Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-48380) ON A LOAN IN THE AMOUNT OF US$ 180 MILLION TO THE

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-48380) ON A LOAN IN THE AMOUNT OF US$ 180 MILLION TO THE PEOPLE S REPUBLIC OF CHINA FOR A SICHUAN URBAN DEVELOPMENT PROJECT June 19, 2014 China and Mongolia Sustainable Development Department China and Mongolia Country Management Unit East Asia and Pacific Region Report No: ICR 2753

2 CURRENCY EQUIVALENTS (Exchange Rate Effective May 22, 2014) Currency Unit = RMB Yuan 1.00 = US$ [0.16] US$ 1.00 = [6.23] FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Activities MIS Management Information System CPDF China Project Development Facility O&M Operations and Maintenance CPS Country Partnership Strategy PAD Project Appraisal Document EA Environmental Assessment PAP Project Affected People EMP Environmental Management Plan PDO Project Development Objective ERR Economic Rate of Return PIU Project Implementation Unit GDP Gross Domestic Product PMO Project Management Office GIS Geographical Information System PPMO Provincial Project Management Office ICR Implementation Completion Report RAP Resettlement Action Plan IDCB Institutional Development and Capacity Building SEDZ Southern Economic Development Zone IFC International Finance Corporation SUDP Sichuan Urban Development Project KPI Key Performance Indicator SUEP Sichuan Urban Environment Project M&E Monitoring and Evaluation TA Technical Assistance MIGA Multilateral Investment Guarantee Agency WWTP Waste Water Treatment Plant Vice President: Country Director: Sector Manager: Project Team Leader: ICR Team Leader: Axel van Trotsenburg, EAPVP Klaus Rohland, EACCF Abhas K. Jha, EASIN Paul Procee, EASCS Lasse Melgaard, EACCQ

3 People s Republic of China CHINA: Sichuan Urban Development Project TABLE OF CONTENTS Page Data Sheet A. Basic Information... iv B. Key Dates... iv C. Ratings Summary... iv D. Sector and Theme Codes... v E. Bank Staff... v F. Results Framework Analysis... v G. Ratings of Project Performance in ISRs... ix H. Restructuring (if any)... ix I. Disbursement Profile... ix Main Report 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annexes Annex 1. Project Costs and Financing Annex 2. Outputs by Component Annex 3. Economic and Financial Analysis Annex 4. Bank Lending and Implementation Support/Supervision Processes Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. List of Supporting Documents Annex 10: Resettlement and Land Acquisition Implementation and Results Annex 12. Before and after photos of selected investments Annex 13. Map of Earthquake Impact Area... 71

4

5 Data Sheet CHINA: Sichuan Urban Development Project A. Basic Information Country: China Project Name: Sichuan Urban Development Project Project ID: P L/C/TF Number(s): IBRD ICR Date: 06/13/2014 ICR Type: Core ICR Lending Instrument: SIL Borrower: PRC Original Total Commitment: USD M Disbursed Amount: USD M Revised Amount: USD M Environmental Category: A Implementing Agencies: Cofinanciers and Other External Partners: B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 09/15/2004 Effectiveness: 01/05/ /05/2007 Appraisal: 11/30/2005 Restructuring(s): 08/18/2011 Approval: 09/07/2006 Mid-term Review: 09/01/ /10/2011 Closing: 12/31/ /31/2013 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Moderately Satisfactory Substantial Moderately Satisfactory Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Unsatisfactory Government: Satisfactory Quality of Supervision: Satisfactory Implementing Agency/Agencies: Satisfactory Overall Bank Moderately Satisfactory Overall Borrower Performance: Satisfactory 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/No): Yes Quality at Entry (QEA): None Problem Project at any time (Yes/No): Yes Quality of Supervision (QSA): None DO rating before Closing/Inactive status: Satisfactory

6 D. Sector and Theme Codes Sector Code (as % of total Bank financing) Original Actual Flood protection General agriculture, fishing and forestry sector 4 4 Other social services 2 2 Urban Transport Wastewater Collection and Transportation Theme Code (as % of total Bank financing) City-wide Infrastructure and Service Delivery Municipal governance and institution building Other social development Urban services and housing for the poor Water resource management E. Bank Staff Positions At ICR At Approval Vice President: Axel van Trotsenburg Jeffrey S. Gutman Country Director: Klaus Rohland David R. Dollar Sector Manager: Abhas Kumar Jha Keshav Varma Project Team Leader: Paul Procee Hiroaki Suzuki ICR Team Leader: ICR Primary Author: Lasse Melgaard Lasse Melgaard F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) To improve core urban functions in an equitable and resource efficient manner by removing identified infrastructure bottlenecks hampering land development, transport, and environmental conditions in four second-tier cities in Sichuan Province. Revised Project Development Objectives (as approved by original approving authority) N/A. (a) PDO Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Indicator 1 : Formally Revised Target Values Actual Value Achieved at Completion or Target Years Evidence that identified bottlenecks have been removed, as expected by the strategic investments of the project including a high level of satisfaction among

7 Value quantitative or Qualitative) users of investments and PAPs Evidence identified via reports from technical and social audits Time savings on the roads are apparent and overall satisfaction of PAPs is high Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) The PAD did not define what "evidence" would be adequate to determine results, other than the intermediate outcome indicators shown below and in Annex 2. (b) Intermediate Outcome Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Indicator 1 : Value (quantitative or Qualitative) Formally Revised Target Values Mianyang: Area of land sold (ha) in Pioneer Park and SEDZ 0 PP=238 ha; SEDZ=312 ha Actual Value Achieved at Completion or Target Years PP= SEDZ= Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 2 : Value (quantitative or Qualitative) It is difficult to quantify the extent to which the project investments contributed to land sales and values. Achievement for PP=87.5% and for SEDZ = 61.6% Mianyang: Number of new residents on site 0 PP=30,440; SEDZ=18,202 PP=65,020 SEDZ=3,850 Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 3 : Value (quantitative or Qualitative) PP= 213.6% SEDZ = 21.1% Mianyang: Satisfaction of PAPs with resettlement process and outcome in Pioneer Park and SEDZ no resettlement started 75% of PAPs satisfied at both sites 100% both sites Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 4 : Value (quantitative or Qualitative) The survey conducted at completion asked respondents to report on degree to which they were "satisfied", "basically satisfied" and "not satisfied". 60% were satisfied, 40% were basically satisfied and 0% were not satisfied. Mianyang: Length of service roads built (km) cumulative in Pioneer Park 0 23 km Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 5 : Value (quantitative or Qualitative) This indicator was added at the Nov restructuring. Achievement = 78.8% Mianyang: Length of sewerage built (km) cumulative in Pioneer Park 0 23 km Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) This indicator was added at the Nov restructuring. Achievement %

8 Indicator 6 : Value (quantitative or Qualitative) Mianyang: Length of service roads built (km) cumulative in SEDZ 0 11 km Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 7 : Value (quantitative or Qualitative) This indicator was added at the Nov restructuring. Achievement = 98.6% Mianyang: Length of sewerage built (km) cumulative in SEDZ 0 11 km Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 8 : Value (quantitative or Qualitative) This indicator was added at the Nov restructuring. Achievement = Suining: Area of land sold (ha) ha Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 9 : Value (quantitative or Qualitative) It is difficult to quantify the extent to which the project investments contributed to land sales and values. Achievement = 50% Suining: Number of new residents on site 0 19,820 17,500 Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 10 : Value (quantitative or Qualitative) 88% achieved. Suining: Satisfaction of PAPs with resettlement process and outcome no resettlement 75% satisfied 100% Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 11 : Value (quantitative or Qualitative) The survey conducted at completion asked respondents to report on degree to which they were "satisfied", "basically satisfied" and "not satisfied". 63.2% were satisfied, 36.8% were basically satisfied and 0% were not satisfied. Suining: Travel time in minutes at peak from Railway station to Xining District 25 minutes 16 minutes not applicable not applicable Date achieved 12/01/ /31/ /30/ /31/2013 Comments (incl. % achievement) Indicator 12 : Value (quantitative or Qualitative) Most of the Xining road was dropped in the November 2011 restructuring. Yibin: Reduced travel time from Mianjiang Bridge to Chang Jiang Bridge: travel time in minutes at peak 10 minutes 7.5 minutes 6 Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 13 : Value (quantitative or Qualitative) 125% Yibin: Satisfaction level with landscape improvements not applicable 75% of sampled people satisfied 100%

9 Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 14 : Value (quantitative or Qualitative) The survey conducted at completion asked respondents to report on degree to which they were "satisfied", "basically satisfied" and "not satisfied". 31% were satisfied, 69% were basically satisfied and 0% were not satisfied. Yibin: Satisfaction of PAPs with resettlement process and outcome not applicable 75% of sampled people satisfied 100% Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 15 : Value (quantitative or Qualitative) The survey conducted at completion asked respondents to report on degree to which they were "satisfied", "basically satisfied" and "not satisfied". 57% were satisfied, 43% were basically satisfied and 0% were not satisfied. Panzhihua: Wastewater service coverage (average wastewater volume collected and treated, 1000 m3/d) Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 16 : Value (quantitative or Qualitative) 103.5% Panzhihua: Reduced travel time at peak in minutes - East Duren Road at km 49 to railway station 56.4 minutes 49.9 minutes 20 Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 17 : Value (quantitative or Qualitative) 249.5% Panzhihua: Satisfaction level with scenic improvements not applicable 75% of sampled people satisfied with landscape improvements 100% Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 18 : Value (quantitative or Qualitative) The survey conducted at completion asked respondents to report on degree to which they were "satisfied", "basically satisfied" and "not satisfied". 90% were satisfied, 10% were basically satisfied and 0% were not satisfied. Panzhihua: Satisfaction of PAPs with resettlement process and outcome not applicable 75% of PAPs satisfied 100% Date achieved 12/01/ /31/ /31/2013 Comments (incl. % achievement) Indicator 19 : Value (quantitative or Qualitative) The survey conducted at completion asked respondents to report on degree to which they were "satisfied", "basically satisfied" and "not satisfied". 92% were satisfied, 8% were basically satisfied and 0% were not satisfied. Institutional and Capacity Development: Number of contracts awarded and satisfactorily implemented as indicated in ToR. Date achieved 12/01/ /31/2013 Comments (incl. % achievement) 7 7

10 G. Ratings of Project Performance in ISRs No. Date ISR Actual Disbursements DO IP Archived (USD millions) 1 12/13/2006 Satisfactory Satisfactory /13/2007 Satisfactory Satisfactory /19/2009 Satisfactory Satisfactory /29/2009 Satisfactory Satisfactory /28/2010 Unsatisfactory Satisfactory /09/2011 Unsatisfactory Moderately Satisfactory /18/2012 Moderately Satisfactory Moderately Satisfactory /23/2012 Satisfactory Satisfactory /22/2013 Satisfactory Satisfactory H. Restructuring (if any) Restructuring Date(s) Board Approved PDO Change ISR Ratings at Restructuring DO Amount Disbursed at Restructuring in USD millions 08/18/2011 U MS IP Reason for Restructuring & Key Changes Made Amend the project scope to include additional works in Xinglong Area, reallocate Loan proceeds, and revise the Results Framework. I. Disbursement Profile

11 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal Urbanization has been a key driver of economic growth and poverty reduction in China. It has transformed the country from a rural, agricultural economy into an increasingly urban and economically diversified one. When the Sichuan Urban Development Project (SUDP) was designed, urbanization was anticipated to continue to accelerate as increasing numbers of people from rural parts of China sought employment in cities across the country. In 2005, urbanization in Sichuan was only 28 percent but was projected to reach 40% by 2010, representing over 10 million new inhabitants and a corresponding need to plan new urban land and higher level of infrastructure investments. Sichuan was a driver of economic development in the inland provinces, a process supported by the central government s Western Development Strategy at the turn of the century, which sought to move economic growth inland from the coastal areas. Urbanization was similarly an important strategic goal of successive five year plans, including the 11 th Five Year Plan ( ). The four second-tier cities (Mianyang, Suining, Yibin and Panzhihua) chosen to be part of the project were all among the fastest growing urban centers in the province and were found to have considerable growth potential, making them a likely attractive target for migrant workers. When the project was approved in August 2006, China s economy was growing at a rate of 10.7 percent, the fastest pace in a decade and much of the growth was generated in the country s cities. The movement of people to cities was seen as key to economic growth and migration was encouraged. Yet urbanization also produced a myriad of economic, environmental, regional and social challenges due to its speed and scale. As cities continued to grow, the pressures of urbanization led to inefficient urban sprawl, urban-rural inequality resulting from barriers to migration, uneven access to quality public services, and inequitable distribution of gains from rural-urban land conversion. Rationale for Bank involvement. SUDP aimed to address one of China s most pressing development problems, namely promoting equitable and resource-efficient development in four of China s rapidly growing second-tier cities through innovative strategies particularly with respect to social impacts on project affected people. The intention was also to generate important lessons for future engagements elsewhere in China. The Bank s experience in infrastructure planning and peri-urban development planning and its work to develop resettlement guidelines and compensation systems for project affected people were considered key reasons for its engagement. The Bank had also financed the Sichuan Urban Environment Project (SUEP) gaining important insight about the province and its challenges. The objectives of SUDP cut across three of the five pillars of the Country Partnership Strategy , including: (i) promoting efficient and balanced urbanization and migration of surplus labor from rural to urban areas by improving the quality of urban management and infrastructure; (ii) building a resource efficient society by promoting more financially sustainable utility systems, expanding urban wastewater collection and treatment facilities, and by promoting 1

12 urbanization with transport option including public and more efficient transportation modes that reduce pollution and fuel consumption; (iii) improving land administration management by clarifying landholder rights, land acquisition and compensation practices, and support alternative approaches to acquisition of rural land, and help enhance the role of land as a stable revenue source; and (iv) strengthening regional competitiveness in the lagging inland regions to attract foreign and domestic investment. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) In the Project Appraisal Document (PAD), the PDO was to improve core urban functions in an equitable and resource efficient manner by removing identified infrastructure bottlenecks hampering land development, transport, and environmental conditions in four second-tier cities in Sichuan Province. The PDO in the Loan Agreement (LA) was to assist the Borrower s Sichuan Province in facilitating rational urban development by removing identified infrastructure problems that impede land development, efficient transport movement and environmental protection. The LA PDO will be used to evaluate achievement of the PDO in this report. The one key outcome indicator was evidence that identified bottlenecks hampering core urban functions have been removed in participating municipalities, as expected by the strategic investments of the project, including a high level of satisfaction among users of the investments funded under the project and among those affected by land acquisition and resettlement under the project. The PAD did not define what evidence or which reports and technical audits were to be used in determining achievements of the project; however detailed outcome and output indicators for each city were included in Annex 3 of the PAD. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification N/A 1.4 Main Beneficiaries The beneficiaries were the populations of the four project cities: Mianyang (1,170,000), Suining (740,000), Yibin (870,000) and Panzhihua (560,000), for a total of 3,340,000. Moreover, the management capacity of the provincial and city PIUs was strengthened in areas such as financial management, procurement and contract management, and application of safeguards. Indirect project beneficiaries also included private sector companies in the Economic Development Zones in Suining and Mianyang. 1.5 Original Components (as approved) Urban Infrastructure Investment Component (Total cost: US$ million. Loan allocation of US$180 million or 49% of total project cost). This component was planned to fund strategic investments in different second-tier cities in Sichuan. Mianyang. (Total component cost: US$98.70 million; loan allocation: US$47.91 million or 49% of component cost). Mianyang s key urban challenges included limited urban space and 2

13 inefficient spatial development along existing trunk roads leaving large areas of land closer to downtown undeveloped. This led to overstretched public transport systems, increased travel times and congestion. The project was to construct trunk and secondary infrastructure, including drainage and environmental improvements, for two major urban development areas: Pioneer Park (US$49.96 million) and the Southern Economic Development Zone (SEDZ) (US$48.73 million). Investments would provide a well-organized road network and developed land for industrial and commercial activities as well as public facilities and housing. Suining. (Total component cost: US$64.98 million; loan allocation: US$28.8 million or 44% of component cost). Suining marketed itself as a satellite city for spill-over growth from neighboring Chongqing. It followed a similar development pattern as Mianyang: linear growth along a trunk network and along the Fujian River (extending 16 km along the river). The city master plan proposed developing new districts across the river and to the west of the city. The project was to construct secondary infrastructure and roads in the newly developed Xining District Area (US$58.23 million) to the west of the city, including an associated link road to the city railway station area, the Xining Road (US$6.75 million). Yibin. (Total component cost: US$ million; loan allocation: US$28.3 million or 37% of component cost). Due to its location at the confluence of two rivers, Yibin s economic growth was constrained by fragmented form and function due to land scarcity. The scattered city scale prevented the formation of the city core as a commercial and business center, and the existing road system lacked effective traffic connections and network functionality. Moreover, parts of the old city were in dire need of redevelopment. The project was to construct two riverbank roads: Route A (US$40.44 million) and Route B (US$35.91 million) designed to improve access within the city and works would also enhance the degraded riverbank environment. Panzhihua. (Total component cost: US$ million; loan allocation: US$ million or 54% of component cost). As a major mining town and regional industrial center, Panzhihua had significant potential, but a poor layout, an underdeveloped transport network and little urban character which posed challenges to its continued development. The project was to improve access and traffic circulation in two urban roads, viz. Bing-Ren Road (US$80.22 million) and Bin Jiang Road (US$9.32 million), and would upgrade the city s sewerage systems (US$10.41 million), riverbanks, and landscape conditions (US$25.60 million). Institutional Development and Capacity Building (IDCB) Component (US$7.00 million; 100% Loan financed). This component consisted of technical assistance (TA) for IDCB for the project municipalities (US$3.30 million), and for Project Implementation and Management, including EMP/RAP implementation monitoring (US$3.70 million). The goal of the TA was to help municipalities improve urban planning and management capacities related to spatial planning, land management, transport planning, and utility and asset management. 3

