FOR OFFICIAL USE ONLY

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY EMERGENCY PROJECT PAPER ON A PROPOSED LOAN IN THE AMOUNT OF US$71. MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A WENCHUAN EARTHQUAKE RECOVERY PROJECT January 22,29 China and Mongolia Sustainable Development Unit Sustainable Development Department East Asia and Pacific Region Report No: CN This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

2 CURRENCY EQUIVALENTS (Exchange Rate Effective October 1,28) CurrencyUnit = RMB RMB6.849 = US$1 RMB 1 = US$.146 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS ADB AFD BEWAP BLG CNAO CPS DA DC DGTPE EIB ERL ESSAF FA FMM FMS GCC GDRC GEF GFDRR GoC GPAO GPFD ICB IFAD IF1 LMG MEP MHURC MINEFE MoCA MoE MoF MOT NDRC OM Asian Development Bank Agence Franqaise de Dkveloppement Basic Education in Western Areas Bureau Leading Group China National Audit Office Country Partnership Strategy Designated Account Direct Contracting Direction Gknkrale du Trksor et de la Politique Economique European Investment Bank Emergency Response Loans Environmental and Social Screening Assessment Framework Force Account Financial Management Manual Financial Management Specialist Gansu Construction Commission Gansu Development and Reform Commission Global Environment Facility Global Facility for Disaster Reduction and Recovery Government of China Gansu Province Audit Office Gansu Province Finance Department International Competitive Bidding International Fund for Agricultural Development International Financing Institutions Longnan Municipal Government Ministry of Environment Ministry of Housing and Urban-Rural Construction French Ministry of Economy, Finance and Industry Ministry of Civil Affairs Ministry of Education Ministry of Finance Ministry of Transport National Development and Reform Commission Operations Manual 2

3 FOR OFFICIAL USE ONLY PIU PMO PLG PPMO RRC SARS SCC SDRC SOE SPA SPFD SPHD SPLG SUEP WA WHO Project Implementation Unit Project Management Office Provincial Leading Group Provincial Project Management Office Rapid Response Committee Severe Acute Respiratory Syndrome Sichuan Construction Commission Sichuan Development and Reform Commission Statement of Expenditures Sichuan Provincial Audit Office Sichuan Provincial Finance Department Sichuan Provincial Health Department Sichuan Provincial Reconstruction Financing Leading Group Sichuan Urban Environment Project Withdrawal Application World Health Organization Vice President: Country Director: Sector Manager: Task Team Leader: James W. Adams David R. Dollar Ede Jorge Ijjasz-Vasquez Keshav Varma MaraK. Warwick This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.

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5 CHINA Wenchuan Earthquake Recovery Project CONTENTS A. Introduction... 7 B. Emergency Challenge... 7 C. Project Description D. Appraisal of Project Activities... 2 E. Implementation Arrangements and Financing Plan F. Project Risks and Mitigating Measures G.. Terms and Conditions for Project Financing Annex 1: Detailed Description of Project Components Annex 3: Summary of Estimated Project Costs Annex 4: Financial Management and Disbursement Arrangements. 38 Annex 5: Procurement Arrangements Annex 6: Implementation and Monitoring Arrangements Annex 7: Project Team Members Annex 8: Environmental and Social Safeguards Framework Annex 9: Economic Background Annex 1: Documents in the Project File Annex 11: Statement of Loans and Credits Annex 12: Country at a Glance... 7 Annex 13: Maps... 72

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7 EMERGENCY OPERATION PROJECT PAPER DATA SHEET CHINA Wenchuan Earthquake Recovery Project EAST ASIA AND PACIFIC Date: January 22,29 Country Director: David R. Dollar Sector Manager: Ede Jorge Ijjasz-Vasquez Keshav Varma Lending instrument: Emergency Recovery Loan Project ID (s): P11417 Team Leader: Mara K. Wanvick Sectors: General water, sanitation and flood protection sector (44); Roads and highways (39); Health (13); General education sector (4) Themes: Disaster Recovery I Environmental screening category: A Project ID(s): P11417 Proposed terms: VSL; 5 years grace, 3 years repayment Expected effectiveness date: June 12,29 Borrower: People s Republic of China Total Amount: US$7 1 million Expected implementation period: January 15,29 -June 3,214 Expectedhevised closing date: June 3,214 Responsible agencies: Sichuan Provincial Government/Gansu Provincial Government To restore essential infrastructure, health, and education services to at least levels existing prior to the Wenchuan Earthquake, and where appropriate, to provide for expansion of services, while reducing the vulnerability to seismic and flood hazards and building capacity of local governments to manage the recovery program. Short Description: The project comprises two provincial parts, one each for Sichuan and Gansu. The project will finance the restoration and recovery of urban and town infrastructure and health services in selected counties in both provinces, and the restoration and recovery of education services in selected counties in Gansu. Sub-projects will be selected in a manner that ensures an overall balance between reconstruction and providing a foundation for the longer-term sustainable economic recovery of project cities, counties and towns. Source Borrower Total IBRD/IDA Total Local Foreign Total Total IBRD/IDA Trust Funds

