Report and Recommendation of the President to the Board of Directors ______
Project Number: 40017 November 2008
Proposed Loan People’s Republic of China: Qingdao Water Resources and Wetland Protection Project
CURRENCY EQUIVALENTS (as of 15 November 2008)
Currency Unit – yuan (CNY)
CNY1.00 = $0.14653 $1.00 = CNY6.82
ABBREVIATIONS
ADB – Asian Development Bank BOT – build-operate-transfer EA – executing agency EIA – environmental impact assessment EIRR – economic internal rate of return EMP – environmental management plan EPB – environmental protection bureau FMA – financial management assessment FYP – five-year plan GDP – gross domestic product GEF – Global Environmental Facility IEE – initial environmental examination JCG – Jiaozhou city government JFB – Jiaozhou Finance Bureau LIBOR – London interbank offered rate O&M – operation and maintenance PMO – project management office PPMS – project performance management system PRC – People’s Republic of China QFB – Qingdao Financial Bureau QMG – Qingdao municipal government SEA – strategic environmental assessment SIEE – summary initial environmental examination TA – technical assistance UNEP – United Nations Environment Programme WWTP – wastewater treatment plant
WEIGHTS AND MEASURES
1 mu = 0.067 hectares 1 hectare = 15 mu
NOTES
(i) The fiscal year (FY) of the Government and its agencies ends on 31 December. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2008 ends on 31 December 2008.
(ii) In this report, "$" refers to US dollars.
Vice-President C. Lawrence Greenwood Jr., Operations 2 Director General K. Gerhaeusser, East Asia Department (EARD) Director K. Kannan, Agriculture, Environment, and Natural Resources Division, EARD
Team leader Q. Zhang, Senior Water Resources Engineer, EARD Team members G. Atay, Assistant General Counsel, Office of the General Counsel S. Ferguson, Senior Social Development Specialist (Resettlement), EARD J. Huang, Urban Development Specialist, EARD T. Lin, Natural Resources Economist, EARD F. Radstake, Environment Specialist, EARD M. Watanabe, Rural Development Specialist, SARD Y. Zhou, Water Resources Specialist, EARD
CONTENTS Page
LOAN AND PROJECT SUMMARY i
MAP I. THE PROPOSAL 1 II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES 1 A. Performance Indicators and Analysis 1 B. Analysis of Key Problems and Opportunities 2 III. THE PROPOSED PROJECT 6 A. Impact and Outcome 6 B. Outputs 6 C. Special Features 8 D. Project Investment Plan 9 E. Financing Plan 10 F. Implementation Arrangements 11 IV. TECHNICAL ASSISTANCE 15 V. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS 15 A. Project Benefits and Impacts 15 B. Financial Analysis 15 C. Economic Benefits 17 D. Environmental Benefits and Impacts 18 E. Health Impact 19 F. Poverty Impact 19 G. Resettlement 20 H. Risks and Mitigation Measures 20 VI. ASSURANCES AND CONDITION 21 A. Specific Assurances 21 B. Condition for Disbursement 23 VII. RECOMMENDATION 23
APPENDIXES 1. Design and Monitoring Framework 24 2. Sector Analysis 27 3. Problem Tree Analysis 32 4. External Assistance 33 5. Detailed Cost Estimates 34 6. Flow of Funds 36 7. Implementation Schedule 37 8. Procurement Plan 38 9. Technical Assistance 41 10. Financial Analysis 44 11. Economic Analysis 48 12. Environmental Analysis 53 13. Summary Poverty Reduction and Social Strategy 59 14. Summary Resettlement Plan 63 SUPPLEMENTARY APPENDIXES (available on request) A. Flood Management Component B. Water Quality and Pollution Control Component C. Nonstructural Measures D. Terms of Reference for Consultants E. Detailed Cost Estimates and Financing Plan F. Health Impact Assessment G. Flood Risk Assessment H. Wetland Assessment and Integrated Urban Management for Coastal Areas I. Detailed Procurement Plan J. Detailed Financial Analysis and Financial Management Assessment K. Detailed Economic Analysis L. Institutional Analysis M. Short Resettlement Plans N. Due Diligence of Resettlement of Shaohai Lake O. Social and Poverty Analysis P. Summary Initial Environmental Examination and Environmental Management Plan Q. Integrated Approach to Environmental Management in Coastal Zones
LOAN AND PROJECT SUMMARY
Borrower People's Republic of China
Classification Targeting classification: Targeted intervention Sector: Agriculture and natural resources; water supply, sanitation, and waste management Subsectors: Environment and biodiversity, water supply and sanitation Themes: Sustainable economic growth, environmental sustainability, private sector development Subthemes: Natural resources conservation, fostering physical infrastructure development, public-private partnership
Environment Category B. An initial environmental examination was undertaken, and Assessment a summary environmental analysis is in Appendix 12. The summary initial environmental examination is in Supplementary Appendix P.
Project Description The Qingdao Water Resources and Wetland Protection Project represents a major environmental improvement investment in Jiaozhou Bay, including Jiaozhou City and protection of its downstream wetlands. It is classified as a targeted intervention because it contributes to achieving Millennium Development Goal 7, target 10, which calls for halving by 2015 the proportion of people without access to safe drinking water and improved sanitation. The Project will bring tangible benefits to the environment of Jiaozhou City and the bay area by (i) reducing water pollution; (ii) protecting water resources; (iii) reducing economic losses and disruption to livelihoods from frequent localized flooding; (iv) enhancing wetland ecosystems in both Shaohai Lake and the Dagu Estuary/Jiaozhou Bay wetlands; (v) promoting sustainable economic development; (vi) improving the environment, living conditions, and public health standards; and (vii) strengthening public service delivery through corporatization and improved financial sustainability. The impact of the Project will be enhanced by the replication of project lessons learned in other newly developed zones within the Qingdao municipal government (QMG) by the implementation of a strategic environmental assessment (SEA).
The Project has three key outputs: (i) improved water resources and flood management, including (a) dredging, embankment, and rehabilitation of four river courses with a total length of 19.5 kilometers (km); (b) upgrading flood retention facilities; and (c) constructing about 11.4 km of storm sewers; (ii) strengthening wastewater management and pollution control, including (a) constructing about 15.9 km of interceptor sewers, (b) establishing about 11.8 km of additional sewerage networks to supplement the existing trunk sewerage, and (c) supporting the establishment of a wastewater treatment plant with private sector involvement for an additional 50,000 cubic meters per day; and (iii) integrated water and ecosystem management. The integrated information system for Jiaozhou flood, water, and wastewater management and the related emergency response system will be established. Management of the downstream Shaohai Lake will be ii
strengthened by (i) improving biodiversity monitoring capacities; (ii) establishing surface water flow, water quality, and other ecosystem parameters; and (iii) establishing a hydraulic and water quality simulation tool. The goal of protecting environmental conditions in Jiaozhou Bay and preserving wetland areas will be reinforced by strengthening both Qingdao’s and Jiaozhou’s integrated planning capabilities through preparation of an SEA aimed at providing guidance for environmental management in Qingdao Municipality.
Rationale Most of the water management problems in the People’s Republic of China (PRC), particularly in coastal cities, are the result of a fragmented approach to development. There is a need to move towards a more integrated management approach whereby the different tasks associated with water management (water supply, wastewater management, and drainage) and ecosystem rehabilitation are managed together in close coordination with land-use planning, coastal zone and water resource management, and pollution control at the river basin level. To reduce pollution in the country’s coastal waters and sustain ecosystems, a number of specific actions are needed, including (i) adopting a holistic approach to water management in river basins and coastal zones; (ii) reducing land-based pollution sources, particularly from industrial and urban sources; and (iii) continuing institutional and financial management reforms to facilitate sustainable environment management.
The coastal wetlands of Jiaozhou Bay surrounded by Qingdao Municipality (including Jiaozhou City at the head of the bay) are vital; they represent the most important marine ecosystem of the Qingdao coastal region and the Shandong Peninsula. They provide breeding grounds for many types of fish and shellfish, a resting place for migratory birds, and a habitat for other coastal biological diversity. In addition, they play a key role in absorbing excessive nutrients from land-based activities before the nutrients enter the waters of the bay proper, thereby helping to prevent eutrophication in the bay. Finally, the wetlands play a key role in flood management and coastal protection, which will be increasingly significant to coastal cities as sea levels continue to rise as a result of global warming. Since the 1950s, the coastal wetlands around Jiaozhou Bay have been severely impacted by human activities, notably in relation to excessive pollution. It is estimated that since 1950, the wetland area has shrunk by 30%. Moreover, the area of natural wetlands has decreased, with the area of artificial wetlands, such as salt and aquaculture ponds, doubling. Effective upstream environmental and water resources management (i.e., reducing pollution loads, preserving river regimes, and effective coastal zone management) is required to reduce further wetlands loss and degradation, and thereby ensure the preservation of the Jiaozhou Bay environment.
Jiaozhou City is one of the county-level cities under the administration of Qingdao municipality on the northwest coast of Jiaozhou Bay. In 2007, the city had a total area of 1,210 square kilometers and a iii
population of 891,800. The population is estimated to be increasing at an average annual rate of 1.12%. Economic growth in the project area has averaged about 20% per annum in real terms since 2004 (well above the national average) and this rapid growth is expected to continue in the intermediate term. Immediate impacts of this rapid development have included (i) an increase in the incidence of flooding in the expanding urban areas, (ii) a high rate of waterborne disease, and (iii) increasing environmental damage in Jiaozhou Bay. While flooding was relatively rare in the 1990s, it has subsequently increased to about once in every 3 years, with average damage valued in excess of CNY200 million per flood. As the economy continues to develop rapidly, the extent and value of this damage is expected to further increase. The incidence of waterborne diseases, particularly stomach- related diseases, is estimated to be well above the national average and is expected to increase in the future if attention is not paid to wastewater collection and treatment and increased public awareness of personal hygiene. In addition, the extent and quality of the wetlands in Jiaozhou Bay has seriously deteriorated over recent years and the annual rate of loss is currently estimated at about 0.9%. All of these factors are having a serious impact on continued local development, and together contribute to a strong demand for remedial action.
While Jiaozhou City has implemented various water conservation and management projects, including notably the development of Shaohai Lake (serving both as a flood retention zone and artificial wetland at the confluence with the Dagu River) and the first phase of the centralized wastewater treatment facilities, there are still significant opportunities to improve environmental management in relation to (i) the collection and interception of industrial and domestic wastewater discharge directly into water courses; (ii) the expansion and enhancement of the centralized treatment facilities to protect the Dagu River/Jiaozhou Bay wetlands; (iii) the improvement of urban rivers and storm-water networks in the old urban area; (iv) the development of an integrated approach to flood management, incorporating the different structural and nonstructural measures currently operated separately by different entities; and (v) the continuation of institutional and financial management reforms to facilitate sustainable environmental management. The initial results and lessons learned from these efforts to improve environmental management will be a good model for other county governments in the PRC.
Impact and The impact of the proposed Project will be improved quality of life, a Outcome sustainable ecosystem, and biodiversity conservation in Jiaozhou Bay.
The project outcome will be improved condition of water resources and the environment in Jiaozhou City and the downstream wetlands.
Project Investment The investment cost of the Project is estimated at $105.8 million, Plan including taxes and duties of $3.1 million.
Financing Plan A loan of $45.0 million from the ordinary capital resources of the Asian
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Development Bank (ADB) will be provided under ADB’s London interbank offered rate (LIBOR)-based lending facility. The loan will have a 25-year term including a grace period of 5 years, an interest rate determined in accordance with ADB’s LIBOR-based lending facility, a commitment charge of 0.15% per annum on undisbursed funds, and such other terms and conditions set forth in the draft loan and project agreements.
Amount Source ($ million) %
Asian Development Bank 45.0 42.5 Jiaozhou City Government 60.8 57.5 Total 105.8 100.0 Source: Asian Development Bank estimates.
Allocation and The Government of the PRC will relend funds to the Qingdao Municipal Relending Terms Financial Bureau, which is under the QMG. The imprest fund account will be set up in the Qingdao Municipal Financial Bureau. QMG will then onlend the loan proceeds to the Jiaozhou city government (JCG) with the same loan terms and conditions. JCG will disburse the funds to the contractors for the project implementation. In terms of loan repayment, JCG will pay QMG, and QMG will then repay the Ministry of Finance, which will in turn pay ADB. JCG will assume the foreign exchange and interest rate variation risks of the ADB loan.
Period of Utilization Until 30 September 2014
Estimated Project 31 March 2014 Completion Date
Executing Agency Jiaozhou city government
Implementation A project leading group has been established, headed by the vice Arrangements mayor of JCG and comprising representatives from Jiaozhou City Construction Bureau, City Development and Reform Bureau, Finance Bureau, Environmental Protection Bureau, Planning Bureau, Shaohai Artificial Lake Management Bureau, Land Resources Bureau, and Water Resources Bureau. The project leading group will provide overall policy guidance, facilitate interagency coordination, and resolve any institutional problems affecting project implementation. A project management office (PMO) has been established, comprising 10 staff from Jiaozhou City Construction Bureau, which includes the project manager and staff for undertaking activities related to procurement, disbursement, engineering, social and environmental safeguards, and interpreting.
Procurement All procurement of goods and works shall be carried out in accordance with ADB's Procurement Guidelines (2007, as amended from time to time). Contracts for goods estimated to exceed $1.0 million and contracts for works estimated to exceed $10.0 million shall be procured v
using international competitive bidding procedures. Contracts for goods and works estimated to be equal to or less than the above international competitive bidding values but more than $100,000 shall be procured through national competitive bidding procedures in accordance with the PRC Tendering and Bidding Law (1999), subject to modifications agreed upon with ADB. Contracts for goods and works estimated to cost $100,000 or less shall be procured using shopping procedures. The relevant sections of ADB’s Anticorruption Policy (1998, as amended to date) will be included in all procurement documents and contracts.
Consulting Services About 31 person-months of international and 100 person-months of national consulting services, to be funded under the Project, will be required for project management support and implementation of nonstructural measures. Consulting services will be provided in the following specific areas: (i) development of an integrated information system for management of drainage and wastewater assets in Jiaozhou, (ii) ecological upgrading of the Shaohai Lake wetlands, (iii) construction supervision and quality control, (iv) financial management and corporate governance, and (v) operation and maintenance improvements. The international consultants will also provide training and capacity building in wastewater management and treatment planning, industrial pollution control, hydrological and hydraulic analysis, storm-water source control, financial management, and environmental monitoring and management. Contracts for consulting services estimated at $200,000 and above will be awarded to consulting firms using the quality- and cost-based selection procedure (80:20), in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time).
Project Benefits The Project will directly benefit about 370,000 people living in the and Beneficiaries project area, of whom about 1.5% are poor, and indirectly benefit about 3 million people in the Jiaozhou Bay area. All residents in Jiaozhou City will benefit, as their living conditions will improve as a result of (i) reduced pollution of Jiaozhou Bay’s surface water, with water quality improving to at least class V by 2014, with longer-term potential to be upgraded to class IV; (ii) protection from flooding and elimination of hazards resulting from poor drainage; and (iii) 40% reduction in the incidence of waterborne diseases from 2008 levels, with a corresponding decline in the number of sick days and expenses for medical treatment. Residents in the broader Jiaozhou Bay area will also benefit from (i) reduced pollution of Jiaozhou Bay, improved amenity values, reduced health risks from the consumption of shellfish and reduced algal growths in the bay and surrounding areas; and (ii) improved urban planning through the raising of environmental sustainability at the early stages of project conception.
The Project will create about 3,400 full-time jobs during construction, of which about 75% will be for the unemployed. To maximize the project benefits, women will be given priority in the employment and training opportunities generated in the Project’s construction and operation
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phases. The Project will generate direct economic benefits from improved flood control and management, improved health, and reductions in the extent of environmental degradation in the coastal wetlands from both the structural and nonstructural investments. For flood management, the annualized economic benefit in constant 2008 values is estimated at CNY90.8 million in 2011, increasing to CNY120.1 million in 2021; health benefits are expected to increase from CNY0.75 million in 2010 to CNY12.35 million in 2033; finally, the value of wetland benefits was projected to increase from CNY0.04 million (from 1.1 hectare [ha] saved) in 2011 to CNY6.97 million (from 196.1 ha saved) in 2033. The overall project economic internal rate of return is 14.7%. The project design is technically sound, economically efficient, affordable to beneficiaries, and financially and economically viable.
Risks and Potential risks to the Project include (i) failure of the Government to Assumptions implement timely extensions and enhancement to the Jiaozhou wastewater treatment plant (WWTP), (ii) insufficient capacity to ensure the proper operation and maintenance of project facilities, (iii) ineffective organizational structures and inadequate capacity of the PMO, (iv) delays in the provision of counterpart funding, (v) failure of JCG to increase wastewater tariffs to meet cost recovery targets, and (vi) delay in implementation of the proposed SEA. These risks have been mitigated by (i) obtaining assurances from the JCG on the timely implementation of the WWTP; (ii) capacity building for the PMO through the Project; (iii) assurances from JCG on the provision of counterpart funding, and regular tariff reviews and increases; and (iv) provision of a technical assistance (TA) grant by ADB to the Government.
The Project does not have any unusual technical risks. Standard engineering designs will be adopted for flood control and wastewater management. During project implementation, consultants will help undertake proper survey and design prior to construction.
Technical An advisory TA grant of $750,000 is requested to strengthen the Assistance capacity of QMG in strategic environmental planning and management to support SEA on Jiaozhou Bay development. QMG will provide $250,000 for in-kind costs. The TA will address three priority issues identified by the sector analysis and lessons learned in the implementation of integrated water and environmental management scheme: (i) integrated planning and analysis, (ii) an effective management scheme, and (iii) an appropriate mechanism to monitor and ensure the effective implementation.
The proposed TA includes three components: (i) supporting the creation of an effective management mechanism for strategic environmental and planning process, (ii) SEA of further development of Jiaozhou Bay for integrated planning, and (iii) operational guidelines and a monitoring system for implementation.
Map 1
I. THE PROPOSAL
1. I submit for your approval the following report and recommendation on a proposed loan to the People's Republic of China (PRC) for the Qingdao Water Resources and Wetland Protection Project.1 The report also describes proposed technical assistance (TA) for Enabling the Protection of Jiaozhou Bay Water Quality and Wetland Ecosystem, and if the Board approves the proposed loan, I, acting under the authority delegated to me by the Board, will approve the TA. The design and monitoring framework is in Appendix 1.
II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES
A. Performance Indicators and Analysis
2. Since the opening up of the PRC in 1978, spearheaded by the coastal provinces, the PRC has achieved unprecedented gross domestic product (GDP) growth rates. Over this period, the rate of urbanization has increased from 17.9% in 1978 to 36% in 2000, and 40.5% in 2005. Thus, the urban population has tripled over a period of 25 years, reaching a total of about 500 million city dwellers by 2005. By 2030, the urban population is expected to reach about 870 million, representing around 60% of the total population. The increasing urban population is (i) fuelling further industrialization, economic development, and intensification of agriculture; (ii) straining the already overloaded infrastructure; and (iii) contributing to widespread pollution and environmental threats to the PRC’s rivers, lakes, and coastal waters. Urbanization pressures are particularly intense in the PRC’s coastal provinces; various activities (settlements, ports, and industrial facilities) are increasingly competing for land in the narrow coastal zones. Increasing pollution loads, more frequent floods, and droughts (exacerbated by climate change and rising sea levels) impose threats to sustainable water resources management in these coastal regions. A review of the sector is in Appendix 2.
3. Combined with the declining availability of base flows, the river courses, streams, and lakes have seen a progressive increase in the quantity of wastewater discharged into them. The total volume of wastewater discharged in the PRC has been increasing since 1991, with about 54 billion tons of wastewater discharged in 2006. The combined effects of overuse of water, water pollution, and water-related developments are destroying aquatic ecosystems in the PRC. However, due to a lack of regular and systematic monitoring, it is difficult to quantify the effects. The most vulnerable among these aquatic systems are lakes and wetlands because of their lower assimilative capacity and vulnerability due to the adverse effects of sudden changes.
4. The Government’s plans to address water pollution have not kept pace with the rate of economic growth. During the 10th Five-Year Plan (FYP, 2001–2005), environmental protection was the only area of the plan that failed to fully achieve its targets, and as a result, eight of the 20 environmental targets remained unattained. In particular, emissions of chemical oxygen demand showed only a 2% decrease, compared with the planned 10% reduction. Treated sewage short of the envisaged target of 45% by about 8%. Only about 60% of the targets for pollution control for the major rivers and lakes were accomplished; about 41% of the water in the seven major river basins do not meet the class III national water quality standard and thereby is unacceptable as a source of drinking water. Marine ecosystems are also increasingly under stress, with significant rises in the number of harmful algal blooms over the last few decades; during the 10th FYP period, the number of harmful algal blooms increased to over 100 events per year in coastal waters, from around 20 in previous years. The recent occurrence of
1 ADB. 2007. Technical Assistance to the People’s Republic of China for Preparing the Qingdao Water Resources Management Project. Manila. 2 an algal bloom prior to the staging of the sailing regatta as part of the 29th Olympiad has significantly raised awareness of the issue. Several factors contributed to the poor environmental performance during the 10th FYP, the most significant being (i) inadequate attention of local governments to environmental protection, (ii) high economic growth and rapid urbanization with low resource-use efficiency, (iii) weak regulatory supervision and enforcement, (iv) weak cross-sectoral and transboundary coordination, and (v) ineffective financing mechanisms.
5. As part of the 11th FYP (2006–2010), the Government has given priority to several environmental and natural resource concerns, which include (i) land degradation, (ii) water shortage and pollution, (iii) poor urban environmental infrastructure, (iv) degradation of marine ecosystems and wetlands, (v) increasing frequency and intensity of environmental accidents, and (vi) global environmental issues such as climate change and greenhouse gas emissions. The Government issued a series of policy directives on environmental protection for the 11th FYP period. These policy directions are incorporated into the National Economic and Social Development Master Plan of March 2006. This plan gives priority to (i) protecting and rehabilitating valued ecosystems, (ii) increasing efforts in pollution control, (iii) improving natural resources management, and (iv) sustainably utilizing marine/water resources. As a guiding policy for the 11th FYP, the State Council directive sets forth two broad environmental objectives for the next 5–15 years. By 2010, the environmental quality of key regions and cities will be improved, and the trend of ecological degradation will be arrested. By 2020, the quality of the environment and the state of the country’s ecosystems will have improved significantly. There are many other specific targets set under the 11th FYP, but the reduction in energy intensity by 20% and total pollution load by 10% are the two most prominent.
B. Analysis of Key Problems and Opportunities
6. Most of the water management problems in the PRC, particularly for the coastal cities, are the result of a fragmented approach to development. There is a need to move towards a more integrated management approach whereby the different responsibilities associated with water management (water supply, wastewater management, and drainage) and ecosystem rehabilitation are managed together in close coordination with land-use planning, coastal zone management and water resource management, and pollution control at the river basin level. To reduce pollution in the country’s coastal waters and sustain ecosystems, a number of specific actions are needed, including (i) adopting a holistic approach to water management in river basins and coastal zones; (ii) reducing land-based pollution sources, particularly industrial and urban sources; and (iii) continuing institutional and financial management reforms to facilitate sustainable environment management.
7. The coastal wetlands of Jiaozhou Bay, surrounded by the Qingdao Municipality (including the city of Jiaozhou situated at the head of the bay), are vital, as they are the most important marine ecosystem of the Qingdao coastal region and the Shandong Peninsula. They provide breeding grounds for many types of fish and shellfish, a resting place for migratory birds, as well as maintaining coastal biological diversity. In addition, they play a key role in absorbing excessive nutrients from land-based activities, before the nutrients enter the waters of the bay proper, thereby helping to prevent eutrophication in the bay. The wetlands are also a key to flood management and coastal protection, which will become increasingly significant to coastal cities as sea levels continue to rise as a result of global warming. Since the 1950s, the coastal wetlands around Jiaozhou Bay have been severely affected by human activities, notably in relation to excessive pollution generation. It is estimated that since the 1950s, the wetland area has shrunk by 30%. As a result, the area of natural wetlands has decreased, while the artificial wetlands, such as salt and aquaculture ponds, have doubled in area. Whereas the water quality 3 conditions appear not to be eutrophic in the bay (with generally high levels of oxygen and low levels of biomass), the frequency of algal blooms has been increasing and nutrient levels are considered to be sufficiently high to favor eutrophication should wetlands continue to degrade. These observations indicate that effective upstream environmental and water resources management (reducing pollution loads and preserving river regimes) together with effective coastal zone management zoning is required to reduce further wetlands loss and degradation, and thereby ensure the preservation of the Jiaozhou Bay environment.
