Concept Paper
Project Number: 53059-001 August 2019
Proposed Loans People’s Republic of China: Shandong Jiaxiang Smart Water Sector Development Program
This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.
CURRENCY EQUIVALENTS (as of 1 July 2019)
Currency unit – yuan (CNY) CNY1.00 = $0.1456 $1.00 = CNY6.8668
ABBREVIATIONS
ADB – Asian Development Bank GDP – gross domestic product JCG – Jiaxiang County Government NRW – nonrevenue water PRC – People’s Republic of China SDP – sector development program TA – technical assistance XWC – Xiangcheng Water Company
NOTE
In this report, "$" refers to United States dollars.
Vice-President Ahmed M. Saeed, Operations 2 Director General Amy S.P. Leung, East Asia Department (EARD) Director Sangay Penjor, Urban and Social Sectors Division, EARD
Team leaders Linh Le, Urban Development Specialist, EARD Baochang Zheng, Senior Project Management Officer, EARD Team members Alan Baird, Principal Urban Development Specialist, Southeast Asia Department (SERD) Stephane Bessadi, Senior Water Utility Specialist, Sustainable Development and Climate Change Department (SDCC) Ostiane Goh-Livorness, Counsel, Office of the General Counsel Aimee Hampel-Milagrosa, Economist, Economic Research and Regional Cooperation Department Joel Mangahas, Principal Planning and Policy Economist, Strategy, Policy and Partnerships Department Rosemary Ong, Public–Private Partnership Specialist, Office of Public–Private Partnership Sanmugam Ahembaranathan Prathapar, Senior Water Resources Specialist, SDCC Arun Ramamurthy, Senior ICT Specialist (Innovations), EARD Viswanathan Ramasubramanian, Senior Safeguards Specialist (Resettlement), EARD Stefan Rau, Senior Urban Development Specialist, EARD Mark Allister Robis, Senior Financial Management Officer, EARD Shotaro Sasaki, Senior Environment Specialist, EARD Arghya Sinha Roy, Senior Climate Change Specialist (Climate Change Adaptation), SDCC Gohar Tadevosyan, Senior Social Development Specialist (Safeguards), EARD Rochelle Villanueva, Senior Operations Assistant, EARD Peer reviewers Vivian Castro-Wooldridge, Urban Development Specialist, South Asia Department Satoshi Ishii, Principal Urban Development Specialist, SERD
In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.
CONTENTS Page
PROJECT AT A GLANCE PROBLEM TREE I. THE PROGRAM 1 A. Rationale 1 B. Proposed Solutions 2 C. Proposed Financing Plans and Modality 4 D. Implementation Arrangements 5 II. PROGRAM PREPARATION AND READINESS 5 III. DELIBERATIVE AND DECISION-MAKING ITEMS 5 A. Risk Categorization 5 B. Project Procurement Classification 6 C. Scope of Due Diligence 6 D. Processing Schedule and Sector Group’s Participation 6 E. Key Processing Issues and Mitigation Measures 6
APPENDIXES 1. Preliminary Design and Monitoring Framework 7 2. Project Procurement Classification 10 3. Technical Assistance Facility Utilization Update 11 4. Initial Poverty and Social Analysis 13
Project Classification Information Status: Complete
PROJECT AT A GLANCE
1. Basic Data Project Number: 53059-001 Project Name Shandong Jiaxiang Smart Water Sector Development Department EARD/EASS Program /Division Country China, People's Republic of Executing Agency Jiaxiang County Borrower People's Republic of China Government Country Economic https://www.adb.org/Documents/LinkedDocs/?id=5305 Indicators Portfolio 9-001-CEI at a Glance https://www.adb.org/Documents/LinkedDocs/?id=5305 9-001-PortAtaGlance 2. Sector Subsector(s) ADB Financing ($ million) Agriculture, natural Rural sanitation 13.75 resources and rural Rural water policy, institutional and capacity development 5.00 development Rural water supply services 43.50 Water-based natural resources management 3.00 Public sector Reforms of state owned enterprises 3.00 management Water and other urban Urban policy, institutional and capacity development 5.00 infrastructure and Urban sewerage 24.65 services Urban water supply 2.10 Total 100.00 3. Operational Priorities Climate Change Information1 Addressing remaining poverty and reducing inequalities Climate Change impact on the Medium Project Accelerating progress in gender equality Tackling climate change, building climate and disaster resilience, and ADB Financing enhancing environmental sustainability Adaptation ($ million) 10.00 Making cities more livable Promoting rural development and food security Strengthening governance and institutional capacity Sustainable Development Goals Gender Equity and Mainstreaming SDG 1.1, 1.5 Effective gender mainstreaming (EGM) SDG 5.5 SDG 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.b SDG 10.2 Poverty Targeting SDG 11.6 General Intervention on Poverty SDG 12.2 SDG 13.a SDG 16.6 4. Risk Categorization: Complex . 5. Safeguard Categorization Environment: B Involuntary Resettlement: A Indigenous Peoples: C
. 6. Financing Modality and Sources Amount ($ million) ADB 100.00 Sovereign SDP - Program (Regular Loan): Ordinary capital resources 30.00 Sovereign SDP - Project (Regular Loan): Ordinary capital resources 70.00 Cofinancing 0.00 None 0.00 Counterpart 100.45 Government 100.45 Total 200.45 Currency of ADB Financing: US Dollar 1 The project reduces greenhouse gas emissions. However, it does not fall under the eligibility criteria for climate mitigation finance as defined by the joint multilateral development bank methodology on tracking climate finance, which notes that not all activities that reduce greenhouse gases in the short term are eligible to be counted towards climate mitigation finance. Accordingly, greenfield fossil fuel projects are excluded, and climate mitigation finance is considered zero.