14 1.6 Revised Components Sichuan province was severely impacted by the Wenchuan Earthquake on May 12, The city of Mianyang, which was especially affected, consequently changed its master plan and received significant assistance from the central government for reconstruction. As a result, the following changes were made to its planned works (Part A. 1 of the project) in a restructuring dated November 18, 2011: 1. Construction of the section of the Second Ring Road from the interchange with Yingbin Avenue to the boundary of Pioneer Park (Part A.1 (b) in Schedule 2 of the Loan Agreement) was dropped and the associated indicators related to the Ring Road were removed as the road was financed by domestic resources; 2. As a result of land use changes and national support for earthquake reconstruction efforts, selected road and landscaping contracts in the SEDZ were dropped; 3. Savings amounting to US$11.8 million from these cancellations were utilized for new investments in the Xinglong area (a new development zone within Pioneer Park) and included: (i) 4.60 km of roads, (ii) 9.3 km of storm pipelines, (iii) 6.1 km of sewer pipelines, (iv) 1.1 km of drainage channel, and (v) slope protection, landscaping, lighting and traffic signals. 1.7 Other significant changes Following the Wenchuan Earthquake, Mianyang, Suining and Panzhihua were unable to meet counterpart funding requirements due to unexpected expenditures associated with earthquake recovery and reconstruction activities. The Loan Agreement was therefore amended on December 9, 2008 to increase the percentage of expenditures to be financed from the Loan for works (Category 1) in these cities from 70% to 100%. The mid-term review in November 2010 adjusted infrastructure works in several cities. As a result, the Xining road in Suining (S6 and S7 in the procurement plan) was cancelled; route B in Yibin was shortened from 3.5 to 2.1 km; and a sewer line in Panzhihua was shortened. In addition to the revised components mentioned above, the November 2011 restructuring included a reallocation of Loan proceeds, changes in the Results Framework, and an increase in the threshold of international competitive bidding for goods from US$500,000 to US$1 million. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Soundness of background analysis. Sichuan s strategic location, large population size substantial GDP, resources and growth potential made it a driver of development for China s Western Region. Urbanization in Sichuan was expected to increase rapidly and reach 40 percent by 2010 (it actually reached 43.5 percent in 2013). That combination of growth potential and resources made it fertile ground for an innovative project combining careful urban planning and 4

15 higher levels of infrastructure investment to meet economic and social needs while addressing environmental challenges of rapidly expanding cities. The four small and medium sized cities selected for the project were chosen as representative candidate cities for this kind of intervention. Lessons learned. The project design incorporated lessons learned from the implementation of the Sichuan Urban Environment Project (SUEP, closed January 2007) which financed water and wastewater treatment facilities in the provincial capital and three other second-tier cities. Specifically, lessons included: (a) the need to develop urban infrastructure projects as part of an integrated spatial plan rather than as a discrete activity; (b) the importance of thorough project preparation to avoid delays and avoid problems with fund flows; and (c) the importance of carrying out detailed socio-economic surveys in preparing high quality resettlement action plans (RAPs) to avoid implementation delays. Other background studies. The Bank initiated a number of studies to further inform the project design, including detailed economic and financial analysis of the investments. The Bank team examined the viability of some of the industries expected to be located in the economic development zones in these 4 cities, drawing on analysis of the electronics components industry 1 and supply chain for automotive components. 2 Moreover, the Bank benefited from a value chain analysis undertaken by the IFC to identify opportunities and challenges associated with strengthening the electronic and agribusiness sectors. 3 During preparation, the Bank was also able to draw on work undertaken by IFC and MIGA through the China Project Development Facility (CPDF), a multi-donor small and medium sized enterprise facilities located in Chengdu. 4 An investment climate survey and benchmarking study completed in March 2006 analyzed the opportunities and challenges associated with promoting economic activities of SUDP cities in areas such as industrial clustering and investment promotion. MIGA and IFC organized a workshop to present the outcome of this study in which the representatives of Mianyang and Suining participated. Findings from a strategic review of wastewater management in Panzhihua City undertaken by the World Bank-Netherlands Water Partnership Program also informed the preparation of the project. Assessment of project design. The project design responded to a clear need to address the expected pressures of urbanization in medium sized cities in Sichuan province while supporting the government s strategy of fostering economic growth in the Western Region. The design was complex, involving urban area development, urban transport, wastewater and scenic 1 Economic Development Strategies for Northeast China: A Study of the Electronic Components Industry - March 2005, Jun Kurihara, Senior Fellow, Center for Business and Government, John F. Kennedy School of Government, Harvard University. 2 Northeast China Supply Chains for Automotive Components June 2005 focusing on the challenges faced by the auto parts industry in Northeast China, which has one of the important concentrations of automotive sector activities in China. 3 IFC Value Chain Analysis January The intention of the Government is to seek IFC technical assistance in identifying the opportunities and challenges in further developing its two sectors, agribusiness and electronics manufacturing. Especially, the Government would like to gain a better understanding of the key policy elements required to realize competitive performance of value chains in the two selected sectors pork and electronics. 4 Snapshot Sichuan Benchmarking FDI Competitiveness in China's Sichuan Province March

16 improvement in multiple investments in four cities with no prior experience in implementing a Bank project. The project sought to be innovative by helping these cities promote efficient spatial development through rational rural-urban land conversion in peri-urban areas and development of the urban transport network connecting these areas. The strengthening of infrastructure to support Special Economic Zones, including support to resettle farmers living in these areas, added to its complexity as did the intention to monitor a range of factors, including market movement and prices of land. The project sought to address critical issues to the urbanization process in a more systematic way, including land conversion, valuation and resettlement. It is not clear, however, that the conditions were right to implement a project of such complex and whether the potential risks were adequately identified or mitigated during project the design. As the borrowers ICR notes, a key lesson of the project is to avoid setting unduly optimistic goals and objectives. PDO/KPI Formulation. As mentioned, the PDO in the LA was inconsistent with the PDO in the PAD. Furthermore, the PAD did not provide guidance on what core urban functions were, which infrastructure bottlenecks needed to be removed, and the causal links between the PDO and the infrastructure investments was less than obvious. The key performance indicator evidence that identified bottlenecks hampering core urban functions have been removed, was neither quantifiable nor measurable. The evidence was to be established via reports from technical and social audits but these were not defined, nor did the Results Framework specify what should be contained in these reports. The Results Framework did, however, contain detailed outcome and output indicators by city, which were measurable (see Section 2.3). Safeguards. The project was correctly categorized as a Category A given the scope of the investments and the substantial resettlement work to be carried out. The government acquired rural land from agricultural collectives and auctioned or sold it for urban development. As a result, significant emphasis was placed on conducting field-based due-diligence for environmental and social aspects of the project. Because of the sensitivities involved, the Bank conducted a special safeguards review in Mianyang and Suining, based on a revised RAP and undertook an enhanced analysis of the land components in support of project appraisal. Resettlement activities were designed (and implemented) by the four municipal PIUs, and overseen by the provincial PMO and the Bank. Furthermore, as part of the design, resettlement implementation was to be regularly monitored by an independent external resettlement monitoring agent. The capacity of the PIUs in the four cities varied significantly, and as a result, the need for support and capacity strengthening was not uniform. This should have been recognized upfront and a more comprehensive assessment undertaken to inform the project design, and develop appropriate and targeted training methodologies for each city. Assessment of risks. The PAD identified a range of risks, the majority judged to be moderate, with just two deemed substantial (delay in land sales and inadequate compensation levels). The team did not assign an aggregate rating to the project, which should have been considered given its complexity. The project was included in the corporate risk list due to its resettlement requirements, and was subject to review by the Resettlement Committee. The overall risk profile 6

17 should have been at least substantial if not high, especially considering the reputational risks and controversy surrounding the land valuation and resettlement. This potential market downturn on land value was not identified as a risk in the PAD. While the market trajectory cannot be predicted, the results framework included an indicator specifically related to land prices, and the potential impact of the market and macro-economic situation should therefore also have been taken into account. The PAD assigned a moderate risk to implementation delays caused by lack of experience implementing World Bank projects on the part of the municipalities. The risk mitigation envisaged was systematic training and the recruitment of procurement agencies and project management consultants. An additional risk to capacity was, however, that the PIUs had inadequate capacity to ensure that key lessons could be extracted from resettlement and land valuation activities, and especially from the development of the Special Economic Zones. Finally, the risk assessment did not mention the risk of natural disaster even though Sichuan is historically seismically active and prone to other hazards including flooding. The PAD should have referenced disaster risk management, for example in ensuring that selected contractors would incorporate disaster risks methods in the construction of civil works. Adequacy of government commitment. The commitment from the government was strong from the beginning of the formulation process. A leading group headed by a Vice Governor designated the Sichuan Construction Commission as the agency responsible for project management. The Commission subsequently appointed the Provincial Project Management Office (PPMO), which had been responsible for implementation of SUEP to prepare and execute the project, thus ensuring that the extensive capacity and experience gained from SUEP would be applied to SUDP. Quality at entry was moderately unsatisfactory. Significant resources were spent on preparation, spurred not only by the need for careful preparatory work for Bank investments supporting the conversion of rural land to urban land, but also to put in place an adequate framework for implementation. There was strong World Bank Group collaboration early in project preparation, although little evidence of it having continued through appraisal. The PDO in the PAD was inconsistent with that in the LA, and the key performance indicator was not measurable which complicated monitoring and evaluation. Causal linkages between the PDO and investments were somewhat tenuous. While the team paid significant attention to the technical aspects of the project during preparation, the institutional complexities and capacity constraints would have benefited from further analysis, and the results framework was poorly designed. Many outcome indicators were not project specific as they were equally influenced by external factors (e.g. land prices, traffic volumes, and economic growth). The Bank team also did not include experts on industrial or development zone during the design stage to help build local capacity on planning these zones. Not much attention was given to strengthening the local capacity to manage resettlement and rural to urban hukou conversion, as capacity building was more focused on project management for infrastructure development. The project involved four cities that had never worked with the Bank before, incorporated multiple sectors, including economic zone development, wastewater, transport, and very complex resettlement and land 7

18 valuation. Risk assessment was somewhat wanting as noted above. At the time of its design, the project was highly innovative and attempted to address critical challenges in China s urbanization process. By the standards at the time, the quality at entry would have been considered satisfactory, but applying the standards expected from projects today, the quality at entry is considered moderately unsatisfactory, accentuated by the lack of a clear PDO and results framework, which significantly complicated evaluation of the achievements of the project. 2.2 Implementation Key factors outside government control On May 12, 2008, an earthquake measuring 7.9 on the Scale of Richter struck Sichuan Province. The epicenter was located in Wenchuan County (see map in annex 13) and the quake inflicted severe damage across Sichuan and a number of other provinces. The numbers of people dead or missing reached 87,150, more than 370,000 people were injured and 4.8 million became homeless. More than 45 million people were affected in some way by the earthquake, and it stands as one of the most expensive earthquakes in human history in terms of socio-economic losses. Due to their proximity to the epicenter, Mianyang, Yibin and Suining were declared heavily affected disaster areas. Authorities immediately turned their attention to providing emergency relief for the affected areas, followed by an extended period of recovery and reconstruction. This work took precedence over all other infrastructure development, and authorities were forced to reassess the existing master plans and carefully evaluate existing investments, including those under SUDP, to ensure these were still relevant and a priority. As a result, the attention of both the client, including the PPMO, and task team was re-directed to the preparation of a $710 million emergency loan for the Wenchuan Earthquake Reconstruction Project, which was approved in February Understandably, the PMO and cities were stretched to the limit overseeing recovery activities and were unable to supervise the SUDP adequately. In addition, a planned supervision mission in June 2008 had to be postponed as the affected areas were closed due to marshal law. The next could not take place until March 2009 to give provincial and Bank staff the opportunity to devote their energy to reconstruction activities from the earthquake. The earthquake forced alterations to the cities master plans and hence the project scope. City officials also struggled to obtain counterpart funding as all available resources were directed to reconstruction activities. Skyrocketing prices of construction inputs in the aftermath of the earthquake imposed further financial constraints. At the same time, the project was affected by the global financial crisis of 2007/2008, which led to a depreciation of the RMB. Due to its distance from the epicenter, the city of Panzhihua was less affected by the devastation. Three and a half months later, however, it was hit by an earthquake measuring 6.1 on the Scale of Richter, causing 40 deaths, the collapse of some 10,000 houses and significant damage. The inability of the PMO and cities to devote adequate time and resources to the supervision of the SUDP in the aftermath of the earthquake, led to the downgrading of progress towards 8

19 reaching the PDO to unsatisfactory in mid Following a successful restructuring and reengagement to complete the SUDP, the project was upgraded to moderately satisfactory in early 2012 and to satisfactory in late This also reflected the fact that the cities had to address multiple reconstruction challenges, infrastructure works under the project slowed down but continued to progress. The restructuring did not change the overall scope of the project, and although the original plan was to complete all works by August 2011, they were not completed until June This prevented a more in-depth study and documentation of the long-term impacts and lessons learned, particularly on experiences gained rural-to-urban land conversions. Key factors subject to government control. The Earthquake affected the subprojects in Mianyang and Yibin the most. In Mianyang, the SEDZ and neighboring areas were used for temporary housing and to resettle a number of affected people away from high-risk mountainous areas of Sichuan. In Yibin, a new master plan was developed which prioritized the expansion and construction of a new administration center in the south-western part of the city. Consequently, Route B ceased to be a priority and the distance was reduced. As a result, the road did not actually address any specific transport bottleneck, though it did contribute to improved accessibility to an area adjacent to the river and significant riverbank beautification. According to the city, there has been a substantial increase in land prices as the area has become more attractive to development and citizens, but there is no data to back this up. The changes in Master Plans were most significant in Mianyang, which was also most heavily affected by the earthquake. The city changed the plans for Pioneer Park and the SEDZ with the former focusing on high-tech, electronic industry development as well as development of a commercial and residential area, whereas the SEDZ would focus on industrial development. Throughout the project, significant attention was placed on ensuring the timely completion of construction, but less emphasis was devoted to institutional development. The institutional development component introduced a GIS/MIS as a major instrument for municipal institutional development and capacity building. Furthermore, workshops were to be held linking SUDP cities with other cities worldwide for information sharing. This global linkage was also meant to induce foreign investment into the Economic Development Zones, but there is no evidence that this training had significant impact. Moreover, while the project introduced both GIS/MIS hardware and software in the four cities and training was provided, the actual impact of these systems is not measurable. Key factors subject to implementing agency control Road design. The roads in Suining and Mianyang were designed to accommodate traffic flows that were greater than the ones observed during field visits. Even if the roads will accommodate higher traffic flows in the future, the operation and maintenance costs in the meantime will be significantly larger than necessary. It would have been more efficient if the PIUs had secured the 9