8. Jiaozhou City, one of the county-level cities under the administration of Qingdao Municipality, is on the northwest coast of Jiaozhou Bay. In 2007, the city had a total area of 1,210 square kilometers and a population of 891,800. The population is estimated to be increasing at an average annual rate of 1.12%. Economic growth in the project area has averaged about 20% per annum in real terms over the since 2004, which is well above the national average, and this rapid growth is expected to continue in the intermediate term. Immediate impacts of this rapid development have included (i) an increase in the incidence of flooding in the expanding urban areas, (ii) a high rate of waterborne disease incidence, and (iii) increasing environmental damage to Jiaozhou Bay. While flooding was relatively rare in the 1990s, the incidence has subsequently increased to about once in every 3 years, with average damage valued in excess of CNY200 million per flood. As the economy continues to develop rapidly, the extent and value of this damage is expected to further increase. The incidence of waterborne diseases, particularly stomach-related diseases, is estimated to be well above the national average and is expected to increase in the future. Its attention is not given to wastewater collection and treatment and increased public awareness of personal hygiene. In addition, the extent and quality of the wetlands in Jiaozhou Bay has seriously deteriorated over recent years and the annual rate of loss is currently estimated at about 0.9%. All of these factors are having a serious impact on continued local development and together contribute to a strong demand for remedial action. A problem tree analysis is in Appendix 3.
9. In the past, too many water conservation programs in the PRC have failed due to the inability of county governments to raise adequate counterpart funds, or have been distorted due to the need to focus on activities that create short- and medium-term revenues. There is a need for international financing institutions to fund those areas not supported by private funding sources. The wastewater treatment system is a good example where the establishment of sewerage networks is not attractive to private funding sources and is underfinanced by local governments.
10. While Jiaozhou City has implemented various water conservation and management projects, including notably the development of Shaohai Lake (serving both as a flood retention zone and artificial wetland at the confluence with the Dagu River) and the first phase of the centralized wastewater treatment facilities, there are still significant opportunities to improve environmental management in relation to (i) the collection and interception of industrial and domestic wastewater discharge directly into water courses, (ii) the expansion and enhancement of the centralized treatment facilities to protect the Dagu River and Jiaozhou Bay wetlands, (iii) improvement of rivers and storm-water networks in the old urban area, (iv) the development of an integrated approach to flood management incorporating the different structural and nonstructural measures currently operated separately by different entities, and (v) continuing institutional and financial management reforms to facilitate sustainable environmental management. The initial results and lessons learned from these efforts to improve environmental management will be a good model for other county governments in the PRC.
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11. The Qingdao municipal government (QMG) and the Jiaozhou city government (JCG) are requesting the Asian Development Bank’s (ADB) assistance to reduce flooding and pollution impacts, and improve environmental management upstream from the Jiaozhou Bay wetlands. This Project will serve as demonstration for further development of other districts around the bay area. This is particularly consistent with QMG’s master plan for Jiaozhou Bay, which aims for balanced development along the western and eastern parts of the bay. It also supports ADB’s strategic priority in the country partnership strategy (CPS),2 which aims to promote inclusive growth and environmental sustainability.
12. Government Policies and Plans. The Government recognizes the urgent need to address the prevailing pollution and water management issues of its marine ecosystems. In the white paper Environmental Protection in China3 , the Government of the PRC attached great importance to the appropriate development and protection of marine resources and the prevention of marine pollution and ecological damage to facilitate sustainable development. The Government is a signatory to the RAMSAR Convention4 on Wetlands, and has issued protection orders for many national and provincial wetlands including the Jiaozhou Bay/Dagu River wetlands. These actions are complemented by the issuance of legislation related to wetlands protection by QMG, proposing definite and strict requirements for wetland protection. The development of Shaohai Lake is a core subproject in “Project of wetlands protection and restoration in Shandong Jiaozhou Bay Nature Reserves” (Jiaozhou section) and an integral part of the “Shandong Province ecological construction planning”.
13. QMG started preparation of the new development strategy of “embracing bay development, surrounding bay protection” in March 2008. The strategy was to involve the whole Jiaozhou Bay development and address the future population of an extra 3–3.5 million in 2020 in the Qingdao urban area. One of the key issues for the new planning is to focus on detailed planning of several regions, including the Shaohai new area in Jiaozhou City. The features of the new bay development will highlight environment protection, new technology development, and ecotourism. QMG is aware of the need for a comprehensive and integrated water resource and environmental management approach to address the complex and interrelated problems associated with such development. It is for this purpose that QMG is seeking effective approaches for managing its water resources and environment which, in turn, may serve as basis for further development of other economic/industrial zones in the bay area.
14. ADB’s Country Partnership Strategy. ADB’s CPS emphasizes inclusive growth through balanced development and environmental sustainability. There will be increased focus on ecosystem conservation, and increased investment in natural resources management, agriculture, and rural development. The proposed Project supports ADB’s strategic priorities. The Project will also support and strengthen ADB’s policy dialogue and initiatives with QMG/JCG in several key areas including (i) nonstructural measures for flood management, (ii) integrated approaches to river basin management and ecosystem restoration, (iii) wastewater and storm-water management, (iv) cost recovery and tariff reform for wastewater management, (v) strengthening corporate governance and private sector participation, and (vi) strategic environmental assessment (SEA).
2 ADB. 2008. The People’s Republic of China: Country Partnership Strategy 2008–2010. Manila. 3 State Council Information Office. 2006. Environmental Protection in China 1996–2005. Beijing. 4 Ramsar Convention is an international treaty for the conservation and sustainable utilization of wetlands: i.e., to stem the progressive encroachment on and loss of wetlands now and in the future, recognizing the fundamental ecological functions of wetlands and their economic, cultural, scientific, and recreational value. 5
15. External Assistance. The Government of the PRC is an active participant in the Global Programme for Action for the Marine Environment for land-based activities organized by the United Nations Environment Programme (UNEP), taking part in regional programs such as the North West Pacific Action Plan, the UNEP Global Environmental Facility (GEF) project on the South China Sea and the Gulf of Thailand, and the UNEP GEF Yellow Sea Marine Ecosystem Project. To gain from international experience, the Government has entered into strategic partnerships with the GEF and other international partners to develop comprehensive resource management approaches that integrate ecological, economic, and social dimensions of biodiversity management. ADB and other international agencies have provided a number of technical assistance and loan projects to assist the PRC in environmental and wetland protection, flood management, and pollution control management (Appendix 4).
16. Lessons. ADB’s water supply and wastewater loan projects in the PRC have been generally well implemented. 5 Lessons from previous projects in the Songhua and Nanjing Qinghuai rivers, Sanjiang Plain, and Baiyangdian Lake were considered in policy dialogue with the Government, engineering designs of the project facilities, and capacity-development programs. Lessons identified from ADB’s post-evaluation experience in water infrastructure projects also highlights the importance of nonstructural measures: (i) encouraging broad reforms, such as autonomous management, and introducing private sector participation for efficient and responsive delivery of water and wastewater services; (ii) appropriate pricing policies to encourage sustainable water and sanitation services; (iii) the use of management tools such as management and geographic information systems and performance grading to more appropriately manage water service assets; and (iv) educating, consulting, and involving the public in environmental improvement. In the project design, specific actions have been defined to reinforce the nonstructural element of this Project, notably taking into account the feasibility report recommendations.6
17. Where projects have had difficulty, it has rarely been in the construction process itself but rather in relation to (i) inadequate or late treatment of resettlement issues leading to serious delays in construction start-up, (ii) inadequate or poor project design, (iii) inadequate knowledge of procurement procedures and complex procurement plans, and (iv) low proportion of civil works financing resulting in loan savings and cancellation of surplus loan amounts. These issues have been reviewed in detail during project processing and the relevant lessons have been incorporated in the project design. A more detailed discussion of lessons learned is in Supplementary Appendix Q.
18. Recent reviews7 on reviving Tai Lake, Baiyangdian Wetland, Sanjiang Plain Wetland, and West Lake have identified a series of features common to effective restoration of lakes and wetlands:
(i) Strong and consistent leadership and action. Restoration takes time and resources often beyond the rather narrow focus of the typical FYP, and also requires effective cross-sector and transjurisdictional coordination. Catchment boundaries are rarely the same as jurisdictional boundaries, and thus there is a
5 In the project completion reports, the Dalian Water Supply Project was rated "generally successful"; the Anhui Environmental Improvement Project, Fuzhou Water Supply and Wastewater Treatment Project, and Suzhou Creek Rehabilitation Project were all rated "highly successful". The project performance audit report for the Dalian Water Supply Project rated it "highly successful". 6 ADB. 2005. PRC: Water Supply, Sanitation and Waste Management Portfolio Performance Review. Final Report. Manila. 7 ADB. 2008. Reviving Lakes and Wetlands: Lessons Learned from the People’s Republic of China. Manila.
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need to develop effective management and appropriate structures to ensure coordination across administrative and sector boundaries. (ii) Integrated planning and analysis. Planning needs to integrate many sectors including land use, and should serve as a strategy that will be acceptable to all sectors for future development. 8 The development of an integrated planning framework has often led to particularly notable long-term and successful partnerships between the PRC and the major development agencies and commercial banks. (iii) Effective financial engineering. Too many programs have failed due to the inability of county governments to raise counterpart funds and focus spending on activities that create short- and medium-term revenue-raising possibilities.9 There is a need for international financing institutions to fund those areas not supported by traditional and/or private funding sources. Domestic wastewater treatment systems are a good example where one of the major deficiencies is with respect to the funding of networks which are not attractive to private funding sources.
III. THE PROPOSED PROJECT
A. Impact and Outcome
19. The impact of the proposed Project is improved quality of life, a sustainable ecosystem, and biodiversity conservation in the Jiaozhou Bay area. The project outcome is improved condition of water resources and environment in Jiaozhou City and the downstream wetlands.
B. Outputs
20. The Project will adopt an integrated approach to address the current constraints in flood management, wastewater, environmental management, and ecosystem conservation. The project outputs will comprise improved water resources and flood management, strengthened wastewater management and pollution control, integrated water and ecosystem management, and strengthened project management capacity. A detailed description of these components is provided in Supplementary Appendixes A–C.
21. Improved Water Resources and Flood Management. This component will help (i) undertake river dredging, embankment works, and greening over of a total length of 19.5 kilometers (km) for four river courses; (ii) upgrade the Erli’he flood retention facilities; and (iii) construct 11.4 km of storm sewerage facilities in Jiaozhou City.
22. Strengthened Wastewater Management and Pollution Control. This component will help (i) construct 15.9 km of interceptor sewer along river embankments in Jiaozhou City to collect and transport sewerage to the existing wastewater trunk sewerage system; and (ii) supplement the existing trunk sewerage system with an additional network of 11.8 km.
23. To expand the wastewater treatment plant, a partnership with the private sector has been established. The expanded treatment capacity of 50,000 cubic meters (m3) per day will be
8 The proposed strategic environmental assessment on the Jiaozhou Bay development, in parallel with the proposed Project, will strengthen QMG’s integrated planning capabilities through streamlining environmental consideration and ecosystem conservation into its plan for further embracing Jiaozhou Bay. 9 The Project is designed to use ADB financing to support the construction and upgrading of the storm-water and wastewater interceptor and sewerage system as well as the development of nonstructural measures which could not directly generate revenue but are crucial to ensuring the sustainability of the water infrastructure investments. At the same time, the private sector partnership to build a wastewater treatment plant has been established. 7 added to the existing wastewater treatment plant through a build-operate-transfer (BOT) contract between Jiaozhou authorities and a private company. As a result, the treatment level of the plant will be enhanced from the existing class II10 to class IB, and will be adapted to treat limited storm-water flows during high rainfall periods. The Project will provide safeguards due- diligence support to the Jiaozhou authorities with respect to wastewater treatment process design and environmental assessment.
24. Integrated Water and Ecosystem Management. This component will complement the structural investments with a series of nonstructural measures to ensure effective utilization of the new infrastructure and facilities. Activities are clustered into three key tasks, namely (i) capacity building for flood and water resources management, (ii) environmental management and pollution control, and (iii) support for sustaining Shaohai artificial lake ecology.
25. To enhance JCG’s capacity in flood and water resources management, the Project will help JCG develop an integrated information system for flood, water, and wastewater management. This system aims to gather data on hydrology, flood facilities, engineering, drainage and wastewater collection network, and water quality information and integrate it into one data system, rather than it being scattered across various line agencies, in order to promote holistic management. In addition to capacity building on the integrated information system, training on emergency response measures, flood zone mapping, storm-water control at source, and improved regulation for control structures will be provided under this component.
26. The following activities have been designed to improve JCG’s capacity in environmental management and pollution control: (i) strengthening the participation of the local community and industries in the environmental management and pollution control via training, workshops, and improved compliance awareness; (ii) corporatization and strengthening of wastewater services in Jiaozhou City;11 (iii) wastewater tariff reform to ensure sustainable operations and to adopt a pro-poor approach; and (iv) enforcement of the environmental monitoring plan under the environmental management plan.
27. To support the ecology of Shaohai Lake and its ecosystem management, the Project will construct artificial wetlands and enhance habitats to reduce nutrient loads into the lake. The management of Shaohai Lake will be improved by strengthening capacity for monitoring of biodiversity, surface water flow, water quality, and other ecosystem parameters, and establishing a hydraulic and water quality simulation tool. Further details of this component are in Supplementary Appendix C.
28. The goal of protecting environmental conditions in Jiaozhou Bay and preserving wetland areas will be reinforced by strengthening both Qingdao’s and Jiaozhou’s integrated planning capabilities through the preparation/formulation of an SEA aimed at providing guidance for sustainable environmental management to ensure “Qingdao embraces the bay” (as described in paras. 56–58).
29. Strengthened Project Management Capacity. The existing project management office (PMO) of the Jiaozhou City Construction Bureau will be strengthened through staff training and the provision of vehicles and equipment. Relevant staff from the PMO will receive training at the
10 State Environmental Protection Administration. 2006. Amended Urban Wastewater Treatment Discharge Standards (GB18918-2002), the 21st Notice. Beijing. 11 This includes strengthening the institutional capacity of the intended wastewater service company, particularly for financial management, improved accountability, and increased transparency. The design of institutional capacity development will incorporate the best international practices for wastewater service companies.
8 start of the Project in financial management and reporting, and ADB disbursement and procurement procedures. The PMO will establish and maintain a project performance management system (PPMS) to monitor project implementation and performance in meeting project targets. An international project implementation specialist will be recruited to provide technical advice to the PMO in technical design review, procurement, and project supervision. International and national experts in the following disciplines will also be provided to support project management: (i) procurement; (ii) hydraulic, structural, and wastewater engineering; (iii) project monitoring and evaluation; (iv) resettlement supervision; and (v) environmental monitoring. The terms of reference for consultants are in Supplementary Appendix D.
C. Special Features
30. Strategic Environmental Assessment. The proposed SEA on the Jiaozhou Bay development, in parallel with the proposed Project in Jiaozhou City, will enable the initial results and lessons learned from the Jiaozhou project development to be incorporated into improved environmental planning over the whole bay area. The SEA will reinforce the institutional set-up by encouraging the development of a bay-wide environmental protection authority from the existing leading group structure, and thereby contribute significantly to the coordination and integration of the existing fragmented pollution control and water resources planning with urban development and marine ecosystem planning. The development of the SEA as a statutory planning document guiding future detailed planning, and the implementation will reinforce the project outcome, enabling the Project to be replicated throughout the bay area, thereby significantly enhancing the project impact.
31. Integrated Water and Ecosystem Management. Increased wastewater collection from about 55% to over 80% will significantly reduce the pollution loads currently discharged to Jiaozhou’s rivers and Shaohai Lake. As a result, the risk of increasing eutrophication of the lake can be mitigated. However, to reduce and further improve the existing conditions, a number of in situ measures involving the development of wetland areas at the point of entry of the rivers to the lakes have been developed, together with studies to monitor and further investigate improvements to water quality in the lake.
32. The Project will complement the structural measures with the designed nonstructural measures, which were well accepted by the Government. During project design, hydraulic simulation techniques were developed to diagnose current flooding behavior and test the adequacy of proposed structural measures. These simulation approaches will be continued during project implementation to develop operational rules to cater for events rarer than the design events through flood mapping and emergency warning systems, and test the effectiveness of storm-water source control. In addition to these measures, the Project will contribute to the corporatization of wastewater services and strengthening of tariff reform. An integrated information system for flood, water, and wastewater management will be developed and operated during the project implementation.
33. Public–Private Partnership. Due to the underdevelopment of the sewage network, inadequate wastewater is being captured for the wastewater treatment plant (WWTP). In this Project, ADB financing will support the construction and upgrading of the storm-water and wastewater interceptor and sewerage system as well as the development of nonstructural measures, which may not directly generate revenues but are crucial to ensuring the sustainability of the water infrastructure investments. In addition, to expand the WWTP, a partnership with the private sector has been established. An expanded treatment capacity of 50,000 m3/day will be added to the existing WWTP through a BOT contract between the Jiaozhou authorities and a private company. The Project will (i) provide safeguards and due- 9 diligence support to Jiaozhou authorities with respect to wastewater treatment process design and environmental assessment, and (ii) promote wastewater tariff reform in Jiaozhou City.
34. This WWTP will be constructed and operated under a 20-year BOT arrangement by the Zhongkecheng Environmental Company using the A2O12 treatment process. The agreement with the Zhongkecheng Environmental Company has been signed. The WWTP is expected to be operational by the end of 2009. In addition to being responsible for the operation and maintenance (O&M) of the ADB-financed project, the public utility division under the Jiaozhou Construction Bureau will also be responsible for the supervision and management of the proposed WWTP.
35. Optimization of Design. Significant design optimizations were undertaken to improve both the efficiency of the overall Project and to reduce resettlement and associated social disruptions. The Erli’he Reservoir subcomponent investment was significantly reduced while preserving its overall function and reducing significantly the amount of resettlement and land acquisition required. Initially, it was proposed to separate the sewerage system in the older parts of Jiaozhou, thereby creating two sewerage systems. Experience has shown that this solution is both costly and difficult to achieve in practice. As a result, an alternative solution based on the use of an interceptor system (associated with separation of the secondary sewerage) has been developed, enabling reduction in both investment costs and social disruption.
36. Pollution Control Enforcement. A major percentage of industries in Jiaozhou are connected to the exiting sewerage system, parts of which discharge directly to water courses. Connection of these sewerage systems to the centralized wastewater treatment facilities can create risks in relation to the efficiency of the treatment process without industrial wastewater pre-treatment. The Project will consider these risks and strengthen pollution control enforcement by implementing the following activities: (i) strengthen the enforcement capacity 13 of local environmental protection bureaus (EPBs) through the proposed SEA, (ii) train the wastewater entity to undertake effective monitoring of these industries, (iii) establish a community-based monitoring team to help promote compliance, and (iv) design an appropriate industrial wastewater tariff (as part of the wastewater tariff reform) based upon pollution loads rather than simply water use.
D. Project Investment Plan
37. The total cost of the Project is estimated at $105.8 million equivalent, including taxes and duties ($3.1 million), contingencies ($17.7 million), and interest and other charges ($5.8 million). A summary of cost estimates is shown in Table 1 and details are provided in Appendix 5.
12 Anaerobic/anoxic/oxic (A2O) is a process to treat domestic wastewater. The A2O process is proven to be effective in removing the nitrogen and phosphorus in the wastewater, which are key contributors to the eutrophication of lakes and wetlands. 13Both the Qingdao EPB and Jiaozhou EPB have established environmental inspection offices which are responsible for checking the level of compliance by enterprises with pollution standards, permits, and payment of charges. Private enterprises are inspected by Jiaozhou EPB. State-owned enterprises which are assigned a special administrative status are inspected by Qingdao EPB. When noncompliance is established, inspectors can issue warning letters, impose fines, or withdraw the permit for a part of or the whole installation. Compliance schedules (called “pollution control within deadlines”) are also frequently used. In August 2007, Jiaozhou EPB carried out a thorough inspection of 42 key polluting enterprises across seven sectors, and required these enterprises to reduce their pollution discharges to acceptable levels by June 2008.
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Table 1: Project Investment Plan ($ million)
Item Amount a A. Base Costsb 1. Improving Water Resources and Flood Management a. Improvement of the Erli'he Flood Retention Facilities 5.5 b. Upgrading of Stormwater Drainage Facilities 14.4 c. Rehabilitation of River Courses 53.3 Subtotal (A1) 73.2 2. Strengthening Wastewater Management and Pollution Control a. Upgrading of Wastewater Collection System 6.4 Subtotal (A2) 6.4 3. Integrated Water and Ecosystem Management a. Capacity Building for Flood and Water Resources Management 0.8 b. Environmental Management and Pollution Control 0.6 c. Support for the Shaohai Artificial Lake Ecology 0.4 Subtotal (A3) 1.8 4. Strengthening Project Management Capacity 0.9 Subtotal (A) 82.3 B. Contingencies 1. Physical Contingenciesc 7.7 2. Price Contingencies 10.0 Subtotal (B) 17.7 C. Financing Charges During Implementationd 5.8 Total (A+B+C)e 105.8 a In mid-2008 prices. b Includes taxes and duties of $3.1 million. c Contingencies will be financed by the Government. Price contingencies on local currency are 5.5% between data collection and loan effectiveness, and 5% for all subsequent years. On foreign exchange, 6.8% between data collection and loan effectiveness, and 0.7%, 1.4%, 0.4%, 0.5%, and 0.5% for subsequent years. Physical contingencies are at 10% other than for survey, design, and supervision where they are 0%. d Includes interest during construction computed at the 5-year forward London interbank offered rate (LIBOR), with a spread of 0.2%. Commitment charges were computed at 0.15% on undisbursed amounts. e Numbers may not sum precisely because of rounding. Source: Asian Development Bank estimates.
E. Financing Plan
38. The Government has requested a loan of $45.0 million from ADB’s ordinary capital resources to help finance the Project. The loan will have a 25-year term, including a grace period of 5 years, an interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility, a commitment charge of 0.15% on undisbursed funds, and such other terms and conditions set forth in the loan agreements. The Government has provided ADB with (i) the reasons for its decision to borrow under ADB’s LIBOR-based lending facility on the basis of these terms and conditions, and (ii) an undertaking that these choices were its own independent decision and not made in reliance on any communication or advice from ADB. The financing plan is in Table 2. 11
Table 2: Financing Plan ($ million)
Source Total % Asian Development Bank 45.0 42.5 Jiaozhou City Government 60.8 57.5 Total 105.8 100.0 Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank estimates.
39. The ADB loan will finance 42.5% of the total project costs. The remaining costs will be financed by JCG covering base costs, financing charges during implementation, and physical and price contingencies. The local costs of JCG will be financed from land-use fees and urban construction and maintenance taxes. JCG has issued a commitment letter confirming the availability of counterpart funds.14
40. Loan Funds Flow. The Qingdao Municipality is one of the few special cases in the PRC that report directly to the central Government in terms of fiscal revenues and outlays. Therefore, in terms of loan disbursement, ADB loan proceeds will be disbursed directly from the Ministry of Finance to the QMG. The imprest fund account will be set up in the Qingdao Financial Bureau, which has prior experience in dealing with loans from international institutions such as the World Bank, Japan Bank for International Cooperation, and ADB. QMG will then onlend the loan proceeds to JCG with the same loan terms and conditions. JCG will disburse the loan funds to the contractors for project implementation. In terms of loan repayment, JCG will pay QMG, QMG will repay the Ministry of Finance, which will then repay ADB. JCG will assume the foreign exchange and interest rate variation risks of the ADB loan. The flow of funds and onlending arrangements are in Appendix 6.
F. Implementation Arrangements
1. Project Management
41. The Executing Agency (EA) for the Project is JCG. A project leading group has been established, headed by the vice mayor of JCG and comprising representatives from Jiaozhou City Construction Bureau, City Development and Reform Bureau, Finance Bureau, Environmental Protection Bureau, Planning Bureau, Shaohai Artificial Lake Management Bureau, Land Resources Bureau, and Water Resources Bureau. The leading group will provide overall policy guidance, facilitate interagency coordination, and resolve any institutional problems affecting project implementation. A PMO has been established, comprising 10 staff from Jiaozhou City Construction Bureau, which include the project manager and staff for undertaking activities related to procurement, disbursement, engineering, social and environmental safeguards, and interpreting.
42. During project implementation, the PMO will be responsible for coordinating with the design institutes, specialists, and contractors procured under the Project. Upon completion of the Project, the Public Utility Division of the Jiaozhou Construction Bureau will be responsible for the O&M of the completed facilities including wastewater networks, drainage, river courses management, and supervision and management of the WWTP, which will be built by the private sector through the BOT modality.
14 Land acquisition and resettlement costs are estimated at about CNY2.8 million, and will be financed by local counterpart funds.
12
43. The capacities of water-related agencies in Qingdao and Jiaozhou were assessed. It was concluded that there is a need for assistance to strengthen water resources management and conservation, such as (i) the introduction of an integrated information system, which will apply real-time data acquisition, geographic information system platform, river courses and drainage/sewer system simulation software, and a decision support system for real-time flood management; (ii) training for the corporatization of wastewater services; and (iii) planning for wastewater tariff reform. The detailed analysis are provided in Appendix 3 and Supplementary Appendixes C–L.
44. The PMO’s financial, technical, and institutional capacity was assessed. Based on the assessment, the Jiaozhou PMO will need training in relevant ADB procedures during project implementation. The detailed discussion is in Supplementary Appendix L.
2. Implementation Period
45. The Project will be implemented over 5 years from April 2009 to March 2014. An implementation schedule is presented in Appendix 7. The implementation period is estimated based on the project scope and construction technology requirements and ADB’s successful experience with similar projects in the PRC, combined with the knowledge and experience of JCG/QMG and the PMO in wastewater management and other urban environmental improvement projects. The implementation schedule is realistic and achievable.
