World Bank Documentdocuments.worldbank.org/curated/en/...management of wastewater, water supply,...

Document of

The World Bank

Report No: ICR00004259

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IBRD-76920, IBRD-79370)

ON A

LOAN

IN THE AMOUNT OF SDR 63 MILLION

(US$ 150 MILLION EQUIVALENT)

TO THE

PEOPLE’S REPUBLIC OF CHINA

FOR A

YUNNAN URBAN ENVIRONMENT PROJECT

April 23, 2018

Global Water Practice

China Country Management Unit

East Asia and Pacific Region

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The World Bank (P096812)

ii

ABBREVIATIONS AND ACRONYMS

AF Additional Financing

COD Chemical Oxygen Demand

FY Fiscal Year

FYP Five-Year Plan

GEF Global Environment Facility

IBRD International Bank for Reconstruction and Development

IDA International Development Association

ICR Implementation Completion Results Report

ILBM Integrated Lake Basin Management

IO Intermediate Outcome Indicator

ISR Implementation Status and Results Report

M&E Monitoring & Evaluation

MTR Mid-Term Review

MS Moderately Satisfactory

MU Moderately Unsatisfactory

O&M Operation & Maintenance

PAD Project Appraisal Document

PDO Project Development Objective

PIU Project Implementation Unit

PMO Project Management Office

QEA Quality at Entry Assessment

QSA Quality of Supervision Assessment

RF Results Framework

RMB Renminbi

S Satisfactory

SDR Special Drawing Rights

SIL Specified Investment Loan

SWM Solid Waste Management

TA Technical Assistance

UNESCO United Nations Educational, Scientific, and Cultural Organization

USD United States Dollar

WTP Willingness To Pay

WWTP Wastewater Treatment Plant

Senior Global Practice Director: Guang Zhe Chen

Practice Manager: Sudipto Sarkar

Project Team Leader: Joanna Masic

ICR Authors: Scott Moore

Yan Li


iii

CHINA

Yunnan Urban Environment Project

CONTENTS

Data Sheet

A. Basic Information

B. Key Dates

C. Ratings Summary

D. Sector and Theme Codes

E. Bank Staff

F. Results Framework Analysis

G. Ratings of Project Performance in ISRs

H. Restructuring

I. Disbursement Graph

1. Project Context, Development Objectives and Design ............................................................ 1

2. Key Factors Affecting Implementation and Outcomes ........................................................... 8

3. Assessment of Outcomes ....................................................................................................... 18

4. Assessment of Risk to Development Outcome ..................................................................... 29

5. Assessment of Bank and Borrower Performance .................................................................. 29

6. Lessons Learned .................................................................................................................... 31

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners........................ 32

Annex 1. Project Costs and Financing ....................................................................................... 34

Annex 2. Outputs by Component .............................................................................................. 36

Annex 3. Economic and Financial Analysis .............................................................................. 40

Annex 4. Bank Lending and Implementation Support/Supervision Processes.......................... 41

Annex 5. Beneficiary Survey Results ........................................................................................ 42

Annex 6. Stakeholder Workshop Report and Results ............................................................... 43

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR .................................. 44

Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders .................................... 57

Annex 9. List of Supporting Documents ................................................................................... 58

MAP…………………………………………………………………………………................59


iv

A. BASIC INFORMATION

Country: China Project Name: Yunnan Urban

Environment Project

Project ID: P096812 L/C/TF Number(s): IBRD-76920,IBRD-79370

ICR Date: 04/30/2018 ICR Type: Core ICR

Financing Instrument: SIL Borrower: CHINA

Original Total

Commitment: USD 90.00M Disbursed Amount: USD 130.70M

Revised Amount: USD 130.70M

Environmental Category: A Implementing Agencies:

Yunnan Provincial Environment Protection Bureau - Foreign Financed PMO

Cofinanciers and Other External Partners:

B. KEY DATES

Process Date Process Original Date Revised / Actual Date(s)

Concept Review: 09/26/2006 Effectiveness: 09/30/2009

Appraisal: 12/03/2007

Additional Financing: 05/27/2010

Approval: 05/05/2009 Restructuring(s): 06/15/2015

Mid-term Review: 05/31/2013 12/15/2013

Closing: 06/30/2015 04/30/2017

C. RATINGS SUMMARY

C.1 Performance Rating by ICR

Outcomes: Moderately Satisfactory

Risk to Development Outcome: Substantial

Bank Performance: Moderately Satisfactory

Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings

Quality at Entry: Moderately Unsatisfactory Government: Moderately Satisfactory


v

Quality of Supervision: Moderately Satisfactory Implementing

Agency/Agencies: Moderately Satisfactory

Overall Bank

Performance: Moderately Satisfactory

Overall Borrower

Performance: Moderately Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation

Performance Indicators

QAG Assessments (if

any) Rating

Potential Problem Project at

any time (Yes/No): No Quality at Entry (QEA): None

Problem Project at any time

(Yes/No): Yes

Quality of Supervision

(QSA): None

DO rating before

Closing/Inactive status: Moderately Satisfactory

D. SECTOR AND THEME CODES

Original Actual

Major Sector/Sector

Social Protection

Social Protection 18 18

Water, Sanitation and Waste Management

Other Water Supply, Sanitation and Waste

Management 18 18

Public Administration - Water, Sanitation and Waste

Management 28 28

Waste Management 18 18

Sanitation 18 18

Major Theme/Theme/Sub Theme

Environment and Natural Resource Management

Environmental Health and Pollution Management 45 45

Air quality management 15 15

Soil Pollution 15 15

Water Pollution 15 15

Environmental policies and institutions 5 5

Water Resource Management 5 5

Water Institutions, Policies and Reform 5 5


vi

Urban and Rural Development

Cultural Heritage 7 7

Urban Development 38 38

Urban Infrastructure and Service Delivery 38 38

E. BANK STAFF

Positions At ICR At Approval

Regional Vice President: Victoria Kwakwa James W. Adams

Country Director: Bert Hofman David R. Dollar

Practice Manager: Sudipto Sarkar Keshav Varma

Task Team Leader(s): Joanna Masic Takuya Kamata

ICR Team Leader: Joanna Masic

Senior Global Practice Director: Guang Zhe Chen

Co Task Team Leader1: Shunong Hu

Co Task Team Leader2: Scott Michael Moore

ICR Primary Author: Scott Michael Moore

ICR Author: Yan Li

F. RESULTS FRAMEWORK ANALYSIS

Project Development Objectives (from Project Appraisal Document)

To assist Yunnan Province in improving the effectiveness and coverage of critical urban infrastructure services in

selected counties and the effectiveness of lake basin management in Dianchi, through investment in systems for the

management of wastewater, water supply, solid waste, river environment and cultural heritage.

Revised Project Development Objectives (as approved by original approving authority)

PDO was not revised.

(a) PDO Indicator(s)


vii

Indicator Baseline

Value

Original

Target Values

(from

approval

documents)

Formally

Revised

Target

Values

Actual Value

Achieved at

Completion or

Target Years Indicator 1 : People in urban areas provided with access to wastewater services (cumulative) Indicator 1 : People in urban areas provided with access to wastewater services (cumulative)

Value

quantitative or

Qualitative)

350,000

n/a

806,000

828,800

Value

quantitative or

Qualitative)

Date achieved 12/31/2009 n/a 04/30/2017 04/07/2017 Date achieved

Comments

(incl. %

achievement)

103% achieved.

Note: Includes Lijiang, Huaping, Qiubei, Guangnan, Yanshan, & Zhaotong.

PO-1 added at restructuring so no original target value available.

Comments

(incl. %

achievement)

Indicator 2 : People in urban areas with access to solid waste management services (cumulative) Indicator 1 : People in urban areas with access to solid waste management services (cumulative)

Value

quantitative or

Qualitative)

182,000

n/a

448,000

455,000

Value

quantitative or

Qualitative)


Comments

(incl. %

achievement)

102% achieved.

PO-2 added at restructuring so no original target value available.

Comments

(incl. %

achievement)

Indicator 3 : People in urban areas provided with access to water services (cumulative) Indicator 1 : People in urban areas provided with access to water services (cumulative)

Value

quantitative or

Qualitative)

319,000

n/a

404,000

502,000

Value

quantitative or

Qualitative)


Comments

(incl. %

achievement)

124% achieved.

Note: Includes Zhaotong City and Qiubei County . PO-3 added at restructuring so no original target

value available.

Comments

(incl. %

achievement)

Indicator 4 : Improved capacity for Dianchi Lake Basin management Indicator 1 : Improved capacity for Dianchi Lake Basin management

Value

quantitative or

Qualitative)

Lack of

information to

assess pollution

load into Dianchi

Lake and absence

of planning

towards integrated

lake basin

management

Improved

management and

coordination by

responsible

agencies/bureaus

for Dianchi as

evidenced by

regular sharing of

data among all key

bureaus involved

Lessons included

in sector 13th

FYP, information

system for

Dianchi Lake in

place. Findings

from

integrated plan

incorporated into

sector plans

under the 13th

FYP

Plan completed. Lessons

incorporated into 13th FYP,

information system for

Dianchi Lake in place.

Findings from integrated

plan incorporated into sector plans

under plan for the 13th FYP.

Value

quantitative or

Qualitative)

Date achieved 12/31/2009 06/30/2015 04/30/2017 04/30/2017 Date achieved

Comments

(incl. %

achievement)

100% achieved; lessons included in 13th FYP.

Note that PO-4 originally emphasized data-sharing; this was revised at restructuring to

emphasize completion of an Integrated Lake Basin Management plan (see below).

Comments

(incl. %

achievement)


viii

Indicator 5 : Improved management & coordination by responsible agencies/bureaus for

Dianchi as evidenced by regular sharing of data among all key bureaus involved

Value

quantitative or

Qualitative)

n/a (No data entered)

n/a

Dropped

n/a

Date achieved 12/31/2009 06/30/2015 04/30/2017 04/30/2017

Comments

(incl. %

achievement)

This PO dropped at restructuring and incorporated into PO-4. Online monitoring

and data-sharing platform developed and in use as of Project close.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target

Values (from

approval

documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Total Chemical Oxygen Demand (COD) Pollutant Load Reduction (tons/year)

Value

quantitative or

Qualitative)

1800

n/a

2100

3815

Date achieved 12/31/2007 n/a 04/30/2017 04/30/2017

Comments

(incl. %

achievement)

180% achieved, based on full-year data for 2017. This IO was added at restructuring to

comply with the Core Sector Indicators (2013). The PAD included a related but different

IO, “COD level at main discharge point”, measured in mg/L, for several WWTPs (see

below). Indicator 2 : Volume of Municipal Solid Waste (SW) Disposed in Landfill (tons/year)

Value

quantitative or

Qualitative)

143

n/a

480

535

Date achieved 12/31/2009 n/a 04/30/2017 04/30/2017

Comments

(incl. %

achievement)

141% achieved.

IO-2 was added at restructuring so no original target value available. Original IOs from

PAD were 1) # of new population served by SWM services and 2) amount of SW being

disposed to sanitary landfills. 2nd IO revised to be Core IO (2013). Indicator 3 : Length of river section restored (km)

Value

quantitative or

Qualitative)

0

n/a

49.7

51.97

Date achieved 12/31/2009 n/a 04/30/2017 04/30/2017

Comments

(incl. %

achievement)

103% achieved.

IO-3 was added at restructuring so no original target value available.

Indicator 4 : Increase in visitors to Lion Mountain

Value

quantitative or

Qualitative)

0

n/a

75,000

79,170

Date achieved 12/31/2009 n/a 04/30/2017 04/30/2017


ix

Comments

(incl. %

achievement)

106% achieved.

IO-4 was added at restructuring so no original target value available. The PAD included an

IO “Development of rehabilitation plans in compliance with UNESCO protection codes and

other national cultural heritage regulations” (see below). Indicator 5 : Development of Flood Risk Management System for Zhaotong

Value

quantitative or

Qualitative)

n/a

n/a

Flood risk

management

adopted

Flood risk management

adopted

Date achieved 12/31/2007 n/a 04/30/2017 04/30/2017

Comments

(incl. %

achievement)

100% achieved.

IO-5 was added at restructuring so no original target value available. The PAD includes an

IO for “Incidence and severity of floods as compared to historical data in terms of number

of people displaced and extent of material damage” (see below).

Indicator 6 : Number of people in urban areas provided with access to Improved Sanitation under the

project

Value

quantitative or

Qualitative)

190,200 319,300 Dropped

320,600

Date achieved 12/31/2009 06/30/2016 04/30/2017 12/31/2017

Comments

(incl. %

achievement)

100% achieved.

This was a core indicator but was dropped at restructuring. Incorporated in PO-1 following

re-structuring.

Indicator 7 : Number of people in urban areas provided with access to Improved Water Sources under

the project

Value

quantitative or

Qualitative)

270,050 347,600 Dropped

400,000

Date achieved 12/31/2009 06/30/2016 04/30/2017 12/31/2017

Comments

(incl. %

achievement)

115% achieved.

This was a core indicator but was dropped at restructuring. Incorporated in PO-3 following

re-structuring.

Indicator 8 : Number of population served by solid waste management services (104)

Value

quantitative or

Qualitative)

Songming: 5.56

Xundian: 5.73

Luquan: 5.02

Lijiang: 16.66

Funing: 3.52

Songming: 7.36

Xundian: 7.89

Luquan: 7.45

Lijiang: 24.89

Funing: 5.22

Dropped

Songming: 11.42

Xundian: 13.69

Luquan: 8.77

Lijiang: 37.9

Funing: n/a (dropped before

implementation)

Date achieved 12/15/2007 06/30/2015 04/30/2017 10/31/2014

Comments

(incl. %

achievement)

Achievement ranged from 118% to 173%; average of 150%. This indicator was dropped at

restructuring. Incorporated in PO-2 following re-structuring. No data is available after

restructuring. Latest data (herein reported) is from ISR17221 12/06/2014.


x

Indicator 9 : Amount of solid waste disposed to sanitary landfills (tons/day)

Value

quantitative or

Qualitative)

Songming: 0

Xundian: 51.61

Luquan: 0

Lijiang: 142.7

Funing: 0

Songming: 79.5

Xundian: 70

Luquan: 80.5

Lijiang: 230.1

Funing: 62.10

Dropped

Songming: 125

Xundian: 62

Luquan: 70

Lijiang: 278


implementation)

Date achieved 12/31/2009 06/30/2015 04/30/2017 12/31/2017

Comments

(incl. %

achievement)

Achievement ranged from 87% to 157%; average of 114%. Indicator was dropped at

restructuring. Incorporated in PO-2 following re-structuring. At Xundian and Lijiang

original amount was disposed to an old landfill replaced by Project-financed sanitary

landfill.

Indicator 10 : Operating cost covered by solid waste fee revenues (%)

Value

quantitative or

Qualitative)

Songming: 0

Xundian: 0

Luquan: 0

Funing: 0

Songming: 103

Xundian: 55

Luquan: 121

Funing: 100

Dropped

Songming: 91

Xundian: 8.9

Luquan: 11.2


implementation)

Date achieved 12/15/2007 06/30/2015 04/30/2017 10/31/2014

Comments

(incl. %

achievement)

Achievement ranged from 9% to 88%; average of 38%. Indicator was dropped at

restructuring; at restructuring, the definition of cost recovery was modified to include

governments’ subsidies, thus this indicator became unnecessary.

Indicator 11 : Wastewater Management System – Population Served

Value

quantitative or

Qualitative)

Lijiang Town:

166,600

Huaping: 0

Qiubei: 39,600

Yanshan: 46,500

Guangnan: 0

Ljiang Town:

248,900

Huaping: 56,400

Qiubei: 53,050

Yanshan: 66,200

Guangnan:

68,300

Dropped

Lijiang Town: 192,200

Huaping: 49,000

Qiubei: 72,000

Yanshan: 75,000

Guangnan: 120,000

Date achieved 12/15/2007 06/30/2015 04/30/2017 04/30/2017

Comments

(incl. %

achievement)

77% to 176% achieved; average of 118%. This indicator was dropped at restructuring.

Data provided by PMO as of Project close.


xi

Indicator 12 : Lijiang Ancient Town District, Development Masterplan – Compliance with UNESCO and

National Protection Codes (Yes/No)

Value

quantitative or

Qualitative)

Y

Y

Dropped

Y

Date achieved 12/31/2007 06/30/2015 04/30/2017 04/25/2014

Comments

(incl. %

achievement)

100% achieved.

This indicator was dropped at restructuring. No data entered after restructuring; Latest data

(herein reported) from ISR17221 12/06/2014. This indicator was complied with but was

dropped at restructuring.

Indicator 13 : Lijiang Ancient Town District, Maintenance of UNESCO World Cultural Heritage Status

(Yes/No)

Value

quantitative or

Qualitative)

Y

Y Dropped Y

Date achieved 12/31/2007 06/30/2015 04/30/2017 04/25/2014

Comments

(incl. %

achievement)

100% achieved.