20 right-of-way for a larger road, but only built the road to standards based on the current or near future projected traffic flows. Lack of procurement experience. The Chinese construction sector is gradually transitioning towards a more competitive and market oriented system, and cost estimates were often based on national or state level guidelines. The project cities were not familiar with the Bank procurement practices, and in a number of cases awarded contracts to the lowest bidder, which were not fully qualified or did not have the necessary capacity and experience to undertake the works in a timely manner. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization Design Beyond the inconsistency in the PDOs in the PAD and the LA, the results framework lacked clear and quantifiable key performance indicators. The reference in the key performance indicator to evidence identifying bottlenecks hampering core urban functions have been removed in participating municipalities is not quantifiable and therefore offered little in the way of a useful tool for management to monitor project progress. Tailoring the indicators to each city was appropriate given their differing situation, but many tracked things not directly attributable to the project. This was the case with the output indicators, especially for Mianyang and Suining, where attribution to the project was not straightforward. Indicators pertaining to land, e.g. area of land sold each quarter, auction price of land, time lag between lease attribution and land use/occupation, price per square meter sold, number of new resident on site, etc. were subject to factors beyond control of the project, and should have been refined to have a more direct correlation with the investments. While travel time provided is a critical way to measure the impact of road construction, it can be influenced by many external factors such as increase in car ownership and overall traffic, improvements in public transportation systems and adjacent roads. Alternative indicators such as percentage of People Affected by the Project who are trained or re-employed and percentage of the population who have access to sewerage services would have provided more meaningful indications of the results of the project. Some of the intermediate indicators, such as satisfaction of PAPs with resettlement process and outcome were measurable only at the end of the project, and therefore could not guide project implementation. The project would have benefited from having clearer targets, disaggregated by year, to allow for more accurate monitoring as well as to enable management to take corrective action sooner. Implementation and utilization M&E focused on collecting data on the basis of the outlined indicators, and to this effect, the system was implemented as designed. However, monitoring and evaluation were not strong tools to support project management or decision making and it is unlikely that the project M&E arrangements will prove sustainable after project closing. However, despite these difficulties, the 10

21 importance of the learning process that grew out of the development and evaluation of the project has helped to demonstrate to the municipal governments the value of well-designed, quantitative monitoring in decision-making and project management. 2.4 Safeguard and Fiduciary Compliance Safeguards The project triggered the Environmental Assessment (OP4.01) and the Involuntary Resettlement (OP 4.12) safeguard policies, and the project was assigned a Category A. The project did not affect any indigenous people and the Indigenous Peoples policy under OP Environmental Assessment. The project s road and sewer investments were determined to have adverse impacts during the construction and operation phase. Consequently, an Environmental Assessment (EA) was carried out in each project city. The Environmental Monitoring Plans (EMP) followed national procedures and standards and Bank safeguard policies. Two rounds of public consultations on the EAs were held in each city, and the issues and concerns raised were incorporated into the final EAs and EMPs. The EA was disclosed in English in November 11, 2005 and locally in Chinese in October The PPMO hired an independent agency to conduct external environmental monitoring for the works in all four cities. The agency monitored implementation of the works vis-à-vis the relevant EMPs. The independent external monitoring agency confirmed that the infrastructure in all four cities was completed with due consideration to ensuring that adverse environmental impacts were properly mitigated. The infrastructure in Panzhihua and Yibin was judged to have a positive environmental impact on wastewater discharge and improved environmental aesthetics along the river embankments (see pictures in annex 12). As such, project performance with respect to compliance with environmental safeguards is considered satisfactory. However, the medium to long term aggregate environmental impact of promoting industrial development in designated geographical locations, inter alia how companies dispose of waste and limit hazardous emissions, was not part of the scope of the project. Involuntary Resettlement. During preparation, it was determined that the project s resettlement requirements would affect enterprises, people and assets in all four cities. Each city carried out extensive surveys on the impact of the project on project affected people (PAP) and their assets, and detailed Resettlement Action Plans were prepared and disclosed in the Infoshop in English and locally in Chinese in October Due to its extensive resettlement, SUDP was included in the corporate risk list and was subject to review by the Resettlement Committee, which endorsed the approach of the project in a meeting in April With the exception of a few relatively isolated cases where the lack of agreement on compensation caused implementation delays, there was no significant adverse impact on PAPs. This was confirmed by surveys undertaken as part of the project, and the work of the independent monitoring consultancy on resettlement. The surveys also confirmed overall high levels of satisfaction on the part of the PAPs. Beyond their monetary compensation, resettled individuals were entitled to unemployment insurance and job training. Moreover, the actual 11

22 impact of the project on land acquisition, house demolition, and relocated households was less than anticipated in the RAP. Surveys have confirmed that livelihood restoration was successfully achieved and related compensation paid to PAPs. (See annex 10 for further discussion on resettlement results). The table below summarizes land acquisition, housing demolition, enterprises and PAP impacts on the project, comparing RAP estimates to actuals. Table 1. Summary of Estimated and Actual Resettlement and Land Acquisition Panzhihua Suining Mianyang Yibin Total RAP Actual RAP Actual RAP Actual RAP Actual RAP Actual Land acquisition (mu) ,432 1,809 2,415 1, ,805 4,591 House demolition (m 2 ) 47,403 26,625 84,566 88,216 87,246 25,866 83,194 46, , ,953 Enterprises/Institutions Affected households ,003 1,374 1, ,066 3,262 Each municipality developed independent RAPs for their own resettlement activities. While resettlement was also subject to delays, implementation of the RAP s was complete by project closing. Resettlement, which received major attention in the design phase, does not appear to have been a significant challenge in the course of project implementation. One road in Suining was affected by a refusal of two household to vacate the land forcing a redesign and narrowing of the road, preventing completion of sidewalks, posing safety hazards and voiding their full use as per their original design. The implementing agency should have addressed the failure to come to agreement with the residents of the areas blocking road construction prior to construction moving ahead, or modified the design as a result of anticipated difficulties. On the basis of the measures implemented and results recorded in the final surveys, the project complied satisfactorily with the resettlement policies of the Bank. Financial Management. The project financial management system was continuously maintained by the PPMO and municipal PIUs from appraisal through closing. Project audit reports were submitted in a timely manner and auditors' opinions were all unqualified (clean). The internal control weaknesses detected by auditors were properly addressed by the implementing agencies. PPMO, as an experienced agency, provided the necessary training and guidance to municipal PIUs, and its strong capacity in project management and coordination attributed to sound financial management and efficient disbursements. The overall project financial management performance is satisfactory and the Bank s fiduciary requirements were complied with. Procurement. The PPMO was experienced with Bank procurement guidelines and procedures and no substantial procurement issues were identified. The PPMO implemented the procurement plan as agreed, maintained smooth communication with the Bank on issues for attention and action, kept procurement files safe and complete and guided the PIUs on contract management. During project implementation, three procurement related complaints were received regarding three contracts. In one of the three cases, the Bank validated the complaint and the PPMO agreed 12

23 to re-bid. The overall procurement performance is satisfactory and the Bank s procurement requirements were complied with. 2.5 Post-completion Operation/Next Phase The four PIUs have continued to operate as integral parts of their respective municipalities, and are expected to implement projects wholly financed with government resources. As their fundamental institutional structure remained in place after closing, a seamless transition to postcompletion operation of the investments can be expected. The infrastructure completed under the project is now operated and maintained by experienced entities with adequately knowledgeable personnel, and are funded through budgetary allocations from the municipal governments. All four project cities have furnished the Bank with an annual O&M plan, including budget, for the infrastructure constructed under the project (as required in paragraph 14, schedule 2 of the Project Agreement), and continued budget allocations for the works are expected in the future. Nevertheless, during the ICR mission, some recently completed infrastructure was in need of repair, which had also been identified by the task team as a challenge in the course of implementation, emphasizing the importance of continually ensuring adequate attention and resources to O&M. Both construction investment companies in Miangyang were converted as part of the marketoriented reform agenda of the government to facilitate private investments and manage the economic development zones. In Panzhihua and Suining the companies are moving towards developing comprehensive asset management systems, a concept currently in its infancy in both cities. By the end of 2012, the Panzhihua Water Affairs Company was running a surplus as the cost-recovery rate reached 115%, but it falls short of the targeted 130% set in the Project Agreement. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Relevance of objectives and design: High China s policy makers have intensified the focus on urbanization in recent years inter alia by launching the New Urbanization Agenda to sustain economic growth by promoting urbanization, which gives higher priority to developing small cities and towns, recognizing their role in linking the cities and rural areas. China s 11 th Five-Year Plan ( ) encouraged the permanent settlement of rural migrants in medium and small cities and spending programs focused on reducing the rural urban disparities in public service delivery. The 12 th Five-Year Plan ( ) continued the emphasis of urbanization as a driver of economic growth. The development trajectory of China in the years since appraisal of the project reinforces its relevance in addressing relevant challenges for the country. Urbanization has assumed a key role in the Bank s continued engagement in China, and cuts across the pillars of the Country Partnership Strategy FY In 2012, the Bank and Chinese authorities agreed to work on a joint study ( Urban China: Towards Efficient, Inclusive and Sustainable Urbanization ) to define 13

24 a new model of urbanization, one that is more efficient, inclusive, and sustainable. It has been recognized that to achieve this goal, significant reforms will be needed, among other in land management, household registration and the provision of social services, all areas that were critical aspects of SUDP. With a PDO that aimed at facilitating rational urban development by removing identified infrastructure problems to further land development, efficient transport movement and environmental protection, the project addressed a critical challenge for China s growing cities. Ensuring that farmers received adequate compensation according to transparent criteria, an issue that was paid significant attention in the design phase of the project, has become a critical aspect of the country s urbanization strategy. Promoting livability in the project cities through a range of measures including improved environmental conditions, beautification of public spaces and ensuring cleaner water, are also well aligned with the current and future priorities of the country. The lessons of the project have therefore provided important input to the Bank s continued engagement on the urbanization process in China and to new projects in the country. The relevance of the project was substantial. It was implemented in context of extraordinarily challenging circumstances, and the Bank was highly responsive to the changing needs in the aftermath of the earthquake and restructured the project. Nevertheless, important work on monitoring urban-to-rural conversion activities and associated impacts on farmers was not undertaken due to the challenging and demanding post-earthquake situation in the province. As a result, an opportunity was missed to gain more detailed knowledge on this process for other cities in China and elsewhere. 3.2 Achievement of Project Development Objectives Rating: Moderately Satisfactory As mentioned in Section 1.2 above, this report will use the LA version of the PDO to argue for the achievement of the PDO because it is clearer and more closely related to the component outputs. That formulation is: to assist the borrower s Sichuan Province in facilitating rational urban development by removing identified infrastructure problems that impede land development, efficient transport movement and environmental protection. Urban Infrastructure Investment Component Mianyang City Level Objective. The objective was to rationalize the city s spatial development by expanding two urban development areas (Pioneer Park, SEDZ) adjacent to its overcrowded city core area, and to construct a connecting urban road, to provide new urban space and relieve congestion. Project investments. To develop land closer to the city center, the project funded the construction of trunk and secondary infrastructure, including drainage and environmental improvements, in Pioneer Park where the focus was on construction of local access roads and associated bridges, sewers, and drainage, as well as landscaping activities, to expand the park 14

25 area and a section of the Second Ring Road within Pioneer Park; and the Southern Economic Development Zone (SEDZ) where the investment was aimed at supporting the construction of local access roads, together with associated drainage infrastructure and landscaping. Achievements. At closing, the following infrastructure had been completed in Pioneer Park: (i) the construction of 22 sections of local access roads and associated sewers and drainage, as well as landscaping activities with a length of km of roads to expand the park area; and (ii) in the Xinglong area: the construction of three sections of local access roads and associated sewers, and 2 km drainage. The construction of the roads in the Pioneer Park opened up new areas and enabled the establishment of three service centers for development of science and technology. Community hospitals and primary schools are now under construction as is an urban park and public transportation hubs. Infrastructure in Pioneer Park contributed significantly to relieving its congested core (see before and after photos in annex 12). The number of new residents on site at 65,020 reached twice the target of 30,440. High-tech enterprises have entered the Park, and the tax revenue has increased significantly as shown in table 2. Incomes across Mianyang have increased as outlined in annex 10. Table 2. Economic data of enterprises in Mianyang (in RMB) Year Sales Revenue (millions) Export Volume (millions) Annual Profit (millions) Annual Taxation (millions) , , , , , , , , In the Southern Economic Development Zone (SEDZ), the output was km of local access roads constructed, together with associated underground basic infrastructure and landscaping. After completing the infrastructure in the SEDZ, it was assigned status of National Level Economic Development Zone by the central government in October Since 2008, the SEDZ has attracted foreign investment of RMB 365 million, and local investment reached RMB 25,785 million by 2012, with the annual fiscal revenue increasing accordingly. The area of land sold only reached 192 ha per quarter compared to the targeted 312 ha, and the number of new residents on site only reached 3,850 compared to the targeted 18,202. People affected by land acquisition received multifaceted compensation, including living expenses, social security and employment training. Relevant training provided by each zone facilitated employment for the resettled residents. 15

26 Table 3. Key outcome Results indicators for Mianyang Outcome indicator Target Result Pioneer Park Area of land sold each quarter (ha) Auction price of land per m 2 compared to projected price (RMB/m 2 ) 291 1,080 Number of new residents on site 30,440 65,020 Length of service roads built (km) cumulative in Pioneer Park (2011 Restructuring) Southern Economic Development Zone Area of land sold each quarter (ha) Auction price of land per m2 compared to projected price (RMB/m 2 ) 240 1,630 Number of new residents on site 18,202 3,850 Length of service roads built (km) cumulative in SEDZ (2011 Restructuring) Achievements in Mianyang are satisfactory, with the project largely meeting or exceeding its targets, with the exception of lower than expected numbers of land sales in SEDZ and a shortfall in attracting residents to SEDZ. This, however, is explained by the change in master plan and rezoning of specific areas following the earthquake. Nevertheless, all data related to the city needs to consider the very substantial transfers of central government financing to the city in the aftermath of the earthquake, which have skewed the impact of the project making attribution difficult. Moreover, a range of measures was put into place to attract new investors as a means to help the city recover, which further complicated the task of accurately assessing the causal relation between outputs and outcomes for Mianyang. Suining City Level Objective: to support the city s urban area development on its western side, by developing a new urban area including a connecting urban road, to provide new urban space and to relieve congested core areas. Project Investments. The project sought to expand the city s western part (Xining District some 1.5 to 4 km from the city center), and support an associated link road of 8.5 km from Xining District to the Suining Railway Station in order to lower commuting distances and alleviate traffic congestion on the trunk road network. Achievements. At closing, the project had completed 13.2 km of access and distributor roads, seven bridges, 3.5 km of river embankments, sewers, and landscaping in the Xining District Area. The infrastructure provided a foundation for the further development of an area of 351 ha for mixed residential, administrative and commercial use. With regards to the Xining Road, only 2.97 km were constructed from the Suining-Mianyang express highway to the Suining Railway Station with the remainder cancelled following the earthquake, but completed using local funds. The Xining EDZ went through significant changes in the course of implementation including a new master plan. In 2006, it was km 2 of which 5 km 2 had been developed. From 2007 to 2013, its area increased to km 2. In 2012, the Suining EDZ was designated as a National 16

27 Level Economic Development Zone (NLEDZ), the fourth NLEDZ in Sichuan Province (NLEDZ s receive a number of regulatory benefits and privileges aimed at reducing the cost of investment and facilitating importing and exporting, they have greater autonomy and administrative tasks can be completed more quickly and they generally benefit from more central government support). Furthermore, Suining EDZ was designated as an Electronic Industry Zone in Sichuan to attract these types of companies (from 2007 to 2011, a total of 147 new electronic enterprises have established themselves in the Suining EDZ). Table 4. Outcome Results indicators for Suining Outcome indicator Target Result Area of land sold each quarter (ha) Auction price of land per m2 compared to projected price (RMB/m 2 ) Number of new residents on site 19,830 17,500 Results in Suining have been moderately unsatisfactory. With the cancellation of the Xining road, it is not possible to ascertain the reduction in travel time, though there have been improvements in the short stretch of the road that was completed with project financing. The infrastructure improvements targeting the Suining Economic Development Zone have been completed successfully, but the development of the economic development zone has still not reached the anticipated results, and the roads suffer from overdesign. The number of new residents on site reached 17,500, short of the project target of 19,380. Only 50% as much land as expected had been sold on a quarterly basis, but this reflects in part the change of the master plan as well as the reduction of the size of the residential areas to accommodate an expected increase in enterprises. Moreover, in one area road construction was not completed as designed due to the refusal of two households to accept the established cost norms for resettlement. Yibin City Level Objective: To improve the city s strategic traffic function, relieve congestion in city core areas, and to improve the landscape of the new administration area. Project Investments. The project sought to construct two riverbank roads: Route A (US$40.44 million) and Route B (US$35.91 million) designed to improve access within the city and fund works to enhance the degraded riverbank environment. Achievement. Under the project, the city completed Route A, a 6.7 km (100% of appraised distance) distributor road along the north bank of the Min Jiang and Chang Jiang rivers, connecting the old city and existing urban areas with the Tianyuan District and the new Lingang Economic Development Zone (LEDZ), which was established in LEDZ, which will encompass 193 km 2, will be an important gate from Sichuan to the rivers, oceans as well as hub of southeast transportation in China, and was designated as a National Level Economic Development Zone in January The project also completed 2.1 km of Route B (compared to 3.52km at appraisal), an extension of the existing riverbank wall, connecting with an 800 meter walkway from the Cultural Square in the center of Nan An District. The construction of this road has opened up an area of the riverbank, where the city is establishing a large beach and recreational area. 17

