Document of The World Bank Report No: ICR2616 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-47510) ON A LOAN IN THE AMOUNT OF US$ 172 MILLION TO THE PEOPLE’S REPUBLIC OF CHINA FOR A HUNAN URBAN DEVELOPMENT PROJECT April 25, 2013 Sustainable Development Department China and Mongolia Country Management Unit East Asia and Pacific Region CURRENCY EQUIVALENTS Exchange Rate Effective December 5, 2012 Currency Unit = RMB 1.00 = US$ 0.16 US$ 1.00 = 6.20 RMB FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS BOD Biological Oxygen Demand CAS Country Assistance Strategy CDS City Development Strategy CMDC Changsha Municipal Drainage Co. Ltd COD Chemical Oxygen Demand CPS Country Partnership Strategy CZT Region Changsha-Zhuzhou-Xiangtan Region DO Dissolved Oxygen EA Environmental Assessment EIO Economic Integration Office EIRR Economic Internal Rate of Return EMP Environmental Management Plan GDP Gross Domestic Product HUDP Hunan Urban Development Project Hunan Provincial Hunan Provincial Office of the Leading & Coordination RES Office Commission for the Construction of CZT “Resource-saving & Environment-friendly Society� Reform & Experimental Zone ICR Implementation Complete Report IP Implementation Performance KPI Key Performance Indicators MIS Management Information System MLG Municipal Leading Group MOF Ministry of Finance MPMO Municipal Project Management Office O&M Operation and Maintenance ii PAP Project Affected Person PC Project Component PAD Project Appraisal Document PDO Project Development Objectives PIU Project Implementation Unit PMO Project Management Office PPMO Provincial Project Management Office RAP Resettlement Action Plan RMB Renminbi Yuan (Chinese currency) RPF Resettlement Policy Framework QAE Quality at Entry SO2 Sulfur Dioxide SS Suspended Solids TA Technical Assistance TTDC Tourism and Trade Development Co. Ltd. UDIC Urban Development Investment Co. Ltd. WWTP Wastewater Treatment Plant XMCC Xiang Mei Clean Coal Shareholding Co. Ltd. ZZCCC Zhuzhou Zhuxi Clean Coal Company Vice President: Axel van Trotsenburg Country Director: Klaus Rohland Sector Manager: Mark R. Lundell Project Team Leader: Paul Procee ICR Team Leader: Paul Procee ICR Primary Author: Josef Ernstberger iii CHINA Hunan Urban Development Project CONTENTS Data Sheet A. Basic Information....................................................................................................... v  B. Key Dates ................................................................................................................... v  C. Ratings Summary ....................................................................................................... v  D. Sector and Theme Codes .......................................................................................... vi  E. Bank Staff .................................................................................................................. vi  G. Ratings of Project Performance in ISRs ................................................................. viii  H. Restructuring (if any) .............................................................................................. viii  I. Disbursement Profile .................................................................................................. ix  Main Report: 1. Project Context, Development Objectives and Design ............................................... 1  2. Key Factors Affecting Implementation and Outcomes .............................................. 5  3. Assessment of Outcomes .......................................................................................... 12  4. Assessment of Risk to Development Outcome......................................................... 17  5. Assessment of Bank and Borrower Performance ..................................................... 17  6. Lessons Learned ....................................................................................................... 20  7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 21  Annexes: Annex 1. Project Costs and Financing .......................................................................... 22  Annex 2. Outputs by Component ................................................................................. 23  Annex 3. Economic and Financial Analysis ................................................................. 31  Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 36  Annex 5. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 38  Annex 6. Photo Illustrations of Project Sites ................................................................ 39  Annex 7. List of Supporting Documents ...................................................................... 42  Annex 8. Resettlement and Land Acquisition ............................................................. 43  Annex 9. Project Map - IBRD#33573 ......................................................................... 53  iv A. Basic Information Country: China Project Name: Hunan Urban Development Project Project ID: P075730 L/C/TF Number(s): IBRD-47510 ICR Date: 04/25/2012 ICR Type: Core ICR Lending Instrument: SIL Borrower: People's Republic of China Original Total Commitment: USD 172.00M Disbursed Amount: USD 172.00M Revised Amount: USD 172.00M Environmental Category: A Implementing Agencies: Hunan Provincial RES Office Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 03/03/2003 Effectiveness: 08/16/2005 08/16/2005 03/09/2006 Appraisal: 03/08/2004 Restructuring(s): 08/16/2009 06/02/2010 Approval: 09/16/2004 Mid-term Review: 12/01/2008 01/16/2009 Closing: 12/31/2010 10/31/2012 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate 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 Implementing Quality of Supervision: Satisfactory Moderately Satisfactory Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation Performance Indicators QAG Assessments (if any) Rating Potential Problem Project at any time Yes Quality at Entry (QEA): None (Yes/No): v Problem Project at any time (Yes/No): Yes Quality of Supervision (QSA): None DO rating before Closing/Inactive Moderately status: Satisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Coal Mining 5 3 Flood protection 45 52 Other social services 3 5 Urban Transport 20 20 Wastewater Treatment and Disposal 27 20 Theme Code (as % of total Bank financing) City-wide Infrastructure and Service Delivery 40 60 Climate change 20 20 Pollution management and environmental health 40 20 E. Bank Staff Positions At ICR At Approval Vice President: Axel van Trotsenburg Jemal-ud-din Kassum Country Director: Klaus Rohland David R. Dollar Sector Manager: Mark R. Lundell Keshav Varma Project Team Leader: Paul Procee Raja Iyer ICR Team Leader: Paul Procee ICR Primary Author: Josef Ernstberger Vivian Argueta-Bernal F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The objective of the project is to foster greater integration in the Changsha-Zhuzhou-Xiangtan (CZT) Region of Hunan Province through support for a carefully selected set of priority investments to address specific regional needs in a sustainable manner. Revised Project Development Objectives (as approved by original approving authority) N/A (a) PDO Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years Meeting held by Provincial Leading Group for Economic Integration on Project Indicator 1 : Progress (meetings per year) Value quantitative or 2 2 2 Qualitative) vi Date achieved 08/31/2004 12/31/2010 10/31/2012 The target of two meetings was met, but it does not fully reflect the PDO outcome. Many Comments more meetings have been held at the regional level. The Coordination Commission for (incl. % the Construction of CZT “Resource-saving & Environment-friendly Society� Reform & achievement) Experimental Zone (Hunan Provincial CZT RES Office) managed this project. During project implementation the office was up-graded in its functions and responsibilities. (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised Target approval Completion or Values documents) Target Years PC1 – Corridor: Length of embankment strengthened to required standard Indicator 1 : (cumulative km of embankment) Value (quantitative 0 72 61.4 66.1 or Qualitative) Date achieved 08/31/2004 08/31/2010 10/31/2012 10/31/2012 Comments The target value was revised from 72 to 61.4km for 2012. This was due to the fact that (incl. % embankment to be strengthened is 61.4km; and the length of road to be constructed on achievement) top of the dyke is 72 km. Indicator 2 : PC1 – Corridor: Length of scenic road constructed (cumulative km) Value (quantitative 0 72 71.84 or Qualitative) Date achieved 08/31/2004 08/31/2010 10/31/2012 Comments (incl. % The target has been achieved. achievement) Indicator 3 : PC2 – Wastewater component: construction of network (cum. Km) Value (quantitative 0 49 43.84 48.89 or Qualitative) Date achieved 08/31/2004 08/31/2010 10/31/2012 10/31/2012 Comments (incl. % Target achieved achievement) Indicator 4 : PC2 – Wastewater component: % of sewage treated in Changsha Value (quantitative 30% 44% 58% 92% or Qualitative) Date achieved 08/31/2004 08/31/2010 10/31/2012 10/31/2012 The original target has been met through the construction of a wastewater plant with a Comments capacity of 120,000 m3/day followed by an expansion to a capacity of 160,000 m3/day (incl. % treating about 58% of the wastewater in Changsha. However, more wastewater treatment achievement) plants are being constructed in Changsha and the percentage of sewage treated in Changsha has reached 92%. TA: Institutional Strengthening and Implementation Assistance: Project Indicator 5 : management (cumulative awarded contracts) Value (quantitative 0 48 58 62 or Qualitative) Date achieved 08/31/2004 08/31/2010 10/31/2012 10/31/2012 vii Comments (incl. % All TA contracts have been awarded. achievement) CMDC institutional strengthening (Recommendations, Approvals, and Indicator 6 : implementation/operation) Value (quantitative 0 51/O 51/O 51/O or Qualitative) Date achieved 08/31/2004 08/31/2010 10/31/2012 10/31/2012 Comments (incl. % The final target of 5 I/O was met in 2010. achievement) CZT-EIO Project Management (Recommendations, Approvals, and Indicator 7 : implementation/operation Value (quantitative 0 51/O 51/O 51/O or Qualitative) Date achieved 08/31/2004 08/31/2010 11/30/2012 11/30/2012 Comments (incl. % The final target of 5 I/O was already met in 2010. achievement) G. Ratings of Project Performance in ISRs Date ISR Actual Disbursements No. DO IP Archived (USD millions) 1 09/30/2004 Satisfactory Satisfactory 0.00 2 06/15/2005 Satisfactory Moderately Satisfactory 0.00 3 03/29/2006 Satisfactory Moderately Satisfactory 6.86 4 11/14/2006 Unsatisfactory Unsatisfactory 6.86 5 06/20/2007 Unsatisfactory Unsatisfactory 11.94 6 06/29/2008 Unsatisfactory Unsatisfactory 21.80 7 04/28/2009 Moderately Unsatisfactory Moderately Unsatisfactory 36.06 8 06/25/2009 Moderately Unsatisfactory Moderately Unsatisfactory 44.45 9 09/18/2009 Moderately Unsatisfactory Moderately Unsatisfactory 51.01 10 05/17/2010 Moderately Unsatisfactory Moderately Unsatisfactory 63.61 11 12/23/2010 Moderately Satisfactory Moderately Satisfactory 76.71 12 02/20/2012 Moderately Satisfactory Moderately Satisfactory 123.80 13 10/27/2012 Moderately Satisfactory Moderately Satisfactory 154.17 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Restructuring Disbursed at Reason for Restructuring & Key Approved Date(s) Restructuring in Changes Made PDO Change DO IP USD millions Postponing effectiveness condition 03/09/2006 N S MS 6.86 related to TA for design review and certification Reallocation of loan proceeds from 08/16/2009 N MU MU 45.02 unallocated category Reasons: devaluation of US$ and 06/02/2010 N MU MU 63.61 cost increases, delays in viii resettlement and provision of counterpart funds, changes in regional master plan, and bankruptcy of one project entity. Main changes: (a) cancellation of project activities no longer relevant; (b) reallocation of loan from cancelled activities; (c) adjustment of disbursement percentages; (d) extension of closing date; and (e) revision of monitoring indicators and targets. I. Disbursement Profile ix 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. At appraisal in early 2004, urbanization and urban development were central themes in China’s overall development strategy. During the Tenth Five-Year Plan (2001- 2006) the Government of China emphasized the importance of sustainable development and improvements in livability during the transition from a rural to an urban economy. It also decided to emphasize the provision of environmental infrastructure to ensure the sustainability of the rapid industrialization and urbanization process during this period. 2. The Government also set the strategic objective to develop central China and promote regional cluster development as one urbanization model, with a view to benefiting from the efficiencies that could be gained through economic integration of multiple urban areas. National and local governments played an important role in cluster development by creating and supporting the necessary policy and planning framework for such clusters, providing infrastructure to assist physical integration and supporting improvements to livability. 3. Hunan Province is located in the central region of China, which is characterized by quite humid cold winters and hot and rainy summers. At appraisal, the Hunan’s GDP per capita was ranked 17th nationally, at 22% below the national average. Both the national and Hunan Provincial governments attached high priority to the economic development of the Changsha - Zhuzhou - Xiangtan (CZT) Region in the eastern part of the Province as an example of cluster based urban development. Development of the CZT Region was intended to be the basis upon which Hunan would transform from a largely agricultural province into a more balanced economy, with growth in tertiary sectors and high technology. The CZT Region encompasses some 28,000 square kilometers, and had a population of 13.8 million (of whom 3 million lived in the core urban areas of the three cities), and was the only significant urban agglomeration in the province. The plan for setting up the CZT reform and experimental zone (approved by the State Council) required not only forming a new model for cluster-based city development, but also one that would develop a resource-saving and environmental friendly regime, and accumulate experience in transforming the traditional industry. 4. Rationale for Bank Involvement. Hunan participated in the East Asia Region’s first cohort of City Development Strategies (CDS). It requested the Bank and the Cities Alliance to support the preparation of a Regional CDS (RCDS) for the CZT Region instead of a single city CDS. An important part of the CZT integration was determined to be the development of the Xiang River corridor to improve the connectivity between the three cities and reduce flood risk posed by the river in order for development to happen. The provision of environmental infrastructure would support regional development and reduce the potential environmental impacts and diseconomies. Further, the environmental infrastructure sector suffered from many of the same institutional, technical and financial 1 deficiencies as other areas of China. Capacities needed to be strengthened to improve efficiency and sustainability. The province subsequently requested Bank support for a project that would address these specific needs. In addition to providing financial support for the investment program, the Bank provided international experience and support in the crucial capacity building of CZT Economic Integration Office (EIO), so that it becomes an important and influential organization able to coordinate strategic regional development. 5. The Bank also intended to provide Hunan the benefit of its extensive global and China experience in urban development, flood protection, water pollution control, cultural heritage, air quality improvement, institutional development, and financial management. Even though Hunan had worked with the Bank in other sectors, this was the first project in the urban sector. