Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 46872-CN PROJECT APPRAISAL DOCUMENT ON A Public Disclosure Authorized PROPOSED LOAN IN THE AMOUNT OF US$200 MILLION TO THE PEOPLE’S REPUBLIC OF CHINA FOR A SHANGHAI URBAN ENVIRONMENT PROJECT Public Disclosure Authorized IN SUPPORT OF THE THIRD PHASE OF THE SHANGHAI URBAN ENVIRONMENT PROGRAM June 2, 2009 Urban Development Sector Unit Sustainable Development Department East Asia and Pacific Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective August 1, 2008) Currency Unit = Renminbi Yuan (RMB) RMB 6.842 = US$ 1 US$ 0.146 = RMB 1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS APL Adaptable Program Loan APL LG Adaptable Program Loan Leading Group BOT Build-Operate-Transfer BSSM Bailonggang South Sewer Main CEAM Shanghai Chengtou Environmental Asset Management Company Limited CNAO China National Audit Office COD Chemical Oxygen Demand CRR Cost Recovery Ratio DA Designated Account DFV District Financing Vehicle DN Diameter Nominal DSCR Debt Service Coverage Ratio EA Environmental Assessment EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EMP Environmental Management Plan EPP Emergency Preparedness Plan FIRR Financial Internal Rate of Return FMM Financial Management Manual FMS Financial Management Specialist GDP Gross Domestic Product GEF Global Environmental Facility ICB International Competitive Bidding IST Institutional Strengthening and Training JHWF Jiading Hazardous Waste Treatment and Disposal Facility LIBOR London Inter-Bank Offered rate MOF Ministry of Finance NCB National Competitive Bidding NDRC National Development and Reform Commission NI Nanjing Institute NPV Net Present Value OECD Organization for Economic Co-operation and Development OMM Operation and Maintenance Manual PAD Project Appraisal Document PAP Project Affected People FOR OFFICIAL USE ONLY PIU Project Implementing Unit PMO Project Management Office PPI Private Participation in Infrastructure QCS Qing Cao Sha QCSC Qing Cao Sha Investment Construction and Development Company Limited QCSRWP Qing Cao Sha Raw Water Project RAP Resettlement Action Plan RMB Renminbi SBD Standard Bidding Documents SCC Shanghai Construction and Communications Commission SCEIC Shanghai Chengtou Environmental Investment Company, Ltd. SEP Shanghai Environmental Project SFB Shanghai Finance Bureau SDRC Shanghai Development and Reform Commission SMAO Shanghai Municipal Audit Office SMG Shanghai Municipal Government SMSC Shanghai Municipal Sewerage Company, Ltd SOE Statement of Expenditure SSP Shanghai Sewerage Project SWA Shanghai Water Authority SWDC Shanghai Solid Waste Disposal Center UDIC Urban Development and Investment Corporation, Ltd UFW Unaccounted-for-Water UNDB United Nations Development Business WSC Water Supply Company WTP Willingness-to-Pay WWTP Wastewater Treatment Plant Vice President: James W. Adams, EAPVP Country Manager/ Director: David R. Dollar, EACCF Sector Manager: Keshav Varma, EASUR Ede Jorge Ijjasz-Vasquez, EASCS Task Team Leader: Hiroaki Suzuki (TTL), EASUR Axel E.N. Baeumler (Co-TTL), EASUR This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. CHINA Shanghai Urban Environment Project - APL Phase III CONTENTS Page I. STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 A. Country and sector issues.................................................................................................... 1 B. Rationale for Bank involvement ......................................................................................... 3 C. Higher level objectives to which the project contributes.................................................... 3 II. PROJECT DESCRIPTION ................................................................................................. 3 A. Lending instrument ............................................................................................................. 3 B. Program objective and phases............................................................................................. 4 C. Project development objective and key indicators.............................................................. 5 D. Project components............................................................................................................. 6 E. Lessons learned and reflected in the project design............................................................ 7 F. Alternatives considered and reasons for rejection .............................................................. 8 III. IMPLEMENTATION ...................................................................................................... 8 A. Partnership arrangements (if applicable) ............................................................................ 8 B. Institutional and implementation arrangements.................................................................. 8 C. Monitoring and evaluation of outcomes/results................................................................ 10 D. Sustainability..................................................................................................................... 10 E. Critical risks and possible controversial aspects............................................................... 10 F. Loan/credit conditions and covenants............................................................................... 11 IV. APPRAISAL SUMMARY ............................................................................................. 12 A. Economic and financial analyses...................................................................................... 12 B. Technical........................................................................................................................... 14 C. Fiduciary ........................................................................................................................... 16 D. Social................................................................................................................................. 16 E. Environment...................................................................................................................... 17 F. DFV Safeguards Framework ............................................................................................ 18 G. Safeguard policies............................................................................................................. 19 H. Policy Exceptions and Readiness...................................................................................... 20 Annex 1: Country and Sector or Program Background ......................................................... 21 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 41 Annex 3: Results Framework and Monitoring ........................................................................ 42 Annex 4: Detailed Project Description...................................................................................... 50 Annex 5: Project Costs ............................................................................................................... 67 Annex 6: Implementation Arrangements ................................................................................. 69 Annex 7: Financial Management and Disbursement Arrangements..................................... 73 Annex 8: Procurement Arrangements...................................................................................... 81 Annex 9: Economic and Financial Analysis ............................................................................. 90 Annex 11: Project Preparation and Supervision ................................................................... 115 Annex 12: Documents in the Project File ............................................................................... 117 Annex 13: Statement of Loans and Credits............................................................................ 118 Annex 14: Country at a Glance ............................................................................................... 123 Annex 15: Maps......................................................................................................................... 125 CHINA SHANGHAI URBAN ENVIRONMENT PROJECT - APL PHASE III PROJECT APPRAISAL DOCUMENT EAST ASIA AND PACIFIC EASUR Date: June 2, 2009 Team Leader: Hiroaki Suzuki Country Director: David R. Dollar Sectors: Water supply (75%); Sewerage (20%); Sector Manager/Director: Keshav Varma, Solid waste management (5%) Ede Jorge Ijjasz-Vasquez Themes: Pollution management and environmental health (P);Environmental policies and institutions (P);Water resource management (P);Municipal governance and institution building (P);Regulation and competition policy (S) Project ID: P096923 Environmental screening category: Full Assessment Lending Instrument: Adaptable Program Loan Project Financing Data [X] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 200.00 Proposed terms: VSL Financing Plan (US$m) Source Local Foreign Total Borrower