8 I Does the emergency operation require any exceptions from Bank policies? Have these been approved by Bank management? I Yes [ 1 No [XI Are there any critical risks rated substantial or high? Yes [XI No [ ] What safeguard policies are triggered, if any? Safeguards policies potentially triggered: Environmental Assessment (OPh3P4. 1); Natural Habitats (OPBP4.4); Involuntary Resettlement (OPh3P4.12); Physical Cultural Resources (OPh3P4.11); Indigenous Peoples (OPh3P4.1); Safety of Dams (OPh3P4.37). Significant, non-standard conditions, if any: None Negotiations and Board presentation: None Effectiveness: None Disbursement: (i) Payment of the Front-End Fee; (ii) Adoption of the Operations Manual, including the ESSAF and the FMM, by Sichuan and Gansu Provinces; (iii) Approval of sub-projects by the Bank, and the Borrower, and Sichuan or Gansu as the case may be; and, (iv) Adoption of the Procurement Plan by Sichuan and Gansu Provinces. Implementation: Sichuan and Gansu will: (a) maintain the Provincial Project Leading Groups, the Project Management Offices and local Project Implementing Units throughout the period of the project for the purpose of managing, coordinating and monitoring the implementation of the project; (b) apply the OM, the ESSAF and the FMM in carrying out the project;(c) ensure that sub-projects meet agreed eligibility criteria and are prepared taking into account the Bank s comments, and in those cases where the Bank s prior review is required, implement sub-projects after the Bank has provided its approval; (d) implement sub-projects in accordance with implementation plans to be prepared, and plans to mitigate any adverse environmental and social impacts to be prepared pursuant to the ESSAF; and (e) carry out capacity building and technical assistance activities in accordance with proposals developed by the Provinces and approved by the Bank. 6

9 A. INTRODUCTION 1. This project paper seeks the approval of the Executive Directors to provide a loan in an amount of US$ 71 million to the People s Republic of China for a Wenchuan Earthquake Recovery Project (WERP). The project, which supports the Government of China s (GoC) reconstruction strategy articulated in the National Masterplan for the Rehabilitation and Reconstruction of Wenchuan Earthquake (the Masterplan), will finance post-earthquake reconstruction and recovery in infrastructure, health and education sectors in Sichuan and Gansu Provinces and will assist both provinces in laying the foundation for the longer-term sustainable economic recovery of areas severely affected by the Wenchuan Earthquake. 2. To support the GoC s recovery and reconstruction strategy, the project will support the following activities in the infrastructure, health and education sectors: (a) the rebuilding, restoration and strengthening of facilities and services damaged by the earthquake; and (b) provision of appropriate expansion to provide the basis for longerterm sustainable development in the earthquake affected areas, including reducing the vulnerability of these services to the potential effects of future seismic and flood hazards. To facilitate the emergency response, the project is designed using a framework approach. While the overall project framework has been established and agreed during appraisal, the full set of individual investments consistent with this framework will be selected, screened and appraised during project implementation. B. EMERGENCY CHALLENGE 3. China is prone to a range of natural hazards, including earthquakes, floods, typhoons, and drought. It is estimated that economic losses caused by disasters amount to between three and six percent of China s total annual GDP.2 According to a World Bank global disaster risk analysis study, about 56.6 of China s GDP is generated in areas at high risk of two or more natural hazard~.~ 4. On May 12,28, a devastating earthquake of magnitude 8. struck southwestern China. The epicenter of the earthquake was located in the mountainous Wenchuan County, Sichuan Province, approximately 8 kilometers northwest of the provincial capital of Chengdu. Impact of the Wenchuan Earthquake 5. The earthquake impact area is characterized by two specific geographic regions with marked differences in topography and socio-economic development levels: the sparsely populated Longmen Mountain alpine plateau and the densely populated Sichuan Basin, historically named the rice bowl of China. The infrastructure financed under this project will primarily be in urban and town areas. * Integrated Disaster Risk Management in China (OECD) pdf Natural Disaster Hotspots: A Global Risk Analysis, World Bank, 25. 7