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) 6. The Project Development Objective (PDO) was to foster greater integration in the Changsha - Zhuzhou-Xiangtan (CZT) Region of Hunan Province through support for a carefully selected set of priority investments to address specific regional needs in a sustainable manner. 7. The only Key Performance Indicator (KPI) at the PDO level was the number of meetings held by the Provincial Leading Group for economic integration on project progress. At the component level KPIs included: (1) length of embankment strengthened to required standard and length of scenic road constructed; (2) length of sewage collection network and percentage of sewage treated in Changsha; (3) sales of clean coal products and reduction of Sulphur Dioxide emissions in the CZT region; (4) number of visitors to Zhaoshan Scenic Area, and (5) contract awards and implementation of key recommendations with regard to the development of institutional. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 8. The PDO remained unchanged throughout the project implementation. As part of the project restructuring on May 25, 2010, some of the indicators and targets were changed to reflect the agreed revisions in the scope of construction works including:  The total “length of embankment strengthened� was changed from 72km to 61.4km;  The length of sewer network was reduced from 49km to 43.85km and the percentage of sewage treated in Changsha was increased from 44% to 58%;  The indicators (3) and (4), related to Zhuzhou Clean Coal Component and Zhaoshan Scenic Area Component, were deleted. 2 1.4 Main Beneficiaries 9. The CZT Region had a population of 13.8 million, of whom 3 million lived in the core urban areas of the three cities. Most of this population was to benefit to some extent from the project through improved economic development, improved transportation, cleaner air, a better landscape and cleaner rivers. However, the direct beneficiary population was much smaller. Some 205,200 people were projected to directly benefit from the wastewater treatment plant. The actual number was 273,600. Some 257,000 people were projected to benefit from the flood protection investment, while the actual beneficiary number reached 413,500. 10. The benefiting institutions include the CZT Economic Integration Office, government line departments at the provincial, municipality and lower levels as well as the public utility company of the Changsha Waste Water Treatment Facility and the Zhuzhou Zhuxi Clean Coal Company, but also design and supervision companies. 1.5 Original Components (as approved) 11. The original project included five Project Components (PCs) described below:  PC1: Corridor Component (US$253.8 million or 66% of total project costs): which was intended to jointly improve the livability along the Xiangjiang River in the CZT Region, reduce flood damages, create recreational areas, foster economic activities, and improve transportation infrastructure. The component included strengthening the Xiangjiang River embankment, and developing a scenic road along the embankment (total length of 72 km) from Changsha to Leidashi Township in Zhuzhou. This component included four sections: (1) The Changsha section about 22 km, (2) the Zhaoshan section about 6 km, (3) the Xiangtan urban section about 11 km, and (4) the Zhuzhou section about 33 km.  PC2: Changsha Wastewater Component (US$101.6 million or 26% of total project costs), which was intended to reduce water pollution in the Liuyang River , and improve urban environment and living conditions and develop the Changsha Municipal Wastewater Company into an autonomous public utility that would operate following commercial principles. The WWTP and its operation were also included as a demonstration project for the region. Specific investments included: (1) a wastewater treatment plant (WWTP) with the capacity of 120,000 m3/d; (2) the associated sewage collection system of approximately 47.4 km; and (3) three pumping stations (PS) to lift the overflows to the Liuyang River.  PC3: Zhuzhou Clean Coal Component (US$15.3 million, or 4% of total project costs) which was designed to support the construction of coal water mixture and briquette manufacturing plants, and the renovation of a coal washing and blending plant in Zhuzhou to provide clean coal products, to replace the use of raw coal 3 and fuel and thus reduce air pollution in the CZT Region. This included: (1) coal washing plant with a capacity of 1 million tons/year, (2) a coal briquette plant with a capacity of 250,000 tons/year, and (3) a coal water mixture plant with a capacity of 250,000 tons/year.  PC4: Zhaoshan Scenic Area Component (US$8.5 million, or 2% of total project costs) which sought to improve livability in the CZT Region through the sustainable redevelopment of one of its main recreational assets, the Zhaoshan Scenic Area. This included works to rehabilitate and afforest natural grounds, including eight natural scenic spots with a park, providing supporting infrastructure and utilities, and sights for educational purposes.  PC5: Technical Assistance for Implementation and Institutional Development Component (US$6.9 million, or 2% of total project costs) which sought to assist the project’s implementation and to build capacity in the CZT EIO and other project agencies. 1.6 Revised Components 12. As a result of the changing economic situation in the CZT region, some of the project components were adjusted. Several activities were financed under national programs instead of the project, while some new activities were added to existing components. The changes and the relevant adjustments included:  PC2: The Changshanyuan WWTP was originally designed to treat 120,000 m3/day and later expanded to 160,000 m3/day. This included the construction of the Chaozhengyuan pumping station. The corresponding expansion of the wastewater network was included as part of counterpart financing of this component.  PC3: When the original implementing agency, the Zhuxi Clean Coal Company, declared bankruptcy in December 2008, the operation was taken over by the Xiang Mei Clean Coal Shareholding Limited Co. (XMCC). The coal washing equipment procured under the project was transferred and put in operation by the XMCC which became responsible for sub-loan repayment. Out of the US$7.76 million originally allocated to this component, US$4.32 million were used, with the balance reallocated to other components.  PC4: Changes in the master plan for the Zhaoshan Scenic Area and issues with counterpart funding responsibilities affected this component. It was therefore canceled and its US$3.18 million reallocated to other components.  PC5: Some of originally planned domestic and overseas study tours were considered less relevant and cancelled in favor of more important technical assistance contracts such as the collection and processing of data for the Chang- Zhu-Tan Management Information System (MIS) and a technical assistance for the Changsha Urban Development Investment Company (UDIC) regarding project management, capacity building, training, and developing a long-term training plan. 4 1.7 Other significant changes 13. Extension of the Loan closing date: Project implementation started in 2005 and was originally scheduled for completion at the end of 2010. The project suffered major implementation delays mostly caused by resettlement delays and issues related to a timely provision of counterpart funding. At the mid-term review the loan closing date was extended to October 31, 2012 as part of an overall project restructuring. 14. Exchange rate fluctuations: The U.S. dollar depreciated some 30% over the life of the project. This significantly reduced the value of the World Bank loan in local currency, in which most contracts were denominated. The financing gap was largely covered by additional counterpart funding. 15. Adjustment of the disbursement rates: To off-set the increased financing burden on the counterpart side caused by higher than expected costs for resettlement, a number of additional non-Bank financed activities, and the devaluations of the U.S. dollar the disbursement percentages for different components were increased in May 2009. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 16. As mentioned above, this project was developed under a partnership between the East Asia Region of the Bank and the Cities Alliance which supported Hunan’s request to prepare a project with a regional angle instead of for a single city. 17. PDO/KPI. The PDO was fully aligned with the CZT Regional development objective and Chinese urban policy priorities. However, the PDO was very broadly defined and overly ambitious given the size of the project (US$386.16 million) and its activities in relationship to the scope of an economic development region as large and complex as the CZT Region. The PDO was also difficult to measure, and attribution, in terms of how and to what extent the project would foster greater integration of the region, was difficult to establish. The outcome indicator “number of meetings of a Provincial Leading Group for Economic Integration� was qualitative and should have been more quantitatively linked to future progress on regional integration. The links between the results indicators at the component level with the PDO of the project should have been made more explicit. Still, the intermediate outcome indicators were useful for monitoring physical progress of project investments. 18. Assessment of project design. The project concept was innovative and guided by strong borrower commitment and trust in the Bank. The design was relatively complex including three cities, four sectors (urban transport, flood protection, wastewater treatment and clean coal) and seven implementing agencies. One of the biggest 5 challenges with the design of this project was the mismatch between government commitment for integration, mostly at the provincial level, and the required co-financing that depended entirely on resources from the three municipalities. Without actual budget, the Hunan Province and PPMO had limited leveraging power to direct local governments to prioritize investments in the project and regional activities. 19. Concerning the design process, even though the resettlement design process largely took place in parallel with detailed engineering design, there appears to have been little information exchange during the process. During implementation many designs, particularly those for PC1, were modified to minimize resettlement needs and reduce overall project costs and address some changes in local conditions. 20. Incorporation of Lessons Learned. Based on experience from previous Bank- financed projects in the urban sector, the importance of borrower ownership, appropriateness and efficiency of design of capital investments, as well as financing and institutional arrangements for proper operations and maintenance (O&M) were addressed during project preparation. The design of the PC1 component ensured that responsibilities for ownership and O&M of assets were clarified and legalized by the municipal and provincial governments. 21. The Changsha wastewater component incorporated earlier experiences and was well designed as a complete system that included both a primary network collection system in the entire catchment area including institutional reform and self-financing capacity strengthening. However, the design and feasibility study carried out at the project preparation stage were based on a Master Plan that was later changed. A neighborhood that was originally going to be connected to another WWTP was connected to this project. The location of the WWTP was also affected by a mismatch between the existing and new layout in the Master Plan (existing blocks/streets were moved), which resulted in additional resettlement requirements. Neither issue was easy to foresee during project preparation. As part of the project restructuring, an expansion of the Changsha WWTP had to be included in the project. 22. Risk Assessment. The overall risk rating for this project was “moderate/substantial�. The team did an accurate assessment of several potential project risks, including: (a) significant delays in the implementation of the Corridor component; (b) substantial changes to the components described in the feasibility study; and (c) major cost escalation. In particular, unanticipated issues in the flood protection works in the Corridor component were identified as potential causes of delays or cost variation. Several of these risks materialized and the risk mitigation measures proved effective. 23. The team anticipated potential reputational risks of deviations from the RAP/RPF. However, risk management by supervision was a weak mitigation measure and in hindsight insufficient particularly because of the weak capacity of the external monitoring consultant. The Bank team could have given closer attention to the design of the RAP taking into consideration the need for coordination between the technical design 6 and resettlement planning. Training and support could have been provided to the external monitoring consultant to raise its capacity and help it stay on top of critical issues. Furthermore, at the time of project appraisal, the timely provision of counterpart funds was a common and widely known issue in the Bank’s China portfolio. The crucial activity of resettlement was fully dependent on counterpart funding and delayed the implementation of major project activities. The magnitude of these risks might have been better estimated and a step taken to ensure financing of resettlement was consistent with timely budgetary provisions of the participating cities. Overall the risk assessment should have been “substantial�. 24. Quality at Entry (QAE). The QAE is rated as “moderately unsatisfactory�. The strength of the preparation included an innovative concept, a good integration of lessons gained in similar operations, and the introduction of international expertise and technical assistance in the design of the project. The shortcomings relate to an imprecisely and overly ambitious PDO, KPIs that were specifically related to investment outputs but too imprecisely linked to monitoring the achievement of the project development objective, problems in capacity assessment of implementing agencies, and weakness in the risk assessment and the design of the resettlement activities. Finally the TA component might have included a more strategic approach to flood forecasting. The shortcomings made it difficult to track and assess progress toward achieving the PDO and the soft institutional and risk assessments and lack of robust mitigation measures proved challenging throughout the project’s life. 2.2 Implementation 25. Project implementation was very slow for at least the first five years until a restructuring was approved. A number of factors affected project implementation. 26. Initial weak implementation capacity: As discussed, the institutional framework and lack of alignment between local and provincial priorities for regional integration hampered the implementation of the project and the capacity of the PPMO to steer investments and expedite the project. The relatively weak technical capacity of the PMOs at the various levels led to instances of uncoordinated implementation actions which precipitated further delays. These difficulties were eventually overcome thanks to strong support from the PPMO and the project’s institutional strengthening and training activities. 