Document of The World Bank FOR OFFICIAL USE ONLY

Public Disclosure Authorized Report No: ICR00005021

IMPLEMENTATION COMPLETION AND RESULTS REPORT Loan No. 8236-CN

ON A LOAN

FROM THE Public Disclosure Authorized INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

IN THE AMOUNT OF US$ 150 MILLION

TO THE

PEOPLE'S REPUBLIC OF CHINA

FOR THE

Public Disclosure Authorized Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project

March 28, 2020

Urban, Resilience And Land Global Practice East Asia And Pacific Region

Public Disclosure Authorized

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

CURRENCY EQUIVALENTS

(Exchange Rate Effective September 30, 2019)

Currency Unit = Chinese Yuan (CNY) CNY 7.14 = US$1

FISCAL YEAR January 1 – December 31

Regional Vice President: Victoria Kwakwa Country Director: Martin Raiser Regional Director: Benoit Bosquet Practice Manager: Francis Ghesquiere Task Team Leader(s): Minghe Tao ICR Author: Yuko Arai

ABBREVIATIONS AND ACRONYMS

BRT Bus Rapid Transit CNY Chinese Yuan CPF Country Partnership Framework CPS Country Partnership Strategy EA Environmental Assessment EIA Environmental Impact Assessment EMP Environmental Management Plan EIRR Economic Internal Rate of Return GDP Gross Domestic Product GHG Greenhouse Gas HSR High-speed Railway ICR Implementation Completion and Results Report IRI Intermediate Results Indicators ISR Implementation Status and Results Report LCZDP Liaoning Coastal Zone Development Plan LDRC Liaoning Provincial Development and Reform Commission LNG Liquefied Natural Gas M&E Monitoring and Evaluation MTR Midterm Review NMT Non-Motorized Transport O&M Operation and Maintenance PAD Project Appraisal Document PIU Project Implementation Unit PMO Project Management Office PPMO Province Project Management Office RAP Resettlement Action Plan RF Results Framework TA Technical Assistance TOD Transit-oriented Development

TABLE OF CONTENTS

DATA SHEET ...... 1 I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ...... 5 A. CONTEXT AT APPRAISAL ...... 5 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION ...... 10 II. OUTCOME ...... 13 A. RELEVANCE OF PDOs ...... 13 B. ACHIEVEMENT OF PDOs (EFFICACY) ...... 14 C. EFFICIENCY ...... 22 D. JUSTIFICATION OF OVERALL OUTCOME RATING ...... 24 E. OTHER OUTCOMES AND IMPACTS ...... 25 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ...... 26 A. KEY FACTORS DURING PREPARATION ...... 26 B. KEY FACTORS DURING IMPLEMENTATION ...... 28 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 29 A. QUALITY OF MONITORING AND EVALUATION (M&E) ...... 29 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ...... 29 C. BANK PERFORMANCE ...... 31 D. RISK TO DEVELOPMENT OUTCOME ...... 32 V. LESSONS AND RECOMMENDATIONS ...... 33 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ...... 35 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ...... 44 ANNEX 3. PROJECT COST BY COMPONENT ...... 46 ANNEX 4. EFFICIENCY ANALYSIS ...... 46 ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 50 ANNEX 6. SUPPORTING DOCUMENTS ...... 52 ANNEX 7. RESULTS STORIES ...... 53 ANNEX 8. PHOTOGRAPHS OF SELECT PROJECT ACTIVITIES (BEFORE AND AFTER) AND PROJECT MAP ...... 57

The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

DATA SHEET

BASIC INFORMATION

Product Information Project ID Project Name

Liaoning Coastal Economic Zone Urban Infrastructure and P126611 Environmental Management Project

Country Financing Instrument

China Investment Project Financing

Original EA Category Revised EA Category

Partial Assessment (B) Partial Assessment (B)

Organizations

Borrower Implementing Agency

PEOPLE'S REPUBLIC OF CHINA Liaoning Urban Construction and Renewal Project Office

Project Development Objective (PDO)

Original PDO To improve the efficiency of urban transport and address water scarcity issues in selected cities in Liaoning Province

Revised PDO To improve transport connectivity and reclaim wastewater in selected cities in Liaoning Province

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

FINANCING

Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing

150,000,000 140,547,610 140,547,610 IBRD-82360 Total 150,000,000 140,547,610 140,547,610

Non-World Bank Financing 0 0 0 Borrower/Recipient 189,500,000 75,720,000 52,590,000 Total 189,500,000 75,720,000 52,590,000 Total Project Cost 339,500,000 216,267,610 193,137,610

KEY DATES

ApprovalFIN_TABLE_DAT Effectiveness MTR Review Original Closing Actual Closing 20-Mar-2013 22-Jul-2013 27-Feb-2017 30-Sep-2018 30-Sep-2019

RESTRUCTURING AND/OR ADDITIONAL FINANCING

Date(s) Amount Disbursed (US$M) Key Revisions 19-May-2016 5.48 Change in Project Development Objectives Change in Results Framework Change in Components and Cost Change in Financing Plan Reallocation between Disbursement Categories Change in Implementation Schedule 27-Sep-2018 95.51 Change in Results Framework Change in Loan Closing Date(s) Change in Implementation Schedule

KEY RATINGS

Outcome Bank Performance M&E Quality Satisfactory Moderately Satisfactory Modest

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

RATINGS OF PROJECT PERFORMANCE IN ISRs

Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 22-Jun-2013 Satisfactory Satisfactory 0

02 22-Dec-2013 Satisfactory Moderately Satisfactory 0

03 15-Jun-2014 Moderately Satisfactory Moderately Unsatisfactory 0 Moderately 04 16-Dec-2014 Unsatisfactory 0 Unsatisfactory 05 16-Jun-2015 Unsatisfactory Unsatisfactory 1.00 Moderately 06 10-Dec-2015 Moderately Unsatisfactory 5.48 Unsatisfactory Moderately 07 24-Jun-2016 Moderately Unsatisfactory 10.48 Unsatisfactory Moderately 08 04-Nov-2016 Moderately Unsatisfactory 29.36 Unsatisfactory 09 09-Apr-2017 Moderately Satisfactory Moderately Satisfactory 53.21

10 20-Oct-2017 Moderately Satisfactory Moderately Satisfactory 54.77 Moderately 11 25-Apr-2018 Moderately Unsatisfactory 78.57 Unsatisfactory 12 09-Nov-2018 Moderately Satisfactory Moderately Satisfactory 95.51

13 03-May-2019 Moderately Satisfactory Moderately Satisfactory 113.98

SECTORS AND THEMES

Sectors Major Sector/Sector (%)

Public Administration 2 Sub-National Government 1 Other Public Administration 1

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

Transportation 73 Urban Transport 72 Other Transportation 1

Water, Sanitation and Waste Management 25 Sanitation 20 Other Water Supply, Sanitation and Waste 5 Management

Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Urban and Rural Development 100

Urban Development 100

Urban Infrastructure and Service Delivery 100

Environment and Natural Resource Management 100

Climate change 100

Mitigation 90

Adaptation 10

ADM STAFF

Role At Approval At ICR

Regional Vice President: Axel van Trotsenburg Victoria Kwakwa

Country Director: Klaus Rohland Martin Raiser

Director: John A. Roome Benoit Bosquet

Practice Manager: Mark R. Lundell Francis Ghesquiere

Task Team Leader(s): Paul Procee Minghe Tao

ICR Contributing Author: Yuko Arai

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES

A. CONTEXT AT APPRAISAL

Context

1. China's cities had been growing at a rate and scale never seen before. About 380 million people had moved from rural to urban areas over the previous two decades; and another 300 million people were expected to migrate by 2025.1 While urbanization drives growth and raises living standards, it also brings tremendous environmental and service delivery challenges. Rapid urbanization had dramatically transformed China's socio- economic structure and had posed tremendous challenges to policymakers and practitioners, especially in secondary cities and lagging regions, to keep pace with demand, especially for basic urban services. In the past decades, China's economic development rate had also been (and still is) very high, with gross domestic product (GDP) growing at an average annual rate of nine to twelve percent at the time of appraisal, leading to a rapid growth in demand for basic services such as water supply, sanitation, and transport, as well as a rapid increase in consumption of natural resources and increased pollution.

2. Liaoning Province is located in Northeast China and had a total population of about 43.7 million people in 2010. With a GDP for 2011 of CNY2.20 trillion (ca. US$ 308 billion) it was the seventh largest provincial economy in China. At the time of appraisal, the per capita GDP in Liaoning was CNY41,782 (around US$ 5,853). In 2008, Liaoning's tertiary industry accounted for 34.5 percent of the total GDP.2 Liaoning was seen to continue its efforts to restructure large and medium-sized state enterprises. Rapid urbanization, motorization and industrialization were leading to various negative externalities in the Liaoning Coastal Zones, and issues around transport and water were particularly severe, in need of more sustainable urban infrastructure specifically as detailed in the following paragraphs:

3. Urban Transport. Motorization as part of the urbanization and economic development process caused urban road congestion and worsened urban air quality. These problems affected all urban residents, but the lower- income groups who relied on buses and non-motorized transport (NMT) suffered a disproportionately higher share of the problems, in the form of lower mobility, higher accident rates (especially for non-motorized traffic), and poorer air quality. At the time of appraisal, the national and local governments had made significant efforts to alleviate traffic congestion and vehicle pollution by promoting public transport and cleaner transport modes. Cities in the coastal zone of Liaoning were investing heavily in new road infrastructure, especially in proposed new development zones, while many of the existing urban infrastructure, especially in the old urban areas, needed urgent rehabilitation and upgrading. Increased traffic and congestion were starting to become a serious problem in some cities due to the rapid increase in motorization rates, deficient road infrastructure, irrational use of road infrastructure, and deficient public and NMT systems.

1 Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project Appraisal Document, Report number 74405-CN. 2 Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project Appraisal Document, Report number 74405-CN.

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

4. Water Scarcity. Liaoning Province was already facing serious water pollution and water scarcity issues which limited development.3 Water supply relied on dams and groundwater extraction; however, years of over- exploration of groundwater had resulted in a falling groundwater table, sinking surfaces and cave-ins, seawater intrusion, and secondary salinification of the coastal area. Most river basins suffered from water pollution and under-served water and wastewater infrastructures. River runoff was too low to dilute and purify discharged wastewater. This posed an additional challenge to pollution control in these rivers and innovative4 approaches to tackle water scarcity and pollution were required to reduce these problems. The exploitation rate of groundwater in Liaoning Province had exceeded 95 percent, creating ecological problems such as seawater encroachment, and in February 2013 the Provincial Government implemented its toughest regulations to address excessive exploitation of groundwater.5 According to the meteorological and hydrological survey data on local water availability in the last three decades, climate change was considered a cause for even more severe water scarcity in the years to come. The scarcity of water in the province was seen to have negative effects on the municipality’s development initiatives and economy.

5. Government Strategies. The challenges and priorities outlined in China’s 12th Five Year Plan (FYP, for 2011- 2015) and the World Bank Group’s Country Partnership Strategy (CPS) for FY2013-20166 were aligned at the time of appraisal, where the latter focused on three main areas of engagement: green growth, inclusive development, and mutually beneficial relations with the world. The Liaoning Coastal Zone Development Plan (LCZDP) was launched in 2009 by the Government of China with support from the Liaoning Provincial Government to help with the economic revitalization of cities and the region and create a gateway to the Northeast of China and surrounding countries. The Liaoning Coastal Zone, comprising the Bohai Bay Area and the Yellow Sea Coast, has the city of Dalian as its anchor and is a hub for development. The comprehensive plan intended to guide the development process around urban and economic clusters, help protect valuable ecosystems, and create livable cities with better public services to attract people and investments. A department within the Liaoning Provincial Development and Reform Commission (LDRC) was created to oversee and guide the LCZDP’s implementation process.

6. A key challenge for the development of the Liaoning Coastal Zone was coordinating and integrating plans of different cities and balancing competing demands for urban expansion, infrastructure, financial investments, economic growth, industries, agriculture, and natural resources, while minimizing pollution and ensuring that valuable ecosystems and natural resources were protected and did not become a constraint for future growth and development. The planning capacity of local authorities was very weak and relied mostly on a top-down process with little interaction with local stakeholders and an understanding of actual demands and investment needs and priorities. The anticipated industrialization and urbanization rates were expected to put increased pressure on existing infrastructure in medium-sized cities in the coastal zone of Liaoning. To sustain economic growth, attract more private investments, and service a growing urban population, construction and rehabilitation of basic infrastructure and improvement of urban transport systems were prioritized; however, they needed to be carefully balanced with more efficient use of land and natural resources.

3 The average availability of water resource per person in the province was 820 m3, one third of the national average. 4 For example, moving away from the conventional approach of groundwater use towards use of reclaimed wastewater. 5 The Provincial Government banned all new groundwater drilling projects and set a target of cutting the extraction quantity by more than 1.2 billion m3 by 2015. Companies were required to look for alternative sources of water, including reusing, recycling and reclaiming water. 6 Report number 67566.

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

Theory of Change (Results Chain)

7. The project’s original theory of change (results chain) is illustrated in Figure 1. The project aimed to “improve the efficiency of urban transport and address water scarcity issues in selected cities in Liaoning Province”.