10 6. The effects of the earthquake were widespread. There were more than 3, significant and ongoing aftershocks, the epicenters of which have stretched several hundred kilometers northeast from the original earthquake center. As a result, over 69, people have died, 374, have been injured, and 18, remain mi~sing.~ Asset damage includes: 34, km of highways destroyed; 1,263 reservoirs damaged; 7,444 schools and 11,28 hospitals and clinics collapsed. The houses of more than 4 million families have been destroyed or damaged.' In addition, the earthquake and the large number of secondary disasters caused extensive ecological damage including landslides, barrier lakes and destruction of forests.6 7. A comparison of recent major earthquakes around the world highlights the scale and significance of the Wenchuan Earthquake and the magnitude of the GoC's task in addressing the impact of the earthquake: Table 1 : Comparison of damage from sampling of recent earthquakes Damage Houses Earthquake Date Magnitude Fatalities assessment destroyed cvs Billion) Guj arat Jan. 26, , 4, 2.1 Kobe Jan. 17, >6,4 1, 87. Marmara Aug. 17, , 1 13, Pakistan Oct. 8, >73, >2, 5.2 Wenchuan Mav >69. >4 million Six provinces have been affected by the Wenchuan Earthquake: Sichuan, Gansu, Shaanxi, Henan, Yunnan, and Hubei. Total direct economic losses have been estimated by the GoC at RMB 844 billion (US $123 billion). The two most affected provinces are Sichuan and Gansu, accounting for 9 1 and 6 of the total direct economic losses, respectively. 9. The infrastructure, health and education sectors suffered significant damage during the earthquake. Typical damage to urban wastewater and water supply systems includes fracturing of pipes, opening of joints increasing leakage and loss of water supply pressure, and damage to system structures including pumping stations and treatment plants. Typical damage to roads includes settling and surface cracking over large areas, as well as weakened foundations, which has been exacerbated by damaged water supply pipelines, sewerage networks, and drainage systems. Damage to bridge load carrying capacities occurred as a result of secondary flooding events (e.g., downstream of breached barrier lakes) which resulted in significant slope erosion around bridge embankments, abutments and piers. Data as of November 28. Estimated as the sum of urban and rural housing units reported in the Masterplan as being destroyed. The data in this paragraph and paragraph 8 are quoted from the National Masterplan for the Rehabilitation and Reconstruction of Wenchuan Earthquake. 8

11 1. In the education sector, the earthquake caused extensive damage to school buildings and facilities including equipment and libraries. In the health sector, many township health centers and village clinics collapsed or have had to be condemned as a result of earthquake damage. Structural damage to county and municipal hospitals was also experienced, as was a significant loss of equipment and facilities. Government response to the Wenchuan Earthquake 11. The GoC has taken a strong leadership role in the earthquake relief and recovery and has been widely commended by the international community for the speed and efficiency of its response. Within hours of the earthquake, Premier Wen Jiabao visited affected areas, and civilian teams supported by the military and police had been deployed. Relief supplies, including approximately 1.6 million tents, 4.9 million blankets and 4.2 million tons of fuel were distributed in the impact area. Much of the relief aid was provided domestically by the central government and by local governments not affected by the earthquake, supplemented with donations from the private sector and the international community. Specialized international rescue teams and other experts such as trauma surgeons, were invited by GoC to assist in the initial relief efforts. 12. Following the immediate response, the GoC and local governments commenced the initial recovery, focusing on the provision of transitional housing, schools and health centers, and the repair of essential services. As of the end of September 28, more than four million transitional houses had been built in Sichuan Province alone, 53, km of roads had been restored, and 128, of the almost 139, businesses, and many schools and township health centers that were damaged had been reopened. 13. In parallel to the relief and recovery efforts, from early June to August 28 the GoC conducted the damage and loss assessment and initial reconstruction planning. A dedicated team of more than 35 specialists was sent to the provinces to carry out the damage assessment on site, sending the information as it was collected to an experts group of more than 5 senior specialists from all sectors established under the direct control of the State Council. As the assessment was ongoing, more than 5 planning specialists commenced the drafting of the national and local reconstruction plans.7 The first version of the national reconstruction plan was published on August 12,28, just three months after the earthquake, on the National Development and Reform Commission s (NDRC) website to solicit public feedback. A range of domestic and international organizations and individuals provided comments during the consultation period. 14. Throughout the relief, recovery and planning periods following the Wenchuan Earthquake, the GoC has invited the international community to support and assist its efforts. The first discussion with the Bank, in which the GoC sought information on international experience in disaster response, took place in Washington D.C. on May 13, 28, less than twenty four hours after the earthquake. In the following weeks, the Bank 7 The estimates of the numbers of specialists involved in the damage assessment and planning was provided by the National Disaster Reduction Commission. 9

