Document of The World Bank Public Disclosure Authorized Report No.: 16622-CHA STAFF APPRAISALREPORT Public Disclosure Authorized CHINA GUANGXIURBAN ENVIRONMENTPROJECT Public Disclosure Authorized May 15, 1998 Public Disclosure Authorized Urban Development Sector Unit East Asia and Pacific Regional Office Staff Appraisal Report China Guangxi Urban Environment Project dated May 15, 1998 CORRIGENDUM Page Para. Text in Error Correct 10 3.1 (d) in poor neighborhoods in existing urban neighborhoods 25 5.6 authorized allocation of $4.5 million. authorized allocation of $5 million. 25 5.6 (b) consultant contracts less than (b) individual consultant contracts $50,000 less than $50,000 and consulting firm contracts less than $100,000 CURRENCY EQUIVALENTS (as of May 1998) Currency = Renminbi Currency Unit = Yuan (Y) Y 1.00 = 100 fen $1.00 = Y 8.3 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES 1 hectare (ha) = 2.4711 acres (ac) 3 1 cubic meter (m ) = I ton of water = 284 US gallons 3 1 mega liter (ML) = 1000 m PRINCIPAL ABBREVIATIONS AND ACRONYMS USED BOD Biological Oxygen Demand (A measure of water pollution) CAS Country Assistance Strategy CIF Cost, Insurance, Freight COD Chemical Oxygen Demand (A measure of water pollution) EA Environmental Assessment EPB Environmental Protection Bureau ICB International Competitive Bidding GAR Guangxi Zhuang Autonomous Region (equivalent to Province) GM Guilin Municipality GOC Government of the People's Republic of China GP Guilin Prefecture GUEPO Guangxi Urban Environment Project Office LIBOR London Interbank Offered Rate MOC Ministry of Construction MOF Ministry of Finance NCB National Competitive Bidding NEPA National Environmental Protection Agency NM Nanning Municipality O&M Operation and Maintenance PMO Project Management Office PV Present Value (Discounted at 12% a year unless otherwise stated) RAP Resettlement Action Plan STP Sewage Treatment Plant = WWTP TOR Terms of Reference TSP Total Suspended Particulates TVE Town and village enterprise WWTP Wastewater Treatment Plant = STP Vice President Jean-Michel Severino, EAP Country Director Yukon Huang, EACCF Sector Manager Keshav Varma, EASUR Task Manager Songsu Choi, Senior Urban Economist, EASUR TABLE OF CONTENTS LOAN, CREDIT AND PROJECT SUMMARY Wii 1. SECTOR BACKGROUND: URBAN ENVIRONMENTALMANAGEMENT ... 1 A. Environmental Issues in China ................................ 1 B. Environmental Management System in China ....................... 2 C. Bank Group Strategies and Experiences .......................... 4 2. DEVELOPMENTAND ENVIRONMENTOF GUANGXI: STATUS AND ISSUES . 6 A. Economic and Urban Development ............................. 6 B. Environmental Issues ..................................... 7 C. Nanning and Guilin ....................................... 7 D. Bank Group Involvement in Guangxi ........................... 9 3. PROJECT DESCREPTION ..................................... 10 A. Project Objectives ....................................... 10 B. Project Components ..................................... 10 C. Major Targets and Monitoring Indicators ....................... 11 D. Project Cost and Financing . ................................ 12 E. Project Preparation Status ................................ 14 4. BENEFICIARIES AND FNANCES ................ ............. 15 A. Local Governments ..................................... 15 B. Sewerage Finances and Organizations ......... .................. 16 C. Small Area Improvement ................................... 19 D. Managing the Lijiang .................................... 20 E. Industrial Pollution Control . ................................ 21 F. Sugar Refineries Pollution Abatement ......... .................. 22 5. PROJECT IMPLEMENTATION ARRANGEMENTS ....... .. ........... 24 A. Organizations and Plans ........... ........................ 24 B. On-Lending and Disbursement ......... ...................... 25 C. Procurement Arrangements ........... ...................... 26 D. Resettlement and Land Acquisition ....... ..................... 28 E. Accounting and Auditing . .................................. 29 F. Monitoring and Supervision ................................. 30 This Staff Appraisal Report is based on the findingsand agreementsof the appraisal missionthat visited Guangxiin June 1997 and during follow-updiscussions in Guangxi. The Bank's project team included: Songsu Choi (Senior Urban Economist,Task Manager), Edouard Motte (Senior Municipal Engineer, Co-TaskManager), Alain Bertaud (PrincipalUrban Planner), Roger Heath (Principal Chemical Engineer), Kyung Wook Hur (FinancialAnalyst), Mary Judd (Anthropologist),Wei-jen Leow (Project Analyst), Douglas Olson (IrrigationEngineer), Margaret Png (Counsel), Chongwu Sun (Project Officer), Dawn Vermilya(Financial Analyst), YanxiangWang (EnvironmentalConsultant), and Youlan Zou (ResettlmentSpecialist). Peer reviewerswere Carl Bartone and Jack Fritz (EnvironmentalEngineers) and Julie Viloria (CommunityDevelopment Specialist). Country Director is Yukon Huang and Sector Manager is Keshav Varma. 