(herein reported) from ISR17221 12/06/2014. This indictaor was complied with but not

deemed a useful indicator to measure subproject implementation.

Indicator 14 : Rainwater Drainage System – Population served

Value

quantitative or

Qualitative)

Yulong: 30000

60000

Dropped

n/a (no data entered)

Date achieved 12/31/2007 06/30/2015 04/30/2017 04/25/2014

Comments

(incl. %

achievement)

This indicator was dropped in 2010 and incorporated into IO-3. No data in ISRs. No data

on achievement pre-restructuring.

Indicator 15 : Wastewater Management – COD level (mg/L) at discharge point

Value

quantitative or

Qualitative)

Huaping: 250-400

Qiubei: 250-400

Yanshan: 250-400

Guangnan: 250-

400

Huaping: 60

Qiubei: 60

Yanshan: 60

Guangnan: 60

Dropped Huaping: 24

Qiubei: 30

Yanshan: 36

Guangnan: 26

Date achieved 12/15/2007 06/30/2015 04/30/2017 10/31/2014

Comments

(incl. %

achievement)

100% achieved. This indicator was dropped at restructuring. No data is available after

restructuring. Latest data (herein reported) is from ISR17221 12/06/2014.

Indicator 16 : Frequency of water monitoring at Wenshan Prefecture Environment Monitoring Station

(times/year)

Value

quantitative or

Qualitative)

6

12

Dropped 12


xii

Date achieved 12/31/2009 06/30/2010 04/30/2017 04/25/2014

Comments

(incl. %

achievement)

100% achieved.


(herein reported) from ISR17221 12/06/2014.

Indicator 17 : Wenshan County Environment Monitoring – Percentage of polluters aware of new

regulation standards

Value

quantitative or

Qualitative)

0

100

Dropped 100

Date achieved 12/15/2007 06/30/2015 04/30/2017 04/25/2014

Comments

(incl. %

achievement)

100% achieved.



Indicator 18 : Dianchi Lake Basin Management – Number of monitoring on 3 rivers (times per year)

Value

quantitative or

Qualitative)

6

8,760

Dropped 2,190

Date achieved 12/15/2007 06/30/2015 04/30/2017 12/31/2017

Comments

(incl. %

achievement)

25% achieved.

This indicator was dropped at restructuring. Data provided by PMO for full year 2017.

Frequency based on sampling 6x/day, whereas original target assmed 1x/hour.

Indicator 19 : Dianchi Lake Basin Management – Number of monitoring on 14 streams (times/year)

Value

quantitative or

Qualitative)

0

8,760

Dropped 24

Date achieved 12/15/2007 06/30/2015 04/30/2017 12/31/2017

Comments

(incl. %

achievement)

<1% achieved.

This indicator was dropped at restructuring. Data provided by PMO for full year 2017.

Frequency based on sampling 2x/month, whereas original target assmed 1x/hour.

Indicator 20 : Dianchi Lake Basin Management – Online monitoring and information management

carried out (Yes/No)

Value

quantitative or

Qualitative)

N

Y

Dropped Y

Date achieved 12/15/2007 06/30/2015 04/30/2017 04/25/2014

Comments

(incl. %

achievement)

100% achieved.



Indicator 21 : Lake Basin Component, System terminal has capacity to receive & process monitoring

data (Yes/No)

Value

quantitative or

Qualitative)

n/a (No data

entered)

Y

Dropped Y


xiii

Date achieved 12/31/2009 12/31/2011 04/30/2017 12/31/2011

Comments

(incl. %

achievement)

100% achieved.



Indicator 22 : Collection of tariffs covers O&M costs and some debt obligations (wastewater)

Value

quantitative or

Qualitative)

n/a (No data

entered)

n/a (No data

entered)

Dropped Lijiang: Revenue =

1.10RMB/m3 (expenses =

1.76RMB/m3)

Yanshan: Revenue =


1.26RMB

Qiubei: Revenue = 0.8

RMB/m3 (expenses

unknown)

Guangnan: Revenue =

1RMB/m3 (expenses =

1.1RMB/m3)

Zhaoyang: Revenue =


1.26RMB/m3)

Date achieved 12/31/2009 06/30/2015 04/30/2017 04/30/2017

Comments

(incl. %

achievement)

0% achieved.

This indicator dropped at restructuring. No data entered pre-restructuring. Wastewater

tariff rate of 0.8RMB defined in Project Agreement (Section 4) and achieved. Lijiang,

Chaoyang & Guangnan on track to achieve full cost recovery w/o subsidies.

Indicator 23 : Increase in collection rate of Solid Waste services

Value

quantitative or

Qualitative)

n/a (No data

entered)

n/a (No data

entered)

Dropped n/a (No data entered)

Date achieved 12/31/2009 12/31/2011 04/30/2017 12/31/2011

Comments

(incl. %

achievement)

This indicator was listed in the PAD but not included in the Project Agreement results

framework (Annex B). No data in ISRs or entered pre-restructuring.

Indicator 24 : Incidence and severity of floods as compared to historical data in terms of number of

people displaced and extent of material damage

Value

quantitative or

Qualitative)

n/a (No data

entered)

n/a (No data

entered)

Dropped n/a (No data entered)

Date achieved 12/31/2009 12/31/2011 04/30/2017 12/31/2011


xiv

Comments

(incl. %

achievement)

This indicator was listed in the PAD but not included in the Project Agreement results

framework (Annex B). No data in ISRs or entered pre-restructuring. Indicator incorporated

in IO-5 (see above).

Indicator 25 : Dianchi protection regulations are revised, approved and enforced

Value

quantitative or

Qualitative)

n/a (No data

entered)

n/a (No data

entered)

Dropped Regulations approved in

September 2012 and

enforced since January 1,

2013.

Date achieved 12/31/2009 12/31/2011 04/30/2017 01/01/2013

Comments

(incl. %

achievement)

100% achieved. This indicator was dropped at restructuring. Data provided by PMO as of

Project close.

Indicator 26 : ILBM Master Plan for Dianchi is developed and adopted, particularly conducting water

resource carrying capacity of the lake basin

Value

quantitative or

Qualitative)

n/a (No data

entered)

100%

Dropped 100%

Date achieved 12/31/2009 12/31/2011 04/30/2017 04/30/2017

Comments

(incl. %

achievement)

This indicator was dropped at restructuring and incorporated into PO-4. No data in ISRs or

entered pre-restructuring. However, development and adoption of ILBM Master Plan has

taken place based on data provided by PMO and verified during ICR mission.

G. RATINGS OF PROJECT PERFORMANCE IN ISRs

No. Date ISR

Archived DO IP

Actual Disbursements

(USD millions)

1 12/03/2009 Satisfactory Satisfactory 0.00




5 04/22/2013 Moderately

Satisfactory

Moderately

Satisfactory

37.32


Satisfactory

Moderately

Satisfactory

43.32


Satisfactory

Moderately

Unsatisfactory

53.49


Satisfactory

Moderately

Unsatisfactory

58.60


Satisfactory

Moderately

Unsatisfactory

69.80


xv


Satisfactory

Moderately

Unsatisfactory

71.99


Satisfactory

Moderately

Satisfactory

82.30


Satisfactory

Moderately

Satisfactory

100.03



Satisfactory Satisfactory

117.15


Satisfactory

Moderately

Satisfactory

117.15

H. RESTRUCTURING (IF ANY)

Restructuring

Date(s)

Board

Approved

PDO

Change

ISR Ratings at

Restructuring Amount Disbursed at

Restructuring in USD

Millions

Reason for Restructuring & Key

Changes Made

DO IP

06/15/2015

MS MU 71.99

The Project underwent an

Additional Financing on

05/27/2010 to fund an additional

Project subcomponent (See Section

1.6). A subsequent Level 2

restructuring took place in 2015. In

addition to the reallocation of loan

proceeds amongst components due

to client decision to finance

subcomponents under Component

1 and to use loan savings from

cultural heritage management to

expand sewer restoration, the 2015

restructuring also included (a) a

revision of the indicators to better

reflect the Project’s scope and

context; (b) an extension of the

Project’s closing date by 22 months

to April 30, 2107 to allow for

completion of delayed and newly

added subcomponents (c) revision

of cost estimates; (d) increase in

disbursement percentages for civil

works; (e) revison of cost recovery

definition in the PA; ; and (f)


xvi

change one project implementing

unit and revise another.

I. DISBURSEMENT PROFILE

1

1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

1. At appraisal, China’s Yunnan Province was benefiting from years of strong

economic growth. Gross Domestic Product (GDP) averaged 8.9 percent between

2000 and 2005. Tourism was a key driver of growth. Tourists were attracted to

Yunnan for its scenery and ethnic diversity. Approximately 30 ethnic groups

(representing 40 percent of the population) resided in Yunnan. Economic growth

was accompanied by rapid urbanization in the Province’s largest cities and a

number of county seats, heavily straining existing urban water supply, wastewater

treatment, and solid waste disposal infrastructure. The urbanization rate for

Kunming Municipality, for example, was 57% in 2005, while the province-wide

rate was almost 30%. The strain on sanitation infrastructure was resulting in

considerable environmental degradation, especially water pollution. For example,

at the time of Project appraisal, the Province-wide wastewater treatment rate was

40.5 percent, far below the national level of about 50 percent.1

2. The Provincial Government was focused on sustaining rapid economic

development and reversing environmental degradation. In its 11th Five Year Plan

(2007-2012), the Provincial Government outlined a growth strategy centered on

exploiting its natural resource base, promoting tourism, and providing basic

services to urban residents. The strategy also highlighted the importance of

reducing water pollution in the Province’s smaller cities and county seats. The

strategy targeted one of the most visible signs of water pollution in the Province,

the severe eutrophication of Dianchi Lake. The water quality in Dianchi Lake,

Yunnan’s largest lake and a primary water source, had deteriorated from Grade II

in the 1980s to Grade V2 by the mid-2000s. One reason for the deterioration in

water quality was local authorities’ lack of coordination and capacity to implement

pollution control regulations.

3. Sector Details. Yunnan’s urban sector was under-developed at the time of appraisal,

especially in the semi-urban county seats that were the focus of the Project.

Yunnan’s local governments, which included municipal and county governments,

were primarily responsible for the sector, with financial and technical support from

the provincial government. County-seat towns, and the county-level governments

under whose responsibility they fell, were identified as the focus of the Project

because they played a key role in the province’s development strategy at the time

of appraisal, as they were expected to absorb a substantial share of rural-urban

1 See Project Appraisal Document, Report No. 41199 – CN. 2 Water quality ratings in China correspond to qualitative standards like “Good” and “Very Good.” Grade V represents

water that is not judged as being suitable for human contact or consumption.

2

migration and employment generation from tourism, natural resource-based

manufacturing, trading, and other services. Access to basic urban services,

including WW and water supply services, was very low at appraisal. For example,

Huaping County in Lijiang Municipality did not have any wastewater treatment

plants.3 Meanwhile, as noted above, the province-wide wastewater treatment rate

was well below the national average.

4. Rationale for Bank Involvement. The Yunnan Urban Environment Project (YUEP)

represented a continuation of the Bank’s prior engagement in the Province. YUEP

built upon similar past projects, including the Yunnan Environment Project

(P003599), which financed construction of wastewater treatment systems and other

urban infrastructure in several cities and attempted to address the eutrophication of

Dianchi Lake. In addition, YUEP complemented the Bank’s Global Environment

Facility-funded “Lake Dianchi Freshwater Biodiversity Restoration Project”

(P068239). YUEP also aimed to replicate the cultural heritage management

dimension of the China Yunnan Earthquake Reconstruction Project (P114107).

5. Higher-Level Objectives. The Project’s focus on improving natural resource

management and expanding urban wastewater and solid waste management

(SWM) services directly supported Pillar Three, To manage resource scarcity and

environmental challenges, of the World Bank’s 2006 to 2010 Country Partnership

Strategy (CPS) for China (Report No. 35435).4 The Project also directly supported

China’s 11th Five-Year Development Plan (2006 to 2010), which included targets

for improving water use efficiency and solid waste collection and reducing

pollution discharges.5 Finally, the Project’s emphasis on expanding the coverage of

urban infrastructure services attempted to help Yunnan Province achieve the

Millennium Development Goals pertaining to water supply and sanitation.6

1.2 Original Project Development Objectives (PDO) and Key Indicators

6. The Project Development Objective (PDO) as stated in the Loan Agreement and

Project Appraisal Document (PAD) was “to assist Yunnan Province in improving

the effectiveness and coverage of critical urban infrastructure services in selected

counties and the effectiveness of lake basin management in Dianchi, through

investments in systems for the management of wastewater, water supply, solid

waste, river environment and cultural heritage.”

7. The original PDO outcome indicator was “Improved management and coordination

by responsible agencies/bureaus for Dianchi as evidenced by regular sharing of data

3 See Project Appraisal Document. 4 World Bank. 2006. China - Country partnership strategy . Washington, DC: World Bank.

https://hubs.worldbank.org/docs/imagebank/pages/docprofile.aspx?nodeid=7089669 5 NPC & CPPCC National Committee Annual Sessions. 2006. Facts and figures: China’s main targets for 2006-2010.

http://www.gov.cn/english/2006-03/06/content_219504.htm 6 See United Nations. 2015. Millennium Development Goals. http://www.un.org/millenniumgoals/environ.shtml

http://www.gov.cn/english/2006-03/06/content_219504.htm

3

among all key bureaus involved.” This was the only PDO outcome indicator prior

to restructuring.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators,

and reasons/justification

8. The PDO was not revised during implementation. In 2015, however, the results

framework was substantially modified via a Level 2 Project restructuring. The

original outcome indicator concerning Dianchi Lake management was broadened

to focus on institutional capacity and inter-jurisdictional cooperation instead of

simply data-sharing. In addition, three Project-level outcome indicators (See Table

1 below) were added to measure the Project’s impact on coverage of critical urban

infrastructure. These Project-level outcome indicators incorporated several

intermediate indicators (IOs) from the pre-restructuring results framework (See

Data Sheet).

Table 1. Project Outcome Indicators Before and After Restructuring BEFORE RESTRUCTURING AFTER RESTRUCTURING

IMPROVED MANAGEMENT AND

COORDINATION BY RESPONSIBLE

AGENCIES/BUREAUS FOR DIANCHI AS

EVIDENCED BY REGULAR SHARING OF DATA

AMONG ALL KEY BUREAUS INVOLVED

Improved capacity for Dianchi Lake Basin management

N/A People in urban areas with access to wastewater services

(cumulative)

N/A People in urban areas with access to SWM services

(cumulative)

N/A People in urban areas provided with access to water

services (cumulative)

1.4 Main Beneficiaries

9. The PAD identified Yunnan’s approximately 20.4 million urban residents7 as the

primary beneficiaries of the Project. Yunnan’s urban residents in selected Project

sites were expected to benefit primarily from improved SWM, WW treatment and

access to clean water. The selection of Project sites emphasized Yunnan’s poorer

regions; the poverty rates in Project areas were higher than provincial and national

averages (See Section 2.1). In addition, the Province as a whole was expected to

benefit from the Project’s comprehensive approach to improving urban

infrastructure. For example, the cultural heritage management subcomponent was

expected to benefit both local residents and tourists at Lion Mountain, while the

Integrated Lake Basin Management (ILBM) Plan was expected to substantially

improve the overall natural environment (and thus recreational and tourism

opportunities) in the Kunming area.

7 Per the PAD, page 16, Yunnan’s total population is some 41 million, of whom approximately half are estimated to

live in cities.

4

1.5 Original Components

10. The Loan Agreement referenced three components, which are summarized

below:8

11. Component 1: Urban Environment Infrastructure Development: The objective

of this component was to help key counties develop SWM service systems,

wastewater and water supply systems, cultural heritage management, riverbank

improvement measures, and capacity for environmental monitoring and project

management. This component supported the construction of a wide range of works,

including wastewater treatment plants (WWTPs), landfills, solid waste transfer

stations, and pumping stations (See Annex 2).

12. Component 2: Integrated Lake Basin Management: The objective of this

component was to assist the Kunming municipality in establishing better integrated

lake management systems for Dianchi Lake through technical assistance (TA) to

support policy implementation and the development of monitoring systems. This

component supported the construction of several water quality monitoring and data

management platforms, TA to Dianchi Lake management authorities, and the

development of an ILBM Plan.

13. Component 3: Resettlement: This component was intended to support

resettlement of displaced persons in conjunction with the works completed under

Component 1.9

1.6 Revised Components

14. The Fiscal Year (FY) 2011 Additional Financing (AF, See Section 1.7) and the

2015 Restructuring included the following adjustments to the Project’s components

(See Table 2 and Annex 1).

Table 2. Revised and Additional Subcomponents

Note: The Zhaotong Subcomponent, linked to Component 1, was added as part of the AF SUBCOMPONENT ORIGINAL ADJUSTMENT RATIONALE

I.B.2 (ii) Stormwater drainage in Yulong

County (US$6.3 million)

Dropped in 2015

restructuring.