28 Table 5. Outcome Results indicators for Yibin Outcome indicator Target Result Reduced travel time Mianjian Bridge to Chang Jiang Bridge at peak (min) Increase in flow at peak (% increase over the baseline) Landscape improvements of the river bank of the new administration area (satisfaction level) - 100% Satisfaction of PAPs with resettlement process and outcome (%) - 100% The performance of the project in Yibin is satisfactory. Despite the increase in travel flow, there has been a decrease in travel time exceeding the target set by the project. As a result of the construction of route A, the travel time has been reduced from 10 minutes at appraisal to 6 minutes at project closing. The project connected key parts of the city with high quality transport arteries and renovated riverbank areas to recreational areas for use its citizens. The road stretches financed by the project have been constructed to a high standard and have removed key bottlenecks of the city s infrastructure as shown by the reduction in travel time. Panzhihua City Level Objective: To develop the city s comprehensive and sustainable wastewater system, and to improve strategic urban transport functions and the environment and landscape of the riverbanks. Project Investments. The project had four subcomponents designed to accommodate growth of the city by improving access and traffic circulation (two urban roads), and upgrading the city s sewerage systems, riverbanks, and landscape conditions. Achievements. The primary results include the completion of the following 4 sub-components: The Bing-Ren Road. The project constructed a 6.7km (100% of appraisal estimate) stretch linking the existing central business district and the expanding residential district of Renhe. It links the recently completed Airport Access Road to Duren Road (West) in Renhe. The rear section of the road has opened up a passage connecting Shizong District and Renhe District and constitutes the first road to the new Huacheng District, which will house 250,000 people. The road has also become the axis of the newly planned Ganbatang district, with a range of services, inter alia a new hospital currently under construction. The planned targets for reduction in traffic flow and travel time were all exceeded, and the roads had a significant impact in removing a constraining infrastructure problem. Bin Jiang Road. The completed road improvement work (2.54 km or 94% of appraisal) relieves congestion in the downtown area and provides additional capacity for longer distance cross-town traffic. The travel time led to an improvement of 85% compared with the targeted 20% at appraisal. Sewage pipelines: The project built 12.5 km sewer interceptors, which were connected to the Qingxiangping Waste Water Treatment Plan (WWTP); 3.4 km sewer interceptors along the Bin- 18

29 Jiang Road, which were connected to the existing Bingcaogang WWTP; and 8.8km of sewer pipelines that were connected to the Dadukou WWTP, which was financed under a JBIC loan project. Based on the Borrower s ICR, after many years of decreasing cost recovery rates, the Panzhihua Water Affairs Company has reached a cost recovery rate of 1.15 in 2013, largely due to the increase in the water tariffs, which now exceeds the operational costs. River Embankment and Landscape Improvement. The project supported a series of improvements along the Jinsha River including cleaning up debris, constructing an embankment to prevent slope and soil erosion, and improving landscapes at two scenic spots, including planting trees and bushes along the 15 km of river from Xinzhuang Bridge to Jinsha railway station. These works contributed to the beautification of the river area where city residents expressed a 100% satisfaction level with scenic improvements in the last survey (see photos in annex 12). Table 6. Outcome Results indicators for Panzihua Outcome indicator Target Result BOD loading to Jinsha River (tons/year) 1,900 N/A Sewerage constructed (km) Additional number of service connection sewers (cumulative) 8,125 7,100 Improved financial performance of WWT operations (cost recovery rate) Reduced travel time Bing-Ren Road (% reduction of the baseline) Reduced travel flow Bing-Ren Road (% reduction of the baseline) Reduced travel time Bin-Jiang (% reduction of the baseline) Reduced travel flow Bin-Jiang (% reduction of the baseline) Satisfaction level of scenic improvements 100% 100% Satisfaction of PAPs with resettlement process and outcome (%) 2-100% Note: 1 Data based on the borrower s ICR; 2 Includes both moderately satisfactory and satisfactory ratings. The performance of the project in Panzhihua is satisfactory. Activities have been successfully implemented and assisted in alleviating Panzhihua s urban development challenges. Completion of the Bing-Ren road has significantly reduced the travel time from Renhe District to the downtown or airport, and it is a major transport artery for the recent planned residential living area Ganbatang district. As an innovation under the project, solar LED lamps were supplied along the Bing-Ren road, resulting in energy savings totaling at least RMB 230,000 yuan annually. Due to the positive results, the lamps are being installed across the entire city. The project has met its target on the volume of wastewater to be treated, though it fell slightly short of the target on the length of sewer constructed, in part because the landscape offered extreme conditions (steepness) for construction. The data is not valid on the results of the Biochemical Oxygen Demand (BOD) loading. The original indicator was setup on the basis of BOD loading, but in the course of implementation it became apparent that the Panzhihua Environment Protection Bureau was only in a position to provide data for COD loading (Chemical Oxygen Demand), and the values between BOD and COD cannot be converted. The cost recovery rate of the wastewater operation under the Panzhihua Water Affairs Company 19

30 (PWAC) has increased to 1.15 times the sum of its total operating expenses and the amount by which its debt service requirements exceed the provision for depreciation by end of 2012, falling short of the 1.30 times outlined in the project agreement. The river embankment and landscape improvement investment along the Jinsha River have also led to an improved environment with high satisfaction levels, and the city is actively promoting itself as a tourist destination. Table 7. Household income changes before and after resettlement (in RMB) Cities Samples tracked (household) Before resettlement Average income After resettlement Average income Change ratio Mianyang 16 23,675 28, % Suining 35 28,449 35, % Yibin 21 14,130 34, % Panzhihua 8 22,375 36, % Institutional Development and Capacity Improvement Component The four project cities had no prior experience with the World Bank and a comprehensive package of technical assistance was put together to support the implementation of the project and provide advisory and quality control services for the infrastructure components. It provided assistance to the municipalities in reviewing project designs, preparing and evaluating bids, negotiating contracts and monitoring contract execution. As part of this component, assistance was also provided to monitor and implement the EMPs and RAPs. The project undertook a range of training for the PPMO as well as the PIUs in the project municipalities and the PIU s recruited international consultants to help support project management and construction supervision tasks. The project strengthened the capacity of the project municipalities to use Geographical Information System and Management Information Systems, supporting local efforts to increase the use of information technology in city planning. In Panzhihua and Yibin, the following activities were undertaken: (a) Improvement of urban infrastructure information platform, regulation of Data Collection and Management, and setup of an Urban Master Plan Management System; (b) establishment of a model using GIS basic data and geological disaster data; (c) information technology training and establishment of a technical group for the database maintenance. In Mianyang and Suining an internet service platform and GIS basic data platform were established and information technology training was undertaken for. The PIU s have used the GIS information and information technologies to manage infrastructure and quality of public services, but evidence of how the systems have improved overall efficiency, competitiveness and sustainability of city development is unclear. All project cities cited a major benefit of the project to be strengthened project management skills in areas of planning, procurement, and financial management. 20

31 3.3 Efficiency Land ERR analysis at appraisal: Economic analysis was conducted at appraisal for the Urban Area Development components in Mianyang and Suining. The objectives of these components were to provide new urban land for city development and to relieve congestion in core city areas whilst providing infrastructure for city development and at the same time relieving congestion in core city areas. An economic rate of return (ERR) was calculated based on the projected appreciation of land value, net of all costs of development, including resettlement costs payable to the original rural land owners. Recognizing the difficulties in estimating the market prices of rural land at the fringes of cities, the value of salable land was estimated using a residual land pricing model 5. The ERR analysis used a 30-quarter timeframe starting from July 2006, and a number of assumptions which turned out to be quite conservative: The assumed infrastructure costs and resettlement costs were over-estimated, while the market prices of salable land were underestimated. ERR analysis at ICR: For the purpose of the ICR, data on actual land sale transactions and actual infrastructure and resettlement costs from 2006 to 2013 were collected. An updated ERR was calculated using the same economic analysis model as the one at appraisal, with costs, land sale revenues, implementation schedule, and inflation rates updated to reflect the actual economic rate of return. All other minor assumptions made to the model use a prudent approach so that the actual ERR at ICR is calculated on the conservative side 6.The results are presented in the following table: Table 8: Project Efficiency ERR Analysis: At Appraisal ERR (%) At ICR Mianyang SEDZ Mianyang Pioneer Park Suining Xining District Sources: Data Collection for SUDP ICR Missions and ICR TTL calculation 5 Refer to Annex 9 of the PAD for details of the model. 6 See Annex 3 Economic and Financial Analysis for details. 7 Two high-value land sales at the beginning of the project (Nov. 2006) greatly distort this figure. If these two pieces of land transactions were added in the calculation, the ERR would become 22596%. 21

32 Transport ERR analysis: Economic analysis was conducted at appraisal for the urban transport components in all project cities (sub-section of the Second Ring Road in Mianyang; Xining Road in Suining; Bing-Ren Road and Bin Jiang Road in Panzhihua; and Route A in Yibin). The ERRs of the roads were calculated based on time and vehicle operating cost savings. All roads generated adequate ERRs. At project completion, ERRs were also calculated based on the same assumptions used at project appraisal. The following listed all ERRs of these roads, not only calculated at project appraisal but also at project completion. Table 9: Summary of ERRs of Urban Transport Component ERR (%) At Appraisal At ICR Mianyang: Second Ring Road 14.5% Cancelled Suining: Xining Road 13.8% 16.2% Panzhihua: Bing-Ren Road 13.8% 23.2% Panzhihua: Bin Jiang Road 18.4% 24.9% Yibin: Rout A Road 15.5% 11.2% On the basis of the analysis, the project generated satisfactory ERR. Sewerage, Embankment and Landscape Improvement Due to the difficulties in quantifying the benefits of the sewerage, embankment and landscape improvement in Panzhihua and Yibin, ERRs were not computed, but cost-effectiveness analysis was carried out at project appraisal. At project completion, the cost-effectiveness was only conducted for sewerage component. Since the planned sewers were completed with lower cost, the objective of this sewerage component to develop comprehensive wastewater collection systems was achieved, though with some delays in completing contracts for sewers construction. Financial Analysis Sewerage Component in Panzhihua. At project appraisal, financial projection was conducted to predict the wastewater tariff which could make the wastewater systems full cost recovery. The financial information for 2011 and 2012 shows that the Panzhihua wastewater company is running a profit. Assessment of project efficiency: Based on the above economic analysis, the efficiency of the project is considered substantial. 22

33 3.4 Justification of Overall Outcome Rating The overall rating is considered moderately satisfactory. The project had significant achievements, completing the vast majority of all planned infrastructure within the timeframe despite extraordinary disruption caused by natural disasters. The available data and completion of infrastructure indicate that a satisfactory number of the project targets and objectives will ultimately be achieved, despite the delays. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development The project was not designed to specifically track impact on the poor or to take into account gender aspects. However, the key outcome indicator in the PAD was articulated around ensuring a high level of satisfaction among users of the project investments and among PAPs. Their levels of satisfaction have consistently registered highly in project monitoring. Overall, people in all project cities have benefitted from the environmental and transportation improvements brought about by enlarging the urban areas and improving living conditions. The PAPs were predominantly farmers with rural registration, and were worse off than their urban registered peers before the project. It is therefore highly probable that the project disproportionately benefited the poor, whose incomes increased as a result of their resettlement (see resettlement annex 10). As part of the resettlement, the farmers were entitled to construct multi-story houses, and many rent out rooms or operate businesses with the excess space. Farmers were also offered training to strengthen their skills in new areas. The conversion to the urban hukou registration ensured equity with their former neighbors, bringing benefits such as easier and faster access to schools, hospitals, and other social services. The hukou household registration system in China has led to inequity between urban populations and farmers, with the former having access to a wider range of services. In the project cities, this inequity was becoming pronounced as the growth of the cities meant that populations registered as rural residents were de facto living within city areas but not enjoying the associated benefits. The project contributed to addressing this inequity for the 3,262 households that were relocated. Residents have remarked that access to services has improved markedly and household incomes have risen in all four cities as outlined in annex 10. (b) Institutional Change/Strengthening Institutional strengthening under the project built on the capacity already put in place by SUEP. The placement of the project under the overall leadership of the Sichuan Construction Commission headed by a Vice-Governor ensured proximity to provincial authorities and thereby a channel through which noteworthy results of the project might be recognized and replicated in other parts of the province. The anchoring of the provincial management in a provincial PIU which is also responsible for implementing government financed investments, ensures that the lessons learned and the capacity strengthened at central level will be sustained after project closure. 23

34 All four city PIUs cited strengthened capacity in planning, procurement (contract bidding, award and supervision), project management and financial management as key outcomes of the project, as well as an improved awareness of O&M requirements of newly constructed infrastructure. Moreover, the PIUs emphasized that as a result of the project, they now choose investments based on economic and financial considerations to a greater extent than previously, and have improved their capacity to evaluate the merits of individual investments. The introduction of GIS/MIS has similarly improved their overall capacity to prioritize, monitor and evaluate investments and improve public service delivery though measuring this impact has not been possible. (c) Other Unintended Outcomes and Impacts (positive or negative) In Panzhihua, the construction of the Bing-Ren road opened up a transport corridor to an entirely new district planned to house 250,000 people. Innovations from the project further had spill-over benefits. An example of this includes the introduction of solar panel street lighting, which was piloted under the project in Panzhihua, and has now been replicated in major areas of that city. The embankment and landscape improvement works were key components in the efforts to promote city as a tourist destination for people in Sichuan province and beyond. In Yibin, the construction of Route B and the linear park along the river improved the access to the river, as a result the city decided to create an artificial beach along the river bank, which is expected to be a major draw for its citizens. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops N/A. 4. Assessment of Risk to Development Outcome Rating: Substantial A key premise of the project was the selection of cities anticipated to see population growth, but according to census data, the total population in Suining has actually shrunk 4% in the past decade, and the urban population in Panzhihua has decreased by 1%, whereas Sichuan province as a whole over the same period has seen outward migration to other parts of China. 8 Larger cities across the country have greater appeal for many migrant workers than second-tier cities. This development should have been anticipated at the time of design and explicitly addressed. It 8 Population data in China s cities is unreliable, with differences in provincial and municipal reporting. Migrants are at times not taken into account in local figures except in some cases where the Public Security Bureau reports on migrants who have, as required by law, registered with the PSB, which many migrants do not do. The National Bureau of Statistics recognized these problems and, in 2000, instituted measures to enumerate all persons (including migrants resident for longer than 6 months) at their actual place of residence in the national census. The 2000 census is widely believed to be the most reliable reporting of population in China. The same measures were followed in the 2010 census so data are fully comparable with The figures used at appraisal were based on locally obtained figures and may therefore be unreliable. 24

35 calls into question whether the selection of the cities was appropriate, although it is an important motivation for these cities to improve their services to make themselves more attractive destinations for migrants. Careful study of migration patterns also will offer critical insight for future initiatives that have similar objectives as SUDP, and failure to attract labor raises questions about the ability of cities to reach their growth projections. The considerable investments in new road infrastructure will result in higher operation and maintenance (O&M) cost for the project cities. To address this challenge, the project helped build the capacity of project cities to develop well financed O&M plans. A covenant in the legal agreements required the cities to furnish the Bank an annual plan and budget for O&M. However, in the absence of sustained effort towards asset management and the over-design of some of the public infrastructure, the allocation of sufficient resources for O&M will likely remain a challenge and mostly based on yearly assessments of wear and tear. This will be a particular challenge if the projected economic growth patterns are not reached and at times of greater fiscal pressure and lead to infrastructure falling into disrepair due to the lack of resources. Sichuan is vulnerable to natural disasters such as earthquakes and floods. Project infrastructure was designed based on national level earthquake standards and should withstand major disaster, although flooding and landslides could still inflict considerable damage in high risk areas. Another issue that might affect the outcomes of the project are the long-term cumulative environmental impacts of industrial development in the EDZs. The EIA did not consider these impacts and the cities give limited attention to the cumulative environmental impacts of their development plans. The Wenchuan Earthquake posed a significant threat to the project, but sustained efforts by the PMO and PIUs enabled completion of most infrastructure investments before its closing date. However, the delays ruled out the ability to conduct a more detailed post-completion assessment on the long-term outcomes of the project on land development and resettlement, and providing insight into the sustainability of the project and draw lessons for other similar projects. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory Given the complexity of the project and the potential reputational risk related to the large scale land acquisition and resettlement activities, the Bank team involved a wide range of experts with different backgrounds, including: urban planners, economists, social scientists, engineers and lawyers. The team prepared background reports in areas of urban planning, economic and financial analysis and the legal complications of resettlement, improving the design of the project. The design of the project was also complex, however, seeking to address a range of issues at the 25