3. Procurement
46. All procurement of goods and works shall be carried out in accordance with ADB's Procurement Guidelines (2007, as amended from time to time). Contracts for goods estimated to exceed $1.0 million and contracts for works estimated to exceed $10.0 million shall be procured using international competitive bidding (ICB) procedures. Contracts for goods and works estimated to be equal to or less than the above ICB values but more than $100,000 shall be procured through national competitive bidding procedures in accordance with the PRC Tendering and Bidding Law (1999), subject to modifications agreed to with ADB. Contracts for goods and works estimated to cost $100,000 or less shall be procured using shopping procedures. A procurement plan setting out the indicative list of all procurement packages and the procurement methods is provided in Appendix 8. The relevant sections of ADB’s Anticorruption Policy (1998, as amended to date) will be included in all procurement documents and contracts.
4. Consulting Services
47. The Project will finance about 31 person-months of international and 100 person-months of national consulting services (to be funded) for project management support and implementation of nonstructural measures. Consulting services will be provided in the following specific areas: (i) development of an integrated information system for management of drainage and wastewater assets in Jiaozhou City, (ii) ecological upgrading of the Shaohai Lake wetlands, (iii) construction supervision and quality control, (iv) financial management and corporate governance, and (v) O&M. The international consultants will specifically provide training and capacity building in wastewater management and treatment planning, industrial pollution control, hydrological and hydraulic analysis, storm-water source control financial management, and environmental monitoring and management. Contracts for consulting services estimated at $200,000 and above will be awarded to consulting firms using the quality-and cost-based selection procedures (80:20), in accordance with ADB’s Guidelines on the Use of Consultants 13
(2007, as amended from time to time). The consultant’s terms of reference are provided in Supplementary Appendix D.
5. Advance Procurement and Retroactive Financing
48. JCG has requested for advance contracting and retroactive financing to enable early commencement of procurement of goods and services including consultant services, training, design, preliminary construction, and small equipment procurement for river courses (i.e., Erli’he River and Sanlihe) rehabilitation due to the deterioration of downstream wetlands. The details of activities to be financed will be set out in a written request to ADB. ADB has advised the Government that retroactive financing could only apply up to 20% of the ADB loan in respect for expenditures incurred not earlier than 12 months before the signing of the loan agreement. All contracts for advance action will be undertaken in accordance with ADB’s Guidelines on the Use of Consultants and Procurement Guidelines. The Government has been advised that approval of the advance action and retroactive financing does not commit ADB to financing the Project.
6. Anticorruption Policy
49. ADB’s Anticorruption Policy was explained to and discussed with QMG, JCG, and the PMO. Consistent with its commitment to good governance, accountability, and transparency, ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project. To support these efforts, relevant provisions of ADB’s Anticorruption Policy are included in the loan regulations and the bidding documents for the Project. In particular, all contracts financed by ADB in connection with the Project shall include provisions specifying the right of ADB to audit and examine the records and accounts of JCG, the PMO, and all contractors, suppliers, consultants, and other service providers as they relate to the Project. The project design and implementation arrangements provide for mitigating corruption risks. Risks associated with project management, including procurement and disbursement, will be mitigated by (i) engaging an international consultant and a national consultant to advise and assist in the procurement of goods and services, and the engagement of other consultants; (ii) introducing a dual signing system in which the civil works contractor awarded the contract will also sign an anticorruption contract with the employer; and (iii) periodical inspection by the PMO of the contractor’s activities related to fund withdrawals and settlements. In furtherance of the principles of transparency and accountability, JCG will cause the PMO to set and develop a project website that describes the Project in order to provide the public with information on the Project, including (i) a summary of the audited financial statements of the Project, and (ii) tracking of contract awards in accordance with ADB’s Procurement Guidelines. JCG will ensure that the PMO establishes financial control and management arrangements compatible with ADB’s Guidelines for the Financial Management and Analysis of Projects and Loan Disbursement Handbook (2007, as amended from time to time).
7. Disbursement Arrangements
50. The proceeds of the loan will be disbursed in accordance with ADB’s Loan Disbursement Handbook. Since many of the payments will be made for large contracts, direct payment, reimbursement, and commitment procedures will be used to withdraw funds from the loan account. To expedite the flow of funds and simplify document processing, the statement of expenditure procedure may be used to reimburse eligible expenditures for any individual payment not exceeding $100,000. Payments exceeding this ceiling will be reimbursed based on the full documentation process.
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51. A project imprest account will be set up by the Qingdao Financial Bureau in a commercial bank acceptable to ADB. Disbursements from the imprest account will be supported by an appropriate withdrawal application and required documentation. The initial amounts to be deposited to the imprest account shall not exceed the estimated expenditures for the following 6 months or 10% of the loan amount, whichever is lower, to be financed from the imprest account.
8. Accounting, Auditing, and Reporting
52. The PMO will maintain records and accounts that identify goods and services from loan proceeds, financing resources received, expenditures incurred, and use of local funds. These accounts will be established and maintained in accordance with sound accounting principles and internationally accepted accounting standards. The PMO will review and consolidate these accounts and have them audited annually in accordance with sound accounting practices by the sovereign audit agency of the Government or other auditors acceptable to ADB. The audit report will include a statement verifying whether or not the funds disbursed by ADB were used for the purposes for which they were provided, as well as the auditor’s opinion on the use of the imprest account and statement of expenditures procedures. Copies of the audited accounts and auditor’s report will be submitted to ADB within 6 months after the end of each financial year. The PMO will prepare consolidated quarterly reports indicating progress made, problems encountered during the period, steps taken or proposed to remedy the problems, proposed program of activities, and progress expected for the next quarter. Within 3 months of physical completion of the Project, the PMO will submit to ADB a completion report that describes the achievements in relation to the Project’s expected impact, outcome, and outputs.
9. Project Performance Monitoring and Evaluation
53. To monitor the progress of the Project in achieving the planned outcome and outputs, the PMO will establish and maintain a project performance monitoring system (PPMS), which will be designed to permit adequate flexibility to adopt remedial action regarding project design, schedules, activities, and development impacts. The PPMS will adopt the following agreed indicators: (i) physical progress of subproject implementation; (ii) results of the capacity- development program; (iii) water quality and quantity improvements in the rivers and Shaohai Lake, Dagu River, and Jiaozhou Bay; (iv) improvement in biodiversity conservation in Shaohai Lake and Jiaozhou Bay; and (v) social development. At project inception, the PMO will develop comprehensive PPMS procedures to systematically generate data on inputs and outputs of the project activities, and the socioeconomic, health, and environmental indicators to measure project impacts.
54. The PMO will refine the PPMS framework, confirm achievable targets and monitoring and recording arrangements, and establish systems and procedures no later than 6 months after project implementation begins. Baseline and progress data will be reported at the requisite time intervals by the PMO, including annual reporting on the environmental management plan. The PMO will be responsible for analyzing and consolidating reported data through its management information system, and for reporting outcomes to ADB and QMG through quarterly progress reports.
10. Project Review
55. In addition to regular monitoring, project performance will be reviewed at least once a year jointly by ADB and the Government. The review will assess implementation performance and achievement of progress towards project outcomes and outputs, financial progress, and issues and constraints affecting implementation, and work out a time-bound action plan for their 15 resolution. ADB and the Government will undertake a midterm review to assess implementation status and take appropriate measures, including modification of scope and implementation arrangements, and reallocation of loan proceeds, as appropriate, to achieve the Project’s expected outcomes and impact.
IV. TECHNICAL ASSISTANCE
56. An advisory TA grant of $750,00015 is requested to strengthen the capacity of QMG in integrated environmental planning and management to support the SEA on the Jiaozhou Bay development. QMG, through the Qingdao Environmental Protection Bureau as the Executing Agency (EA), will provide $250,000 for in-kind costs. The TA will address three priority issues identified by the sector analysis and the lessons learned from previous interventions that need to be improved in the implementation of an ecosystem-based integrated water resources management scheme: (i) integrated planning and analysis, (ii) an effective management scheme, and (iii) an appropriate mechanism to monitor and ensure effective implementation.
57. The advisory TA comprises three components to support the SEA: (i) support the creation of an effective management mechanism for strategic environmental and planning processes, (ii) the SEA of Jiaozhou Bay’s further development for integrated planning, and (iii) operational guidelines and a monitoring system for implementation.
58. An international firm will be engaged through the quality- and-cost-based selection method (80:20) using simplified technical proposals in accordance with ADB's Guidelines on the Use of Consultants. Fifteen person-months of international and 60 person-months of national consulting services will be required. The indicative consultant needs and outline terms of reference are provided in Appendix 9. Implementation of the TA will commence in the first year of the Project (2009).
V. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS
A. Project Benefits and Impacts
59. The Project will benefit directly about 370,000 people living in the project area, of whom about 1.5% are poor, and indirectly benefit about 3 million people in the Jiaozhou Bay area. All the residents in Jiaozhou City will benefit and their living conditions will improve as a result of (i) reduced pollution of Jiaozhou’s surface water, with water quality improving to at least class V by 2014, with longer-term potential to be upgraded to class IV; (ii) protection from flooding and elimination of hazards resulting from poor drainage; and (iii) 40% reduction in the incidence of waterborne diseases from 2008 levels, with a corresponding decline in the number of sick days and expenses for medical treatment. Approximately 3 million residents in the broader Jiaozhou Bay area will benefit from (i) reduced pollution of Jiaozhou Bay, improved amenity values, reduced health risks from the consumption of shellfish, and reduced algal growths in the bay and surrounding areas; and (ii) improved urban planning through the raising of environmental sustainability in the early stages of project conception.
B. Financial Analysis
60. The Project is considered financially viable and sustainable. The Government does not charge beneficiaries directly for its flood protection services and other project-related environmental services. The interventions will not directly generate any revenues. Therefore,
15 About $400,000 will be cofinanced from the Water Financing Partnership Facility.
16 the project financial analysis only focuses on three aspects: (i) funds flow and Jiaozhou City’s fiscal capacity, (ii) the financial management capacity of the EA and the PMO, and (iii) the Project’s cost recovery and financial sustainability. These are discussed in detail in Appendix 10 and Supplementary Appendix J.
61. Jiaozhou City’s Fiscal Capacity. Jiaozhou has adequate experience in servicing loans from international financial institutions such as the World Bank and ADB. The Jiaozhou revenue situation indicates that adequate funds are available for the project counterpart contribution and debt servicing. The major source where such funds can be drawn from is the land-use fees and urban construction and maintenance taxes, which are estimated at an annual average of CNY655 million, and have been stable in the past.
62. According to the projection of fiscal status of Jiaozhou City by 2020, the total debt service will be about 3% of the city’s total fiscal revenue in the first year of the project implementation in 2009, decreasing to about 2% in 2014, the last year of implementation. As a percentage of annual GDP, total debt service is estimated at about 0.2% in 2009 and is projected to decrease to about 0.1% in 2013. Total counterpart funds and debt service as a percentage of total potential sources of funds range from 13% to 15% during 2009–2014, the period of project implementation. This is projected to decrease to about 5% and even 4% thereafter. As debt service accounts for only a small proportion, it is safe to indicate that JCG will more than adequately cover the required repayments under the loan.
63. Project Financial Management Assessment. Financial management assessment (FMA) has been undertaken to determine the institutional capacity of each implementing agency, funds flow arrangements, staffing, accounting policies and procedures, internal and external auditing arrangements, reporting and monitoring aspects, and information system. JCG is the EA of the proposed Project. A PMO was set up within the EA in May 2008. An FMA questionnaire was adapted to the subprojects’ conditions. Issues or risks associated with the financial management systems were identified and the most appropriate risk mitigation measures were determined as part of project design and/or project implementation arrangements.
64. The results of the FMA questionnaire were analyzed, with particular focus on the accounting and auditing procedures and staff expertise. In terms of accounting and auditing procedures, the existing financial information system (i.e., accounting, reporting, and internal control system) is complete and applicable for domestic construction entities. In terms of staff expertise, the PMO under the Jiaozhou Construction Bureau has broad experience in infrastructure construction financed by domestic funds, but has not implemented any ADB projects. Training on ADB procedures and advanced financial management will be necessary to ensure success of implementation of the proposed Project.
65. Project Financial Sustainability Analysis. Project financial sustainability was conducted by comparing the O&M costs of each project component with their financing sources. Such analysis was done separately for the flood management component and environmental management components under the Project. Under the environmental components, consideration was given not only to the O&M of the wastewater collection and treatment but also the O&M of the downstream wetlands.
66. In terms of financial sustainability of the flood management component, the incremental annual O&M cost is CNY4.32 million per year, which is to be financed through a flood control management fee. Analysis shows that by 2020, the flood management fee could reach CNY178 million per year, providing sufficient funds for the flood management O&M. In order to assess 17 the financial sustainability of the wastewater network subcomponent, the existing wastewater collection and treatment facilities were examined. Analysis shows that the annual O&M costs are about CNY16 million for the WWTP. JCG will pay the WWTP about CNY18 million per annum at a BOT price for wastewater treatment services. Therefore, the WWTP has adequate revenue to cover the O&M costs of wastewater treatment. The Government collects wastewater treatment fees from households, institutions, and industries at different rates. Tariff analysis shows that current tariffs are lower than the BOT price, resulting in a fiscal subsidy of around CNY2 million per year for wastewater treatment. The subsidy comes from the Government’s general budget, especially from the urban construction and maintenance tax, which is around CNY46 million per annum. In the long run, it is advisable for the Government to increase the wastewater treatment fees in order to reduce such subsidies, but in the short- and medium- term the Government has sufficient resources to cover the O&M. The annual O&M costs of wastewater network are CNY2.3 million and of the pumping stations CNY0.5 million, and these are generally financed by the fiscal budgets.
67. Analysis shows that a tariff level of CNY1.35/m3 (as compared to the current tariff of an average of CNY0.88/m3) would allow the wastewater treatment work to be self-financed, and even show a small profit. A willingness-to-pay survey and an affordability analysis were conducted to assess households’ acceptance of potential tariff increases in the future. Ninety percent of the interviewees, except the extreme poor, find the current water tariff acceptable. Other things being equal, an increase of the wastewater treatment fee from the current CNY0.88/m3 to CNY1.35/m3 would increase the total water expenditure as a percentage of household total income from 0.6% in 2008 to 0.75% in 2013. JCG has submitted to ADB a wastewater reform plan which aims to gradually increase the wastewater tariff to CNY1.40/m3 by 2014. The economic analysis is in Appendix 11.
C. Economic Benefits
68. The economic analysis provides a rationale and justification for the Project based on policy and sector analysis. It considers the Project directly contributing to pollution reduction and flood control. These will in turn decrease health costs and increase the overall quality of urban life. The economic analysis includes the rationale for the Project through demand analysis, the selection of the optimal design through least-cost analysis design of the plan, and the determination of economic benefits.
69. The Project will generate direct economic benefits from improved flood control and management, improved health, and reductions in the extent of environmental degradation in the coastal wetlands from both the structural and nonstructural investments. Currently, in the without-project situation, Jiaozhou experiences frequent flood damage caused by severe siltation and poor flood-discharge capability of the Yunxi and Hucheng rivers. This mainly affects industrial/commercial and private properties within the city proper, and from various Jiaozhou documents, it is estimated to occur once every 3 years. Based on these data, the 2001 flood, which caused CNY298 million of damage, was estimated to represent the 30-year flood return period. An estimate of the impact of the 50-year flood return period was obtained from the flood simulation model.16 With this information, the annualized economic benefit, in constant 2008 values, was estimated at CNY90.8 million in 2011, increasing to CNY120.1 million in 2021.
70. Economic benefits from reduced disease incidence were estimated based on statistical data from JCG and information collected in the socioeconomic survey. The main diseases
16 The flood simulation model was developed specifically for this Project, This represents a special feature as discussed previously. See Supplementary Appendix G.
18 included in the analysis are diarrhea, dysentery, gastroenteritis, and hepatitis A. Due to lack of data, stomach and intestinal cancers and pollution-related diseases were excluded. Without the Project, the incidence of stomach-related illnesses was projected to increase from about 11,400 in 2009 to 50,200 in 2033. A 40% reduction in these diseases is expected following project completion, and the benefits are expected for both urban and rural populations. With an economic cost of these diseases valued at CNY613.80 per person per year, the health benefits are expected to increase from CNY0.75 million in 2010 to about CNY12.35 million in 2033.
71. The premise underlying the estimation of benefits derived from strengthened water resources and environmental management is that pollution will be effectively regulated and controlled, thereby significantly reducing wetland degradation. In addition, implementation of the SEA for Jiaozhou Bay is expected to have a significant longer-term impact on the wetlands as it increases awareness of degradation and provides a legal basis for further preservation and pollution control in the bay as a whole. Direct and quantifiable environmental benefits are identified as both direct uses (food production, raw materials, recreation, and cultural) and indirect uses (disturbance regulation, nutrient cycling, biological control, and habitat and refuge). Of these, the main benefit is through nutrient cycling, for which direct estimate of the benefit was made based on the cost of treating the total amount of wastewater currently produced to remove nitrogen and phosphorus, since this is the major source of pollution in the bay proper. This was expressed in terms of the cost per hectare (ha) of wetlands. The value of wetland benefits was projected to increase from CNY0.04 million (from 1.1 ha saved) in 2011 to CNY6.97 million (from 196.1 ha saved) in 2033.
72. The project economic internal rate of return (EIRR) is estimated at 14.7%. The result indicates that the Project as a whole is economically viable. Sensitivity analysis shows that the project EIRR will fall (i) to 13.0% if economic benefits fall by 10%, (ii) to 13.3% if investment costs increase by 10%, (iii) to 12.6% if commissioning is delayed for 1 year and 11.1% if delayed for 2 years, and (iv) to 11.7% if (i) and (ii) occur together. Sensitivity analysis is also tested for each benefit and indicated that flood benefits had the greatest impact on economic viability. Sensitivity tests indicate that the returns to the overall Project are generally robust. The economic analysis is in Appendix 11. Detailed economic analysis is presented in Supplementary Appendix K.
D. Environmental Benefits and Impacts
73. The Project is classified as category B in accordance with ADB’s Environment Policy (2002). An environmental assessment for the Project has been carried out in accordance with the PRC regulatory framework and ADB’s Environmental Assessment Guidelines. The analysis indicates that the Project will bring significant environmental improvements for the Jiaozhou urban area, the downstream Shaohai Lake, and the parts of the wetlands of the Jiaozhou Bay. These include better public health in Jiaozhou City, improved water quality of urban rivers, and reduced pollution loads in the downstream Shaohai Lake and Jiaozhou Bay wetlands. The proposed SEA will enable QMG to introduce sustainable approaches to urban development, thus protecting and maintaining the functions of the coastal wetlands and ecosystems.
74. Potential negative environmental impacts associated with the Project have been identified, and adequate mitigation and monitoring arrangements have been incorporated in the environmental management plan (EMP). Potential adverse impacts during the construction and operation phase include unsafe disposal of dredged sediments and WWTP sludge, and limited standard construction impacts. An associated requirement for adequate treatment of collected wastewater has been mitigated through project assurances. Extensive public consultations 19 involving meetings with stakeholders, focus group discussions, and surveys were undertaken twice during preparation of the environmental impact report.
75. The possible adverse environmental impacts associated with the subprojects will be prevented, or minimized to an acceptable level, if the EMP, set out in the summary initial environmental examination (SIEE) (Supplementary Appendix P), is effectively implemented. The environmental analysis is provided in Appendix 12.
E. Health Impact
76. The improved environmental situation will reduce the population exposed to waterborne diseases from various sources such as direct contact through washing, pollution of water supply resources, and consumption of polluted shellfish. This will lead to a corresponding decline in medical costs and the number of workdays lost due to sickness. The medical cost savings for the elderly, women, children, and the poor would be greater, as they are most vulnerable to such diseases. Women will benefit from the improvements in sanitation, water quality, and urban environment as a result of the Project. The poor, who are exposed to unsanitary conditions and flooding, will gain more than the average population from improved environmental and living conditions. To realize the full health benefits, parallel improvements in water supply, public health education, higher standards of personal hygiene, disease prevention and control, and improved housing and living conditions will be required. The health impact assessment is in Supplementary Appendix F.
F. Poverty Impact
77. The Project supports the achievement of the Millennium Development Goal for environmental sustainability (goal 7), which aims to halve the proportion of people without sustainable access to safe drinking water and basic sanitation by 2015 (target 10), through improved urban environmental management. The Project will directly benefit an urban population of 370,000 by improving environmental conditions and enhancing sanitation through wastewater treatment, flood prevention, and control. Of the beneficiary population, 1.5% are classified as poor, living below the standard poverty line of CNY1,500 per capita per annum in Jiaozhou City.
78. The Project has incorporated two key features to benefit the poor. First, to mitigate the financial burden of the poor from increased wastewater tariffs, the Project has negotiated with the Government that subsidies will be provided to poorer families. Second, the Project will provide 75% of the jobs generated in the Project to vulnerable groups, including the poor and women. It is expected that the Project will generate about 3,400 jobs during construction. To maximize the project benefits, women will be given priority in the employment and training opportunities generated in the Project’s construction and operation phases.
79. The Project is also expected to have the following positive effects on the poor: (i) improvement of the living environment by providing better wastewater collection and cleaning up the polluted rivers; (ii) reduction of waterborne diseases by improving environmental and drinking water problems; and (iii) reduction of natural disaster (flooding) associated damages, mitigating possible loss of shelter and assets.
80. Public consultation and participation, which have been key elements of the project design, will continue during project implementation, monitoring, and evaluation. Ongoing consultations also will be carried out by the PMO to (i) meet the evolving needs and expectations of the users, (ii) increase the awareness of the public about the benefits of the
20
Project, (iii) encourage the active involvement of local communities to maximize their support for the Project, (iv) promote environmental protection, and (v) raise the social acceptance of tariff increases.
81. The social and poverty assessment conducted during the TA implementation suggested that no indigenous people or ethnic minorities will be adversely affected. The summary poverty reduction and social strategy is in Appendix 13. Details are in Supplementary Appendix O.
G. Resettlement
82. Resettlement impacts have been identified and a resettlement plan has been prepared in accordance with the PRC land law and ADB’s Involuntary Resettlement Policy (1995). All subcomponents were planned to minimize disruption of residential areas and communities. Impacts will include: (i) acquisition of 42.1 mu 17 collective land is required, affecting 15 households with 51 persons; (ii) loss of use of 48.7 mu of informal farmland along the river banks or inside the current reservoirs/ponds, affecting 60 households with 212 persons; and (iii) temporary use of 149 mu of state-owned land. Land acquisition and resettlement costs are estimated at CNY2.8 million, or $0.4 million (representing less than 1% of total project base costs). The summary resettlement plan is provided in Appendix 14.
83. A due-diligence review (Supplementary Appendix N) of the resettlement associated with the implementation of the Shaohai Lake development was undertaken. The resettlement documentation has been reviewed and the implementation of the land acquisition and resettlement has been undertaken satisfactorily in compliance with the PRC regulations and laws. It is considered that resettlement issues were addressed and mitigated adequately. The proposed extension of the existing WWTP will not involve any land acquisition or resettlement as land was previously acquired during the development of the first phase of the WWTP in 2004.
84. ADB requires internal and external monitoring and evaluation of the resettlement implementation. The PMO will report progress regularly to the EA, which will summarize the land acquisition and resettlement progress in the quarterly progress reports to ADB. The PMO will retain the services of a domestic monitor for external monitoring and evaluation. The monitor will visit the subcomponents every 6 months to (i) review resettlement progress and the general welfare of those affected, (ii) recommend ways to resolve any issues or problems, and (iii) provide advice to PMO and local officials. The monitor will pay special attention to women, to assess whether they have fully regained their standard of living. Monitoring and evaluation reports will be prepared every 6 months during implementation, followed by an annual report 1 year after the completion of resettlement. These reports will be submitted simultaneously to ADB and the EA. They also will be uploaded onto the ADB website.
H. Risks and Mitigation Measures
85. The Project does not have any unusual technical risks. Standard engineering designs will be adopted for flood control and wastewater management. During project implementation, consultants will support the PMO by undertaking design review and ensuring that constructed works, goods, and equipment comply with bidding documents and associated quality standards.
17 1 mu = 0.067 hectares.
21
86. The following risks could affect timely implementation and economic viability, and reduce the available benefits of the Project: (i) the WWTP extension and process enhancement is not undertaken in parallel by JCG during the implementation of the Project; (ii) insufficient capacity to ensure proper O&M of project facilities; (iii) ineffective organizational structures and inadequate capacity of the PMO, which could result in inefficient project development and implementation delays; (iv) delays in the provision of counterpart funding; (v) failure of JCG to increase wastewater tariffs to meet cost recovery targets; and (vi) the proposed SEA implementation delayed and not in parallel with the development of planning proposals for urban development around Jiaozhou Bay.