Borrower financed

this activity

separately. IBRD

financing directed to

other subcomponents.

I.C.1 SWM in Funing County (US$5.2

million)

Dropped in 2015

restructuring.

Borrower financed

this activity

separately. IBRD

8 Component 3 did not appear in the PAD due to human error, but was fully incorporated into the project design. 9 No costs were allocated to this component but was instead included in the cost of each subcomponent. Costs were

financed by domestic funds rather than loan proceeds.

5

financing directed to

other subcomponents.

I.B.3(i) Capacity enhancement for Lion

Mountain (US$44.29 million)

Reduced in 2015 restructuring

to US$10.66 million.

Reduced because of

delays in confirmation

of no objection from

National Government

and UNESCO10 that

led to a reduction in

the sub-component’s

scope and domestic-

financing for several

works. Works

accordingly reduced

and savings

reallocated to a new

subcomponent, Shuhe

Ancient Town sewer

expansion.

I.B.3(ii) Lion Mountain study tours

(US$0.02 million)

Dropped in 2015 restructuring Same rationale as

above—surplus funds

reallocated to new

subcomponent, Shuhe

Ancient Town sewer

expansion.

3.B.2 Support for Resettlement activities Inadvertently left out of PAD,

included in LA and

Restructuring Paper

Resettlement financed

by domestic funds

and not loan proceeds.

SUBCOMPONENT

ZHAOTONG

(LINKED TO

COMPONENT 1)

Water supply, WW treatment, and

riverbank restoration in Zhaotong

Added as part of AF Added in response to

client demand.

1.7 Other significant changes

15. As shown in Table 3, the AF introduced a subcomponent under Component 1 for

Zhaotong Municipality. This subcomponent aimed to substantially expand access

to water supply and wastewater services in Zhaotong given the low quality of

service. This subcomponent supported the (1) construction of (i) two water supply

plants (US$22.73 million) with a total capacity of 60,000 cubic meters per day to

increase the population served by an estimated 194,350 people (from 270,050 in

2010 to 464,400 in 2020); and (ii) a 20,000 meter per day WWTP (US$8.22

million) to expand WW access to an estimated 306,700 people (from 190,200 in

2010 to 496,900 residents in 2020); (2) rehabilitation of 48.2 km of river bank

structures (US$27.69 million); and (3) provision of implementation support,

including TA, equipment, and training in operation and management (O&M) of

water supply and wastewate treatment works (US$1.2 million).11

10 Interventions in this site required approvals from State Administration for Cultural Heritage and UNESCO. 11 See Project Paper, Report No. 53586-CN.

6

Table 3. Other Significant Changes

AF

05/27/2010

The Project received an AF of US$60 million to “a)

include Zhaotong [municipality] to support water supply,

WW treatment and riverbank rehabilitation works and b)

continue to improve the effectiveness and coverage of

critical urban infrastructure services in selected counties

through investment in systems for the management of

wastewater, water supply and river rehabilitation in

Yunnan province.”12 LEVEL II

RESTRUCTURING

06/15/2015

In addition to the changes to the Project-level indicators

and subcomponents reflected in Table 1 and 2

respectively, the restructuring included: (a) a revision of

the IOs to better reflect the Project’s scope and context

as well as to promote alignment with the Bank’s core

indicators. Several indicators originally listed in the RF

were dropped (See Data Sheet); (b) an extension of the

Project’s closing date by 22 months to April 30, 2017 to

allow for completion of delayed works, including the

Lion Mountain Cultural Heritage site, Qiubei water

supply system, Puzhehei Lake environmental

improvements, and Zhaotong civil works, and to provide

time to complete additional work in Lijiang financed

with loan savings re-directed from the Lion Mountain

subcomponent; (c) a revision of cost estimates; (d) the

reallocation of loan proceeds amongst categories and

sub-components (See Table 4); (e) an increase in

disbursement percentages for civil works; and (f) the

amendment of the Project Agrrement to include

Government subsidies in cost recovery calculations.

16. As further indicated in Table 3, the restructuring included an adjustment of cost

estimates as well as a reallocation of loan proceeds. Under the restructuring,

US$16.46 million was reallocated between works, goods, and consulting service

categories (See Table 4). At the request of the client, the restructuring also re-

directed US$500,000 from the Zhaotong sub-component to develop a flood risk

warning system in Zhaotong. The restructuring further redirected funds

(approximately US$7 million) from the two dropped subcomponents to add an

additional 20,000 cubic meters per day of wastewater treatment capacity and an

additional 68 km of sewage pipelines in Lijiang to serve an additional 41,500

residents by 2020 (See Section 1.6). The restructuring also amended the definition

of cost recovery contained in the Project Agreement to, in line with common

practice in China, include the Government’s subsidies in the calculation of

“revenues.”

12 See Loan Agreement, August 23, 2010, Loan Number 7937-CN.

7

Table 4. Subcomponent Cost Changes at Restructuring (from Restructuring Paper) SUBCOMPONENT

NUMBER

SUBCOMPONENT

NAME

PRE-

RESTRUCTURING

BUDGET

ALLOCATION

(US$ MILLION)

POST-

RESTRUCTURING

BUDGET

ALLOCATION

(US$ MILLION)

I.A.1(I) Songming Solid

Waste Management

(SWM)

4.51 4.89

I.A.1(II) Xundian SWM 4.47 9.17

I.A.1(III) Luquan SWM 4.69 5.4

I.B.1 Lijiang Ancient

Town SWM

12.57 20.94

I.B.2(I) Lijiang City

Wastewater

Treatment (WWTP)

25.37 32.66

I.B.2(II) Yulong County

Drainage

6.3 0

I.B.2(III) Huaping Wastewater

Treatment (WWTP)

7.12 9.34

I.B.3(I) Lion Mountain

Cultural Heritage

44.29 10.66

I.B.3(II) Lion Mountain

Study Tours

(Capacity

Enhancement)

0.02 0

I.B.3(III) Shuhe Ancient Town

Wastewater (WW)

0 18.17

I.C.1 Funing County

SWM

5.2 7.0413

I.C.2(I) Qiubei County WW 8.55 12.34

I.C.2(II) Guangnan County

WWTP/WW

4.73 6.04

I.C.2(III) Yanshan County

WW

4.99 4.4

I.C.3(I) Puzhehei Water

Environment (WE)

3.48 5.3

I.C.3(II) Funing WE 6.94 8.7

I.C.4 Wenshan Capacity

Enhancement

0.41 0.47

I.D Technical Assistance

(Design, Review,

Construction, etc)

1.5 0

II.A Dianchi Lake

Integrated Lake

Basin Management

10.98 7.38

CONTINGENCIES 21.98 0

TOTAL COST 178.26 162.89

13 This subcomponent dropped and funds re-allocated to Funing Water Environment subcomponent (I.C.3(II)).

8

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry

17. Background Analysis. The Project directly supported the Provincial Government’s

growth strategy, which emphasized enhancing urban environmental services,

especially solid waste and wastewater services. The Province was focused on

facilitating sustainable urbanization to preserve Yunnan’s natural scenery and

environment and to maintain its economic growth rates, especially in the tourism

sector. Accordingly, the Project adopted a comprehensive approach to improving

the Province’s urban environment, including cultural heritage management aspects.

The Project also built on experience from previous World Bank-funded projects

like the Yunnan Environment Project (P003599), which highlighted the need for an

integrated, inter-agency approach to improving water quality and overall

management of Dianchi Lake, a signature part of Yunnan’s natural heritage.14

Finally, the Project integrated lessons from World Bank knowledge products such

as “Stepping Up: Improving the Performance of China’s Urban Water

Utilities,” 15 which recommended raising utility tariffs to support sustainable

operation of urban infrastucture. The Bank Team also conducted a technical

analysis during appraisal that evaluated different wastewater treatment

technologies and identified appropriate solutions, such as a hydro-geological

assessment to ensure proper siting of landfills for solid waste management.

18. Assessment of Project Design and Quality at Entry. The Project’s PDO was well-

aligned with Government and sector priorities. Other elements of the Project design,

such as selection of Project sites, were also well-thought-out. The selection of

Project sites followed a criteria-focused two-step process, first for the selection of

municipalities/prefectures and second for the selection of counties within each

municipality/prefecture,16 to ensure that the Project’s investments targeted areas

where urban infrastructure services were most needed, the environment was most

clearly degraded, and institutional and fiscal capacity was favorable. The Project

14 World Bank. 2006. China - Country partnership strategy . Washington, DC: World Bank.

https://hubs.worldbank.org/docs/imagebank/pages/docprofile.aspx?nodeid=7089669 15 See World Bank, Stepping Up: Improving the Performance of China’s Urban Water Utilities.” Washington, DC:

World Bank, 2008. 16 Criteria for the first-stage selection were: National and provincial strategic priority economic development areas;

high degree of pollution; danger of flood and other issues to be remediated through infrastructure investment;

fiscal/budgetary need; inclusion into a group of five high-priority areas; rapid urbanization rates status; status as rural

areas or small towns; speed of tourism development; willingness for World Bank financing; institutional capacity; and

readiness of Project implementation. Criteria for second-stage selection were: Municipal and provincial/prefectural

strategic economic development priority areas; high degree of pollution; urgency; fiscal/budgetary need; urbanization;

rural and small town status; tourism development; willingness of World Bank financing; institutional capacity; and

readiness of Project implementation. On this basis, the following Project counties and municipalities/prefectures were

selected: Kunming Municipality (Luquan, Songming, and Xundian Counties); Lijiang Municipality (Lijiang Ancient

Towen, Huaping, and Yulong Counties); and Wenshan Prefecture (Funing, Guangnan, Qiubei, and Yanshan Counties).

All four of the Wenshan counties were at appraisal nationally-designated poor counties, while two of the Kunming

counties were at appraisal provincially-designated poor counties.

https://hubs.worldbank.org/docs/imagebank/pages/docprofile.aspx?nodeid=7089669

9

also included an innovative subcomponent on biofiltration plants in Puzhehei to

improve water quality at a low cost.

19. However, the “effectiveness” dimension of the PDO was not clearly defined or

reflected in the outcome indicators. The PAD and legal documents indicate that

“effectiveness” of critical urban infrastructure referred to the financial

sustainability of service providers, including by reference to a minimum tariff

needed for WWTPs to achieve cost recovery.17 In the Project Agreement, cost

recovery is defined in terms of both O&M and debt service payments. 18 This

restrictive definition was codified in covenants in the Project Agreement and

required that Project implementing utilities (PIUs) have total revenues, defined as

the sum of operating and net non-operating revenues, above the sum of O&M costs

and the greater of depreciation and debt service amounts in a given year. This

restrictive definition was inappropriate for the context given that China’s central

and provincial governments regularly and reliably subsidize the provision of urban

infrastructure services.

20. Furthermore, the original results framework lacked a Project-level indicator linked

to Component 1, and the Project-level indicator linked to Component 2, which was

focused on data-sharing, did not fully capture the importance of integrated and

inter-jurisdictional management of Dianchi Lake. Overall, the original results

framework did not have adequate Project-level outcome inidicators to fully

measure achievement of the PDO. Finally, the number of IOs (33 are listed in the

PAD, See Annex 3) was excessive.

21. Implementation Arrangements. In line with other Bank-funded projects in China,

the Project adopted a three-tiered implementation system involving: (i) the

Provincial Government; (ii) municipal and prefectural governments; and (iii)

county governments, utilities and investment companies. The Provincial

Government assumed overall responsibility for Project coordination through its

Project Management Office (PMO), housed in the Yunnan Provincial Environment

Protection Department. Municipal governments were responsible for establishing

PMOs within local Environmental Protection Bureaus to oversee the performance

of three to four implementing agencies at the county level. County-level PIUs were

responsible for engineering design and construction supervision, procurement,

contract management, implementation of safeguard and fiduciary measures, and

monitoring and evaluation (M&E). The PAD noted that the provincial PMO was

17 (i) As per the PAD (refer section 3 on PDO and key indicators - pg 3), ‘for the urban infrastructure component, the

key intermediate outcomes are increased access to and improved financial viability of wastewater services and solid

waste management…’; (ii) Also, the cost recovery aspect was also deemed important in the design of the operation

given there were financial covenants for solid waste and wastewater services, as well as indicators in the results

framework.

18 In contrast to the Project Agreement, the Loan Agreement does not specifically define cost recovery.

10

highly capable and had experience working on previous World Bank-funded

projects, and helped to bolster the ability of the sometimes-less capable PIUs to

implement the Project. These implementation arrangements helped achieve the

Project’s urban infrastructure coverage targets. Senior officials at the county level

frequently chaired inter-agency working groups, helping to facilitate construction

planning and other permissions, for example. For SWM facilities, ownership was

initially vested with specially-created construction entities, but later to be

transferred to county-owned enterprises, which were intended to provide sustained

fiscal capacity (See Section 3.3).

22. Assessment of Risks. Most of the relevant risks, including those related to dam

safety and county and local government fiscal capacity, were identified at design.

The Project also identified relevant mitigation measures. For example, to mitigate

the fiscal capacity risk, utilities with low tariff rates relative to operating expenses

were obliged to comply with a financial covenant in the Project Agreement that

required a minimum level of wastewater tariffs to be attained by 2010 and to

develop financial capacity improvement plans.19 Two PIUs completed these plans

before the start of the Project and all utilities complied with the required minimum

tariff levels as per the Project Agreement by the time of the Project’s close.

23. Safeguards. This Project triggered six safeguards: Environmental Assessment

(Operational Policy (OP) 4.01), Natural Habitats (OP4.04), Physical Cultural

Resources (OP4.11), Involuntary Resettlement (OP4.12), Indigenous Peoples

(OP4.10), and Safety of Dams (OP4.37). The Project adequately complied with all

safeguard preparation requisites. The Project was classified as Category A. The

Environmental Management Plan (EMP) prepared for each Project city/county was

comprehensive. Public consultations were carried out with residents of different

ethnicities, gender, and socioeconomic backgrounds. Information about the Project

and announcements of public meetings were widely disseminated online and in

local newspapers in order to facilitate stakeholder engagement.

2.2 Implementation

24. Project implementation was affected by four principal factors: (i) restructuring and

subcomponent changes, which paved the way toward achievement of Project

objectives in the post-restructuring phase; (ii) implementation delays as a result of

weak contract management of some PIUs and slow approval of the cultural heritage

management component; (iii) supervision by the Bank Team; and (iv) government

commitment and capacity at provincial and local levels. These factors are discussed

briefly below.

25. Restructuring and subcomponent changes: Several adjustments made at Project

restructuring enhanced the impact of the Project. For example, the cultural heritage

subcomponent was substantially delayed due to the need to obtain no objection

19 The required tariff level was 0.8 RMB per cubic meter. See Project Agreement Section IV.

11

from the State Administration for Cultural Heritage (and address comments from

UNESCO). As a result of this delay, some of the proposed investments on Lion

Mountain became prohibitively expensive to proceed with. Therefore the

investments were downscaled to include only those critically important to improve

the environment of the area and the allow safe access of visitors (See Section 1.6).

Savings were subsequently re-directed toward expansion of wastewater access in

Lijiang City, which helped the Project achieve its objective to expand coverage of

critical urban infrastructure services and benefitted the operation of the Project-

financed WWTP in Lijiang (See Section 1.7). In Zhaotong Municipality, in

response to client demand, funds were directed to an innovative flood warning

management system, which was requested by the client and met a critical need for

the City to provide flood warning for its rapidly growing urban area. These changes

helped increase coverage of urban infrastructure services, ensuring that the

coverage aspect of the PDO was met. The AF also helped the Project increase and

meet its coverage goals. Restructuring moreover amended the Project Agreement

to aid implementation, as described below.

26. Implementation delays: The Mid-Term Review (MTR) conducted in December

2013 identified two primary issues that contributed to implementation delays,

namely i) low capacity of some county-level PIUs in contract management; and ii)

unexpectedly long time needed to obtain approval for the Lijiang subcomponent

(Lion Mountain) from cultural heritage management authorities. Although these

issues were eventually resolved, the restructuring extended the Project by 22

months. Overall, though, restructuring substantially aided Project efficacy and the

achievement of Project coverage targets, as detailed below. At restructuring the

Project Agreement was also amended to allow for government subsidies, which

was much more appropriate for the Project context.20

27. Supervision by the Bank Team: The Bank Team ably executed several important

supervision tasks, and the 2015 restructuring addressed several important flaws in

the original Project design (see above). The Fiscal Year (FY) 2016 procurement

post-review documented several instances of non-compliance, including the

rejection of a large number of bids based on deviations that could not constitute

“substantial non-responsiveness” as specified in World Bank guidelines, which the

Bank team helped to correct through intervention by the procurement specialist.