36 same time, and the capacity of the client to undertake all of these simultaneously as overestimated. During preparation, there was significant internal discussion about the merits and risks associated with the project s land conversion and resettlement. The team sought guidance from the Bank s Resettlement Committee, particularly on compliance of related RAPs with the Bank policy, OP The Resettlement Committee endorsed the approach for addressing resettlement, noting that the policy did not anticipate interventions of this nature, though it represented an increasingly common challenge in Bank financed projects in China and elsewhere. The preparation and background analysis were solid, and an extended period of time was included after the completion of infrastructure to assess the impacts and outcomes of the project. Substantial attention was paid to the differences between Government of China and the World Bank procurement practices. Instead of relying on using standard prices by the Provincial Government, the Bank team worked intensively with the PPMO and local consultants during appraisal to verify the cost estimates and revise cost estimates based on market prices. Extensive efforts went into reviewing procurement packages to improve cost-effectiveness and technical soundness. A major weakness of the project was the design of the PDO (which also was not consistent between the PAD and LA, and outcome indicators. The results framework, in particular, included too many indicators (68 in total), many of which were not solely attributable to the project. As a result, it was difficult to comprehensively assess the actual outcomes of the project. (b) Quality of Supervision Rating: Moderately Satisfactory During the 7 years of project implementation, the Bank only undertook 6 full supervision missions. The Bank management and the Chinese Government made a conscious decision to prioritize the preparation and implementation of the Wenchuan Earthquake Recovery Project (WERP), and decided not to overburden the same PPMO with too many visits. Moreover, given the team s frequent WERP missions to the PPMO in Chengdu, there were more regular exchanges on the SUDP than indicated by the number of full supervision missions. As a result of the impacts of the Earthquakes in project cities, the Bank, Provincial Government and four municipalities worked closely together to restructure the project and ensure that it supported the cities overcome the disaster. The counterpart financing requirements were eased and adjustments were made, in particular in Mianyang. The Bank team and the PPMO invested considerable efforts to help cities to move with the implementation. During the mid-term review, the team discussed changes to the PDO, but the client felt there was strong ownership in the various cities of the PDO and did not wish to change it. The team, however, should have made the PDO consistent in the LA and PAD, and the results framework should have been overhauled. Supervision missions typically included procurement, financial management and safeguards specialists, and aide memoires demonstrate a consistent focus both on ensuring that resettlement 26

37 was undertaken appropriately and that construction was progressing in accordance with signed contracts including the EMPs. The comprehensive AAA tracer study to monitor rural to urban conversion was never undertaken, nor did the issue receive substantive attention in any of the supervision missions conducted by the Bank. This resulted in a missed opportunity to focus on some of the project s more innovative aspects related to land value and the potential benefits for the rural population whose land is converted for urban use. However, the independent resettlement monitoring agency closely monitored adherence to resettlement guidelines to ensure that compensation was carried out effectively during project implementation. Affected population received either new urban housing with transferable title or compensation to build own dwellings in new settlements. The affected households received monthly payments for loss of income from agricultural production, which were adjusted annually. To improve the livelihood conditions and provide better job opportunities for resettled people, skills and job training was conducted in connection with job opportunity programs. At the end of the project, data points to incomes being higher than before. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory The Bank s performance was moderately satisfactory. It exhibited sufficient flexibility to the changing realities and involved a wide range of experts. Nevertheless, the implementation of the project suffered due to an overly complex design that was not sufficiently focused, evidenced through two separate PDOs and a results framework that made the progress of the project difficult to measure. The project has achieved the vast majority of the planned outputs following Bank procedures, but due to the lacking post-completion analysis of the broader impact, the long-term impacts are not evident at this stage. 5.2 Borrower Performance (a) Government Performance Rating: Satisfactory Notwithstanding the disruption caused by the Wenchuan Earthquake, the commitment of the provincial government to the project was strong, witnessed most strikingly by the ability to ensure the completion of all infrastructure activities without requesting an extension of the closing date. During the preparation of the project, the borrower conducted extensive consultations with PAP s and prepared a RAP of a good quality. The municipal PMOs consistently quote strong and supportive oversight by the PPMO. (b) Implementing Agency or Agencies Performance Rating: Satisfactory 27

38 Based on the experience with SUEP, the PPMO engaged a joint venture between an international and a domestic consultancy company to provide support to the PPMO and PIUs with project management and supervision. This arrangement, which is not common in China, helped ensure improve the quality of construction supervision and transfer international knowledge and best practices to local consulting firms as well as project cities. The municipal PIUs had designated the necessary resources to execute the subprojects providing adequate support for the infrastructure investments. Most of the construction sites required strong coordination for land acquisition and resettlement, and municipal PIU s provided satisfactory support to this effect. In Mianyang, the heads of the local PMOs were the directors of the Pioneer Park and SEDZ, who provided great support to move the project towards successful completion, even though Mianyang was heavily affected by the Wenchuan Earthquake and the municipal government had to shift their efforts and resources to the reconstruction and recovery of the city. In Suining, the local PMO was established in the Suining Economic Development Zone Administration under the local DRC. The municipal PMO adequate support and guidance to the implementation and completion of project activities even though changes were made to the Zone s Master Plan and some of roads were completed using domestic funding. In Yibin, the vice secretary-general of Yibin City Government was the head of the municipal PMO. The municipal PMO provided great supports during the implementation of the subcomponent, especially to secure counterpart funding for land acquisition, resettlement and civil works. In Panzhihua, the municipal PMO was established in the City Urban Planning and Construction Bureau. The PMO was very engaged in the supervision of the project, especially in optimizing of the designs and managing land acquisition and resettlement. The strong leadership and guidance contributed to the successful completion of this sub-component, which included complex civil works. The performance of the PMO and PIUs has to consider the enormously disruptive nature of the Wenchuan Earthquake, which justifiably distracted attention and resources from the supervision of SUDP. Despite the severe impact of the natural disaster notwithstanding, the project cities showed strong ownership throughout its implementation period, and the local teams were able to overcome the challenges it faced and ensure investments were completed. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory The performance of the borrower was satisfactory, especially taking into account the challenges it faced during implementation and efforts made to address and overcome them. 28

39 6. Lessons Learned One of the lessons from the borrower s ICR focuses on the need to be candid about the capacity of the client and ability to implement projects with due regard to the full range of Bank requirements. The project introduced a number of new management measures, with special attention provided to the social safeguard policies. The complexity of the project required the involvement of a wide range of experts in urban development, infrastructure and transport planning, land valuation and development, resettlement and economic zone development, and placed considerable demands on the capacity of the client. The demands were amplified by the Wenchuan Earthquake, and the strong focus on completion of the physical infrastructure at the expense of some of the other objectives of the project. In infrastructure focused lending operations, the defined project objectives should adequately reflect the underlying investments and avoid setting too ambitious an agenda. The design of a clear and measurable Results Framework is critical. Defining a clear, strategically focused and measurable PDO is key to measure the results of the project and to guide its implementation. The absence of a high quality results framework complicates the measuring of project outcomes. The Bank continues to improve in new operations as teams become increasingly familiar with the tool and learn from the past, but it is an area that should receive considerable attention throughout the project cycle. Additional training for Bank staff as well as the client should be considered. Increased attention should be given to safeguard issues and the risks they pose on the timely completion of infrastructure investments. Engineering designs should allow for more flexibility to reduce resettlement impacts. In some cases, like Suining, the lack of consultation and ability to reach an agreement with a couple of affected households should have triggered some modifications in the road design, as suggested by the Bank team. The project also highlighted the importance of considering a strategic environmental assessment (SEA) for these type of projects. The EIA and EMP focused narrowly on construction related impacts and did not consider overall and cumulative impacts of attracting industries and foster economic development in economic zones. Future projects should build the capacity of local authorities to assess and manage the cumulative environmental impacts and risks of concentrating industrial and economic development in specific zones. The challenges associated with O&M were anticipated during project design and included in a covenant; however the project should have provided greater support to cities on capital investment planning and asset management. Strengthening of capacity for O&M planning and budgeting should become an integral part of future infrastructure investments and urban development projects. It is inadequate to require the submission of O&M plans and budgets on a regular basis, as training in ensuring strong systems is also required. Moreover, Bank teams should pay special attention to the life-cycle costs of infrastructure and help cities make more cost-effective decisions based on actual demand, capacity and availability of resources. The development of EDZ has to be accompanied by significant technical assistance and capacity building to understand the local competitiveness and design effective policies and 29

40 incentives to attract private investments. The project was narrowly focused on infrastructure investments, but it should have included more support to the project cities in developing strategies to attract investments and industries, and share best practices from around the world. Inter alia, this should also be addressed by the Bank ensuring that he has the requisite expertise on its task team during design and implementation of the project. The private sector was also not consulted during project preparation, missing an important opportunity to understand the needs and demands of enterprises that were targeted by the EDZs. Project designs should consider the risk of changes to city and regional master plans. With multi-year investments, there is significant risk that plans change, impacting planned investments and the expected project outcomes. Project design needs to be cognizant of the risk of changes to master plans, and incorporate provisions for flexibility accordingly. Attention to disaster risk management and climate risks must be given due regard in infrastructure projects. Sichuan Province is located in a seismic active area, and is regularly affected by floods, but the risks of natural disaster were never considered in the project design or included in the project ORAF. While earthquakes cannot be predicted, the associated risks should have been considered in the design of project and its infrastructure investments. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The borrower did not have comments on the ICR. (b) Cofinanciers (c) Other partners and stakeholders N.A. 30

41 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Civil Works Components Appraisal Estimate Actual/Latest Estimate Percentage of Appraisal Part A.1. Mianyang % Part A.2. Suining % Part A.3. Yibin % Part A.4. Panzhihua % Goods % Consultant Services % Total Project costs Physical Contingencies: Price Contingencies: - - Total Project Costs: - - Interest During Construction (IDC): - - Commitment Fee: - - Front-end Fee: - - Total Financing Required (b) Financing (in USD Million equivalent) Source of Funds Type of Cofinancing Appraisal Estimate Actual/Latest Estimate Percentage of Appraisal Borrower % International Bank for Reconstruction and Development % 31

42 Annex 2. Outputs by Component Urban Infrastructure Investment Components & Institutional and Capacity Development Component Mianyang Component Pioneer Park 1 2nd Ring Road (S.W University via 2RR to Pioneer Park Yingbin Avenue / 2RR interchange), length of roads built (km) Travel time at peak (min) Reduction in travel time at peak (% reduction of the baseline) 2 Land Baseline Target 9 Actual % achieved N/A N/A 26 (100) Length of service roads built (km); cumulative Length of sewerage built (km); cumulative Area of land sold (ha); cumulative Average sale price of land (rmb/m2) , Time lag between lease attribution and occupation (months); residential areas Time lag between lease attribution and land use (months); industrial areas 6 77 (23) N/A N/A Price of apartment sold by developers (RMB/m2) - 1,200 3, Number of new residents on site (cumulative) - 30,440 65, Households resettled due to civil works (cumulative) Households resettled due to land sale (cumulative) 3 Resettlement Satisfaction of PAPs with resettlement process and outcome Southern Economic Development Area (SEDA) 1 Land , % 60% satisfied/ 40% basically satisfied Length of service roads built (km); cumulative Length of sewerage built (km); cumulative Cumulative area of land sold (ha); cumulative Average sale price of land (RMB/m2) , Time lag between lease attribution and occupation (months); residential areas Time lag between lease attribution and land use As per the amendment of Project Agreement (Ln CHA). 32

43 (months); industrial areas Price of apartment sold by developers (RMB/m2) - 1,300 3, Number of new residents on site (cumulative) - 18,202 3, Households resettled due to civil works (cumulative) Households resettled due to land sale (cumulative) Satisfaction of PAPs with resettlement process and outcome , ,303 1, % satisfied/ 40% basically satisfied Suining Component Baseline Target Actual % Achieved 1 Xinning Road Railway Station to Xining District (location to be defined) via Xining road: Road length (km) Railway Station to Xining District (location to be defined) via Xining road: Travel time at peak (min) Reduction in travel time at peak hour (% reduction of the baseline) Traffic flow on Suizhou Road (pcu/h) Reduction in traffic flow on Suizhou road (% reduction of the baseline) 2 Xining Area Development (2.97 km financed by project, 5.1 km financed locally) 25 (100) 882 (100) (64) (90) N/A 14, Length of service roads built (km); cumulative (13.20 km financed by project, 11 km financed locally) Length of sewerage built (km); cumulative (13.20 km financed by project, 11 km financed locally) 95 N/A Traffic flow increased Cumulative area of land sold (ha) Average sale price of land (RMB/m2) Time lag between lease attribution and occupation (months); residential areas Time lag between lease attribution and land use (months); industrial areas Price of apartment sold by developers (RMB/m2) ,000 (April 2012) 308 Number of new residents on site (cumulative) - 19,820 17, Households resettled due to civil works (cumulative) Households resettled due to land sale

44 (cumulative) 3 Resettlement Satisfaction of PAPs with resettlement process and outcome 63.2% (63.2% satisfied, 36.8% basically satisfied) Yibin Component Baseline Target Actual % Achieved 1 Route A Road constructed (km); cumulative Mianjiang Bridge to Chang Jiang Bridge: Travel time at peak (min) Reduction in travel time at peak (% reduction of the baseline), cumulative Traffic flow at peak (pcu/h) Increase in flow at peak (% increase over the baseline) 2 Route B (100) (100) (260) Road constructed (km); cumulative Satisfaction level of scenic improvements (see table with indicators definitions) 3. Resettlement Satisfaction of PAPs with resettlement process and outcome Panzhihua Component Baseline Target Actual % Achieved 1 Bing-Ren Road Road constructed (km); cumulative East Duren Road at km 49 to railway station via Bing-Ren Road, airport access road: Travel time at peak (min) Reduced travel times at peak (% reduction of the baseline); cumulative Traffic flow at peak on East Duren Road, (pcu/h); cumulative Reduction in flow at peak on East Duren Road. (% reduction of the baseline); cumulative 2 Bin-Jiang Road 56.4 (100) 3238 (100) (October 2013) Road constructed (km), cumulative Panzhihua Hydrological Station to Dukou Bridge via Bin Jiang Road: Travel time at peak (min) Reduction in travel time at peak (% reduction of the baseline); cumulative Traffic flow on Jang Nan 4 Road at peak (pcu/h); cumulative 34.6 (100) (80)

45 Reduction in flow on Jang Nan 4 Road at peak (% reduction of the baseline); cumulative 3 Sewerage (100) 20.5 (79.5) Sewerage constructed (km), cumulative Average wastewater volume collected and treated (cumulative, 1000m3/d) Number of service connection sewers 4, BOD loading to Jinsha River (tons/year) 2,190 1,900 18,110 (COD) N/A 4 Resettlement Satisfaction of PAPs with resettlement process and outcome** 5. Embankment and landscape improvement Construction of new embankments (km), cumulative Plantation of trees and bushes for embankment slopes (ha); cumulative Satisfaction level of landscape improvements Institutional Development and Capacity Building Baseline Target Actual % Achieved Efficient use of information produced by the GIS/MIS systems Number of contracts awarded and satisfactorily implemented as indicated in ToRs

46 Land Development in Mianyang and Suining Annex 3. Economic and Financial Analysis Economic analysis: At appraisal, economic analysis was conducted using a 30-quarter timeframe starting from July Since market price for under-developed rural land at the fringes of cities in China is not available as the transactions do not take place within a free market, the model used the market price for floor space and the price of construction to derive the residual value of land, net of all cost of development and buildings on it, including resettlement costs. Three ERRs were calculated: two major urban development areas (Southern Economic Development Zone and Pioneer Park) adjacent to the city center in Mianyang; and the Xining District Area in Suining, adjacent to the old downtown area. The estimated ERR of these three urban area development components in a 30-quarter timeframe (7.5 years) were 7.2 percent, 7.4 percent, and 7.4 percent, respectively. At ICR the actual ERRs as of 2013 are higher (103 percent, 82 percent, 138 percent respectively) than the original estimates this is mainly due to very conservative assumptions of key parameters used at appraisal. A comparison of key parameters is shown as follows using Mianyang SEDZ as an example: Table 3.1 Comparison of Key Parameters in ERR Calculation for Mianyang SEDZ Estimated value at appraisal Actual value at ICR As a % of the estimated Total construction costs (RMB) 449,216, ,245,466 32% Total resettlement costs (RMB) 284,737, ,579,400 46% 10 Sale of developed land (RMB) 957,572,200 5,404,542, % When calculating the actual ERR at ICR, other than updating the costs, revenues, implementation schedule, and inflation rates to reflect actual value, no major changes are made to the economic analysis model. Some prudent assumptions are adopted, and the actual ERR is calculated on the conservative side: All unsold salable land as of 2013 is assumed to have zero value as it is hard to predict when and at what price these lands will be sold The model assumes the starting quarter of the calculation is July 2006 both at appraisal and at ICR. All land sales prior to this quarter were excluded from the calculations as the infrastructure and resettlement had not started and the gain in land value was not directly from the work of urban area development components. All resettlement costs were paid in full at the start of the project, so that land sales can start as early as October From ICR Resettlement Component, part of the reasons that this figure differs a lot from the projected value were some changes in local economic growth patterns as well as the 5.12 Wenchuan Earthquake. 36