87. Risk (i) will be mitigated by synchronizing the implementation of the WWTP extension with that of the interceptor network. JCG will provide specific assurances that are covenanted in the Loan Agreement to this effect. Risks (ii) and (iii) will be mitigated through provision of targeted capacity building for the PMO with the support of consultants. Risks (iv) and (v) will be mitigated through covenanted assurances from JCG on the provision of counterpart funding, and regular tariff reviews and increases. Risk (vi) will be mitigated by the provision of specific technical assistance by ADB to the Government.
VI. ASSURANCES AND CONDITION
A. Specific Assurances
88. In addition to the standard assurances, the Government, QMG, and JCG have agreed the following assurances which are incorporated in the Loan and Project Agreements: (i) JCG will ensure that capacity of Jiaozhou’s private sector funded WWTP is extended by 50,000 m3/day nominally, in a phased manner, and the discharge content is raised from class II to class IB in parallel with the wastewater network extensions to be undertaken under the Project, but in any case no later than 2014. (ii) JCG will ensure that (a) the regulations for industrial pollution control and water conservation are enforced strictly; (b) a comprehensive plan for reusing the storm water and treated wastewater is developed, adopted, and implemented in a timely manner; (c) the water savings master plan adopted under the 11th FYP for Jiaozhou is carried out effectively; and (d) a community-based monitoring team, acceptable to ADB, is set up to assist with independent monitoring of the environmental impact of the project activities and carrying out of the environmental protection awareness education. (iii) JCG will ensure that (a) all local and foreign currency counterpart financing necessary for the Project, including cash advances, are provided as and when due to enable completion of the project activities in the scheduled implementation period; (b) additional counterpart funding will be promptly provided for any shortfall of funds or cost overruns; and (c) the wastewater entity to be established by JCG adopts and maintains an appropriate financial management system acceptable to ADB. (iv) JCG will ensure that the wastewater fees charged are gradually brought, by 2014, to a level that ensures full cost recovery of O&M, depreciation, and financial costs including debt service obligations, and a reasonable profit margin for wastewater treatment. (v) JCG will ensure that prior to the implementation of any tariff increases, the City Price Bureau will (a) conduct a comprehensive review to determine the number of poor people, including those living at or below the poverty line, who would be
22
affected by such tariff increase, and the impact of such wastewater adjustments on the poor; (b) prepare a scheme acceptable to ADB, which may include price subsidies or other measures such as lifeline tariffs, to ensure that the livelihood or standard of living of the affected poor is at least as good after the tariff increase as it was in the period preceding such increase; (c) hold public hearing to consult with the affected people; (d) issue a decree before the tariff increase takes effect to ensure that all those affected are provided with subsidy or other appropriate measures are taken; and (e) monitor the effectiveness of the subsidy provided or other measures taken. (vi) JCG shall ensure that (a) the resettlement plan is implemented promptly and efficiently in accordance with its terms; (b) all land and rights-of-way required by the Project are made available in a timely manner; (c) the resettlement plan provisions, including compensation and entitlements for affected persons, will be undertaken in accordance with all applicable PRC laws and regulations, and ADB’s Involuntary Resettlement Policy; (d) all affected persons are given adequate opportunity to participate in resettlement planning and implementation; (e) compensation and resettlement assistance are given to the affected persons prior to dispossession and displacement; (f) the affected persons will be at least as well off as they would have been in the absence of the Project; (g) counterpart funds for land acquisition and resettlement activities are provided in a timely manner; and (h) any financial obligations in excess of the resettlement plan budget estimates are promptly met. JCG shall (a) upon the completion of detailed design, update the resettlement plan based on detailed measurement survey, disclose it to the affected persons, and obtain approval from ADB prior to award of civil works; and (b) during project implementation, advise ADB and reflect any significant material changes in project scope in an updated resettlement plan and submit to ADB for approval. (vii) JCG shall ensure that (a) adequate staff and resources are committed to supervising and monitoring the implementation of the resettlement plan and providing quarterly reports on such implementation to ADB; (b) an independent agency acceptable to ADB is engaged to carry out monitoring and evaluation, and to forward to ADB monitoring reports semiannually during resettlement implementation, and a post- evaluation report prior to project completion. (viii) JCG shall (a) ensure that civil works contractor specifications include requirements to comply with the resettlement plan and entitlements for permanent and temporary impacts to affected persons; (b) supervise contractors to ensure compliance with requirements of the resettlement plan, applicable laws and regulations, and ADB’s Involuntary Resettlement Policy; and (c) ensure that contractors are required as a priority to provide employment to affected persons. (ix) JCG will ensure that project facilities are constructed, operated, maintained, and monitored in strict conformity with (a) all applicable laws, regulations, and standards of the PRC for environmental protection, health, labor, and occupational safety and relevant ADB policies; (b) the environmental mitigation and monitoring measures detailed in the approved environmental impact assessment, summary initial environmental examination, and EMP for the Project are undertaken in strict conformity; and (c) that adequate numbers of personnel are engaged to monitor implementation of the EMP, under guidance of the Jiaozhou Environment Protection Bureau. (x) QMG and JCG shall cooperate closely with ADB in preparation of the SEA for the Jiaozhou Bay under an ADB-financed technical assistance project, to ensure that appropriate integrated planning methodologies are identified and incorporated in 23
the applicable environmental regulations following their approval by the relevant authorities by 2011. (xi) JCG shall ensure that (a) all applicable labor laws, health and occupational safety laws of the Borrower are complied with; (b) child labor is prohibited; (c) men and women are paid equally for work of equal value; (d) women are given priority in the employment and training opportunities generated in the Project’s construction and operation phases; (e) seventy-five percent of the jobs generated by the Project are given to vulnerable groups, with priority being given to women, all other conditions being equal; (f) the community-based monitoring team mentioned in item (ii) above is enlisted to monitor selection and recruitment of the construction workers; and (g) compliance with these provisions are closely observed and monitored during project implementation.
B. Condition for Disbursement
89. It will be a condition for disbursement of the loan proceeds for any subcomponents that the Government submit to ADB the certification that (i) the onlending agreement between the Government and QMG, and the onlending agreement between QMG and JCG have been entered into; and (ii) such onlending agreements contain the same financial terms and conditions and other requirements as provided in the Loan and Project Agreements.
VII. RECOMMENDATION
90. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Asian Development Bank (ADB) and, acting in the absence of the President, under the provisions of Article 35.1 of the Articles of Agreement of ADB, I recommend that the Board approve the loan of $45,000,000 to the People's Republic of China for the Qingdao Water Resources and Wetland Protection Project from ADB’s ordinary capital resources, with interest to be determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility; a term of 25 years, including a grace period of 5 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft Loan and Project Agreements presented to the Board.
C. Lawrence Greenwood, Jr. 24 November 2008 Vice President
24 Appendix 1
DESIGN AND MONITORING FRAMEWORK
Data Sources and/or Design Performance Targets Reporting Assumptions Summary and/or Indicators Mechanisms and Risks Impact Assumptions • Improved quality of life, • Reduced incidence of • Annual public health • Jiaozhou Urban Master sustainable ecosystem, waterborne diseases by 40% reports by the QMG Plan (2005–2020) and biodiversity in Jiaozhou City by 2015 and JCG effectively implemented conservation in the • Water quality in Jiaozhou • Annual state of the • Focus on the preservation Jiaozhou Bay area rivers restored to class IV/V environment report by of the quality of the by 2015 QMG and JCG ecosystem maintained by • Water quality in Jiaozhou • Monitoring of Ocean Jiaozhou as embodied in Bay maintained in non- and Fisheries Bureau the 11th FYP QECEP eutrophic conditions by 2015 • Reduced episodes of harmful Risks algae blooms in Jiaozhou • Adequate Government Bay by 2015 budget not provided • Overheated economic growth
Outcome Assumptions th • Improved condition of • Reduced COD discharges by • Jiaozhou Environment • 11 FYP QECEP water resources and 28% and P discharges by Protection Bureau and effectively implemented environment in Jiaozhou 43% in or around Jiaozhou Ocean and Fishery • Jiaozhou Water City and the downstream Bay by 2014 Bureau reports Resources 11th FYP wetlands area • Improved hygiene conditions • Annual livelihood effectively implemented and reduction of waterborne surveys by the Poverty • Jiaozhou Pollution Control diseases for 370,000 people Alleviation and Plan effectively in Jiaozhou City by 2014 Development Office of implemented • Enhanced flood protection for JCG • Local communities willing about 370,000 people in to participate Jiaozhou City by 2014 • Reduced pollution loads in Risks Jiaozhou Bay by 2014 • Ineffective enforcement of environmental regulations • Results and recommendations of SEA not implemented • Extension of the wastewater treatment facilities of Jiaozhou not implemented
Outputs Assumptions 1. Improved Water and • Institutions have an Flood Resource • A total of 19.5 km of • PQPRs by the JCB appreciation of and feel Management riverbanks • Annual development the need for improving • Major river courses upgraded/rehabilitated in reports by QMG and their capacity on flood rehabilitated/upgraded four major rivers by 2011 JCG management Yunxi River - 9.4 km • ADB mission reports • Adequate counterpart Hucheng River - 3.9 km (i.e., annual progress, funds made available on Wushui River - 3.2 km midterm, and project time Sanli River -3.0 km completion) Risk • Implementation of the • Flood retention facilities • Existing Erli’he flood improved retention facilities upgraded Project delayed by from 0.2 million m3 to 0.8 external factors million m3 by 2011 • Urban storm drainage
Appendix 1 25
Data Sources and/or Design Performance Targets Reporting Assumptions Summary and/or Indicators Mechanisms and Risks network • A total of 11.4 km of storm installed/upgraded drainage pipelines installed by 2011
2. Strengthened Assumption Wastewater Management • Institutions and local and Pollution Control communities have an • A total of 27.7 km of • Urban wastewater • PQPRs by JCB appreciation of and feel wastewater drainage drainage network the need for wastewater pipelines installed by 2011 • ADB mission reports upgraded (i.e., annual progress, management and midterm, and project pollution control completion) Risk • Economic development accorded higher priority over water resource and environmental protection by JCG
3. Integrated Water and Ecosystem Management Assumptions • Shaohai Lake and • About three artificial • PQPRs by JCB • All local governments Jiaozhou Bay ecosystem wetlands established and • ADB mission reports concerned along the protection measures habitats enhanced by 2011 (i.e., annual progress, Jiaozhou Bay area feel developed • Operations manual for midterm, and project the need for the SEA Shaohai Lake ecosystem completion) study management in place by • Institutions and local 2013 communities have an appreciation and feel the • Water resources and • Integrated information need for ecosystem flood management system for flood, water, and management strengthened in Jiaozhou wastewater management developed and operated by Risks 2012. • Development along • A total of 30 persons Jiaozhou Bay does not trained within JCG by 2014 proceed as envisioned and as planned • Environmental • A total of 5 communities • Delay in implementation management and and surrounding industries of the proposed SEA pollution control mobilized for training and • Trained staff being strengthened in Jiaozhou awareness raising activities reassigned to other by 2011 positions/institutions • Public education and and prevented from awareness program performing the duties implemented by 2012 they are trained for • Wastewater service corporatized by 2014 • Wastewater tariffs reformed by 2014
• Environmental monitoring plan is enforced by 2011
• SEA on Jiaozhou Bay • SEA incorporating development prepared integrated planning methodologies approved by relevant authorities by 2011
4. Strengthened Project Assumptions Management Capacity • PMOs established and • PMO staff appointed on • Project management operational by 2009, • PQPRs by JCB time and most stay with
26 Appendix 1
Data Sources and/or Design Performance Targets Reporting Assumptions Summary and/or Indicators Mechanisms and Risks support provided adequate budgetary • ADB mission reports the Project throughout its resources allocated, office (i.e., annual progress, implementation. equipment and vehicles mid-term, and project • Relevant staff nominated procured by 1Q 2009, 92 completion) on time for training person-months of consulting services provided by 2014 Risk • A total of $0.2 million • Adequate counterpart provided for logistical funds not made available support (i.e., computers, on time equipment, etc.) Activities with Milestones Inputs ($ million)
Component 1: Improved Water Resources and Flood Management ADB loan: 45.0 1.1 Four river courses totaling 19.5 km rehabilitated and completed by 2011. Jiaozhou: 60.8 1.2 Erli’he flood water retention facilities upgraded by 2011. 1.3 Urban storm-water drainage network totaling 11.4 km upgraded by 2011. Total Cost: 105.8
Component 2: Strengthened Wastewater Management and Pollution Control Civil works: 67.2 2.1 About 15.9 km of urban interceptor sewer constructed by 2011. Survey and 2.2 About 11.8 km of additional trunk sewerage system constructed by 2011. Design: 1.9 Management and Component 3: Integrated Water and Ecosystem Management Supervision: 3.0 3.1 Shaohai Lake and Jiaozhou Bay ecosystem protection Vehicles: 0.2 3.1.1 Artificial wetlands between the four river courses and Shaohai Lake constructed Equipment and by 2011. Materials: 7.8 3.1.2 Shaohai Lake Ecosystem Management System developed by 2014. Consulting Services: 1.8 3.2 Strengthening capacity for water resources and flood management in Jiaozhou Capacity Building: 0.1 3.2.1 Integrated information system for flood, water, and wastewater management Monitoring and developed in Jiaozhou City by 2014. Reporting 0.2 3.2.2 Emergency response measures, flood zone mapping, storm-water source Contingencies 17.7 control, and improved control structure regulation developed by 2014. Interest during 3.3 Environmental management and pollution control in Jiaozhou Implementation: 5.7 3.3.1 Participation of community and industrial enterprises in environmental Commitment management and pollution control strengthened through training and awareness Charges 0.1 raising by 2014. 3.3.2 Wastewater services in Jiaozhou City corporatized and strengthened by 2014. 3.3.3 Wastewater tariff reform conducted by 2014. 3.3.4 Environmental monitoring plan enforced by 2014. 3.4 SEA developed by 2014
Component 4: Strengthened Project Management Capacity 4.1 Municipal PMO and city PMO established by 1Q 2009 4.2 PMO staffed and provided with initial training by 1Q 2009 4.3 Consultant for project implementation and capacity building engaged by 1Q 2009 11th FYP QECEP = 11th Five-Year Plan of Qingdao Ecological Conservation and Environmental Protection, ADB = Asian Development Bank; COD = chemical oxygen demand, JCB = Jiaozhou Construction Bureau, JCG = Jiaozhou county government, km = kilometer, P = phosphorus, PMO = project management office, PQPR = project quarterly progress report, QMG = Qingdao municipal government, SEA = strategic environmental assessment.
Appendix 2 27
SECTOR ANALYSIS
1. The proposed Qingdao Water Resources and Wetland Protection is located in Jiaozhou county-level city, Qingdao municipality, in the southeast of Shandong Peninsula. Qingdao, the so-called Eastern Switzerland, surrounds Jiaozhou Bay in the Yellow Sea and faces the People’s Democratic Republic of Korea, Republic of Korea, and Japan. As an important coastal city with an increasingly open economy, Qingdao’s annual gross domestic product has increased at an average of more than 10% per year since 1990. Its major industries include tourism, electrical appliances, and petrochemicals. Qingdao is also a major city for finance and foreign trade in Shandong Province. Seven districts and five county-level cities are under the administration of Qingdao with a total area of 10,654 square kilometers (km2) and a total population of 7 million people. In addition, Qingdao was the host city for the sailing regatta of the 29th Olympiad which was held in the People’s Republic of China (PRC) in August 2008.
2. Qingdao, including Jiaozhou City, has experienced rapid economic development over the past three decades through intensive public investments and by encouraging foreign and private investors to participate in its development plans and activities. This has resulted in rapid urban and industrial development, along with the associated problems which have had detrimental effects on the water resources and on the overall condition of the municipality’s environment. The Qingdao municipal government (QMG) is aware of the need to address these problems and strengthen the capacity of the institutions that are mandated to manage water resources and the environment in order to meet its development objectives and targets. It is also aware of the need for a comprehensive and integrated water resource and environmental management approach to address the complex and interrelated problems as a requisite for sustainable economic development and improved quality of life within the Jiaozhou Bay area.
3. It is for this purpose that QMG is requesting assistance from the Asian Development Bank (ADB) in designing a project that will effectively address these problems which, in turn, may serve as a pilot for further replication to other economic/industrial zones in the bay area. This is particularly relevant to, and consistent with, QMG’s master plan for Jiaozhou Bay, which aims for balanced development along the western and eastern parts of the bay.
4. The Project incorporates the following plans:
(i) In 2006, the Shandong Peninsula City Cluster Development Strategy Plan1 was approved by the Shandong provincial government and has been implemented since the end of 2006. The general objective of the plan is to develop Shandong Peninsula cluster cities to be one of the essential advanced manufacturing and service centers in the PRC and even in the economic region around the Yellow Sea. Qingdao is one of the eight core cities and will be developed into the largest city in Shandong. The population of Qingdao is expected to be about 12 million by 2020, and the population of Jiaozhou about 1 million. As a leading city in Shandong Province and middle-to-downstream Yellow River area, Qingdao will be developed into an international seaport and a developed and coastal tourist city with modern manufacturing and service industries with an urban population of 5 to 5.5 million.
(ii) In order to incorporate Shandong Peninsula City Cluster Development Strategy Plan, QMG started to adjust the Qingdao Master Plan in March 2008. The
1 Shangdong Provincial Government. 2006. Shandong Peninsula City Cluster Development Strategy Plan. Jinan.
28 Appendix 2
principal concept was to involve the whole Jiaozhou Bay development and address the issue of an extra 3 to 3.5 million in 2020 in Qingdao urban area. One of the key issues for the new planning is to focus on the detailed planning of several regions, including Shaohai New Area in Jiaozhou City. The features of the new bay development will highlight environment priority, industry, tourism, and ecological conservation eco-supporting in planning new urban areas.
(iii) Water resources and environmental management are always critical in development. Qingdao has set as its goal to improve the integrity of its ecological and environmental position in its 11th Five-Year Plan (FYP). In line with these policy statements and consistent with its 11th FYP and overall plan for economic development, QMG intends to improve its capacity for water resources and environmental management by focusing on Jiaozhou City, which suffers from a variety of interrelated problems related to severe flooding, and consequently, pollution of its watercourses and overall environment. Structural and nonstructural measures will be considered simultaneously to effectively address the problem of environmental degradation.
5. Jiaozhou is situated at the head of the Jiaozhou Bay area, encompassing the lower estuarine reaches of the Dagu River (the largest river basin in Qingdao Municipality). The coastal wetlands of Jiaozhou Bay are vital, representing the most important coastal wetland ecosystem in Qingdao coastal region, providing breeding grounds for many types of fish and shellfish, a resting place for migratory birds, as well as maintaining coastal biological diversity. In addition, the wetlands absorb excessive nutrients in the river flow before it reaches the sea, thereby reducing eutrophication in Jiaozhou Bay.
6. Since the 1950s, the coastal wetlands around Jiaozhou Bay have been severely impacted by human activities including urbanization, industrialization, and the intensification of agriculture. From 1950 to 2000, it is estimated that the wetland area has been reduced by 30%; moreover, natural wetland has been replaced by artificial wetland such as salt and fishery (shellfish/shrimp) ponds. The water environment in Jiaozhou City has deteriorated significantly. As the same time, urbanization has changed the population structure and water consumption in this area. Both existing natural environmental resources and management systems are facing big challenges to prevent further degradation in wetland areas and the water environment, as well as to maintain fast economic and social development in this area.
A. Overview of Water Resources and Environment in Qingdao and Jiaozhou
7. Qingdao is a coastal city located at the tip of the Shandong Peninsula between the Yellow Sea to its east and southeast, and Jiaozhou Bay to its west and southwest. The total area of Qingdao Municipality is 10,654 km2, including cultivated land of approximately 484,600 hectares (ha). Annual rainfall is only 689.2 millimeters (mm) on average, but large water surface evaporative losses (about 1,000–1,100 mm annually), compounded by uneven geographic and seasonal distributions, present particular challenges for water resource management. Total annual water resources are only 313–342 cubic meters (m3 ) per capita, only about 14% of the national average and far less than 500 m3 per capita which is recognized as the international standard for water scarcity. Due to the serious water shortage, the Yellow River has been diverted since 1990 for municipal and industrial use in Qingdao City and southern Laoshan District, with 51–130 million m3/year being diverted. The current domestic water tariff is CNY2.5/m3 (including CNY0.7/m3 for wastewater treatment charge) and is considered low as it does not reflect the actual production costs, which are estimated at about CNY3–4/ m3.
Appendix 2 29
8. According to the Qingdao Environmental Report 20062, the water quality in 40.4% of 31 river courses was found to meet class III national surface water standard or better; the water quality in 42.9% of 47 river courses was found to be worse than class V standard. There were around 75,000 wells supplying water from underground in Qingdao Municipality in 2004. In general, groundwater quality is poor in shallow aquifers, as reported in the Qingdao Water Resources Report 2006. Poor water quality was reported in more than 65% of monitored wells.
9. Jiaozhou is in the southwest of Jiaodong Peninsula and in western Qingdao Municipality, along the northwestern side of Jiaozhou Bay. The area of the city is 1,210 km2. The central region of the city consists of hills and plains while the northeast region consists of alluvial plains. The eastern region has the estuary where the land and the sea join. Jiaozhou has a temperate monsoon climate, with high humidity, high rainfall, and moderate temperatures; the annual average temperature in Jiaozhou is 12° centigrade. The average annual wind speed is estimated at 5.3 meters per second, and is predominantly from the southeast. The city’s average annual rainfall is estimated at 776 mm, and annual water evaporation rate is 1,100 mm. Most of the rainfall occurs from June to September. Rainfall can be heavy in July and August and lead to flooding.
10. There are 27 rivers in Jiaozhou City, and these are mainly tributaries to three water systems—the Dagu, South Jiaolai, and Yanghe rivers. These rivers are characterized by rapid flow and short river courses and brief riverhead. During the high-water season, flash floods frequently occur, while during the low-water season, run-off is so low that the rivers usually dry up. In urban areas, the Yunxi River from the west and the Danzi (Sanli) River from the west- southwest join and flow into Dagu River in eastern Jiaozhou City. Water quality in both the Yunxi and Danzi rivers is poor. In 2005, there were 50 reservoirs operating in Jiaozhou City. These included two medium-sized reservoirs and 48 small reservoirs, with a total water storage capacity of 62 million m3.
11. There are two operating water supply factories owned by the Jiaozhou City Water Company with a capacity of about 60,000 m3/day, a service area of 50 km2, and servicing a population of about 300,000 including Jiaozhou urban area, Jiaodong town, and Yinhai town. The Qianhan water factory, with a design capacity of 35,000 m3/day, obtains groundwater from the Dagu River basin. The Zhuanglitou water factory, with a design capacity of 20,000 m3/day, obtains surface water from the Sanzhou and Qingnien reservoirs. Due to the aging water supply facilities (which were built nearly 40 years ago) and poor maintenance of distribution networks, the water loss ratio is estimated to be 25% including leakage, billing errors, and unmetered water use. Jiaozhou wastewater treatment plant (phase I) was constructed in 2003 with a design capacity of 50,000 m3/day. The other wastewater treatment plant, with a capacity of 20,000 m3/day, was built in the industry park for textile factories.
12. A wetland area is located in the eastern part of Jiaozhou. The Jiaozhou Bay and Dagu Estuary wetland, the only wetland in Qingdao Municipality, is included in the national wetlands protection list. The wetland covers the mudflat and beach from the freshwater zone of the Dagu Estuary to the low-saltwater zone of Jiaozhou Bay, and has a total area of about 50,000 ha. The wetlands are home to 156 species of waterfowl and miscellaneous fish, and habitat for post- house to many migratory birds. However, due to the adverse impacts of industrial development and agricultural activities, the wetlands have suffered from severe pollution and destruction in recent years. The number of wildlife species is declining and ecosystem functions are impaired,
2 Qingdao Environmental Protection Bureau. 2006. Qingdao Environmental Report. Qingdao.
30 Appendix 2 especially in some areas along the eastern bank of Jiaozhou Bay which are already degraded and consequently can no longer function as natural wildlife habitats.
B. Problems Affecting Water Resources and Environment in Qingdao and Jiaozhou
13. With rapid urban development and population growth, water shortages as well as frequent flooding have become key constraints to sustainable development in Qingdao Municipality and Jiaozhou City. The latter has implemented various water conservation and management projects in recent years. However, it is constrained by inadequate funds for investing in new (and incomplete) water resources management infrastructures as well as poor maintenance and management. Key problems affecting the Jiaozhou environment sector are summarized as follows:
(i) Frequent destructive floods. Jiaozhou City suffers from frequent destructive floods due to the natural topography and ineffective river flood control system. There are three main kinds of floods. First, high water level in the main stream of the Dagu River outside the Ccity combined with high tide level restricts the discharge of the Yunxi and Sanli rivers from Jiaozhou City area; furthermore, storm surges from the Dagu River go back to Jiaozhou City through these rivers in some situations. Within the city, floods are induced by either problems with the drainage system or local river flooding from the Yunxi and Sanli rivers. The Jiaozhou municipal government constructed a proper flood gate in the Yunxi River in 2003 to prevent the storm surges from the Dagu River and has started to build a floodplain (named Shaohai Lake) to contain the floodwaters from Jiaozhou City. There is still the need for improved drainage facilities in flood- prone areas to prevent waterlogging, and upgrade watercourses in local rivers.