Finally, some minor environmental issues were encountered at one of the Project

sites (See Section 2.4). However, timely intervention by the Team and detailed

coordination with PIUs and the PMO helped ensure that these issues had been

corrected by the time of Project’s close (See Sections 2.4 and 5.2). A participatory

process was also adopted for the selection of village sanitation technology in

20 Covenants concered cost recovery for water utility financial covenants, financial statements, and dam safety. Cost

recovery was defined slightly differently for WW and solid waste, but mandated that operating expenses be met

without subsidies. The PA amended the definition of cost recovery so as to define total operating revenues and total

revenues “including government subsidies.”

12

Puzhehei to ensure local needs were addressed in the implementation of the

Puzhehei subcomponent.21 Perhaps most important, however, as noted above, the

Bank team addressed most of the Project’s initial design flaws at restructuring,

paving the way to achieving Component 1 and 2 objectives post-restructuring in

combination with subcomponent changes also processed at restructuring.

28. Government commitment and capacity at provincial and county levels: Overall, the

Provincial and Local Government Authorities demonstrated commitment to the

Project played a key role in facilitating implementation. Vice-mayors frequently

chaired the PIU inter-agency working group, helping improve inter-agency

coordination and advance smooth implementation. This coordination helped ensure

that an environmental issue concerning a leachate spill was quickly resolved (See

Section 2.4). Moreover, at the Provincial level, the Government diligently allocated

the necessary funds for Project implementation and supported compliance with the

Legal Agreement. 22

29. In general, the PMO evidenced a high level of capacity that greatly enhanced

Project efficacy and efficiency and ensured that the Project met and in many cases

exceeded its coverage targets under Component 1 and lake management objectives

under Component 2. However, some gaps were noticeable in the capacity of some

county-level PIUs that negatively impacted Project implementation, particularly by

causing implementation delays of works, as cited above (See para. 26) and, for

example, the mention in one ISR of: “Weak capacity in contract management and

supervision” at county level.23

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

30. M&E Design. The original M&E design included several indicators to track

progress toward improving the coverage of urban infrastructure services as well as

improving Yunnan’s urban environment. However, the initial Project design

contained two flaws: (i) an excessive number of IOs, many of which were not well-

aligned with Project components and which hindered M&E implementation; and

(ii) a failure to explicitly define “effectiveness of critical urban infrastructure

services.” In the absence of a clear definition of “effectiveness,” a restrictive and

inappropriate focus was placed on cost recovery for Project implementing utilities.

This definition of cost recovery was not suitable for the context, wherein

government subsidies are regularly allocated to support critical urban infrastructure.

The Project restructuring addressed most of these issues. Additional Project-level

outcome indicators were added to reflect the Project’s focus on increasing the

coverage of critical urban infrastructure services as well as on improving

institutional capacity for ILBM. The IOs were streamlined to focus on the Project’s

21 Initially biofiltration was considered as an alternative to conventional wastewater treatment plants, but was rejected

because it was unclear this technology could meet national water quality standards. However, the biofiltration facility

as piloted in Puzhehei where it serves serves a small rural community in which the discharge standards are lower. 22 See Restructuring Paper, Report No. RES18711. 23 ISR Sequence 4, March 29, 2012.

13

direct scope. The restructuring also adjusted the definition of cost recovery to

reflect the Chinese Government's typical practice of subsidizing public services,

better reflecting the Project’s context.

31. Although the PDO itself was not changed at restructuring, the results framework

was substantially modified in a way that improved M&E implementation and

utilization. Several intermediate indicators were dropped and incorporated into

three new Project-level indicators. These were: Number of people in urban areas

provided with access to improved sanitation, which was incorporated into PO-1

(People in urban areas provided with access to wastewater services); Number of

people in urban areas provided with access to improved water sources, which was

incorporated into PO-3 (People in urban areas provided with access to water

services); and Number of new population served by solid waste management

services, which was incorporated into PO-2 (People in urban areas with access to

solid waste management services). These helped to assess achievement of the

coverage dimension of the PDO. However, the post-restructuring results

framework did not include indicators explicitly linked to “effectiveness,” which

could have included indicators linked to fiscal sustainability when government

subsidies are accounted for. Thus, while the restructuring corrected most M&E

design flaws, the definition of effectiveness remained an outstanding issue. Overall,

however, the post-restructuring results framework was greatly strengthened and

better reflected Project objectives.

32. For example, the Project-level outcome indicator described in the PAD, Improved

management and coordination by responsible agencies/bureaus for Dianchi as

evidenced by regular sharing of data among all key bureaus involved, was

incorporated into PO-4 (Improved capacity for Dianchi Lake management). This

new Project-level outcome indicator more accurately captured the underlying

issues with respect to Dianchi Lake management, which pertained not simply to

data-sharing but also a lack of inter-jurisdictional coordination and capacity more

generally. A total of 11 IOs cited in the PAD were dropped during restructuring,

and a further five IOs related to volume of waste deposited in landfills, cultural

heritage management, water quality, flood protection, drainage, and Dianchi Lake

management were revised (See Table 5).24

33. M&E Implementation. Pre-restructuring, the sheer number of indicators was

unwieldly and hindered M&E implementation. This was rectified post-

restructuring however. County-level PIUs consistently provided data on a timely

basis, which the provincial PMO collected along with other data, such as water

quality data on landfills and rivers and waterways feeding into Dianchi Lake,

relevant to assessing Project outcomes.

24 See Restructuring Paper, Report No. RES18711.

14

Table 5: Comparison of Pre- and Post-Restructuring Results Framework. Note: PO-level

indicators underlined; intermediate indicators in italics.

COMPONENT (FROM

PAD)

PRE-

RESTRUCTURING

INDICATOR (FROM

PAD)

POST-

RESTRUCTURING

INDICATOR

URBAN

INFRASTRUCTURE

DEVELOPMENT

Number of new population

served by expanded

wastewater management

service

People in urban areas

provided with access to

wastewater services

URBAN

INFRASTRUCTURE

DEVELOPMENT

COD level at main

discharge points

Total COD pollutant

load reduction (tons/yr)

URBAN

INFRASTRUCTURE

DEVELOPMENT

Collection of tariffs covers

O&M costs and some debt

obligations

Dropped

URBAN

INFRASTRUCTURE

DEVELOPMENT

Number of new population

served by solid waste

management services

People in urban areas


solid waste management

services

URBAN

INFRASTRUCTURE

DEVELOPMENT

Amount of solid waste

being disposed to sanitary

landfills

Volume of municipal

solid waste disposed in

landfill (tons/yr)

URBAN

INFRASTRUCTURE

DEVELOPMENT

Increase in collection rate

(of SWM tariffs)

Dropped

URBAN

INFRASTRUCTURE

DEVELOPMENT

Incidence and severity of

floods as compared to

historical data in terms of

number of people

displaced and extent of

material damage

Development of Flood

Risk Management System

for Zhaotong

URBAN

INFRASTRUCTURE

DEVELOPMENT

Increased frequency and

regularity of water quality

monitoring

Dropped

URBAN

INFRASTRUCTURE

DEVELOPMENT

% targeted pollutant

producers aware of new

regulatory standards

through surveys

Dropped

URBAN

INFRASTRUCTURE

DEVELOPMENT

n/a Length of river section

restored (km)

URBAN

INFRASTRUCTURE

DEVELOPMENT

n/a People in urban areas


water services

CULTURAL

HERITAGE

MANAGEMENT

Development of

rehabilitation plans in

compliance with UNESCO

protection codes and other

national cultural heritage

regulations

Increase in visitors to

Lion Mountain

DIANCHI LAKE

MANAGEMENT

Improved management

and coordination by

responsible

agencies/bureaus for

Dianchi as evidenced by

regular sharing of data

among all key bureaus

involved

Lessons included in

sector 13th FYP,

information system for

Dianchi Lake in place.

15

34. M&E Utilization. The results framework was used by both the PMO and the Bank

Team to assess implementation progress. In particular, the Bank Team used the

coverage indicators to identify and correct potential delays in construction works.25

The revised results framework also benefitted the Provincial Government by

greatly increasing the knowledge base pertaining to Dianchi Lake management.

The Kunming Municipal Environmental Protection Bureau uses the data generated

from the 12 water quality monitoring stations constructed as part of the Project to

track progress towards pollution reduction goals. These stations are being used to

sample water quality once a month on the basis of 35 separate indicators. The

Project also financed the development of information-sharing systems to facilitate

data-sharing between the various entities involved in Dianchi Lake management.

Information provided by the borrower indicates that this data continues to inform

decision-making by these entities, especially related to targeting enforcement of

pollution regulations based on water quality data from different streams and

waterways feeding into Dianchi Lake (See Section 3.2).

2.4 Safeguard and Fiduciary Compliance

35. Compliance with safeguards was rated Moderately Satisfactory throughout

implementation. The Bank received no complaints regarding social and

environmental issues and safeguards compliance. However, as discussed below, the

Project encountered a minor environmental issue during implementation.

36. Environmental Assessment: Despite the existence of the EMPs, the operation of

landfills was sometimes deficient. For example, operators did not consistently spray

water to reduce dust. In addition, the Bank Team encountered and corrected a

leachate spill at one of the landfills caused by improper O&M procedures. The

Team visited the landfill in question and reported that the environmental issues had

been satisfactorily resolved and that landfill management training procedures had

been conducted. Site visits during the ICR mission to the Luquan County and

Songming landfills demonstrated progress in implementing sound O&M, such as

regular compaction and groundwater and leachate monitoring. No subsequent

environmental issues were reported.

37. Natural Habitats: Several of the Project sites fell within protected areas, notably

the Puzhehei National Wetland. For these areas, mitigation measures were

incorporated into the EMPs. The environmental monitoring required in the EMPs

was conducted for most subcomponents, with the exception of the leachate spill, in

a timely manner in order to control potential impacts. The reporting on the

safeguard was exemplary, and the reports have been shared with other project teams

as a demonstration of good practice. Dedicated staff responsible for implementing

the EMPs were stationed at most sites.

25 See for example Aide-Memoire for Third Supervision Mission, April 4 – 9, 2011.

16

38. Physical Cultural Resources: The potential impact of the Project on physical

cultural resources was identified in the environmental assessments completed for

each subcomponent; mitigation measures were included in the EMPs and were

implemented adequately.

39. Indigenous Peoples: At appraisal it was estimated that approximately 400,000

indigenous people might be affected by the Project. As a result, extensive

consultations were undertaken with these populations. An Indigenous Peoples Plan

was prepared and implemented. A social assessment report prepared at appraisal

concluded that the Project was likely to have a highly beneficial impact on

indigenous communities by improving the urban environment, expanding urban

spaces, and improving tourism and other economic development opportunities. The

assessment also concluded that the risk of tariff increases significantly depressing

indigenous peoples’ income was relatively low.26

40. Involuntary Resettlement: At appraisal, the Project estimated that resettlement

would take place in 17 villages and would impact 376 households (1,570 people),

who were resettled under the client-financed Component 3. Individual

Resettlement Action Plans were completed for each subcomponent. Compliance

with resettlement policy was assessed to be Satisfactory during supervision

missions. The Provincial PMO’s highly competent management was essential to

ensuring compliance with applicable Bank policies related to resettlement. The

engagement of an external entity, Hohai University, to monitor resettlement efforts

also contributed to the Satisfactory rating on compliance with safeguards pertaining

to resettlement. The University prepared a report during implementation identifying

experiences, lessons learned, and beneficiary feedback, which helped ensure

compliance with safeguards. There were no complaints registered from displaced

people affected by the Project.

41. Dam Safety: A dam safety review was conducted by an independent dam safety

specialist from the Nanjing Dam Safety Center. The specialist recommended

remedial and supplementary work at two Project sites. The Provincial PMO ensured

that the recommendations were implemented during Project implementation and

proper measures in place for future management.

42. Financial Management: Except for minor issues concerning delays in

disbursement due to staff changes in the Provincial Finance Bureau, the financial

management system for the Project proved to be adequate. The audits revealed no

major issues during implementation, and there were no outstanding audit issues at

the time of the Project’s closure. The Project closed with a Satisfactory financial

management rating.

26 China Cross-Cultural Consulting Center, Sun Yat-sen University. 2007. Social Assessment (Summary Report).

Report No. IPP252-V2.

17

43. Procurement: The appraisal process concluded that the overall procurement risk

was modest, and that agencies at all levels had allocated sufficient resources to

implement the Project. However, the FY16 post review found a few instances of

non-compliance with respect to a bid evaluation that did not constitute substantial

non-responsiveness. Bidders were not given the opportunity to make necessary

clarifications. As a result, the Bank Team directed the PMO to take remedial actions

to prevent recurrence of these issues. These issues were satisfactorily resolved.

Overall, the procurement performance throughtout Project implementiton was

Satisfactory.

2.5 Post-completion Operation/Next Phase

44. As anticipated in the financial analysis conducted at appraisal, the most significant

risk post-completion is, in the eventual absence of subsidies, the fiscal capacity of

local governments to continue providing financial support to PIUs. At Project

completion, several of the SWM operators remained below cost recovery levels

when subsidies are excluded. In China, however, the tariffs are often set below cost

recovery rates given that the Government, especially in China’s poorest provinces,

subsidizes debt service. In recognition of this reality, the Project team amended the

Project Agreement to include government subsidies as part of utilities’ operating

revenue. The Loan Agreement, which stresses the provision of support for

operation and management of solid waste and wastewater facilities,27 does not

define cost recovery, and was not amended. The strong fiscal position of the

Yunnan Provincial Government and Chinese Central Government mitigates cost

recovery concerns substantially and indicates that subsidies will be maintained. The

urban infrastructure services financed by the Project are central to both

governments’ development plans, and both levels of government have proven more

than willing to subsidize elements of utility operation, especially debt service, for

extended periods. The governments’ active involvement will help ensure that a high

quality of service will be maintained post-Project, and in the case of the solid waste

operators that have not achieved cost recovery, the planned transfer to county-

owned enterprises is likely to assure fiscal sustainability (See Section 3.3). Likewise,

the strong commitment of both levels of government to improving environmental

protection make it highly likely that funding for the continuation of environmental

protection activities under Component 2 post-Project will be secure. The continuing

use of data generated by Project-financed monitoring stations for Dianchi Lake

Management further suggests these are likely to be maintained by the province well

into the future.

27 See Schedule 1, Part 1 e)ii)B).

18

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

Relevance of Objectives: Substantial

45. The PDO continues to be highly relevant to Yunnan’s development needs given the

Province’s continued focus on expanding urban infrastructure provision and

enhancing environmental protection. The PDO is aligned with the Provincial

Government’s 13th Five Year Plan, 2016 to 2020 (developed to complement that of

the Central Government), which emphasizes providing cleaner water and

promoting environmental protection.28 The PDO also remains highly relevant to

Strategic Theme 1, Supporting Green Growth, in the current Country Partnership

Framework.29

Relevance of Design and Implementation Pre-Restructuring: Modest. Post-

Restructuring: Substantial.

46. Overall, the Project design was well aligned with the PDO, and the implementation

arrangements with the PMO overseeing PIUs helped the Project achieve its primary

objectives. The Project’s two primary components targeted two issues, urban

infrastructure service provision and Dianchi Lake management, that are of clear

and substantial importance for Yunnan’s urban environment. The Project design

pre-restructuring, however, had several notable shortcomings related to the results

framework. As mentioned earlier, the original results framework lacked a Project-

level outcome indicator related to Component 1 and did not adequately define

“effectiveness.” Moreover, the initial Project-level outcome indicator for

Component 2 emphasized data sharing but did not include other relevant

institutional aspects critical to effective ILBM, especially coordination among

Dianchi Lake management authorities. Finally, the pre-restructuring definition of

cost recovery was overly ambitious given the Government’s typical practice of

subsidizing service. These design-related shortcomings negatively impacted the

Project’s overall efficacy pre-restructuring. Because of these deficiencies, pre-

restructuring relevance of design and implementation is rated Modest.

47. At restructuring, these shortcomings were largely corrected. The revised Project-

level outcome indicator concerning lake basin management addressed the broader

issue of institutional capacity and inter-agency coordination through preparation of

the ILBM Plan and inclusion of lessons learned in the 13th FYP, which guides all

28 Provincial Five-Year Plans closely reflect those of the country as a whole, but emphasize some region-dependent

issues. 29 World Bank. 2006. China - Country partnership strategy . Washington, DC: World Bank.


See also World Bank. 2012. China – Country partnership strategy. Washington, DC: World Bank.


(See previous citation note)



19

local government policy and targets. Indicators related to effectiveness of critical

urban infrastructure services, which was indirectly defined in the pre-restructuring

results framework in terms of full cost recovery, were dropped from the results

framework. Moreover, while the PDO reference to “effectiveness of critical urban

infrastructure services” remained undefined and unmodified post-restructuring,

cost recovery was redefined in the Project Agreement to include the Government

subsidies as part of the utilities’ revenues. Accordingly, post-restructuring

relevance of design and implementation is rated Substantial.