Source: Asian Development Bank This document must only be generated in eOps. 15072019032624366360 Generated Date: 22-Aug-2019 11:59:25 AM
PROBLEM TREE
Increased migration Effects and loss of labor Constrained economic growth force
Core Problem Degraded livability and compromised environmental sustainability
Causes Inadequate access to safe drinking water and wastewater management services
Inefficient operation Poor planning and Water supply Sewage systems Sub-causes and maintenance in Water sources weak governance infrastructure lacking inadequate water sector not reliable
Separate entities to Fragmented and overlapping manage services in Groundwater with responsibilities across agencies urban and rural areas emerging signs of on water resources depletion and Inadequate financing management contamination Lack of application of Plans are formulated without best practices and limited consideration full water cycle assessment, basin-level considerations, or of performance Surface water with cross-boundary coordination quality and quantity issues Insufficient capacity of Progressive tariffs not yet personnel enforced for all users, and not linked to capital or operational expenditures
I. THE PROGRAM
A. Rationale
1. The People’s Republic of China (PRC) has undergone rapid urbanization, with the proportion of urban inhabitants increasing from 17.92% in 1978 to 58.52% in 2017.1 Urbanization has supported high economic growth but has widened the income and infrastructure services divide between urban and rural areas and perpertuates rural to urban migration. This places pressure on urban areas, while reducing the rural labor force and effectively constraining rural economic growth. Improved urban–rural integration and strengthened rural infrastructure services are key priorities in the PRC’s national strategies, including the National New-Type Urbanization Plan, 2014–2020,2 and the National Strategic Plan for Rural Vitalization, 2018–2022.3 These strategic plans seek to improve the provision and quality of critical infrastructure services in underserved rural areas to reduce outmigration to urban areas. For the water sector these efforts include expanding water supply and wastewater service networks, as well as ensuring safe drinking water and improving the health of rural residents.
2. The Government of the PRC has selected Jiaxiang County in Shandong Province as a case study on how a poor county can leverage international best practices and an innovative mix of financing to achieve urbanization and rural vitalization objectives. Jiaxiang County is located in the western part of Jining City, Shandong Province. The county had a population of 925,500 in 2017, including 342,500 urban residents (37%) and 583,000 rural residents (63%). The urban– rural ratio is expected to reverse by 2030 when the urbanization rate is projected to reach 63%. In 2017, the county had a total per capita gross domestic product (GDP) of CNY32,051, well below the national per capita GDP of CNY50,571, and ranked 11th out of 14 counties in Jining City in terms of per capita GDP. Jiaxiang County has developed county-level goals in line with the PRC’s urbanization and rural vitalization plans, with a top priority of addressing reduced livability and compromised environmental sustainability, especially in rural areas. The county has prioritized actions to improve access to safe drinking water and wastewater management services as these have the most direct and significant impact on local residents.
3. Jiaxiang County faces many water sector management and service delivery issues. Water management is hindered by poor planning and weak governance, mostly as a result of fragmented and overlapping agency responsibilities. It is difficult to effectively implement national policies or formulate actions to address basin-wide and cross-sector water resource management issues such as groundwater conservation policies or water balance assessment. Plans are often formulated without full water cycle assessments or basin-level considerations, which require multiagency cooperation within the county and coordination across local administrative boundaries, for which both institutions and mechanisms are lacking. The Jiaxiang County Government (JCG) pilot-tested the integration of water services (water supply, drainage, and wastewater) operation and maintenance (O&M) in urban areas to Jiaxiang Water Company about 4 years ago. The test was not replicated in rural areas as not all services are available. Xiangcheng Water Company (XWC) handles O&M of water supply services (wastewater services are not available in the rural areas), but is struggling to recover costs. Both companies remain inefficient because of their failure to apply best practices, poor performance, and insufficient personnel capacity. Nonrevenue water is about 30%–35% in urban and rural areas, which can be
1 Government of the PRC, National Bureau of Statistics. 1979. China Statistical Yearbook. Beijing; and Government of the PRC, National Bureau of Statistics. 2018. China Statistical Yearbook. Beijing. 2 Government of the PRC, State Council. 2014. National New-Type Urbanization Plan, 2014–2020. Beijing. 3 Government of the PRC, Central Committee of the Communist Party of China and State Council. 2018. National Strategic Plan for Rural Vitalization, 2018–2022. Beijing.
2
improved together with measures to optimize energy consumption. Progressive tariffs do not apply to all users, and tariffs are not completely linked to capital and/or operational expenditure, making it difficult to achieve cost recovery for O&M and depreciation.
4. Unreliable water sources and significant infrastructure deficits as a result of inadequate financing also contribute to poor water service delivery. Water use, apart for some agricultural irrigation, relies heavily on groundwater which is showing signs of depletion and contamination in selected areas. Well data show a 15.7% decrease from 2004 to 2015, and only 40% of sites yield water suitable for drinking. Surface water quality and quantity remain unsuitable for drinking use. Both groundwater and surface water are sensitive to climate change impacts, and historical data demonstrate decreased annual precipitation in the province. Both water sources will be needed to accommodate growing demand, which is expected to nearly double from 73,500 cubic meters per day in 2015 to 144,000 cubic meters per day by 2030, excluding irrigation needs. Urban water service coverage is high (98%) with a steady supply. Although 95% of villages are reportedly reached, not all rural households are connected. The XWC finds it challenging to meet regulatory quality standards (particularly for calcium, magnesium, and sulfate) because of inadequate financing for capital investment and proper O&M. Urban wastewater collection and treatment coverage is about 80%, but many areas still rely on antiquated combined sewer overflow systems that impact wastewater treatment plants and threaten to pollute nearby water bodies. Collection and treatment systems in rural areas are limited to a few poorly operating sewage treatment facilities that lack sewer collection systems and negatively impact the health, environment, and quality of life of residents.
5. The Asian Development Bank (ADB) is strategically positioned to support the JCG with institutional, policy, and infrastructure transformation of the water sector. ADB can build on lessons from independent evaluation reports and similar ADB sector development programs (SDPs) in South Asia,4 as well as projects in the PRC (specifically in Shandong Province),5 to support water sector reform and enhance infrastructure development. ADB will incorporate knowledge from ADB technical assistance (TA) projects on innovative smart water development in Shenzhen 6 and water utility tariff support. 7 ADB can also support water utility capacity strengthening through water operator partnerships, which facilitate cross-learning and knowledge sharing between water operators in the region.