8. The project was designed to support the implementation of the LCZDP through the National Development and Reform Commission and Ministry of Finance to address critical water and transport issues, which had hampered the long-term development of the Liaoning coastal zone and help reduce environmental impacts as a result of the region’s rapid development and urbanization. Donggang City, Kuandian County, Longcheng District (in Chaoyang City), Lingyuan City, Panjin City, and Suizhong County (hereafter "Project Cities") were strategically selected as they were located near the Liaoning coast and formed an integral part of the economic cluster development and transport axis, which was proposed by the LCZDP. The city authorities were also uniquely positioned to make decisions that could greatly improve the livability and transport services offered in the cities. This project was designed to foster an integrated approach to transport planning, combining infrastructure investments with traffic management improvements, better public transport services, and integrated transport and land use planning. Water related subprojects in Lingyuan and Suizhong were designed to provide good examples of integrated investments to address critical water pollution and scarcity issues.7

9. Besides ensuring that each subproject complied with government regional and local plans and addressed critical urban transport and water issues, the Project Cities and subprojects were selected based on the following criteria: (a) strong justification based on detailed analysis of current and future demands; (b) cost-effectiveness and economic and financial returns; (c) overall environmental and social benefits to the city; and (d) the long-term financial and operational sustainability. The project included several innovative approaches in terms of water reclamation, road designs that prioritized NMT and public transport, and preparation of an asset management framework to ensure long-term sustainability of project financed facilities.

7 The subproject in Suizhong was intended to address the water pollution and poor drainage due to encroachment of existing canals, siltation, and reduced hydraulic flows.

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

Figure 1 Original Theory of Change at Appraisal

Project Development Objectives (PDOs)

10. As stated in the Project Appraisal Document (PAD) and Loan Agreement8, the PDO was to improve the efficiency of urban transport and address water scarcity issues in selected cities in Liaoning Province.

Key Expected Outcomes and Outcome Indicators

11. The key outcomes were: 1) improved efficiency of urban transport in selected cities in Liaoning Province and 2) water scarcity issues addressed in selected cities in Liaoning Province. The PDO Indicators were: (i) percentage of people walking and biking satisfied with new and improved facilities on selected roads in Chaoyang, Donggang, Kuandian and Lingyuan, (ii) percentage increase of riders satisfied with public transport services on selected routes in Panjin, (iii) percentage of reclaimed wastewater used in the new industrial park in Lingyuan, (iv) urban area benefitting from improved drainage system in Suizhong and (v) project beneficiaries (disaggregated by gender). Emphasis was on (i) providing better public transport services in selected cities and improving transport flows along

8 74405-CN, Loan Number 8236-CN.

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

rehabilitated and new roads and (i) improving wastewater treatment and water reclamation to reduce pollution and foster more efficient use of scarce water resources.

Components

12. Component 1: Improving urban transport systems. (Original allocation: Government US$142.3 million, IBRD US$ 107.8 million; Actual cost: Government US$ 48.6 million, IBRD US$ 109.0 million). The funding was meant to improve public transport systems and foster transit-oriented development along selected public transport corridors by integrating land use and transport planning. The project was to finance new urban roads and rehabilitation of existing roads and ensure the engineering designs incorporated traffic management and traffic calming features and included facilities that promoted cleaner alternative modes of transport, such as bicycling and walking. The designs were also to be based on the function and typology of streets within the urban area, such as neighborhood streets, local access roads, major urban thoroughfares, public transport corridors, and roads servicing industrial zones. Furthermore, all road designs were to include necessary underground urban utilities, traffic signs and management systems, landscaping, street furniture, and other ancillary facilities, and acquisition of road maintenance equipment. In Panjin, the project was to acquire buses and improved bus depots to support the overall improvement of public bus transport services provided by the Panjin Public Transport Company.

13. Component 2: Improving urban wastewater treatment and reclamation. (Original allocation: Government US$ 47.1 million, IBRD US$ 40.6 million; Actual cost: Government US$ 12.0 million, IBRD US$ 29.9 million). The funding was to be used to rationalize the use of scarce water resources, reduce groundwater abstraction, and reduce water pollution. The project was to finance the construction of new, and rehabilitation of existing wastewater plants, separation of sewage and drainage networks, and replacement of groundwater supply systems with water reclamation systems. This component also was to finance wastewater treatment facilities and water reclamation systems, while also separating sewage and drainage networks in selected cities.

14. Component 3: Project Management and Capacity Building. (Original allocation: IBRD US$ 1.65 million; Actual cost: IBRD US$ 1.65 million). This component was closely linked to the infrastructure investments under components 1 and 2 and was to help to increase impacts and sustainability of investments, as well as build the capacity of the local staff and officials involved in delivering water and urban transport services in participating cities. The areas of technical assistance included the following:

(a) Building the capacity of local transport management agencies and supporting them in preparing or revising urban transport investment and management plans, focusing on promoting public transport, pedestrian, bicycles and overall traffic safety;

(b) Developing comprehensive capital investment and asset management plans for local implementing agencies to ensure long-term sustainability of project investments; and

(c) Supporting project management and supervision, including consultancy services and training in technical supervision, procurement and financial management; contract supervision; environmental management plans (EMPs); and resettlement action plans (RAPs).

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

B. SIGNIFICANT CHANGES DURING IMPLEMENTATION

Revised PDOs and Outcome Targets

15. The PDO was revised in a restructuring in May 2016. The revised PDO was “to improve transport connectivity and reclaim wastewater in selected cities in Liaoning Province".

Revised PDO Indicators

16. The RF was revised to reflect changes to the PDO as follows: Chaoyang was removed from the first PDO Indicator and it became “People walking and biking satisfied with new and improved facilities on selected roads in Donggang, Kuandian and Lingyuan”; and PDO indicator “Urban area benefitting from improved drainage system in Suizhong” was dropped entirely. See Table 1 and Annex 1 for more details.

Revised Components

17. As part of the May 2016 restructuring, several changes were made to components 1 and 2. The subproject in Longcheng District under Component 1 (Improving Transport Systems), and the subproject in Suizhong County under Component 2 (Improving Urban Wastewater Treatment and Reclamation) were dropped. Changes were accordingly made to the components’ costs and the unallocated loan funds in the amount of US$144.52 million were allocated to activities in Donggang, Kuandian, Lingyuan and Panjin under Component 1, and to activities in Lingyuan under Component 2.

Other Changes

First restructuring dated May 20, 2016

18. Change in Total Project Cost and Reallocation of Funds. The total cost of the project was revised from US$339.50 million to US$225.72 million. Unallocated IBRD proceeds in the amount of US$144.52 million were reallocated to existing subcomponents as mentioned, and the disbursement percentage for the civil works category was increased from 45-679 to 90 percent. The cost of Component 1 was reduced from US$250.10 million to US$182.36 million, and the cost of Component 2 was reduced from US$87.70 million to US$41.71 million. Disbursement estimates, the financing plan, and implementation plans were revised accordingly.

Second restructuring dated September 30, 2018

19. Changes in Implementation Schedule and Loan Closing Date Extension. The loan closing date was extended by 12 months, from September 30, 2018 to September 30, 2019. Disbursement estimates and the implementation plans were revised accordingly.

9 In the original Loan Agreement, the Works category was broken down by participating city, wherein each city had a different loan disbursement rate.

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

20. Changes to the Intermediate Indicators. The target of intermediate indicator 2.1 (number of industries connected to reclaimed wastewater) was reduced to 5.

Table 1 Results Framework (before and after restructuring)

Original RF (Before Restructuring) Revised RF (After Restructuring) PDO Indicators 1) People walking and biking satisfied with new and 1) People walking and biking satisfied with new improved facilities on selected roads in and improved facilities on selected roads in Chaoyang, Donggang, Kuandian and Lingyuan Donggang, Kuandian and Lingyuan. 2) Increase of riders satisfied with public transport 2) Increase of riders satisfied with public services on selected routes in Panjin transport services on selected routes in Panjin 3) Reclaimed wastewater used in the industrial park 3) Reclaimed wastewater used in the industrial 4) Urban area benefitting from improved drainage park system in Suizhong 4) Project beneficiaries (disaggregated by 5) Project beneficiaries (disaggregated by male/female) male/female) Intermediate 1) New and rehabilitated streets with improved 1) New and rehabilitated streets with improved Results Indicator public transport and NMT in Chaoyang, public transport and NMT in Donggang, Donggang, Kuandian and Lingyuan Kuandian and Lingyuan 2) Increase in passengers per year on selected bus 2) Increase in passengers per year on selected routes in Panjin bus routes in Panjin 3) Increase of Annual Road Maintenance budget in 3) Increase of Annual Road Maintenance budget participating cities in participating cities 4) Industries connected to reclaimed water system 4) Industries connected to reclaimed water in Lingyuan system in Lingyuan 5) Drainage pipes completed in Suizhong 5) Staff training days in project financed training 6) Staff training days in project financed training and TA activities and TA activities 6) Revised local traffic management plans and 7) Revised local traffic management plans and capital investment plans capital investment plans

Rationale for Changes and Their Implication on the Original Theory of Change

21. The following paragraphs explain the rationale for changes:

(a) Change in the PDO: Due to lagging implementation progress during 2013-2016 and the focus of the project on improving road networks in existing project cities, it was difficult to measure the efficiency gains from urban transport investments. It was, therefore, agreed that a more appropriate PDO would focus on the connectivity within the city and with regional transport systems (for example, high-speed rail). The second part of the PDO focused on addressing water scarcity issues; however, the dropping of a major water subproject in Suizhong in 2016 (see below), which was to focus on drainage and water pollution control, meant that the project could not demonstrate an impact on water scarcity. Since the remaining water subproject focused on reusing the effluent of a wastewater treatment plants for industries in Lingyuan City, it was agreed that the revised second part of the PDO would look at reclaimed wastewater in selected cities in Liaoning Province.

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

(b) Change in the Results Framework: The RF was revised to measure project outcomes and outputs toward achieving the revised PDO.

(c) Change in Components and Costs: Suizhong County and Longcheng District in Chaoyang City decided to drop from the project in 2016, resulting in changed costs of the project and components. The decision to drop from the project was due to (i) the slow-down of the Chinese economy, which had hit Liaoning Province particularly hard, resulting in the city’s inability to provide counterpart funding; (ii) the new budget law amendments in August 201410, which had limited the capacity of cities to borrow to raise counterpart funds; and (iii) changing local development and investment priorities by the new leaders of Suizhong County and Longcheng District. The Lingyuan road subprojects at appraisal focused on rehabilitation of key trunk roads of the city in order to improve the efficiency of public transport; however, with the change to the PDO, these subprojects were redesigned to connect various functional zones of the city to improve transport accessibility, in line with the revised PDO.

(d) Increase of the disbursement percentage of civil works category: The disbursement percentages for civil works contracts increased to 90 percent, which helped reduce the local government’s pressure for counterpart funds and allowed more local resources to be allocated to resettlement and project management.11

(e) Extension of project duration: The project’s closing date was extended by one year to allow the completion of lagging activities.

22. As a result of the above changes, the project’s theory of change was modified as follows:

10 The budget law was stipulated on March 22, 1994. It was then amended on Aug 31, 2014 and revised on Dec 29, 2018. In connection with this, regulation issued by the State Council on September 21, 2014 document no. Guofa 2014-43, titled: Opinion of Strengthening Local Government Loan Management, further limited the source of funding for local governments. 11 For instance, the counterpart funding decreased from 30 percent to 10 percent in Panjin City, which had relieved the financial pressure on the project city eventually leading to successful project completion.

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

Figure 2 Theory of Chain after First Restructuring

II. OUTCOME

A. RELEVANCE OF PDOs

Assessment of Relevance of PDOs and Rating

Rating: Substantial

23. The PDO has high strategic relevance for China and is well aligned with the World Bank Group’s Country Partnership Framework (CPF) for FY2020-2025.12 Consistent with the challenges and priorities in China’s 13th Five Year Plan (FYP, for 2016-2020) which outlined five main areas of engagement: innovation, coordinated development, green growth, openness and inclusive growth, the World Bank’s CPF for FY2020-2025 focuses on three main areas of engagement: advancing market and fiscal reforms, promoting greener growth, sharing the benefits of growth. The project addressed the CPF’s theme to promote greener growth by helping participating

12 Report number 117875.

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

cities to enhance urban environmental services; promote low-carbon urban transport; and demonstrate measures to reduce pollution. The project promoted more inclusive development by enhancing services and opportunities in secondary cities in Liaoning and access and transport connectivity in less developed areas of the province. Innovative13 designs in terms of transport infrastructure and water reclamation benefitted from the World Bank's global knowledge and these experiences are expected to be shared with the rest of the world. Out of the three priorities of the CPF, the latter two were addressed to a lesser extent by the project. There was also a change in priorities of subproject cities which led to the dropping of two subproject cities during the first restructuring (refer to para 21 - the restructured project was aligned with the changed priorities, as discussed earlier).

B. ACHIEVEMENT OF PDOs (EFFICACY)

Assessment of Achievement of Each Objective/Outcome

24. Given the PDO change, a split rating evaluation for efficacy is presented. The original PDO statement had two outcomes: (a) improved efficiency of urban transport; and (b) addressed water scarcity issues in selected cities in Liaoning Province, while the outcomes in the revised PDO statement were: (a) improved transport connectivity; and (b) reclaiming of wastewater in selected cities in Liaoning Province. The following is an assessment of the level of achievement of both the original and revised project outcomes.

Assessment of the achievement of the original outcomes

25. The original PDO lacked explicit definitions of “improved efficiency of urban transport” and “addressed water scarcity issues”. Rather, various parts of the PAD implied that the expected outcomes were increase in user satisfaction.