3.2 Achievement of PDO

48. The PDO contains two distinct elements: 1) effectiveness and coverage of critical

urban infrastructure services; and 2) effectiveness of lake basin management in

Dianchi.

Improved effectiveness and coverage of critical urban infrastructure services: Pre-

Restructuring: Modest. Post-Restructuring: Substantial.

49. As noted above, Component 1 consists of two distinct elements, effectiveness and

coverage. As detailed below, the Project substantially achieved the objective of

improving the coverage of critical urban infrastructure services. The Project

delivered a comprehensive set of interventions that substantially improved

Yunnan’s urban environment. The Project’s achievement with respect to improved

effectiveness of critical urban infrastructure services, however, is less clear given

the lack of a direct definition of “effectiveness.” However, as of Project close

wastewater operators had adopted specified tariff increases, and several wastewater

operators were on a predictable path to achieving cost recovery.

50. Although the PAD does not explicitly define “effectiveness of critical urban

infrastructure services,” there is evidence in the PAD and the Loan/Project

Agreements that shows the relevance of the utilities’ financial conditions to the

Project’s objetives. For example, the PAD states that “for the urban infrastructure

component, the key intermediate outcomes are increased access to and improved

financial viability of wastewater services and solid waste management.”30 There

are also IOs on cost recovery in the original results framework. Moreover, the pre-

restructuring Project Agreement included financial covenants that required solid

waste service providers to achieve a certain level of solid waste tariffs at an early

stage of implementation and solid waste and wastewater providers to achieve full

cost recovery31 by the Project’s completion. As such, the effectiveness of the urban

30 As noted in Section 1, the financial performance of the service providers were deemed important enough in the

Project design that financial covenants were included in the original PAD results framework for solid waste and

wastewater services. 31 These covenants specify that each WW implementing utility “Ensure that total operating revenues will be sufficient to

cover total operating expenses including provisions for depreciation and the amount by which debt service requirements

exceed the provision for depreciation” while SWM implementing utilities were required to “cover total operating

20

infrastructure services is interpreted as compliance with the financial performance

criteria outlined in the legal documents.

51. Improved Effectiveness and Coverage Pre-Restructuring: The Project substantially

met the original targets with respect to access to improved water sources, SWM

services, and cultural heritage services. As Table 6 illustrates, the achievement of

these coverage-related targets was in general high, and in several cases the results

exceeded the targets. The Project included a comprehensive set of interventions

with respect to solid waste, wastewater, and water supply that improved coverage

for many Yunnan residents. However, the Project did not meet a few water service

coverage indicators, and fell well short of meeting the three indicators related to

improved effectiveness of critical urban infrastructure services. As a result, the pre-

restructuring efficacy on the effectiveness and coverage dimension of the PDO is

rated as Modest.

52. Improved Effectiveness and Coverage Post-Restructuring: The Project fully

achieved the coverage aspect of its development objective post-restructuring,

accelerating progress towards meeting its coverage targets and substantially

improving urban residents’ access to water, wastewater, and SWM services. The

Project achieved the associated post-restructuring Project-level outcome indicators

(See Data Sheet), which measured access to these services as a result of the Project.

The Project exceeded its target for the “number of people provided with access to

wastewater services” indicator by over 20,000 people, a considerable achievement

given the low rates of access to wastewater treatment in the Province (See Section

1.1). The Project also exceeded its target for the “number of people with access to

SWM services,” providing over 450,000 with SWM services through the

construction of sanitary landfills and waste transfer stations. This level of access

represented a more than two-fold increase over pre-Project levels. The Project also

surpassed the target number of people in urban areas with access to water services

by over 100,000 people.

53. In addition, the Project achieved its objective to improve the coverage of critical

urban infrastructure services with respect to river environment, cultural heritage,

and flood warning. The Project exceeded intermediate objectives for length of river

section restored (IO-3, 103 percent achieved), number of visitors to Lion Mountain

(IO-4, 106 percent achieved), and development and adoption of a flood risk

management system for Zhaotong that provides not only a tool for better

management of flood and water resources, but also a template to guide urban

development to reduce future flood risk32 (IO-5, 100 percent achieved; See Data

Sheet). The selected physical achievements of each subcomponent are also

expenses of garbage collection services, transfer stations, and landfill operations, excluding provision of depreciation for

landfill construction capital cost.” As noted earlier, this definition was later amended to allow for government subsidies

as part of utility operating revenues. The Loan Agreement was not modified.

32 See Borrowers’ ICR.

21

summarized in a table in Annex 2. Overall, the Project produced a comprehensive

set of interventions that improved wastewater and SWM service coverage,

improved lake basin management, reduced flood risk, and improved the quality of

the river environment.

54. By the time of Project close, Project cities and counties had instituted wastewater

tariffs equal to or greater than the level specified in the original Project Agreement,

thereby complying with it (0.8RMB per cubic meter) and, under the revised

definition of cost recovery, two of the five SWM Project implementing utilities

were able to meet O&M expenses with tariff revenues. The remaining three SWM

utilities are expected to be able to meet O&M expenses in the near future when, as

has always been planned, their operation is transferred from the construction

companies that built them to permanent, county-owned enterprises which will

oversee long-term operations (See Section 3.3). Moreover, as noted above, in the

context of China achieving full cost recovery is not necessarily a pre-requisite to

ensuring the provision of reliable urban infrastructure services. Accordingly, post-

restructuring the Project substantially met its effectiveness objectives, and

accordingly is rated as Substantial.

Improving the effectiveness of lake basin management in Dianchi: Pre-Restructuring:

Substantial. Post-Restructuring: Substantial.

55. Improved Effectiveness Pre-Restructuring: The Project contributed to the

establishment of an online data-sharing and information platform as well as a data

processing system to monitor water quality. The Project financed construction of

three fixed automatic monitoring stations for waterways entering Dianchi Lake,

two mobile monitoring vehicles to sample smaller streams and equipment for a

water quality laboratory. In addition, 14 fixed water flow monitoring stations were

procured or constructed. 33 The Project also completed an ILBM Plan (discussed

below) and monitored three major rivers in the Dianchi Lake Basin at a frequency

of over 21,000 times per year. Though this is slightly less than originally envisioned

due to a change in sampling frequency, the combination of these information and

data-collection systems substantially strengthened the capacity of Dianchi lake

basin management authorities to cooperate and share data to facilitate better

decision making. Moreover, new regulations concerning protection of Dianchi

Lake that were related to the ILBM Plan were approved in September 2012 and

have been in effect since January 1, 2013. Thus, the pre-restructuring efficacy on

the lake basin management dimension of the PDO is rated Substantial.

56. Improved Effectiveness Post-Restructuring: During the restructuring, the IOs in the

RF related to lake basin management were dropped and the PO was modified.

However, the Project fully achieved both the original and the revised PO targets. In

compliance with the revised PO, lessons from the ILBM Plan for Dianchi Lake

were incorporated into the Five-Year Plan. Moreover, the completion of the ILBM

33 Data provided by PMO.

22

Plan represented a major step forward for coordination among Dianchi Lake

management authorities as no previous plan existed for the region. Project

investments in water quality data collection and sharing, such as construction of the

water monitoring equipment described above, moreover provided a knowledge

foundation for better lake basin management. Accordingly, post-restructuring

efficacy on the lake basin management dimension of the PDO is rated Substantial.

Table 6: Project Achievement by Indicator, Pre- and Post-Restructuring. Note: PO-level

indicators underlined; intermediate indicators in italics.

PDO DIMENSION PRE-

RESTRUCTURING

INDICATOR

% OF TARGET ACHIEVED POST-RESTRUCTURING

INDICATOR

% OF

TARGET

ACHIEVED

IMPROVED

EFFECTIVENESS

OF CRITICAL

URBAN

INFRASTRUCTURE

SERVICES

Operating cost

covered by SW fee

revenues

0-88%

(Avg. = 26%)

Dropped Not

Applicable

Collection of tariffs

covers O&M costs and some debt

obligations (WW)

0%

Dropped

Increase in collection

rate of SW services

N/A (Dropped before implementation) Dropped

IMPROVED

COVERAGE OF

CRITICAL URBAN

INFRASTRUCTURE

SERVICES

Population served by

WW Management System

77-176%

(Avg. = 118%)

People in urban areas provided

with access to WW services

103%

Number of people in

urban areas provided with access to

Improved Sanitation

62% 100%

Number of population served by

SWM services

118-173% (Avg = 150%)

People in urban areas provided with access to SWM services

102%

Amount of solid waste disposed to

sanitary landfills

87-157% (Avg. = 114%) Volume of municipal solid waste

disposed in landfill

141%

People in urban

areas provided with access to improved

water sources

80% People in urban areas provided

with access to water services

115%

WW management -- COD level

100%

Total COD pollutant load

reduction

180%

% of Wenshan

polluters aware of new regulations

100%

Dropped

Frequency of

Wenshan water

monitoring

100% Dropped

Lijiang Development

Masterplan

100%

Increase in visitors to Lion

Mountain

106%

23

Lijiang UNESCO

Status

100%

Dropped

Incidence and

severity of floods as compared to

historical data in

terms of number of people displaced and

extent of material

damage

Not available

Development of Flood Risk

Management System for Zhaotong

100%

Rainwater drainage

population served

Not Available

Length of river section restored

103%

IMPROVED

EFFECTIVENESS

OF LAKE BASIN

MANAGEMENT

Improved

management &

coordination as evidenced by regular

sharing of data

among all key bureaus involved

Data Sharing platform in place

and in use

Improved capacity for Dianchi

Lake Basin management

100%

Number of

monitoring on 3

rivers (times/yr)

25%

Dropped

Number of

monitoring on 14

streams (times/yr)

<1%

Dropped

Online monitoring and evaluation

system established

(Y/N)

Y

Dropped

Data processing

system established

(Y/N)

Y

Dropped

Dianchi protection

regulations are

revised, approved

and enforced

Y

Dropped

ILBM Master Plan

for Dianchi is developed and

adopted, particularly

conducting water resource carrying

capacity of the lake

basin

Y

Dropped

24

3.3 Efficiency

Rating: Substantial.

57. Efficiency is assessed with respect to three aspects: (i) economic efficiency in terms

of economic internal rate of return (EIRR); (ii) financial viability and sustainability;

and (iii) administrative and operational efficiency. Each aspect is discussed below.

Economic Efficiency

58. At appraisal, a cost-benefit analysis was carried out utilizing a contingent valuation

method based on the responses to a willingness-to-pay (WTP) survey. For each

category of investment, namely wastewater collection and treatment, solid waste

collection and disposal, and river rehabilitation, a Project town was chosen as a

representative site for estimating the EIRR. While wastewater and river

rehabilitation investments showed ample estimated returns of 19.934 percent and

18.2 percent respectively, the solid waste investments only showed an estimated

EIRR of 5.2 percent. This low EIRR was likely the result of the fact that many peri-

urban residents had a surface-level understanding of public sanitation and did not

consider the public health implications of poor solid waste collection and

management.

59. Following the appraisal-stage methodology, the EIRR of each category of

investment was reassessed at completion to reflect: (i) the actual scope of

investments in all Project locations; (ii) the actual scope of Project impact; and (iii)

the actual Project costs. Although the WTP for each category of investment has

almost certainly increased due to rapid growth in income over the Project

implementation period, the analysis maintained the WTP from appraisal to be

conservative.

60. At completion, all categories of investments yielded higher EIRRs than the

estimates at appraisal. (see Table 7 below)

Table 7. EIRR appraisal vs. completion APPRAISAL COMPLETION

WASTEWATER 19.9%

(10.2% cost

adjusted)

24.5%

SOLID WASTE 5.2% 7.6%

RIVER

REHABILITATION

18.2% 28.8%

▪ WW collection and treatment yielded an EIRR of 24.5 percent, higher than the

appraisal-stage estimate of 19.9 percent (not to mention the cost-adjusted

34 At appraisal, the cost of wastewater investments was underestimated due to a longer pipeline resulted from the

expansion of the wastewater subcomponents as described in Section 1.6. Once factored in, the estimated EIRR on the

wastewater at appraisal would decrease from 19.9 percent to 10.2 percent .

25

estimate, based on predicted equipment and materials costs, of 10.2 percent at

appraisal). Two factors contributed to the high EIRR: (i) a higher service ratio

in terms of households served per unit of capacity constructed; and (ii) a better

cost ratio in terms of total system investment (collection and treatment) per unit

of capacity constructed. More people were served at a lower total cost than

initially expected.

▪ SW collection and disposal yielded an EIRR of 7.6 percent, higher than the

appraisal-stage estimate of 5.2 percent and the prevailing economic discount

rate of 6.0 percent. The primary reason for the higher EIRR is a higher service

ratio in terms of households served per capacity constructed.

▪ River rehabilitation yielded an EIRR of 28.8 percent, higher than the appraisal-

stage estimate 18.2 percent. The primary reason for the higher EIRR is a higher

investment-to-service ratio in terms of number of households served per dollar

invested.

61. Thus, from the perspective of economic efficiency, the Project’s performance is

high.

Financial Viability and Sustainability

62. Both the PAD and Project Agreement placed strong emphasis on the financial

viability and sustainability of Project cities/counties and their subordinate

implementing utilities in terms of their cost and debt service coverage ratios.35

However, compliance with these provisions is complicated by the fact that the

implementing utilities are merely operating companies without ownership of fixed

assets registered on their balance sheets. Local governments are responsible for

capital investments along with debt service obligations. In essence, local

governments provide full capital subsidies to all Project implementing utilities.

Under this institutional arrangement – explicitly permitted under the amendment to

the Project Agreement in 2015 — (i) any debt service coverage requirement is

automatically met; and (ii) utilities only need to recover their O&M expenses to

meet the cost recovery requirement.

a. WW: All five Project wastewater utilities comply with the Project

Agreement-mandated tariff rate of 0.8RMB per cubic meter; and they also

fully recover costs when local government capital subsidies are accounted

for (See Table 8).

35 The Project Agreement specifies that a solid waste Project utility’s total revenues, i.e., the sum of its operating and

net non-operating revenues, must the sum of its O&M costs and the greater of depreciation and debt service in a given

year. The Project Agreement was later modified to allow for government subsidies to be counted as part of utility

operating revenue. The Loan Agreement does not define cost recovery, and was not modified.

26

Table 8. Project Wastewater Utility Reported Revenues and Expenses COUNTIES WITH

WW SERVICES

CURRENT LEVEL

OF EXPENSES (AS

PER PA

DEFINITION)

CURRENT LEVEL

OF REVENUES

(W/O SUBSIDIES)

CURRENT LEVEL

OF REVENUES

(WITH CAPITAL

SUBSIDIES)

LIJIANG ANCIENT

TOWN DISTRICT

WWTP

RMB 1.76/ m3 Average: RMB1.10/

m3 (2017)

Average: RMB 1.89/

m3/ (Jan. 1, 2018)

Full cost recovery with

debt service paid by

government

YANSHAN O&M approx. RMB

0.90/ m3

Full: RMB 1.26/ m3

Residential: RMB 0.80/

m3

Non-residential: n/a

Approximately RMB

1.20/ m3 (w/subsidy)

QIUBEI n/a Residential: RMB 0.80/

m3 (to government)

WTTP under

government paid

management &

operating contract)


government paid

management and

operating contract

GUANGNAN RMB 1.10/ m3 Residential: RMB 1.00/

m3



government

ZHAOYANG RMB 1.26/ m3 Residential: RMB

1.00/ m3

Non-residential: RMB

1.25/ m3

http://shuifei.zhutousan

.net/zhaotong.html



government

a. SW: the provisions concerning cost recovery for solid waste utilities were

amended at restructuring. In practice, the operator’s revenue is not directly

linked to the market tariff. Instead, local governments pay the operator a

fixed annual lump sum to cover its O&M costs. During the ICR mission,

three operators reported that the subsidies they received from the

government were not sufficient to cover their O&M costs, raising some

concern with respect to fiscal sustainability in the long-term. However, in

all three cases, the operators were construction companies temporarily

managing operation of the sites. Once the sites are, as was always planned,

conferred to county-owned enterprises, the situation is expected to improve

because county-owned enterprises have more direct and reliable access to

government financing and revenues (See Table 9).

63. Thus, from the perspective of financial viability and sustainability, the Project’s

performance is assessed as Substantial.

Administrative and Operational Efficiency

64. Implementation proceeded smoothly after restructuring, and the Provincial PMO

capably addressed several minor issues encountered during implementation

including weak contract management capacity in some county-level PIUs (See

Section 2.1). However, a longer-than-expected period of time to obtain “cultural

heritage” approvals for the Lion Mountain activities did reduce implementation

efficiency.

http://shuifei.zhutousan.net/zhaotong.html

http://shuifei.zhutousan.net/zhaotong.html

27

65. Thus, from the perspective of administrative and operational efficiency, the

Project’s performance is rated as Modest.