B. Proposed Solutions
6. The proposed program will be the first SDP for the water sector in the PRC. It will combine institutional and policy interventions with prioritized infrastructure investments. The institutional and policy actions will focus on (i) strengthening integration and cross-agency coordination in water sector planning, as well as management and service delivery; (ii) improving governance and incentivizing service delivery performance; (iii) initiating gradual diversification of water sources away from a sole dependence on groundwater; and (iv) building an environment conducive to sustainable financing, including a road map for private sector participation. The infrastructure investments will complement the policy agenda to (i) improve access to water services (water supply, drainage, and wastewater) for underserved residents; and (ii) demonstrate
4 ADB. Bangladesh: Dhaka Water Supply Sector Development Program; and ADB. India: Rajasthan Urban Sector Development Program. 5 ADB. People’s Republic of China: Shandong Groundwater Protection Project; and ADB. People’s Republic of China: Shandong Hai River Basin Pollution Control Project. 6 ADB. People’s Republic of China: Supporting Project Preparation. 7 ADB. 2009. Understanding Urban Water Tariff in the People's Republic of China. Manila. https://www.adb.org/sites/default/files/publication/27875/urban-water-tariff.pdf
3
commitments to (a) transition away from sole reliance on groundwater, (b) introduce innovative smart water approaches, and (c) integrate urban–rural services. The program has three outputs.
7. Output 1: Water sector strategies and operations strengthened. This nonstructural output will be financed under a policy-based lending modality and includes several interventions to bridge the policy and institutional gaps in Jiaxiang County’s water sector. Specifically, tranche 1 will (i) support the creation of an integrated water management plan, which will (a) be a platform and basis for coordination and integration across agencies, boundaries, and sectors as it will outline the roles and responsibilities of each stakeholder; and (b) build on realistic demand projections and a comprehensive study of the water cycle beyond county boundaries, and assessment and mitigation of climate risks, to define and prioritize investments with the long-term goal of diversifying water sources away from sole reliance on groundwater; and (ii) pilot integrated administrative functions for the water sector within a designated entity to increase management efficiency and coordination. Tranche 2 will (i) improve the efficiency and sustainability of state- owned water utility operations in Jiaxiang County by integrating urban–rural water and wastewater services in one utility company under a performance-based contract, while providing necessary capacity building measures through south-south knowledge sharing activities with regional water operators; and (ii) develop measures to build an environment conducive to sustainable financing, including tariff review and a road map for private sector participation. Both tranches will include capacity building activities for concerned stakeholders in this reform agenda, specially capitalizing on good practices from relevant ADB projects and strategic knowledge partnerships (para. 5).
8. Output 2: Smart water supply services improved. This output will improve water supply services in rural areas by enhancing water treatment and expanding the water supply distribution network. In line with the policy directions on diversifying water sources instituted under output 1, this output will improve water treatment plants for groundwater and construct a reservoir and a treatment plant for surface water. A smart system using metering and data algorithm for improved monitoring of water extraction, treatment, and distribution will be combined with the wastewater treatment monitoring system (output 3) for urban and rural areas to fully integrate service delivery for the whole county.
9. Output 3: Sustainable wastewater management services improved. This output will complement policy actions and investments under Outputs 1 and 2 to improve quality of water sources, specifically surface water, by (i) developing or improving sewage treatment stations in rural towns and villages, and (ii) upgrading antiquated combined sewer overflow pipelines to separate sewer and drainage pipelines in prioritized urban areas. This output will include a community engagement program to involve and build capacity for rural communities to operate and maintain sewage treatment stations, including an awareness campaign on proper solid waste disposal. This output will also improve drainage in selected river segments in urban areas.
10. These outputs will result in the following outcome: access to sustainable, affordable, and safe water and wastewater management services improved. The program will be aligned with the following impacts: urban–rural integration strengthened and rural vitalization in Jiaxiang County improved.8
11. Strategic fit. Supporting water and wastewater infrastructure development of Jiaxiang County will contribute to (i) the PRC’s National Strategic Plan for Rural Vitalization, 2018–2022
8 Footnotes 2 and 3. The preliminary design and monitoring framework is in Appendix 1.
4
(footnote 3); (ii) thirteenth five-year plans of Jining City and Shandong Province, 2016–2020;9 (iii) PRC’s National New-Type Urbanization Plan, 2014–2020 (footnote 2); (iv) Jining City Master Plan, 2010–2030;10 and (v) Jiaxiang County Master Plan, 2010–2030.11
12. The preparation of this proposed program is included under a transaction TA12 facility in ADB’s country operations business plan for the PRC, 2019–2021,13 and is aligned with (i) ADB’s Strategy 2030 and its operational priorities on livable cities; rural development; tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability; and reducing inequalities;14 (ii) ADB’s country partnership strategy for the PRC, 2016–2020;15 and (iii) urban, water, and environment operational plans and/or directions.
C. Proposed Financing Plans and Modality
13. The SDP modality, combining a policy-based loan and a project loan, has been selected as most appropriate to support the government’s commitment to improving water services through both policy reform measures and strategic infrastructure investments. In line with ADB’s Operations Manual,16 policy actions will be critical to the success of infrastructure service delivery as they contribute to fostering an integrated, long-term approach to sector needs by setting strategic directions and priorities for infrastructure investments, building institutions and incentives to efficiently deliver and sustain services, and creating a conducive environment for sustainable financing of future investments. These actions are within the autonomy of the JCG and without any legal or administrative impediments. Infrastructure investments are public sector investments and will complement policy actions to demonstrate the government’s commitment to addressing the most urgent infrastructure needs. ADB has been providing extensive support to the water sector in the PRC through public and private sector project loans, and this SDP will strengthen ADB’s leverage to promote policy and institutional reform to implement and ensure sustainability of the proposed infrastructure.