12 team and other members of the international community liaised closely with GoC, providing advice on international best practice in damage assessment and reconstruction planning. 15. The GoC s reconstruction planning system includes the overall National Masterplan for the Rehabilitation and Reconstruction of Wenchuan Earthquake (the Masterplan) and ten sector plans that address urban development, housing, rural development and agriculture, infrastructure, public services (such as social protection, health and education), land use planning, market and financial services, enterprises, and disaster risk reduction and ecological restoration. The Masterplan was approved by the State Council on September 19,28, following public consultation. The sector plans were finalized and issued in November The Masterplan establishes the following principles and goals for reconstruction, including: (a) housing and employment will be made available to each affected family; (b) basic services and government services will be restored for every person; (c) the environment will be rehabilitated and infrastructure rebuilt, and; (d) the economy will be further developed. The Masterplan estimates the total cost of reconstruction at RMB 1 trillion (US $147 billion). Key reconstruction projects are expected to be substantially completed in about three years. 17. The Masterplan identified 237 earthquake affected counties/cities/districts in Sichuan, Gansu and Shaanxi Provinces, out of which 51 have been classified as extremely or severely affected and targeted for recovery assistance. Thirty-nine of these counties are located in Sichuan, eight in Gansu, and four in Shaanxi. Reconstruction efforts in these counties will be financed through provincial government twinning assistance programs, central and local government funds, social donations, domestic and international loans, and private sector financing. 18. The national reconstruction planning system is supplemented by provincial and local reconstruction implementation plans, which are consistent with the overall national plans, but provide more detail and specific direction for local reconstruction. In July 28 Gansu Province issued a draft provincial Masterplan* that further details the rehabilitation and reconstruction of Gansu s eight severely affected counties included in the national Masterplan. However, in Sichuan, due to the sheer scale and scope of reconstruction needs, the process of developing municipal and county reconstruction implementation plans is still ongoing, and is expected to be completed by the end of Since the earthquake, the various ministries and provinces have reviewed and updated relevant regulations, codes and standards. For example, the Ministry of Housing and Urban-Rural Construction (formerly the Ministry of Construction) has updated China s national seismic design codes, with particular attention to reconstruction works to be carried out in the affected regions. The updated seismic codes were issued in July * The Gansu Provincial plan is entitled Masterplan for the Post Wenchuan Earthquake Rehabilitation and Reconstruction in Gansu Province. 1

13 28 and are applicable to construction of buildings and infrastructure, such as roads and bridges, schools, hospitals, rural housing, municipal buildings and infrastructure. The revisions include the reclassification of seismic design intensities for 7 cities and towns of Sichuan, Gansu and Shaanxi Provinces and new, compulsory requirements for structural design, construction methodology and material quality. The GoC has stipulated that the latest codes and standards, together with other existing national codes and standards, shall be used to guide and control the quality of post-earthquake reconstruction activities. 2. In the education sector, which suffered significant damage during the earthquake, the Ministry of Education (MoE) has taken the lead to improve disaster preparedness in schools and to ensure that reconstructed schools conform to higher seismic standards. Specific actions include: (a) updating of the Construction Standards for Rural Schools by MoE and MHURC; (b) preparation of a sectoral plan for education, which pays special attention to school safety; (c) dissemination of good practice seismic designs for schools developed by experts from Tsinghua and Tongji Universities; and, (d) implementation of a mandatory school safety program including regular drills. The Recovery Strategy of the Government of China 21. Through the Masterplan and associated sector, provincial and local plans, the GoC has established a sound, forward-looking strategy for the post-earthquake recovery and reconstruction. The GoC s vision is not only to restore basic services and living conditions in an incrementally improved way, but to strategically embed the reconstruction efforts into the overall development strategy of the area to ensure that after reconstruction is complete, economic development in the earthquake affected areas is sustainable and surpasses pre-disaster levels. This approach recognizes the importance of the earthquake affected area in the GoC s highly successful and long-standing national poverty reduction strategy, and the risk caused by the earthquake to previous development gains. 22. Since 2, the two provinces most affected by the earthquake, Sichuan and Gansu, have been targeted by the GoC s Western Development Strategy which has focused government poverty reduction and development initiatives on China s western regions. Sichuan Province, with a population of 87 million and a per capita GDP of RMB 9,6 (US$ 1,324) in 26, accounts for one-third of China s western region population and GDP. Sichuan has achieved significant gains through the Western Development Strategy due to the high agricultural and industrial productivity of the Sichuan Basin area. In contrast, the gains achieved by Gansu Province have been more modest due to topographic and resource constraints. Gansu, with a population of 26 million, remains the second poorest province in the country, with per capita GDP of RMB 8,749 (US$ 1,279) in 26. The GoC has recognized that the severity of the Wenchuan Earthquake threatens the development in the area and without intervention by the GoC, unemployment would likely increase and significant populations could lapse below the poverty line. 11