Table 9. Project SW Utility Reported Expenses and Revenues

COUNTIES

WITH SW

SERVICES

CURRENT LEVEL

OF EXPENSES (AS

PER PA

DEFINITION)

CURRENT LEVEL OF

REVENUES (W/O

SUBSIDIES)

SONGMING

COUNTY SW

Annual O&M: RMB

800,000

+ investment

Residential: RMB

10/HH/month

XUNDIAN SW Annual O&M: RMB

2,070,000 + investment

Residential: RMB

2/HH/month

LIJIANG SW n/a Residential: RMB

8/HH/month

LUQUAN SW Annual O&M: RMB

1,914,000

+ investment

Residential: RMB

6/HH/month

3.4 Justification of Overall Outcome Rating

Rating: Moderately Satisfactory

66. Although the Project’s PDO remained unchanged over the life of the Project,

several PDO and output indicators were amended during the restructuring. As a

result, the Project’s outcome is evaluated against both the pre- and post-

restructuring PDO indicators (See Table 10).

Table 10: Relevance, Achievement of PDO and Efficiency Ratings Pre- and Post-

Restructuring PRE-

RESTRUCTURING

POST-

RESTRUCTURING

RELEVANCE OF

OBJECTIVES

Substantial Substantial

RELEVANCE OF

DESIGN &

IMPLEMENTATION

Modest Substantial

PDO1: IMPROVING

THE

EFFECTIVENESS

AND COVERAGE OF

CRITICAL URBAN

INFRASTRUCTURE

SERVICES

Modest Substantial

PDO 2: IMPROVING

THE

EFFECTIVENESS

OF LAKE BASIN


28

MANAGEMENT IN

DIANCHI

EFFICIENCY


RATING

Moderately

Unsatisfactory

Satisfactory

RATING VALUE 3 5

WEIGHT (%) 55 45

WEIGHTED VALUE 1.65 2.25

Final Rating 3.9 i.e. Moderately Satisfactory

3.5 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

67. Poverty Impacts. Poverty reduction was not an explicit objective of the Project.

However, at appraisal, four Wenshan counties were nationally designated as poor

counties, while two of the Kunming counties were provincially designated poor

counties. These designations suggest that the Project disproportionately benefited

citizens of urban areas who were poorer than the national and provincial averages.

68. Gender Aspects. The Project did not include a gender component, but stakeholder

consultation workshops held as part of the environmental assessment attempted to

secure balance in gender representation. Globally, the burden of poor access to

water and sanitation is moreover felt disproportionately by women, so it may be

expected that Project achievements might disproportionately benefit women,

though this was not explicitly evaluated as part of the results framework.36

69. Social Development. Social development was not an explicit objective of the

Project. However, in Zhaotong, investments in river bank improvements inspired

additional local government investment in walking, jogging, and biking paths along

the river banks, enhancing local residents’ quality of life.

(b) Institutional Change/Strengthening

70. The Project’s support of an ILBM Plan strengthened authorities capacity to manage

Dianchi Lake. To formulate the Plan, a special management agency was established

that brought together several previously disparate and uncoordinated entities. In

addition, as a result of the Project, the Dianchi Management Bureau developed

several subsidiary plans. The Bureau also engaged external experts to ensure that

the Plan reflected international best practice. The Bureau and City’s ownership of

the new management strategy was further highlighted by the fact that the Plan was

listed as one of the City’s achievements for the year 2016.

36 See U.N. HABITAT, “Sanitation: A Women’s Issue,”

http://mirror.unhabitat.org/documents/media_centre/APMC/Sanitation%20-%20A%20womans%20issue.pdf

http://mirror.unhabitat.org/documents/media_centre/APMC/Sanitation%20-%20A%20womans%20issue.pdf

29

71. The Project also helped strengthen the capacity of local PIUs. In Zhaotong City, for

example, the PIU reported that it had developed and implemented a financial

monitoring system for the local government as a result of the Project.

(c) Other Unintended Outcomes and Impacts (positive or negative)

72. The Project supported the development of the first flood warning and management

system (via a smart phone application) for the rapidly-growing city of Zhaotong.

The application is being used to provide citizens with advance warning of flash

floods in low-lying municipal areas.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

Not Applicable

4. Assessment of Risk to Development Outcome

Rating: Substantial

73. The failure of some PIUs to achieve full cost recovery by Project close introduces

some degree of risk to the “effectiveness”-related outcomes achieved by the Project.

However, these outcomes represent only part of the Project, and the coverage-

related outcomes of the Project are not at risk. Moreover, overall, the commitment

of the Chinese central and Yunnan provincial governments to maintaining water

supply, wastewater, and SWM services remains strong, mitigating the overall risk

that services will be substantially disrupted as a result of failure to achieve cost

recovery. At the time of Project close all Project cities/counties had adopted the

wastewater tariff levels specified in the Project Agreement and were in compliance

with the modified definition of cost recovery in the amended, post-restructuring

Project Agreement. Furthermore, the fiscal position of SWM operators is expected

to improve considerably pending transfer to county-owned enterprises (See Section

3.3).

5. Assessment of Bank and Borrower Performance

(a) Bank Performance in Ensuring Quality at Entry

Rating: Moderately Unsatisfactory

74. The Bank Team adequately positioned the Project in the existing policy context and

applied thorough technical knowledge to identify the most suitable technologies.

The Project’s design also built upon previous projects and lessons learned. The

Bank properly identified environmental and social safeguard risks and incorporated

adequate mitigation measures in the Project design. Nevertheless, there were

significant gaps in the Project’s results framework as originally designed. The pre-

restructuring results included no Project-level outcome indicators linked to the

30

coverage aspects of the PDO and limited the objective of improved effectiveness

of lake basin management to increased data-sharing. Finally, effectiveness was not

properly defined with respect to critical urban infrastructure services.

(b) Quality of Supervision


75. The Team took appropriate steps to respond to implementation challenges, such as

the leachate spill from a Project-funded landfill (See Section 2.4). After the leachate

spill, the Team directed all landfills financed by the Project to develop O&M

procedures and undergo O&M training. Moroever, the Team processed a

comprehensive restructuring that successfully addressed flaws in the original

Project design, downscaled several subcomponents and redirected funds to higher-

priority activities. During this process, the Project Agreement was amended to

reflect a more appropriate definition of cost recovery, though this was not reflected

in changes to the Loan Agreement. In addition, the Team accommodated client

requests for beneficiary-driven subcomponents, such as the Zhaotong flood

warning management system. However, effectiveness of urban infrastructure

services remained undefined.

(c) Justification of Rating for Overall Bank Performance


76. Based on the Moderately Unsatisfactory Quality at Entry rating and the Moderately

Satisfactory Quality of Supervision rating, overall Bank performance is rated as

Moderately Satisfactory.

5.2 Borrower Performance

(a) Government Performance


77. As noted in Section 2.2 there were some challenges to implementation in the pre-

restructuring phase due to delays in constructing works. Overall, however, the

Yunnan Provincial Government demonstrated commitment to the Project and

offered support to the Project when needed. The commitment of county

governments was evidenced by the participation of high-level officials, usually the

vice-mayor, in site visits and meetings (See Section 2.2).

(b) Implementing Agency or Agencies Performance


78. The Provincial PMO exhibited minor shortcomings in procurement processes,

including an instance in which the bidding process was not conducted in accordance

with Bank procedure (See Section 2.4). However, the Provincial PMO acted

properly and professionally in referring this case to the Bank. Overall, the

Provincial PMO was responsive to Bank supervision missions and took proper

31

steps to address issues encountered in implementation. This competence was

particularly evident in the Provincial PMO’s satisfactory compliance with all

safeguards and promotion of activities that added value to Project investments, such

as the Zhaotong flood warning system. Nevertheless, some PIUs at the county level

demonstrated capacity gaps, particularly in contract management, leading to delays

in the implementation of works.

(c) Justification of Rating for Overall Borrower Performance


79. Based on the Moderately Satisfactory Government Performance and Moderately

Satisfactory Implementing Agency Performance, overall Borrower Performance is

rated as Moderately Satisfactory.

6. Lessons Learned

80. Country Context: One of the most important lessons from this Project is to pay

careful attention to the country context in setting financial targets. While the Project

design emphasized cost recovery that included debt service obligations (which is

usual in World Bank projects), in the Chinese context, it is more important to

consider O&M expenses, since provincial and national governments typically

finance debt payments for urban infrastructure services. The design of this Project

would have been improved, for example, by having realistic indicators tied to the

fiscal sustainability of utilities when government subsidies are accounted for.

Furhtermore, there should be recognition that full costs are often covered through

a combination of tariffs (paid by users) and taxes (through financial support

provided by the government) and they both should be adequate and adjusted to meet

costs. In this Project, the reliance on financial support from the government was not

originally incorporated in the cost recovery plans which led to revisions of the

Project Agreement to reflect the actual situation.

81. Comprehensive Approach to Improving Urban Environmental Service

Provision: This Project’s successfull expansion of key urban environmental

services was notable given its comprehensive approach; the Project included not

only key infrastructure like water supply and WWTPs but also cultural heritage

management and lacustrine water quality. In principle, there are considerable

advantages to attempting to address all of these issues in a comprehensive fashion.

But in practice, this comprehensive approach increased the complexity of the

Project, and introduced delays, especially with respect to the cultural heritage

subcomponent. Future Projects should i) ensure that the implementing agencies

have adequate capacity to undertake all facets of the approach, as was for the most

part the case with this Project; and ii) through frank dialogue with the client identify

highest-priority interventions to ensure all Project subcomponents possess natural

synergies that justify simultaneous implementation. Infrastructure development is

moreover often not sufficient to fully evaluate the success of a Project long-term,

and the results framework should incorporate a range of indicators that reflect

32

indirect impacts of increased service provision, such as for example exposure to

waterborne illnesses which may be expected to be drastically reduced through

improved water infrastructure service coverage.

82. Importance of institutional factors, such as inter-institutional coordination, to

solve complex environmental challenges : Task teams should devote careful

attention to the multiple factors, especially institutional capacity, that underpin

effective coordination and management of inter-jurisdictional resources. The

Project’s successful development of an ILBM Plan was largely the result of

effective coordination between multiple provincial government agencies

responsible for management of Dianchi Lake. Future efforts to address complex

environmental challenges, such as non-point source pollution, should not

underestimate the importance of implementing effective coordination mechanisms.

Accordingly, future Projects focused on addressing such issues should include

inter-jurisdictional coordination capacity, perhaps defined in terms of

representation and frequency of meeting for an inter-jurisdictional commission or

body, as a core element of the desing and indicators.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

(a) Borrower/implementing agencies

Overall comments:

It is highly appreciated that the ICR was deliberated and revised by taking PMO’s

comments into consideration.

It is still considered that the overall project outcome shall be assessed or evaluated

against the post-restructuring result framework and amended LA and PA. As

indicated in the revised ICR, the Project fully achieved the coverage aspect of its

development objective post-restructuring, substantially improving urban residents’

access to water, wastewater, and SWM services. Moreover, in the context of China

achieving full cost recovery is not necessarily a pre-requisite to ensuring the

provision of reliable urban infrastructure services, and accordingly, the Project

substantially met its effectiveness objectives post-restructuring. The post-

restructuring relevance of objectives, relevance of design & implementation,

improving the effectiveness and coverage of critical urban infrastructure services,

improving the effectiveness of lake basin management in Dianchi and efficiency are

all rated as substantial.

Certainly the pre-restructuring indicators could be used for assessment of project

design and quality at entry for the purpose of lessons learned. Also, as indicated in

the revised ICR, those shortcomings of project design and quality at entry were

largely corrected at restructuring.

33

So, from PMO’s point of view, the overall project outcome shall be rated as

Satisfactory, although we don’t fully understand the Bank’s assessment system,

especially the scoring criteria.

(b) Co-financiers

Not Applicable

(c) Other partners and stakeholders

Not Applicable

34

Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent)

Loan 7692-CN

Component Cost at Project

Completion

Cost Estimated at

Appraisal

Cost at Completion as %

of Estimated

Urban Environment Infrastructure

Development 156.71 166.46 94%

Integrated Lake Basin Management 13.70 11.80 116%

Resettlement included in components

above

included in components

above

Institutional Strengthening & Capacity

Building included in components

above


above

Interests During Construction 0.88 12.77 7%

Front-end Fee 0.23 0.23 100%

Total Project Costs 171.52 191.26 90%

Loan 7937-CN (AF)

Component Cost at Project

Completion

Cost Estimated at

Appraisal

Cost at Completion as %

of Estimated

Water Supply 54.76 49.58 110%

Wastewater 14.63 17.21 85%

River Rehabilitation 37.69 60.89 62%

Resettlement included in components

above


above

Institutional Strengthening & Capacity

Building 1.11 1.20 92%

Interests During Construction 0.94 8.44 11%

35

Front-end Fee 0.15 0.15 100%

Total Project Costs 109.28 137.47 79%

(b) Financing

Loan 7692-CN Financing Source At Appraisal

(US$ Million)

Revised

(US$ Million)

Borrower 88.26 72.89

International Bank for Reconstruction and Development 90 90

Total 178.26 162.89

Loan 7937-CN Financing Source At Appraisal

(US$ Million)

Revised

(US$ Million)

Borrower 68.88 64.56

International Bank for Reconstruction and Development 60 60

Total 128.88 124.56

36

Annex 2. Outputs by Component

Component 1. Improving the effectiveness and coverage of critical urban

infrastructure services in selected counties

This component was designed primarily to increase access of urban residents to three

critical services: wastewater, solid waste management, and water supply. These

investments were further expected to help Yunnan meet the challenges of rapid

urbanization while also improving environmental quality and quality of life for urban

residents. This component depended on proper financial management by local Project

implementation units, county governments, and municipally-owned utilities and

enterprises, which operated wastewater treatment plants, water supply infrastructure, and

waste management services. The following seven outcome indicators were identified in

the PAD for measuring the achievement. Three of them are PDO outcome indicators, and

the others are intermediate outcome indicators.

PDO Outcome Indicators:

• Cumulative number of urban residents with access to wastewater treatment

services

• Cumulative number of urban residents with access to solid waste management

services

• Cumulative number of urban residents with access to water supply services

Intermediate Outcome Indicators:

• Total reduction in Chemical Oxygen Demand pollutants loads achieved under the

Project (tons per year)

• Volume of municipal solid waste disposed in landfills (tons per day)

• Length of river section restored (kilometers)

• Increase in number of visitors to Lion Mountain Park (total number of people)

The physical achievements of this component (excluding the AF) are summarized in

Tables 11 and 12 below:

Table 11: Project Physical Achievements by Subcomponent (excludes AF)

SUBCOMPONENT LOCATION SELECTED PHYSICAL

ACHIEVEMENTS

I.A.1.I Kunming 450,000 cubic meter sanitary landfill; 30

ton/day leachate treatment facility; 1 waste

transfer station; 300m access road; associated

equipment for collection and site operation;

closure of existing dumping site.

I.A.1.II Kunming 600,000 cubic meter sanitary landfill; 2 waste

transfer stations; 70 ton/day leachate treatment

station; associated equipment for collection and

site operation; closure of existing dumping site.

37

I.A.1.III Kunming 319,000 cubic meter sanitary landfill; 50

ton/day leachate treatment station; 1 waste

transfer station; associated equipment for

collection and site operation; closure of

existing dumping site.

I.B.1 Lijiang 2.19 million cubic meter sanitary landfill; 9

waste transfer stations, 200 ton/day leachate

treatment station; 3.95 km access road;

associated equipment for collection and site

operation; closure of old landfill site.

I.B.2.I Lijiang 20,000 cubic meter/day wastewater treatment

plant; 311 km of sewers

I.B.2.II Lijiang 129.74 km sewer network

I.B.2.III Lijiang 6,000 cubic meter/day wastewater treatment

plant; 35.74 km sewer network

I.B.3 Lijiang 35 high-powered electric lights, Lion Mountain

access road, trash receptacles, parking lot;

afforestation of 1505m2 and landscape lighting

I.C.2.I.A Wenshan 8km water transfer pipe, 6,000 cubic meter/day

water pumping station, 14 km water supply

pipe

I.C.2.I.B Wenshan 6,000 cubic meters/day wastewater treatment

plant and 850m access road, 14.8 km sewer

network

I.C.2.II Wenshan 8,000 cubic meter wastewater treatment plant,

15.29 km sewer network

I.C.2.III Wenshan 27.25km sewer network, 4.4 km pressure pipe

pipe and channel for discharge of effluent from

WWTP, lifting pump of 10,000 tons/day

I.C.3.I Wenshan 6.17 km drainage ditches and associated

filtration infrastructure

I.C.3.II Wenshan 6.6 km river bank restoration, 1548m

boardwalk construction, and afforestation of

2322 square meter.