27. Design weakness of the resettlement plan and changes in National Policy: An underestimation of resettlement and compensation requirements at the design stage caused significant cost increases and delayed the resettlement works right from the beginning of the project. Additionally, in 2005, in response to a new State Council regulation on land acquisition and resettlement, Hunan Province revised its compensation policies. This affected resettlement not only by increasing costs by about 30 to 50% but also by causing delays as local populations were unwilling to be resettled until the new policy went into effect in 2006. Several large civil works contracts were held up because 7 resettlement action had not been completed and therefore no site access could be given to the contractor. 28. Availability of sufficient counterpart funds: Counterpart fund requirements were underestimated and counterpart funds were not made available in time and at the amounts required by the project. 29. Authority of the PPMO: The PPMO was created within the Hunan Provincial RES Office, which had no jurisdiction over the six PIUs in the three municipalities. The PPMO had very limited power to demand that sufficient counterpart funds be allocated. Only with the intervention of higher level leaders from the Province and the World Bank, were municipal governments inclined to address these problems. The PPMO also did not have the required technical specialist and project management expertise to provide support to the cities and PIUs. 30. Low capacity of local design institutes. Local design institutes produced weak technical designs especially in the early years of the project, and these poor designs hindered effective review by international consultants. The TA funded by the project provided specifically for a separate international consultancy firm to provide Design Review and Advisory services. However, the international consultants were not able to identify early technical shortcomings, particularly the inadequate geo-technical investigations for the corridor component. These shortcomings ultimately led to large variation orders for a number of civil works contracts. 31. Operational responsibilities of the Changshanyuan WWTP. Early in implementation and without prior informing the Bank, Changsha signed a concession contract with a private firm to co-finance and manage the Changshanyuan WWTP. This private company was not competitively selected and the intended construction arrangements would have violated Bank procurement policies. In addition, the estimated operational costs were significantly higher than the estimated cost-recovery values at appraisal. The Bank reviewed the contract and, in agreement with the government, recommended that Changsha would cancel the contract or the Bank would withdraw financing from the components. As a result, Changsha decided to terminate the contract and reinstated CMDC as the operator, but significant delays occurred. 32. Despite significant implementation issues during the first years, the project was successfully brought back on track after a mid-term readjustment with concerted efforts from the government, the implementing agencies and the Bank team. A number of supportive actions helped turn around this project. 33. Project Restructurings. A first amendment to the project was already made in December 2005, when the Bank agreed to postpone the effectiveness condition requiring Changsha to enter into a contract with consultants to provide TA for design review and certification. Instead, this was made a dated covenant (March 9, 2006). A second amendment was carried out in September 28, 2006, to adjust the financing percentages 8 for some categories and to include Hunan Caixin Investment Holding Co., Ltd. as one of the on-lending agencies for the project. On August 16, 2010, the percentage of expenditures to be financed under Category 1 was increased and training and purchase goods were included in the project as well as shopping was added as a procurement method. Following the January/March 2010 mid-term review, a third more substantive restructuring was approved in June 2, 2010 to: (a) cancel components that had become irrelevant, (b) reallocate loan savings of US$8 million among the remaining components to ensure ample financing, (c) revise the results framework to reflect the restructured components, and (d) extend the loan closing date by 22 months. This restructuring provided the motivation necessary for all parties to bring the project to a successful outcome. 34. Political commitment and highly motivated PPMO staff. Government leaders at the provincial level were always very committed in supporting this project and the integration of the three cities into a regional economic zone, but had limited resources to support the strategy. Most funding had to come from municipal governments, but their priorities were not always aligned with the creation of regional economic zone. The lack of continuous support at the local level was probably the most important factor for the lack of timely provision of counterpart funding and resulted in considerable delays in project implementation. Of course, to a certain extent, the WB loan catalyzed local counterpart funding for regional integration, but, as the value of the loan decreased, other local priorities outweighed the provincial ones. Despite the setbacks and delays, the PPMO constructively put forward solutions to the numerous implementation challenges. In 2009, the Hunan CZT EIO was promoted to a higher ranking government bureau named Hunan Provincial Office of the Leading & Coordination Commission for the Construction of CZT “Resource-saving & Environment-friendly Society� Reform & Experimental Zone (Hunan Provincial RES Office). This office, adopted all staff members from the previous Provincial CZT EIO and PPMO, and took over all responsibilities for the project. This greatly helped boost staff morale and accelerated project implementation after the 2010 mid-term review and restructuring. 35. Project Rating. The task team took a candid and proactive approach to assess and describe problems, as is reflected in the ISRs, and suggested appropriate actions to resolve project implementation issues. PDO and IP ratings moved from satisfactory to unsatisfactory and returned to satisfactory in response to identified implementation issues and weaknesses and actions taken to remediate them. These ratings were well supported by the information provided in the ISRs, aide memoires and/or project files. Continuous performance improvements during the last two years of implementation resulted in moderately satisfactory PDO and IP rating before the project closed. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 36. The project design included a project monitoring and results framework with a single, relatively weak outcome indicator (number of meetings by the Provincial Leading Group), which could not fully capture the PDO outcome. Furthermore, the results framework did not provide a strong causal chain between the component investments and 9 the very general PDO of fostering integration of the CZT Region. The intermediate results indicators were well defined and provided a monitorable, timely and hands-on reflection of the status of project implementation. Monitoring of project progress and social and environmental safeguard aspects was done both internally by the PPMO and by external agencies and consultants. 37. The monitoring results were summarized in semi-annual reports. These reports were shared with the Bank, the different PMOs, and also with the respective government departments and offices. Both at the project management level and at the government level the monitoring information was utilized to inform management decisions. For example the continuously updated wastewater treatment levels in Changsha municipality were used to make a decision on the expansion of the collection network and capacity expansion of the treatment facility. 2.4 Safeguard and Fiduciary Compliance 38. The project was categorized as environmental category A and safeguard category S2. The project triggered three Bank safeguard policies: (i) Environmental Assessment (OP/BP 4.01); (ii) Involuntary Resettlement (OP4.12); and (iii) Cultural Property (OPN 11.03, later revised as OP 4.11). An Environmental Impact Assessment (EIA), Environmental Management Plan (EMP) and Resettlement Action Plan (RAP) were prepared satisfactory to the Bank and were disclosed in the Bank’s Infoshop (in English) and locally (in Chinese) between February and March 2004. Project also included TA for the engagement of an independent third party to monitor social safeguards and implementation of the RAPs on a project-wide basis. 39. Environment. Overall, the environmental management system was adequate, well implemented and monitored. All measures recommended in the EMP have been successfully implemented. The actions endorsed under the EMP were incorporated into bidding documents as part of each contract and were executed by the contractor. Monitoring was done by the supervision company. 40. Resettlement. The project included a total of eight Resettlement Action Plans (RAPs) including five RAPs for the different sections of the Corridor component, one each for the Changsha wastewater and Zhaoshan Scenic Area components, and a consolidated plan for the entire project. For the construction of roads outside of the project, but ‘linked’ to the Corridor component, a Resettlement Policy Framework (RPF) was prepared. The preparation and scope of the RAPs and RFP followed Bank policies and standards. Implementation responsibility was assigned to the Project Implementation Units (PIUs) and coordinated by the PPMO. In addition, an external independent monitoring and evaluation agency was assigned. 41. The project witnessed a serious case on non-compliance with the project RAP for the WWTP, which was brought to public attention when a deeply frustrated person attempted suicide in 2006 in a prominent public location. Three main causes were 10 identified. First, when the Urban Master Plan for the area in which the WWTP was to be constructed was adjusted after Board approval of the project, the Bank was not informed of the adjustment to the boundary of the WWTP, nor was the RAP updated and new consultations carried out with the newly-identified Project Affected Persons (PAP). In the original RAP, the person in question was not expected to be affected by resettlement for the WWTP, however, after the revision of the WWTP boundary, his house, and those of several neighbors, were included in the project area. Second, after a dispute started between the PAP and his neighbors and the local government at the commencement of the resettlement activities, the grievance resolution system developed for the project did not work effectively and the dispute escalated quickly. Third, the external monitoring team, although aware of the dispute before it escalated, failed to report it in their independent monitoring report provided to the government and the Bank. 42. In response to the case described above, the central, provincial and municipal governments and the Bank team intervened to ensure a peaceful and effective resolution of the matter. The PPMO, through its international project management consultants, immediately hired an experienced resettlement consultant to work with CMDC and the local government to resolve the issue. A Resettlement Implementation Plan was developed and the RAP-related non-compliances were resolved to the satisfaction of the Bank. Bank supervision was strengthened and compliance with the RAP was closely monitored. Resettlement remained demanding and continued to cause construction delays, but no further non-compliance occurred. A summary of the resettlement and land acquisition activities is provided in Annex 8. 43. In general, non-compliance results from a generally weak project performance in terms of resettlement, but more specifically for the following reasons:  Design issues of the RAP: the resettlement and compensation requirements were poorly estimated including land ownership questions, quantities of land and housing, and compensation rates; the costs were significantly underestimated; the complaints handling mechanism was insufficient; and the implementation capacity was over-estimated;  Coordination between technical design and resettlement planning: design changes occurring after the start of RAP preparation were not fed back into the revised RAP;  Financing responsibilities: the financing responsibilities depended on the timely availability of counterpart funds, which could not be assured; and  Implementation responsibilities and capacity: the implementation of resettlement was assigned to various PIUs, which did not have sufficient experience and capacity, and the capacity of the external monitoring consultant was initially also insufficient. 44. Cultural Property. This safeguards policy was triggered due to potential cultural sites located at the Zhaoshan scenic area (PC4). With the cancelation of the component the policy became irrelevant. 11 45. Procurement followed Bank policies and procedures. Lack of familiarity with the Bank procedures caused some early delays. The project was complex in terms of the size of contracts, and procurement procedures. However, no procurement issues occurred under the project. 46. Financial management complied with World Bank procedures. All financial statements except for the final year have been audited by Hunan Provincial Auditing Bureau. All project audits were delivered in a timely manner and all audits contained unqualified (clean) opinions. 2.5 Post-completion Operation/Next Phase 47. PC1 component. Dyke operation and maintenance was handed back to the municipal water resource bureaus in the three cities, and the road and landscaping will be managed by municipal investment co-operations. Most sections have already been transferred. The remaining transfer will be concluded by mid-2013. The responsible organizations have sufficient capacity and resources to properly operate and maintain the facilities. In addition, relevant trainings were provided by the TA consultant and the equipment supply contractors to the water resource bureaus on dyke monitoring, equipment operation, flood warning and dyke management, etc. 48. PC2 Component. CMDC has been successfully operating the Changshanyuan WWTP since 2009, first at its original capacity of 120,000 m3/day and then, starting 2012, at its expanded capacity of 160,000 m3/d. CMDC’s staff have been involved in its operations since 2008 when the WWTP was installed and commissioned by the equipment supply contractor. Staff members participated in the training seminars provided by the consultants and equipment supply contractors. CMDC has developed a complete management and operational systems based on experiences accumulated over the past few years. The financial analysis of the waste water treatment facilities covering the operational period from 2009 to 2012 shows that the facility is operating profitable with an operational profit after debt service payments of RMB 3.78 million (for details see Annex 3). 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Rating: High 49. The PDO and project design remained highly relevant and consistent with national policy priorities and the World Bank-China Country Partnership Strategy (CPS) 2013-2016 that succeeded the Country Assistance Strategy of the preparation and design period. The Government’s 11th and 12th Five Year Plans (2006-10 and 2011-15) placed high priority on a ‘harmonious society’ that balances economic growth with income 12 distributional and ecological concerns. China's 12th FYP (2011-2015) forcefully addresses these issues. It highlights the development of services and measures to address environmental and social imbalances, setting targets to reduce pollution, to increase energy efficiency, to improve access to education and healthcare, and to expand social protection. Its annual growth target of 7 percent signals the intention to focus on quality of life, rather than pace of growth. The World Bank Group’s CPS for FY13-FY16 is aligned with China's 12th FYP. It is also informed by the joint study, “China 2030�, prepared by the World Bank and the Development Research Center of the State Council. To support China's goal of a harmonious society, the Bank Group will focus on three main areas of engagement. The project directly contributed the CPS’s “Supporting Greener Growth� strategic theme. 