14 23. The State Council is responsible for the overall strategy, planning, policy and management of the Wenchuan Earthquake recovery and reconstruction program. The Masterplan was developed by the National Planning Group for Wenchuan Earthquake Reconstruction led by NDRC. The sector plans were jointly developed by the line ministries and the provinces of Sichuan, Gansu and Shaanxi. 24. Implementation of the reconstruction program is the responsibility of the provincial and local governments, and responsibilities for coordination and quality control are specified in the Masterplan and local reconstruction implementation plans. Provincial Leading Groups (PLGs) have been established in each of the earthquake affected provinces to co-ordinate reconstruction projects province wide and they will set project policy and guide implementation. The responsibilities of the PLGs cover all reconstruction projects regardless of the funding source, whether from central government, twinning sources, IFIs or public donations. Both Sichuan and Gansu have established their PLGs as of December 1, The Masterplan employs a concept of strategic reconstruction zoning to ensure consistency between short-term reconstruction activities and longer-term development strategies for the region. The Masterplan designates areas as priorities for reconstruction if they have lower disaster risk and richer resource bases. In contrast, areas with limited development potential due to lower resource capacity and higher hazard potential are classified for moderate reconstruction. Reconstruction is discouraged in a limited number of remote mountainous areas designated as highly hazard prone. 26. In areas designated for moderate reconstruction, a build back better approach for reinstating previously existing assets is proposed. In contrast, in areas that are likely to become the key focus for longer-term development, build back better reconstruction of assets and services coupled with appropriate expansion, will be supported. Through this strategy, which is consistent for all sectors, the reconstruction will not only restore services, but will also lay the foundation in appropriate locations, for sound, sustainable social and economic development. 27. The funding required for the Masterplan is included in the GoC s two-year fiscal stimulus package of US$586 billion, which was announced on November 9,28. This package is approximately 14.5 of the estimated GDP in 28 and will bolster the economy through new investment in infrastructure, social programs, and overall recovery efforts. MoF has allocated RMB 2 billion (USD$2.9 billion) from the 29 central budget for the provinces of Sichuan, Gansu and Shaanxi to support reconstruction in the fourth quarter of 28 and the first quarter of 29. These funds were allocated in addition to the RMB 7 billion which the central government had already provided in 28. The re-allocated money is intended to speed up reconstruction in the affected area as part of the financial stimulus package. 28. An innovative aspect of the GoC s financing strategy is the provincial twinning program. Under this program, eighteen extremely-affected counties in Sichuan and three severely-affected counties in Gansu are receiving focused reconstruction aid from designated provinces and cities across China. This program, which requires the 12

15 designated provinces and cities to provide at least 1 of their fiscal revenue for three consecutive years. This program, already under implementation, has facilitated a rapid commencement of the recovery and reconstruction activities in many of the key earthquake affected counties. 29. To further support the implementation of the Masterplan, the GoC has requested a total financing envelope of US$ 1.5 billion from four multilateral and one bilateral financing institutions (IFIs): IBRD, Asian Development Bank (ADB), European Investment Bank (EIB), Agence Franqaise de Developpement (AFD) and International Fund for Agricultural Development (IFAD). Of the total, US$ 1.2 billion has been allocated to Sichuan Province, US$2 million to Gansu Province, and US$ 1 million to Shaanxi Province. 3. In accordance with the Masterplan, the IF1 emergency loans will support reconstruction in public utilities, infrastructure, low rent housing, ecological rehabilitation and environmental improvement. The GoC has taken the lead in the definition of geographical and sectoral areas of focus for each IFI, to minimize overlaps, achieve economies of scale and concentration, and build on the comparative advantages and portfolio experience of each organization. Bank Support to the Government Response 3 1. The Bank has leveraged some US$ 5.1 million in grant financing to support the GoC s response to the Wenchuan Earthquake. A grant of US$ 1.5 million from the Global Facility for Disaster Reduction and Recovery (GFDRR) was immediately mobilized after the disaster to provide emergency tents to Sichuan, to support the GoC s damage and needs assessment and reconstruction planning, and to promote south-south collaboration and learning on disaster risk reduction. Coordinated by the Ministry of Finance (MoF), several government agencies including MoF, the National Development and Reform Commission (NDRC), the Ministry of Transport (MOT), and the Ministry of Civil Affairs (MoCA) propose to undertake the following activities: (a) adoption of a standardized damage and loss assessment methodology and related capacity building for government officials (MoCA); (b) monitoring/analysis of post-earthquake reconstruction activities (NDRC); (c) development of an emergency response system for the transport sector (MOT); and, (d) fiscal budget planning and management for post-disaster reconstruction expenditures (MoF). In addition, GFDRR will host four senior officials from GoC for three months, beginning in early 29, in Washington D.C. to provide additional on-the-job training on disaster risk management. 32. The Bank is also assisting the GoC through: (a) a Global Environment Facility (GEF) medium-sized program grant approved in July 28 of US$ 1 million for a rapid response monitoring program for potential chemical contamination caused by damage to industrial facilities; and, (b) a technical assistance grant of $ 1, from the Italian Trust Fund for Culture in Sustainable Development (ITFCSD) mobilized to support damage assessment of key cultural heritage sites. Further, the Government of France has offered a FASEP Grant from the Treasury and Economic Policy General Directorate (DGTPE) of the French Ministry of Economy, Finance and Industry (MINEFE) of Euro 13