14. The program is estimated to cost $200.45 million, including proposed financing of $100.00 million from ADB’s ordinary capital resources and $100.45 million from the government. The tentative financing plan is provided in Table 1. The policy-based portion is expected to account for 20%–30% of the total loan amount and will be disbursed in two tranches, as specific policies may come into effect at different times during implementation. Details will be finalized through policy dialogue with the government during program preparation.
15. Climate adaptation benefits are expected but the exact amount will be estimated during program preparation.
9 Jining Municipal Committee of the Communist Party of China. 2016. Thirteenth Five-Year Plan on Municipal Economic and Social Development, 2016–2020. Jining; Shandong Provincial Committee of the Communist Party of China. 2015. Thirteenth Five-Year Plan on Provincial Economic and Social Development, 2016–2020. Jinan. 10 Jining City Development and Reform Commission. 2010. Jining City Master Plan, 2010–2030. Jining. 11 Jiaxiang County Bureau of Development and Reform. 2010. Jiaxiang County Master Plan, 2010–2030. Jiaxiang. 12 ADB. 2019. Preparing Urban and Social Development Projects. Manila (F-TRTA 9732-PRC). 13 ADB. 2019. Country Operations Business Plan: People’s Republic of China, 2019–2021. Manila. As agreed with the JCG during the reconnaissance mission in May 2019, the name of the program was changed to better reflect its objective. The original name of the program was Shandong Jining Water Supply and Drainage Integration Project. 14 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific. Manila. 15 ADB. 2016. Country Partnership Strategy: People's Republic of China, 2016–2020—Transforming Partnership: People's Republic of China and Asian Development Bank. Manila. 16 ADB. 2003. Sector Development Programs. Operations Manual. OM D5/BP. Manila.
5
Table 1: Indicative Financing Plan Amount Share of Total Source ($ million) (%) Asian Development Bank Ordinary capital resources (program) (regular loans) 30.00 14.96 Ordinary capital resources (project) (regular loan) 70.00 34.92 Government Jiaxiang County Government 20.45 10.20 Jiaxiang City Construction Group Co. Ltd. 80.00 39.92 Total 200.45 100.00 Source: Asian Development Bank estimates.
D. Implementation Arrangements
Table 2: Indicative Implementation Arrangements Aspects Arrangements Indicative implementation period November 2021–December 2027 Indicative completion date December 2027 Management (i) Executing agency Jiaxiang County Government (ii) Key implementing agency Jiaxiang City Construction Group Co. Ltd.a a Jiaxiang City Construction Group Co. Ltd. is a state-owned enterprise created under the Jiaxiang County Government to carry out construction and real estate projects, and to mobilize investments for urban infrastructure in Jiaxiang County. Since 2011, it has been implementing 22 water-related projects with amounts of up to $42 million. Source: Asian Development Bank.
16. The Shandong Provincial Government will provide guidance to the program and onlend the loan proceeds, through the Jining Municipal Government, to the JCG (executing agency). A program leading group will be established to provide overall guidance and support for program preparation and implementation. It will be co-chaired by the party secretary of the Jiaxiang County Committee of the Chinese Communist Party and the JCG governor and will include leaders from key relevant bureaus in the county. A project management office, directly under the program leading group, has been established under Jiaxiang County Bureau of Development and Reform and will oversee project implementation.
II. PROGRAM PREPARATION AND READINESS
17. A transaction TA of $450,000 to prepare the program will be financed on a grant basis by ADB’s Technical Assistance Special Fund (TASF-other sources) under the approved transaction TA facility for Preparing Urban and Social Development Projects (Appendix 3). An additional $150,000 was provided by the Climate Change Fund for a climate risk and adaptation assessment. A consulting firm and individual consultants will be engaged to carry out due diligence in accordance with the ADB Procurement Policy (2017, as amended from time to time) and its associated project administration and/or staff instructions. Advance contracting and/or retroactive financing under the proposed program will be reviewed during program preparation and will be requested during the management review meeting.
III. DELIBERATIVE AND DECISION-MAKING ITEMS
A. Risk Categorization
18. The program is considered complex as the SDP loan amount is more than $50 million, and the involuntary resettlement safeguard is category A.
6
B. Project Procurement Classification
19. The recommended project procurement classification is B as no complex type of contract will be used, borrowing country does not have high procurement environment risks, and only one executing agency with an implementing agency will be implementing the program (Appendix 2).
C. Scope of Due Diligence
Table 3: Scope of Due Diligence Due Diligence Outputs To be undertaken by Comprehensive sector study and technical due diligence Staff, TA consultants Institutional assessment and strengthening plan Staff, TA consultants Assessment of impact of sector reforms on the poor and vulnerable groups Staff, TA consultants Preparation of cost estimates, financing plan, economic and financial analysis Staff, TA consultants Financial management assessment, financial evaluation, financial viability analysis, entity Staff, TA consultants financial analysis and sustainability assessment, design of funds flow, accounting, auditing, and financial reporting arrangements Gender analysis, collection of baseline data, and gender action plan Staff, TA consultants Climate risks and adaptation assessment Staff, TA consultants Safeguard screening and documents on environment, involuntary resettlement, and/or Staff, TA consultants, indigenous peoples JCG, JMG, SPG Summary poverty reduction and social strategy Staff, TA consultants Integrity due diligence for Jiaxiang City Construction Group Co. Ltd. Staff, TA consultants Procurement risk assessment and related procurement documentation Staff, TA consultants Risk assessment and management plan Staff, TA consultants Program administration manual Staff, TA consultants Development coordination Staff, TA consultants JCG = Jiaxiang County Government, JMG = Jining Municipal Government, SPG = Shandong Provincial Government, TA = technical assistance. Source: Asian Development Bank.