(ii) Water pollution and subsequent impact on environment. Severe water pollution has become an increasing problem in the city. In 2006, the Jiaozhou Environmental Protection Bureau carried out wastewater discharge investigation. The survey shows that, within Jiaozhou City, about 48,500 m3/day of wastewater is discharged into the wastewater treatment plant (WWTP); an additional 31,000 m3/day is discharged directly into rivers. A significant portion of the untreated effluent is industrial wastewater. Effluent from the Textile Industrial Park is currently treated at a specialized WWTP for the park; other industrial area wastewater is discharged directly into the rivers or the sewers, many of which are currently not connected to the centralized WWTP. As a result, based on water quality surveys by Jiaozhou Environmental Monitoring Station in 2005, the water quality in the rivers through the main urban area is poor and classified as class V; total phosphorus and chemical oxygen demand exceed acceptable standards.
(iii) Water loss and soil erosion. Jiaozhou experiences severe water loss and soil erosion every year with significant adverse impact on production, living conditions, and integrity of the environment in the affected drainage basins. Contributing to this situation is the lack of a comprehensive plan for controlling/preventing water losses and soil erosion for the city. Moreover, there is need to raise public awareness of water conservation as well as to establish measures for curbing and monitoring activities that contribute to this problem. Institutional capacities for supervising and monitoring soil and water conservation and management also need to be strengthened.
Appendix 2 31
(iv) Weak institutional capacity and nonstructural measures for water resource management. The capacity of relevant institutions involved in water resources management in Jiaozhou City cannot match the requirement for developing and implementing projects/programs/strategies concerning integrated water resources planning and management. There is a need for assistance for developing mechanisms and strengthening capacities for monitoring of water-related activities and the required enforcement of regulations for ensuring that the water quality from scarce resources is maintained properly for drinking purposes. This requires a complete human resource development plan for improving institutional capacities, as well as the provision of incentives to limit the rapid turnover of staff. Furthermore, plans and policies related to water resources management need further clarification and be actually integrated into the district overall development plan. Emphasis should be made on nonstructural measures for improving water resources management and conservation such as (a) introduction of an integrated information system, which will apply real-time data acquisition, a geographic information system platform, river courses and drainage/sewer system simulation software, and a decision support system for real-time flood management; (b) training for the corporatization of wastewater services; (c) planning for wastewater tariff reform; and (d) strict enforcement of regulations for water conservation and environmental protection (those measures which have already been installed need to be reviewed and strengthened). This should be complemented by exploring alternative improved management practices and technology for flood control and water resources conservation. The detailed discussions are in Supplementary Appendixes C and L.
14. In addition, water shortage, low awareness of water conservation, and high potable water leakage, are existing constraints. Jiaozhou City is currently exploring opportunities for maximizing its surface water retention capacity through improvements to existing reservoirs (particularly the Guanlu reservoir) and water diversion projects. There is also need to maximize utilization of existing storage capacity of flood retention areas in conjunction with new construction of flood control infrastructure in urban areas. This will ensure availability of safe drinking water in urban and rural areas.
15. While Jiaozhou City has implemented various water conservation and management projects, including notably the development of Shaohai Lake (serving both as a flood retention zone and artificial wetland at the confluence with the Dagu River) and the first phase of the centralized wastewater treatment facilities, there are still significant opportunities to improve environmental management in relation to (i) the collection and interception of industrial and domestic wastewater discharge directly into watercourses, (ii) expansion and enhancement of the centralized treatment facilities to protect the Dagu River/Jiaozhou Bay wetlands, (iii) improvement of rivers and storm-water networks in the old urban area, (iv) development of an integrated approach to flood management incorporating the different structural and nonstructural measures currently operated separately by different entities, and (v) continuing institutional and financial management reforms to facilitate sustainable environmental management.
32
PROBLEM TREE ANALYSIS 3 Appendix
Low quality Unsustainable Unsustainable of life in Jiaozhou Bay ecosystems in biodivesity area Jiaozhou Bay area conservation in Jaiozhou Bay area
Development Degraded water resources and environment in Jiaozhou with downstream impact on the Problem Shao Hai artificial lake, Dagu River, and Jiaozhou Bay
Weak institutional capacity Weak flood and water Weak environmental for integrated water and resource management management and ecosystem management pollution control
Inadequate and Deteriorated and Deteriorated and Weak/absence of non- Lack of trained Inadequate deteriorated flood Deteriorated river inadequate storm inadequate wastewater structural measures for personnel for flood logistical facilities control/prevention courses drainage facilities drainage network environmental management for flood facilities management management
Low investment Poor maintenance Low investment Poor Low investment Poor maintenance Weak flood Absence of Weak planning Inadequate in new flood of existing flood Poor in new storm maintenance of in new of existing monitoring flood zone capacity for financial support control/prevention control/prevention maintenance of drainage existing storm wastewater wastewater capacity mapping water for institutional facilities facilities river courses facilities drainage drainage drainage conservation capacity building facilities facilities facilities and reuse
Poor planning for Poor planning for water reosurces flood control and and environmental drainage management
Low awareness Lack of community Weak institutional Weak on water participation in capacity for water institutional resources and water resources and resources and capacity for environmental environmental environmental environmental management management management monitoring
Source: Asian Development Bank.
Appendix 4 33
EXTERNAL ASSISTANCE
Amount Donor Project Title Year ($ million) Asian Development Integrated Ecosystem and Water Resources Management in the 2008 100.0 Bank Baiyangdian Basin Kunming Qingshuihai Water Supply 2007 80.0 Nanjing Qinghuai River Environmental Improvement 2006 100.0 Shandong Hai River Basin Pollution Control 2006 80.0 Wuhan Wastewater and Stormwater Management 2006 100.0 Hunan Flood Management Sector 2006 200.0 Strengthening Flood Management Sustainability in Hunan Province 2006 0.5 Henan Wastewater Management and Water Supply Project 2005 100.0 Sanjiang Plain Wetlands Protection 2005 15.0 Fuzhou Environment Protection 2005 55.8 Jilin Water Supply and Sewerage Development 2005 100.0 Fujian Soil Conservation and Rural Development II 2004 80.0 Evaluation of Environmental Policy and Investment for Water 2004 0.5 Pollution Control in the Huai River Basin and the Taihu Lake Basin Sanjiang Plains Wetlands Protection Project 2004 15.0 Wuhan Wastewater Management 2003 83.0 Harbin Water Supply 2003 100.0 Hebei Province Wastewater Management Project 2002 82.0 Hebei Zhanghewan Pumped Storage 2002 144.0 Tianjin Wastewater Treatment 2000 130.0 Fuzhou Water Supply and Wastewater Management 1998 102.0 Zheijiang-Shanxi Water Supply Project (Phase I) 1997 100.0 Anhui Environmental Improvement Project for Municipal Wastewater 1996 28.0 Anhui Environmental Improvement Project for Industrial Pollution 1996 112.0 Hainan Agriculture and Natural Resources Development 1995 53.0 Beijing Environmental Improvement Project 1994 157.0 Dalian Water Supply Project 1994 160.0 Yunnan-Simao Forestation and Sustainable Wood Utilization 1994 77.0 Tangshan and Chengde Environment Improvement 1993 140.0 Qingdao Environmental Improvement Project 1992 103.0 World Bank Bengbu Integrated Environmental Improvement 2008 100.0 Western Provinces Rural Water Supply, Sanitation and Hygiene 2007 25.0 Promotion Second Guangdong Pearl River Delta Urban Environment 2007 96.0 Tai Basin Urban Environment 2004 61.3 Guangdong Pearl River Delta Urban Environment 2004 128.0 Huai River Pollution Control 2001 105.5 Liao River Basin Rehabilitation 2001 100.0 Second Shanghai Sewerage 1996 250.0 United Nations Conservation and Sustainable Utilization of Wild Relatives of Crops 2006 8.0 Development Reducing Environmental Stress in the Yellow Sea Large Marine 2005 14.3 Programme Ecosystem Biodiversity Management in the Coastal Area of China’s South Sea 2002 3.5 Multi-agency and Local Participatory Cooperation in Biodiversity 2000 0.7 Conservation in Yunnan’s Upland Ecosystem Wetland Biodiversity Conservation and Sustainable Use 1999 12.0 United Nations Capacity Building of Clearing House Mechanism and Preparation of 2002 0.4 Environment Second National Conference of the Parties of Community of Practice Programme Support to the Implementation of the National Biosafety Framework 2001 0.9 of China Lop Nur Nature Sanctuary Biodiversity Conservation 1998 0.7 National Biodiversity Strategy, Action Plan and the First National 1997 0.6 Report to the Convention on Biological Diversity Sources: Asian Development Bank, International Bank for Reconstruction and Development, United Nations Development Programme, United Nations Environment Programme, and World Bank.
34 Appendix 5
DETAILED COST ESTIMATES
Table A5.1: Detailed Cost Estimates by Expenditure Categorya
%% Total $ Million Foreign Base Item Local Foreign Total Exchange Costs A. Investment Costsb 1. Civil Works a. Flood Retention 3.0 1.6 4.7 35 4 b. Urban Stormwater Drainage Network 8.1 4.4 12.5 35 12 c. Urban Wastewater Drainage Network 3.4 1.8 5.2 35 5 d. River Course Rehabilitation 29.1 15.7 44.8 35 42 e. Ecological Construction 0.1 0.0 0.1 35 0 Subtotal (A1) 43.7 23.5 67.2 35 64 2. Survey and Design 1.0 1.0 1.9 50 2 3. Preparation, Management, Supervision, and Quality Review 3.0 0 3.0 0 3 4. Vehicles 0.1 0.1 0.2 70 0 5. Equipment and Materials 2.3 5.5 7.8 70 7 6. Consulting Services a. International Consultants 0.1 0.6 0.7 92 1 b. National Consultants 1.0 0 1.0 0 1 c. Consultant Support 0.1 0.0 0.1 26 0 Subtotal (A6) 1.2 0.7 1.8 36 2 7. Capacity Building a. Training 0.1 0.0 0.1 0 0 8. Monitoring and Reporting 0.2 0.0 0.2 10 0 9. Contingencies 17.7 0.0 17.7 0 17 10. Interest and Commitment Charges 5.8 0.0 5.8 0 5 Total Baseline Costs 75.0 30.8 105.8 29 100 a In mid-2008 prices. b Includes taxes and duties of $3.1 million. c Contingencies will be financed by the Government. Physical contingencies were computed at 10% of base costs, other than for survey, design, and supervision where they are 0%. Price contingencies were computed using foreign escalation factors of 6.8% for 2008, 0.7% for 2009, 1.4% for 2010, 0.4% for 2011, 0.5% for 2012 and 2013, and a local escalation factor of 5.5% for 2008 and 5% for 2009–2013. d Includes interest during construction computed at the 5-year forward London interbank offered rate (LIBOR), with a spread of 0.2%, and a commitment charge of 0.15%. Source: Asian Development Bank estimates.
Table A5.2: Detailed Cost Estimates by Financier ($ million)
Asian Development Jiaozhou City Local Bank Government Total Foreign (Excluding Duties and Item Amount % Amount % Amount % Exchange Taxes) Taxes A. Investment Costs 1. Civil Works a. Flood Retention 2.5 53.8 2.2 46.2 4.7 4.4 1.6 2.9 0.2 b. Urban Stormwater Drainage Network 6.7 53.8 5.8 46.2 12.5 11.8 4.4 7.7 0.4 c. Urban Wastewater Drainage Network 2.8 53.8 2.4 46.2 5.2 4.9 1.8 3.2 0.2 d. River Course Rehabilitation 24.1 53.8 20.7 46.2 44.8 42.4 15.7 27.6 1.5 e. Ecological Construction 0.1 53.8 0.1 46.2 0.1 0.1 0.0 0.1 0.0 Subtotal (A1) 36.2 53.8 31.1 46.2 67.2 63.6 23.5 41.4 2.3 2. Survey and Design 0.0 0.0 1.9 100.0 1.9 1.8 1.0 0.9 0.1 3. Preparation, Management, Supervision, and Quality Review 0.0 0.0 3.0 100.0 3.0 2.8 0.0 2.9 0.2 4. Vehicles 0.2 80.0 0.0 20.0 0.2 0.2 0.1 0.0 0.0 5. Equipment and Materials 6.7 85.4 1.1 14.6 7.8 7.4 5.5 1.9 0.4 6. Consulting Services a. International Consultants 0.7 95.0 0.0 5.0 0.7 0.7 0.6 0.0 0.0 b. National Consultants 1.0 95.0 0.1 5.0 1.0 1.0 0.0 1.0 0.1 c. Consultant Support 0.1 95.0 0.0 5.0 0.1 0.1 0.0 0.1 0.0 Subtotal (A6) 1.7 95.0 0.1 5.0 1.8 1.7 0.7 1.1 0.1 7. Capacity Building a. Training 0.1 45.0 0.1 55.0 0.1 0.1 0.0 0.1 0.0 8. Monitoring and Reporting 0.2 95.0 0.0 5.0 0.2 0.2 0.0 0.2 0.0 9. Contingencies 0.0 0.0 17.7 100.0 17.7 16.7 0.0 17.7 0.0 10. Interest and Commitment Charges 0.0 0.0 5.8 100.0 5.8 5.5 0.0 5.8 0.0 Appendix 5 Appendix
Total Project Costs 45.0 42.5 60.8 57.5 105.8 100.0 30.8 71.9 3.1 Source: Asian Development Bank estimates.
35
36
FLOW OF FUNDS 6 Appendix State Agency with Oversight Responsibilities: Ministry Asian - National Development and Reform Commission of Development Finance Bank
Qingdao Municipal Agencies with Oversight Qingdao Responsibilities: Municipal Imprest - Environmental Protection Bureau Government Account - Water Resources Bureau Qingdao Qingdao - Land Bureau Development Finance and Reform Bureau Commission Imprest Account
Project Leading Group Direct Jiaozhou County-Level Agencies with Oversight Payment Responsibilities: Construction Jiaozhou County - Development and Reform Bureau Bureau PMO Recurrent costs - Finance Bureau Finance - Construction Bureau Project Bureau - Environmental Protection Bureau Management Reimbursement - Water Resources Bureau Office - Land and Resources Bureau
Upgrading of Improvement of Urban River Course Flood Retention Stormwater and Rehabilitation Facilities Wastewater Drainage L egen d : OFacilitiesvers ig h t R espons ibili ty Command Line Coordination Indicative Flow of Funds a Suceeding disbursements will be based on actual expenditures. Source: Asian Development Bank. Repayment Flow
Appendix 7 37
IMPLEMENTATION SCHEDULE
2009 2010 20112012 2013 2014 Activity 123 4123 412 341 2341 2341234
A. Flood and Water Resources Management 1. Erli'he Reservoir: Survey and Design 2. Erli'he Reservoir: Rehabilitation 3. Yunxi River: Survey and Design 4. Yunxi River: Rehabilitation 5. Hucheng River: Survey and Design 6. Hucheng River: Rehabilitation 7. Wushui River: Survey and Design 8. Wushui River: Rehabilitation 9. Sanli River: Survey and Design 10. Sanli River: Rehabilitation 11. Guangzhou Road Stormwater: Survey and Design 12. Guangzhou Road Stormwater: Construction 13. Dezhou Road Stormwater: Survey and Design 14. Dezhou Road Stormwater: Construction 15. Beijing Road Stormwater: Survey and Design 16. Beijing Road Stormwater: Construction 17. Quangzhou Road Stormwater: Survey and Design 18. Quangzhou Road Stormwater: Construction B. Improved Wastewater Collection System 1. Simenshou Road: Survey and Design 2. Simenshou Road: Construction 3. Quangzhou Road: Survey and Design 4. Quangzhou Road: Construction 5. Yunxi River: Survey and Design 6. Yunxi River: Construction 7. Hucheng River: Survey and Design 8. Hucheng River: Construction 9. Wushui River: Survey and Design 10. Wushui River: Construction C. Nonstructural Measures 1. Capacity Building for Flood and Water Resources Management a. Equipment Upgrading b. System Development c. Capacity Building 2. Strengthening Community Participation 3. Strengthening O&M of Jiaozhou WW Utility 4. Support for Artificial Lake Ecology a. Artificial Lake Construction b. Monitoring of Lake ecology D. Project Management 1. PMO Establishment 2. Environmental Monitoring 3. Selection and Engagement of Project Consultants 4. Preparation of Quarterly Reports 5. Preparation of Annual Reports
O&M = operation and maintenance, PMO = project management office, WW = wastewater. Source: Asian Development Bank.
38 Appendix 8
PROCUREMENT PLAN
Table A8.1: Project Information Country People's Republic of China Name of Borrower Government of the People's Republic of China Project Name Qingdao Water Resources and Wetland Protection Project Loan Reference To be determined (tbd) Date of Effectiveness tbd Loan Amount ($ million) 45.10 Of which, Committed Nil Executing Agency Jiaozhou city government Approval Date of Original Procurement Plan Tbd Approval Date of Most Recent Procurement Plan Tbd Publication for Local Advertisementa Tbd Period Covered by this Plan 2009-–2014
Table A8.2: Procurement Thresholds, Goods and Related Services, and Works Procurement Method To be used above/below ($) International competitive bidding works > $10,000,000 International competitive bidding goods >$1,000,000 National competitive bidding works $100,000 National competitive bidding goods $100,000 Shopping works
Table A8.3: Procurement Thresholds, Consulting Services Procurement Method To be used above/below ($) Quality- and cost-based selection At least $200,000 Consultants qualifications selection Less than $200,000 Least-cost selection Less than $100,000
Table A8.4: List of Contract Packages in Excess of $100,000 for Goods, Works, and Consulting Services Expected Date Estimated Procurement of ADB Contract Description Costs ($) Methods Advertisement Reviewa Comments A. Goods 7,989,641 1. Pipes 1,831,261 JMAT 10.1 HDPE 522,174 NCB First 18 months Post JMAT 10.2 Reinforced concrete 1,309,087 ICB First 18 months Prior pipes
2. Other construction goods 5,711,858 JMAT 20.1 Lighting 3,314,145 ICB First 18 months Prior JMAT 30.1 Guardrail stone column 496,754 NCB First 18 months Post NCB First 18 months Post JMAT 30.2 Guardrail steel pipe 470,145 NCB First 18 months Post JMAT 40.1 Geotextiles 362,304 JMAT 50.1 Road brim stones NCB First 18 months Prior/post 757,519 NCB First 18 months Post JMAT 60.1 Rubber dam 104,348 JMAT 70.1 Gates and other NCB First 18 months Post miscellaneous items 206,643 3. Non-Structural and PIO 446,522 JIRR 60.1 Jiaozhou GDIS 70,000 Shopping First 18 months Prior JWWM 60.1 Jiaozhou WW vehicles 257,971 NCB First 18 months Prior
Appendix 8 39
Expected Date Estimated Procurement of ADB Contract Description Costs ($) Methods Advertisement Reviewa Comments and equipment JMON 10.1 Environmental monitoring equipment 50,000 Shopping Post JPMIO 10.1 PMIO Equipment and 68,551 Shopping First 18 months Post vehicles
B. Works 67,248,831 1. Integrated River Rehabilitation: 50,256,187 JIRR 10.1 Erli'he flood retention 4,655,989 NCB First 18 months Post facilities JIRR 20.1 Yunxi River: Erli’he River 3,561,588 NCB First 18 months Post lower dam–Xihu Park JIRR 20.2 Yunxi River: Xihu Park– 5,313,867 NCB First 18 months Post Fuzhou Branch Road JIRR 20.3 Yunxi River: Fuzhou 6,512,861 NCB First 18 months Post Branch Road–Haier Road JIRR 20.4 Yunxi River: Haier 5,300,296 NCB First 18 months Post Road–Shaohai inlet JIRR 30.1 Hucheng River: Xihu 4,369,914 NCB First 18 months Post Park–Guangzhou Road JIRR 30.2 Hucheng River: 5,148,412 NCB First 18 months Post Guangzhou–Yunxi River estuary JIRR 40.1 Wushui River: 2,491,897 NCB First 18 months Post Jiaohuang Railway–Haier Road JIRR 40.2 Wushui River: Haier 4,729,767 NCB First 18 months Post Road–WWTP JIRR 50.1 Sanli River: Jiaohuang 3,264,643 NCB First 18 months Post Railway–Haier Road JIRR 50.2 Sanli River: Haier Road– 4,906,954 NCB First 18 months Post Shaohai Inlet 2. Upgrading Storm-water Drainage 12,503,913 JSWM 10.1 Guangzhou and NCB First 18 months Post Hangzhou Road 4,120,507 JSWM 20.1 Dezhou and Fuzhou NCB First 18 months Post Road 2,594,046 JSWM 30.1 Beijing and Shanghai NCB First 18 months Post Road 2,050,446 JSWM 40.1 Quanzhou Road 3,738,913 NCB First 18 months Post 3. Upgrading Wastewater Collection 4,374,528 JWWM 10.1 Simenshou Road NCB First 18 months Post Sewerage 2,671,586 JWWM 10.2 Quanzhou Road NCB First 18 months Post Sewerage 1,702,942 4. Nonstructural Ecological 114,203 First 12 months Construction JECOL 10.1 Jiaozhou Lake 114,203 NCB First 18 months Post Ecological Upgrading A+B: Goods+Works 75,238,471
C. Consulting Services 7,021,619 1. JCON 10.1 Project Management 793,000 QCBS (80:20, First 18 months Prior SP, firm) 2. JCON 20.1 Strengthening 264,600 QCBS(80:20, First 18 months Prior Jiaozhou Wastewater Services BP,firm) 3. JCON 30.1 Jiaozhou Integrated 753,800 QCBS (80:20, First 18 months Prior Information System SP, firm)
40 Appendix 8
Expected Date Estimated Procurement of ADB Contract Description Costs ($) Methods Advertisement Reviewa Comments 4. JCON 30.3 Community 50,000 LCS First 18 months Post Awareness & Public Consultation 5. JCON 35.1 Lake Ecology 223,420 QCBS(80:20, First 12 months Prior BP, firm) 6. Survey, Design, and Supervision 4,913,796 N. B. F. 7. Environmental Monitoring Plan 23,003 DC Prior
BP = biodata proposal, CQS = consultants’ qualification selection, DC = direct contracting, GIS = geographical information system, ICB = international competitive bidding, JCON = Jiaozhou project consultation, JECOL = Jiaozhou Project Ecological Construction, JIRR = Jiaozhou project integrated river rehabilitation, JMAT = Jiaozhou project material, JMON = Jiaozhou project monitoring, JPMO = Jiaozhou Project Management Office, JSWM = Jiaozhou storm-water management, JWWM = Jiaozhou wastewater management, LCS = least-cost selection, N.B.F = not bank financing, NCB = national competitive bidding, PIO = , QCBS = quality- and cost-based selection, SP = simplified proposal, WW = wastewater, WWTP = wastewater treatment plant. a For international competitive bidding (ICB), invitations for bids, invitations for prequalification, draft prequalification documents, draft bidding documents, prequalification, and bid evaluation reports are to be submitted to the Asian Development Bank (ADB) for prior review and approval. For national competitive bidding (NCB), the first draft English language version of the procurement documents should be submitted for ADB review and approval regardless of the estimated contract amount. ADB-approved procurement documents should be used as a model for all NCB procurement financed by ADB for the project, and need not be subjected to further review. ADB will review the bid evaluation report and award of contract on a post-review basis. For shopping and direct contracting, ADB will normally review the award of contract on a post-review basis. Source: Asian Development Bank estimates.
Appendix 9 41
TECHNICAL ASSISTANCE
A. Introduction
1. The sector analysis and lessons learned have identified three priority issues that need to be improved in the implementation of the ecosystem-based integrated water resources management scheme: (i) integrated planning and analysis, (ii) an effective management scheme, and (iii) an appropriate mechanism to monitor and ensure effective implementation.
B. Impact and Outcome
2. The expected impact of the technical assistance (TA) is the strengthened capacity of the Qingdao municipal government (QMG) in strategic environmental planning and management to support sustainable economic development in the Jiaozhou Bay area. The expected outcome of the TA is the increased protection of Jiaozhou Bay water quality and wetland ecosystem through the development of a strategic environmental assessment (SEA).
C. Outputs
3. The advisory TA has three outputs: (i) support the creation of an effective management mechanism for strategic environmental and planning process, (ii) strategic environmental assessment, and (iii) operational guidelines and monitoring system for implementation.
1. Support the Creation of an Effective Management Mechanism for Strategic Environmental and Planning Process
4. This component comprises the following activities: (i) development of a work plan for the SEA process through a participatory approach involving the key stakeholders in the “embracing bay development” strategy; (ii) establishment of an effective mechanism for information, data and documents collection, including data/information on planning, economic development, ecological zoning, land resources, water, soil erosion, and meteorology; (iii) strengthening of information exchange for all stakeholders involved in the SEA process; and (iv) establishment of a distribution network to inform the SEA progress.