16 2.6 million (US$2.5 million) to support project management and implementation of the Bank-financed project in Sichuan and Gansu Provinces. 33. On June 12,28, one month after the disaster, the Bank co-organized with MoF an international workshop entitled Earthquake Recovery and Reconstruction: International Experience and Best Practice. Content drew upon international experience and case studies from a variety of countries such as the United States, India, Indonesia, Turkey and Pakistan. Topics covered in the workshop included: disaster management; catastrophe risk insurance; reconstruction strategies; damage and needs assessment methodology; infrastructure reconstruction; methods for incorporating environmental, social and seismic considerations into reconstruction; and post-disaster livelihood restoration programs. 34. In July 28, at the GoC s request, the Bank prepared seventeen sector-specific good practice notes in Chinese and English, designed to provide input to key sections of the GoC s reconstruction plan. These and other knowledge materials developed by the Bank after the Wenchuan Earthquake have been published on a dedicated external website, and are available for general distribution. 35. The second China Development Marketplace, a Bank initiative that funds innovative projects of civil society organizations in China, held in October 28, included eight awards dedicated to earthquake relief activities supported by private sponsors. These awards will assist grass-roots NGOs and groups in the rebuilding of earthquake affected communities in Sichuan and Gansu Provinces. 36. In addition to the new activities launched since the earthquake, the Bank continues to work with the China Insurance Regulatory Center (CIRC) on a technical assistance activity financed by a GFDRR grant of US$4, that commenced prior to the Wenchuan Earthquake to expand catastrophe risk insurance funding. This activity will analyze catastrophe risk data and produce detailed catastrophe risk assessments in selected provinces, including Sichuan, and is expected to offer essential input for designing an actuarially sound and well managed catastrophe insurance system in China. 37. Discussions between the Bank and the GoC on the proposed emergency recovery loan commenced immediately after the earthquake and continued throughout the period of the damage assessment and initial reconstruction planning. The consultations between the GoC and the Bank shaped the overall program for IF1 support. In September 28, after initial agreement from ministerial level officials, the GoC requested the Bank to provide an emergency recovery loan. The formal State Council approval of the IF1 program of reconstruction support was issued on November 1, The Bank has coordinated its response with the international community through two main coordination mechanisms. The first is a regular series of country representative level meetings convened alternately by the Country Directors of the Bank and ADB in Beijing. These meetings have been used to coordinate knowledge input to the GoC s 14

17 earthquake response, discuss grant availability, the use of international resources, and details of the IF1 earthquake recovery lending program. The Bank has also coordinated with other institutions by participating in the regular inter-agency meetings organized by the Office for the UN Resident Coordinator in China. These meetings have served to disseminate information about the Bank s earthquake response program and to share information about the GoC s requests for international input. Rationale for Bank Involvement 39. The Bank has decades of global experience in post-disaster reconstruction, management, and prevention. The Bank brings to bear value added across several areas, such as rigorous oversight of fiduciary and safeguards measures, quality assurance of the overall recovery program, and capacity building and the transferring of lessons learned from past recovery operations. It is uniquely placed to provide large-scale assistance to the GoC during the reconstruction process in an objective and transparent manner. The Bank has successfully supported reconstruction after three previous earthquakes in China. These were the North China Earthquake Reconstruction Project in 199, the Inner Mongolia and Yunnan Earthquake Reconstruction Program in 1996, and the Hebei Earthquake Rehabilitation Project in In addition, the Bank has experience in financing emergency operations in the health sector through the Severe Acute Respiratory Syndrome (SARS) and Other Infectious Disease Response Program, approved in With its large and stable portfolio of IBRD loans in China, the World Bank is the only international financier that has experience in all sectors specified for international financing in the GoC s Plan. While GoC has invited other financial institutions to support the reconstruction program through lending, the Bank financed portion of the internationally-supported recovery program will be the largest and broadest, covering more sectors and geographic areas than any other program. Moreover, through many years of project experience in Sichuan and Gansu, the Bank is especially well positioned to work at the provincial and local levels to assist the provinces in this unprecedented task of reconstruction Strengthening local capacity for project management and quality assurance is a key focus of all Bank projects in China. This is especially important in the post-disaster context where there has been a significant loss of local capacity as a result of the earthquake. Moreover, experts have identified that several factors relating to seismic standards and quality assurance may have contributed to the severe damage during the Wenchuan Earthquake, including: (a) many structures were built either prior to the formalization of seismic standards and codes in China, or during a period in which seismic standards were inadequate to address the seismic risks; (b) the intensity of the event exceeded the prevailing design standards in some areas; and likely, in some cases, (c) standards and quality procedures were inadequately applied during design and construction. With the Bank s extensive experience in post-disaster reconstruction and with input from international consultants, it is well positioned to provide assistance to the GoC, provinces and local governments in the assessment of design standards and codes, 15