50. From national as well as from international perspectives, the project concept and design were forward-looking. Promoting regional cluster development by creating and supporting the necessary policy and planning framework for the cluster, providing infrastructure to assist physical integration, and supporting improvements to livability are important elements in any successful urbanization model. The project anticipated policy trends and priorities by giving high importance to integrated economic development. It demonstrated feasible and practical arrangements to cluster development, which are valuable for scaling up other programs. 3.2 Achievement of Project Development Objectives Rating: Moderately Satisfactory 51. The project achieved its development objective of fostering greater integration in the Changsha – Zhuzhou – Xiangtan (CZT) Region of Hunan Province. All but one of the selected set of priority investments supported under the project was well chosen and justified as they individually and collectively contributed towards meeting the PDO. Except for the coal washing activity, each of the infrastructures was of a strategic and mutual importance for all three cities. The process of implementing these activities through a higher level management office stimulated integrated planning and development coordination much beyond the project investments by themselves. 52. While the Hunan Provincial CZT RES Office was assigned as the project managing unit, the same office was up-graded during the project in its functions and responsibilities as the Coordination Commission for the Construction of CZT “Resource- saving & Environment-friendly Society� Reform & Experimental Zone. The office now has overall planning, coordinating and policy development responsibility for the three city economic development and oversees a number of joint infrastructure investment projects of significant size; some involve investment values exceeding 100 billion RMB. 53. Achievements of the project by component are discussed below. The findings are based on the ICR team’s field visit, third party assessments, and the external monitoring agency and stakeholder consultations, including with local government leaders and implementing agencies. Section F of the datasheet summarizes the findings with regard to 13 the main PDO and intermediate outcome/output indicators. Further details are provided below and in Annex 2. 54. Strengthen flood protection and develop a scenic road along the embankment (targets achieved). This investment was intended to improve the livability along the Xiangjiang River in the CZT Region, reduce flood damages, create recreational areas, foster economic activities, and improve transportation infrastructure. The project constructed 66.1 km of embankment and 71.84 km of road. The targets were 61.4 km and 72 km respectively. 55. The investment has increased flood protection levels from originally 1 in 10 (or 1 in 30) years to 1 in 50 (or 1 in 100) years flood occurrence, with great mitigation to the possible loss of life and properties for the population of 413,500 people in the region. The areas have gained value and became attractive for industry and tourism development. Some suburban sections have developed into attractive recreational areas used by several thousand tourists during peak days. Other sections (e.g. Changsha, where the dyke and road has been widened giving space to a four-lane intercity road) have contributed to reduce inner-city traffic. See pictures of the completed investment in Annex 6. 56. Increase percentage of sewage collected and treated in Changsha Municipality (targets exceeded): The investment was intended to reduce river pollution and improve urban environment and living conditions and develop an autonomous public utility that would operate following commercial principles. The project built a WWTP with a total capacity of 160,000 tons per day, constructed the associated sewer network of some 48.89 km (original target was 43.84 km) and the percentage of wastewater treated in Changsha has reached 92 percent against an appraisal target of 58 percent. 57. This investment has significantly reduced the inflow of pollutants in the Liuyang and Xiangjiang River and improved water quality waste. Over the first three years of operation (2009 to 2011), it is estimated that the treatment facility removed COD by 21,000 tons, BOD by 8,300 tons and SS by 10,000 tons. Further details are provided in Annex 2. The treatment plant is financially sustainable. It became operationally profitable in 2011 and achieved a net profit after debt services payment of nearly 3.8 million RMB in 2012 (see Annex 3). 58. Reduce air pollution through the use of cleaner coal (restructured targets achieved). Originally, this investment was to support construction of coal water mixture and briquette manufacturing plants and renovate a coal washing plant, with a view to increasing the sale of clean-coal products and reduce SO2 emissions in the CZT Region. However, as told in Section 2.2, ZZZC declared bankruptcy in December 2008 and as part of the May 2010 restructuring, the component was curtailed. XMCC, which took over the coal-washing equipment already procured under the project, is now successfully operating the plant, with a capacity of one million tons/year. 14 59. From June 2010 to December 2012 over two million tons of coal were cleaned. The total reductions of sulfur dioxide (SO2) emissions are estimated at nearly 19,000 tons. While the coal washing facility is located in one of the three cities, the benefits are not targeted to the CZT Region, since clean coal products are sold to power plants and industrial areas in and outside of Hunan. Hence, the strategic relevance in terms of economic integration is limited, but the restructured component, at US$5 million, represents only 1% of the final project cost. 60. Zhaoshan scenic area development (not achieved): The objective of this component was to improve livability in the CZT Region with redevelopment of a key scenic area. This relatively small component was cancelled due to changes in the overall master plan after the project was appraised. However, with total costs representing only 2% of the original project investments, the loss of this component had a negligible impact on achievement of the PDO. 61. Improve project management and institutional capacities (achieved): The management skills and capacities of the PPMO, MPMOs and the PIUs have been significantly improved through the successful implementation of all TA packages. The number of awarded contracts has been in line with the plan, and the PPMO and MPMOs have accepted and implemented the key recommendations proposed by the consultants. 3.3 Efficiency Rating: High 62. An economic analysis was carried out at the end-of the project for the PC1- (Corridor) and PC2 (Wastewater Treatment) components using actual project data and applying the same methodology used during appraisal. The EIRRs of 24.3% (PC1) and 23.8% (PC2) measured at the end of project implementation were actually higher than appraisal estimates. Detailed analysis and assumptions are shown in Annex 3. A summary is provided below: Economic internal rate of return （EIRR） PC1 - corridor PC2 – Changsha Wastewater Component PAD 19.50% 15.50% Actual 24.32% 23.79% 63. The main reasons for the higher than expected economic returns relate to economic growth, which was much higher than expected, and people’s sensitivity related to clean water and appropriate wastewater treatment, which have significantly increased. Despite implementation delays and cost increases, the flood protection net benefits in terms of value of protected personal property, enterprises and public facilities were significantly higher than anticipated. Similarly the difference in value of land and property with and without safe collection and treatment of wastewater was higher than expected attributed to the fact that environmental consciousness has gained significant importance in China. 15 3.4 Justification of Overall Outcome Rating Rating: Moderately satisfactory 64. The project has contributed to foster a greater economic integration in the CZT. This has happened through the project’s implemented key infrastructure items, the institutional innovations, but also through the implementation process itself including the solving of planning design and implementation issues, which have brought different stakeholders constructively together. The extent to which the project has achieved its PDO is not quantifiable. Since no precise indicators are available and targets were not set, the ICR team suggests a conservative approach and considers efficacy as moderately satisfactory. In light of the high relevance of the PDO and the project design, a moderately satisfactory efficacy, and a satisfactory efficiency, the overall outcome is rated as “Moderately Satisfactory�. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 65. This project was not designed to have specific poverty alleviation or gender impacts; however in terms of social development, the project highlighted the possible collision between serving the public interest to provide infrastructure for a developing society and a fast growing economy and the private interest of individuals, when they have to cede their assets for a higher benefit. The project provided a testing ground as to how such conflicting interests can be resolved in a transparent and mutually acceptable process. After initial shortcomings and a more difficult and lengthier than expected resettlement process, the Project provided a significant lesson-learning opportunity. This will be of high value in the wider context of public infrastructure development and related resettlement requirements in the region. It was reported to the mission that over 95% of the PAP stated their satisfaction with the process and compensation provided. Unfortunately, at the time of the ICR mission a final resettlement assessment and satisfaction was not available. (b) Institutional Change/Strengthening 66. Institutional strengthening was provided at least at four levels: (1) to provincial government agencies, (2) the PPMO; (3) the local MPMOs, PIU and UDICs and, (4) those agencies providing technical support such as the design institutes, supervision companies, contractors, etc. Such strengthening was the result of the experience gained through the implementation of the project as well as the training provided on procurement procedures and contract management, accounting and financial management, environmental monitoring, resettlement planning, budgeting, and periodic reporting. Overall at least 25 trainings were organized with over 1,300 participants (see summary of training and study tours in Annex 2). It has additionally been noted that such knowledge has been disseminated in the region and that other projects such as the inter-city railway 16 system currently under construction in Changsha, Xiangtan, and Zhuzhou have now modified their practices mirroring those utilized in the project. 67. Regarding institutional strengthening at an operational and technical level, it appears more could have been done for each of the various investment areas. For example, there is no evidence that a strategic approach to flood forecasting is taking place. Even so, the facilities are all currently under operation, reasonably managed, and are financially sustainable. (c) Other Unintended Outcomes and Impacts (positive or negative) 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 68. No beneficiary surveys or stakeholder workshops were done. 4. Assessment of Risk to Development Outcome Rating: Moderate 69. The political leadership remains strongly committed to the integration of the CZT Region. This is also expressed by the promotion and extended responsibility of the Hunan Provincial RES Office. The political risks are considered low. 70. The infrastructure, which was put in place, is technically sound and in full operation, some of it is even in the process of continuous expansion meeting the requirements of a fast growing economy. The O&M responsibilities are assigned to institutions that have sufficient capacity and secure financial resources. The technical and operational risks are considered low. 71. The agricultural and housing areas protected by the dykes have now gained significant value and have become attractive as development areas. This raises concerns that some of the original beneficiaries’ land and housing areas might be converted involving secondary resettlement. The potential social safeguard risk is seen as significant and the overall risk to development outcome is rated “moderate�. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately unsatisfactory 72. Project preparation and design were based on existing national and international experiences. On the Bank side, preparation was undertaken by an experienced team with an appropriate skill mix and significant country experience. It involved detailed site 17 investigation, and stakeholder interviews. During the preparation and design phase, intensive client interaction and cooperation took place leading to a joint and mutually agreed project design. Innovative design features included: a) the integrated approach towards public infrastructure development including physical, institutional, legal, financial and operational aspects, b) construction supervision executed by independent international service providers, and c) human and institutional capacity building linked to the development of infrastructure. 73. The project concept and PDO was well aligned with national policy priorities and the Bank CPS. However, the PDO was framed imprecisely with no clearly specified strategy to measure its achievement. The design included shortcomings in the resettlement planning and risk assessment, which significantly affected project implementation. The design was also not flexible and forward looking enough to anticipate demands of a fast growing economy and a changing development planning framework. The design therefore required frequent changes, caused the cancellation of a component, and delayed implementation. Implementation was also affected by overestimating the local implementation management capacity. Due to the PDO weakness and design shortcomings, the Bank performance in ensuring quality at entry is rated “moderately unsatisfactory�. (b) Quality of Supervision Rating: Satisfactory 74. The Bank conducted regular supervision missions at least twice per year and provided project implementation support on a much more frequent basis. In addition and on a continuing basis, the Bank carried out fiduciary supervision through country office based staff. Supervision identified and addressed implementation issues and problems in a timely manner. The Bank team added additional missions and expertise in response to the resettlement implementation problems. The quality of aide memoires was consistently high and agreed actions were described in concise and comprehensive ways. PDO and IP ratings at various stages of implementation were frank and well supported by the aide memoirs and project reports. The team was effective in informing and alerting Bank management, the Borrower and the implementing agencies about the project situation and triggered the necessary actions, e.g. finding agreeable solutions regarding the bankruptcy of the coal company or the concession agreement with the CMDC. 75. Over time the supervision strategy was built on a constructive partnership. Thereby the Borrower became an active partner, put forward suggestions and provided well designed inputs, which were flexibly addressed by the Bank team. The supervision teams put equal emphasis on technical aspects and processes and involved third party partners such as independent consultants when necessary. While a serious non- compliance issue with resettlement at the Changsha WWTP site happened, the Task Team responded decisively and effectively, and the problem was resolved in close collaboration with the Borrower. Since the problem happened during the early stages of project implementation, critical adjustments were made to strengthen project supervision, 18 resettlement monitoring and build the capacity of the PMO by adding a resettlement specialist to the team. As a result, a number of subsequent implementation problems were detected beforehand and solutions were found and agreed between the Bank and the Borrower. The team helped accessing support from higher level government leaders, when this was necessary to solve problems. Despite these serious implementation challenges the team always maintained a sensitive and constructive approach, and provided professional and timely assistance, which greatly helped solving issues. (c) Justification of Rating for Overall Bank Performance Rating: Moderately satisfactory 76. Implementation issues and delays were to a large extent rooted in shortcomings in the design and preparation. Over the project lifetime and particularly after the MTR, professional supervision made up for most of the design shortcomings and helped bring the project back on track. While an impact on the Project’s outcome due to quality at entry issues could not be fully avoided, the project still achieved a moderately satisfactory outcome. The overall Bank performance is thus rated “moderately satisfactory�. 