47 Based on the above economic analysis, the project efficiency with regards to land can be considered as substantial. Urban Area Development Components in Mianyang and Suining Objective of the Components. The objective of the urban transport network improvement components was to allow the four project cities to: (a) improve cities strategic traffic function; (b) reduce congestion and traffic in core and downtown areas; (c) reduce travel time and vehicle operating costs; and (d) improve reliability of public transport services. During implementation, this objective remained unchanged. However, due to the limitation of additional counterpart funding, increased marketing price on construction materials, as well as adjustment of city/regional master plans during the implementation, the project scopes were changed in some areas. Since a number of these works were dropped from the project and completed using domestic funds, the benefits were not measured as part of this project. Methodology. The urban transport components were evaluated at project appraisal based on time and vehicle operating cost savings calculated relative to the do-nothing scenario. The travel demand was forecasted by using standard four-step transport models. The economic analysis at project appraisal used Net Present Value (NPV) methods and all estimated costs and benefits reflected 2005 prices. At project completion, the economic re-evaluation also used NPV methods, but the investment costs are actual costs and the operating cost and benefits estimated at project appraisal were scaled up to 2013 by national inflation rates, assuming that the estimation made at project appraisal reflected real situation. Benefits. At project appraisal, there were four incremental benefits of the planned strategic roads in the four cities. Due to the lack of appropriate data, only savings in passenger travel time and vehicle operating cost were taken into account. The other two are savings in accident-related costs and savings in environmental costs (noise and air pollution). To compare with the results of economic analysis at project appraisal, the same benefits of project strategic roads were calculated at project completion. At project appraisal, forty percent of the average hourly wage was assumed as the value of time. This was calculated for each city as the GDP per capita divided by the number of yearly working hours. Average vehicle operating costs per kilometer traveled were estimated for different vehicle categories (e.g., small passenger cars, light goods vehicles, heavy goods vehicles, etc.). At project appraisal, the estimation of the travel time saved and vehicle-kilometers (traffic performance for the scenarios with and without the proposed road components. For each forecast year (e.g., 2009, 2014, 2019, 2024 and 2029), the differences between scenarios with and without the new roads in total travel time spent, and total travel distances, were calculated. Each vehicle category's share of total vehicle-kilometers saved was then calculated, and multiplied by the respective average vehicle operating cost, which resulted in vehicle operating costs saved for each category. The savings in passenger travel times were calculated accordingly, taking into 37

48 account average vehicle occupancy for each vehicle category and using the values of time estimated above. All these assumptions at project appraisal were followed when the economic reevaluation on urban transport components was carried out. NPV and ERR. The outcomes of economic analysis made at project and reevaluation carried out at project completion are summarized as follows. Following the Wenchuan Earthquake, adjustments were made to the Pioneer Park component in Mianyang. Construction of the interchange bridge and the second ring road, which were originally setup in contracts MK1 and MK2 in PP, were financed by domestic funds from Mianyang City commencing in Construction of the section of the Second Ring Road from the interchange with Yingbin Avenue to the boundary of Pioneer Park (Part A.1 (b) in Schedule 2 of the Loan Agreement) was cancelled from the project, as these were financed through domestic funds. As a result,, the NPV of 2RR was not calculated at project completion. Only 2.97 km Xingning Road from Suining- Mianyang express highway to Suining Railway Station area has been built, and the rest of originally proposed Xining road from Xining District area to Sui-Mian Express Highway has been combined with Suining outer ring-road and constructed using local funds. Table 3.2. NPV (in RMB million) and ERR for the Xining Road in Suining At Appraisal At Completion Discount rate: 10% Discount rate: 12% Discount rate: 10% Discount rate: 12% Discounted Costs Discounted travel time savings Discounted vehicle operating cost savings Net Present Value Economic Rate of Return 13.8% 16.2% The completed Bin-Jiang road relieves congestion in the downtown area and provides additional capacity for longer distance cross-town traffic. The travel time in the area have been reduced at least 20 min. Table 3.3. NPV (in RMB million) and ERR for the Binjiang Road in Panzhihua At Appraisal At Completion Discount rate: 10% Discount rate: 12% Discount rate: 10% Discount rate: 12% Discounted Costs Discounted travel time savings Discounted vehicle operating cost savings Net Present Value Economic Rate of Return 18.4% 24.9% 38

49 The completion of Bingren Road has reduced the traffic communication time with at least 30 min from Renhe District to the downtown or airport. It also became a trunk road along the recent planned Ganbatang District as the high-level residential living area. Table 3.4. NPV (in RMB million) and ERR for the Bingren Road in Panzhihua At Appraisal At Completion Discount rate: 10% Discount rate: 12% Discount rate: 10% Discount rate: 12% Discounted Costs Discounted travel time savings Discounted vehicle operating cost savings Net Present Value Economic Rate of Return 13.8% 23.2% Route A road is an important access road to Yibin Lingang Economic Development Zone (LEDZ) which has developed rapidly since it was established in By completing the investments in Yibin, the congestion, poor overall mobility, and inefficient urban transportation systems along the Yangtze River have improved. Table 3.5. NPV (in RMB million) and ERR for the Route A in Yibin At Appraisal Discount rate: 10% Discount rate: 12% Discount rate: 10% At Completion Discount rate: 12% Discounted Costs Discounted travel time savings Discounted vehicle operating cost savings Net Present Value Economic Rate of Return 15.5% 11.2% The lower ERR and some negative NPVs were the result of increasing project costs, mostly the result of escalating resettlement costs, which were actually 61% higher than estimate at project appraisal. 39

50 Wastewater Component Wastewater Component was implemented in Panzhihua as planned. The objective of this component, i.e. development of comprehensive wastewater collection systems in three catchments areas, was achieved. Since the benefits of this component are difficult to quantify, no EIRR was calculated at project appraisal. Least-cost analysis was undertaken. The timing of construction, location, and capacity of WWTPs which were planned to build in the areas that would not require pumping station construction and use gravity for sewage flow in order to economize both investment and operation costs determined the construction of the wastewater collection systems. At project appraisal, three contracts were proposed to build sewers. The total contract value estimated was about RMB58.99 million. Due to the optimization of wastewater plan during the implementation of the project, only RMB51.42 million was spent on achieving the objective of this component. However, one contract was completed with 4.5-year delay and one contract was finished about 6 months behind the schedule. These delays should have negative impact on the value of achieving component objective. A financial projection of wastewater system in Panzhihua was carried out at project appraisal. The results of this projection showed that Panzhihua had to increase its wastewater tariff in 2007 in order to achieve full cost recovery. The wastewater tariff in Panzhihua at project appraisal, the projected tariff in 2009, and current tariff at ICR are presented in the following table: Table 3.6. Summary of Wastewater Tariff in Panzhihua (RMB per m 3) At Appraisal Projected for 2009 At ICR Domestic Industrial Commercial 0.90 Special 1.35 Although the current wastewater tariff in Panzhihua for domestic users is lower than the projected one, the financial situation of the wastewater system in Panzhihua is encouraging. In both 2011 and 2012, the wastewater system in Panzhihua was running profitably. The following table demonstrates the financial income and expenditure of Panzhihua wastewater system. Table 3.7. Financial Situation of Panzhihua Wastewater Company (RMB million) Operating Revenues 1,669 1,967 Operating Expenses 1,577 1,705 Financial Charge -2-2 Net Income Cost Recovery Rate

51 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility / Specialty Lending A.D.C. Godavitarne Consultant EASCS Consultant Zhentu Liu Sr Procurement Specialist EASR2 Procurement Specialist Rodney J. Stickland Consultant SASDT Consultant Chongwu Sun Sr Environmental Specialist EASCS Environment Safeguards Hiroaki Suzuki Lead Urban Specialist UDRUR Task Team Leader Douglas Wayne Webster Consultant EASUR Stuart Whitehead Consultant EASTE Youlan Zou Consultant EASCS Supervision/ICR Nancy J. Cooke Country Program Coordinator EACCQ Program Coordination Eleanor Dougoud Consultant EASCS Urban Development Martin Joseph Fox Consultant EASUR Yi Geng Sr Financial Management Specialist EASFM Financial Management Jianjun Guo Sr Procurement Specialist EASR2 Procurement Bruce M. Harris Consultant EASTE Anne K. Harrison Temporary IMTPS Assistant Shunong Hu Sr Water Engineer EASCS Water and sanitation Eddie Ke-Siong Hum Consultant EASCS Water and sanitation N. Vijay Jagannathan Consultant WBGRS Naoko Kataoka Consultant HDNCY Consultant Zongcheng Lin Sr Social Development Specialist EASCS Social Safeguards Zhefu Liu Sr Social Development Specialist EASCS Social Safeguards Joanne S. Nickerson Operations Officer EASSD Operations Officer Xin Ren Environmental Specialist EASCS Environment Safeguards Masato Sawaki Consultant EASIN John Carter Scales Lead Transport Specialist EASCS Transport Management Chongwu Sun Sr Environmental Specialist EASCS Environment Safeguards Victor M. Vergara Lead Urban Specialist WBIUR Urban management Lynn Wang Consultant EASFM Financial Management Hongkun Yang Consultant EASCS Procurement Fang Zhang Financial Management Specialist EASFM Financial Management 41

52 (b) Staff Time and Cost Stage of Project Cycle Lending Staff Time and Cost (Bank Budget Only) No. of staff weeks USD Thousands (incl. variable costs) FY FY FY FY Total: Supervision/ICR FY FY FY FY FY FY FY FY Total:

53 Annex 5. Beneficiary Survey Results (if any) N.A. 43

54 Annex 6. Stakeholder Workshop Report and Results (if any) N.A. 44

55 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR 1. Assessment of Development Objective, Design and Quality at Entry Project Development Objectives Original Objective. Full details of objectives have been provided in the Project Appraisal Document(Report No: CN) of August 11, 2006 Section B, Project Description, and Annex 4: Project Description. The same objectives are cited in the Loan Agreement Number 4838 CHA and the Project Agreement, which were signed on October 27, The specific project development objective (PDO) is to improve core urban functions in an equitable and resource efficient manner by removing identified infrastructure bottlenecks hampering land development, transport, and environmental conditions in four second-tier cities in Sichuan Province. Revised Objective. There has been no change in the main Project objectives during implementation. Project Components Component 1: Urban Infrastructure Investment. This component supports spatial planning priorities in four cities of Mianyang, Suining, Yibin and Panzhihua. a) Mianyang: The proposed project funds the construction of trunk and secondary infrastructure, including drainage and environmental improvements, in two new major urban development areas adjacent to Mianyang city; b) Suining: The project subcomponents in Suining are secondary infrastructure, sewerage and roads in the newly developed Xining District Area to the west of the city, including an associated link road to the city railway station area. c) Yibin: The project subcomponent funds two-riverbank roads designed to improve accessibility within the city and to enhance the degraded riverbank environment; d) Panzhihua: The project subcomponent supports four infrastructural projects to accommodate the growth of the city, i.e., (a) Bing-Ren Road; (b) Bin Jiang Road; (c) Sewerage; and (d) River Embankment and Landscape Improvement. Component 2: Institutional Development and Capacity Building. The Institutional Development and Capacity Building Component (IDCB) consisted of: 4. TA for Institutional Development and Capacity Building for the project municipalities, including the management information system (MIS) and geographical information system (GIS) to be used as major instruments for municipal institutional development and capacity building and 5. TA for Project Implementation and Management, including project management and construction supervisions, EMP/RAP implementation monitoring. 45

56 Changes in SUDP There has been no change in the project components. However, there were several changes in scopes of some of the components during implementation. The changes were proposed and approved through the SUDP Mid-Term Review. There were also other changes in the design of some of the project components in order to optimize the project outputs without change in Project objectives. The major changes are described below. Amendment to Loan Agreement The Wenchuan Earthquake on May 12, 2008 and the subsequent Panzhihua Earthquake on August 30, 2008 have affected Mianyang, Suining and Panzhihua components in SUDP. The Loan Agreement was amended accordingly on December 9, 2008 and has become effective on December 18, 2008, and the amendment states that the percentage of expenditure for the works (Category 1) by the loan in Mianyang, Suining and Panzhihua under SUDP has been changed from 70% to 100%. After the May 12 Wenchuan Earthquake, Mianyang decided to make the restructure on this project sub-component. The remaining World bank fund for Mianyang sub-component totaling USD million, which was mainly due to the contract cancellations as the master plan changed after the earthquake as well as the living room project as funded by the government. The remaining fund had been reallocated to the infrastructure investments in the Xinlong area-a new development area within Pioneer Park. The Loan Agreement was amended on August 18, Changes in Project Scope Due to the limitation of additional counterpart funding, increased marketing price on construction materials as well as adjustment of city/regional master plans during the implementation, some of the project scope was changed. The works on the section of Route B road in Yibin have been shortened from 3.5 Km to 2.5Km due to the decreased amount of the loan in RMB equivalent as a result of US dollar devaluation, and Yibin will use its own fund to complete the remaining work in Route B. Due to the improvement of Panzhihua Sewerage Plan, approximately 24.2Km interceptor sewers were built under SUDP, and most of branch sewers were fully financed by local funding, which were constructed simultaneously with the regional development. Suining Economic Development Zone restructured the Suining sub-component due to the regional master plan changed. Section B of Xining road and No. 7 road in Xining area had been covered in the municipal road network (Xining road) and Suining Jinjia Wuliu (Logistics) Park, which were re-planned and were built by its own local fund; Roads No. 5, 16, 17, 19 and 20 in Xining area were re-planed by Suining Economic Development Zone for Chuanzhong Mining District, which were built through local funding only. 46

57 Because the entrance of Sui-Zi-Mei Express Highway to Suining is located at the 10# road in Xining Area as well as the road 10# will connect to the outside ring road of Suining, the area being originally setup in Suining has been re-planned, and the cancelation of construction of roads 3# Section B, 11#, 12# and 21# from SUDP Suining Sub-component had been made. Institutional Development and Capacity Improvement Component No change was made in the TA services, however, the schedule of TA services had been extended because the implementation of SUDP was progressed slower than the original schedule even though it did not affect the closing date of the loan. Quality at Entry Project preparation at appraisal can be evaluated as satisfactory when compared with SUDP actual outcome. The overall project design (as stated in PAD as well as Loan Agreement) proved to be in line with the government and WB development strategy in China and it is in line with the plans of enlarging urban area to reduce the high pressure of the transportation and population density in city center. The scope of the project and the primary project design proved to be appropriate. The feasibility studies and engineering design for each project component (as well as for the overall project) proved to be generally appropriate. Most of the technical designs employed the advanced and yet commercially available technologies. 2. Achievement of Objective and Outputs Outcome / Achievement of Objective Sichuan Urban Development Project (SUDP) has supported an important element of Sichuan s growth strategy, which is to accelerate infrastructure investment in strategic second tier cities and to attract international and national investments to stimulate development and growth. Sichuan s second-tier cities, like other secondary cities in China, must adapt to new sources of growth and changing industrial structures. Labor- and land-intensive industries are leaving city centers for suburban locations, and being replaced by high technology industries and information-based service industries. Four second-tier cities are targeted for Bank assistance under SUDP: Mianyang, Suining, Yibin and Panzhihua. These cities are among the fastest growing urban centers in Sichuan province, and have considerable growth potential. At SUDP completion, the achievement and outcome are gradually and obviously revealed. After the infrastructure in the Pioneer Park has been established under SUDP, the centers in the Pioneer Park has occupied ha, and the total investment will be RMB1500 million and total architecture area will be approximately 340,000 m 2. At present, some of enterprises with hightech technology have entered into the Park, and the estimated gross output value will be over RMB 20,000 million, and increased industrial output value will be over RMB 5,000 million in the upcoming five years. 47