18 local training in the requirements of new codes, enforcement of design and construction quality assurance procedures, and assessment of retrofitting needs. 42. This project will be the Bank s first large-scale framework loan in China and will introduce an innovative project design into the country portfolio. The procedures developed and implemented under the project, particularly with respect to the design of the project framework, the methodology for prioritizing, screening and appraising specific investments, and the procedures for monitoring the outcomes of the program, will have a demonstrably broader impact in China. The GoC has also emphasized the importance of bringing the Bank s monitoring, safeguards and fiduciary rigor to the reconstruction program as a positive demonstration of effective program management. 43. Another advantage of the Bank s engagement is its ability to mobilize international expertise and resources. This allows it to package recovery efforts as a strategic program, comprised of a range of technical assistance activities, such as those being carried out with GFDRR support, investment loans, and global best practice knowledge and lessons on post-disaster recovery programs in other countries. 44. Finally, while other sources such as domestic twinning programs are poised for quick delivery and replacement in-kind of lost or damaged assets, the Bank is well positioned to support the GoC s strategic initiatives of laying a solid foundation for future economic growth in the earthquake affected area. C. PROJECT DESCRIPTION Project Development Objective 45. The objectives of the Project are to restore essential infrastructure, health, and education services to at least levels existing prior to the Wenchuan Earthquake, and where appropriate, to provide for expansion of services, while reducing the vulnerability to seismic and flood hazards and building capacity of local governments to manage the recovery program. 46. The key project indicators are listed in Annex 2. Outcome indicators measure the restoration of infrastructure, health and education services to pre-earthquake levels or better. Intermediate indicators measure whether the reconstructed assets have reduced vulnerability to seismic and flood hazards, and are fully equipped to operate in a sustainable manner. Project Framework 47. The project comprises two provincial parts, one each for Sichuan and Gansu. The focus is on the restoration and recovery of infrastructure and health services in selected counties in both provinces, and, in the case of Gansu, also on the restoration and recovery of education services. Priority has been given to the infrastructure, health and education sectors under the project as the benefits of restoring these sectors in affected areas are 16

19 expected to support local economic growth through access to markets as well as achieving longer term health and primary and secondary education objectives. 48. The project is designed using a framework approach. During project preparation, the Bank agreed on the overall project strategy with the GoC and the provinces of Sichuan and Gansu, and on specific criteria that will be used during implementation for the selection of sub-projects. An Operations Manual (OM) acceptable to the Bank that will guide the implementation of the project is being developed and will be adopted by each province as a condition of disbursement of the loan. 49. Sub-projects will be selected in a manner that ensures an overall balance between reconstruction and providing the foundation for the longer-term sustainable economic recovery of project towns, with the aim to utilize the full amount of the loan proceeds within the project timeframe. Comprehensive projects that support multiple project sectors in the same county towns and townships will be encouraged. 5. The following ten selection criteria for sub-projects have been agreed by the Bank and the GoC. All sub-projects shall be: Contained in the respective national, provincial and local Wenchuan Earthquake Reconstruction Plans; Within either the infrastructure, health, or education sectors; Consistent with national and local development plans; Given priority if they address restoration and strengthening of destroyed or damaged services or facilities, especially those for vulnerable groups, for which no other sources of reconstruction financing are available; Consistent with World Bank OP/BP 8.; In accordance with national, provincial, and local standards, procedures and codes; Designed to ensure sustainable service delivery, including the financing of equipment and capacity building; Designed based on a rational and efficient option analysis, including technical, financial, social, environmental and safety considerations; Scaled and phased in accordance with current and appropriately projected demand; Can be completed prior to the Loan Closing Date. Summary of Project Components 5 1. Project components are summarized below with further details in Annex 1. Part 1 - Sichuan Recovery Program (Bank loan US$51 million) Infrastructure (Bank loan US$432.4 million) - This component will finance civil works and goods required for the reconstruction and appropriate expansion of 17