5.2 Borrower Performance (a) Government Performance Rating: Moderately satisfactory 77. The central and provincial governments attached importance to the CZT integration process, and during both the initial appraisal stage and the implementation phase provided support for the CZT economic integration project. Not long after the appraisal, the central government approved for Hunan to set up the experimental zone of Hunan CZT “resource-saving and environmental-friendly� society construction, which further enhanced the concept and contents of CZT integration. The Hunan Provincial Government has accordingly set up the Hunan Provincial RES Office (bureau level) to expedite the CZT integration process; however its mandate and responsibilities are not very clear and available resources to co-finance the project were very limited for this project. The MOF and National Development and Reform Commission have provided specific support to HUDP. The provincial leaders reported at least twice a year on the project implementation and associated issues and played a key role in resolving some of the difficult issues encountered during various stages of project implementation. 78. After a number of serious start-up problems, the three municipal governments made great efforts in tackling pressing issues and providing assistance needed. Many tough issues were resolved under direct leadership of the mayors (or vice mayors) with simplified procedures specifically applied only for HUDP. The transition arrangements and assignment of operational responsibilities were smooth and appropriate. 19 79. The failure to timely provide counterpart funding delayed project implementation, affected resettlement and triggered a number of project adjustments. The unplanned concession of the water treatment plant also disrupted project implementation. These problems were eventually solved. At the end of the project, the provision of counterpart funding nearly doubled the originally committed amount and increased from US$214.16 million to US$419.82 million. Given the initial problems and lack of commitment, the Government performance is rated ‘moderately satisfactory’. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 80. The Project experienced delays for nearly five years after project effectiveness due to a demanding project design, a demanding resettlement agenda and issues with counterpart funding. The PPMO and PIUs had to overcome a steep learning curve and had high staff turnover from design to implementation. During the early stages of project implementation, the different PMOs did not fully understand their responsibilities and the lack of open and effective communication between the PMOs and the Bank team caused some problems (e.g. changes in scope of resettlement, concession contract for WWTP) that could have been avoided or minimized. 81. The resettlement problem at the WWTP in Changsha might have been avoided by a more experienced team on the side of the borrower, but both PPMO and PIU worked very effectively with the Bank team to resolve this problem in a very short period of time. Furthermore, the capacity of supervision was strengthened and local project staff succeeded to overcome many complex implementation issues afterwards. In particular after the project restructuring, the PPMO and other agencies jointly solved a large number of accumulated challenges, greatly improved the implementation progress, raised the needed counter-part financing, and properly dealt with the existing difficult resettlement problems. As a result, the project performance rating was brought back to satisfactory in the later stages of project implementation. 82. Project financial management was notably strong throughout implementation, as reflected in audit reports. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 83. Project start-up shortcomings caused by delayed counterpart funding provision, low capacity of the implementing agencies and inefficient communication could be overcome in the course of implementation. However, these issues remained to affect the outcome. The overall Borrower performance is therefore rated “moderately satisfactory�. 6. Lessons Learned 20 84. Constructive and focused supervision can bring a seemingly derailed project back on track: The project was facing a number of challenging implementation issues. The project supervision team addressed these issues in a focused, constructive and flexible way. This brought the project back on track. 85. A fast growing and changing economic situation requires a forward looking and adaptable project design: The project involved multiple investments to be implemented over a relatively long time frame. The static planning framework at the design stage was frequently outdated by changes in the economic planning and development triggered by a rapid economic growth. The implementers faced adjustments of master plans, advancing of priority investments using national funding, underestimated demand and capacities issues, changes in the business situation of participating companies, etc. Based on the experience of this project and other similar multi-sectoral and multi-city projects, there is a need to allow for more flexibility in the design of these projects so that priority investments can be adjusted over time while maintaining a strong focus on the achievement of key results. This is especially relevant in Chinese cities, which are facing rapidly changing realities and priorities. 86. Resettlement planning and project design need closer and more formal interaction: Under the project resettlement planning and detailed project design were largely separated processes starting from the pre-feasibility stage. After pre-feasibility, different institutions prepared the resettlement planning documents and the detailed designs. Limited attention was given to the quality and validity of the RAP. There were also deficiencies in the process to feedback design changes and modifications into the on- going resettlement process and to verify and cross-check designs changes with the RAP provisions. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies (b) Co-financiers (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) 21 Annex 1. Project Costs and Financing (a) Project Costs by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Estimate Percentage of Components (USD millions) (USD millions) Appraisal PC1 Corridor 217.60 393.41 181% PC2 Wastewater 87.10 88.20 101% PC3 Clean coal 13.10 5.50 42% PC4 Zhaoshan scenic area 7.30 - 0% PC5 TA services 5.95 3.35 56% Total Baseline Cost 331.05 490.46 148% Physical Contingencies 33.11 - Price Contingencies 8.64 - Total Project Costs 372.80 490.46 132% Interest during construction 12.50 100.50 804% Front-end fee IBRD 0.86 0.86 100% Total Financing Required 386.16 591.82 153% *Original appraisal costs are from PAD, Annex 5. (b) Financing Appraisal Actual/Latest Percentage Type of Estimate Source of Funds Estimate of Cofinancing (USD (USD millions) Appraisal millions) Borrower 214.16 419.82 196% International Bank for Reconstruction and Development 172.00 172.00 100% 22 Annex 2. Outputs by Component Summary of Outputs by Components Component Planned at Appraisal Actual Achieved PC1 – Corridor Component Changsha Section Length of corridor 22 km approximately 22.3 km Dyke length strengthened 21.732 km 21.83 km Road 21.732 km 22.3 km Pumping station 28 pump sets, 6,706 KW 26 pump sets,4,218 KW Culverts to be extended 27 locations 1 location New/modify culverts 8 locations 22 locations Strengthen flood canals 6 off 1 off Slope protection 20.84 km 21.55 km Landscaping area 404,000 m2 805,000 m2 Xiangtan Section Length of corridor 5 km approximately 5.86 km Dyke length strengthened 5.3 km 5.86 km Road 11.38 km 11.65 km Pumping station 6 pump sets, 3430KW 8 pump sets, 3260KW Culverts to be extended 4 locations 2 locations New/modify culverts 0 9 off Strengthen flood canals 1 off 1 off Slope protection 1.6 km 1.7 km Landscaping area 400,000 m2 300,000 m2 Zhuzhou Section Length of corridor Approx. 33 km 32.75 km Dyke length strengthened 33 km 32.26 km Road 33.02 km 32.754 km Pumping stations 16 stations: 3,030KW 22 stations: 3,396KW Culverts to be extended 22 locations 7 locations New/modify culverts 8 locations 29 locations Strengthen flood canals 1 off 1 off Slope protection 7.38 km 8 km Landscaping area 600,000 m2 689,000 m2 23 Component Planned at Appraisal Actual Achieved PC1 – Corridor Component Zhaoshan Section Length of corridor Approx. 6 km 6.5 km Dyke length strengthened 6.25 km 6.15 km Road 6.25 km 6.5 km Pumping station 11pump sets, 3 430 KW 11pump sets, 4,460 KW Culverts to be extended 5 locations 5 locations New/modify culverts 1 location 2 locations Strengthen flood canals 1 off 1 off Slope protection 6.25 km 6.15 km Landscaping area 312,000 m2 220,000 m2 PC2 – Changsha Wastewater Component Changshanyuan WWTP Capacity of 120,000 m3/day Expanded to 160,000m3/day Built: Center & Chaozhangyuan Three (Central, Dong-Tun-Du & Pumping stations Cancelled: Dong-Tun-Du & Ting-Zi-Gang) Ting-Zi-Gang Sewer network 47.4 km 48.89 km Construct 250,000 t/a WCM 1 million t/d coal washing plant PC3 – Zhuzhou Clean Coal workshop, 250,000 t/a coal completed, the rest cancelled at Component briquette workshop and 1 project 2010 restructuring million t/a coal washing plant PC6 – Zhaoshan Scenic Area Rehabilitate historical sites & Component cancelled at 2010 Component construct tourism facilities project restructuring Achievements by Components PC1 –Corridor Component 1. Under this component a total of 71.87 km of corridor was completed within the project’s timeframe, including embankment strengthening, a scenic road along on top of the embankment, landscaping and other works. Only 1.33 km of scenic road on top of the embankment in the Changsha section remains to be constructed because of the current construction of two bridges that is preventing the road from being built. The affected sections are located at the Xiangfu Bridge site (1200 m) and the high speed railway bridge site (133 m). The Changsha UDIC has already reached an agreement with the two bridge contractors that the outstanding scenic roads will be built by the bridge contractors upon completion of the bridges. This should be completed in mid-2013. 24 Table 2.1 Summary of key monitoring indicators for PC1 Year 2004 2005 2006 2007 2008 2009 2010 2011 2012 Indicators Baseline Length of Original 0 5 19 40 61 72 72 - - embankment strengthened Revised 0 5 19 25 30 40 55 61.4 61.4 （km） Actual 0 0 6.7 19 26.8 39.1 57.8 62.48 66.1 Length of Original 0 0 5 16 40 60 72 - scenic road built (km） Revised 0 0 0 0 0 7 12 34 72 Actual 0 0 0 0 0 6 13.5 26.7 71.87 2. The completed corridor has important social and economic benefits and is of significance to the sustainable development of CZT Region and the process of CZT integration in three key ways: a) Flood protection: Upon completion, the flood protection capacity in CZT Region along the 72 km long section has increased from originally 1 in 10 (or 1 in 30) years to 1 in 50 (or 1 in 100) years, thereby mitigating the possible loss of life and properties for the population of 413,500 people in the region. b) Improved environment: The landscaping and scenic road contributed to environment improvement in the whole region. Facilities built under the project connect the scenic areas in Moon Island, Juzizhou Island, Zhaoshan and Kouzhoudao Island, creating a unique recreational space for the people in CZT Region, and greatly improved the quality of life of the area. The Xiangjiang River Corridor is now one of the most popular recreational sites in each of the three cities giving space for activities such as cycling, fishing, walking and playing sports. The improved environment has naturally also increased the value of land along the corridor. c) Transportation: The scenic road has also contributed to improving the transportation network in the CZT Region as it connects to each municipality’s road system to National Highway No. 107, the Beijing- Guangzhou Expressway and a light rail system currently under construction. PC2 – Changsha Wastewater Component 3. Under this component, the Changshanyuan WWTP, with a treatment capacity of 160,000 m3/d, two lifting pumping stations and 48.89 km sewer network, were completed, benefiting a population of 273,600 people. The initial 120,000 m3/d WWTP was commissioned in January 2009 and officially put into production in April 2009. The 40,000 m3/d expansion using loan savings was commissioned in November 2011. 25 Table 2.2 Key monitoring indicators for PC2 2004 2005 2006 2007 2008 2009 2010 2011 2012 Indicators Baseline Sewer Original 0 2 14 31 43 46 49 - - network Revised 0 2 14 31 43.8 43.8 43.8 43.8 43.8 built （km） Actual 0 0.6 13.6 35 43.8 43.8 43.8 44.2 48.8 Percentage Original 30 30 30 30 44 44 44 - - of wastewater Revised 30 30 30 30 44 44 44 58 58 treatment （%） Actual 30 30 30 30 43 55 75 85 92 Table 2.3 Wastewater data for the Changshanyuan WWTP Items Year 2009 2010 2011 Treated volume ( 1000t/d) 107.7 100.4 109.9 Annual average （mg/l) Inflow Outflow Inflow Outflow Inflow Outflow COD 220.6 23.8 221.9 28.4 212 29.2 BOD5 97.2 11.0 85.5 10.7 75.6 9.5 SS 108.1 11.9 106.2 11.3 96 12 NH3-N 19.2 3.3 22.0 1.4 19.76 1.57 TN 25.0 8.5 33.2 12.3 25.36 14.48 TP 2.0 0.5 2.6 0.5 2.55 0.42 COD 7,291 6,775 6,867 BOD5 3,194 2,620 2,483 Pollutants SS 3,565 3,321 3,152 removed annually (t) NH3-N 589 722 684 TN 609 732 409 TP 57 72 80 4. Samplings were carried out in the dry seasons in 2004 and 2010 at Langli Sampling Station and Heishidu Sampling Station. Langli is located upstream of the Changshanyuan WWTP and Heishidu is downstream. From the above table, one can appreciate how, although the water quality in Liuyang River has no significant changes before and after the WWTP was built, there was improvement after the WWTP was put in operation. 