Original Outcome 1: Improved efficiency of urban transport

26. This outcome was to be measured by two PDO Indicators:

(a) People walking and biking satisfied with new and improved facilities on selected roads in Chaoyang, Donggang, Kuandian and Lingyuan (target: 70 percent). This target was partially achieved, since the city of Chaoyang was dropped early on (see the discussion of the revised outcomes for details).

(b) Increase of riders satisfied with public transport services on selected routes in Panjin (target: 60 percent). This target was exceeded as shown in the discussion of the revised outcomes.

27. Since these PDO Indicators were not direct measures of efficiency, they can only be considered in the context of other indicators, such as bus density, frequency, ticketing system, and energy efficiency. Additional data on changes in travel time and improved bus networks, which are considered measures of urban transport efficiency,

13 For transport: moving away from the conventional approach of supporting motorization towards mainstreaming public transport and non-motorized transport. For water supply: moving away from the conventional approach of groundwater use towards use of reclaimed wastewater.

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

were collected as part of the Implementation Completion and Results Report (ICR) preparation and are presented in the discussion of the revised outcomes.

28. The following intermediate indicators were used to measure the achievement of this outcome and were maintained after the restructuring (see the discussion under the revised outcomes).

(a) Length of new and rehabilitated streets with improved public transport and NMT in Chaoyang, Donggang, Kuandian and Lingyuan (target: 52km)

(b) Increase in number of passengers per year on selected bus routes in Panjin (target: 5,100)

(c) Increase of Annual Road Maintenance budget in participating cities (target: 15 percent)

(d) Revised local traffic management plans and capital investment plans (target: 3)

29. As these indicators are not direct measures of transport efficiency, they should only be considered within a broader framework of indicators and analysis. However, given that the PDO was revised early in project implementation (after disbursement of only 3.9 percent of the IBRD loan), and given the difficulty in collecting additional data specific to transport efficiency, this analysis was not carried out for the purpose of the split evaluation in the ICR.

Original Outcome 2: Addressed water scarcity issues

30. This outcome was to be measured by two PDO Indicators:

(a) Reclaimed wastewater used in the industrial park (target: 60 percent). This target was exceeded as shown in the discussion of the revised outcomes. It, however, measures only one aspect of “water scarcity” and is not sufficient to confirm that the outcome was achieved.

(b) Urban area benefitting from improved drainage system in Suizhong (target: 75 percent). This target was not achieved, since the investments in Suizhong were dropped.

31. The following intermediate indicators were used to support achievement of this outcome:

(a) Number of industries connected to reclaimed water system in Lingyuan (target: 20). This target was exceeded as shown in the discussion of the revised outcomes.

(b) Length of drainage pipes completed in Suizhong (target: 76km). This target was not achieved, since the investments in Suizhong were dropped as mentioned.

Assessment of the achievement of the revised outcomes

Revised Outcome 1: Improved transport connectivity

32. This outcome was measured by the following revised PDO Indicators:

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(a) People walking and biking satisfied with new and improved facilities on selected roads in Donggang, Kuandian and Lingyuan (target: 70 percent; achieved: 99 percent).

(b) Percentage increase of riders satisfied with public transport services on selected routes (1, 30, 31, 32 & 33) in Panjin (target: 60 percent; achieved: 98 percent).

33. The following Intermediate Results Indicators (IRIs) measured results:

(a) Length of new and rehabilitated streets with improved public transport and NMT in Chaoyang, Donggang, Kuandian and Lingyuan (target: 31.68km; achieved: 50.7km)

(b) Increase in number of passengers per year on selected bus routes in Panjin (target: 5,100; achieved: 62,122 [see footnote 16])

(c) Increase of Annual Road Maintenance budget in participating cities (target: 8.0 percent; achieved: 15.0 percent)

(d) Revised local traffic management plans and capital investment plans (target: 2; achieved: 2)

34. These results are attributed to the project since it financed the rehabilitation and construction of roads in Donggang, Kuandian and Lingyuan, improvement of pilot public transport system, bus depots, and road maintenance equipment in Panjin, building the capacity of local transport investment and management agencies; developing comprehensive capital investment and asset management plans; and supporting project management and supervision in all project cities.

35. Since the above PDO Indicators primarily measure user/ beneficiary satisfaction and do not directly measure the outcome of transport connectivity, additional data gathered by the Project Management Office (PMO)14 and the World Bank on direct measures of connectivity, i.e., reduction in travel time, increase in road density, public transport density, relation to land use, etc.15 are presented below, showing achievement of the outcome as follows:

36. Satisfaction with new and improved roads: Satisfaction surveys’ results16 in Lingyuan, Kuandian and Donggang revealed that user satisfaction rates were high, exceeding 90 percent compared to a target of 70 percent. The following is a quote of a resident from Kuandian.

“Before the project, residents from one side of the river had to go all the way around the block to access the other side of the river. Upon completion of the Kuandian component, residents can use the new bridge and paved roads. Before the project, residents used to treat the river right beside the road like a waste dump, it was very unsanitary, and the odor was bad, and after the project, residents have changed their behavior and have stopped dumping garbage into the river. The river has become clean and residents plant flowers along the road over the summer”.

14 The information in the ICR has been provided by the PMOs during the ICR mission, unless otherwise stated. The ICR team has verified most of the data. Explanations for discrepancies have been provided where warranted. 15 The data were gathered and verified by the World Bank Team during the ICR mission on November 25, 2019 in the form of interviews, street surveys, and joint scrutinization of data with the PMOs. The World Bank also held numerous follow-up sessions post mission to obtain this information, which was subsequently verified. 16 2,000 respondents for Lingyuan, 500 respondents for Kuandian, and 100 respondents for Donggang.

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37. Passengers’ satisfaction with public transport services in Panjin17: The number of passengers per year on selected bus routes (1, 30, 31, 32 & 33) increased by 62,12218 by the end of the project, reflecting a strong uptake of project investments, and, potentially, the satisfaction of passengers. It should be noted, however, that the increase could also be compounded by other factors such as an increased interest in destinations due to new attractions, a population increase, etc. The increase may also be due to the increased mobility and attractiveness of the city thanks to project-financed improved public transport services. For example, Line 3 which connected key destinations in the urban core in particular saw a 50 percent increase in passenger demand at closing compared to the pre-project demand rate. Modal share (percentage of travelers using a particular type of transportation or number of trips using said type) of public transport also increased from 16.0 percent in 2013 to 20.3 percent in 2017. Results from a satisfaction survey from March 201919 revealed that 99 percent of passengers thought that the services were safe or relatively safe, 91 percent of passengers were satisfied with the sanitation conditions, 90 percent were satisfied with the bus facilities, 88 percent were satisfied with the bus services, 81 percent were satisfied with the fares, 74 percent were satisfied with the travel speed, and few raised issues of discomfort (crowding, slow bus speed, high and low temperatures, a poor bus environment, bad attitude of bus drivers and passengers, and traffic jams).

The following is a quote of a female passenger on Line 1 in Panjin City: “I used to walk long distances to get around the city. The new bus service is very punctual, clean and comfortable. I have a car but prefer to use the bus because the service is reliable – no need to look for or pay for parking. I feel very safe riding the bus on my own during the night.”

38. Regional connectivity: Enhancing regional connectivity was an important aspect of the project. The project financed roads improving connectivity to the (a) China National Highway 101 which is from Beijing to Shenyang; and (b) China National Highway 306 which is from Inner Mongolia to Liaoning coastal cities.

39. Local networks establishment: Project-financed road construction and rehabilitation created local transportation networks, which allowed residents from the four project cities to access good quality interconnected roads. For example, project-financed investments in Donggang strengthened the connectivity between the city core and the newly constructed high-speed railway (HSR) station in the north of the town to the city. These improved access to economic livelihood opportunities, with better connection from neighborhoods to the city center where job opportunities exist. By the end of the project, the length of new roads constructed with project financing totaled 13.65 km, and existing roads rehabilitated totaled 37.05 km.

40. The project also significantly improved the connectivity of cities. Figure 3 illustrates that In Lingyuan, for example, the project improved the connectivity of the city in at least three ways: (i) it enhanced inner-city

17 During the ICR mission, the World Bank Team took a trip on some of the selected bus routes, where random interviews with passengers on board were conducted. All expressed high satisfaction with the new bus services, which are in line with the satisfaction survey results reported by the PMO. 18 This figure was provided by the PMO in 2019 and questioned by the World Bank team for its credibility due to the manifold increase. The PMO confirmed the result and insisted that the big jump in number of passengers in the last year was convincing, and that the ticket-machine based data is reliable. The Bank financed facilities were fully completed around one year before loan closing, including 140 new buses, two bus depots and associated maintenance equipment, and optimized bus operation, in line with the authorities’ ambition to turn the city into a bus-oriented ‘Transit Metropolis’ initiated by the national government and supported by the Bank. Given that the results in 2013-2018 gradually increased to fully achieve the target already in 2018, it is safe to conclude that the target was exceeded even if there might be a flaw in the final reported number. 19 250 respondents for Panjin.

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connectivity in the old town and the city core (area in green); (ii) it improved the access of newly constructed residential areas south of the Lingyuan River to the city core north of the river (area in yellow); and (iii) it ensured accessibility to the logistics industries located within the industrial zone east of the city (area in red).20

Figure 3 Illustration of the twenty Project-financed Road Subprojects in Lingyuan City

Source: Lingyuan PMO.

41. Reduced travel time: Project-financed technical assistance (TA) for interventions in Panjin resulted in an average 30-minute travel time reduction for passengers.21 This was due to the (i) optimization of bus routes through the improvement of Transport Plans under the Component 3 technical assistance; (ii) improvement of the quality of roads under Component 1; and (iii) new buses financed through the project, which enabled speed efficiency and easier operation compared to before project. Similarly, in Lingyuan, travel time reduction in project-supported roads averaged between six minutes/km for automobiles and eleven minutes/km for bicycles compared to the baseline in 2013, respectively (as shown in Table 2) thanks to the project-financed construction and rehabilitation of roads. Results from the beneficiary survey22 in Kuandian also indicate an average 30-minute time saving in project-

20 The other colors mark the following: Dark Blue: roads and bridges funded by the IBRD loan; Blue: area south of the river; Purple: Bajianfang Area. The blue lines indicate roads built/rehabilitated by the subprojects. 21 Panjin PMO. 22 The survey was based on 500 respondents, or 0.8 percent of the 60,000 project beneficiaries in Kuandian.

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supported roads due to road realignment (elimination of detours, etc.), paving of dirt roads, and removal of waste and construction materials blocking the roadways. In Donggang, there was a five-minute reduction in the time it took to travel from the city center to the high-speed railway station thanks to the new project-financed roads, which improved accessibility.

Table 2 Average Travel Time in Lingyuan Road Subprojects (in 2013 and at Project Closing) Average Traveling Time (min) Project-financed Constructed Road Length (km) Automobiles/Bicycles Automobiles/Bicycles (2013) (2019) Wuliu Avenue 1.1 30/40 5/10 Binghe East Road (Northern Section) 2.52 40/50 15/20 Binghe East Road (Southern Section) 1.9 40/50 15/20 Jingliu road 0.26 5/9 2/3 Beijianchang Street 0.49 6/10 3/4 Hedong Avenue (Northern Section) 0.29 5/9 2/3 Liangshi Road (Eastern Section) 0.38 5/9 2/3 Pesdestrian Street 0.32 5/9 2/3 Jingshi Road 0.44 6/10 3/4 Xiaobeikou Lane 0.18 4/8 2/5 Fanrong Road (Eastern Section) 0.55 6/10 3/5 Yuchai Road (Eastern Section) 0.36 5/9 2/3 Nanbei Avenue 2.28 18/25 15/20 Xingyuan Avenue 5.2 20/30 15/30 Zunhua Street 0.57 4/8 2/5 Tiebei East Road 0.79 5/10 3/8 Tiebei Middle Road 0.72 5/10 3/8 Guangming Road 1.36 15/20 10/15 Yihou West Road 0.42 5/10 3/8 Wenhua Road 0.28 4/6 2/3 Total 20.39 233/342 124/234 Source: Lingyuan PMO23.

42. Increased road density: Road density is defined as the ratio of the total road network’s length to the overall land area and is an indicator of transport connectivity in a city. Road density increased significantly compared to the situation in 2013 in all four cities: by 47 percent in Donggang (from 5.32 to 7.81), by 48 percent in Kuandian (from 0.23 to 0.34), by 21 percent in Panjin (from 6.12 to 7.42), and by 58 percent in Lingyuan (from 2.39 to 3.78).24 The bus route density increased from 0.073 in 2013 to 0.096 in 2019, thanks to five project-financed optimized routes in Panjin. As discussed, although the increase could be a result of other contributing factors such as increased interest in destinations due to new attractions, population increase, etc., such effects are also due to the increased mobility and attractiveness of the city thanks to project-financed improved public transport services.

43. Panjin City and Donggang City revised their local traffic management plans and asset management plans by project closing with the support of the project. The target number of staff training days on traffic management plans and asset management plans was exceeded at 575 compared to a target of 340. However, since they were developed toward the end of the project, they did not have the full impact expected on the design of investments.

23 During the ICR mission, the World Bank Team verified average traveling time by automobile in around a third of the roads listed in Table 2, results were in line with the numbers reported by the PMO. 24 Source: Donggang, Kuandian, Panjin, and Lingyuan PMOs.

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For example, the TA support to the Panjin bus route optimization took place only between July 2018 and June 2019, when the works were nearing completion. On the other hand, recommendations from the traffic management TA were endorsed by Panjin City and contributed to the bus route optimization. A project-financed asset management database for all four cities contributed new data on city-owned assets and their location, to be used for improved asset management plans in the future.