58 By completing SUDP Mianyang SEDZ component, the Mianyang SEDZ has become the National Level of Economic Development Zone since October After the land development, the Total foreign investment has been RMB 365 million since 2008, and local investment has been RMB 25,785 million from 2008 through The annual fiscal revenue in Mianyang SEDZ has been increased rapidly. Significant changes have been made after the implementation of SUDP Suining Component. From 2007 to now, the area of Suining EDZ has been increased from 10.96Km 2 to 66.02Km 2, in which the 10.93Km 2 has been developed. Suining EDZ has been designated as national level on the Economic Development Zones in China since June 2012, which is the fourth national level EDZ in Sichuan Province. Suining EDZ has been created as Electronic Industry Zone in Sichuan. There were more than 150 electronic enterprises entered into Suining EDZ by end of Along with the implementation of SUDP Yibin Component, Yibin Lingang Economic Development Zone (LEDZ) was setup in 2009 and developed rapidly since then. The route A road under SUDP is an important access to LEDZ. By completing SUDP Yibin Component, the congestion, poor overall mobility, and inefficient urban transportation systems along the Yangtze River have been obviously changed. By completing the SUDP Panzhihua Component, Panzhihua urban area has been developed significantly: (1) Bingren road completed has reduced the traffic communication time for at least 30 min from Renhe District to the downtown or airport. The Bingren road has become the truck road along the recent planned Ganbatang district area as the high-level residential living area; (2) the completed Bin-Jiang road relieves congestion in the downtown area and provides additional capacity for longer distance cross-town traffic. The travel time in the area have been reduced at least 20 min.; (3) the wastewater treatment efficiency in Panzhihua has been increased from 45% to 86%; and (4) after improvement of the river embankment and landscape, the circumstance and living standards along the Jinsha river have been promoted significantly and satisfied to the residents living in the area. Outputs by Components Urban Infrastructure Investment Component (US$ million PAD; US$ million; December 2013) Mianyang (US$ million PAD; US$ million; December 2013). The Pioneer Park sub-component had been satisfactorily implemented between 2007 and The component includes: (a) the construction of 22 sections of local access roads and associated sewers, and drainage, as well as landscaping activities with length of 18.60Km roads to expand the park area (483 ha); and (b) restructured components in Xinlong area: the construction of 3 sections of local access roads and associated sewers, and drainage with length of 2.0Km. The Southern Economic Development Zone sub-component had been satisfactorily implemented between 2008 and The component includes: approximately km of local access roads within areas A & C of the SEDZ (built and opened), together with associated drainage infrastructure and landscaping. 48

59 Suining (US$ million PAD; US$ million; December 2012). The component had been satisfactorily implemented between 2007 and The component includes 4 subcomponentes: (a) Xining District Area: The Xining District Area has setup the secondary infrastructure construction to develop an area of 351 ha for mixed residential, administrative and commercial uses. The works completed include 13.2 km of access and distributor roads, 7 bridges, river embankments (3.5Km long), sewers, and landscaping. nd (b) Xingning Road: Only 2.97Km Xingning Road from Suining-Mianyang express highway to Suining Railway Station area had been built, and the rest of originally proposed Xingning road from Xining District area to Sui-Mian Express Highway has been combined with Suining outer ring-road by only local funds. Yibin (US$ million PAD; US$ million; November 2012). The component had been satisfactorily implemented between 2007 and The component includes: (a) Route A (6.7 km) is a distributor road along the north bank of the Min Jiang and Chang Jiang rivers connecting the old city and existing urban areas with the Tianyuan District and the proposed new industrial development zone (Lingang Economic Development Zone); and (b) Route B comprises a 2.1 km extension of the existing riverbank wall as connected with 800m long walkway from the Cultural Square in the center of Nan An District. Panzhihua (US$ million PAD; US$ million; December 2012). The component had been satisfactorily implemented between 2007 and The component includes: (a) Bing- Ren Road, the road serves a link between the existing central business district (CBD) and the expanding residential district of Renhe, which comprises a 6.7 km section of a road linking the recently completed Airport Access Road to Duren Road (West) in Renhe; (b) Bin Jiang Road, the road improvement work (2.54 km) relieves congestion in the downtown area and provides additional capacity for longer distance cross-town traffic; (c) Sewerage: The sewerage construction helps to form a comprehensive wastewater interceptors (24.7 km of pipeline) in the Bingcaogang, Geliping, and Qingxiangping catchments, which is connected to the existing Bingcaogang Wastewater Treatment Plant (WWTP), as well as the new Qingxiangping WWTP and Dadukou WWTP; and (d) River Embankment and Landscape Improvement, the project had provided a series of measures along the Jinsha River: cleaning up debris; constructing an embankment to prevent slope and soil erosion; and improving landscapes at two scenic spots, including planting trees and bushes along the 15 km of river from Xinzhuang Bridge to Jinsha railway station. Institutional Development and Capacity Improvement Component (US$ 7.0 million PAD; US$ 7.66 million; December 2013) The component has been satisfactorily implemented between 2007 and The component includes the Project Management and Construction Supervision (TA1), RAP Monitoring (TA2), EMP Monitoring (TA3), Geographical Information System (GIS) and Management Information System (MIS), including training for SPPMO, City PMOs, all the PIAs, and other relevant government agencies as well as contractors. The implementation of the component has substantially improved government capacity in executing the project, ensuring the project quality, and improving the efficiency of the execution, and helped the municipalities on urban planning 49

60 and management capacities related to spatial planning, land management, transport planning, and utility and asset management Net Present Value / Economic Rate of Return The economic rate of return and Net Present Value for each subproject as well as for the overall project was not calculated at appraisal. Financial Rate of Return A financial rate of return was not prepared at appraisal. Performance of Panzhihua Waste Water Component The Qingxiangping BOT wastewater treatment plant (WWTP), of which the interceptor under SUDP is connected, began its operation in April 2009; the Dadukou WWTP under the JBIC loan project was operated in 2010, to which the interceptor under the SUDP has been connected; and also part of sewer interceptor built under SUDP is connected to Bingcaogang WWTP in Being audited, the cost recovery rate of the wastewater operation under the Panzhihua Water Affairs Company (PWAC) is gradually increased to 1.15 by end of Institutional Development Impact There are 5 subproject entities within the overall project. Among the 5 entities, only Suining PIA (SEDZMC) is a government own institution, and others are the company structures. At the project completion, their institutional improvements have been achieved through their internal improvements and their reforms from the existing entity structures. The project management and construction supervision tasks were substantially enhanced by the deeper involvement of international consultants. The enhanced involvement proved highly effective service in speeding-up the project implementation and in safeguarding the project quality. The project implementation related training was carefully designed and conducted. The training has served as technology transfer to the PMOs and the PIAs on accepting of new concepts in project management, construction supervision and financial systems improvements. RAP/EMP monitoring programs have ensured the SUDP implementation safety with the WB guidelines, project objectives, and the entire project progress. The programs maintained policies and procedures adequate to enable the Government to monitor and evaluate the implementation in accordance with guidelines of the Land Acquisition & Resettlement Action Plans and Environment Management Plans, and the achievement of the objectives of said plans and frameworks. GIS/MIS systems, including hardware and software, have been setup in Mianyang, Suining, Yibin and Panzhihua in SUDP, and the training provided had ensured that the systems being used efficiently. It comprehensively utilizes the geographic information systems (GIS) and network/communication technology to identify and develop an advanced infrastructure of city information and digital framework in order to help the cities realize their goals. 50

61 Social Improvements Whilst the objectives of the Project were essentially urban development in nature there have been important social benefits. In the project area, over 10 million people are now benefiting from the environmental and transportation improvements resulting from enlarging of urban area and improving of residential living standards. These improvements have been especially beneficial for the poorer people in the local communities. Urbanization is now the national strategy in China. SUDP is a pilot project of infrastructure improvement for the land development in Mianyang and Suining, and improvement of local transportation in the urban area in Yibin and Panzhihua. For the urbanization target, the easing of congestion on population and transportation in central city is an important objective. As completion of SUDP, the values of land as well as the population in the development areas have been increased, and the population in the downtown area has been decreased gradually. In addition, through the implementation of the project, the public attitudes towards channelization of transportation, land development and resettlements, environmental awareness and participation have been significantly improved. On the other side, Government has gained useful inputs and comments from the public, which is beneficial for the future planning and policy making for potential projects on land development. 3. Major Factors Affecting Implementation and Outcome Factors Outside the Control of Government or Implementing Agency The events of 5.12 Wenchuan Earthquake and 8.30 Panzhihua Earthquake in 2008 had affected the progress of SUDP during the implementation. Three of the four project cities had been designated as the heavy disaster areas except Yibin. Since 2008, the work of the earthquake recovery and reconstruction has been the priority task in Sichuan and the government had made more efforts on the priority task. In 2007 and 2008, the international fiscal crises had affected the investment of SUDP. During the fiscal crises, the domestic construction market in China was fluctuating violently, and the price for most construction-material and the costs for labor were gone up, which resulted in a slow progress of ongoing contracts of civil works. Value of RMB currency has being steadily increased since the SUDP loan agreement was in effective in 2007 and the exchange rate between US dollar and Renminbi Yuan has changed from 1:8.1 at the SUDP appraisal to 1:6.20 at the end of SUDP implementation. Due to the limitation of additional counterpart funding, increased marketing price on construction materials as well as adjustment of city/regional master plans during the implementation, some of the project scope had to be changed. 51

62 Factors Generally Subject to Government Control Due to the changes of city/regional master plans, some of the subcomponents had to be changed accordingly. For instance, some of changes on the scope of works in Mianyang, Suining and Yibin were caused by the master plan changed. As resulted, the early preparation efforts were wasted a lot, and the time of implementation of the entire project was delayed. The changes in institutions and leaderships in Mianyang had affected the progress of SUDP Mianyang components. Mianyang Science and Education Pioneer Investment Co., Ltd. (MSEPIC) and Mianyang Sanjiang Construction Investment Co., Ltd. (MSCIC) were under separate jurisdictions. However, MSEPIC and MSCIC changed their leaderships in 2008 and 2009, and both of them were then became service companies under Mianyang Kefa Investment Group, which belongs to Mianyang municipality. Due to the institutional changes, the leading positions were also changed. The changes consumed a lot of valuable project time and resulted in a slow progress of SUDP for these subcomponents. Factors Generally Subject to Implementing Agency Control After 5.12 Wenchuan Earthquake and 8.30 Panzhihua Earthquake, the amendment of Loan Agreement states that the percentage of expenditure for the works (Category 1) by the loan in Mianyang, Suining and Panzhihua under SUDP has been changed from 70% to 100%. It is understandable that the recovery and reconstruction in Sichuan needed huge investment, and the amendment of the SUDP loan agreement had been relieved the pressure of shortage counterpart funding during the earthquake recovery period. However, shortage of local counterpart funding as well as the increase of compensation in land acquisition and resettlement had also resulted in the scope changes of the works in the project cities even though the regional master plans changes were the main reason. The capacity and efficiency of PIAs in managing the subprojects had been varied, which had caused difficulties for SPPMO and PIAs to coordinate and communicate among the relevant agencies for such large-scale and comprehensive project. In addition, due to the longer time period of implementation, project management teams and key personnel had been changed substantially. All these factors had increased the difficultness in implementation. Slow executions of the land acquisition and resettlement components under SUDP had delayed the completion of SUDP. The works involved temporary or permanent occupation of large pieces of land, which should be acquired before construction. The land acquisition & resettlement should follow the policy as setup by the government, which took the time on the action. The executions took longer than the original schedule and results in the project delay. The less inputs caused the poor quality of geological survey during the preparation of design, which had increased the contract price for the civil works. The works in Panzhihua and Yibin are located in the Panzhihua hills and along Yibin Yangzi River, and the geological survey had not been made in sufficient detail, which caused the changes of design drawings during the construction and increased the actual completion cost of the civil works. 52

63 Costs and Financing Costs. Total project cost, including interest during construction, is currently estimated at USD million (refer to the Table), which is close to the estimated project cost (USD million) in PAD at appraisal. However, the amount cost in Chinese currency is still lower than that at Appraisal. The main reasons that had caused the project cost variation are: (1) Chinese currency value had been increased; (2) Competitive bidding procedure and good contract management were carried out during SUDP implementation, which saved the project budget; and (3) Some of sub-components in SUDP had been dropped due to the changes of regional master plans as well as lack of local counterpart funds, which were caused by the earthquake, fiscal crises, increased exchange value of RMB currency. Financing. The utilization of WB loan and counterpart fund, and information on sources of counterpart fund are provided in SUDP Cost Summary at the Table. The required counterpart funds were provided through a mixture of central government bonds and grants, provincial municipal grants, and local borrowings from the government and from the commercial banks. The financing split at the project completion is Loan fund 49% and Government 51% as compared to the appraisal split of Loan 45% and Government 55%. 53

64 4. Sustainability In overall terms the project can be considered sustainable although there are, and will continue to be, some taking-over issues after the completion of the works, O&M cost recovery and further investment for public services. Each project city in SUDP has already made Long Term Plan and Annual Plan for Investment and Public Services, and the plans have been realized step by step. Such as, Mianyang SEDZ will be built as industrial development zone, Mianyang PP will be built as High-tech Development Zone, Suining EDZ will become the center of national electronic industrial zone, SUDP Yibin component will help Yibin Lingang Economic Development Zone, and SUDP Panzhihua component will support the development of high - level residential area along the Bingren road. Sustainability needs to be viewed in terms of (i) the ability to operate and maintain the assets, (ii) the land development arrangements put in schedule, and (iii) adequate and further investment arrangements for development sustainability. 5. Bank and Borrower Performance Bank The WB s performance during the phases of project identification, preparation, appraisal and implementation for the project is considered to be satisfactory. The diligence of WB managers and staff was appreciated by all the implementing agencies. The work of the WB Beijing Office was highly appreciated in terms of timely instructions to SUDP on WB procedures; review, comment, and approval of bid documents; and instructions on management and social dimensions. Borrower The national and provincial government s commitment to the project remained strong and supportive during all phases of the project. The SPPMO, City PMOs and PIAs resumed active management functions throughout the project. Each subproject entity had designated necessary resources to execute the subproject. The government had assisted all the subproject entities to gather sufficient counterpart funding. Municipal governments in the project region had given utmost support for the construction at all the subproject sites. Most of the construction sites had required strong coordination for land acquisition and resettlement, and Government support had been remained strong. Government support was also related to the successful implementation of the project in respect to land acquisition and resettlement. Provincial and municipal governments have made great efforts towards the initiation and provision of the O & M costs for the project assets. Provincial and municipal governments are also committed for further investment to public services. For those investments that may have 54

65 notable impacts to the local social and economical situations, the governments and PIAs have formed long-term and annual plans. 6 Lessons Learned The SUDP has been an important project for Sichuan Province to improve core urban functions in an equitable and resource efficient manner by removing identified infrastructure bottlenecks hampering land development, transport, and environmental conditions in four second-tier cities (Mianyang, Suining, Yibin and Panzhihua). The implementation process had been a successful and valuable experience for all the agencies involved. Lessons have been learned in respect to implementation management, institutional and financial reforms, promotion of environmental protection, and raise of public awareness and participation. Some of the main points can be summarized in the following paragraphs. Experience have gained in the development of a large scale urban-development project, which comprehensively considering feasibility, alternatives, least-cost approach, institutional development, policy support, and the impacts to the environment, society, economy, poverty reduction, urbanization and long-term sustainability. The good experience has been adopted in preparation of further WB projects in Sichuan. Significant institutional capacity had been achieved by the adoption of modern project management method, international practice of bidding and contracting, project supervision, performance measurement, and completion evaluation. Through the project development and implementation, trained people from this project can be a valuable resource for the management of future projects not being financed by WB. WB project implementation rules and procedures on procurement, contracts management, and construction supervision had been broadly recognized as advanced management procedures. Good experience has been gained by practicing these rules and procedures. The procedures have been replicated on similar projects not being financed by WB. The good construction supervision and contract management system similar to the international practice had been adopted in the SUDP implementation and the successes had been achieved on the aspects of contact management, cost control, quality control, etc. However, there are still several issues influenced the practice of contract management: In China, the qualification of construction supervision service is needed for during the construction. SUDP adopted a foreign engineering consulting firm to assume the role of the project management and construction supervision, and it is a good international practice on the contract management and the PIAs benefited a lot on the project management. However, the government authorities have a problem to accept a foreign firm to perform as the engineer of construction supervision. Therefore, more explanation had to be made to the municipal construction bureaus that need to review the qualification of construction supervision firm at commence of construction. At the completion, there is a government authority, namely the Quality Supervision Station, who needs to review and accept all of construction files as well as qualification of construction 55