26 Table 2.4 Sampled water quality data on Liuyang River (before and after completion of the Changshanyuan WWTP in 2009) Year 5 Jan 2004（before project） 5 Jan 2010（after project） Location Langli Heishidu Langli Heishidu C=B-A C=B-A Items （A） （B） （A） （B） pH 7.93 7.56 7.7 7.5 DO (mg/l) 10 2.7 -7.3 6.2 4.9 -1.3 COD (mg/l) 9.2 34.8 25.6 16 28 12 BOD5 (mg/l) 1 4 3 1 6.3 5.3 NH3-N (mg/l) 0.07 3.47 3.4 0.9 2.74 1.84 TN (mg/l) 3.09 10.1 TP (mg/l) 0.061 0.798 0.737 0.13 0.8 0.67 As (mg/l) 0.008 0.007 0.0032 0.0027 5. There was also improvement in the water quality of the Xiangjiang River which joins with the Liuyang River, where the treated outflow from Changshanyuan WWTP is discharged. The table below shows the changes of water quality in Xiangjiang River before and after the WWTP was built and operational. Table 2.5 Water data sampled before and after Changshanyuan WWTP was operational Sampling locations Houzishi (upstream) Sanchaji (downstream) January V V 2004 August III III January V IV 2012 August II II Note: These types refer to different water bodies: Type I - water sources and national nature reserves; Type II - Class1 I protection zones for drinking water sources, valuable fish and spawning grounds; Type III - Class II protection zones for drinking water 1 For industrial and domestic wastewater discharges, the National Integrated Wastewater Discharge Standard (GB8978- 1996) classifies wastewater discharge limits into Class I, Class II, and Class III. Wastewater cannot be discharged to Type I and Type II water bodies. For wastewater discharged to a municipal wastewater treatment plant, Class III limits apply. Wastewater discharged to a Type IV or Type V water body as defined in GB3838-2002, and to a Type III marine area as defined in the Marine Water Quality Standard (GB3097-1997) must meet Class II standards. Wastewater discharged to a Type III water body as defined in GB3838-2002, and to a Type II marine area as defined in the Marine Water Quality Standard (GB3097-1997), must meet Class I standards. 27 sources, fish and swimming areas; Type IV - general industrial water zones and water recreation areas; and Type V - agricultural water zones and scenic water areas. (Surface Water Environmental Quality Standard - GB3838-2002). PC3 – Zhuzhou Clean Coal Component 6. Before its cancellation, PC3 component had completed construction of the one million t/a coal washing plants (Contract no. HN-ZZ-CC-EQ-1) which started production in June 2010. After three years of operation, the coal washing plant is in good condition. The processed amounts of coal and the reduction of SO2 emissions over the past years have been reported as follows: Table 2.6 Zhuzhou Clean Coal Processing Date Processed raw coal (tons) Reduction of SO2 (tons) 2010 (June to December) 363,900 3,973 2011 974,800 8,484 a 2012 748,220 6,512 a) The processed coal was lower in 2012 due to the economic slow-down. Projections for 2013 indicate and increase to nearly 1 million tons. PC5 – Institutional Strengthening and Implementation Assistance Component 7. The management skills and capacities of the PPMO, MPMOs and the PIUs were improved through the successful implementation of a large number of TA packages. The monitored results of key indicators show that the number of awarded contracts has been in line with the plan, and PPMO and MPMOs have accepted and implemented the key recommendations proposed by the consultants. Details on the type of trainings are provided in the tables below: Table 2.7 Training provided under TA01.1 and TA01.1a: No. of Date Description of training topics attendants 19 Jan 2006 Procurement: procedures and the WB’s guidelines 73 19 Jan 2006 Procurement: preparation of technical specifications 73 Monitoring of PDO, the implementation EMP and the bidding 20 Jan 2006 75 document tracking system 20 Jan 2006 Contract management 75 21 Jan 2006 The preparation of monthly report and disbursement procedures 80 28 July 2006 Quality control on dyke construction 74 28 July 2006 Cost control in project management 74 29 July 2006 Financial management 74 1 Feb 2007 Accounting practice and auditing 16 2 Feb 2007 Land acquisition and resettlement 66 22 June 2007 Resettlement: internal monitoring 35 10 July 2007 The implementation of monthly reporting system and its format 40 28 No. of Date Description of training topics attendants 11 Jan. 2008 Quality control on dyke grouting 50 30 May 2008 Variation assessment and other issues in contract management 78 The implementation and monitoring of EMP and the revised version of 1 Aug 2008 40 monthly report 6 Jan 2009 The preparation of mid-term report 30 5 Mar 2009 Project planning, procurement & reporting (Zhuzhou County) 13 6 Mar 2009 Contract management and disbursement procedures (Zhuzhou County) 13 21 May 2009 Operation and maintenance of WWTP 40 26 Aug 2009 Preparation of project management plan 40 Strengthening on contract management, disbursement and reporting on 19 Jan 2011 64 NCB civil works contracts 20 Mar 2011 The preparation of implementation completion report 120 Contract management and disbursement forms (Zhuzhou Tianyuan 20 Oct 2011 15 District Government) A number of issues on the operation and maintenance of 16 Jan 2012 48 Changshanyuan WWTP 29 May 2012 Preparation and data collection for the ICR 55 Table 2.8 Summary of completed tasks under contract TA01.2 Task no. Task description Date No. of attendants TA01.2-18 Domestic training by attending various seminars Various 59 person and training courses organised by universities, central government departments and research institutions. TA01.2-16 Domestic study tour to Shanghai, Hangzhou and 19-26 July 2008 13 Ningbo TA01.2-13 Domestic study tour to Shanxi on WWTP 18-24 Apr 2009 11 TA01.2-05 Overseas study tour to France & Germany 7-16 Dec 2009 8 TA01.2-9 Domestic study tour to Inner Mongolia Aug 2010 18 TA01.2-13a Domestic study tour to Xi’an on WWTP Aug 2010 14 TA01.2-10 Domestic study tour to Ningbo Nov 2010 14 TA01.2-11 Domestic study tour to Heilongjiang China Feb 2011 13 TA01.2-08 Domestic study tour to Guangxi WWTP Mar 2011 15 TA01.2-01 Overseas study tour to American and Canada 16-25 Dec 2011 4 (Wastewater specialty) TA01.2-08 Domestic study tour to Beijing and Tianjin 18-22 Sep 2011 15 (Wastewater) TA01.2-04 Overseas study tour to France and Germany 11-22 Dec 2011 6 TA01.2-12 Domestic study tour to Yunnan 21-26 Nov 2011 11 TA01.2-3 Overseas study tour to Northern Europe 12-22 Feb 2012 6 29 Task no. Task description Date No. of attendants TA01.2-14 Domestic study tour to Sichuan 21-26 May 2012 17 Table 9. Summary of completed tasks under TA package TA06.3 & TA07 Task no. Task description Date No. of attendants TA06.3-10 Domestic study tour to Chongqing & Guangxi 30 Jul – 6 Aug 2007 10 TA06.3-12 Domestic training by attending seminars and Various 90 training courses TA06.3-13 Seminar on regional integration and cluster 18 - 20 Dec 2007 Over 100 development TA06.3-6 Domestic study tours to North-east China 17-23 Aug 2008 5 TA06.3-01 Overseas study tour to UK & Switzerland 22-31 May 2010 6 TA06.3-07 Domestic study tour to Xi’an 27-31 May 2010 9 TA06.3-14 Seminar in Hunan June 2010 60 TA06.3-02 Overseas study tour to India Dec 2010 6 TA06.3-04 Overseas study tour to America and Canada 14-25 Sep 2011 6 TA06.3-03 Overseas study tour to France and Germany 23 Oct – 2 Nov 2011 6 TA06.3-08 Domestic study tour to Xinjiang 30 Oct – 5 Nov 2011 8 TA06.3-05 Overseas study tour to South America 5-15 Dec 2011 5 30 Annex 3. Economic and Financial Analysis Economic analysis for PC1 corridor component 1. The primary objectives of the PC1 – corridor component were to: (a) reduce the future flood damage along Xiangjiang River in CZT Region by strengthening and raising the dyke; and (b) stimulate economic growth in the region and increase the livability of the cities by building a scenic road along the dyke. 2. Benefits of the component included: � Direct benefit: this is the reduction of flood damage such as those caused to personal property, enterprises and public facilities during major flood events. Benefits would also increase over time as the area becomes more developed. � Indirect benefit: this accounts for the saved flood costs to other regions and to subsequent periods. In the PAD, a 20 percent addition was adopted to the savings in direct losses in the economic analysis. � Other benefit: the Xiangjiang River Corridor would also generate additional benefits by serving as the entry point for the CZT Economic Integration, which would allow the individual cities along the corridor to take advantage of the economies of scale at the regional level. 3. Based on the above framework, the PAD estimated an economic internal rate of return (EIRR) of 19.5%. The EIRR has been re-estimated using data available at the time of project completion resulting in an EIRR of 24.32%, which exceeds the appraisal estimate. 4. Data and assumptions used in calculating the EIRR are summarized below: Data/assumptions at appraisal Data/assumptions used in this evaluation Analysis period：23 years Analysis period：23 years Benefit starts at: the year 2008 Benefit starts at: the year 2011 Total value of benefits at the starting Total value of benefits at the starting year: 682.45 million Yuan year: 360.1 million Yuan RMB. RMB, which has been re-evaluated by accounting for the changed population, property value increase over the past years etc. Annual benefit increase:3.5% Annual benefit increase: 6.6%, this has been estimated as the average increase rate of the total value of benefit over the period from 2002 to 2011. Annual operating cost: 72.26 Annual operating cost: 48.88 million Yuan RMB. (This has been million Yuan RMB estimated as 5% of the actual construction cost. Cost figures from the O&M plans proposed by the PIUs are much lower than this. ) Project investment:1.721 billion Project investment: 2.732 billion Yuan RMB Yuan RMB 31 Table 3.1 EIRR calculation for PC1 corridor component Benefit Investment No. Year Annual Total annual Net benefit Recovery Fixed asset WB loan Domestic Sub-total Total benefit Sub-total Liquid fund operating operating funds investment interests loan interests cost costs 1 2005 0 0 0 11,915 11,915 0 0 0 0 -11,915 2 2006 0 0 0 26,975 26,975 0 9 0 0 -26,975 3 2007 0 0 0 24,173 18,484 5,689 572 4,001 1,116 -24,173 4 2008 0 0 0 57,795 49,220 8,576 810 6,660 1,106 -57,795 5 2009 0 0 0 39,806 30,526 9,280 751 7,448 1,081 -39,806 6 2010 0 0 0 42,148 32,698 9,451 583 7,758 1,109 -42,148 7 2011 68,245 68,245 0 45,645 35,153 10,492 735 8,401 1,355 22,600 8 2012 72,726 72,726 0 31,603 21,793 9,810 769 7,929 1,111 41,123 9 2013 93,760 93,760 0 14,583 1,084 13,499 2,268 6,343 4,888 79,177 10 2014 99,917 99,917 0 12,070 12,070 2,108 5,074 4,888 87,846 11 2015 106,478 106,478 0 10,891 10,891 1,944 4,060 4,888 95,587 12 2016 113,469 113,469 0 9,909 9,909 1,774 3,248 4,888 103,560 13 2017 120,920 120,920 0 9,085 9,085 1,599 2,598 4,888 111,835 14 2018 128,861 128,861 0 8,386 8,386 1,420 2,078 4,888 120,475 15 2019 137,322 137,322 0 7,785 7,785 1,234 1,663 4,888 129,537 16 2020 146,339 146,339 0 7,261 7,261 1,043 1,330 4,888 139,078 17 2021 155,949 155,949 0 6,799 6,799 847 1,064 4,888 149,150 18 2022 166,189 166,189 0 6,384 6,384 644 851 4,888 159,806 19 2023 177,102 177,102 0 6,005 6,005 436 681 4,888 171,097 20 2024 188,731 188,731 0 5,654 5,654 221 545 4,888 183,078 21 2025 201,124 201,124 0 5,324 5,324 0 436 4,888 195,801 22 2026 214,331 214,331 0 5,236 5,236 0 349 4,888 209,095 23 2027 273,758 228,405 45,353 5,167 5,167 0 279 4,888 268,591 Total 2,465,221 2,419,869 45,353 400,599 226,763 1,084 172,752 19,769 72,795 80,196 2,064,623 EIRR = 24.32% 32 Economic analysis for PC2 wastewater component 5. The objectives of this component were to: (a) improve the quality of urban environment in Changsha by increasing sewage collection and treatment; and (b) support institutional upgrading in the wastewater sector. 7. Benefits of PC2 – wastewater component were considered in the PAD are the following: � The safe collection, treatment and disposal of wastewater will greatly improve the local environment, which in turn will lead to land and property value increases in the areas served; � Cost savings in water treatment and increased outputs in agriculture and fishing industry as a result of less polluted Xiangjiang River; and � The demonstration effect of wastewater sector reform in CZT Region. 8. Based on the above, the PAD estimated an economic internal rate of return (EIRR) of 15.5%. 9. The EIRR has been re-estimated using data available at the time of project completion resulting in an EIRR of 23.79%, which exceeds the expectation at appraisal. 10. Data and assumptions used in calculating the EIRR are summarized in the table below: Data/assumptions at appraisal Data/assumptions used in this evaluation Analysis period：23 years Analysis period：23 years Benefit starts at: the year 2008 Benefit starts at: the year 2010 (the WWTP started operation in 2009) Total value of benefit at the starting year: 1.7499 Total value of benefit at the starting year: 1.7499 million Yuan RMB million Yuan RMB Annual increase rate of benefit:6.15% Annual increase rate of benefit:6.15% Annual operating cost: 18.09 million Yuan RMB Annual operating cost:35.04 million Yuan RMB Construction cost:722.6 million Yuan RMB Construction cost:650 million Yuan RMB 33 Table 3.2 EIRR calculation for PC2 wastewater component Sewerage network, pumping stations and the WWTP Year Constructio WB loan Domestic Operation Environ’ Net Total cost n cost interests interests cost benefits benefit 2005 10.18 0.00 2.25 0.00 12.44 0.00 -12.44 2006 139.08 2.86 8.34 0.00 150.27 0.00 -150.27 2007 95.13 0.52 0.00 0.00 95.65 0.00 -95.65 2008 178.16 1.19 0.00 0.00 179.35 0.00 -179.35 2009 120.85 0.00 3.62 4.84 129.31 0.00 -129.31 2010 105.73 4.27 0.00 16.31 126.30 174.99 48.69 2011 75.30 2.03 0.00 17.69 95.02 185.75 90.73 2012 26.31 4.27 0.00 20.78 51.36 197.18 145.82 2013 0.00 7.94 0.00 28.47 36.41 226.74 190.34 2014 0.00 7.28 0.00 31.76 39.03 268.46 229.43 2015 0.00 6.62 0.00 35.04 41.66 314.45 272.80 2016 0.00 5.95 0.00 35.04 40.99 333.79 292.80 2017 0.00 5.29 0.00 35.04 40.33 354.32 313.98 2018 0.00 4.63 0.00 35.04 39.67 376.11 336.44 2019 0.00 3.97 0.00 35.04 39.01 399.24 360.23 2020 0.00 3.31 0.00 35.04 38.35 423.79 385.44 2021 0.00 2.65 0.00 35.04 37.69 449.85 412.17 2022 0.00 1.98 0.00 35.04 37.02 477.52 440.50 2023 0.00 1.32 0.00 35.04 36.36 506.89 470.52 2024 0.00 0.66 0.00 35.04 35.70 538.06 502.36 2025 0.00 0.00 0.00 35.04 35.04 571.15 536.11 2026 0.00 0.00 0.00 35.04 35.04 606.28 571.24 2027 0.00 0.00 0.00 35.04 35.04 643.56 608.52 EIRR= 23.79% 34 Financial Analysis for PC2 wastewater component 11. The financial analysis of the waste water treatment facilities covering the operational period from 2009 to 2012 shows that the facility is operating profitable with an operational profit after debt service payments of RMB 3.78 million. In 2012 the cost coverage ratio reached coefficient of 1.16 meeting the financial covenants requiring a value above 1. Table 3.4 Income Statement of the Changsha Municipal Drainage Co. Ltd (in RMB 1,000) Year 2009 2010 2011 2012 Operating Revenues 13,671.75 27,393.00 35,368.50 43,435.00 Operating Costs (excl. depreciation) 4,179.29 15,069.93 10,897.20 14,621.61 Tax and Surplus 0.00 0.00 0.00 0.00 Operating Profit 9,492.46 12,323.07 24,471.30 28,813.39 Other Profit 0.00 0.00 0.00 0.00 Selling Costs 205.08 410.90 340.00 360.00 Administrative Costs 459.11 832.97 860.00 1,070.00 Depreciation 0.00 0.00 0.00 0.00 Financial Charges 0.00 0.00 0.00 0.00 Profits 8,828.28 11,079.21 23,271.30 27,383.39 Investment Profit 0.00 0.00 0.00 0.00 Subsidies 0.00 0.00 0.00 0.00 Non-operating Profits 0.00 0.00 0.00 0.00 Non-operating Costs 0.00 0.00 0.00 0.00 Total Profits 8,828.28 11,079.21 23,271.30 27,383.39 Income Tax 0.00 0.00 0.00 0.00 Net Profit 8,828.28 11,079.21 23,271.30 27,383.39 Total undisbursed profits 8,828.28 15,723.43 23,059.55 27,557.99 Debt Services 0.00 0.00 0.00 0.00 Repayment to WB 0.00 10,833.38 20,363.19 20,249.78 Interest for WB 2,632.38 1,514.46 1,963.02 3,400.00 Commitment Fee 1,551.68 3,587.34 558.74 132.06 Total Debt Service 4,184.06 15,935.17 22,884.95 23,781.84 Profits after debt services payment 4,644.22 (211.75) 174.60 3,776.15 Cost Coverage 2.11 0.99 1.01 1.16   35 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Raja Iyer TTL, Lead Management Specialist EASUR Mara Warwick Co-TTL, Environmental Engineer EASUR Yi Dong Financial Management Specialist EAPCO Mingyuan Fan Municipal