D. Processing Schedule and Sector Group’s Participation
Table 4: Processing Schedule by Milestone Milestones Expected Completion Date 1. Approval of concept paper August 2019 2. Loan fact-finding mission October 2020 3. Management review meeting December 2020 4. Loan negotiations March 2021 5. Loan approval June 2021 6. Loan signing September 2021 7. Loan effectiveness November 2021 Source: Asian Development Bank.
E. Key Processing Issues and Mitigation Measures
20. No significant processing issues are expected. There is only one executing agency and one implementing agency, both at the county level. Guidance will be provided by the Shandong Provincial Government, which has experience in implementing ADB projects. Capacity development will be provided during program preparation with respect to technical solutions, institutional arrangements and program implementation, economic and financial analyses, financial management, procurement, and safeguards.
Appendix 1 7
PRELIMINARY DESIGN AND MONITORING FRAMEWORK Impacts the Program is Aligned with Urban–rural integration strengthened (National New-Type Urbanization Plan, 2014–2020)a Rural vitalization of Jiaxiang County improved (National Strategic Plan for Rural Vitalization, 2018–2022)b
Data Sources and Performance Indicators with Reporting Results Chain Targets and Baselines Mechanisms Risks Outcome By 2027 Access to sustainable, a. XX people benefitting from 24x7 a–c. Annual program Operation and affordable, and safe supply of safe and affordable reports and completion maintenance is not water and wastewater drinking water (sex-disaggregated) report properly carried out management services (2019 baseline: XX)c and availability of funds improved b. XX people benefitting from sustainable wastewater management services (sex- disaggregated) (2019 baseline: XX)c
c. XX towns have water sources other than groundwater (2019 baseline: 0)
d. XX% of residents report d–e. Annual reports increased satisfaction with water from water utility services (sex-disaggregated) company (2019 baseline: XX%)
e. Nonrevenue water reduced to at least XX% in XX towns (2019 baseline: XX%)
Outputs By 2026 1. Water sector 1a. A water management plan for 1a–g. Knowledge Changes in strategies and Jiaxiang County approved, and a products, relevant macroeconomic or operations strengthened road map for reform and water- government political situations smart guidelines issued documents, and (2019 baseline: not issued) progress reports
1b. Platform and mechanisms for cross-sector, cross-boundary coordination and collaboration established (2019 baseline: not established)
1c. County-level water sector management functions integrated (2019 baseline: not applicable)
1d. Sustainable plan for water sector infrastructure financing developed (2019 baseline: not developed)
1e. Sustainable and affordable tariff regime established (2019 baseline: not established)
8 Appendix 1
Data Sources and Performance Indicators with Reporting Results Chain Targets and Baselines Mechanisms Risks 1f. Performance-based smart integrated urban–rural water and wastewater services provided by one utility (2019 baseline: not applicable)
1g. XX water utility and county staff (of which 30% are female) trained and report improved program management skills, and operation and maintenance of project facilities (2019 baseline: 0)
2. Smart water supply 2a. XX new households connected 2a–d. Program Land acquisition and services improved to water distribution network progress and resettlement process (2019 baseline: 0) completion reports
2b. XX energy-efficient water treatment plants built or upgraded (2019 baseline: 0)
2c. XX surface-water supply available for domestic use (2019 baseline: 0)
2d. XX towns with new smart water equipment and digital technology equipment installed (2019 baseline: 0)
3. Sustainable 3a. XX new households connected 3a–d. Program Land acquisition and wastewater management to wastewater management progress and resettlement process services improved services completion reports (2019 baseline: 0)
3b. XX villages with improved or new wastewater management systems (2019 baseline: 0)
3c. XX hectares of urban areas have improved drainage and/or sewage systems (2019 baseline: 0)
3d. XX community members trained and have participated in maintaining wastewater treatment facilities (sex-disaggregated) (2019 baseline: 0)
Key Activities with Milestones 1. Water sector strategies and operations strengthened 1.1 Establish program management office by 2019 1.2 Complete recruitment of consultants for water sector development plan and implementation support by 2020 1.3 Draft and approve water management plan during 2021–2022 1.4 Establish institutional setup during 2021–2023 1.5 Assess training needs and develop training plan by 2020 1.6 Provide required training during 2021–2026 1.7 Implement equipment installation and training during 2022–2026
Appendix 1 9
2. Smart water supply services improved 2.1 Design infrastructure, update and implement resettlement plan and monitor resettlement activities, and procure works during 2021–2022 2.2 Implement infrastructure works and equipment installation during 2022–2026 3. Sustainable wastewater management services improved 3.1 Design infrastructure, update and implement resettlement plan and monitor resettlement activities, and procure works during 2021–2022 3.2 Implement infrastructure works and equipment installation during 2022–2026 3.3 Implement rural community engagement program and capacity building activities during 2022–2026 Inputs Asian Development Bank: $100.00 million (loan) Government: $100.45 million Assumptions for Partner Financing Not Applicable a Government of the PRC, State Council. 2014. National New-Type Urbanization Plan, 2014–2020. Beijing. b Government of the PRC, Central Committee of the Communist Party of China and State Council. 2018. National Strategic Plan for Rural Vitalization, 2018–2022. Beijing. c Outcome-level indicators a and b contribute to ADB Results Framework Indicators 15 (people benefitting from increased rural investments), and 12 (people benefitting from services in urban areas). Source: Asian Development Bank.