66 supervision firms. Its issue could be a problem if the construction had been reviewed by the Chinese regulation. The good method of the project management and construction supervision in this WB project in Sichuan has been adopted by the SPPMO with the Joint venture team consisting of both international consulting firm and qualified Chinese supervision firm. The PIAs designated as the Employer (client) in the contracts of civil works, however, the PIA, except Suining, is a company that is associated with the government, which usually does not have enough power to address the issues during the implementation, particularly in land acquisition and resettlement, because the policy had been setup by the government, and any blocks and bottlenecks had to be solved by the relevant government agencies, which took a time. It is really a good practice that the project management and construction supervision in SUDP had been executed by the consulting team. In this arrangement, SPPMO and the Consultant can manage the contracts of civil works efficiently on aspects of quality, schedule, cost and safety. In addition, it was also easier for the Consultant to conduct the skill transfer of international construction management practices. This methodology could be adopted for those future projects in China either being financed by the multilateral Banks financed or being financed by the domestic banks. Under SUDP, most of the disbursements under WB loan took place in when the exchange rate was changing a lot, therefore, the local currency based withdrew of the WB loan had lost a lot on Chinese currency. That amount of investment in RMB currency had been reduced because the slow progress of SUDP during the implementation at that time, although the 512 Wenchuan Earthquake event slowed down the progress. The contingencies on the variable exchange rate if it may have a risk on the local investment should be considered during the preparation of the World Bank loan project. Though the project preparation/implementation capacities have been built at provincial level and for the SUDP involved agencies, however, many other government agencies and potential future subproject entities still do not have the capacity. For the future WB projects, the WB and the Government should initiate the trainings early enough for those agencies that may later be involved in project development and implementation. In the project preparation stage, feasibility studies must be conducted in enough details for all aspects of technical, geological survey, financial, economical, institutional, environmental and social topics, following WB rules and guidelines, so as to pave a sound base for the WB project appraisal, and for the timely and successful implementation of the project. In the project preparation stage, both WB and the Government should avoid setting unduly optimistic goals and objectives for the project to achieve. This includes the targets, indicators of outputs and outcomes, environmental improvement and financial improvement. Setting realistic targets, indicators and using stepped approach (with a workable action plan) may be more practical. Both WB and the Government should make careful selection on the project components to be financed by WB loan and pay great attention to predict risks that might occur during the implementation. The municipal/regional master plan should not be changed during the implementation. Potential changes, as they might be envisaged, should be predicted and analyzed during the preparation. The major changes and components cancellation 56

67 will cause the delay of the implementation and the waste of preparation inputs. It will also affect the achievement of the project objective. The project asset management should be efficiently considered during the preparation and prepared during the implementation and the action plan of the operation, maintenance and management should be approved by the municipal government before the asset built. 57

68 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders N.A. 58

69 Annex 9. List of Supporting Documents 1. Project Appraisal Document, People s Republic of China, Sichuan Urban Development Project, August 11, Report No CN 2. Project Agreement, Loan Agreement and amendments 3. Aide Memoires, ISRs for the Project 4. Restructuring paper, August 18, Minutes of Project Preparation Review Meeting, Resettlement Committee, etc. 6. Statements of Executive Directors at Board Discussion 7. SUDP Semi-Annual Progress Reports 8. AAA: China Integrating Land Policy Reforms II (P096320), Aide Memoire, May Country Partnership Strategy, FY Urban China, Towards Efficient, Inclusive and Sustainable Urbanization, Conference Edition, The World Bank and Development Research Center, February Snapshot Sichuan, Benchmarking FDI Competitiveness in China s Sichuan Province, March China, Land Policies For a Modern and Harmonious Society, The World Bank, June Borrowers Implementation Completion Report and annexes, March

70 Annex 10: Resettlement and Land Acquisition Implementation and Results Social Safeguards. All four participating municipalities had subprojects involving resettlement activities, so RAPs were developed for each one. Although the subprojects were completed at different times in the project cycle, all resettlement was completed by closing at the end of The total completed resettlement activities included mu of land acquisition and 276, m2 of housing demolition of which 239, m2 took place in rural areas and 36, m2 in urban areas. A total of 10,788 people were directly affected by resettlement. The SUDP resettlement components were designed, prepared and implemented by the four project municipal authorities and PIUs, and were overseen by the provincial PMO and the Bank. Resettlement implementation was regularly monitored by an independent resettlement external monitoring agency, the Southwest China Communication University, which provided nine consecutive semi-annual monitoring reports and the final resettlement completion reports for the four project municipalities. During implementation, the municipal subprojects contents and resettlement activities were altered to a certain extent due to changes in local economic growth patterns and following changes necessistated by the May 2008 Wenchuan Earthquake. Yet the resettlement components still met the needs of the PAPs whose livelihoods were rehabilitated in a satisfactory manner. Overall, SUDP resettlement proved to be a success: it was processed in compliance with the Bank s social safeguard requirements and the project s legal covenants, while proceeding with local land development in the economic zones on a pilot basis. Minor challenges were associated with resettling households from two locations in Suining and a small factory in Yibin, complicating completion of the roads. Resettlement The SUDP supported urban construction (mainly roads, some bridges and pipelines) in Panzhihua, Suining, Mianyang and Yibin. Works in the four cities caused land acquisition and population relocation and hence triggered OP4.12. Because the four municipalities implemented their subprojects individually, each developed a RAP for its own resettlement activities. RAP implementation in Panzhihua municipality was started in February 2008 and completed in year end of Suining resettlement was implemented in the same period of time, while Yibin implemented resettlement from March 2007 to June 2012, and Mianyang from December 2007 to June 2013.Although there were delays, resettlement was wholly completed when SUDP closed on December 31, During project implementation, an expert team from the Southwest China Communication University, the independent resettlement external monitoring agency, conducted regular semiannual monitoring of RAP implementation in each of the four project municipalities, and produced nine consecutive external monitoring reports to review and ensure resettlement quality. Alongside project closing, the monitoring agency also developed the SUDP Resettlement ICRs for the four municipalities in accordance with the OP4.12 requirement. 60

71 Resettlement Impacts SUDP resettlement statistics were recorded in detail at municipal level and consolidated roughly at provincial level for the project as a whole. At closing, the total resettlement impacts comprised mu 11 of land acquisition and 276, m2 of housing demolition in which 239, m2 took place in rural areas and 36, m2 in urban. About 10,788 people in 3,262 households were affected by the resettlement (either by land acquisition, house demolition, or both). In addition, more than 3,000 people were also indirectly affected by enterprise relocation. Table x-1 below shows the overall resettlement statistics of the project. Table 4.1 Major Resettlement Impacts Items Cities Panzhihua Suining Mianyang Yibin Total Land Acquisition House Demolition Area (mu) , , Affected p/h 172/42 2,899/938 3,908/ /57 7,177/2,411 Rural Area (m2) 20, , , , , Affected p/h 214/69 2,226/642* 2,895/1126* 227/66 5,562/1903 Area (m2) 6, , , Urban Affected p/h 382/ ,775/599 2,157/716 Enterprises/Shops & Inst. Relocation Area (m2) 24, , , , Affect p/unit 280/13 68/4-3,148/272 3,496/289 Total costs RMB Million * Because the resettlement in Mianyang and Suining took place in the economic development zones, the people affected by housing demolition were already included in the numbers of the people affected by land acquisition. Each of the municipal resettlement ICRs presents detailed resettlement impact inventories. Because some municipalities adjusted their city development master plans and local economic growth speeds, some subproject items were taken out or added in which altered the associated resettlement activities both in size and timing. Moreover, the Wenchuan Earthquake which happened on May 12, 2008, near Mianyang Municipality, interrupted all local processes. Table x-2 presents the changes in actual resettlement implementation compared with the RAPs. Although changed in size and timing, all resettlement was implemented in conformity with the RAP instructions, and, furthermore, all the compensation rates were raised by a large margin so as to ensure that PAPs were resettled properly in the changing situations. Table 4.2 compares actual vs. planned resettlement implementation ha. = 15 mu. 61

72 Table 4.2 Comparison of Actual and Planned Resettlement Cities Items Affected Panzhihua Suining Mianyang Yibin Total RAP Actual RAP Actual RAP Actual RAP Actual RAP Actual Land acquisition (mu): House demolition (m2): 47,403 26,625 84,566 88,216 87,246 25,866 83,194 46, , ,953 Companies/Institutions PAP (households) Resettlement Costs and Fund Distribution Although resettlement costs varied within municipalities, all resettlement was budgeted for compensation based on replacement costs as the guiding principle indicated in the RAPs. In actuality, when the local situations changed and economy grew, resettlement was actually implemented with substantially higher investment costs and at higher compensation rates in all four municipalities. For instance, compensation rates for land were enhanced by three to four times and housing by 25% on average in Panzhihua; housing compensation was increased between 59-71% in Yibin; the life-time monthly subsidies for PAP were increased by around 39-43% in the economic development zones of Suining and Mianyang. Detailed consultations with PAPs and advances in the national/local social policies contributed to increasing the resettlement investments. The table below summarizes SUDP resettlement costs. 12 Table 4.3 Panzhihua and Yibin Actual Resettlement Costs Compared to RAP (RMB million) Cities Items Panzhihua Yibin RAP Actual RAP Actual Land acquisition Asset demolition Taxes, fees, & others Total Table 4.4 Mianyang and Suining Resettlement Cost in RMB million (as of 2012) Items Cities Lifetime allowance Compensation for house demolition Investment for new site construction Subsidies for new housing Costs for other assets and works Mianyang Suining Total 12 These two groups represent different resettlement approaches. Resettlement in Mianyang and Suining received the lifetime allowance as the basis for their livelihood restoration. The resettlement costs increased here mainly contingent upon CPI changes chronically. In Panzhihua and Yibin, project affected people gained compensation for land requisition or/and assets demolition by which they rehabilitated their livelihoods individually with the local authorities assistance. The resettlement budget increased here due to enhancement of compensation rates for land and assets but one shot normally. 62

73 All compensation payments were allocated to individual PAPs on time and in full as stipulated in the RAPs. Municipal resettlement authorities and PIUs assured the smooth flow of funds from the land users, through the municipal financial departments and PIUs, to PAP households accounts in local banks. PAPs participated in the resettlement processes with two-way communication on land compensation distribution, new site selection, replacement housing, livelihood earnings, and complaint handling. PAPs report being overwhelming satisfied with the process and the results of resettlement under SUDP. PAP Livelihood Rehabilitation Housing in different compensation forms: resettled people had a choice of three types of replacement housing: self-establishment, official arrangement, and exchange of house property rights. With self-establishment, housing plots were provided in accordance with the regulations for private construction use of rural land. Most resettled people moved into the officially arranged urban apartment buildings paid for under special preferable policies, or exchanged the property rights of their original houses. Either way, the resettled people received larger spaces and higher quality housing, resulting in overall improved living circumstances. Incomes with various sources and generation patterns: Most PAPs changed their occupation from agricultural production to non-agricultural, and their Hukou status was converted from rural to urban. After resettlement, their economic incomes came from major three sources: 1) contracted employment after job training, 2) remunerative work in urban areas, and 3) lifetime monthly allowances or pensions. In the economic development zones of Mianyang and Suining, the lifetime allowances for individuals helped offset the loss of agricultural income. For farmers who lost land in other municipalities, compensation for land acquisition was allocated to them even though they held no land titles, but who held use-rights only (their home villages held the land ownership but agreed that the household losing the land could receive compensation). Farmers used these funds from land for either to start their own businesses or to invest it as appropriate. Moreover, as everywhere in rural China, migrating to urban areas in search of remunerative work became another major source in PAP livelihood generation. In all cases, the incomes of PAP were at least restored and in some cases higher than before resettlement. Table x-4 summarizes PAP incomes based on the sample surveys of the households tracked in all the four municipalities (the figures in this table are on averages summarized from individually sampled households. None of the households tracked saw a decrease in incomes). Table 4.5 Summary of PAP Income Levels before and after Resettlement Cities Samples tracked (household) Before resettlement Average incomes (hh) 63 After resettlement Average incomes (hh) Change ratio Mianyang 16 23,675 28, % Suining 35 28,449 35, % Panzhihua 8 22,375 36, % Yibin 21 14,130 34, %

74 PAP satisfaction: Period surveys were undertaken to gauge the extent of resettled people s satisfaction with SUDP s resettlement implementation and results. In the earlier stages, some non-satisfaction with living conditions was registered; however when resettlement was approaching the end, satisfaction rates were high, and eventually an overwhelming number of resettled people expressed satisfaction with the resettlement results. Table 4-6 summarizes the random survey results of resettled people s satisfaction in the four project municipalities as of the project end. Table 4.6 Statistics of PAP s Degree of Satisfaction Sample Households Q&A Overall satisfaction degree for resettlement work Mianyang Suining Panzhihua Yibin HH Ratio HH Ratio HH Ratio HH Ratio % % % % Satisfied 60 60% % 23 92% 20 31% Basically satisfied 40 40% % 2 9% 45 69% Not satisfied 0 0% 0 0.0% 0 0% 0 0% Overall satisfaction degree for resettlement results % % % Satisfied % 21 84% 37 57% Basically satisfied % 3 12% 28 43% Not satisfied 0 0.0% 1 4% 0 0% Overall satisfaction degree for lives after resettlement % % % % Satisfied 50 50% % 22 88% 38 58% Basically satisfied 50 50% % 2 8% 27 42% Not satisfied 0 0% 0 0.0% 1 4% 0 0% Applicability of the Resettlement Policy Framework in Mianyang and Suining Because SUDP was implemented in the economic development zones in Mianyang and Suining, the project developed Resettlement Policy Frameworks (RPF) to guide the overall resettlement work entailed by land development in the whole development zones. As a result, the project RAPs as resettlement instruments were implemented not only under the Bank-supported subprojects but also by local authorities for all land development. All resettled people and PAPs thus enjoyed equal levels of compensation and treatment to enable their livelihoods to be rehabilitated and their living standards enhanced. They benefited from local economic growth as well. SUDP RAP implementation became more influential and fruitful in its interaction with local experiences and expertise, promoting a concerted effort to maintain such good practice in resettlement in the years to come. 64

75 Annex 11. Major Milestones of Sichuan Urban Development Projects 2003 SUDP is listed in File (Jiwaizi [2003] #8) on the rolling plan of fiscal year by the NDRC September 2003 November 2003 May 2004 November 2004 May 2005 July 2005 September 2005 November/ December 2005 February 2006 Project Concept Note SUDP Preparation commences/first World Bank Project Preparation Mission; World Bank site visit Mission; World Bank Identification Mission; Pre-appraised /Second World Bank Project Preparation Mission; Third World Bank Project Preparation Mission; Pre-appraised/Fourth World Bank Project Preparation Mission; Fifth World Bank Project Appraisal Mission; /Project Components agreed with World Bank during five missions, Environmental Assessment and Resettlement Action Plans prepared and Approved; Finalized appraised /SUDP World Bank mission: Land Development on Suining and Mianyang 2006 SUDP Investment Report approved by the File No. Fagaiwaizi [2006]#686 as issued by the NDRC July 2006 August 2006 September 2006 October 2006 January 5, 2007 May 2007 September 2007 December 18, 2008 April 2009 April 2010 January 2011 August 2011 April 2013 February 2014 Loan negotiations successfully completed; SUDP Appraised and Project Appraisal Document (PAD) prepared; SUDP presented to the Board of the World Bank; Agreements signed by the authorized representatives form China and the World Bank; SUDP become effective First World Bank Project Supervision Mission Second World Bank Project Supervision Mission; Amendment to Loan Agreement: the percentage of expenditure for the works (Category 1) by the loan in Mianyang, Suining and Panzhihua under SUDP has been changed from 70% to 100% Third World Bank Project Supervision Mission; Fourth World Bank Project Supervision Mission Fifth World Bank Project Supervision Mission: Mid-term Review. Amendment to Loan Agreement: The remaining fund had been reallocated to the infrastructure investments in the Xinlong area--an new development area within Pioneer Park. Sixth World Bank Project Supervision Mission: SUDP Completion Review. World Bank ICR Preparation Mission; 65

76 Annex 12. Before and after photos of selected investments Mianyang Road construction in Pioneer Park before Road construction in Pioneer Park - after Road construction in Pioneer Park before Road construction in Pioneer Park - after Road construction in SEDZ before Road construction in SEDZ after 66

77 Suining Canal embankment during construction Canal embankment after construction Suining city road during construction Suining city road after construction Yibin Retaining wall during construction Retaining wall after construction 67

78 Walkway before construction Walkway after completion Route A during construction Route A after construction Panzhihua Bing-ren road during construction Bing-ren road after construction 68

79 Bing-ren tunnel during construction Bing-ren tunnel after construction Bin-jian road during construction Bin-jian road after construction Landscape improvement during construction Landscape improvement after construction 69

80 Site of interception sewer line construction Interception sewer line after construction 70