Revised Outcome 2: Reclaiming wastewater

44. This outcome was measured by the following revised PDO Indicators:

(a) Reclaimed wastewater used in the industrial park (target: 50 percent; achieved: 78 percent).

45. The following IRIs measured results:

(a) Number of industries connected to reclaimed water system in Lingyuan (target: 5; achieved: 6). The downwards revision of the target from 20 industries to 5 larger industries did not result in a reduction in project benefits as the volume (15000m3/d), which was collected additionally and ratio of utilization (60 percent) were already achieved. At the time of restructuring, the project had already identified the larger consumers (e.g. steel factory) of reclaimed wastewater and the indicator target was adjusted accordingly .

46. While the revised second outcome was phrased as an input, the intention, as measured by the second PDO Indicator, was for the project to result in an increased use of reclaimed water in the province’s industrial park by investing in its water recycling infrastructure.

47. The outcome was achieved with 78 percent of reclaimed water used in the industrial park of Lingyuan City compared to the 50 percent target due to the construction of new, and rehabilitation of existing wastewater plants, construction of new, and rehabilitation of existing separate sewage and drainage networks, and replacement of groundwater supply systems with water reclamation supply systems. At completion, six major industrial users (including heavy water users such as a steel factory) had signed up long-term agreements to buy around 20,000 m3/day reclaimed water at full-cost recovery at the competitive market price of US$0.36/m3, or 60 percent of the municipal tap water tariff for industrial users.25 This is an important achievement, given that the average use of reclaimed water in other parts of China is around 20-30 percent.26 After wastewater, storm water and reclaimed water facilities were completed, about 60 percent of treated municipal wastewater was reclaimed, and 57 percent of the reclaimed water was sold to industries at a competitive price. This enabled a full recovery of operating costs.

48. Government leadership played an important role in the market promotion of reclaimed water by ensuring that water quality followed standards, enforcing the regulatory limits on groundwater extraction, identifying users of reclaimed water, and setting a value-based water tariff. Combined with the reliability and satisfactory quality of the reclaimed water, reclaimed water became an attractive option for the industries.27

25 The project offered an alternative cost-competitive water supply option to industries: while water tariffs ranged from CNY 3.00/m3 to CNY 4.55/m3 for piped water, the tariff was CNY 2.50/m3 for the reclaimed water. 26 According to Z. Zhu and J. Dou. 2018. Current status of reclaimed water in China: an overview. Journal of Water Reuse and Desalination. Irvine, USA. 27 Verified through a phone interview with an industrial user during the ICR mission.

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Long-term Socio-economic and Environmental Impacts

49. The long-term aim of the project was to support greener growth and achieve more inclusive development of participating cities. Although the project did not measure these impacts, there are several indications of their achievement:

50. The introduction of hybrid buses in the Panjin subproject was one clear and obvious indication of the project’s contribution towards greener growth, as it leads to greenhouse gas (GHG) emission reductions.28 Globally, the transit-oriented development (TOD), which was supported by the project, is being mainstreamed in urban planning as a key principle to achieve greener growth, with attention to both environmental management and economic development. As a result of project activities in Panjin, the city issued an ordinance to mandate housing developers to reserve land for bus routes, bus stops, etc. in order to provide accessibility and mobility of the residents. This is an important outcome from the perspective of sound urban planning since (i) it supports the transit-oriented approach of the city by providing feeder services from transit nodes to bus station stops near residences; and (ii) it allows early inclusion of such planning requirements, leading to the reduction of land acquisition costs downstream. The Panjin experience was a model for other cities to follow at various levels, but this regulation is one evidence of how the transit-oriented development approach was fully internalized by the city, increasing the likelihood for other cities to follow.

51. In Lingyuan, the environmental benefits of reclaimed water use are also notable with doubled access to municipal wastewater collection since the project’s start date.29 Consequently, water pollution has likely been reduced. Industrial water users are supplied with reclaimed water for their operations, which significantly reduces the depletion of the groundwater and secures the urban water resilience in this seriously water scarce region.

52. Reclaimed water is also used to regenerate the urban landscape. About 10,000m3/day of reclaimed water are used to replenish an urban lake and the Daling River, which used to be polluted by untreated wastewater flowing downstream to cities. The reclaimed water is helping to restore the urban water ecosystem, establish riparian habitats, and ultimately increase urban biodiversity. The Daling River, which used to run dry and have a problem with pollutants, is now a restored ecosystem with a 65-hectare urban lake formed by reclaimed water, which helps to improve the aquatic and wildlife habitat in the area.

53. Inclusive development was achieved by focusing project support on small and medium cities, thus complementing the government’s investments in the region, and ensuring that these cities are not left behind in the context of the overall national growth. The project also paid attention to various cohorts of society, including the emerging elderly population in China, which is less mobile. The intervention in Panjin City demonstrated inclusive development as bus routes were extended to fringe areas and townships, and free admission was offered to the elderly. In addition, the procured buses incorporated universal accessibility design principles of low-step buses to allow easy access to the elderly and disabled populations.

54. The number of direct project beneficiaries reached 350,340, 49.2 percent (172,520) of which were female compared to a target of 213,200, of which 50.0 percent (106,600) female. The surveys were conducted by the subprojects’ PMOs. All survey questions were related directly to project-financed investments, and the people asked were local and users of relevant transport services.

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

Justification of Overall Efficacy Rating

Rating: Substantial

Overall rating before restructuring: Modest Overall rating after restructuring: Substantial

The efficacy rating for the original PDO is rated as Modest, given the limited achievement of the original urban transport outcome. Efficacy for the revised PDO is rated Substantial given that the majority of the performing indicators have exceeded the original target values and the additional data collected and presented above.

C. EFFICIENCY

Assessment of Efficiency and Rating

Rating: Substantial

Economic and Financial Analysis

55. Economic analysis. At appraisal, an economic analysis was conducted to assess project efficiency. A similar analysis was conducted at closing using the same methodology and assumptions, and the following describes its main findings. For the full economic analysis, please refer to Annex 4.

56. The project was expected to generate direct benefits to city residents by providing newly built or improved urban traffic roads, sewage and drainage systems, wastewater reclamation facilities or public transit system within the four beneficiary cities or counties. Indirect benefits included improvement to people’s living environment and local economic development due to road improvements. The betterment of traffic conditions can attract more investment and commerce, and facilitate safe, comfortable and fast travels.

57. Road pavement or rehabilitation. At appraisal, a cost-benefit analysis was used to evaluate the economic viability of the three urban road rehabilitation and/or development subprojects. Among the five project-financed subprojects, three financed urban road pavement or rehabilitation, and the urban roads were the key contributors to the project’s economic benefits, as follows:

 Savings in traffic operating costs, including fuel consumption, daily maintenance, repairing, and administrative expenditures.  Car passengers’ saved travel time around the newly built or rehabilitated roads.  Reduced costs for working capital used for vehicle carrying goods on roads due to faster transportation.  Reduced losses from car accident occurrences thanks to the upgraded road conditions, including advanced intelligent traffic control systems.

28 Every year, the use of the new buses is resulting in a reduced fuel consumption of 2,136 tons, leading to the mitigation of 1,336 tons of emitted CO2. 29 From 50 percent coverage to 90 percent of the urban population.

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 Transporting and walking convenience, people flows, commercial development, entertainment, amenity, etc., thanks to urban road and traffic system improvements. The typical indicator for all these was land and property value appreciation (refer to para 66), which was considered an indirect but important economic benefit to the society.

58. At completion, the project resulted in economic benefits from increased regional connectivity as it financed access roads from the city center to the HSR station. Country-wide studies30 have shown that the HSR has played a critical role in promoting regional economic and macroeconomic development, and that, generally, transport improvements could stimulate economic activities if they materially improved accessibility, especially to major national and regional hubs of commerce and information. According to a 2019 World Bank study on China’s HSR development25, with about 50 percent of riders traveling for business purposes and a total ridership of 1.7 billion passengers per year (nation-wide), over 850 million new opportunities have been created to connect, trade, and exchange ideas each year (nation-wide), compared to the situation prior to HSR, leading to additional economic activity, innovation and increased productivity.

59. Wastewater reclamation. At appraisal, a cost-effective/least cost analysis was conducted instead of a cost- benefit analysis due to the difficulty to quantify and monetize the economic benefits of project-supported wastewater treatment and reclamation interventions. Two alternative technical options, of which the route and materials of pipelines were different, were identified, compared, and analyzed to select the least cost technical scheme. An economic reevaluation of the least cost analysis was not applied here since the project is already completed. Instead, a comparison of costs and resource cost savings between “with” and “without” scenarios was carried out to analyze the economic benefit, showing that the wastewater reclamation project, when combined with the urban road development project, had a high Economic Internal Rate of Return (EIRR).

60. The following table summarizes the economic reevaluation results of each of sub-project in comparison with the figures forecasted at appraisal. Among the four, the economic results of the urban road development in Donggang and the public transit system Improvements in Panjin were slightly below the forecasts. The overall EIRR is 14.2 percent, which is higher than the 8 percent31 threshold equivalent to the social discount rate.

Table 3 Summary of Economic Reevaluation Results

EIRR at EIRR at Discrepancy Project-financed Interventions Appraisal Completion (percent) (percent) (percent) Donggang Urban Road Development 11.9 11.1 -0.8 Kuandian Urban Road Development 17.8 18.9 1.1 Lingyuan Urban Road Development and Wastewater 14.6 19.3 4.7 Reclamation Panjin Public Transit System Improvement 15.3 13.9 -1.4

30 Lawrence, Martha, Richard Bullock, and Ziming Liu. 2019. China’s High-Speed Rail Development. International Development in Focus. Washington, DC: World Bank. doi:10.1596/978-1-4648-1425-9. 31 National Development and Reform Commission (NDRC) of the People’s Republic of China (2006). The Economic Analysis of Construction Projects: Methods and Parameters, 3rd version. Ministry of Construction, China.

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61. Financial Analysis. As the project cities shouldered the project investment costs and were responsible for loan repayment, no Financial Internal Rate of Return (FIRR) at project level was necessary at closing. In addition, a financial analysis was not conducted at appraisal to assess the financial capacity of the project cities to sustain such commitments (only financial ability to repay).

Implementation Efficiency

62. The final project cost was at US$193.1 million, which is about 56.9 percent of the estimated cost of US$339.5 million at appraisal; or 85.6 percent of the estimated cost of the first restructuring (US$225.72 million). This is mainly because of the dropping of activities in Suizhong County and Longcheng District as discussed. The project took 74 months to complete, including a one-year extension, which is within an acceptable standard among other lending projects in China. Project progress was slow during the first years until the beginning of 2018, with only a third of the loan disbursed by the end of 2017. However, the progress during the remaining project period compensated for the delays and the loan amount was 93 percent disbursed at closing. Procurement savings (difference between original cost estimates and the final contract payment) was around 20 percent due to competitive bidding.

D. JUSTIFICATION OF OVERALL OUTCOME RATING

63. In summary, the project relevance was substantial, efficacy was substantial, and efficiency substantial. Therefore, the overall outcome rating is satisfactory. The overall outcome rating considers the high relevance of the project’s objective to national and World Bank priorities at closing, the modest and substantial efficacy of the project as measured by the original and current indicators, respectively, and the substantial efficiency of the project. Before the May 2016 restructuring (the most profound revision of the results framework in terms of indicators and set targets), the overall outcome rating is moderately unsatisfactory with 4 percent disbursement. After the restructuring, the project disbursed the remaining 96 percent of the total project disbursement, with the overall outcome rated satisfactory. Applying the World Bank’s split rating evaluation methodology results in an overall outcome rating of Satisfactory.

Table 4 Calculation of Outcome Rating

Before Restructuring After Restructuring Relevance of PDO Substantial Efficacy (PDO) Modest Substantial Outcome A Modest Substantial Outcome B Modest Substantial Efficiency Substantial 1 Outcome rating Moderately Unsatisfactory Satisfactory Numerical value of 2 3 5 the outcome rating* 3 Disbursement (US$M) 5.48 135.06 Share of disbursement 4 0.039 (or 4 percent) 0.9610 (or 96 percent) before and after

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Before Restructuring After Restructuring restructuring Weighted value of the 5 outcome rating 0.117 4.805 (Row 2 X Row 4) Satisfactory 6 Final outcome rating (0.117+4.805=4.922, rounded to 5) Note: Highly Unsatisfactory (1); Unsatisfactory (2); Moderately Unsatisfactory (3); Moderately Satisfactory (4); Satisfactory (5); Highly Satisfactory (6)

E. OTHER OUTCOMES AND IMPACTS

Gender

64. There were no specific gender-targeted activities in the project’s design; however, the project’s overall approach was to ensure equal benefits for both men and women by ensuring equal access to the project-financed investment, and the project tracked the number of direct beneficiaries by gender disaggregation, showing a 49.2 percent of female beneficiaries compared to 50.8 percent of male beneficiaries. Moreover, female project beneficiaries during the ICR mission stated that the cleaner and safer bus services enhanced the confidence of women to use the services during the night, compared to the situation pre-project.