10 Appendix 2
PROJECT PROCUREMENT CLASSIFICATION Characteristic Assessor’s Rating: Is the procurement environment risk for this project assessed to be ☐Yes ☒No high based on the country and sector and/or agency risk assessments? Are multiple (typically more than three) and/or diverse executing ☐Yes ☒No ☐Unknown agencies and/or implementing agencies envisaged during project There will be one executing implementation? Do they lack prior experience in implementation agency and implementing under an ADB-financed project? agency but this is the first time they will implement an ADB- financed project. Are multiple contract packages and/or complex and high-value ☐Yes ☒No ☐Unknown contracts (compared with recent externally financed projects in the {add comments, if ‘Yes’} developing member country) expected? Does the project plan to use innovative contracts (public–private ☐Yes ☒No ☐Unknown partnership, performance-based, design and build, operation and maintenance, etc.)? Are contracts distributed in more than three geographical locations? ☐Yes ☒No ☐Unknown {add comments, if ‘Yes’} Are there significant ongoing contractual and/or procurement issues ☐Yes ☒No ☐Unknown under ADB (or other externally) financed projects? Has misprocurement been declared in the developing member country? Does the DMC have prolonged procurement lead times, experience ☒Yes ☐No ☐Unknown implementation delays, or otherwise consistently fail to meet The executing and implementing procurement time frames? agencies require specific support to implement ADB project. Do executing and/or implementing agencies lack capacity to manage ☐Yes ☒No ☐Unknown new and ongoing procurement? Have executing and/or implementing agencies requested ADB for procurement support under previous projects? Regional department’s overall recommendation (Linh Le) Overall project categorization recommended ☐ Category A ☒ Category B The executing and implementing agencies will require additional procurement support during project preparation in the form of training by PPFD staff and transaction technical assistance consultants, and during project implementation in the form of capacity building by the project implementation consultants, with support from the PPFD staff. Procurement support will also be provided by a tendering agency that will be engaged to facilitate the bidding process and ensure compliance with government and ADB regulations and policies. Procurement, Portfolio, and Financial Management Department’s recommendation (M. Shahadat Russell) Category B is supported for this project. PPFD will provide inputs on procurement-related documents and provide training to executing and implementing agencies staff on the new procurement framework. ADB = Asian Development Bank, PPFD = Procurement, Portfolio, and Financial Management Department. Source: ADB.
Appendix 3 11
TECHNICAL ASSISTANCE FACILITY UTILIZATION UPDATE
1. The technical assistance (TA) facility for Preparing Urban and Social Development Projects was approved on 8 May 2019 in an amount of $1,800,000.1 No contract awards and disbursements were recorded as of 1 July 2019.
2. The major outputs and activities are summarized in Table A3.1.
Table A3.1: Summary of Major Outputs and Activities Major Outputs Delivery Dates Key Activities with Milestones 1. Technical feasibility Q3 2020–Q1 2021 1.1 Assess feasibility of technical designs for water assessments conducted supply and sanitation systems in selected areas of Jining 2. Due diligence completed Q3 2020–Q1 2021 2.1 Prepare economic and financial analysis 2.2 Undertake social and environmental safeguards due diligence and climate change assessment 2.3 Prepare fiduciary and governance due diligence (procurement, financial management, and anticorruption) 3. Social and sector assessments Q3 2020–Q1 2021 3.1 Undertake poverty, social, and gender analysis and undertaken propose gender mainstreaming entry points and design features 3.2 Prepare sector and subsector analyses in urban development and rural water supply and wastewater 3.3 Prepare additional social and sector assessments as needed 4. Implementation plans prepared Q3 2020–Q1 2021 4.1 Prepare program procurement plans, implementation and capacity developed schedules, risk management plans, program action plans, program administration manuals, gender action plans, ethnic minority development plans, environmental management plans, and resettlement plans 4.2 Design and carry out capacity building activities for executing and implementing agencies and other government counterparts Q = quarter. Source: Asian Development Bank.
3. Resources under the technical assistance facility. The updated consultants’ input allocation from the TA facility is in Table A3.2 and confirms that the (i) TA facility has adequate resources, and (ii) existing terms of reference for consultants are sufficient to undertake the activities required to deliver the outputs for the ensuing Shandong Jiaxiang Smart Water Sector Development Program.
1 Asian Development Bank. 2019. Preparing Urban and Social Development Projects. Manila (F-TRTA 9732-PRC).
12 Appendix 3
Table A3.2: Updated Consultants’ Input Allocation from the Technical Assistance Facility International National Item (person-month) (person-month) 1. Water resources management and water institutions specialist 4.0 (team leader) 2. Rural water supply and sanitation specialist (deputy team leader) 6.0 3. Smart water utility specialist 1.5 3. Economists 1.0 2.0 4. Environment specialists 1.5 3.0 5. Gender and social development specialists 1.0 1.0 6. Resettlement specialists 1.5 3.0 7. Financial management specialist 2.0 8. Procurement specialist 1.0 9. Program coordinator 2.5 Total 13.0 18.0 Source: Asian Development Bank estimates.
Table A3.3: Updated Budget Allocation from the Technical Assistance Facility Amount Item ($‘000) Asian Development Banka 1. Consultants a. Remuneration and per diem i. International consultants 195.00 ii. National consultants 156.00 b. Out-of-pocket expenditures i. International and local travel 53.64 ii. Reports and communicationsb 15.00 2. Training, seminars, and conferences 15.00 3. Contingencies 15.36 Total 450.00 a Financed by the Asian Development Bank’s Technical Assistance Special Fund (TASF-other sources). b Includes printing and translation. Source: Asian Development Bank estimates.