Engineer EASUR Anne Harrison Program Assistant EASUR Shunong Hu Urban Environmental Specialist EASUR David I Senior Financial Management Spec. EAPCO Xiaofeng Li Program Assistant EACCF Zhentu Liu Procurement Specialist EAPCO Shomik Mehndiratta Transport Specialist EASTR Robert O’Leary Senior Finance Officer LOAG3 Margaret Png Senior Counsel LEGEA Graham Smith Sector Leader, Transport EASTR Chongwu Sun Senior Environmental Specialist EASEN Masaki Takahashi Senior Power Engineer EWDEN Chaogang Wang Social Development Specialist EASSD Mei Wang Senior Economist EASPR Youlan Zou Senior Social Development Spec. EASSD Gustaf de Monie Consultant, Trade Logistics EASUR Jan Franck Consultant, Finance EASUR Peter How-Kim L a i Consultant, Urban Planning EASUR Jaroslav Kozel Consultant, Sanitary Engineering EASUR David Hanrahan Lead Environmental Specialists SASES Peer Reviewer Karin Kemper Sr. Water Resources Management Spec. SASES Peer Reviewer Richard Scurfield Sector Leader, Transport TUDTR Peer Reviewer Supervision/ICR Mingyuan Fan Sr Sanitary Engineer EASCS Daniel R. Gibson Lead Social Development Specialist ECSOQ Shunong Hu Senior Water Engineer EASCS David I Sr Financial Management Specialist LCSFM Rajagopal S. Iyer Consultant EASCS Tomoko Kato Consultant IEGPS Haixia Li Sr Financial Management Specialist EASFM Zhentu Liu Senior Procurement Specialist EASR2 Xujun Liu Consultant EASCS Yan Lu Transport Specialist EASCS Xin Ren Environmental Specialist EASCS Chongwu Sun Senior Environmental Specialist EASCS Masaki Takahashi Sr Power Engineer EASWE 36 Luquan Tian Sr Transport Specialist SASDT Chaogang Wang Senior Social Development Specialist MNSSO Mara K. Warwick Manager, Operations EACCF Dan Xie Team Assistant EACCF Dawei Yang Consultant EASTS Hongkun Yang Consultant EASCS Yijing Ye Consultant EASCS Guoping Yu Procurement Specialist EASR2 Jun Zeng Social Development Specialist EASCS Fang Zhang Financial Management Specialist EASFM Youlan Zou Consultant EASCS ICR Josef Ernstberger Consultant Primary Author Vivian Arguenta-Bernal Consultant ICR Team Member (b) Staff Time and Costs Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY02 9.11 71.33 FY03 39.89 144.15 FY04 106.78 417.62 FY05 9.95 35.45 Total: 165.73 668.55 Supervision/ICR FY05 9.66 23.07 FY06 18.97 55.26 FY07 23.85 68.81 FY08 18.51 53.94 FY09 18.23 57.26 FY10 24.89 99.00 FY11 19.28 99.40 FY12 13.63 49.15 FY13 6.62 34.68 Total: 153.64 540.57 37 Annex 5. Summary of Borrower's ICR and/or Comments on Draft ICR The project has been implemented successfully and all project implementing agencies have learnt valuable experiences. The WB not only provided the needed financing but also brought in advanced project management technologies and modern practice for enterprise operation. The project agencies accumulated a vast amount of experiences on procurement, contract administration, project management and financial management etc. There are also lessons learnt from the project implementation including:  Detailed measures and instruments should be designed and implemented at the project implementation stage to ensure the project management agencies such as PPMO and MPMOs have adequate funding for normal operation and maintaining competent technical staff.  Inaccurate data or information in the RAP could lead to inadequacy of the planned counter-part financing for resettlement and in turn cause delay of resettlement. It is suggested that the following actions can be taken during the project preparation stage to avoid recurrence of the problem: (1) independent checking and review of the draft RAP should be formally taken by an experienced consultant or other competent organization; (2) adequate flexibility or contingency should be allowed in the cost estimate in the RAP; (3) in drafting the RAP, there should be involvement of people from the local land authority and the organizations which will actually carry out the house demolition to reflect their experiences to anticipate potential problems in advance.  At the very early stage of project implementation, both the PPMO and the WB should monitor very closely the actual counter-part financing availability which is usually the key reason for delayed resettlement. Effective measures should be taken immediately once problems are identified in this regards. It may be inadequate to link the actual resettlement progress to the approval of bidding document by the WB as the only measure to resolve issues in relation to delayed resettlement progress, and occasionally it could even cause adverse effect. The issue of counter-part financing availability and resettlement progress should be the key topics during meeting with top leaders from the local government;  Effective measures should be taken to avoid the use of preliminary design documents for tendering.  It is recommended for the WB to fund a research project with participates from experienced consultants, borrowers etc. to work out a set of effective measures, based on the summary of past experiences and lessons, to tackle some common practical issues occurring on many projects including extremely low winning bid prices, bidders using borrowed qualification certificates etc. 38 Annex 6. Photo Illustrations of Project Sites Zhaoshan section of the combined flood protection dyke and recreational areas: Top left: Recreational walkway at the crest of the dyke Top: Wall protection at narrow section Left: Wide sections used to provide recreational areas and piers for boats and fishing 39 Zhuzhou section of the combined flood protection dyke and recreational areas: Top left: Bar and restaurant area at the crest of the dyke Top: Recreational area used as popular location for wedding photos Left: Wide sections provide a large variety of recreational facilities including walking and cycling areas, botanical gardens, beach and sports grounds, fishing ponds, etc. 40 Changsha Wastewater Treatment Plant: Biological treatment tanks Zhuzhou Clean Coal: Parts of coal washing equipment 41 Annex 7. List of Supporting Documents  Hunan Urban Development Project Appraisal Document, 2004  Aide memoires, and ISRs  Borrower’s Draft Completion Report  Financial and Economic Analysis (Excel spreadsheets)  Resettlement Summary Report  Various monitoring and evaluation reports 42 Annex 8. Resettlement and Land Acquisition 1. Two components of the World Bank (WB)-financed Hunan Urban Development Project (HUDP) had resettlement work. These were PC1 corresponding to the Changshai Section, Xiangtan Urban Area Section, Zhaoshan Section, Zhuzhou Section, Zhuzhou Leidashi Section and PC2 corresponding to the Changshanyuan Sewage Treatment Plant. The resettlement activities for each of the sections are described below. PC1-Changsha Section 2. In this section, both the area of acquired lands and the quantity of demolished houses increased to some extent. The main reason was that the lagging resettlement work caused a slight increase in the population and the quantity of houses within the scope of project. Additionally, the regulations in design, such as Xingang Flood Control Dike, also resulted in a rise in the area of acquired lands. Meanwhile, the total investment in resettlement significantly grew from RMB122.38 million during the project’s evaluation stage to RMB590.09 million at implementation, which was close to five times of the amount in the original plan. This change was a result of changes in domestic policies which caused compensation standards to substantially increase, and thus better help affected people to rehabilitate their livelihood. The 112 vulnerable households affected by the project were granted special subsidies as required in RAP. The public participation of villagers was well implemented, during which period women were given special attention. Table 8.1 Summary of Resettlement and Land Acquisition for Changsha Section Item RAP Actual Amount Variation I. Number of Affected People 1. Number of resettled households 502 744 48.2% 2. Number of resettled people 1,902 3,051 60.4% II. Land (Mu) 1. Permanent land acquisition 2,095 3,164 51.0% Collective land 2,023 2,999 48.2% State-owned land 71 165 132.4% 2. Temporary land acquisition 1,098 1,151 4.8% III. House (m ) 2 142,315 184,300 29.5% 1. Residence 94,866 145,894 53.8% 2. Non-residence 47,449 38,406 -19.1% IV. Unit and store 55 43 -21.8% 1. Unit 55 43 -21.8% 2. Business store V. Investment (RMB million) 122.38 590.09 382.2% * Affected people in enterprises and public institutions 43 3. As an adequate grievance mechanism was established for the affected people, most of complaints were properly handled, while complainants were also satisfied. In June 2009, villagers of Huanghe Village expressed their dissatisfaction with resettlement arrangement to World Bank. The WB team visited Huanghe Village together with the PPMO to learn about specific situations. Through consultation, they reached a satisfactory solution. 4. In accordance to the project’s progress and the Bank’s requirements, the resettlement external monitors submitted nine external resettlement monitoring and evaluation reports to the WB, the Hunan Provincial RES Office, and the Changsha Urban Construction Investment and Development Co., Ltd. in March and September 2006, March and September 2007, March, September and December 2008, September 2009 and September 2010, all of which were approved. In March 2013, the resettlement and construction completion report of the project was submitted. 5. Effects of resettlement:  Residential conditions. According to the follow-up investigation and analysis on the post-resettlement residential conditions in 2007, 2008 and 2009, the per capita residential area increased from 50.4m2 prior to resettlement to 70.86m2 after resettlement. Furthermore, building structures were upgraded from originally brick- wood or civil structure to brick-concrete structures, indicating a significant improvement in residential conditions;  Infrastructure conditions. Upon completion of the construction of the riverside flood control and landscape road in Changsha Section, resettled people witnessed a notable improvement in infrastructure conditions such as traffic and landscape;  Income standard. According to the follow-up investigation and analysis on the economic income standard (2007, 2008 and 2009), in 2007, the total economic income was slightly reduced, while the per capita net income declined by 21.2% compared with that prior to resettlement. This was because of the proceeding of the land acquisition and resettlement, as well as the failures in implementing the production resettlement measures and rehabilitating production of resettled people. In addition, resettled people spend most of their energy building new houses, instead of production and operation activities. Having rehabilitated their production activities in 2008 and 2009, the resettled people witnessed the rapid growth of their income, with per capita net incomes increasing to 46.3% and 65.2%, respectively. 6. Consequently, compared to the standard before the demolition of houses, the residential conditions of the resettled people in Changsha Section were significantly improved, as evidenced by the increase in the quantity of large-size furniture and the significant improvement in their quality of life. In the meantime, the resettled people witnessed quick rehabilitation in production, as well as rapid growth in their economic income. 44 PC1-Xiangtan Urban Area Section 7. In the section, both of the area of acquired lands and the quantity of demolished houses increased to some extent. The main reason was that the lagging resettlement work caused a slight increase in the population and the quantity of houses within the scope of project. Additionally, the house demolition plan caused an increase in indicators. For instance, Xiangtan Construction Research Institute, Xiangtan Navigation Sport School and Xiangtan County Pot Factory only needed partial demolition in the planning report, but would require overall demolition during the implementation phase, which lead to a rise in the area of acquired state-owned land, the house demolition indicators. Furthermore, the rise in the actual indicators and the compensation standards resulted in the growth of the investment in resettled people. Specifically, affected by policy upgrade and market factors, the compensation standards for land acquisition and house demolition were much higher than that in RAP, with a total investment significantly up from RMB77.7429 million during the project’s evaluation stage to RMB241.68 million during implementation. The public participation of villagers was well implemented. As a grievance mechanism was established for affected people, most of complaints were properly handled, while also being satisfied. Table 8.2 Summary of Resettlement and Land Acquisition for Xiangtan Urban Section Item RAP Actual Amount Variation I. Number of Affected People 1. Affected by Household demolition Number of households 341 331 -2.9% Number of people 1107 810 -26.8% 2. People affected by loss of production 497 438 -11.9% 3. Non-residential affected people * 225 231 2.7% II. Land (Mu) 744 936 25.9% 1. Permanent land acquisition 715 936 30.9% Collective land 565 432 -23.5% State-owned land 150 504 235.3% 2. Temporary land acquisition 28 2 III. House (m ) 63,738 108,438 70.1% 1. Residence 45,828 61,757 34.8% 2. Non-residence 17,911 46,681 160.6% IV. Unit and store 1. Unit 31 32 3.2% 2. Business store V. Investment (RMB million) 7,774 24,168 210.9% * Affected people in enterprises and public institutions 45 8. According to the actual project progress and WB’s requirements, the resettlement external monitors submitted altogether nine external resettlement monitoring and evaluation reports to the WB, the Hunan Provincial RES Office and the Changsha Urban Construction Investment and Development Co., Ltd. in March and September 2006, March and September 2007, March, September and December 2008, September 2009 and September 2010, all of which were approved. In March 2013, the resettlement and construction completion report of the project was submitted. 9. According to the analysis on the comparison for production and living indicators before and after the resettlement (in 2005 and 2009), after the resettlement, the per capita residential area increased by 7.2%, with the improvement in both the residential standard and the living conditions; the shrinkage in the arable area contributed to the decrease in the agricultural income and the increase in the income from the secondary and tertiary industries, with per capita net income up by 29.3%. This demonstrated that the resettlement work in Xiangtan Urban Area Section achieved or surpassed the original planning targets, with a good effect. PC1-Zhaoshan Section 10. The design plan for Zhaoshan Section was adjusted in 2008. Through the optimization of the embankment plan, the project continued with a significant reduction in the impact from land acquisition and house demolition; the increase in the total investment in land acquisition and house demolition was benefited by the substantial rise in the compensation standards. In early 2005, the resettlement work in Zhaoshan Section started the posting of the house demolition and land acquisition announcements and the distribution of the house demolition and land acquisition policy brochures to resettled households. The whole process of land acquisition, house demolition and resettlement, including the selection of resettlement area on collective land, the distribution of land acquisition subsidy, the determination of the production resettlement plan, and the payment of compensation, was determined after the participation of resettled people and the negotiation of all parties. As required in RAP, the public participation, negotiation and information disclosure during the implementation of resettlement in Zhaoshan Section fully respected the wishes of all parties, and better protected the rights and interests of the affected people. As a grievance mechanism was established for the affected people, most of complaints were properly handled and also satisfied. 