2. Strategic Environmental Assessment of the “Embracing Bay Development, Surrounding Bay Protection” Strategy
5. Through the SEA process, the TA aims to map out an integrated water resources and environmental plan for further developing the other parts of Jiaozhou Bay. The “embracing bay development” strategy formulation and SEA practice will be an interactive process. The outline terms of reference for the consultants are as follows: (i) review the existing international and national experiences in SEA, in consideration of coastal zone management, a bay development strategy, and a regional development plan; (ii) carry out a baseline survey on water quality, water and land resources availability, and marine biodiversity types in Jiaozhou Bay; (iii) identify the environmentally and ecologically sensitive areas in the bay area, and formulate an inventory of environmental limitation factors, which will provide the basis for the strategy, particularly in terms of land-use planning and industrial sector distributions; (iv) utilize necessary modeling techniques to assess the potential impacts caused by the proposed strategy and related action plans, including direct, indirect, and cumulative impacts; and (v) recommend measures to improve the strategy formulation process, and propose necessary safeguards measures (institutional, legal, instrumental, and investment) to ensure the sustainable development of Jiaozhou Bay.
42 Appendix 9
3. Operational Guidelines and Monitoring System for Implementation
6. The TA will support QMG to further develop operational guidelines and a monitoring system for SEA implementation. It will help the Executing Agency (EA) prepare an operational manual for strengthening QMG’s capacity to develop a sustainable regional development plan around the bay area. In view of the large number of natural resources involved and associated large number of long-term activities to be executed, the TA will assist the EA in establishing a computer-based information and monitoring system to monitor the changes in natural resources around the bay and maintain the record of SEA implementation. The outline terms of references are as follows: (i) review and analyze the necessary techniques for regional integrated environmental management and planning (or regional environmental assessment); (ii) based on the findings of component 2, help the EA prepare an operational manual for rapid environmental assessment, covering detailed guidelines on a baseline survey, valuation of the ecosystem, impact assessment of specific regional development plans, the interactive process between rapid environmental assessment and regional plan formulation, an integrated marine ecosystem management approach, and related safeguards measures; and (iii) help the EA develop a computer-based monitoring system to monitor the environmental impacts and natural resources changes during the strategy implementation. This monitoring system will also provide the basis to examine if the SEA is effectively implemented, and, if necessary, suggest improvements to the safeguards measures. It is necessary to ensure the SEA is a continuous process and leads towards the social and economic development of Jiaozhou Bay being sustainable.
D. Implementation Arrangement
7. QMG is the EA for the TA. QMG has established the Leading Group for Qingdao Embracing Bay Development Strategy Formulation. This group is headed by the vice-mayor of QMG, and consists of senior officials (at deputy director general level) from various line agencies. 1 The leading group will provide overall guidance to the formulation of an “embracing bay development” document and the related SEA process.
8. A cross-agency SEA preparation committee will be established in Qingdao Environmental Protection Bureau (EPB), chaired by the director general of the Qingdao EPB and comprising senior officials of the Water Resources Bureau, Ocean Bureau, Planning Bureau, Land Resources Bureau, and environmental monitoring stations, and the divisions for international cooperation, pollution control, environmental impact assessment, and ecological conservation in the Qingdao EPB. A technical management office will be established in the environmental impact assessment division of the Qingdao EPB.
9. The consultant team will comprise six international consultants for 15 person-months and eight national consultants for 60 person-months, and detailed terms of references are provided in Supplementary Appendix D. The indicative international consultants include (i) an SEA specialist/team leader (4 person-months), (ii) a marine ecosystem management specialist (3 person-months), (iii) a wetland ecologist (3 person-months), (iv) a regional planning specialist (1 person-month), (v) an integrated water resources management specialist (2 person-months),
1 The vice-mayor of QMG serves as the chair of this leading group, with the participation of the senior officials from Planning Bureau, Financial Bureau, Qingdao Development and Reform Commission, Economy and Trade, Construction Bureau, Environmental Protection Bureau, Land Resources Bureau, Ocean and Fishery Bureau, Transportation Commission, Public Utility Bureau, Labor and Social Security Bureau, Foreign Trade and Economic Cooperation Bureau, state-owned Assets Supervision and Administration Commission, Standing Committee of Communist Party Central Committee of Shinan District, Shibei District, Sifang District, Li Chang District and Chengyang District, Science and Technology Committee, Economic Development Zone, and Jiaozhou Municipal Commission.
Appendix 9 43 and (vi) an environmental management specialist (2 person-months). Indicative national consultants include (i) an SEA specialist/deputy team leader (12 person-months), (ii) a water resources planner/hydrologist (10 person-months), (iii) a wetland ecologist (8 person-months), (iv) a water-quality modeling specialist (6 person-months), (v) a social development specialist (6 person-months), (vi) a management information system specialist (6 person-months), (vii) an environmental economist (6 person-months), and (viii) planning and management trainers (6- person months).
10. An international firm will be engaged by the Asian Development Bank (ADB) in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time). Equipment to be purchased under the TA will be procured in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time), and will be handed over to the EA upon completion of the TA. The implementation of the TA will take 15 months, from April 2009 to July 2010. Implementation progress will be monitored through inception, interim, and draft final review meetings, workshops, and conferences. The training, workshop, and conference funds will be administrated through the EA and an advance payment facility will be provided.
E. Cost and Financing
11. The total cost of the TA is estimated at $1,000,000 equivalent, of which $750,0002 will be provided by ADB on a grant basis. The remaining $250,000 will be financed by the QMG through in-kind contributions. The estimated costs are provided in Table A9.
Table A9: Cost Estimates and Financing Plan ($’000) Total Item Cost A. Asian Development Bank Financing (Total) 1. Consultants a. Remuneration, Per Diem, and Travel (i) International Consultants 300.00 (ii) National Consultantsa 240.00 b. International and Local Travel a 40.00 c. Reports, Communications, Translation, and Interpretation a 60.00 2. Equipments and Suppliesb 30.00 3. Surveys and Workshops a 30.00 4. Contingencies 50.00 Subtotal (A) 750.00 B. Government Financing 1. Remuneration and Per Diem of Counterpart Staff 80.00 2. Office Accommodation, Utilities, and Transport 50.00 3. Surveys and Investigations 50.00 4. Logistical Support in Districts 50.00 5. Contingencies 20.00 Subtotal (B) 250.00 Total 1000.00 a Expenses to be financed by Water Financing Partnership Program. b Includes computers, survey equipment, and office supplies. Source: Asian Development Bank Estimates.
2 About $400,000 will be cofinanced from the Water Financing Partnership Program, and $350,000 will be financed by ADB’s technical assistance funding program.
44 Appendix 10
FINANCIAL ANALYSIS
A. Introduction
1. The Government does not charge beneficiaries directly for its flood protection services and other project-related environmental services. The interventions will not directly generate any revenues. Therefore, the project financial analysis only focuses on three aspects: (i) fund flow and Jiaozhou City’s fiscal capacity, (ii) the project management office’s (PMO) financial management capacity, and (iii) the Project’s financial sustainability.
B. Fund Flow and Jiaozhou City’s Fiscal Capacity
2. Qingdao municipality is one of the few special cases in the People’s Republic of China (PRC) which reports directly to the central Government in terms of its fiscal revenues and outlays. Therefore, in terms of loan disbursement, the Asian Development Bank (ADB) loan proceeds will be disbursed directly from the Ministry of Finance to the Qingdao Financial Bureau (QFB) which is under the Qingdao municipal government (QMG). The imprest fund account will be set up in QFB, which has prior experience in dealing with loans from international institutions such as the World Bank, Japan Bank for International Cooperation, and ADB. QFB then onlends the loan proceeds to the Jiaozhou Finance Bureau (JFB) with the same loan terms. JFB disburses the funds to the contractors for project implementation. In terms of loan repayment, JFB pays QMG on behalf of the Jiaozhou city government (JCG). QMG then repays the Ministry of Finance, which in turn repays ADB. The fund flow of the proposed project is shown in Appendix 6.
3. By a comprehensive evaluation on GDP value, growth rate and development potential, Jiaozhou City was ranked fourth among county-level cities in Shandong Province and 26th among top 100 county-level cities in all of the PRC in 2005. In 2007, its gross domestic product (GDP) was estimated at CNY42 billion and GDP per capita was about CNY50,000. The internal fiscal revenue of Jiaozhou City was about CNY1.5 billion. Total revenues, including transfers from the upper-level governments (i.e., Qingdao Municipality, Shandong provincial government, and central Government), are estimated at about CNY1.7 billion.
4. By the end of the 11th Five-Year Plan (FYP, 2010), Jiaozhou City sets the fiscal target of “3211”, which means (i) the internal fiscal revenue of the city proper should reach CNY3 billion, (ii) the disposable income for urban inhabitants should be CNY20,000 per capita, (iii) the net income of rural inhabitants should be CNY10,000, and (iv) the GDP per capita should be CNY10,000. Projections of GDP and aggregate fiscal revenue were conducted according to the 11th FYP based on historical data provided by Jiaozhou’s project implementation office (PIO) (Table A10).
5. The Jiaozhou fiscal revenue situation indicates that adequate funds are available for the project counterpart contribution and debt servicing. Although there are multiple sources where such funds can be drawn from, such as land-use fees, urban construction and maintenance taxes, and wastewater tariffs, the major source is the land-use fees and urban construction and maintenance taxes. These are estimated at an annual average of CNY655 million and have been stable in the past (Table A10).
Appendix 10 45
Table A10: Projections of GDP and Aggregate Fiscal Revenue Item 2009 2010 2011 2012 2013 2014 2015 2016 Funds required for counterpart contribution and debt servicing (CNY million)a 93 98 103 104 18 36 35 35
GDP (CNY million) 60,236 72,284 86,018 102,361 121,809 144,953 172,494 205,268 Funds required for counterpart contribution and debt servicing as a percentage of GDP (%) 0.15 0.14 0.12 0.10 0.01 0.02 0.02 0.02 Fiscal revenue (CNY million) 2,803 3,476 4,170 5,014 6,012 7,220 8,660 10,394 Funds required for counterpart contribution and debt servicing as a percentage of fiscal revenue 3.32 2.82 2.47 2.07 0.30 0.50 0.40 0.34 Potential sources of funds: land-use fee and urban construction and maintenance fee (CNY million) 655 664 675 687 702 720 741 766 Funds required for counterpart contribution and debt servicing as a percentage of land-user fee and urban construction and maintenance fee (%) 14.20 14.75 15.27 15.13 2.56 5.00 4.73 4.57 a Including the outstanding debt service of the World Bank loan of CNY0.5 million–CNY0.8 million per year. Source: Asian Development Bank.
6. With the Project, the total counterpart contribution and debt service for Jiaozhou ranges from CNY93 million to CNY104 million during the project implementation period of 2009 to 2012, then decreases to CNY18 million to CNY36 million per year after 2012. This is about 0.15% of the projected GDP of Jiaozhou in 2009, and is projected to decrease to 0.02% of GDP in 2016. According to the projection of the fiscal status of Jiaozhou City to 2020, the total counterpart contribution and debt service account for 3% of the city’s total fiscal revenue in the first year of project implementation in 2009 and decrease to about 2% in 2012, the last year of implementation. Total counterpart funds and debt service as a percentage of total potential sources of funds range from 14% to 15% during 2009–2014, the period of project implementation. This is projected to decrease to about 3%–5% thereafter. As counterpart contribution and debt service accounts for only a small proportion of funds available, it is safe to conclude that JCG will more than adequately cover the required repayments under the loan (Table A10).
7. Jiaozhou City has experience in servicing loans from international financial institutions such as the World Bank and ADB. A subproject of Jiaozhou Carbon Black Group, with an ADB loan amount of $25 million, was included in the Qingdao Tyre Project 1 in 1989. The loan maturity was 20 years with a 4-year grace period. The debt service has been fulfilled according to the loan agreement and there is no outstanding loan amount for this Project. A World Bank- financed subproject of the Qingdao Irrigation, with the loan amount of $1.43 million, started from fiscal year 2001 with a loan period of 20 years and a grace period of 5 years. The outstanding debt service is shown in Table A10.
C. Project Financial Management Assessment
8. The financial management assessment (FMA) has been undertaken to assess the institutional capacity of each implementing agency, funds flow arrangements, staffing, accounting policies and procedures, internal and external auditing arrangements, reporting and monitoring aspects, and information system. JCG is the Executing Agency (EA) of the proposed Project. A project management office (PMO) was set up within the Jiaozhou Construction Bureau in May 2008. An FMA questionnaire was adapted to the subprojects’ conditions and is shown in Supplementary Appendix J. Issues or risks associated with the financial management systems are identified and the most appropriate risk mitigation measures are determined as part of project design and/or project implementation arrangements.
1 ADB. 1989. Report and Recommendation of the President to the Board of Directors on Proposed Loan to the People’s Republic of China for the Qingdao Tire Development Project. Manila (Loan 0987-PRC, $138.1 million, effective in June 1989)
46 Appendix 10
9. The results of the FMA questionnaire were analyzed with particular focus on the accounting and auditing procedures and staff expertise. In terms of accounting and auditing procedures, the existing financial information system (i.e., accounting, reporting, and internal control system) is complete and applicable for domestic construction entities. The PMO has extensive experience in implementing/constructing infrastructure projects and is very knowledgeable in carrying out these works following the Accounting Standards for State-owned Construction Entities issued by the Ministry of Finance in 1995. The financial statements prepared regularly according to the standards are (i) a balance sheet, (ii) an infrastructure investment statement, (iii) a statement of investment to be deferred, (iv) a statement of loans for infrastructure, and (v) a statement of lump-sum investment. The statements are reported to JFB on a monthly basis. The PMO uses accounting software (User Friend), from which all required financial statements are automatically produced. The PMO has also established budgeting systems for internal control and a sound auditing system, both internally and externally. There is an internal auditor in Jiaozhou Construction Bureau (JCB) who performs auditing regularly. As a government agency, it is audited annually by the Jiaozhou Auditing Bureau. It is also subject to external auditing each year and the auditing reports are usually produced by accounting firms before the end of the first quarter.
10. In terms of staff expertise, the PMO has broad experience in infrastructure construction financed by domestic funds, but has not implemented any ADB projects. Training on ADB procedures and advanced financial management will be necessary to ensure successful implementation of the proposed Project.
D. Project Financial Sustainability Analysis
11. Project financial sustainability was conducted by comparing the operation and maintenance (O&M) costs of each project component with their financing sources. Such analysis was done separately for the flood management component and wastewater management component of the Project. Under the wastewater management component, consideration was not only paid to the O&M of the wastewater collection and treatment but also to the O&M of the downstream wetlands.
12. Financial Sustainability of the Flood Management Component. The rivers are not well maintained in Jiaozhou City and 240,000 square meters (m2) river courses are currently maintained only once a year. The annual O&M cost is only CNY480,000. With the Project, 720,000 m2 of river course will be maintained three times a year, resulting in the increase of annual O&M costs to CNY4.32 million.
13. The river course O&M cost is financed through the flood control management fee. Since 2000, JCG has been collecting the flood control management fee for the river course improvement and flood control. It is levied at 0.1% of the turnover of enterprises in Jiaozhou City. During 2003–2006, this turnover has increased from CNY20 to CNY55 billion, with an annual growth rate of over 30%. Using conservative figures, the turnover is projected to increase at 10% per annum from 2007 to 2020. The flood management fee should be CNY55 million in 2006, but the collection performance before 2008 was not satisfactory, with the collection rate of 10% or even less. Since May 2008, a new directive published by JCG stated that the flood management fee should be levied together with other mandatory taxes or subtaxes, such as urban construction and maintenance tax and education sub-tax. The collection rate could be improved significantly from 10% in 2007 to 50% in 2008, and later in 2020 could reach 85%. By year 2020, the flood management fee could reach CNY178 million. Analysis shows that the O&M cost as a percentage of the total flood management fee revenue of the Government will decrease from 10% in 2006 to 2% in 2020.
Appendix 10 47
14. Financial Sustainability of the Wastewater Management Component. In order to assess the financial sustainability of the wastewater network subcomponent, the existing wastewater collection and treatment facilities were examined. Analysis shows that the annual O&M costs are about CNY16 million for the wastewater treatment plant (WWTP), CNY2.3 million for the wastewater network, and CNY0.5 million for the pumping station.
15. In terms of wastewater treatment, JCG pays the private sector operated WWTP at a build-operate-transfer (BOT) price of CNY0.998 per cubic meter (m3) and CNY18 million per annum. Therefore, the WWTP has adequate revenue to cover the O&M costs of wastewater treatment. The Government collects wastewater treatment fees from households, institutions, and industries at different tariffs. Tariff analysis was conducted and the weighted average of tariff is CNY0.88/m3, CNY0.11 lower than the BOT price. This results in a fiscal subsidy of around CNY2 million per year for wastewater treatment. The subsidy comes from the Government’s general budget, especially from the urban construction and maintenance tax, which is around CNY46 million per annum. In the longer term, it is advisable to increase the wastewater treatment fees in order to reduce such subsidies,2 but in the short- and medium- term, the Government has sufficient resources to cover the O&M for wastewater treatment.
16. As far as the wastewater network is concerned, it is owned by JCG and operated and maintained by the Municipal Engineering Division under JCB. An annual O&M cost of CNY2.3 million is partially financed by JCG (CNY1 million) and partially by profits of other engineering projects operated by the Municipal Engineering Division (CNY1.3 million). The O&M cost of the pumping station is around CNY500,000 per year, including CNY100,000 for electricity and CNY400,000 for eight management staff and three workers. While salaries are paid by the Government from budgetary recurrent expenditures, the electricity expenditure comes from the urban construction and maintenance tax.
17. River course management and wastewater collection and treatment will improve the ecological environment of Jiaozhou wetlands located at the downstream end of the Erli’he River. However, the benefits of the wetlands will not be fully obtained unless there is an additional O&M work in the area. The wetland in Shaohai will be managed by a major real estate developer in the area, Guangdong Liantai Real Estate Group Corporation, with the BOT contract price of CNY3 billion including infrastructure construction and preparation, environment improvement, and wetland protection. Wetlands in other areas will be maintained by the Water Resource Bureau and the source of funds is the flood management fee which, according to the PMO, is sufficient for both river course and wetland. However, due to data limitations, such costs cannot be accurately quantified at this stage.
2 Analysis shows that a tariff level of CNY1.35/m3 (as compared to the current tariff of an average of CNY0.88/m3) would allow the wastewater treatment work to be self-financed, even with a small profit. A willingness-to-pay survey and an affordability analysis were conducted to assess households’ acceptance of potential tariff increase in the future. Ninety percent of the interviewees, except the extreme poor, find the current water tariff acceptable. Other things being equal, an increase of wastewater treatment fee from the current CNY0.70/m3 to CNY1.35/m3 would increase the total water expenditure as a percentage of household total income from 0.6% in 2008 to 0.75% in 2013. More detailed analysis is included in Supplementary Appendix J.
48 Appendix 11
ECONOMIC ANALYSIS
A. Introduction
1. The proposed Qingdao Water Resources and Wetland Protection Project provides public goods including flood prevention, wastewater collection and treatment, and wetland preservation for the relatively densely populated county of Jiaozhou in Shandong Province. There exists a clear and strong rationale for public interventions. The proposed Project includes both structural and nonstructural components including: (i) water resources and flood management, (ii) wastewater management and pollution control, (iii) integrated water and ecosystem management, and (iv) project management support. In addition, a strategic environmental assessment is proposed to be financed by an advisory technical assistance (TA) project. Economic analysis was undertaken for the overall Project, including the TA, since the proposed interventions to improve flood control and management and to upgrade wastewater collection and treatment are interrelated, and to some extent, strengthen each other. Similarly, no separation of the costs and benefits of structural and nonstructural benefits was attempted since the nonstructural interventions were considered necessary to sustain the impact of the structural ones. Achievement of the full benefits from wastewater activities will also require investment in an extension of the existing wastewater treatment plant (WWTP) by 2010, an investment that is being implemented by the Government through a build-operate-transfer (BOT) model. Completion of structural investments is expected to take 3 years and the final two project years will be required to complete all nonstructural investments as well as for full commissioning of the structural investments.
2. The project life is assumed to be 25 years, including the 5-year implementation period. Flood control benefits are assumed to be fully achieved on completion of the infrastructure. Benefits from improved health and environment are staged over 3 and 5 years respectively, following completion of investments, to reflect the build-up of impact from the nonstructural investments. For the economic analysis, economic costs and benefits have been valued using the world price numeraire. Financial costs of nontraded goods are adjusted to their respective economic values using a standard conversion factor of 0.93.1 The shadow wage rate factor for surplus labor was estimated at 0.90 of the prevailing wage rate, reflecting the high level of activity in the project area, and the shadow wage rate for scarce labor was estimated at 1.0. These were adjusted by the standard conversion factor to derive economic values. All traded inputs and outputs were valued at their market prices. Financial investment costs, including physical contingencies, have been converted to economic values by deducting taxes and duties and applying relevant conversion factors to the various investment components including foreign exchange costs, local currency costs, unskilled labor, and skilled labor.2 The resulting values represent the economic investment costs of the Project according to the world price numeraire. The analysis is based on constant 2008 prices. The economic analysis has been conducted in accordance with the Guidelines for the Economic Analysis of Projects of the Asian
1 The standard conversion factor of 0.93 is based on the economic analysis in recent ADB reports and recommendations of the President, e.g., (i) ADB. 2006. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People’s Republic of China for Inner Mongolia Autonomous Region Environment Improvement Project. Manila; and (ii) ADB. 2007. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the People’s Republic of China for Integrated Ecosystem and Water Resources Management in the Baiyangdian Basin Project. Manila. 2 Costs of the proposed extension to the WWTP were estimated based on a unit cost of CNY2,500 per cubic meter, which is in line with similar projects in the People's Republic of China. Taxes were assumed to account for 5% of costs while the breakdown into foreign exchange, local currency, and unskilled labor was assumed to be the same as for the Project.
Appendix 11 49
Development Bank (ADB). The detailed methodology and supporting tables for the analysis are available in Supplementary Appendix K.
B. Demand Analysis
3. The population of Jiaozhou City was estimated to be about 891,800 in 2007,3 of which about 230,000 lived in the project area. The population is estimated to be increasing at an average annual rate of 1.12%. Based on local data, economic growth in the project area has averaged about 20% per annum in real terms since 2004over the past 3 years, which is well above the national average, and this rapid growth is expected to continue in the intermediate term, albeit with some gradual slowing as the economy develops. Immediate impacts of this rapid development have included (i) an increase in the incidence of flooding in the expanding urban areas, (ii) a high rate of waterborne disease incidence, and (iii) increasing environmental damage to Jiaozhou Bay. While flooding was relatively rare in the 1990s, the incidence has subsequently increased to about once in every 3 years with average damages valued in excess of CNY200 million per flood. As the economy continues to develop rapidly, the extent and value of this damage is expected to further increase. The incidence of waterborne diseases, particularly stomach-related diseases, is estimated to be well above the national average and is expected to increase in the future if attention is not given to wastewater collection and treatment, and increased public awareness of personal hygiene. The current situation, where much wastewater is drained into open channels and the river network which traverses the project area and permeates into the groundwater, is not conducive to overall development and reduced incidence of stomach and intestinal illnesses. In addition, the extent and quality of the wetlands in Jiaozhou Bay has seriously deteriorated over recent years and the annual rate of loss is currently estimated at about 0.9%. All of these factors are having a serious impact on continued local development and together contribute to a strong demand for remedial action.
C. Least-Cost Analysis
4. Least-cost analysis was conducted to determine whether cost-effective water resources and environmental management measures have been proposed to achieve overall intended targets of (i) improving flood retention facilities, (ii) upgrading the urban storm drainage network, (iii) rehabilitating river courses, and (iv) improving wastewater drainage facilities. Based on the findings, further revisions of the preliminary design were investigated. The resulting proposed investments entail the least cost compared with alternative investment. Moreover, the proposed investments can be completed within the 5-year project implementation period.
D. Project Cost and Benefit Analysis
5. Economic Costs. Financial capital costs, including physical contingencies, are converted to economic capital costs by deducting taxes and duties, and then applying the relevant conversion factors to the shares of local costs, unskilled labor, skilled labor, and other costs. The resulting values represent the economic capital costs of the Project in world price numeraire. Annual operation and maintenance (O&M) costs include (i) operating costs for project investments in flood control, storm-water collection, river improvement, and wastewater collection; and (ii) operating and maintenance costs for the WWTP extension to be financed from Government sources.
6. Economic Benefits. The Project will generate direct economic benefits from improved flood control and management, improved health, and reductions in the extent of environmental
3 Jiaozhou City Government. 2007. Jiaozhou Statistical Yearbook. Jiaozhou.
50 Appendix 11
degradation in the coastal wetlands from both the structural and nonstructural investments. Due to the extent of road and pavement repair, as well as greening of the urban environment, there are expected significant direct and indirect benefits that can be attributed to these activities. However, no attempt is made to quantify these benefits due to the lack of data.