Appendix 4 13
INITIAL POVERTY AND SOCIAL ANALYSIS
Country: People’s Republic of China Project Title: Shandong Jiaxiang Smart Water Sector Development Program
Lending/Financing Project/Policy-Based Department/ Urban and Social Sectors Division, East Asia Modality: Division Department
I. POVERTY IMPACT AND SOCIAL DIMENSIONS A. Links to the National Poverty Reduction Strategy and Country Partnership Strategy The proposed program will contribute to rural vitalization and urban–rural integration in Jiaxiang County in Jining City, Shandong Province by improving selected water infrastructure (water supply, drainage, and wastewater) and delivering sustainable services. The program is aligned with the PRC’s Thirteenth Five-Year Plan for Poverty Alleviation and Development, 2016–2020 and conforms with the PRC’s Thirteenth Five-Year Plan for National Economic and Social Development of the PRC, 2016–2020;a the National Strategic Plan for Rural Vitalization, 2018–2022; and the Shandong Province’s Thirteenth Five-Year Plan for Economic and Social Development, 2016–2020.b All these plans prioritize urban–rural integration and coordination development. The Opinions on Implementing Rural Revitalization Strategy by the Central Committee of the Communist Party of China and State Council, 2018 stressed the importance of rural infrastructure improvement to meet the increasing needs of public services in the process of urban–rural economic development and people’s living standard improvement.c It is also consistent with ADB’s country partnership strategy for the PRC, 2016–2020, which states that ADB will help generate employment, increase incomes, and reduce inequality between urban and rural areas.d B. Poverty Targeting General intervention Individual or household (TI-H) Geographic (TI-G) Non-income MDGs (TI-M1, M2, etc.) The program is proposed as general intervention. While the poverty rate in Jiaxiang County has decreased significantly, there were 17,485 poor people at the end of 2018. Poverty analysis carried out under the transaction TA will inform the design of pro-poor, inclusive program components. C. Poverty and Social Analysis 1. Key issues and potential beneficiaries. The proposed program will directly impact Jiaxiang County, which is located in the west of Jining City, Shandong Province. The county had a population of 925,500 in 2017, including 342,500 urban residents (37%) and 583,000 rural residents (63%). Jiaxiang County is economically less developed than most other cities in Shandong Province. In 2017, Jiaxiang County ranked 11th in terms of per capita gross domestic product among the 14 districts, counties, and economic development zones under Jining City. As a result of the government’s targeted poverty alleviation program, the poverty rate in Jiaxiang County has decreased significantly. The county had 17,572 poor inhabitants as of the end of 2018; of these, 12,540 were subsidized through the program, with 71.6% of them living on dibao (a minimum living allowance), and 4.9% on a special subsidy for people in extreme poverty. In addition, 4,983 poor people received subsidies from various other sources and 94 are county-level poor who became poor because of unexpected reasons such as sudden diseases, disasters, etc. The main causes of poverty are (i) unexpected illness, physical disability, and chronic diseases; (ii) lack of up-to-date skills and knowledge; (iii) lack of job opportunities; and (iv) poor access to quality public services (such as quality water supply and sewage systems). All people in the 13 townships will be potential beneficiaries of improved drinking water and sewage systems. The urban residents of Jiaxiang County will benefit from the improvement of their living environment as a result of the separation of wastewater and rainwater in city streets. 2. Impact channels and expected systemic changes. The program will provide positive impacts by improving access to stable and quality water supply and wastewater services, as well as to public spaces; increasing job opportunities; and improving the urban–rural living environment and health. The transaction TA will help identify potential opportunities, benefits, and proper approaches to incorporate social concerns into program implementation and remain in line with the PRC’s poverty alleviation and development strategy. 3. Focus of (and resources allocated in) the transaction TA or due diligence. The transaction TA will (i) collect social and poverty data to assess current water supply and wastewater service needs from a social and poverty perspective; (ii) assess the social and poverty impacts of the program components and help ensure benefits flow to local residents, particularly women, the poor, and ethnic minority individuals (if any); (iii) design program components that are inclusive with respect to these vulnerable groups; (iv) assess the types of employment opportunities and identify effective measures to improve employment opportunities for local people, including the poor, women, and ethnic minority individuals; and (v) assess potential adverse impacts (if any), including affordability of services for program beneficiaries. The transaction TA will allocate inputs consisting of 1 person-month each for international and national gender and social development specialists. 4. Specific analysis for policy-based lending. Not applicable. II. GENDER AND DEVELOPMENT 1. What are the key gender issues in the sector and/or subsector that are likely to be relevant to this project or program? Women account for 47.6% of the total population in Jiaxiang County. Women and children are more likely to be affected
14 Appendix 4 by poor quality drinking water and an unsanitary living environment. Currently, most local residents (both men and women) leave their homes to seek employment in other places, or men go to bigger cities on a short or long-term basis, leaving women at home to care for children or aged parents. More employment opportunities and an improved living environment will contribute significantly to family life and the education of children. The transaction TA will identify the potential of, frameworks for, and approaches to promote women’s participation in program implementation to maximize benefits by working closely with women’s federations and village committees. 2. Does the proposed project or program have the potential to contribute to the promotion of gender equity and/or empowerment of women by providing women’s access to and use of opportunities, services, resources, assets, and participation in decision making? Yes No The program has some potential to contribute to the promotion of gender equity and/or empowerment of women but this needs further assessment during transaction TA implementation. It is expected that this program will provide chances for women to participate in program design and implementation, which will directly impact the lives of women and their families through increased employment opportunities, and an improved living environment, which will contribute to women’s health and wellbeing, and family life. A gender assessment will be conducted by the transaction TA consultant as part of the poverty and social analysis. 3. Could the proposed project have an adverse impact on women and/or girls or widen gender inequality? Yes No The program does not anticipate any adverse impacts on women. 4. Indicate the intended gender mainstreaming category: GEN (gender equity) EGM (effective gender mainstreaming) SGE (some gender elements) NGE (no gender elements) III. PARTICIPATION AND EMPOWERMENT 1. Who are the main stakeholders of the project, including beneficiaries and negatively affected people? Identify how they will participate in the project design. The main stakeholders include (i) local residents (particularly the rural poor, women, and other vulnerable people) in Jiaxiang County who will benefit from improved access to services, a better living environment, and increased job opportunities during construction and operation; (ii) residents living downstream who will benefit from reduced water pollution, and a healthier, safer environment; (iii) the state-owned Jiaxiang City Construction Group Co. Ltd.; (iv) small and medium-sized enterprises that will supply clean water and manage wastewater; and (v) local governments and their line agencies that will be responsible for revitalizing rural areas, thereby attracting more people to stay and work in the county, and contributing to better development. The program will have a consultation and participation strategy to ensure meaningful consultation with all key stakeholders and timely delivery of program-related information to communities, program-affected households, and all relevant stakeholders. 