Institutional Strengthening

65. Three of the four project city governments had no prior experience in implementing World Bank-financed projects and had very low technical and managerial capacity for project management and procurement when the project started. The project strengthened these cities’ capacity mainly in the following areas:

(a) Project management: Through training and hands-on support provided by the Task Team and learning by doing, the project cities greatly improved their capacity and performance in project management, which was considered satisfactory by the World Bank in the latter half of the project. Quoting the General Manager of the Panjin Public Transport Authority from the ICR mission in November 2019, “we prefer the Bank procurement and safeguards rules and procedures: transparent, less complaints, and moreover protects our interests from bidders.” Smaller project partners like Kuandian Municipality had initial difficulties to use World Bank rules and procedures (procurement, FM, safeguards) due to a smaller number of city officials in the PMO, but eventually they internalized them and achieved very good progress during the latter part of the project. (b) Institutionalization of project interventions: The project’s transport and asset management TA benefitted the Panjin Public Transportation authority in ensuring efficiency in public transport services, resulting in improvement of the cities’ statutory transport plans. The asset management TA helped develop comprehensive traffic asset management plans for local agencies to ensure long-term sustainability of their investments and contributed to the cities’ understanding of the importance of O&M from a life cycle cost

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perspective. The internalization of this can be seen in the increase of the cities’ annual road maintenance budget, from 8 percent at baseline to 15 percent at project closing.

Mobilizing Private Sector Financing

66. Although the project did not directly aim to mobilize private sector financing, there are various indications of land value increase and more investments made by the private sector as a result of the project. For example, in Kuandian, the total number of small businesses along the financed 36 roads increased from 530 in 2013 to 809 in 2019 (52.6 percent increase). Moreover, it was reported by the Kuandian PMO during the ICR mission that the average property price adjacent to three of these 36 roads increased from CNY 3,000-3,500/m2 in 2016 to CNY 3,800-4,500/m2 in 2019. In Panjin, there was an increase in housing sales along the project-supported bus routes (for example, Yipin Liuli residential building) at closing. A prominent example was seen in Kuandian, where the road development triggered the investment of a well-furnished international kindergarten. The ICR mission confirmed with the investor of the kindergarten that it was only after they received information of the upgrading of the roads nearby that they decided to invest in this site. The kindergarten serves young families who bought apartments near the improved roads. While recognizing the project’s contributions towards the mobilization of private sector financing, it should be noted that these changes could also be the result of contributing factors outside the project, such as increase in population due to in-migration, and overall growth of the local economy, among others.

Poverty Reduction and Shared Prosperity

67. The project benefited 350,340 people in the four cities in terms of improvement of livelihood opportunities as shown in the efficacy section. (see para 49-54)

Other Unintended Outcomes and Impacts 68. Adoption of new technologies: In Panjin, the city adopted new technologies for public transport optimization. Big data were used for origin-destination (OD) analysis and riding modality while established internet networks resulted in real-time connection between passengers and the bus company to optimize bus dispatching. Apps on smart devices provided user-friendly interfaces for e-ticketing, itinerary planning, information inquiries, bus locating, and these effectively addressed user dissatisfaction from long hours of waiting.

69. Creation of new jobs: See para 39.

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME

A. KEY FACTORS DURING PREPARATION

70. Reflection of lessons learnt. The project adequately reflected lessons learnt from past projects in Liaoning, in terms of timely availability of counterpart funds and adequate number of project staff at both provincial and local PMOs and Project Implementation Units (PIUs). During preparation, the project followed four World Bank-financed urban environmental projects in Liaoning: the Liao River Basin Project (P051859), and the first, second and third Liaoning Medium Cities Infrastructure Projects (P099992). The

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experiences from these projects were incorporated into the design of the project, for example, addressing shortage of capital in secondary cities, which was the biggest challenge for infrastructure development, by conducting financial analysis of participating cities/counties, and also having local government commitments on availability of counterpart funds for the project implementation. Secondary cities generally also showed shortage of funds for operation and maintenance, which was reflected and monitored in the project’s output indicator which participating cities/counties showed adequate annual road maintenance budgets in participating cities/counties; and also, the reclaimed water tariffs are adequate to cover the capital and O&M costs of the assets built. Implementing agencies’ experience with World Bank-financed projects was reflected in a decision to hire project management consultants at an early stage. The project therefore focused on priority basic infrastructure services to support these cities in their development and also includes technical assistance for capacity building of implementing agencies, improving capital investment and municipal asset management planning.

71. Soundness of background analysis and appropriateness of project design. During project preparation, thorough analyses in connection with the technical, financial, environmental, social, and institutional aspects were carried out and their feasibility was confirmed before they were included in the design.32 Technically, the project design was simple with few well-defined components. The results framework (RF) had deficiencies as discussed earlier (see also M&E Design Section). The design provided little flexibility to replace subprojects as the project was preparing with fixed scope and project cost estimates.

72. Adequacy of government commitment. The government commitment was strong during preparation as evidenced by the swift actions of the involved agencies in preparation, reviewing and approval of project documents. The Liaoning Provincial Government established a Steering Committee chaired by a Liaoning Vice Governor to provide overall policy direction for preparation of the project. In addition, the Liaoning Foreign Fund Utilization Project Office, established under the LDRC, was the Liaoning Province Project Management Office (PPMO), which was responsible for overall supervision of the project, focusing on technical and project management aspects, advisory to participating cities and PIUs, quality assurance and control, consolidation of monitoring, reporting, and due diligence requirements. The PPMO selected a Procurement Agent to assist with the preparation of bidding documents and managing the overall bidding process; and a Project Management and Contract Supervision team of consultants to support the PPMO in carrying out its functions and to provide advice to the cities and local PIUs on contract and safeguard supervision. These were considered adequate at the project preparation stage.

73. Assessment of risks and mitigation measures. The overall risk was justifiably rated substantial. The project identified three substantial risks which were related to stakeholder and implementing agency risks. To mitigate these substantial risks, a team of consultants was hired to support the PPMO with project management and contract supervision and provide advisory services to the PIUs; and capacity building and training were provided for staff from PMOs and PIUs. These mitigation measures, however, were later proven insufficient to avoid implementation delays. The other three risks, which were correctly rated moderate, were related to (i) the project’s design, which had inadequate involvement of communities (ii) social and environmental safeguards due to cities’ limited ability to compensate affected people in a timely

32 Project Appraisal Document for Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project, February 8, 2013.

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manner; and (iii) delivery monitoring and sustainability due to inadequate capacity of concerned agencies and shortage of funds. The PAD did not identify a substantial risk of timely provision of the counterpart funds by several of the participating governments, as was the case during implementation. Another risk that was not anticipated was the change of investment priorities in the participating cities/counties.

74. Readiness for implementation. Readiness for implementation varied considerably among participating cities, mainly due to the different availability of counterpart funds, and inexperienced and technically weak staff in several of the cities despite sessions of trainings conducted for the staff during project preparation.

B. KEY FACTORS DURING IMPLEMENTATION

75. Implementation delays in the first three years.33 Key reasons for the implementation delays were (i) inexperienced and inadequate numbers of staff members at two local PMOs and PIUs; (ii) weak Lingyuan City Government commitment evident in the unavailability of counterpart funds in timely manner; and (iii) some changes to development priorities, leaderships, and policies overtime at local level. Accordingly, almost five years after loan approval, in April 2018 the disbursement was only a third of the total loan amount. The project implementation progress was rated moderately unsatisfactory for a relatively long time. It was not until November 2018 when the implementing progress had improved in terms of works completion and loan disbursed, that the implementation progress was upgraded from moderately unsatisfactory to moderately satisfactory. The lack of progress in the first three years and the dropping of investments, as discussed, led to the need to make changes to the project through restructuring in May 2016. In September 2018, local PIUs needed time to complete their contracts and a second restructuring was approved just for the extension of the project by twelve months.

76. The Mid-Term Review (MTR) discussed changes which were considered necessary to improve the project’s performance and finetune its direction within an acceptable timeframe, as discussed throughout this report.

77. Institutional reform and improved communication. Project performance gradually turned around in January 2018 when the Liaoning Provincial Government implemented an institutional reform program, and a more experienced PPMO took over project implementation responsibilities. Accordingly, project implementation progress rating was upgraded to moderately unsatisfactory to moderately satisfactory and disbursement began to pick up in November 2018. The performance turnaround was also thanks to better teamwork within all the PMOs and with the PIUs and better communication between the PMOs and the World Bank Task Team.

33 It took about 20 months from loan effectiveness to first disbursement.

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IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME

A. QUALITY OF MONITORING AND EVALUATION (M&E)

Rating: Modest

M&E Design 78. A result-based monitoring and evaluation (M&E) system was developed, to be implemented by the PPMO and the local implementing agencies to monitor and evaluate the project implementation progress and analyze project results towards achieving the project objectives under each component. The design demonstrated several weaknesses, with a major issue being that the PDO Indicators primarily measured user/ beneficiary satisfaction and do not directly measure the outcome of transport efficiency, and later connectivity.

M&E Implementation 79. Monitoring was carried out primarily through monitoring of the agreed outcomes and output performance indicators, keeping track of progress of physical, procurement, financial, institutional, EMP and RAP issues which were reported in the semi-annual progress reports. EMP and RAP reports were prepared and submitted by independent consultants annually. A reliable flow of M&E information during implementation enabled the Bank team to assess the performance of project components and their potential sustainability. Although beneficiary surveys were conducted with comparatively small number of sample sizes during the last two years of the project implementation, more than 90 percent of the beneficiaries expressed that they were satisfied with the project. As mentioned, the May 2016 restructuring revised the PDO and the RF; however, the revised RF continued to present the same weaknesses.

M&E Utilization 80. The data and information generated were used by the Steering Committee and the PPMOs to determine the project outputs and its PDO achievement upon project closing. The results captured through the M&E framework served as a robust evidence base and provided confidence for the local governments to invest in more water reclamation and recycling facilities in Lingyuan City and in urban public transport in Panjin. (refer to Annex 7)

Justification of Overall Rating of Quality of M&E

81. The overall rating of quality of M&E is Modest to reflect the results framework’s (original and revised) design weaknesses, small sample size of feedback surveys, and the accuracy of some of the data, as indicated in this report.

B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE

82. Environmental and Social. The project triggered and OP 4.01 (Environmental Assessment) and was classified Category B-partial assessment. OP 4.12 (Involuntary Resettlement) was also triggered and was implemented following the applicable policy requirements, as presented below.

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83. Environment Assessment. During project preparation, adverse environmental impacts were identified for the physical components of the project during their construction and operation, which were considered moderate, site-specific and mostly temporary. An Environmental Impact Assessment (EIA) and an EMP were developed for the project and disclosed locally on September 20, 2012 and through the Bank’s InfoShop on October 12, 2012.34 During the project restructuring in 2016, EIAs were prepared for the two new subprojects (Kuandian and Lingyuan, respectively) with the approval of local authorities, and the project’s EMP was accordingly updated and disclosed by the World Bank. The project complied with the EMP requirements. The provincial PMO and PIUs established and maintained satisfactory environmental management capacity with the support of third-party consultants who conducted independent EMP implementation monitoring and reported on its results to both the provincial PMO and the World Bank on a regular basis. The reports35 showed that environmental mitigation measures and environmental monitoring were implemented during the construction and operation of all subprojects without any environmental non- compliance and occupational, health and safety incidents. In addition, the project resulted in significant environmental benefits as anticipated in the PAD and explained above.

84. Involuntary Resettlement. The project triggered the Involuntary Resettlement policy (OP 4.12) due to expected significant land acquisition and physical resettlement impacts across the participating cities/counties. A consolidated RAP and site-specific RAPs, including land acquisition due diligence reports, were prepared for urban road improvement and wastewater treatment activities. The RAP provided details regarding resettlement policy principles and regulations to be followed, compensation rates and budgets, mitigation measures to restore incomes where necessary, and institutional and monitoring arrangements. A resettlement office was set up under each city’s PIU to implement the land acquisition and resettlement activities. All RAPs were disclosed locally on October 16, 2012 and disclosed through the Bank’s InfoShop on December 14, 2012.36 During the project restructuring in 2018, land use due diligence was prepared for the new subproject of road rehabilitation activities in Kuandian to add additional activities to utilize the loan savings. The land for these activities had already been acquired years earlier, therefore no RAP was required. In addition, a public consultation report was prepared for the new road rehabilitation activities in Lingyuan. The document reported on interviews with different stakeholders, such as women, the disabled, and elders, and presented comments and suggestions from these stakeholders which were incorporated as relevant into the project design and construction activities. In conclusion, the project was implemented in compliance with OP 4.12 as confirmed by a third-party external monitoring function (a consulting firm that is a subsidiary to the Liaoning Social Academy). The project also generated significant social benefits to local people as discussed. The total land acquisition area of the project was 760.6mu, impacting 1,843 persons/492 households, and the total number of affected households by physical resettlement was 548.

85. Grievance redress. An effective grievance redress mechanism was set up and operated at each PIU to respond to concerns and complaints in a timely manner. According to mission interviews, when a PIU

34 https://hubs.worldbank.org/docs/imagebank/Pages/docProfile.aspx?nodeid=16828580 35 Six annual/semi-annual Environmental Monitoring Reports for Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project drafted during December 2016 – August 2019. 36 https://hubs.worldbank.org/docs/imagebank/pages/docprofile.aspx?nodeid=16870843

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received questions and concerns from affected people, these were responded to through telephone or a visit to the site. No formal appeal cases were raised under this project.

86. Procurement. Procurement was generally conducted in accordance with the agreed procedures and rules as specified in the loan and project agreements. Main issues identified during project implementation included: (a) in the Lingyuan urban transport subproject, significant time was spent in bid evaluation for some works contracts which resulted in substantive delay in contract award in order to fully address complaints from bidders; (b) the payment to various consultants was not made timely in accordance with the conditions of contract which partly contributed to the consultants not fully delivering the required output; (c) the unit prices in some shopping contracts were higher than prevailing market prices; (d) the performance security provided by the contractor under one works contract in Lingyuan component was not issued in accordance with the conditions of contract and it was not unconditional on-demand bank guarantee. The issues were resolved as follows: (b), payments due to consultants were made subsequently and the consultants resumed the work; (c), the client subsequently explained and documented that this was because more spare parts were purchased than standard; (d), since the issue was identified during procurement post review in June 2019 when the works in the contract had been substantially completed, the contractor was not asked to replace with new performance bank guarantee.