I.C.4 Wenshan 1 Environmental monitoring vehicle, 4

emergency protective clothings procured

Component 2. Improving the effectiveness of Dianchi Lake Management

This component was intended to address acute water pollution in Dianchi Lake, which was

largely attributed to coordination challenges between the multiple governments and entities

charged with improving water quality and managing the lake basin. This component

largely took the form of an Integrated Lake Basin Management plan which was formulated

through a consultative process and laid out a master vision for development and

environmental protection of the lake. This component also financed associated water

quality monitoring infrastructure. One PDO outcome indicator was specified to measure

progress toward the objectives of this component.

This component, aside from producing a lake basin master plan, also produced an online

data-sharing platform and associated access system; installed water quality monitoring

equipment; and generated tens of thousands of water quality monitoring records.

38

PDO Outcome Indicators:

• Improved capacity for Dianchi Lake management

Component 3. Resettlement

This component was concerned with managing resettlement related to the Project,

especially compliance with safeguards. No PDO outcome or intermediate indicators were

specified for this component.

Additional Financing

The following subcomponents were added as part of the Additional Financing:

Part 1. Urban Environmental Infrastructure Development

Develop critical urban environmental infrastructure in Zhaoyang District of Zhaotong

Municipality as follows:

(a) Development of wastewater and water supply systems, including expansion of wastewater

treatment plants; construction of sewage collection and drainage networks; construction of

water supply treatment plants and networks and construction of water transmission mains.

(b) Carrying out of investments to improve management of the river environment, including

construction and rehabilitation of river embankments, and dredging of rivers, all to mitigate

against erosion and floods and control and scale down pollution and restore the river eco-

system.

(c) Provision of support for the implementation of Project activities, including:

(i) with respect to Zhaoyang District of Zhaotong Municipality, provision of technical

assistance and equipment for supervision of environmental infrastructure

construction and for environmental monitoring; and

(ii) with respect to other implementing agencies and entities, provision of technical

assistance, training courses and study tours to assist in:

(A) detailed engineering design, design review, procurement management and

contract supervision;

(B) operation and management of water supply, wastewater and river

management facilities; and

(C) building capacity for Project management and operation.

Part 2. Resettlement

39

Carry out resettlement and rehabilitation of Displaced Persons in connection with the

implementation of Part 1 of the Project.

Table 12. Project Physical Achievements by Subcomponent under AF

SUBCOMPONENT LOCATION SELECTED PHYSICAL

ACHIEVEMENTS

(a)(i) Zhaotong 25.79 km water transfer pipe; 2 water

treatment plants of 60,000 m3/day; 1 pumping

station of 20,000 m3/day; 83.46 km water

supply distribution pipes.

(a)(ii) Zhaotong 20,000 cubic meters/day extension of

wastewater treatment plant and 48.92 km

sewer network

(b) Zhaotong 45.35 km river rehabilitation; environmental

monitoring equipment and waste collection

facilities; as well as flood risk management

system

40

Annex 3. Economic and Financial Analysis

Not required.

41

Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members

Name Title Unit

Joanna Mclean Masic Sr Urban Specialist GSU09

Zheng Liu Procurement Specialist GGOPP

Fang Zhang Sr Financial Management Specialist GGOEA

Dan Xie Program Assistant EACCF

Huiying Guo Huiying Guo EACCF

Meixiang Zhou Sr Social Development Specialist GSU02

Scott Michael Moore Young Professional GWA02

Shunong Hu Sr Water Engineer GWA02

Sing Cho

Sr Water Supply and Sanitation

Specialist GWA02

Xin Ren Sr Environmental Specialist GEN2A

Eddie Hum Sr Municipal Engineer Consultant

Mantang Cai

Cultural Heritage and Watershed

Specialist Consultant

Yan Li Economist and Financial Specialist consultant

42

Annex 5. Beneficiary Survey Results

Not Applicable

43

Annex 6. Stakeholder Workshop Report and Results

Not Applicable

44

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR

Note: the following is a summary of Borrower’s Implementation Completion Reports for

YUEP and the AF provided by the Borrower.

CHINA

YUNNAN URBAN ENVIRONMENT PROJECT AND ITS ADDITIONAL

FINANCING

SUMMARY OF BORROWER’S IMPLEMENTATION COMPLETION

REPORTS

1. Assessment of Project Objective, Design and Implementation

1.1 Key Project Data

Country People’s Republic of China

Project Name Yunnan Urban Environment Project and its Additional

Financing

Project Number P096812 / P117819

Loan Number 7692 / 7937-CN

Totoal Financing US$ 150 Million (US$ 90 M / US$ 60 M )

Loan Terms

A single currency, variable spread loan, with a maturity of

25 years, incl. an 8-year grace period, and a front-end fee

of 0.25%

Total Estimated Project

Investment

RMB 2,235.33 Million (RMB 1,300.53 M / RMB 934.80

M)

Environmental Category A

Dates of Loan/Project

Agreement July 22, 2009 / August 23, 2010

Effectiveness Dates September 30, 2009 / November 15, 2010

Original Closing Date June 30, 2015 / June 30, 2016

Extended Closing Date April 30, 2017

1.2 Background

1. Yunnan is endowed with rich natural resources in the agriculture, mining and power

sectors as well as in its scenic landscape and cultural heritage. The province’s diverse

cultural heritage includes 25 ethnic minority groups comprising 40 percent of its population

and contributing to a strong tourism industry. Yunnan has experienced robust economic

growth over the past two decades. GDP growth has averaged 8.9 percent. During 2000–

2005, GDP per capita grew from RMB 4,600 to RMB 7,800. Yunnan Province faces urban

development issues on two fronts: (i) the need to develop urban environmental

infrastructure for future growth promotion in secondary urban centers; and (ii) the need to

45

reverse environmental degradation in its largest urban centers caused by the robust

economic growth in the past. The major aim of Yunnan Urban Environment Project

(YUEP) and its Additional Financing (AF) was thus to assist the province in addressing its

lagging basic urban infrastructure.

1.3 Assessment of Project Objective

2. The project development objective (PDO) of YUEP and its AF is to assist Yunnan

Province in improving the effectiveness and coverage of critical urban infrastructure

services in selected counties and effectivenss of lake basin management in Dianchi lake,

through investments in systems for the management of wastewater, water supply, solid

waste, river environment and cultural heritage.

3. The PDO reflects the problems of lagging basic urban infrastructure and the

demands to urgently address them in development of Yunnan Province. The project focus

on the construction of municipal wastewater and solid waste collection and treatment

facilities and integrated management of river/lake environment while is combined with the

improvement of integrated management effectivenss of Dianchi lake basin. It is consistent

with the growth strategy set in Yunnan’s 11th Five-Year Plan, the development policies in

outline of China’s 11th Five-Year Plan and also the key strategic pillars in the Bank’s

Country Partnership Strategy for China.

1.4 Assessment of Project Design

4. The YUEP consists of two pillars: (i) county towns urban environmental

infrastructure development; and (ii) integrated lake basin management infrastructure

investments. The total project investment is estimated at RMB 1,300.53 million, of which

the loan is $90.00 million. Component I: County Towns Urban Environmental

Infrastructure Development would help the selected counties in Kunming, Lijiang and

Wenshan develop critical urban environment service infrastructure by developments of

solid waste management services systems and wastewater and waster supply systems,

cultural heritage management, river improvement measures and capacity building for

environmental monitoring. Component II: Integrated Lake Basin Management would

assist Kunming in establishing more integrated lake management systems in Dianchi Lake

basin through technical assistance in policy actions and development of monitoring

systems. Refer details to the Project Appraisal Document (Report No.: 41199-CN).

5. The AF components for Zhaotong is estimated at RMB 934.80 million, of which

the loan is $60.0 million, including: (a) development of wastewater and water supply

systems, including expansion of wastewater treatment plants, construction of sewage

collection and drainage networks, construction of water supply treatment plants and

networks and construction of water transmission mains; (b) carrying out of investments to

improve management of the river environment, incl. construction and rehabilitation of river

embankments and dredging of rivers; (c) provision of support for the implementation of

project activities. Refer details to the Project Appraisal Document (Report No.: 53586-

CN).

6. Project Restructuring. On the premise that the PDO and total loan amount remained

unchanged, the project restructuring was made and completed in June of 2015 with

approval by the Bank, while the closing dates for both YUEP and its AF were extended to

April 30, 2017 .

46

7. Assessment of project design. In general the project design and preparation are

satisfactory: (i) the project focus on construction of municipal wastewater and solid waste

collection and treatment facilities and integrated management of river/lake environment,

reflecting the issues and demands of Yunnan Province; (ii) the selection of project locations

is consistent with local economic and social development masterplan and special

plannings, fully reflecting the consensus and will of local government and people; (iii) the

alternatives for site selection and process were considered and analyzed in the feasibility

studies and the practical technologies available in market used in the project designs; (iv)

the project procurement plan (PPP) was feasible and the arrangements for implementation,

financial management and disbursement were in accordance with characteristics of the

complex and large-scale project.

8. Major issues in project design: (i) financial covenants designed originally for cost

recovery of wastewater and solid waste management by tariff/fee revenues were actually

difficult to be implemented to meet the requiements and had to be revised in the project

restructuring; (ii) the implementing agency (IA) and the Bank’s team were overly

optimistic about satisfying the general condition for the subcomponent of Lion Mountain

Cultural Heritage Preservation in Lijiang, moreover both sides’ understanding on the

condition was quite different during project implementation, which led to a long delay of

this subcomponent; (iii) most of IAs and local project management offices (PMOs) at levels

of muncipality/prefecture and counties were the first to implement the Bank’s financed

project and lacked of knowledge and experiences on project management, but it was lacked

of enough training for them in project design.

1.5 Assessment of Project implementation

9. Project Management. The project management chain at three levels of governments

was well maintained in general during project implementation. With strong support from

provincial leading committee for the project, provincial PMO and local PMOs strengthened

communication with the Bank’s team and seriously performanced their respective

responsibilties. Overall project management is highly appreciated by the Bank’s team.

10. Procurement Management. The PMOs organized updating of the PPP annually or

as needed, urged and guided the IAs to carry out procurement activities according to the

PPP approved by the Bank. For YUEP, total of 88 contracts (civils 69, goods 15 and

services 4) were awarded with the cumulative prices of about RMB 861.0 million. For AF,

total of 24 contracts (civils 18, goods 4 and services 2) awarded with the cumulative prices

of about RMB 537.58 million.

11. Implementation of Resettlement Action Plan (RAP). The PMOs, IAs and local

related authorities actively coordinated and organized implementation of land acquisition,

demolition and resettlement, and there was no incident of any petition or appeal by affected

persons during project implementation, which created favorable conditions for the project

construction. For YUEP, the permanent land of 959 Mu was acquisited and the

houses/structures of 22,200.6m2 demolished, with about 940 Mu and 41,724m2 less than

the planned respectively, and the temporary land of 1,174.74 Mu borrowed, with increase

of about 506 Mu more than the planned. Total payment of RMB 132.74 million was made

for compensation and resettlement. For AF, the permanent land of 224.38 Mu was

acquisited and the houses/structures of 6,336 m2 demolished, with about 10 Mu and 1,653

m2 less than the planned respectively, and the temporary land of 2,223.37 Mu borrowed,

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with increase of about 968 Mu more than the planned. Total payment of RMB 58.69 million

was made for compensation and resettlement.

12. Implementation of Environment Management Plan (EMP). The PMOs, IAs and

local related environmental authorities seriously implemented measures proposed in the

EMPs of project and reduced short-term adverse environmental impacts during project

construction to an acceptable level. There was no significant environmental accident or

compliant during project implementation.

13. Financial Management. A relatively stable and complete financial management

system was maintained during project implementation: (i) Yunnan Finance Bureau (YFB)

established the designated accounts for the project and timely made the reibmursement; (ii)

the IAs established the independent account for accounting of the project; (iii) the

provincial PMO periodically consolidated the financial statements of subcomponents, and

reported it to the Bank in time; (iv) an annual audit was regularly made on implementation

of the project, and the aduit reports were submitted to the Bank in time.

14. Performance of Legal Covenants. The PMOs, IAs and related authorities closely

cooperated and actively took measures and actions to performance and satisfy legal

covenants of the project in terms of the Loan Agreement (LA) and Project Agreement (PA).

15. Monitoring and Evaluation (M&E). The PMOs organized carring out the M&E on

project implementation, including: (i) continuous tracking and monitoring implementation

progress; (ii) carring out external independent M&E on implementation of RAPs

periodically; (iii) monitoring of environmental status during construction and operation;

(iv) monitoring and updating of indicators in the Results Framework to reflect the progress

of project implementation.

2. Assessment of Outcome against Agreed Objective

2.1 Outcome/achievement of objective

16. Through implementation of the project, a number of urban environmental

infrastructures had been built, and then the effectiveness and coverage of urban

infrastructure services are further improved in selected counties and the effectivenss of

integrated lake basin management of Dianchi lake further improved. The PDO of YUEP

and its AF is achieved.

17. For YUEP:

(i) 4 new sanitary solid waste landfills and 13 waste collection and transfer stations

were built with total capacity of 515 tons/day, while a number of associated

equipments were procured for clearning, collection and treatment of solid waste.

In project areas, the cumulative number of people in urban areas with access to

solid waste management services is increased from 182,000 in 2009 to 453,800

in 2016.

(ii) 4 new wastewaer treatment plants (WWTPs) were built with total capacity of

40,000 m3/day, and sewage main and branch collectors and home connectors

constructed with total extension of 506.7 km. Additional 27.25 km of sewage

system and drainage pipe was constructed and rehabilitated in Yanshan County.

In project areas, the cumulative numbe of people in urban areas with access to

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wastewater services is increased from 159,800 in 2009 to 485,200 in 2016.

(iii) With implementation of Lion Mountain Cultural Heritage Preservation

subcomponent in Lijiang, the access road of about 2 km, ecological parking areas

of 4,246.83 m2, greeing areas of 1,505 m2 and landscape lighting facilities were

completed. The mountain’s ecological environment and landscape were

improved and the visitors to the park are increased year by year, reaching about

79,200 person-times in 2016.

(iv) Also in Wehshan, (a) the existed No.1 water treatment plant (WTP) was

renovated and associated raw water transmission of 8 km, a pump station and

distribution network of about 14 km built. The cumulative numbe of people in

urban areas provided with access to water services was increased from 49,000 in

2009 to 96,000 in 2016; (b) with implementation of integrated water environment

(IWE) management of Puzhehei Lake in Qiubei, 6.17 km of villages’ drainage

ditches, 3 soil infiltration treatment systems and 2 surface-flow wetlands with

total treatment capacity of 500 m3/day as well as such facilities as garbage

collection pits and pins, public and household latrines, etc were constructed,

which effectively control major pollution load into the lake and obviously

improve the water quality of lake and ecological landscape of lakeshore; (c) under

the subcomponent of IWE management of Puting River in Funing, the

mainstream and tributaries were rehabilitiated with total lengthe of 6.6 km, which

greatly improved the river environment and ecological landscape along rivers,

and also make county town’s flood control standard increased from five year to

thirty year return; (d) 1 environmental emergency monitoring vehicle including

equipments, 1 automatic chemical analyzer and 4 emergency protective clothings

were procured under the environment management technical assistance for

Wenshan Prefecture, which filled its gap in environmental emergency monitoring

apparatus and response capability.

(v) Under Component II: (a) with implementation of monitoring and management

system for Dianchi Lake basin, 3 water quality automatic monitoring stations and

14 water monitoring stations for rivres into the lake and 1 water quality

monitoring station were built, 2 movable water quality monitoring stations

(vehicles) and 2 sampling vehicles (incl. equipment) procured, and a total

pollutant emission monitoring and management system developed. More than

300,000 of monitoring data have been generating since the stations for Jinjia,

Haihe and Luolong rivers were put into operation, providing the data support to

environmental management sectors. (b) a long-term integrated management

masterplan for Dianchi Lake basin was prepared, in which the idea and tool of

international advanced integrated basin management was introduced, an overall

strategic and forward-looking planning proposed for the resource development,

environmental governance, ecological protection and economic and social

development, based on comprehensive development and protection of water

resources and subject to constraints of comprehensive carrying capacity of

resources and environment in the basin.

18. For AF components:

(i) 2 new WTPs were built with total designed treatmnet capacity of 60,000 m3/day,

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25.79 km of raw water transmission mains and 83.46 km of water distribution

networks constructed, bringing local water supply capacity to 100,000 m3/day.

The cumulative numbe of people in urban areas provided with access to water

services is increased from 270,000 in 2009 to 400,000 in early 2017.

(ii) Expansion of the existed WWTP was completed with capacity of 20,000 m3/day,

bringing local treatment capacity to 80,000 m3/day, and 97.92 km of sewage

collection networks constructed. The cumulative numbe of people in urban areas

with access to wastewater services is increased from 190,000 in 2009 to 320,000

in 2017.

(iii) The rivers’ courses in total length of 45.32 km were rehabilitiated, including

40.63 km of embankments constructed or reinforced, 5 bridges constructed or

restructured and dredging of rivers at amount of about 520,000m3, which make

rivers’ ecological environment improved, and rivers’ flood discharge capacity

and flood control standard enhanced.

