Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 40423 - CN PROJECT APPRAISAL DOCUMENT ON A Public Disclosure Authorized PROPOSED LOAN IN THE AMOUNT OF US$84 MILLION TO THE PEOPLE’S REPUBLIC OF CHINA FOR A HAN RIVER URBAN ENVIRONMENT IMPROVEMENT PROJECT Public Disclosure Authorized March 24, 2008 Urban Development Sector Unit Sustainable Development Department East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized CURRENCY EQUIVALENTS (Exchange Rate Effective September 1, 2007) Currency Unit = RMB RMB 7.1 = US$ 1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank BOD Biological Oxygen Demand BOT Build-Operate-Transfer CC Construction Commission CEA Comprehensive Summary of Environmental Assessment CNAO China National Audit Office COD Chemical Oxygen Demand CQS Selection Based on Consultant's Qualifications DA Designated Account DHI Delft Hydraulics Institute DP Displaced Persons DRC Development and Reform Commission DSWM Dawu Solid Waste Management Co. DWSWM Danjiangkou Wanjie Solid Waste Management Co. EA Environmental Assessment EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EMP Environmental Management Plan EPB Environmental Protection Bureau ESD Environmental Sanitation Department FIRR Financial Rate of Return FM Financial Management FMS Financial Management Specialist GDP Gross Domestic Product HCSWM Hanchuan Chuanjie Solid Waste Management Co. HEPB Hubei Environmental Protection Bureau HHSWM Honghu Hongjie Solid Waste Management Co. HHWT Honghu Huqing Wastewater Treatment Co. FOR OFFICIAL USE ONLY HPFB Hubei Provincial Finance Bureau HRUEIP Han River Urban Environment Improvement Project HUEP Hubei Urban Environment Project HWWT Hanchuan Hanjiang Wastewater Treatment Co. IA Implementing Agency IBRD International Bank for Reconstruction and Development IC Individual Consultant Selection ICB International Competitive Bidding ICR Implementation Completion Report ID Institutional Development IPC Industrial Pollution Control IPCAP Industrial Pollution Control Action Plan LFB Local Finance Bureau MPMO Municipal Project Management Office NCB National Competitive Bidding NPS Non-point Source O&M Operation and Maintenance OLM On-line Monitoring PAD Project Appraisal Document PDO Project Development Objective PMO Project Management Office PPMO Provincial Project Management Office PRC People's Republic of China QBS Quality-Based Selection QCBS Quality- and Cost-Based Seletion RAP Resettlement Action Plan SA Social Assessment SBD Standard Bidding Document SEPA State Environment Protection Administration SJSWM Shayang Jieyang Solid Waste Management Co. SKDM Shayang Kanglu Drainage Management Co. SWM Solid Waste Management TA Technical Assistance TOT Transfer, Operate and Transfer TWWT Tianmen Wastewater Co. UDIC Urban Development Investment Corporation WACC Weighted Average Costs of Capital 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. WB World Bank WWTP Wastewater Treatment Plant XMWT Xiaochang Minghua Wastewater Treatment Co. XQSWM Xiaochang Qingjiashan Solid Waste Sanitary Disposal Center Co. XFWWT Xiangfan Urban Wastewater Treatment Co. YCESS Yunmeng City Environment & Sanitation Service Co YWWT Yunmeng Urban Wastewater Treatment Co. Vice President: James W. Adams Country Director: David R. Dollar Sector Manager: Keshav Varma Task Team Leader: Hiroaki Suzuki CHINA Han River Urban Environment Improvement Project CONTENTS Page A. STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 1. Country and sector issues....................................................................................................1 2. Rationale for Bank involvement ......................................................................................... 3 3. Higher level objectives to which the project contributes.................................................... 3 B. PROJECT DESCRIPTION................................................................................................. 3 1. Lending instrument............................................................................................................. 3 2. Project development objective and key indicators.............................................................. 3 3. Project components............................................................................................................. 4 4. Lessons learned and reflected in the project design............................................................ 5 5. Alternatives considered and reasons for rejection .............................................................. 6 C. IMPLEMENTATION .......................................................................................................... 7 1. Partnership arrangements (if applicable) ............................................................................ 7 2. Institutional and implementation arrangements.................................................................. 7 3. Monitoring and evaluation of outcomes/results.................................................................. 8 4. Sustainability....................................................................................................................... 8 5. Critical risks and possible controversial aspects................................................................. 8 6. Loan/credit conditions and covenants................................................................................. 9 D. APPRAISAL SUMMARY................................................................................................. 10 1. Economic and financial analyses...................................................................................... 10 2. Technical........................................................................................................................... 12 3. Fiduciary ........................................................................................................................... 13 4. Social................................................................................................................................. 13 5. Environment...................................................................................................................... 15 6. Safeguard policies............................................................................................................. 16 7. Policy Exceptions and Readiness...................................................................................... 16 Annex 1: Country and Sector or Program Background ......................................................... 18 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 25 Annex 3: Results Framework and Monitoring ........................................................................ 25 Annex 4: Detailed Project Description...................................................................................... 33 Annex 5: Project Costs ............................................................................................................... 39 Annex 6: Implementation Arrangements ................................................................................. 43 Annex 7: Financial Management and Disbursement Arrangements..................................... 53 Annex 8: Procurement Arrangements...................................................................................... 63 Annex 9: Economic and Financial Analysis ............................................................................. 71 Annex 10: Safeguard Policy Issues............................................................................................ 92 Annex 11: Project Preparation and Supervision ................................................................... 107 Annex 12: Documents in the Project File ............................................................................... 109 Annex 13: Statement of Loans and Credits............................................................................ 110 Annex 14: Country at a Glance ............................................................................................... 115 Map: IBRD 35070R2 CHINA HAN RIVER URBAN ENVIRONMENT IMPROVEMENT PROJECT PROJECT APPRAISAL DOCUMENT EAST ASIA AND PACIFIC EASUR Date: April 3, 2008 Team Leader: Hiroaki Suzuki Country Director: David R. Dollar Sectors: Sewerage (50%); Solid waste Sector Manager/Director: Keshav Varma management (48%); Sub-national government administration (2%) Themes: Pollution management and environmental health (P); Municipal governance and institution building (P) Project ID: P087224 Environmental screening category: Full Assessment Lending Instrument: Specific Investment Loan Project Financing Data [X] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others (US$ M): 84.00 Total Bank financing (US$ M.): 84.00 Proposed terms: Variable Spread Loan, Level Repayments of Principal, 26 Years Maturity with 5 Years Grace Financing Plan (US$ M) Source Local Foreign Total Borrower 66.62 21.81 88.43 International Bank for Reconstruction