87. Financial Management. Adequate project financial management arrangements were in place for reasonable assurance of the World Bank loan being used for its intended purposes. The FM legal covenants were basically well complied with by the counterpart. All audit reports were unqualified (clean) opinions and submitted to the World Bank on time without significant FM-related control weaknesses. Deficiencies in FM performance, such as slight delays with the submission of Interim Unaudited Financial Reports (IUFRs) in the first project year, were timely flagged by the World Bank team and quickly resolved by the counterpart. The IUFRs were found of acceptable quality. The Bank loan disbursement in the first years was slow and behind schedule due to the delayed implementation progress as discussed. Periodically, the Bank provided FM related on-job training and implementation support to the project and monitor the project FM performance. The project FM performance and disbursement progress gradually accelerated towards the end of the project.

88. Legal covenants. The four legal covenants, namely the 1) yearly progress reports, 2) annual implementation plan, 3) yearly independent audits and 4) yearly operation and maintenance plan were sufficiently adhered to by the counterpart.

C. BANK PERFORMANCE

Rating: Moderately Satisfactory

Quality at Entry

89. The World Bank team included adequate expertise (municipality engineering, wastewater management, economics, and social and environmental specialists) to assist the client to prepare the project. The project was

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prepared in little over a year’s time. The World Bank adequately fulfilled its fiduciary role by carrying out procurement and financial management assessments of the implementing agencies and by ensuring the development and disclosure of necessary safeguard documents before appraisal. Weaknesses at entry were the ones discussed earlier such as the RF weaknesses and the insufficient analysis of local conditions and local capacities, etc. which led to the dropping of two subprojects during implementation.

Quality of Supervision

90. The Task Team focused on project technical aspects and project management throughout the implementation period to ensure quality implementation. It conducted implementation support missions, including extensive site visits, every six months and supported the Liaoning PMO and local PMOs and PIUs through high level discussions with the Liaoning Provincial Finance Department and the Liaoning Development & Reform Commission. Implementation Status and Results Reports were well documented and performance ratings and reporting were candid and fair. However, during the first few years of project implementation, the Task Team could have been more proactive and timelier in addressing project issues: (i) by seeking intervention of provincial and local leaders in resolving counterpart fund and staffing problems of participating city/county/district and (ii) seeking earlier restructuring to solve issues early on in the project. During the last two years of the project implementation, the Task Team maintained frequent communication with the PMOs and PIUs (daily communication between the TTL and PMO coordinator), consultants, design institutes, procurement agent, etc., and actively supported the Liaoning PPMO and local PMOs and PIUs in problem solving in a practical manner, especially on challenges in technical variations, land acquisition, and resettlement.

91. During the last two years of the project, the Task Team maintained more frequent and better communication with the PMOs and PIUs (daily communication between the World Bank Task Team Leader (TTL) and PMO coordinator), consultants, design institutes, procurement agent, etc., and actively supported the Liaoning PMO and local PMOs and PIUs in problem solving in a practical manner, especially on technical challenges, and land acquisition and resettlement issues. For example, in 2018, in Kuandian County, the urban communities expressed their urgent need for rehabilitation of existing roads and bridges on which they traveled daily. The Task Team proactively worked with the Kuandian County PMO to review and optimize the subcomponent design with clearance from the higher authorities timely, including setting of time bounded action plans and their follow-up; as well as provision of training as needed to the client.

Justification of Overall Rating of Bank Performance

92. Based on the insufficient analysis of local conditions and local capacities, the M&E indicators deficiency at quality at entry; and the late restructuring in the first three years of the project supervision, the Bank performance is rated moderately satisfactory.

D. RISK TO DEVELOPMENT OUTCOME

93. The key sustainability elements which have been developed and established in the project are: (a) commitments of participating governments to continue provision of annual O&M budgets of invested assets

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lines in the relevant government budgets from 2019 onward; (b) good quality operations through training of staff and operators using the loan that focused on internationally best practices on O&M for facilities and equipment of constructed assets; and (c) adequate tariffs to cover total costs including debt service by the wastewater treatment and water reclamation company to become financially self-reliant, and the concerned Lingyuan Wastewater Treatment and Water Reclamation Company has demonstrated it has built-up the capacity to manage the company independently and financial self-reliant. Thus, the risk to development outcome are low. Based on the financial and economic benefits generated from the project, the Lingyuan Government has decided to construct a second wastewater treatment plant with water reclamation and recycling infrastructures to support its industrial water demands; and about US$3 million of green fund has been granted by the Central Government to recognize and further support the success of the Panjin urban public transport.

V. LESSONS AND RECOMMENDATIONS

94. Task Teams should properly assess the availability of counterpart funds at appraisal. A fundamental and continuous challenge throughout project implementation was the lack of counterpart funding. The team, at appraisal stage, was not able to foresee the substantial risk of timely provision of the counterpart funds by several of the participating governments and define mitigating measures accordingly. In addition, the risk of participating city and district dropping out of the project during the earlier years after the loan became effective in July 2013 was not recognized and mitigation measures to replace these investments were not designed. The timely availability of counterpart funds must be analyzed and confirmed at appraisal, and mitigation measures must be put in place and reassessed during the course of implementation.

95. TA packages need to be triggered early on to influence impact on project investments. The project’s transport and asset management TA benefitted the Panjin Public Transportation authority in ensuring efficiency in public transport services and led to an improvement of the cities’ statutory transport plans. The asset management TA helped develop comprehensive traffic asset management plans for local agencies to ensure the sustainability of their investments and improve the cities’ understanding of the importance of O&M from a life cycle cost perspective. The internalization of this can be seen in the increase of cities’ annual road maintenance budget, from 8 percent at baseline to 15 percent at project closing. However, the late intervention of this TA did not allow for the full impact of this activity. On the other hand, recommendations from the traffic management TA were provided on time and to Panjin City and contributed to bus route optimization. In order to ensure TA inputs are utilized to a full extent, such packages should be triggered early in the lifetime of a project.

96. Project investments in community can trigger behavioural change for inter-sectoral transformational impact at the city level. The project successfully demonstrated how community-level subprojects could lead to inter-sectoral and transformational impact. For example, a road subproject in Kuandian Municipality, which paved an earth road in the vicinity of homes, was recognized by the local residents as not only improving accessibility, but also as a major enhancement factor of their living environment as they stopped dumping waste into the river in appreciation of their improved conditions.

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Interviews with project beneficiaries conducted at project closing found that this was indeed a spontaneous response of the community, and a fundamental behavioural change. Quoting one beneficiary, “the road has become so beautiful and clean, now we want a clean river next to it, too.” In addition, the community took on itself to beautify its surroundings (paving sidewalks, planting flowers, and so on) as witnessed first-hand by the ICR Team. The road improvements by the Road Bureau also stimulated the Environment Bureau to have more frequent waste collection and place trash bins along the roads; it also stimulated the Water Resource Bureau to carry out proper embankment of the river. In conclusion, simple infrastructure investments can lead to inter-sectoral coordination and mutual encouragement to improve the overall living environment of communities.

97. Exploring alternatives to conventional water supply supported by strong local government support and evidence for demand will serve as an example for other cities to pursue green and sustainable solutions to water scarcity. To date in Lingyuan, over 12 million m3 of reclaimed water have been sold, earning US$4.3 million in revenue and saving around US$3.6 million in operating costs for industries, and resulting in more significant economic value for the local development. As the municipal government has witnessed the benefits from the water recycling project, the decision to build the second wastewater treatment plant has already been made. Reclaimed municipal wastewater may act as a useful alternative to the conventional types of water resources and may help mitigate urban water scarcity pressure, improve the efficiency of water use, reduce water pollution, minimize groundwater extraction, and improve water ecosystems. Such practice can be duplicated for building urban water resilience and establishing a circular economy. Lingyuan’s success in recycling municipal wastewater could not be materialized without strong support from local government in setting right policies and enforcing regulations. Meanwhile, it required stimulation of demand for reclaimed water, to ensure financial viability of investments.

98. Innovative pilot projects catalyzing city-wide change can serve as models for the region and China as a whole. As highlighted in the efficacy section, the Panjin bus subproject effectively demonstrated the potentials of transforming its urban public transport into more inclusive and sustainable infrastructure through mainstreaming bus transport as a means to get around the city and increasing the mobility of its residents. Panjin City is now recognized in China as a pioneer and a model for green mobility in medium sized cities in China, and the project provides a strong example of how this can be replicated in other cities. Panjin City was invited by the National Government to showcase its success in green mobility development to other secondary cities in China.

.

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS contributed(this8. For could IO-1.2, be to thethe this). resultresult isof significantly improper technical higher than appraisal planned. of the Please activity check or foran issueaccuracy of attribution and if this whereis correct, other then things go backhappened to the in M&E the sectionbackground and explainwhich this

A. RESULTS INDICATORS

A.1 PDO Indicators

Objective/Outcome: To improve transport connectivity in selected cities in Liaoning Province Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion PO-1. Percentage of people Percentage 45.00 70.00 70.00 99.00 walking and biking satisfied with new and improved 03-Dec-2012 20-May-2013 28-Sep-2018 30-Sep-2019 facilities on selected roads in Donggang, Kuandian and Lingyuan.

Comments (achievements against targets): ACHIEVED at 141 percent. All survey questions were related directly to project-financed investments, and the people asked were local and users of relevant transport services. Survey data from Provincial Project Management Office. This indicator was revised in the first restructuring.

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion PO-2. Percentage increase of Percentage 35.00 60.00 60.00 98.00

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riders satisfied with public 03-Dec-2012 20-May-2013 28-Sep-2018 30-Sep-2019 transport services on selected routes (1, 30, 31, 32 & 33) in Panjin

Comments (achievements against targets): ACHIEVED at 163 percent. All survey questions were related directly to project-financed investments, and the people asked were local and users of relevant transport services. New comfortable buses with better connections and optimized operation provides better experience for daily mobility. Survey data from Provincial Project Management Office. This is an original indicator.

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion PO-4 Direct project Number 0.00 340000.00 213200.00 350340.00 beneficiaries 03-Dec-2012 20-May-2013 28-Sep-2018 30-Sep-2019

Female beneficiaries Percentage 0.00 170000.00 106600.00 172520.00

31-Dec-2017

Comments (achievements against targets): ACHIEVED at 164 percent. Beneficiaries to the industrial user are not included as per the initial definition. Data from Provincial Project Management Office. This is an original indicator.

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Objective/Outcome: To improve reclaim wastewater in selected city in Liaoning Province Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion PO-3. Percentage of Percentage 0.00 60.00 50.00 78.00 reclaimed water used in the industrial park 03-Dec-2012 20-May-2013 28-Sep-2018 30-Sep-2019

Comments (achievements against targets): ACHIEVED at 156 percent. Data from Provincial Project Management Office. This is an original indicator.

A.2 Intermediate Results Indicators

Component: Component 1 Improving Urban Transport System

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IO-1.1. Length of new and Kilometers 0.00 52.00 31.68 50.70 rehabilitated streets with improved public transport 03-Dec-2012 20-May-2013 28-Sep-2018 30-Sep-2019 and NMT in Donggang, Kuandian and Lingyuan.

IO-1.1.1 Roads constructed, Kilometers 0.00 0.00 10.55 13.65 non-rural 03-Dec-2012 20-May-2013 28-Sep-2018 30-Sep-2019

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IO 1.1.2 Roads Kilometers 0.00 0.00 21.13 37.05 rehabilitated, non-rural 03-Dec-2012 20-May-2013 28-Sep-2018 30-Sep-2019

Comments (achievements against targets): ACHIEVED at 160 percent. Data from Provincial Project Management Office. This indicator was revised in the first restructuring.

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IO-1.2. Increase in number of Number 4300.00 5100.00 5100.00 62122.00 passengers per year on selected bus routes (1, 30, 03-Dec-2012 20-May-2013 28-Sep-2018 30-Sep-2019 31, 32 & 33) in Panjin.

Comments (achievements against targets): ACHIEVED at 1218 percent, and reliability of data is questionable. Data from Provincial Project Management Office. This indicator was revised in the first restructuring.

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IO-1.3. Percentage increase Percentage 8.00 15.00 15.00 15.00

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of Annual Road Maintenance 03-Dec-2012 20-May-2013 28-Sep-2018 30-Sep-2019 budget in participating cities

Comments (achievements against targets): ACHIEVED at 100 percent. Data from Provincial Project Management Office. This is an original indicator.

Component: Component 2 Improving Urban Wastewater Treatment and Reclamation

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IO-2.1. Number of industries Number 0.00 20.00 5.00 6.00 connected to reclaimed water system in Lingyuan 03-Dec-2012 20-May-2013 28-Sep-2018 30-Sep-2019

Comments (achievements against targets): ACHIEVED at 120 percent. Data from Provincial Project Management Office. This is an original indicator.

Component: Component 3 Project Management and Capacity Building

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IO3.1. Number of staff Number 60.00 460.00 340.00 575.00

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

training days in project 03-Dec-2012 20-May-2013 28-Sep-2018 30-Sep-2019 financed training and TA activities

Comments (achievements against targets): ACHIEVED at 169 percent. Data from Provincial Project Management Office. This is an original indicator.

Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion IO.3.2. Number of revised Number 0.00 3.00 2.00 2.00 local traffic management plans and asset 03-Dec-2012 20-May-2013 28-Sep-2018 30-Sep-2019 management plans

Comments (achievements against targets): ACHIEVED at 100 percent. The intended original definition of "revised" is not clear from the Project Appraisal Document, whether it refers to a formal change in statutory plans, or whether it refers to an improvement in any kind of local traffic management plans and asset management plans. The achievement figures are based on the latter definition. Data from Provincial Project Management Office. This is an original indicator.

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B. KEY OUTPUTS BY COMPONENT

Objective/Outcome 1 Improve transport connectivity 1. People walking and biking satisfied with new and improved facilities on selected roads in Donggang, Kuandian and Lingyuan. Outcome Indicators 2. Increase of riders satisfied with public transport services on selected routes in Panjin 3. Project beneficiaries (disaggregated by male/female) 1. New and rehabilitated streets with improved public transport and NMT in Donggang, Kuandian and Lingyuan 2. Increase in passengers per year on selected bus routes in Panjin Intermediate Results Indicators 3. Increase of Annual Road Maintenance budget in participating cities 4. Staff training days in project financed training and TA activities 5. Revised local traffic management plans and capital investment plans Donggang City 1. Construction of 1466 m long x 45 m wide Zhanqian Avenue including segregate bus lanes and other ancillary works. 2. Upgrading of 790.12 m long x 40 m wide Gaotie Avenue and other ancillary works. 3. Construction of 1227.6 m long x 30 m wide Haiguanbei Road and other ancillary works. 4. Construction of 1081.16 m long x 18 m wide Hengyi Road and other ancillary works. 5. Construction of 1197.29 x 30 m long x 30m wide Henger Road and other ancillary works. Key Outputs by Component 6. Construction of 517.22 m long x 30m wide Hengsan Road and other ancillary works. (linked to the achievement of the 7. Procurement of 18 road maintenance equipment consists of one each of asphalt spreader, Objective/Outcome 1) exaction truck, filling machine, spreader, double steel wheel vibrating roller, guardrail cleaning vehicle, and two each of high-altitude working vehicles, pipeline cleaning vehicles, sanitary suction trucks, road sweepers, road cleaning vehicles, and garbage trucks.

Kuandian County 1. Rehabilitation of 36 secondary access roads of total 21460 m long x 4 – 21.5 m wide within the urban area and other ancillary works.

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2. Construction of three bridges of total 176 m long and 9 – 12.5 m wide. 3. Procurement of road maintenance and traffic management equipment including wheel loader, snow thrower, sprinkler, traffic signal control system, traffic signal machine and cabinet, signal machine and cabinet foundation, vehicle signal lamp, direction indicating signal lamp, lane light bracket, cantilever signal lamp pole and foundation, camera, etc.

Lingyuan City 1. Construction of 1895.51 m long x 26 m wide the southern section of East Binhe Road and other ancillary works. 2. Construction of 1550.6 m long x 23 m wide Wenyi Road and 304.4 m Wenyi Bridge and other ancillary works. 3. Rehabilitation of 956.85 m long x 30 m wide Wuliu Da Road and construction of 135 m Wuiu Bridge and other ancillary works. 4. Rehabilitation of 2520 m long x 26 m wide the northern section of East Binhe Road and other ancillary works. 5. Construction of seven roads with total length 5157.90 m and a bridge of 31m long, ands and other ancillary works. 6. Rehabilitation of Construction of ten roads with total length 11871.3 m and other ancillary works. 7. Procurement of 24 sets of equipment for road maintenance and management.

Panjin City 1. Construction of 24000 m2 bus maintenance depot at Shuangtaizi and ancillary works. 2. Construction of 56000 m2 bus maintenance depot at Xinglongtai and ancillary works. 3. Procurement of 40 new 8.5 m LNG buses; 20 new 9.3 m LNG buses; 50 new 10.5 m LNG cum electric buses; and 30 new 12 m LNG cum electric buses. 4. Procurement of replacement facilities and equipment for buses and depots.

Objective/Outcome 2 Reclaim wastewater

1. Reclaimed wastewater used in the industrial park Outcome Indicators 2. Project beneficiaries (disaggregated by male/female)

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1. Industries connected to reclaimed water system in Lingyuan Intermediate Results Indicators 2. Staff training days in project financed training and TA activities 3. Revised local traffic management plans and capital investment plans 1. Installation of 40.27 km of sewage collection networks 2. Installation of 42.98 km of storm drainage networks Key Outputs by Component 3. Installation of 23.76 km of reclaimed wastewater networks, including a pumping station of (linked to the achievement of the 30,000 m3/day that connects the WWTP to the industrial park Objective/Outcome 2) 4. Construction of a boosting pumping station 30,000 m3/d on network to supply remote users 5. Procurement of wastewater, storm water and reclaimed water facilities maintenance and management equipment

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ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION

A. TASK TEAM MEMBERS

Name Role Preparation Paul Procee Task Team Leader Guoping Yu Procurement Specialist Haixia Li Financial Management Specialist Zhefu Liu Social Development Specialist Chongwu Sun Environmental Specialist Yan Zong Transport Specialist Jian Xie Environmental Specialist (Economic Analysis) Alejandro Alcala Gerez Counsel Gang Qing Water Sanitation Specialist Vivian Aggueta-Bernal Urban Specialist Hongye Fan Transport Consultant Olga Kaganova Asset Management Specialist Christopher Sall Climate Change Specialist Supervision/ICR Minghe Tao Task Team Leader Jianjun Guo, Guoping Yu, Hua Xu Procurement Specialists Haixia Li Financial Management Specialist Yan Zong Transport Specialist Yan Zhang Program Assistant (Procurement) Hongwei Zhao Program Assistant (Urban GP) Gang Qin Senior Water Specialist Shuang Zhou Social Development Specialist Xiaodan Huang Senior Environmental Specialist Eddie Hum Senior Municipal Engineer, Consultant Yuko Arai ICR Author

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B. STAFF TIME AND COST

Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY11 0 4,388.34 FY12 29.130 109,858.03 FY13 25.265 161,721.27

Total 54.40 275,967.64

Supervision/ICR FY14 23.137 100,232.59 FY15 18.423 93,413.19 FY16 30.827 138,685.58 FY17 27.926 112,405.89 FY18 23.653 119,117.09 FY19 21.125 110,566.94 FY20 14.897 73,463.30 Total 159.99 747,884.58

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ANNEX 3. PROJECT COST BY COMPONENT37

Amount at Approval Cost after 2016 restructuring Actual Cost at Project Closing Components Total IBRD Local Total IBRD Local Total IBRD Local Component 1: 250.17 107.8 142.37 182,3946 117.098 65.2996 174.2996 109 65.2996 Improving Urban Transportation Systems 1.a. Donggang: Transit 63.27 24.72 38.55 63.5880 35.2084 28.3796 63.5896 35.21 28.3796 oriented development 1.b. Kuandian: Urban 65.52 24.72 40.8 31.0182 24.1316 6.8866 30.7766 23.89 6.8866 road rehabilitation 1.c. Lingyuan: Urban 33.37 17.31 16.06 55.1939 35.604 19.5899 47.5499 27.96 19.5899 road rehabilitation 1.d. Longcheng: 57.15 22.25 34.9 Transit oriented development 1.e. Panjin: Public 30.86 18.8 12.06 32.5971 22.1536 10.4435 32.3835 21.94 10.4435 transportation improvement Component 2: 87.68 40.55 47.13 41.6697 31.2524 10.4173 40.3173 29.9 10.4173 Improving urban wastewater treatment and reclamation 2.a. Lingyuan: 43.71 20.77 22.94 41.6697 31.2524 10.4173 40.3173 29.9 10.4173 Wastewater treatment and collection 2.b. Suizhong: 43.97 19.78 24.19 sewerage and drainage network Component 3: 1.65 1.65 0 1.65 1.65 0 1.64 1.64 0 Technical assistance, training and consultation services 3.a. Technical 0.5 0.5 0 0.5 0.5 0 0.5 0.5 0 Assistance and Capacity Building 3.b. Project 1.15 1.15 0 1.15 1.15 0 1.14 1.14 0 Management Costs Total Project Costs 339.50 150.00 189.50 225.72 150.00 75.72 216.26 140.54 75.72

ANNEX 4. EFFICIENCY ANALYSIS

37 The numbers have been verified by the Bank team and the PMO. There is some discrepancy between the datasheet and Annex 3. For borrower/ recipient financing in the datasheet, the original amount should be 189,500,000, revised amount should be 75,720,000 and actual disbursed should be 75,720,000. The latter could be due an incorrect entry in the system.

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1. Introduction

99. At the completion of the Liaoning Coastal Economic Zone Urban Infrastructure and Environment Management Project, a cost-benefit analysis was carried out by reviewing and analyzing various project materials and by taking field visits to Lingyuan, Donggang and Kuandian for data collection. The purpose of the study was to measure the efficiency of the project implementation by using the actual implementation costs and benefits to envisage how economic resources and inputs were and will be converted into required economic results. During implementation, the number of subprojects was reduced from seven to five. The remaining five subprojects were categorized into three groups in nature: 1) urban road rehabilitation and development; 2) public transit system improvement; and 3) drainage and wastewater reclamation.

100. The economic reevaluation updated the project economic analysis conducted at appraisal, recalculating the economic internal rate of return (EIRR) and the Economic Net Present Value (ENPV) and comparing the results with the appraisal estimates. The analysis generally follows the approach adopted at the initial appraisal. Meanwhile, several World Bank documents, including “Handbook on Economic Analysis of Investment Operations” (1998) and “Cost-Benefit Analysis in World Bank Projects” (2010) were used as references for the analysis.

101. The fundamental economic analysis methodology was to compare the benefits and costs of the “with-project” scenario to those of a “without-project” scenario or a counterfactual situation. The incremental benefits should at least cover the incremental costs at a social discount rate of 8 percent.38 Project costs and benefits were reassessed on the basis of data and information provided by the five project implementing units (PIUs) and were valued using the domestic price numeraire and expressed in constant 2019 prices so that the effect of general inflation was excluded. The project implementation period was six years, from 2014 through 2019. The time span for the operation was set to be 20 years starting in 2020, except for Panjin public transit system improvement project, where the economic life of an LNG-fueled bus was ten years. 50 percent residual value was assumed for the road development subprojects as most of the transport infrastructure could be utilized far beyond 20 years. The exchange rate between USD and CNY was USD 1 = CNY 7.0. Items such as subsidies, taxes and duties that should be considered in a financial analysis were excluded from the economic analysis since they transferred resources from one party to another without reducing or increasing the amount of resources available for the economy as a whole.

102. As a usual case, most of the infrastructural project risks concentrated on the construction stage. Once the construction was complete, the risks mainly rested with benefit realization, and facility operation and maintenance. A sensitivity analysis examined the impacts of changes in key variables on the project's economic result from the basic scheme, thus identifying the factors that needed special attention to ensure economic viability of the project. Key variables examined in the analysis included operating and maintenance costs (O&M) and benefits. Only adverse changes of the variables were considered in the analysis. Two indicators were used to measure the sensitivity of a key variable. The sensitivity index (SI) was the ratio of the change percentage of NPV to the change percentage of the related variable. The conversion value (SV) was the percentage change in a variable, which made the NPV equal to zero.

38 8 percent social opportunity cost was applied during appraisal. This analysis uses the same figure for the sake of consistency.

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2. Urban Road Subproject Economic Analysis

103. Among the five subprojects, three were urban road pavement or rehabilitation, and the urban roads were the key contributors to the Project’s economic benefits. Therefore, the formulas for urban road benefit calculation, which are highly similar to those used at the initial appraisal, are described firstly before the formal reevaluations. The economic benefits from urban road construction or rehabilitation in this study contained five parts:

 Savings in traffic operating costs for vehicle, caused by improvement of road conditions. The costs may have included fuel consumption, daily maintenance, repairing and administrative expenditure.  Savings in travel times on passenger cars that moved around the newly built or rehabilitated roads.  Decreases in costs for working capital used for vehicle carrying goods on roads due to smoother and more speedy transportations.  Reduced losses from car accident occurrences thanks to the upgraded road conditions, including advanced intelligent traffic control systems.  Urban road and traffic system improvements could have had a positive impact on the surrounding areas in terms of transporting and walking convenience, people flows, commercial development, entertainment, amenity, etc. The typical indicator for all these is land value appreciation which is an indirect but important economic benefit to the society.

3. Reclaimed Water Subproject Economic Analysis

104. In the PAD, a cost-effective analysis or least cost analysis, instead of cost-benefit analysis, was conducted due to the difficulty in quantifying and monetizing the economic benefits of the wastewater treatment and reclamation interventions. Two alternative technical options, of which the route and material of pipelines were different, were identified, compared and analyzed to ensure selection of the least cost technical scheme. In this economic reevaluation the least cost analysis was meaningless and was not re- applied, since the Project was already completed. Instead, the basic methodology for economic evaluation for the wastewater treatment and reclamation component was to compare costs in the “with” and “without” project scenarios. The difference in costs between the two scenarios or the resource cost saving was considered as the economic benefit.