11. In the process of implementation of the Zhaoshan Section, as the project was started later than originally planned, the population and floor space affected by the project also increased. Local acquisition and resettlement policies were also updated, and compensation standard were improved, which increased the estimated compensation for resettlement from RMB42.98 million to RMB82.38 million. Furthermore, it was very difficult to raise money for resettlement, and the financing gap was large. Consequently, the project acquisition and resettlement stagnated in 2005, and the progress was severely delayed, which caused trouble for construction. To face the difficulty, Xiangtan MPMO and the owner Zhaoshan Trade Company jointly increased efforts to raise money for resettlement of the project during 2005, hoping to acquire money from multiple channels 46 and approaches. Unfortunately, their efforts made little difference due to various reasons and the capital bottleneck was not resolved, enhancing the negative effects. Table 8.3 Summary of Resettlement and Land Acquisition for Zhaoshan Section Item RAP Actual Amount Variation I. Number of Affected People 889 233 -73.8% 1. Affected by Household demolition 803 65 -91.9% Number of households 192 12 -93.8% Number of people 803 65 -91.9% 2. People affected by loss of production 255 180 -29.4% 3. Non-residential affected people * 48 30 -37.5% II. Land (Mu) 886 369 -58.4% 1. Permanent land acquisition 476 369 -22.5% Collective land 427 316 -26.0% Including arable land 197 280 42.1% State-owned land 48 54 12.5% 2. Temporary land acquisition 410 100 -75.6% 2 III. House (m ) 37,259 5,659 -84.8% 1. Residence 33,594 2,090 -93.8% 2. Non-residence 3,664 3,569 -2.6% IV. Unit and store 12 8 -33.3% 1. Unit 12 8 -33.3% 2. Business store V. Investment (RMB million) 82.38** 55.84 -32.2% * Affected people in enterprises and public institutions. ** New estimated in 2007 from the original estimate of RMB 42.98 million. 12. The PPMO then called administrative organizations, construction companies, design institutes, and consulting companies to survey the site, conduct research and hold discussions to find out feasible alternative plans. In order to maintain the original function and benefit, it was finally decided to adjust and improve the design of the dam section, to reduce project land, and ease the impact on land acquisition and resettlement so as to reduce investment in resettlement. In the second half of 2008, the project owner entrusted the designer to adjust the design program, the removal work was greatly reduced as well as the investment, the pressure on capital was relieved and the project was pushed forward. The abovementioned plan of Zhaoshan Section not only saved project investments, but also conformed to the interests and wishes of surrounding residents and played a very important role in the implementation of the project. 13. According to actual progress and requirements of the World Bank, 9 resettlement monitor and evaluation reports were submitted to the WB and Hunan Province Changzhutan Office and Zhaoshan Trade Company in Mar. 2006, Sep. 2006, Mar. 2007, 47 Sep. 2007, Mar. 2008, Sep. 2008, Dec. 2008, Sep. 2009 and Sep. 2010, and all of which were approved. The resettlement completion report was submitted in Mar. 2013. 14. Compared to the area before demolition, the total resettlement living space increased; building brick-wood structures were replaced with civil engineered brick- concrete structures. A field investigation found that the interior decoration, clean and tidy appearance, and aesthetic measure of resettlement houses were all greatly improved. Compared with living conditions before demolition, the housing conditions of Zhaoshan resettlement were largely improved. A sample survey indicated that compared with 2005 before demolition, the total income of resettlement in 2009 increased by 49.2%, and per capital net income increased by 58.8%. PC1-Zhuzhou Section 15. In this section of the project, the quantity of land acquisition and house demolition increased to a certain extent. The main reasons for these changes were:  changes brought by partial design adjustment, Compared to the RAP, Xiangrun Road, 28 and 29 resettlement areas were added in the implementation process, which led to the increase in quantity of acquisition and resettlement;  the project was started later than original plan, hence the population and floor space affected by the project also increased;  the original RAP didn’t include flood land, which led to great increase in the area of state land;  an update of compensation standards led to and increase in the actual investment for resettlement. 16. In the course of project implementation, the public participation of villagers was fully incorporated. Resettlement complaints and complaint channel were established in accordance with RAP. In the implementation course of project, the complaint channel was smooth, and all sectors were serious about issues reflected by resettlement, and actively sought solutions to resolve them. 17. According to actual progress and requirements of the World Bank, 10 resettlement monitor and evaluation reports were submitted to the World Bank and Hunan Province Changzhutan Office and Zhuzhou Chengtou Company in March 2006, September 2006, March 2007, September 2007, March 2008, September 2008, December 2008, September 2009, September 2010 and April 2011, and all of which were approved. The resettlement completion report was submitted in March 2013. 18. An analysis of the production index and living condition index in 2008 and 2011 before and after resettlement, showed that the per capita living space increased by 1.6% after resettlement (2011), housing standards were raised and living conditions were improved; arable area reduced, agricultural income reduced, income of secondary and tertiary industry increased and per capita net income increased by 60.5%; large-size household appliance increased; all resettled individuals were satisfied or basically satisfied with the resettlement work and current living conditions. 48 Table 8.4 Summary of Resettlement and Land Acquisition for Zhuzhou Section Item RAP Actual Amount Variation I. Number of Affected People 1. Affected by Household demolition Number of households 591 714 20.8% Number of people 1620 1963 21.2% 2. People affected by loss of production 671 722 7.6% 3. Non-residential affected people * 209 231 10.5% II. Land (Mu) 2,415 2,595 7.5% 1. Permanent land acquisition 916 2,441 166.5% Collective land 794 1,234 55.4% State-owned land 122 1,208 890.2% 2. Temporary land acquisition 1,499 154 -89.7% 2 III. House (m ) 129,601 268,767 107.4% 1. Residence 100,546 227,733 126.5% 2. Non-residence 29,054 41,029 41.2% IV. Unit and store 0% 1. Unit 15 15 0% 2. Business store V. Investment (RMB million) 220.67 599.53 171.7% * Affected people in enterprises and public institutions 19. The most pressing problem of resettlement in this area was that houses were insufficient, supply falling short of demand, which in turn resulted in longer transitional period (the transitional period of some resettlement was over 2 years). This was partly because as a development district of Zhuzhu City, Tianyuan District has had numerous construction projects in recent years. A large quantity of land acquisition and resettlement has been taking place which put exerted great pressure on the whole process. In order to arrange resettlement after demolition, Tianyuan District government spent a lot of resources to build houses each year. However, because the construction and development speed were too fast, and resettlement couldn’t keep up with demolition, there was a short supply of resettlement houses. This is a common problem that exists in areas that are developing and constructing, and an important factor that affects the process of resettlement as it causes disputes and complaints from both parties. The government should pay close attention to this matter. It is recommended that a detailed plan on resettlement be made when planning a development zone to ensure that all households to be dismantled can be appropriately resettled into houses nearby; namely that arrangements for resettlement houses for residents is done first. 49 PC1- Leidashi Section of Zhuzhou 20. After an adjustment of the design plan the original functions of the project were revised, and its impacts on resettlement were greatly eased. The number of people affected by resettlement decreased by 80.6%, the area of housing demolition decreased by 78.2%, and the unit number of households to be removed reduced by 79%. 21. The original RAP was completed in 2004, with adjustments made in 2009. The compensation standard was also raised. Even so, when taking inflation consideration, the actual investment amount decreased drastically. In the course of project implementation, the public participation of villagers was fully executed. Resettlement complaints and complaint channels were established in accordance with the RAP. In the implementation course of project, the complaint channel were smooth, and all sectors were serious about issues reflected by resettlement, and actively sought solutions to resolve them. Table 8.5 Summary of Resettlement and Land Acquisition for Leidashi Section Item RAP Actual Amount Variation I. Number of Affected People 943 237 -74.8% 1. Affected by Household demolition 901 175 -80.6% Number of households 257 54 -79.0% Number of people 901 175 -81.0% 2. People affected by loss of production 120 135 12.5% 3. Non-residential affected people * 41 128 212.2% II. Land (Mu) 373 993 166.2% 1. Permanent land acquisition 368 993 169.6% Collective land 368 388 5.2% State-owned land 5 606 12,680.8% 2. Temporary land acquisition 5 2 III. House (m ) 51,533 11,302 -78.17% 1. Residence 43,617 8,338 -80.9% 2. Non-residence 9,716 2,965 -62.6% IV. Unit and store 41 13 -68.3% 1. Unit 13 12 -7.7% 2. Business store 28 1 -96.4% V. Investment (RMB million) 34,34 34,36 0.1% * Affected people in enterprises and public institutions 22. According to actual progress and requirements of the World Bank, 4 resettlement monitor and evaluation reports were submitted to the World Bank and Hunan Province Changzhutan Office and headquarters of Changzhutan flood control landscape road engineering in Sep. 2009, Sep. 2010, Apr. 2011 and Dec. 2011 respectively, and all of which were approved. The resettlement completion report was submitted in Mar. 2013. 50 23. An analysis of the production index and living condition index in 2008 and 2011 before and after resettlement, showed that the per capita living space increased by 23.8% after resettlement (2011), housing standard were raised and living conditions were improved; arable area reduced, agricultural income reduced, income of secondary and tertiary industry increased and per capita net income increased by 74.3%; large-size household appliance increased; all affected persons were satisfied or basically satisfied with the resettlement work and the current standard of living. The resettlement of Leidashi Section of Zhuzhou achieved the original planning targets. 24. All sections of Changzhutan flood control landscape road engineering started in 2004, however the Zhuzhou Leidashi section could not be started in 2008 as all residents of Leidashi town had to be removed, making the scope of the work large and the deficiency of funds severe. Therefore, the PPMO, Zhuzhou City MPMO and Zhuzhou County Luxiang Urban Construction Investment Co., Ltd. and other administrative organizations, construction companies, design institutes, and consulting companies surveyed the site, conducted research and held discussions, to find out feasible alternative plans. 25. In order to maintain the original functions and benefits of the dyke, a decision was made to adjust the design of the Leidashi Town section, changing the flood control earth dike as flood control wall to reduce project land, and ease the need for land acquisition and resettlement and thus reduce the funds needed. In 2008, the project owner entrusted the designer to adjust the design program of Leidashi Section. PC2-Changshanyuan Sewage Treatment Plant 26. The amount of land acquisition and resettlement for this component increased substantially to that estimated during project assessment. The main reason is that adjustment of overall planning of Changsha in 2005 resulted in the movement of 50- 100m northeastward of the sewage treatment plant; thereby the land acquisition area and housing removal area were increased. Due to the occurrence of the severe non- compliance event the PPMO prepared “Relocation Implementation Plan� and submitted it to World Bank for approval. Before May 2007, the public participation and complaint mechanism was not working satisfactorily. After May 2007, the public participation and complaint mechanism of the project were improved, and the PPMO and MPMOs gave a high priority to this subject. 27. According to project progress and requirement of the Bank, 8 relocation monitor and evaluation reports were submitted to the World Bank and Hunan Province Changzhutan Office in Jan. 2006, Jul. 2006, Mar. 2007, Jul. 2007, Oct. 2007, Jan. 2008, Jul. 2008 and Jul. 2008 respectively, and all of which were approved. 51 Table 8.6 Summary of Resettlement for Changshanyuan WWTP Item RAP Actual Amount Variation 1. Number of people relocated 20 110 450.0% 2. Number of households relocated 6 26 333.3% 3. People affected by land acquisition 226 500 121.2% 4. Permanent land acquisition (mu) 150 244 62.7% 2 5. Area of houses removed (m ) 10,896 24,844 128.0% Investment (RMB million) 28.45 66.78 134.7% 28. Due to efforts of several parties, the living space of resettlement increased substantially. The area after resettlement at least doubles that of houses before relocation. As an example, the original living space of one resident was 220 square meters, after resettlement it is now 500 square meters; the original living space of another resident was 220 square meters, after resettlement, it is now 600 square meters. Seven vulnerable households affected by the project also received special subsidies of RMB5,000 each. The compensation for land has been provided to households who were affected by the projects according to resettlement plan. The village also held villagers’ meeting for the use of collective capital and development of industry, and made a resolution. 52 Xiangfan Hefei 112°50’ CHINA ANHUI Huzhou Xia Tongling ng Riv HUNAN URBAN DEVELOPMENT CHONGQING H U B E I Wuhan Ch an g ng Anqing Hangzhou er Zhicheng Jia PROJECT Huangshi Jiujiang Jingdezhen Chenglingji ZHEJIANG Shimun Nanchang Xingtanbian Yingtan Changsha 28°20’ 28°20’ Xiangtan Area of Zhuzhou J I A N G X I Huaihua main map Shaowu Pingziang Zhijiang HUNAN Laizhou ng Fuzhou Xia Hengyang Le An GUIZHOU FUJIAN Yong’an Zhangping Guilin Xiamen Meixian Liuzhou GUANGXI Longchuan Wuzhou GUANGDONG Shantou Guiping Guangzhou Guigang Shenzhen CHANGSHA Nanning Hong Kong SAR Maoming Macau SAR CHANGSHANYUAN Shanjiang WASTEWATER Beihai 0 100 200 300 PROVINCE CAPITALS TREATMENT PLANT PROVINCE BOUNDARIES KILOMETERS DRAINAGE AREA FOR CHANGSHANYUAN 113°10’ WASTEWATER TREATMENT PLANT CHANGSHA WASTEWATER COMPONENT 28°10’ 28°10’ Liu ya ng Ri ve r Beijing - Gu CORRIDOR angz COMPONENT (CHANGSHA) hou Rail iwa CORRIDOR COMPONENT: y ROAD AND EMBANKMENT ZHAOSHAN SCENIC AREA COMPONENT ZHUZHOU CLEAN COAL COMPONENT CHANGSHA WASTEWATER COMPONENT: ZHAOSHAN SCENIC AREA CHANGSHANYUAN WASTEWATER TREATMENT PLANT 28°00’ 28°00’ COMPONENT DRAINAGE AREA FOR CHANGSHANYUAN WASTEWATER TREATMENT PLANT CORRIDOR COMPONENT MAIN ROADS (ZHAOSHAN) SECONDARY ROADS RAILROADS BRIDGES ZHUZHOU CLEAN COAL COMPONENT XIANGTAN CORRIDOR COMPONENT ZHUZHOU (XIANGTAN) 27°50’ 27°50’ ay er CORRIDOR Riv E x p re ss w COMPONENT g Xian (ZHUZHOU) Jingzhu This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. IBRD 33573R MAY 2013 112°50’ 113°00’ 113°10’