2. How can the project contribute (in a systemic way) to engaging and empowering stakeholders and beneficiaries, particularly, the poor, vulnerable, and excluded groups? What issues in the project design require participation of the poor and excluded? The design and construction of water supply, wastewater treatment, and reservoir infrastructure will incorporate the views of the local people, including the poor, women, ethnic minority individuals, and other collaborating agencies engaged in development activities. Local people’s wishes, needs, and appeals will be incorporated into the program design as applicable, and in a timely manner. 3. What are the key, active, and relevant civil society organizations in the project area? What is the level of civil society organization participation in the project design? Village Committee. Information generation and sharing (M) Consultation (H) Collaboration Partnership Extensive consultation with stakeholders will be necessary. Socioeconomic surveys, focus group discussions, and key informant interviews are planned under the social and poverty assessment. Consultations will be conducted with regard to resettlement, environment, and social safeguards. Relevant civil society organizations will be identified during transaction TA implementation and their potential participation will be explored. The transaction TA team will work closely with village committees, women’s federations, and various agricultural cooperatives. 4. Are there issues during project design for which participation of the poor and excluded is important? What are they and how should they be addressed? Yes No The program will take into account the needs of the poor when designing reservoirs and water supply and wastewater treatment infrastructure and services so that the program benefits can be maximized. Extensive consultation with various groups (particularly women, the poor, and vulnerable people) is also critical for program implementation and monitoring. Key documents, such as the social development action plan, gender action plan, and resettlement plans will outline the process of consultation and participation. Loan assurances will address implementation and monitoring of these plans. Local people will be consulted during the transaction TA implementation and preliminary design. The transaction TA will conduct an initial poverty and social analysis and address social safeguards issues through a socioeconomic survey, stakeholder workshops, focus group discussions, and key informant interviews. IV. SOCIAL SAFEGUARDS A. Involuntary Resettlement Category A B C FI 1. Does the project have the potential to involve involuntary land acquisition resulting in physical and economic displacement? Yes No
Appendix 4 15
The program is expected to be classified category A for involuntary resettlement. Construction of new sewage treatment stations for towns and villages and sewage pumping stations will require land acquisition. House demolition and impacts to residential lands are anticipated, as several of the components are located within urban areas. The borrower will seek to avoid and minimize physical and economic displacement impacts as part of the feasibility studies. 2. What action plan is required to address involuntary resettlement as part of the transaction TA or due diligence process? Resettlement plan Resettlement framework Social impact matrix Environmental and social management system arrangement (for policy-based loan) None B. Indigenous Peoples Category A B C FI 1. Does the proposed project have the potential to directly or indirectly affect the dignity, human rights, livelihood systems, or culture of indigenous peoples? Yes No Ethnic minorities account for 0.31% of the total population in Jiaxiang County. The dominant group (Hui) lives mainly in three villages that will not be directly impacted by the proposed program. The program will not directly or indirectly affect the dignity, human rights, livelihood systems, or culture of indigenous peoples. It is envisaged that ethnic minority individuals can benefit equally from employment opportunities provided by the program during construction and operation. 2. Does it affect the territories or natural and cultural resources indigenous peoples own, use, occupy, or claim, as their ancestral domain? Yes No The program will not affect the territories or natural and cultural resources of the ethnic minorities in the program area. The transaction TA needs to confirm if there are ethnic minority individuals in the areas impacted by the program, and if they are more vulnerable than the mainstream population; if this is the case, proper measures will be taken to address the issue. 3. Will the project require broad community support of affected indigenous communities? Yes No 4. What action plan is required to address risks to indigenous peoples as part of the transaction TA or due diligence process? Indigenous peoples plan Indigenous peoples planning framework Social impact matrix Environmental and social management system arrangement (for policy-based loan) None V. OTHER SOCIAL ISSUES AND RISKS 1. What other social issues and risks should be considered in the project design? Creating decent jobs and employment (L) Adhering to core labor standards (M) Labor retrenchment Spread of communicable diseases, including HIV/AIDS (L) Increase in human trafficking (L) Affordability (L) Increase in unplanned migration Increase in vulnerability to natural disasters Creating political instability Creating internal social conflicts Others, please specify ______2. How are these additional social issues and risks going to be addressed in the project design? The additional social issues and risks will be addressed under the social development action plan. VI. TRANSACTION TA OR DUE DILIGENCE RESOURCE REQUIREMENT 1. Do the terms of reference for the transaction TA (or other due diligence) contain key information needed to be gathered during transaction TA or due diligence process to better analyze (i) poverty and social impact, (ii) gender impact, (iii) participation dimensions, (iv) social safeguards, and (v) other social risks. Are the relevant specialists identified? Yes No 2. What resources (e.g., consultants, survey budget, and workshop) are allocated for conducting poverty, social, and/or gender analysis, and participation plan during the transaction TA or due diligence? The transaction TA will engage (i) gender and social development specialists (1 person-month input each for the international and national consultants) to undertake poverty, social, and gender analysis; and (ii) resettlement specialists (1.5 person-months of international and 3 person-months of national consultant inputs). ADB = Asian Development Bank, PRC = People’s Republic of China, TA = technical assistance. a PRC, State Council. 2016. Thirteenth Five-Year Plan for Poverty Alleviation and Development. Beijing; and PRC, State Council. 2016. Thirteenth Five-Year Plan for National Economic and Social Development of the People’s Republic of China. Beijing. b Government of the PRC, Central Committee of the Communist Party of China and State Council. 2018. National Strategic Plan for Rural Vitalization, 2018–2022. Beijing; and Shandong Provincial Committee of the Communist Party of China. 2015. Thirteenth Five-Year Plan on Provincial Economic and Social Development, 2016–2020. Jinan. c Government of the PRC, Central Committee of the Communist Party of China and State Council. 2018. Opinions on Implementing Rural Revitalization Strategy. Beijing. d ADB. 2016. Country Partnership Strategy: People's Republic of China, 2016–2020—Transforming Partnership: People's Republic of China and Asian Development Bank. Manila. Source: ADB.