7. Currently, in the without-project situation, Jiaozhou City experiences frequent flood damage caused by severe siltation and poor flood-discharge capability of the Yunxi and Hucheng rivers. This mainly affects industrial/commercial and private properties within the city proper, and from various Jiaozhou documents is estimated to occur once in 3 years. Based on these data, the 2001 flood which caused CNY298 million of damage was estimated to represent the 30-year return period flood. For the economic analysis, the damage caused to urban areas (the benefiting area) was extracted from the detailed flood information and adjusted to 2008 values. A further adjustment was made to reflect economic growth in the area since 2001, and also economic growth that is expected to occur in future years. An estimate of the impact of the 50-year return period flood was obtained from the flood simulation model, assuming a constant relationship between flood depth and area flooded, and hence caused the damage. With point estimates of the expected financial value of flood damage for the 3-year, 30-year, and 50-year return period floods,4 the annualized financial benefit, in constant 2008 values, was estimated through a triangulation process at CNY96.6 million in 2011, increasing to CNY127.5 million in 2021. The financial values were converted to economic values by applying a group conversion factor of 0.94, which reflects the foreign exchange, local currency, labor, and tax composition of the damage. The resultant economic values were CNY90.8 million in 2011 and CNY120.1 million in 2021.
8. Economic benefits from reduced disease incidence were estimated based on statistical data from Jiaozhou and information collected in the socioeconomic survey. The main diseases included in the analysis are diarrhea, dysentery, gastroenteritis, and hepatitis A. Due to lack of data, stomach and intestinal cancers and pollution-related diseases were excluded. The financial cost of disease incidence was estimated as the total of the cost of medical consultations and treatment, including lost workdays of care providers who attend particularly to children and the elderly. Without the Project, the incidence of stomach illnesses was projected to increase from about 11,400 in 2009 to 50,200 in 2033. A 40% reduction in these diseases is expected following project completion and the benefits are expected for both urban and rural populations. With an economic cost for medical treatment of CNY613.80 per person per year,5 the benefits are expected to increase from CNY0.75 million in 2010 to CNY12.35 million in 2033. Economic benefits are also derived from the reduced losses in income either by the sick persons or those having to provide care particularly to the young and aged. This is estimated at about CNY0.94 million in 2010 increasing to CNY15.5 million in 2033. Total health benefits are estimated at CNY1.7 million in 2010 increasing to CNY27.9 million in 2033.
9. The premise underlying the estimation of benefits derived from strengthened water resources and environmental management is that wastewater production and disposal in industrial, rural, and urban communities will be effectively regulated and controlled, thereby significantly reducing exploitation of wetland resources and pollution loads being deposited into the wetlands. This, in turn, is expected to reduce the continuing threat of human activities on the integrity of the wetlands in the downstream Dagu River, and thereby save the natural wetlands from further degradation. In addition, implementation of the strategic environmental assessment
4 The flood management structures were proposed to be designed up to the 50-year flood. Overdesign probably ensures that they will protect against the 100-year flood but this additional benefit was not included in the analysis. 5 Based on a financial cost of CNY660 converted to economic values using the standard conversion factor of 0.93.
Appendix 11 51
(SEA) for Jiaozhou Bay is expected to have a significant longer-term impact on the wetlands as it increases awareness of degradation and provides a legal basis for reduction. Direct and quantifiable environmental benefits are both identified as direct uses (food production, raw materials, recreation, and cultural) and indirect uses (disturbance regulation, nutrient cycling, biological control, and habitat/refuge). Of these, the main benefit is nutrient cycling for which direct estimate of the benefit was made based on the cost of treating the total amount of wastewater currently produced to remove nitrogen and phosphorus, since this is the major source of pollution of the wetlands. This was expressed in terms of the cost per hectare (ha) of wetlands. The values of other benefits were estimated using a benefit transfer approach based on similar wetlands around Shanghai. The value of wetland benefits was projected to increase from CNY0.04 million (from 1.1 ha saved) in 2011 to CNY6.97 million (from 196.1 ha saved) in 2033. There may be additional benefits from the improved status of the wetlands that are not lost, but these have not been included.
10. Economic Internal Rates of Return. Based on the identified benefits and costs, the economic internal rate of return (EIRR) of the Project is estimated at 14.7%. The result indicates that the Project as a whole is economically viable.
Table A11: Economic Analysis (CNY million) Project Cost Economic Benefits Operation Reduced Reduced Total Net Investment and Total Flood Health Wetlands Economic Economic Year Cost Maintenance Costs Damage Benefits Degradation Benefits Benefits 2009 218.299 0.000 218.299 0.000 0.000 0.000 0.000 (218.299) 2010 393.332 5.201 398.532 0.000 1.683 0.000 1.683 (396.850) 2011 74.807 10.401 85.208 90.759 3.580 0.039 94.378 9.170 2012 2.049 10.401 12.450 98.538 7.617 0.156 106.310 93.860 2013 1.292 10.401 11.693 103.230 8.102 0.347 111.679 99.986 2014 0.000 10.401 10.401 105.197 8.618 0.651 114.466 104.064 2015 10.401 10.401 107.200 9.168 1.027 117.394 106.993 2016 10.401 10.401 109.242 9.752 1.397 120.391 109.990 2017 10.401 10.401 111.323 10.373 1.762 123.459 113.057 2018 10.401 10.401 113.443 11.034 2.123 126.601 116.199 2019 10.401 10.401 115.604 11.738 2.478 129.820 119.419 2020 10.401 10.401 117.806 12.486 2.829 133.121 122.720 2021 10.401 10.401 120.050 13.282 3.175 136.506 126.105 2022 10.401 10.401 120.050 14.128 3.516 137.694 127.292 2023 10.401 10.401 120.050 15.028 3.852 138.931 128.529 2024 10.401 10.401 120.050 15.986 4.184 140.220 129.819 2025 10.401 10.401 120.050 17.005 4.511 141.566 131.164 2026 10.401 10.401 120.050 18.089 4.833 142.972 132.570 2027 10.401 10.401 120.050 19.242 5.151 144.443 134.041 2028 10.401 10.401 120.050 20.468 5.464 145.982 135.581 2029 10.401 10.401 120.050 21.772 5.773 147.596 137.194 2030 10.401 10.401 120.050 23.160 6.078 149.288 138.886 2031 10.401 10.401 120.050 24.636 6.378 151.064 140.662 2032 10.401 10.401 120.050 26.206 6.674 152.930 142.528 2033 10.401 10.401 120.050 27.876 6.965 154.892 144.490 EIRR = 14.66% NPV@ 12% = 119.202 ( ) = negative, EIRR = economic internal rate of return, NPV = net present value. Source: Asian Development Bank.
E. Risk and Sensitivity Analysis
11. Sensitivity analysis shows that the project EIRR will fall (i) to 13.0% if economic benefits fall by 10%, (ii) to 13.3% if investment costs increase by 10%, (iii) to 12.6% if commissioning is delayed for 1 year and 11.1% if delayed for 2 years, and (iv) to 11.7% if (i) and (ii) occur together. Sensitivity analysis is also tested for each benefit and indicated that flood benefits had
52 Appendix 11 the greatest impact on economic viability. Sensitivity tests indicate that the returns to the overall Project are generally robust. Switching values indicated that the investment cost would have to increase by 19.9% or overall benefits decrease by 15.0% for the Project to become nonviable. Considered together, the change would have to be 9.1%. Even in the absence of any health benefits or wetland environmental benefits, the Project would remain economically viable.
F. Distribution Analysis
12. Distribution analysis involves the allocation of net economic benefits among the poor and non-poor in both rural and urban areas. The analysis shows that urban communities receive about CNY11.1 million while rural communities receive CNY22.6 million. The economic cost to the Jiaozhou city government is CNY54.7 million. Based on a poverty rate of 0.58% in urban areas and 4.80% in rural areas, the benefits to the poor are estimated at CNY0.06 million in urban areas and CNY1.09 million in rural areas, and the poverty impact ratio is estimated at 0.06.
G. Financial Sustainability Analysis
13. Financial sustainability analysis was conducted for each project component and is included in Appendix 10.
Appendix 12 53
ENVIRONMENTAL ANALYSIS
A. Introduction
1. This environmental analysis summarizes the findings and recommendations from the environmental assessment carried out for the Qingdao Water Resources and Wetland Protection Project. The Qingdao municipal government (QMG) and the Jiaozhou city government (JCG) requested Asian Development Bank (ADB) assistance to improve environmental conditions in Jiaozhou City, the newly developed Shaohai Lake, and the downstream area of Jiaozhou Bay wetlands. The Project aims to reduce flooding risks and pollution loads, and to further strengthen the JCG environmental management capacity. The Project will also serve as a demonstration project for sustainable development in other economic/industrial zones around the bay area.
2. In accordance with the environmental assessment regulatory framework of the People’s Republic of China (PRC), an environmental assessment was carried out for the proposed Project by the Jiaozhou Development and Reform Bureau.1 A first draft of the environmental assessment report was completed in February 2008 and submitted to the Qingdao Environmental Protection Bureau (EPB) for appraisal on 18 March 2008. In the EPB appraisal meeting, representatives and leaders from Qingdao EPB, Jiaozhou EPB, and Jiaozhou Construction Bureau presented their comments on the environmental assessment report. The panel regarded the report as satisfactory to be used as a reference document for further project processing and approval. JCG updated the environmental assessment report based on EPB comments in April, continued improvement works in May based on ADB comments, and finished the second version of the report in May 2008.
3. During the technical assistance implementation, a summary initial environmental examination (SIEE) was prepared in accordance with the environmental assessment guidelines of ADB. The SIEE is based on the environmental assessment report for the Jiaozhou project and includes an environmental management plan (EMP) summarizing the main mitigation measures, institutional responsibilities, and monitoring arrangements. The first version was finished in April 2008. The SIEE was revised and finalized in July 2008 based on comments received from the Jiaozhou and Qingdao governments and key stakeholders, including ADB.
B. Project Description
4. The proposed Project will introduce an integrated approach to pollution control, water resources, and environmental management. The approach comprises an investment program and technical assistance2 to address key problems/constraints hindering effective management of water resources and the environment in the project area. The Project will be implemented over a period of 5 years from March 2009 to February 2014. The total project cost is estimated at $105.8 million. ADB will finance $45.0 million (42.5% of the total project cost). A summary of the Project’s four components is given below.
1 The environmental assessment was carried out by the Ocean University of China, an Environmental Impact Assessment institute with class A certification. 2 The proposed technical assistance aims to reinforce the goal of protecting environmental conditions in Jiaozhou Bay and preserving wetland areas by strengthening both Qingdao’s and Jiaozhou’s integrated planning capabilities through the preparation/formulation of a strategic environmental assessment.
54 Appendix 12
Table A12: Project Summary Matrix
Estimated Costs Project Components Performance Targets/Indicators ($ million) Component I: Improving Water Resources and Flood Management 73.2 Flood retention facilities Existing Erli’he flood retention facilities upgraded from 0.2 million m3 to 0.8 5.5 improved. million m3 by 2011. Urban storm drainage network A total of 11.4 km of storm drainage pipelines installed by 2011. 14.4 installed/upgraded. Major river courses A total of 19.5 km of riverbanks upgraded/rehabilitated in four major rivers by 53.3 rehabilitated/upgraded. 2011. (Yunxi River - 9.4 km; Hucheng River - 3.9 km; Wushui River - 3.2 km; Sanli River -3.0 km) Component II: Strengthening Wastewater Management and Pollution Control 6.4 Urban wastewater drainage A total of 27.7 km of wastewater drainage pipelines installed by 2011. 6.4 network upgraded. Component III: Integrated Water and Ecosystem Management 1.7 Capacity Building for Flood and A total of 30 persons trained by 2013. 0.8 Water Resources Management A total of $0.2 million provided for logistical support (i.e., computers, equipment, etc.). Environmental Management and Wastewater service corporatized. 0.6 Pollution Control Wastewater tariffs reformed. Support for Artificial Lake Artificial wetlands established and habitats enhanced. 0.3 Ecology Integrated Information System for flood, water, and wastewater management developed and operated. Operational Manual for Shaohai Lake Ecosystem Management in place. Strategic Environmental Assessment on Jiaozhou Bay prepared. Component IV: Strengthening Project Management Capacity 0.9 Project management support Project management office and project implementation units established and provided. operational by 2009; adequate budgetary resources allocated; office equipment and vehicles procured by 1Q 2009; 92 person-months of consulting services provided 2013. Total Base Costs 82.3 Contingencies/Financing Charges 23.5 Total Project Costs 105.8 km = kilometer. Source: Asian Development Bank.
C. Description of the Environment
5. Jiaozhou City is one of the county-level cities under the administration of Qingdao, located to the west of the main city of Qingdao and on the northwest coast of Jiaozhou Bay. Jiaozhou City had a total area of 1,210 square kilometers (km2) and a total population of 891,800 in 2007, of which 40% were residents in the main urban area. It is an important industrial processing and warehousing logistics center based in the economic zone around Jiaozhou Bay.
6. Rapid urban and industrial development in Qingdao and Jiaozhou City has had detrimental effects on its water resources and on the overall condition of the environment. In Jiaozhou City, based on water quality surveys by Jiaozhou Environmental Monitoring Stations in 2005, the water quality in the rivers passing through the main urban area are poor and are classified as class V, with total phosphorus and chemical oxygen demand above the standards. Moreover, during the high-water season, flash floods frequently occur, while during the low- water season, run-off is low with rivers often dry. In order to meet its sustainable development objectives and targets, JCG and QMG are aware of the need to address these problems and strengthen the capacity of the institutions that are mandated to manage water resources and the environment. They are also aware of the need for a comprehensive and integrated water
Appendix 12 55 resource and environmental management approach to address the complex and interrelated problems as a requisite for sustainable economic development and improved quality of life within the Jiaozhou Bay area.
D. Environmental Impacts and Mitigation Measures
7. Environmental Benefits. The Project will mainly have environmental benefits and strengthen the capacity of the Jiaozhou government to implement improved environmental management practices. The river rehabilitation projects will reduce flooding risk, and thereby significantly improving public health. The wastewater interception and collection subcomponents will significantly reduce direct pollution discharges to the rivers in Jiaozhou City. Water quality is anticipated to improve urban rivers, the newly constructed Shaohai Lake, the Dagu River, and the downstream Jiaozhou Bay wetlands. As part of the nonstructural measures, the Project will also provide technical assistance to the Jiaozhou government to improve its capacity to monitor and control pollution in the entire county. Through the establishment of a management information system, support for a "wastewater group" in the city government, and effective coordination and guidance of the Project’s leading group, it is anticipated that compliance with environmental standards will be increased and pollution loads will be reduced.
8. Impacts During Construction Phase. The Project will cause limited environmental impacts during the construction phase. An estimated 1.8 million cubic meters of dredged sludge from the Erli’he River Reservoir and the Yunxi, Hucheng, Wushui, and Sanli rivers will have to be disposed of. Sediment sampling was undertaken during the environmental assessment for regular tests on heavy metal concentrations.3 The results showed that all monitored items are below the maximum permissible concentrations for neutral and alkaline soil of the Pollution Control Standards of Sludge Used in Agriculture (GB4284-84). Based on the sludge characteristics, field utilization is proposed, which has been applied for years in Jiaozhou City for river sludge disposal. In this Project, sludge excavation will be undertaken during the dry season to reduce water contents and minimize environment impacts. Sludge from different rivers will be disposed separatelyarrange disposal specifically. The sediment from the Yunxi River (east of Haier Avenue), the Erli’he River, and the Sanli River can be used for farmland around Shaohai Lake. Sludge from the Yunxi River (west of Haier Avenue), the Hucheng River, and the Wushui River will be used in forest fields or for greening lands inside urban districts.
9. Limited negative impacts on soil, air, water, the acoustic environment, flora/fauna, and surrounding communities are also expected during standard construction activities. The impacts will be temporary and localized, and if proper mitigation measures are implemented during the construction period, the impacts can be minimized or eliminated. The residual impacts are judged to be insignificant. Similarly, construction activities have the potential to disturb cultural and/or historical sites, although none has yet been identified. A 2007 survey in Jiaozhou City indicates that cultural relics—which are from Neolithic Age, Han Dynasty and Qing Dynasty— are located outside the Jiaozhou urban city, mostly in rural towns surrounding the city. The impacts from project construction and implementation on the cultural relics is small and negligible, if any existed. To mitigate possible risks, contractors will protect relevant sites immediately and report to local culture administration agency if some cultural relics are encountered, as described in article 32 of the Culture Relic Protection Law.
3 Compared with Soil Environment Quality Standards (GB15618-1995), basically all the sludge samples can satisfy class II standard, which is the level for guaranteed agriculture production and healthy growth of crops. Mercury in the Wushui River and arsenic in the Yunxi River are higher than class II of GB15618. Sludge of Erli’he River and Sanli River is around class I standard of GB15618, which is the quality level for basic natural conditions.
56 Appendix 12
10. Impacts During the Operation Phase. Environmental impacts during the operation phase have been identified and addressed in the project design. As major parts of the wastewater collection, infrastructure will be combined with storm-water,consist of a combined system, sewer overflows will occur during heavy rainfall. While diluted sewage may be discharged directly to the river systems, impacts are minimized by the higher dilution in the rivers during the wet season. The noise impact from the operation of two pump stations is negligible. The collected wastewater will require adequate treatment. Although the wastewater treatment plant (WWTP) is not financed through the Project, JCG has ensured that the capacity of the existing Jiaozhou WWTP will be expanded and that all wastewater will be treated to a 1B level4 prior to discharge into the Dagu River.
11. Due Diligence. The development of the Shaohai Lake and the required expansion of the WWTP have been identified as “associated impacts to be assessed” with the Project and a due- diligence review has been carried out. The development of the Shaohai Lake, the key to improved flood and water quality management, was started in 2004. The approved environmental impact assessment report has been reviewed and it is considered that environmental impacts were addressed adequately. For the wastewater to be collected by the Project, proper treatment has been assured by JCG through its commitment (project covenant) to expand the capacity of the existing WWTP and improve the quality of the treatment process (to 1B level). Moreover, JCG will monitor and ensure, through the support of the Project, that all industrial establishments will apply pre-treatment to comply with national regulations. Similarly, JCG has provided proof that the sludge from Jiaozhou WWTP is safely disposed of. Since 2008, the sludge has been sent to the Qingdao Diendi Biological Technical Company and processed into plant fertilizers through biological degradation and harmless treatment.
12. Cumulative Impacts. No cumulative impacts have been identified for the proposed project activities.
13. Environmental Management Plan. An environmental management plan (EMP) has been prepared to (i) agree on appropriate mitigation measures, and (ii) guide the establishment of institutions or mechanisms to monitor and ensure compliance with environmental regulations and implementation of the proposed mitigation measures. The EMP describes (i) objectives, (ii) a summary of potential impacts, (iii) mitigation measures, (iv) environmental monitoring, (v) planned public consultation, (vi) responsibilities and authorities for implementation, (vii) institutional strengthening and training, (viii) reporting and supervision, (ix) a work plan, (x) procurement and cost estimation, and (xi) a mechanism for feedback and adjustment. The EMP will be reviewed and updated at the end of the detailed design in order to be consistent with the final detailed design.
E. Institutional Requirements and Environmental Monitoring
14. Executing Agency. JCG, being the Executing Agency, will be responsible for the overall implementation and compliance with the EMP and monitoring plan. JCG will ensure that, as part of standard project monitoring arrangements, environmental monitoring reports will be submitted to ADB on a semi-annual basis. JCG will also be responsible for handling any disputes arising from noncompliance with the EMP.
15. Project Management Office. A project management office (PMO) has been established, comprising 10 staff from the Jiaozhou City Construction Bureau, including the project manager,
4 Discharge standard of pollutants from municipal wastewater treatment plant (GB18918-2002).
Appendix 12 57 staff for procurement, disbursement, engineering, and social and environmental safeguards, and interpreting. The PMO will have overall responsibility for supervising implementation of environmental mitigation measures and reporting to ADB. It will be responsible for the day-to- day implementation and compliance with the EMP and ensuring that mitigation measures are implemented as described in the EMP, and will support the Executing Agency in handling any disputes arising from noncompliance with the EMP. The PMO will provide the periodic environmental monitoring reports to JCG and ADB. On completion of the Project, the wastewater entity under the Jiaozhou City Construction Bureau will be responsible for the O&M of the wastewater networks, drainage, and river courses management.
16. Project Leading Group. To increase project effectiveness, a project leading group, established by the Jiaozhou Government, will provide general oversight and coordination over the project implementation. The leading group is headed by the vice-mayor of Jiaozhou City, and includes members from the Jiaozhou Development and Reform Bureau, Jiaozhou Finance Bureau, Jiaozhou Water Resource Bureau, Jiaozhou Environment Protection Bureau, Jiaozhou Land Resource Bureau, Jiaozhou Construction Bureau, Jiaozhou Planning Bureau, and Jiaozhou People Bank.
17. Environmental Monitoring Arrangements. The PMO will nominate at least one qualified full-time environmental management staff member to undertake environmental management and monitoring activities. The PMO will further engage a construction supervision consultant to assist in carrying out environmental management monitoring activities, prepare semi-annual progress reports, report to ADB, and conduct necessary training. On behalf of the Government, the Qingdao EPB/Jiaozhou EPB will delegate environmental monitoring to the Qingdao Environment Monitoring Center/Jiaozhou Environment Monitoring Centers.
18. Reporting Schedule. The PMO, with the assistance of project consultants, will monitor and assess overall project activities under the project design and monitoring framework, including environmental targets. The PMO will submit to ADB the EMP progress reports and information on project implementation and the environmental performance of the contactors. These reports will include (i) semi-annual environmental reports on EMP implementation, and (ii) environmental compliance monitoring and audit report of the completion of each subproject.
19. Monitoring Costs. The costs for the implementation of the monitoring plan during the construction phase is minimal, estimated at CNY120,000 over a period of 4 years. The annual costs for monitoring during the operation phase will be approximately CNY40,000/year. These costs have been included in the project cost tables.
F. Public Consultations and Disclosure
20. Public Consultations. Two rounds of public consultations and information disclosure were conducted in January and February 2008. The consultations focused on project-affected people in Shinan Community, Yunxi New Village, Yunxi Street Administration Office, Zhongyun Street Administration Office, and Fuan Street Administration Office. A questionnaire survey was conducted among project-affected people living in Dongguan Street, Lanzhou Street, Shimenshou Street, Longzhou Street, and Lanzhou West Street. More than 87% of interviewed people live within 2 kilometers of the proposed Project. Being dissatisfied with current water quality, and eager to solve the existing problems of environmental pollution, 98.2% of the total interviewed people agreed with the construction of the Project, and expressed their expectations that the Project will bring significant environmental benefits. During the consultation, local communities also expressed concerns regarding possible adverse impacts during the
58 Appendix 12
construction phase, and would like construction agencies to take suitable measures to mitigate the impacts.
21. Disclosure. Disclosure of project information was carried out in two rounds on 14 March 2008 and early April 2008. The project scope, environmental impacts, and mitigation measures were posted on the Jiaozhou government's website5 www.jiaozhou.gov.cn. In addition, (i) the SIEE will be made available for review on ADB's website before consideration of the Project by the ADB Board; (ii) copies of the full environmental assessment report will be made available on request; (iii) all environmental monitoring reports will be provided to the Qingdao EPB/Jiaozhou EPB and ADB; and (iv) a formal grievance redress committee will be established to answer public complaints as discussed in former sections.
G. Findings and Recommendations
22. The Project will have positive environmental impacts by reducing flooding and associated pollution and health hazards in Jiaozhou urban city. The Project will significantly improve water quality in the urban rivers and Shaohai Lake. By assuring that all wastewater collected by the Project will be treated to a class IB level through an expansion of the existing Jiaozhou WWTP, JCG will reduce overall pollution loads on the Dagu River and Jiaozhou Bay. Complemented by improved environmental management capacity, the Project is expected to initiate sustainable planning process, contribute to halting the degradation of the wetland areas in Jiaozhou Bay, and contribute significantly to improved water quality in the bay.
23. Potential adverse environmental impacts during both construction and operation periods include unsafe disposal of dredged sediments and WWTP sludge, and limited standard construction impacts. All these impacts have been analyzed in the project environmental assessment report and SIEE. Specific environmental mitigation measures will be undertaken to minimize the adverse impact. No further studies are considered to be necessary.
24. Extensive community consultation indicated that most of the affected people have a positive attitude towards the Project and that they believe it will benefit the local environment, living standards, and economic development. Negative opinions on the Project focused on localized noise, odor, and air pollution associated with the construction phase. The environmental mitigation measures have been developed to address these specific concerns.
H. Conclusion
25. The proposed Project will have significant positive environmental impacts in the project area, including enhanced urban flood prevention in Jiaozhou City and improved water quality of urban water bodies, the Shaohai Lake, and the downstream Jiaozhou Bay wetlands. The proposed strategic environmental assessment will enable JCG and QMG to introduce sustainable approaches to urban development, thus protecting and maintaining the functions of the coastal wetlands and ecosystems. Based on the results of the SIEE, the Project will not generate significant environmental impacts, provided the mitigation measures are implemented appropriately.