(iv) Also, 78 sets of environmental monitoring equipment and 1 environmental

emergency monitoring vehicle were procured, which filled the gap that local has

no environmental monitoring capacity; 12 garbage transportation vehicles and

collection facilities were procured, which lays a foundation for eliminating urban

black-odor water bodies; a flood risk management system was developed, which

provides not only a tool for better management of flood and water resources, but

also a guidance for urban development to cope with stormwater drainage and

flood risk management in future, and moreover further improve local

comprehensive ability of disaster prevention and reduction.

2.2 Project cost and financing

19. For YUEP, as of the closing date:

• total project investment is completed at RMB 1,154 million, accounting for 88.7%

of total estimated project investment;

• total amount of loan is disbursed at US$ 72.28 million, equivalent to RMB 471.25

million, accounting for 40.8% of total project investment completed and 80% of

the loan amount approved, respectively;

• total amount of counterparts is completed at RMB 682.75 million, accounting for

59.2% of total project investment completed.

20. For AF components, as of the closing date:

• total project investment is completed at RMB 730.32 million, accounting for 78.1%

of total estimated project investment;

• total amount of loan is disbursed at US$ 59.45 million, equivalent to RMB 387.20

million, accounting for 53.0% of total project investment completed and 99% of

the loan amount approved, respectively;

• total amount of counterparts is completed at RMB 343.12 million, accounting for

47.0% of total project investment completed.

2.3 Assessment of project benefits

21. Environmental benefits. Through implementaton of the project:

(i) The system for municipal solid waste collection, transportation and disposal is

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further improved in project areas. As of the closing date, the cumulative amount

of municipal solid waste disposed at landfill has been 1.114 million tons since 4

built sanitary landfills were put into trial operation or operation, making lcoal

municipal sanitation and appearance improved and pollution by municipal solid

waste reduced.

(ii) The system for municipal wastewater collection and treatment is further

improved in project areas. As of the closing date, the wastewater has been

cumulatively terated at amount of about 55.2 million m3 with removed COD

pollution load of about 10,900 tons since 4 built WWTPs and extension of

Zhaotong WWTP were put into trial operation or operation, which made

contribution to total emission reduction of COD in whole province, and play a

promoting role in improving water qualities of Jinsha River system in upper

reaches of Three Gorges Reservoir and river system in Pearl River basin.

(iii) The situation of sewage discharged directly into rivers was allevated, pollution of

municipal solid waste to rivers reduced, and river environment and ecological

landscape along rivers improved by integrated river rehabilitation in project areas.

(iv) The ecological environment of Lion Mountain was improved, and unique style

and beautiful environment of the Ancient Town expanded and extended by

cultural heritage preservation, which promots the protection of heritage sites in

Lijiang

(v) The point and non-point pollution into Puzhehei Lake in Qiubei County was

effectively reduced, sanitation conditions of villages in vicinity of lake improved,

water quality of the lake improved obviously by integrated environment

management of the lake.

(vi) Capacity building makes local environmental monitoring and emergency

response capabilities improved, and provide scientific data support and

supervision means for local environmental protection.

(vii) The long-term integrated management masterplan for Dianchi Lake basin would

have a positive guiding role in improving fund use efficiency, reducing

governance costs and improving the level of basin management.

(viii) In short, it has regional and basin eco-environmental status be improved, local

urban function improved, and contradiction between urban development and

environmental constraints further alleviated, which create a suitable environment

for sustainable social and economic development in project counties.

22. Social Benefits. Through implementaton of the project:

(i) The system and neworks of local urban environmental infrastructure services are

further improved, local construction of urban infrastructure and urbanization

accelerated, and subsequently urban function promoted and urban development

space expanded.

(ii) Local investment environment is improved, which enhances investor’s

confidence and attracts investment and provides new opportunity for local

economic development, and then enhances local city's competitiveness.

(iii) The flood dischareging capacities of river courses are enhanced, local urban flood

control standards increased and flood disaster risk reduced by rivers

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rehabititation.

(iv) In project areas, more permanent jobs are created, and a large number of

temporary jobs were added by the construction during project implementation.

(v) The capacity building of environmental protection institutions and technical

progresses of environmental monitoring, scientific research and management

were promoted, the efficiency and effectiveness of government’s environmental

management improved and the environmental awareness of residents be further

increased in project counties.

(vi) A group of project management personnels being familiar with the Bank’s

policies and procedures had been trained and their capcities improved by learning

and practicing the Bank’s criteria and advanced management mode, which creates

favorable conditions for local utilization of foreign capital and international

cooperation in future.

23. Economic benefits. Through implementaton of the project:

(i) It promotes and increases local tourism development and tourism revenue in

project areas. In 2016, Lijiang received a total of about 35.20 million visitors and

total revenue was RMB 60.876 billion, with an increase of 15.18% and 25.91%

over the same period in 2015, respectively. In Qiubei County, it received a total

of about 3 million visitors and total revenue was RMB 1.69 billion in 2015, and

3.11 milliion visitors and revenue of RMB 1.792 billion from January to

November of 2016, with an increase of 13.7% and 16% over the same period,

respectively. In Zhaoyang District, it received a total of about 3.28 million visitors

and total revenue was RMB 1.919 billion in 2016.

(ii) The appreciation of local land is indirectly promoted by improving and expanding

the coverage of urban infrastructure services and improving surrounding

environment of urban areas in project counties.

(iii) Public health is further improved, and moreover the health costs reduced and the

quality of life of residents in project areas improved directly or indirectly, through

improving local urban environmental sanitation and reducing risk of infectious

diseases and health hazards by water pollution and municipal solid waste.

3. Major Factors Affecting implementation and Outcome

3.1 Factors outside the control of government or implementing agency

24. They are summarized as following:

(i) After effectiveness and implementation of the project, the rate of US dollar

against RMB continued to decline, and loan funds in dollar terms was shrunk.

Such changes made greater pressure on raising of counterparts by local

governments and IAs.

(ii) Meanwhile domestic prices were rising, especially labor costs raised rapidly, e.g.

the comprehensive price of labor’s man-days per unit was increased from BMR

34.77 in 2009 to RMB 53.23 in 2011in Yunnan Province. The increases of labor

and material prices caused the project costs increased.

(iii) A new Standard for Pollution Control on the Landfill Sites of Municipal Solid

Waste (GB16889-2008) was issued after project appraisal, in which more strictg

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requirement is provided for leachate treatment. Subsequently, the works of

leachate treatment stations were added in 4 subcomponents of solid waste

mangement and then their project costs increased accordingly.

(iv) For the Lion Mountain cultural heritage preservation of Lijiang, due to its location

in the world cultural hertiage site, the IA had been applying for its endorsemnet

according to the requirement in the PA, and made all procedures completed and

confirmed by the Bank’s team until the end of 2014, which caused it be delayed

for long time, and had to made changes and reductions to its works.

(v) The consultant firm that undertook techncial assistance of design review,

construction supervision and utility operation support forYUEP was difficult to

mobilize and provide expert resources according to the contract signed, and

termincated the contract in October 2013, which increased difficulties for project

implementation and management, althought remedies were taken by employing

individual consultants to provide services based on approval by the Bank’s team.

(vi) At the early of implementation after effectiveness of the project, it was just the

time when the state was to promote economic growth and respond to the global

financial crisis by expanding investment and stimulating domestic demands.

There existed a certain time difference for some subcomponents that were also

financed by the funds for expanding domestic demands and national debt not only

to meet domestic time requirements for construction, but also to sastify the

Bank’s procurement procedures, which increased difficulties for project

implementation and management.

3.2 Factors generally subject to government control

25. They are summarized as following:

(i) The Bank's methods and requirements for bid evaluation are not exactly the same

as those domestic practices, resulted in great challenge to the procurement

maangement, e.g., the IAs and procurement ageney were used to domestic

procedure and practices, moreover the time for bid evaluation was short and some

robust practices made without clarifications in time, which caused repeated

process of reviewing bid evaluation report by the Bank and affected the progress

of project implementatioin.

(ii) For the subcomponents of river rehabilitation, it has a long range and the

complicated topographic and geological conditions and surroundings along the

route, while more towns were involved and greater coordination required. The

delay of land acquisiton once occurred in process of implementation had a certain

impact on execution of works.

(iii) For the subcomponent of Qiubei County WWTP and sewer network, some

planned sewers were cancelled in process of implementation due to readjustment

to masterplan of county town’s, which had an impact on management of contract

being executed. It was also similar to the implementation of subcomponents under

AF components.

3.3 Factors generally subject to implementing agency control

26. The factors are summarized as following:

(i) Local PMOs and IAs at levels of municipality/prefecuture and counties were

53

unfamiliar with the Bank’s procedure and requirements for procurement, contract

management and reimbursement, and lacked of knowledges and experiences on

the Bank’s financed project, which affected implementation progress of the

project to a certain extent.

(ii) It lasted for longer time for the implementation of the Bank’s finaced project.

During implementation, some IAs’ key personnel such as legal person, finance

person and project manager were changed; and also the employed design institute

and procureent agency changed, which caused it could not give full play to

training provided on project management in early, and had an impact on the

continuity of project management.

(iii) For some subcomponents, after being invitated for bids, there eixsted evident

deviation between actual topographic and geological condition and quantities of

works and those designed, due to inadequate survey, delayed updating of maps,

insufficient design, imperfect bidding documents or without conditions for

execution, resulted in that acutal quantities of works were substantially increased

and variations ocurred in process of execution, which caused more difficulties for

project management.

(iv) Local designers were not understood and used to the specific design concept and

use of computer model for verification, as required by the Bank’s experts, which

caused a long delay of river rehabilitation and water supply networks under AF

components.

(v) Some supervision companies employed were lacked of experiences on contract

management for the Bank’s financed project, moreover understaffed and

performanced inadequately, which had an impact on project implementation and

loan reimbursement.

(vi) Some IAs did not made payment in time for works completed according to terms

of the singed contract, on consideration of possible changes of final price in

domestic audit, or not timely made the completion acceptance and environmental

acceptance of works completed, which caused reimbursement for eligible

expenditures of the project affected to a certain extent.

(vii) For some IAs, the communication was not timely made between their financial

manager and project managers, and their budget management was weak, which

caused an impact on raising of counterparts for the project.

4. Sustainability

27. A series of policies issued by the state and local government provide the sound

policy environment for the sustainability of wastewater and solid waste treatment facilities

constructed as well as river management under the project.

28. The facilities built under the project had been transferred to owners or operating

companies for their O&M. The tariff on municipal wastewater and solid waste had been

implemented in project counties. Although revenues from tariff collection are not sufficient

to cover the costs for landfilling and wastewater treatment expenses, local governments

have been providing subsidies for O&M of the facilities, which ensures the sustainability

of the project.

54

29. The online monitoring system of WWTPs built has been linked with environmental

protection sector, and COD reduction by WWTP is included in assessment of local

government’s target for total emission reduction of major pollutants, which enforced to

ensure operation of WWTPs. Also in Wenshan, it is actively promoting trusteeship of

wastewater treatment services by professional company, which is beneficial to ensure the

O&M of WWTPs.

30. Following to the implemention of AF component in Zhaoyang District, it is

continuing to increase investment for landscape greening along rivers, water replenishing

of rivers and integrated management of surrounding of river courses, and to bring rivers in

urban areas into the scope of long-term governance.

5. Bank and Borrower Performance

5.1 Bank

31. The Bank’s overall performance is satisfactory during identification, desing and

preparation, appraisal and implementation of the project. The diligence and professional of

the Bank’s team was highly appreciated by the local government sectors at all levels, PMOs

and IAs.

32. Identification, preparation and appraisal. Through field investigations and

discussions with local authorities and agencies, the Bank’s team carried out a large number

of project screening and identification based on the development plans of project sites, and

advanced many good suggestions for project design and preparation.

33. Implementation. the Bank’s team carried out the supervison on project

implementation progress every half a year on average, to have discussed issues in the

implementation, provided guidance and support for the PMOs and IAs and jointly

promoted implementation of the proect, by focusing on the PDO. All of which ensured

successful implementation of the project and achievement of the PDO.

5.2 Borrower

34. The Borrower’s overall performance is satisfactory during project preparation,

approval and implementation. The concerned state’s authorities and governemnts and

related authorities at levels of province, project municipalities/prefecture and counties had

paid high attention and strong support to the project.

35. Preparation and appraisal. The coordination leading groups and MPOs were

established at levels of the province, project municipalities/prefecture and counties, and

organized the IAs and consultant institutions to have carried out overall project preparation

in accordance with the domestic procedures for capital construction and requirements for

the Bank’s financed project, through input of a lot of human, physical and financial

resources. All of which effectively ensured that project preparation, appraisal and

negotiation were successfully completed.

36. Implementation. The governments and related authorties at all levels maintained

the strong commitment and support to the project. The PMOs, in particular the provincial

PMO, seriously performed their respective responsibilities for project management and

actively coordinated and guided the IAs to have carried out project design, land acquisiton

& resettlement, procurement, construction, reimbursement, accounting and financial

55

management as well as performance of project leagal documents and subsidiary

loan/agency agreements.

6. Experiences and Lessons Learned

6.1 Experiences

37. The experiences from the project implementation are summarized as following:

(i) The governments and related authorities had paid high attention and strong

support to the project and maintained relative stability of project management

institution, which ensured successful implementation of the project and

achievement of the PDO.

(ii) By practicing the rules and procedures of procurement and contract management

for the Bank’s financed project, local IAs and related sectors and institutions

obtained more management mode, method and experiences, and then their

capacities further enhanced.

(iii) It is useful to make potential adverse environmental impacts during project

construction be well alleviated by including major contents and requirments of

the EMPs in bidding documents and signed contracts to increase the binding on

contractors.

(iv) The IA’s ownership and conscientiousness had a significant impact on ensuring

the successful project implementation and O&M of facilities built. For the

subcomponent in Guangnan County, not only the implemention progress and

project investment were effectively controlled, but also the built facilities were

well operated and maintained, which has a good reference for construction and

O&M of a similar WWTP in county.

(v) The practice by introducing idea and method of ecological sanitation and

community participation in the IWE management of Puzhehei Lake in Qiubei

County provides the experience and reference for planning, design and

implementation of similar project.

(vi) The long-term integrated management masterplan for Dianchi lake basin, by

introducing the ieda of integrated lake basin management, has a positive guiding

role in improving fund use efficiency, reducing governance costs and improving

basin management level.

(vii) The application of computer models for optimizing construction drawing designs

of river rehabilitation and water supply networks, and the practice for

conservation and restoration of such historical structures as ancient hydraulic

drop in rivers as well as a the digital system of flood risk management under AF

components provide the experiences and references for similar project.

6.2 Lessons learned

38. The lessons learned from the project implementation are summarized as following:

(i) It shall be designed to provide more training for PMOs and IAs who are the first

time to implement the Bank’s financed project during prepation and

implemention, including training on project implementation and O&M of

facilities to be built.

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(ii) The IAs shall pay full attention to preparations of project to be implemented,

including topographic, geological and site surveies, etc., to avoid substantial

variations and more difficultes for project implementation and contract

management.

(iii) The IAs shall strengthen management of supervision companies employed, and

urge them to be staffed with adequate and competent supervisors and in place, so

as to do well quality control, schedule control and cost control of the project.

(iv) The IAs shall attach importance to the O&M of the facilities built under the

proejct, and early consider the arrangements for O&M of the facilities to be

constructed during project implemention, so that ensure transition of built

facilities to regular operations.

(v) The IAs and PMOs shall keep their personnel relatively stable and maintain the

same design institute, procurement agency and/or supervison company under the

same project, as far as possible, to ensure the continuity of project management

and give full play to the role of related training under the project.

(vi) for the Bank’s finaced project in future, it shall strengthen communication with

the Bank’s team to understand well the Bank’s safeguards and its requirements

timely, and desing a more practical and operable convenant or action plan for the

project.

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Annex 8. Comments of Co-financiers and Other Partners/Stakeholders

Not Applicable

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Annex 9. List of Supporting Documents

(1) Borrower’s Project Completion Report.

(2) China Cross-Cultural Consulting Center, Sun Yat-sen University. 2007. Social

Assessment (Summary Report). Report No. IPP252-V2.

(3) NPC & CPPCC National Committee Annual Sessions. 2006. Facts and figures:

China’s main targets for 2006-2010. http://www.gov.cn/english/2006-

03/06/content_219504.htm

(4) World Bank. 2010. Project Paper, Report No. 53586-CN.

(5) Project supervision documents, Aides-Memoires, and ISRs.

(6) World Bank. 2015. Restructuring Paper, Report No. RES18711.

(7) World Bank. 2006. China - Country partnership strategy . Washington, DC:

World Bank.


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(8) World Bank. 2012. China – Country partnership strategy. Washington, DC:

World Bank.







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