6. BENEFITS,RISKS, AND ALTERNATIVES ......................... 31 A. Environmental Impacts .................................... 31 B. Analysis of Benefits and Alternatives ........................... 32 C. Poverty and Social Considerations ............................. 35 D. Risks and Sustainability ................................... 36 7. AGREEMENTSAND RECOMMENDATION . ........................38 Tables in Text Table 2.1 Guangxi's Economic Growth ............................... 6 Table 3.1 Project Financing Plan ................................... 12 Table 3.2 Estimated Costs ...................................... 13 Table 4.1 Summary of Local Finances ............................... 15 Table 5.1 Implementation Agencies ................................. 23 Table 5.2 Disbursement Arrangements ............................... 25 Table 5.3 Procurement Arrangements ............................... 26 ANNEXES Annex 1: Sewerage and Drainage Management in Nanning ................. 40 Annex 2: Sewerage and Solid Waste Management in Guilin ................. 53 Annex 3: Institution Development and Financial Plans for Sewerage ............ 67 Annex 4 Industrial Pollution Control Action Plans ....................... 86 Annex 5: Sugar Refinery Pollution Control ............................ 91 Annex 6: Regulation of Lijiang .................................. 97 Annex 7: Small Area Improvement ................................ 108 Annex 8: Resettlement Action Plan Summary ......................... 119 Annex 9: Environmental Assessment Summary ........................ 125 Annex 10: Monitoring Indicators ................................. 143 Annex 11: Estimated Project Cost Details ............................ 150 Annex 12: Projected Disbursement Schedule .......................... 156 Annex 13: Procurement Packages and Schedules ........................ 157 Annex 14: Supervision Plan ..................................... 160 Annex 15: Documents and Data in the Project File ....................... 163 - iii - China Guangxi Urban Environment Project Loan, Credit and Project Summary Borrower: The People's Republic of China Beneficiary: Guangxi Zhuang Autonomous Region, Nanning Municipality, Guilin Municipality and Guilin Prefecture Project Cost: $175 million Loan: $72 million LIBOR-based US dollar single currency loan, with standard rates and fees, with a maturity of 20 years including 5 years' grace Credit: SDR 14.9 million ($20 million equivalent) On standard terms with 35 years' maturity Onlending Terms: Loan: From China through Guangxi Region to the Nanning and Guilin Municipalities and Guilin Prefecture: in US dollars at the Bank's standard interest rate for LIBOR-based US dollar single currency loans, for a maturity of 20 years including 5 years' grace Guangxi Region to Sugar Refineries for pollution abatement subprojects: in US dollars, for a maturity of 7 years including 2 years' grace, at the Bank's standard rate for LIBOR-based US dollar single currency loans plus 1.5% per annum. Credit: From China through Guangxi Region to Nanning and Guilin Municipalities and Guilin Prefecture: in SDR currencies for a maturity of 17 years including 5 years' grace, at standard IDA charges. Economic Rates of About 21 % in direct benefits Return Project Code CN-PE-36414 Maps IBRD Nos. 29651, 28799, 28800 1 1. SECTOR BACKGROUND: URBAN ENVIRONMENTAL MANAGEMENT A. Environmental Issues in China 1.1 China's environmental protection system has developed along with the economic reform and opening. Active environmental protection measures started to be instituted in the late 1970s to reverse the environmental degradation resulting from earlier industrial promotions, and over the past 20 years, a broad set of laws and control instruments and an extensive administrative network have been developed. China has also become an active partner in international efforts to control pollution, becoming one of the first countries to develop their Agenda 21 program after the Rio conference. In the meanwhile, China's industrial production has grown explosively, more than quadrupling in the last decade and accounting for about three quarters of total GDP growth during the period. It has brought along an accelerated growth of urban incomes and population. China's urban population is estimated to be over 400 million now and is projected to double within the next two decades. 1.2 Environmental pressures have increased greatly, along with, but not as fast as the industrial growth thanks