5 Available: http://www.jiaozhou.gov.cn/jzoa/jiaozhou/zwgg/zwgg/200804/5753.html.
Appendix 13 59
SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY
Country/Project Title: People’s Republic of China/Qingdao Water Resources and Wetland Protection Project
Lending/Financing Department/ East Asia Department/ Project Loan Modality: Division: Agriculture, Environment, and Natural Resources Division I. POVERTY ANALYSIS AND STRATEGY A. Linkages to the National Poverty Reduction Strategy and Country Partnership Strategy
The goal of the Government of the People’s Republic of China’s 11th Five-Year Plan (FYP 2006–2010) is to build a harmonious society. To achieve the goal, the Government aims for a balanced development strategy that builds a harmonious society and a socialist market economy that is energy-efficient and environmentally friendly. In the FYP, a number of environmental and natural resources concerns are given priority, which include, among others (i) land degradation, (ii) water shortage and pollution, (iii) poor urban environmental infrastructure, (iv) degradation of marine ecosystems and wetlands, (v) increasing frequency and intensity of environmental accidents, and (vi) global environmental issues such as climate change and greenhouse gas emissions. The Chinese Communist Party and the State Council issued a series of policy directives on environmental protection for the 11th FYP period. These policy directions are incorporated into the National Economic and Social Development Master Plan which was developed in March 2006. This plan gives priority to (i) protection and rehabilitation of valued ecosystems; (ii) increasing efforts in pollution control; (iii) improving natural resource management; and (iv) sustainable utilization of marine/water resources. As a guiding policy for the 11th FYP, the State Council directive sets forth two broad environmental objectives for the next 5–15 years. By 2010, the environmental quality of key regions and cities will be improved, and the trend of ecological degradation will be arrested. By 2020, the quality of the environment and the state of the country’s ecosystems will have improved significantly. There are many other specific targets set under 11th FYP but the reduction in energy intensity by 20% and total pollution loading by 10% are the two most prominent.
In accordance with the PRC’s FYP, the Asian Development Bank's (ADB’s) country partnership strategy for PRC 2008–2010 emphasizes inclusive growth through balanced development and environmental sustainability. ADB, as per its long-term strategic framework 2008–2020 (Strategy 2020), will pay greater attention to poverty reduction, management of natural resources and ecosystems, and increasing its investment in natural resources management, agriculture, and rural development.
The proposed Qingdao Water Resources and Wetland Protection Project (the Project) supports ADB’s strategic priorities. With rapid urban development and population growth, severe pollution of water resources as well as frequent flooding have become key constraints to sustainable development in Qingdao Municipality and Jiaozhou City. While various water conservation and management projects have been implemented by the Government in recent years, there are still opportunities to improve environmental management in the area. The Project aims to bring tangible benefits to the environment of Jiaozhou Bay area by (i) reducing water pollution; (ii) protecting water resources; (iii) reducing economic losses and disruption to livelihoods from frequent localized flooding; (iv) enhancing wetland ecosystems in both Shaohai Lake and the Dagu Estuary/Jiaozhou Bay wetlands; (v) promoting sustainable economic development; (vi) improving the environment, living conditions, and public health standards; and (vii) improving public service delivery through corporatization and improved financial sustainability. The poverty and social analysis shows that the Project will contribute to (i) reduced surface and groundwater pollution; (ii) reduced risks of exposure to waterborne and vector-borne diseases, with associated reduction in medical costs and number of workdays lost; (iii) increased employment opportunities and income-generation activities from temporary job creation during the construction period and permanent job creation during the operation period; and (iv) decreased flood-associated damages and economic losses. The expected outcome is improved condition of water resources and environment in Jiaozhou and the downstream wetlands. Its impact is improved quality of life, a sustainable ecosystem, and biodiversity conservation in Jiaozhou Bay. The project impact will be enhanced by the replication of project lessons to other newly developed zones within Qingdao municipal government territory by the implementation of a strategic environmental assessment as an integral part of strategic planning of future economic development in the Jiaozhou Bay area. The Project will benefit directly about 370,000 people living in the project area, of whom about 1.5% are poor.
The Project will also assist the PRC’s progress in achieving the Millennium Development Goal 7, target 10, to halve by 2015 the proportion of people without access to basic sanitation, by increasing coverage of the Jiaozhou public service systems including urban drainage to serve an estimated 370,000 people by 2010 and 450,000 by 2015.
B. Poverty Analysis Targeting Classification: General intervention
1. Key Issues
Currently, 34 poor counties and more than 2.3 million people in Shandong province are living below the rural poverty line of
60 Appendix 13
CNY1,000 per capita per annum. Qingdao City in Shandong Province, however, is a rapidly urbanizing municipality, and the per capita annual net income of urban and rural residents is greater than that of both the PRC and Shandong Province. The Qingdao 2006 Statistics Yearbook shows that per capita annual net income of rural residents was CNY6,546, and per capita annual disposable income of urban residents was CNY15,328. The poor population who had been supported by the Government’s livelihood subsidy program—those living on CNY1,500 per capita per annum in rural areas and CNY3,600 per capita per annum in urban areas— numbered 106,637, or 1.42% of the total population in the city. In Jiaozhou City, the rural and urban minimum livelihood subsidy standards are set at CNY1,500 per capita per annum for rural areas and CNY2,880 per capita per annum for urban areas. Those who were entitled to this subsidy totaled 10,493, or 1.5% of the total population in the city.
The socioeconomic survey showed that most of the urban poor are unemployed workers, part-time workers, the disabled, the elderly, and retirees. The cause of urban relative poverty groups are low income from employment (68.1%), illness (12.1%), lack of knowledge or skills (12.1%), insufficient labor (4.3%), and others (3.4%). This unemployment is usually due to lack of employment opportunities and income resources.
2. Design Features
The Project has incorporated two key features to benefit the poor. First, to mitigate the financial burden of the poor from increased wastewater collection tariffs due to service improvement, the Project has negotiated with the Government that subsidies will be provided to poorer families. Second, the Project will provide 75% of the jobs generated in the Project to vulnerable groups including the poor and women. It is expected that the Project will generate about 3,400 jobs during the construction period. To maximize the project benefits, women will be given priority in the employment and training opportunities generated in the Project’s construction and operation phases.
The Project is also expected to have the following positive effects on the poor: (i) Improving the living environment. The Project can improve the living environment of poor families by providing better wastewater collection and cleaning up the polluted rivers. (ii) Reducing incidences of waterborne diseases. The Project will improve hygiene and drinking water problems, thereby reducing the incidence of waterborne diseases. Poor families often ignore minor illnesses, at times even the major ones, due to financial constraints. The Project can reduce incidences of waterborne diseases and guarantee the basic living standard of poor families. (iii) Poverty-relief effect. The Project is expected to reduce natural disaster (flooding) associated damages, providing a guarantee to the poor population’s housing and finance. II. SOCIAL ANALYSIS AND STRATEGY A. Findings of Social Analysis
A poverty and social analysis was undertaken in line with ADB guidelines to collect detailed social information necessary to inform project design, and identify poverty reduction and social development objectives, outcomes, and indicators. The poverty and social analysis identified vulnerable groups, opportunities for pro-poor interventions and recommended social action measures, and participation and mitigation plans to achieve positive social benefits.
The Project will provide improved public services to residents in Jiaozhou. The direct social benefits include improved cleanliness and health, reduction in incidence of disease, increased job opportunities, and flooding control. However, the main social risks are identified, such as poor families being unable to afford the service of basic infrastructure and facilities such as wastewater services, and less ability to cope with pollution and a degraded environment. They often suffer from wastewater pollution and poor urban environmental sanitation, which in turn increase their exposure to water pollution. This may put them at high risk of diseases related to water pollution such as diarrhea, hepatitis, and respiratory diseases. Thus, the Project will provide equal benefits to poor people through reduced (or free) wastewater treatment charges.
B. Consultation and Participation 1. Provide a summary of the consultation and participation process during the project preparation.
The poverty and social assessment utilized a number of participation processes to solicit the input of a cross section of stakeholders. Stakeholder analysis was conducted during the poverty and social assessment. Various methods and approaches have been conducted, including 400 households sampling socioeconomic survey, stakeholder consultation meetings and workshops, eight focus group discussions, and 103 key informant interviews. The main stakeholder groups are urban residents, women, poor people, enterprise owners, and local decision makers including relevant government agencies at county/committee levels, project management office, project implementation agencies, and the private sector. Formulation of the short resettlement plan utilized separate socioeconomic surveys, community meetings, opinion surveys, and specific impact studies in May 2008.
Additionally, three rounds of public consultations in the project areas were carried out to prepare the environmental impact assessment, social assessment, and the short resettlement plan. The public consultations and information disclosure included
Appendix 13 61
(i) introducing the project components to the stakeholders; (ii) collecting ideas, suggestions, comments, concerns, and critiques on the potential environmental implications of the Project; and (iii) presenting the findings of the environmental impact assessment, social assessment, and short resettlement plan, summarizing potential environmental impacts and mitigation measure, and providing answers raised by workshop participants. The participation will be carried out throughout the whole process of the resettlement plan, environmental impact assessment, and environmental management plan implementation.
2. What level of consultation and participation (C&P) is envisaged during the project implementation and monitoring? Information sharing Consultation Collaborative decision making Empowerment
Public consultation and participation, which have been key elements of the project design, will continue during project implementation, monitoring, and evaluation. Ongoing consultations will be carried out by the implementing agencies to (i) meet the evolving needs and expectations of the users, (ii) increase the awareness of the public about the benefits of the Project, (iii) encourage the active involvement of local communities to maximize their support for the Project, (iv) promote environmental protection, and (v) raise the social acceptance of tariff increases. Moreover, measures to actively involve communities have been established in the design. Community-based monitoring team is planned to be set up to help project construction laborers’ selection, environmental protection awareness education, coordination with other stakeholders, reflect their views on the project implementation, etc. The Project will provide CNY20,000 for the local residents to establish and conduct monitoring activities.
3. Was a C&P plan prepared? Yes No If a C&P plan was prepared, describe key features and resources provided to implement the plan (including budget, consultant input, etc.). If no, explain why.
It is expected that the following results will be achieved through the C&P: (i) increased participation of local population in the project implementation and monitoring, (ii) increased awareness of project benefits and acceptance of the Project, (iii) increased hygiene knowledge and reduced incidence of waterborne and vector-borne diseases, and (iv) increased participation of beneficiaries affected by this Project. Furthermore, stakeholder consultation and disclosure of information will be conducted through environment management plan, resettlement plan, and social development action plan during the project implementation and operation.
C. Gender and Development 1. Key Issues
Women are often the ones who are more negatively impacted by water than men, as they take care of household chores and children. The health benefit would be greater to women, the elderly, children, and the poor as they are most vulnerable to stomachache such diseases. Women, with more chances of contact with water from domestic chores, will benefit disproportionately from the improvement of urban drainage faculties.
A target of 30% for women’s employment in operation and maintenance of infrastructure has been set, plus an assurance from the project managements office to encourage contractors to hire as much female construction labor as possible. Men stand to benefit more than women from the unskilled construction jobs that will be created through the Project, due to the requirement for physically demanding labor. However, there is no constraint to women’s participation in the skilled operation and maintenance work which will be created, as evidenced by the number of women already working in these sectors and the equal numbers of male and female graduates with technical qualifications. There are also requirements for consultation with women in the resettlement plans.
2. Key Actions. Measures included in the design to promote gender equality and women’s empowerment—access to and use of relevant services, resources, assets, or opportunities and participation in decision-making process: Gender plan Other actions/measures No action/measure
Summarize key design features of the gender plan or other gender-related actions/measures, including performance targets, monitorable indicators, resource allocation, and implementation arrangements.
Appropriate participation and consultation is appreciated by women, and is more likely to lead to longer-term support and success of the technical inputs. Women in the community will be actively engaged for the public education and awareness program to promote hygiene education, a garbage recycling program, and social acceptance of tariff increase. For the public education and awareness program, the Project will work closely with local women’s organization such as women association and women’s street committee. The short resettlement plan and environmental management plan will include gender disaggregated data, where relevant.
62 Appendix 13
III. SOCIAL SAFEGUARD ISSUES AND OTHER SOCIAL RISKS
Issue Significant/Limited/ Strategy to Address Issue Plan or Other No Impact Measures Included in Design As the resettlement impacts are not Involuntary Limited significant, a short resettlement plan has Full Plan Resettlement been prepared in accordance with the Short Plan relevant PRC laws and regulations, and Resettlement ADB’s Involuntary Resettlement Policy Framework (1995), to ensure the affected people will No Action be made better off, or at least not worse off. In Jiaozhou City, there are no minority Plan Indigenous Peoples No Impact people and hence the Project has no Other Action impact on indigenous peoples. Indigenous Peoples Framework No Action Labor No Impact The Project will create about 3,400 jobs Plan Employment during the construction period, of which Other Action opportunities 75% will be allocated to the vulnerable, No Action Labor retrenchment such as the poor and women. Core labor standards Affordability Limited An affordability analysis has been Action undertaken and two representative No Action household groups were considered: (i) the general income group; and (ii) the low-income group, which is defined as below Minimum Living Guarantee. Ten percent of the proposed tariff increased is assumed for purpose of an affordability analysis. It indicates that both groups will have no problem with affordability of a tariff increase, since the share of income expenditure for the service is below the 3% benchmark. The impact of any expenditure increase for water is considered to be insignificant given that the total water charges paid by each common household is a small percentage of their total income. Impact on the Minimum Living Standard Scheme households can be potentially significant but will be mitigated through the planned subsidy program. Other Risks and/or Limited Health and safety training will be provided Plan Vulnerabilities to the construction workers. The project Other Action HIV/AIDS management office will ensure that No Action Human trafficking contractors involved in the project Others(conflict, political implementation will receive and instability, etc), please disseminate information on health and specify safety issues. Employees involved in the Project will be protected in accordance with the PRC labor laws and other regulations and guidelines issued by Qingdao municipal government. IV. MONITORING AND EVALUATION
Are social indicators included in the design and monitoring framework to facilitate monitoring of social development activities and/or social impacts during project implementation? Yes No
Appendix 14 63
SUMMARY RESETTLEMENT PLAN
1. The Qingdao Water Resources and Wetland Protection Project consists of three physical subprojects: (i) Improvement of Flood Retention Project in Erli’he Reservoir, (ii) Upgrading of Urban Storm-water and Wastewater Drainage Project, and (iii) River Course Rehabilitation Project. These subprojects will not only increase the storage capacity of reservoirs and enhance the flood discharge capacity of watercourses, but will also improve the drainage system and control the watercourse pollution.
2. According to the resettlement investigation, impacts related to the project resettlement include (i) people affected by the permanent acquisition of land, (ii) people affected by permanent occupation of informal farmland along the river banks, and (iii) people affected by the temporary occupation of state-owned land. A total of 2.80 hectares (ha) of collective land will be acquired, of which 0.75 ha (26.8%) is farmland and 2.05 ha (73.2%) is pond; 15 households with 51 persons are affected. About 3.25 ha of informal farmland along the river banks or inside the existing reservoirs/ponds used for seasonal crops are affected, which involves 60 households with 212 persons. Also, 9.93 ha of state land (i.e., roads, sidewalks, or boulevards) will be temporarily occupied for laying wastewater and storm-water pipelines. There is no demolition of residential houses or shops, and there is no vulnerable or ethnic minority group involved in this Project (Table A14.1). Local officials, leaders from subdistricts and villages, and the affected persons were closely consulted during the feasibility study stage in order to avoid or minimize land acquisition and resettlement.
Table A14.1: Summary of Resettlement Impacts Permanent Temporary Temporary
Land Crops Land Name of Name of Household Population Acquisition Occupation Occupation Subproject Subproject Affected Affected (mu)a (mu) (m2) The pond of Area 0 0 0 0 0 Erli’he Water 1 Retention The pond of Area 30.8 1 0 3 11 Reservoir 2 Project The pond of Area 0 5 0 11 42 3 Erli’he River 0 0 0 0
Yunxi River 0 41 0 38 133 River Course Rehabilitation Hucheng River 0 0.2 0 2 4 Project Wushui River 0 1.5 0 0 0
Sanli River 11.3 0 21 73 Urban Wastewater 0 63,889 Sewage and pipeline Drainage Stormwater 0 35,419 Project pipeline Total 42.1 48.7 99,308 75 263 a Fifteen Chinese “mu” equals 1 hectare. Source: Resettlement Plan by Jiaozhou city government, 2008.
3. As the resettlement impacts are not significant, a short resettlement plan has been prepared on the basis of the Involuntary Resettlement Policy (1995) of the Asian Development Bank (ADB). All affected persons will be eligible for compensation and assistance. The cut-off date for eligibility for compensation and assistance under the Project will be the date that the Jiaozhou municipal government approves the resettlement plan, and will be announced to all affected
64 Appendix 14 persons immediately afterward. Once the detailed designs of the subprojects are finalized, the resettlement plan will be updated and submitted to ADB for approval.
4. Due diligence was required for the previous resettlement impacts caused by the construction of East Lake (Shaohai), since this is a part of the Project which was constructed prior to ADB involvement. The due-diligence report has been prepared to evaluate the resettlement results, compensation and rehabilitation measures, and present conditions of the affected persons. The due-diligence report shows that the compensation and rehabilitation measures are in line with national and local policies on resettlement, and affected persons are satisfied with the resettlement activities. There are no remaining issues on resettlement in the Shaohai East Lake Development Project.
5. For people who will be unavoidably affected by the Project, the resettlement objective is to achieve equal or better income and living standards, in line with the national laws and local regulations, as well as ADB’s Involuntary Resettlement Policy. Consulting with local governments and affected persons, the Jiaozhou city government (JCG) as the Executing Agency (EA) adopted a set of compensation standards based on the replacement cost and general practice in the project districts and counties. The resettlement principles established for the Project are: (i) wherever feasible, land acquisition and involuntary resettlement will be avoided or minimized through the development of design alternatives and the choice of the best alternative; (ii) compensation and entitlements provided will be based on market value or replacement value and must be adequate to allow those affected to maintain or improve their pre-project standard of living; (iii) temporary land occupancy and the period of disruption are to be kept to a minimum; (iv) all the people affected, whether legal or non-legal residents, are to be taken into consideration and accounted for; (v) where the landholding per capita is not enough to maintain the previous livelihood standards, other income-generating activities will be provided for; (vi) vulnerable groups will be given preference in matters such as compensation and employment; (vii) all those affected will be adequately informed about eligibility, compensation rates and standards, livelihood and income restoration plans, and project timing; and (viii) close monitoring and timely actions will be carried out to identify and resolve problems as they arise. The affected persons will be compensated and resettled in a timely and adequate manner in accordance with the resettlement plan so that they will be made better off, or at least not worse off, than they would have been without the Project.
6. With regard to land acquisition, the compensation standard is determined by consulting with the affected villages whose land will be acquired. Land compensation for farmland is 10 times of the average annual output value,1 and resettlement subsidy for farmland is 14 times the average annual output value. A land compensation and resettlement subsidy will be paid to the affected village committees, while young crops compensation will be paid to individuals. To restore the income losses, the following measures will be implemented during the resettlement process: (i) the village committee will adjust the remaining land within the whole villages; (ii) the land compensation and resettlement subsidy will be deposited in banks for income earnings or welfare from interest, such as distributing rice, flour, and edible oil to all villagers; (iii) land compensation will be used for basic social insurance for the land-lost farmers; (iv) secondary and tertiary industries will be developed or expanded to generate employment opportunities and recover the income of the affected persons, and technical training will be provided to the affected persons to teach them nonagricultural skills; and (v) the project EA will give the affected persons priority to be employed in the activities during the project construction and operation.
7. With regard to the loss of access to informal farmland which does not legally belong to farmers, the affected persons will be informed 6 months prior to civil works to stop planting temporary crops along the river banks, or paid one-season young crops compensation. Moreover,
1 The average annual output value of 2005, 2006, and 2007 is CNY1,600/mu in the affected areas, as per the Jiaozhou Statistical Bureau.
Appendix 14 65 skill training programs and employment will be provided for family laborers to help integrate these affected persons into urban society.
8. For businesses or residents that may be temporarily affected or inconvenienced by the construction of the wastewater and storm-water network, mitigation measures are also provided to avoid or minimize the potential impacts during the construction period. Most construction impacts will last less than 1 month; if impacts last longer, compensation will be negotiated between the EA and the affected businesses or residents. Other mitigation measures, such as disclosing construction information, setting warning signs, and prohibiting construction schedules, will be implemented.
9. The JCG, as the EA, will assume the overall responsibility for resettlement. The Jiaozhou project management office (PMO) will take charge of resettlement compensation payment and supervision. The PMO will also coordinate the planning, implementation, financing, and reporting of land acquisition and resettlement progress to ADB.
10. The cost of land acquisition and resettlement is included in the overall budget of the Project, which is estimated to be CNY2.8 million. The project owners will pay compensation and other fees to the affected villages and individuals through the PMO with domestic counterpart capital. To ensure that land acquisition and resettlement can be finished successfully, the PMO has set up various financial and supervising organizations for funds management at different levels.
11. The affected persons were fully consulted and informed during the preparation of the resettlement plan. Local representatives participated in planning meetings, interviews, focus group discussions, public consultation workshops, and community consultations, and their comments and concerns are integrated into the resettlement plan. The draft resettlement plan was distributed to the affected subdistricts and villages in July 2008, and resettlement information booklets were disseminated to the affected villages and affected persons on 3 September 2008. The grievance redress procedures are well established; they are explained in the resettlement plan and referred to in the resettlement information booklets.
12. The resettlement plan implementation will be subject to internal and external monitoring, as described in the resettlement plan. The EA will supervise the implementation and monitor the progress quarterly to ensure compliance with the provisions of the resettlement plan. Each resettlement agency within the EA will undergo capacity building during land acquisition and resettlement; the resettlement staff training programs and budgets are included in the resettlement plan. The PMO will entrust an independent agency with monitoring and evaluation of land acquisition and resettlement activities twice a year, and external monitoring reports will be forwarded directly to the PMO and ADB.
13. The resettlement implementation schedule is based on the overall project preparation and construction timetable. The process of land acquisition is scheduled to begin in the second half of 2009 and be completed by the end of the year. Before land acquisition, the detailed land acquisition plan and agreements required under the PRC regulations will be approved by Jiaozhou Land Resources Bureau, after negotiation with and acceptance by the affected persons. If there are any significant changes in land acquisition, resettlement impacts, or entitlement, the resettlement plan for this Project will be updated to reflect the changes, and the changes will be disclosed to the affected persons and submitted to ADB for approval before land is acquired or civil works commence. The PMO and EA have agreed on a set of supervision milestones with ADB for timely and effective resettlement (Table A14.2).
66 Appendix 14
Table A14.2: Resettlement Supervision Milestones
No. Resettlement Tasks Target Responsible Agency Deadline Status A. Disclosure 1. Information booklet to APs 75 households PMO 3 Sept 2008 complete July–Sept 2. Resettlement plan distribution 30 copies Subdistrict Office complete 2008 3. RP placed on ADB website RP ADB 5 Sept 2008 complete
B. Resettlement Plan and Budget all Qingdao City Gov’t, 27 Aug 1. Approval of feasibility study complete subprojects design institutes 2008 14 July 2. Approval of RP and budget CNY2.8million Jiaozhou Government complete 2008 3. Approval of compensation rates Jiaozhou Government July 2008 complete C. Detailed Rehabilitation Plans Villages, Subdistrict 1. Village rehabilitation plans 2 villages May 2009 Office, PMO 2. Farmland adjustment agreements 1 village Affected village May 2009 3. Technical training plan for APs all APs Subdistrict Office May 2009 D. Detailed Design and RP Updating 1. Detailed design for components Design institute May 2009 Jiaozhou Land Resources Staking survey and Detailed 2. Bureau, towns and June 2009 Measurement Survey (DMS) villages Updated RP based on DMS, including 30 June 3. PMO, EA plans in item 3 above 2009 Qingdao Land and 4. Land use approval 41.2 mu July 2009 Resources Bureau E. Compensation Agreements 1. Village agreements 2 villages Subdistrict Office July 2009 2. Household agreements 15 HHs Subdistrict Office July 2009 F. Implementation Capacity 1. Subdistrict Office resettlement staff 2 villages Subdistrict Office April 2009 2. Designate village representatives 20 persons Subdistrict Office April 2009 3. Training of staff all staff PMO, subdistrict office April 2009 4. Setting up grievance redress 15 staff PMO, Subdistricts April 2009 G. Monitoring and Evaluation 1. Baseline survey 30 households External Monitor July 2009 2. Set-up internal supervision PMO, subdistrict office April 2009 3. Contract external monitor PMO June 2009 4. Internal monitoring reports Quarterly PMO April 2009 1st report 5. External monitoring reports Semiannual External Monitor Dec 2009 1st report 6. Post Evaluation report Once External Monitor 2012 H. Documentation of Consultation PMO Ongoing
Appendix 14 67
No. Resettlement Tasks Target Responsible Agency Deadline Status I. Documentation of Grievances Quarterly PMO, Subdistricts Sept 2009 1st report J. Flow of Funds / Compensation January 1. PMO CNY2.8million Jiaozhou Finance Bureau 2009 February 2. Subdistrict Offices CNY2.8million PMO 2009 February 3. To affected households 75 households Subdistrict Offices 2009 Jiaozhou Land Resources K. Commence Land Acquisition 41.2 mu July 2009 Bureau, villages L. Commence Civil Works Contractors July 2009 ADB = Asian Development Bank, AP = affected people, CNY = yuan, EA = executing agency, HH = household, PMO = project management office, RP = resettlement plan. Source: Asian Development Bank.