4. Summary of the Project economic Assessment

105. After 6 years of project implementation, Liaoning Coastal Economic Zone Urban Infrastructure and Environment Management Project finished the designed contents and has started to generate benefits to the society by separately providing newly built or improved urban traffic roads, sewage and drainage system, waste water reclamation facilities or public transit system to the four beneficiary cities or counties. During the 2016 restructuring, several adjustments in terms of project contents and cost reallocations were made but the general project objectives remained unchanged. Besides their direct benefits, the subprojects, particularly the urban road constructions, will play an important role in improving the people’s living environment and in promoting local economic development. The betterment of traffic conditions created a certain location advantage which could attract more investment and commerce, and at the same time

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facilitated safe, smooth, comfortable and fast travels for the people on the roads. These indirect benefits were significant as well.

106. The following table summarizes the economic reevaluation result of each sub-project in comparison with the figure forecasted at appraisal. Among the five, the economic results of Donggang Urban Road Development Project and Panjin Public Transit System Improvement Project were slightly below the estimation made at appraisal. The overall EIRR is 14.2 percent, higher than the 8 percent threshold. Generally speaking, except for the dropped components, the project successfully fulfilled the planned tasks and its economic viability is sustainable.

Table 5 Summary of Economic Reevaluation Results

EIRR at EIRR at Discrepancy Sub-Project Appraisal Completion (percent) (percent) (percent) Donggang Urban Road Development Project 11.9 11.1 -0.8 Kuandian Urban Road Development Project 17.8 18.9 1.1 Lingyuan Urban Road Development and Wastewater 14.6 19.3 4.7 Reclamation Project Panjin Public Transit System Improvement Project 15.3 13.9 -1.4

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS

Below are the comments from the Liaoning PPMO, received on March 3, 2020

107. On February 14, 2020, we received a copy of the Implementing Completion Results (ICR) Report of the Liaoning Costal Economic Zone Urban Infrastructure and Environmental Management Project from the World Bank. The ICR Report has been carefully reviewed by us, and we have the views that the World Bank describes and summarizes the implementation and completion of the project comprehensively. The followings are some of our feedbacks:

I. Overview on the ICR Report.

108. The Project was approved by the Board of the World Bank on March 20, 2013, became effective on July 22, 2013, and was closed on September 30, 2019. Its implementation took about six and a half years. The project consists of three components: Component 1 – Improving Urban Transport Systems; Component 2 – Improving Urban Wastewater Treatment and Reclamation; and Project Component 3 – Technical Assistances, Training and Consulting Services. There are four participating cities and County (Panjin, Lingyuan, Donggang and Kuandian) with five subprojects.

109. Since the effective of the project in 2013, the project has experienced very slow implementation and a restructuring was done in 2016. However, due to untimely available of adequate counterpart funds and difficulties encountered regarding land acquisition, the project has continuously progressed very slowly. In February 2018, Project Management Office (PMO) was transferred to Liaoning Provincial Urban Construction & Renewal Project Office (LUCRPO). With the support from the World Bank Task Team; the leaderships from Provincial Development & Reform Commission (PDRC), Provincial Finance Department (PFD) and other provincial departments; the remitting efforts from the local governments and their PMOs; and close cooperation from the consulting companies, tender agencies, design units, supervision agencies, contractors and other relevant units, the project was under full and speedy implementation during February 2018 to 30 September 2019.

110. Upon the project closing date of 30 September 2019, the project development objectives (PDOs) have fully realized. Majority of the performing indicators have exceeded the original target values, and cumulative Loan withdrawal has reached 93.7 percent of the total amounts. Regarding the relevance of the PDOs, and the efficacy and efficiency evaluation of the project implementation, it can be concluded that the project outcomes are satisfactorily achieved. Moreover, the gender matter has also been equally recognized, the capacity of the participating cities and county has been enhanced, private investments have been mobilized, and poverty reduction and mutually prosperity have been fulfilled under the project completion. All these achievements have brought significant outcomes to the participating cities and county which have very long-term positive impacts to them.

II. Project Outcomes and Benefits.

111. Through the project implementation and completion reviews, we have the views that the project outcomes and benefits can be depicted under the following aspects:

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The World Bank Liaoning Coastal Economic Zone Urban Infrastructure and Environmental Management Project (P126611)

(a) Improving Urban Transport Systems. Improvement of the urban transport systems has saved traveling costs in urban areas of the participating cities and county. In addition, the improvement also links to pedestrian walkways which are safe and convenient to people; people flow; commercial development; entertainment activities; and other aspects; and have a very positive impacts to the urban areas in the participating cities. A typical indicator of the improvement leads land value appreciation which is indirectly connected but very important economic benefit to the society.

(b) Improving Urban Wastewater Treatment and Reclamation. The reclaimed water is reclaimed to steel production, glass manufacturing, automobile production and metal processing factories in the industrial park. It has not only greatly alleviated the problem of industrial water restrictions and rationing in the industrial park, but it has also reduced exploitation of groundwater, cut down pollution loads to local river. At the same time, the surplus reclaimed water is also discharged to local Daling River which has been completely changed the conditions of this seasonal river during dry season. The reclaimed water not only reduces the production cost of the above-mentioned factories, but also improves the profits of the factories and realizes the environmental benefits and the economic benefits in a win-win situation. At the same time, saving the precious underground water resources and improving the local environment have prompted regional and local economy and its development, in additional to the Government’s request to have “Green Mountains & Clear Water” that benefits the local residents.

(c) Others. The project has improved the living conditions and environment of local residents in the participating cities and county. It has also contributed to the local economic development with the improved connectivity and accessibility of urban transport that have led to the poverty reduction in participating cities and county.

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ANNEX 6. SUPPORTING DOCUMENTS

1. Project Information Document 2. Project Appraisal Document 3. Integrated Safeguards Data Sheet 4. Project Concept Note 5. Loan Agreement 6. Project Restructuring Papers 7. Implementation Support Mission Aide Memoires, including MTR and Management Letters 8. Implementation Status and Results Reports add from June 2013 to May 2019 9. Borrower’s Implementation Completion Report 10. Summary of Resettlement and Social Development Completion Report 11. Data sets used to assess outcomes – baseline surveys, beneficiary surveys, etc. 12. Traffic Management TA Report 13. Asset Management TA Report

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ANNEX 7. RESULTS STORIES

Catalyzing Sustainable Public Transport Development for Green and Inclusive Urban Mobility in Panjin Municipality, China

112. Globally speaking, transport emits 23 percent of all energy-related greenhouse gases while urban transport accounts for up to 60 percent of the urban GHG emission. Therefore, inclusion of green mobility principles in public urban transport development and management can unlock a great mitigation potential at scale. Conventional bus transport system may neither extend into residential quarters nor to cover rural area as to effectively manage the operating costs. This is a story about how a successful pilot project in Panjin Municipality in China transformed the urban public transport into a more inclusive and sustainable experience through World Bank lending.

113. Panjin Municipality is a medium-sized coastal city with a population of around 1.4 million situated in Liaoning Province, northeast part of China. With the ambition of the local government to foster green mobility and the support of a US$22 million IBRD loan, a local bus company replaced its old diesel engine buses with 60 gas-fuelled and 80 hybrid buses with low emission and a comfortable riding experience. Consequently, every year, the use of the new buses is resulting in a reduced fuel consumption of 2,136 tons,

leading to the mitigation of 1,336 tons of emitted CO2. Project-financed interventions also improved the connectivity of roads and optimized bus routing, so people are now more willing to take public buses instead of using their private cars. Survey and big data show that five bus lines with new buses averagely increased the passenger volume by 30 percent with one of them showing a 50 percent increase. This increased use of public transport is further reducing the city’s carbon footprint.

114. Residents living in core urban areas can now access the public transport system more easily thanks to extended bus lines and increased frequently of buses; and urban bus services now reach rural areas. Currently, there are 18 regular bus lines linking villages with a total population of around 200,000 to the core urban areas compared to zero in the past – no formal linkage through urban bus lines. In 2018, more than CNY 20 million of green funds were granted by the Urban bus lines extended to rural villages Central Government to further support this successful initiative in 2018. The municipality is also leveraging more funds to further transform its urban public transport into a more smart, inclusive and sustainable infrastructure. According to Panjin Public Bus Development Planning for 2017-2025, additional lines will operate to further serve urban-rural integration, and additional bus lines will be operated within the residential quarters by 2025.

115. New technologies were critical for public transport optimization. Big data are used for OD (origin- destination) analysis and riding modality while internet can establish a real-time connection between passengers and the bus company as to optimize bus dispatching; Apps on smart devices provides user-

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friendly interfaces for e-ticketing, itinerary planning, information inquiries, bus locating and these have effectively addressed the dissatisfaction due to the long hours of waiting.

116. Two new bus depots with 74,000 m2 accommodating 390 buses were also funded from the Bank Loan. This helps to enhance the safety through improved maintenance. Operation is also improved through newly installed electric piles for charging 80 hybrid buses. With time-of-use electricity tariff, buses are Bus dispatching and operation monitoring charged during off-peak period with valley or flat tariff only 30 percent or 50 percent of the peak respectively, resulting in significant cost saving and wise energy saving. It is estimated that operating costs on fuels reduced by CNY 5.5 million per year. Maintenance costs are reduced as well due to less mechanical parts with electrical vehicles and less labour required.

117. For details, see a Sustainable Cities Blog on the above, prepared by the Task Team: https://blogs.worldbank.org/sustainablecities/catalyzing-sustainable-public-transport-green-urban-mobility- china

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Reclaimed Water for Sustainable Urban Development in Lingyuan, China

118. Lingyuan Municipality in Liaoning Province, China, a city with a population of around 650,000 people, faces acute water scarcity, and its current and only available groundwater supply is over exploited. According to the meteorological and hydrological survey data on local water availability in the last 3 decades, climate change could be a cause for even more severe water scarcity at coming years. The scarcity of water in Lingyuan has negative effects on the municipality’s development initiatives and economy. Groundwater supply services are extended to Lingyuan’s residents, government institutions, commercial entities and more than 100 industries including several large industrial water users whose water consumption ranges from 100,000m3 to 13 million cubic meters per year. This has led to the depletion of local aquifer and government issued regulation to ban any unlicensed exploitation of ground water.

119. In 2013, Lingyuan Municipality, with support of Liaoning Provincial Government, asked the World Bank to help to resolve its water scarcity problem. The World Bank has helped the city to build resilience into its urban water system by investing in its water recycling infrastructure. Now, after completion of all such facilities, about 60 percent of treated municipal wastewater is reclaimed, and 57 percent of reclaimed water is sold to industries at a competitive price. This enables full recovery of operating costs.

120. Two critical factors for this successful story include building comprehensive water infrastructure and proactive marketing supported by the local government.

121. The Bank financed the Liaoning Coastal Zone Development Urban Infrastructure and Environmental Management Project to upgrade wastewater treatment plant processes, improve sewers to double wastewater collection capacity, and build reclaimed water supply

facilities. Upgraded pumping station supplies recycled water to industrial users. 122. Government leadership played an important role in market promotion by assuring water quality is in compliance with standards, enforcing the regulatory limits on groundwater extraction, identifying users reclaimed-water, and setting a value-based water tariff.

123. By the time the project was completed in 2019, six major industrial users had signed up long-term agreements to buy reclaimed water with total amount of around 20,000 m3/day at full-cost recovery at the competitive market price of US$0.36/m3 or 60 percent of the municipal tap water tariff for industrial users.

124. Now that the reclaimed water has become an alternative water resource of the city, the environmental benefits are also notable: Access to municipal wastewater collection has almost doubled since the project’s start date: from 50 percent of coverage to 90 percent of the urban population. Consequently, water pollution is greatly reduced. Industrial water users are supplied with reclaimed water

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for their operations, which significantly reduces the depletion of the groundwater and secures the urban water resilience in this seriously water scarce region.

125. Reclaimed water is also used to help regenerate the urban landscape. About 10,000m3/day of reclaimed water is used to replenish an urban lake and the Daling River, which used to be polluted by untreated wastewater flowing downstream to cities. The reclaimed water is helping to restore the urban water ecosystem, establish riparian habitats, and ultimately increase urban biodiversity, while also reducing extraction and pollution of groundwater. A storage tank for recycled water, owned by one of the large industries 126. To date, over 12 million m3 of in Lingyuan reclaimed water have been sold, earning US$4.3 million in revenue and saving around US$3.6 million in operating costs for industries, and resulting in more significant economic value for the local development. As the municipal government has witnessed the benefits from the water recycling project, the decision to build the second wastewater treatment plant has already been made.

127. Reclaimed municipal wastewater may act as a useful alternative to the conventional types of water resources and may help mitigate urban water scarcity pressure, improve the efficiency of water use, reduce water pollution, minimize groundwater extraction, and improve water ecosystems. Such practice can be duplicated for building urban water resilience and establishing a circular economy. Lingyuan’s success in recycling municipal wastewater could not be materialized without strong The Daling River, which used to run dry and have a problem of support from local government in setting pollutants, is now a restored ecosystem with a 65-hectare urban lake formed by recycled water and which helps improve the aquatic and right policies and enforcing regulations. wild life habitat in the area. Meanwhile, it required stimulation of demand for reclaimed water, to ensure financial viability of investments. It may also act as an example for many other cities looking for green and sustainable solutions to water scarcity.

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ANNEX 8. PHOTOGRAPHS OF SELECT PROJECT ACTIVITIES (BEFORE AND AFTER) AND PROJECT MAP39 Dongbin River East Road Ergao Road

Beiying West Road Xuefu Road

39 The map was cleared by Cartography Unit of the World Bank on February 14, 2020. Photos were taken by the PPMO.

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Zhanqian Alley Zutuan First Road

Zutuan Second Road Zutuan Third Road

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Zutuan Forth Road Zutuan Fifth Road

Qingshangou Road

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