20 infrastructure, in approximately 16 counties in the five municipalities of Mianyang, Guangyuan, Bazhong, Nanchong and Ya an Health (Bank loan US57.6 million) will finance civil works and goods required for the reconstruction and appropriate expansion of health services, in about 19 counties in the seven municipalities of Mianyang, Guangyuan, Bazhong, Nanchong, Ya an, Chengdu and Deyang Project support (Bank loan US2. million) will finance training, capacity building and engineering costs of sub-projects. Part 2 - Gansu Recovery Program (Bank loan US$2. million) will finance infrastructure, health and education sub-projects in 7 counties in Longnan Municipality with a focus on Cheng, Hui, and Xihe Counties Infrastructure (Bank loan US13.3 million) - This component will finance civil works and goods required for the reconstruction and appropriate expansion of infrastructure Health (Bank loan US32.3 million) will finance civil works and goods required for the the reconstruction and appropriate expansion of health services Education (Bank loan US33.4 million) will finance facilities and equipment for the reconstruction and appropriate expansion of primary, secondary, and vocational/technical schools Project support (Bank loan US4. million) will finance training, capacity building and engineering costs of sub-projects. Eligibility for Processing under OPBP The project meets the key criteria and guiding principles for emergency operations as specified in OP/BP 8., particularly concerning: the application of rapid response instruments to address major adverse economic and/or social impacts resulting from an actual or imminent natural or man made crisis or disaster, as it will support the GoC in its recovery from the impacts of the Wenchuan Earthquake. Activities financed under this operation include rebuilding, strengthening and restoring physical assets in the infrastructure, education and health sectors; restoring and enhancing essential services in these sectors; and supporting risk reduction measures to mitigate potential effects of future emergencies. All these objectives are explicitly addressed as part of the policy framework outlined by OP/BP 8.. The Bank s Operations Policy and Country Services unit was informed by the East Asia and Pacific Regional Vice President of the emergency nature of the project through a memo on September 9,28. A Rapid Response Committee (RRC) has been convened, and has met periodically with the team to provide guidance during project preparation. 18

21 Consistency with Country Strategy 53. The proposed project is consistent with the Country Partnership Strategy (CPS), as approved in May 26, as it is aligned with two of the five pillars of the CPS: reducing poverty and inequality; and managing resource scarcity and environmental challenges. During the CPS mid-term review conducted in 28, disaster risk reduction and disaster management were highlighted by the GoC as areas for intensified cooperation with the Bank during the remainder of the CPS period. 54. While the project is restricted in scope due to its emergency nature, it is designed to reinstate services to affected populations, many of whom are vulnerable due to poverty, as well as to reduce the vulnerability of the affected population. The project focuses on the reconstruction and development of critical infrastructure, which will be essential in supporting the resumption of basic services and economic activities. The scale of destruction caused by the earthquake necessitates comprehensive development planning. Expected Outcomes 55. The expected outcomes of the project are to restore and enhance access to essential public infrastructure and services (e.g., water supply, wastewater and drainage, solid waste, roads) and core health services in affected counties in Sichuan and Gansu prioritizing, where possible, the needs of the poor and/or newly vulnerable arising from the earthquake. In addition, the expected outcomes include the rehabilitation of education facilities and restoration of access to public education in project counties in Gansu. In both provinces, sub-projects will be designed to reduce the vulnerability of the services to seismic and flood hazards. 56. Infrastructure and health and education facilities will be built to newly revised technical standards and with stronger quality of construction supervision than were required before the May 12,28 earthquake. All levels of government are strongly committed to facilitating sustainable long-term recovery as laid out in the GoC s Masterplan. This project is directly in line with the objectives of the Masterplan and adheres to the guiding principles of ensuring not only the rapid restoration of basic services and infrastructure but also the high quality assets to be rebuilt. 57. By using existing government institutions from the national to the local level, the capacity to manage the reconstruction process and coordinate across sectors will be enhanced. Technical assistance and training will be provided to support the provincial/municipal/county officials for procurement, safeguards, monitoring and evaluation, construction quality, and technical standards compliance. 19

22 D. APPRAISAL OF PROJECT ACTIVITIES 58. In accordance with OPBP 8., a joint project identificatiodappraisal was carried out in Gansu and Sichuan Provinces, under the guidance of the Rapid Response Committee. The appraisal focused on the following activities: (a) evaluation of the GoC s Masterplan and strategy for reconstruction; (b) initial technical discussions on possible investment types and sector strategy during recovery; (c) institutional capacity assessment of the project implementing agencies; (d) background economic study of the project area; (e) fiduciary capacity assessments and arrangements; (f) environmental and social safeguard framework development; and (g) review of lessons learned from past emergency projects. Technical Summary 59. The project will support sub-projects included under the Masterplan, the ten sector reconstruction plans and local reconstruction implementation plans. These reconstruction plans are based upon an exhaustive set of Government-financed studies, which included damage and needs assessments, resource and environmental carrying capacity, and physical and economic seismic vulnerability analyses. In addition, the infrastructure services and facilities financed by the project will be integral parts of approved local development and land use plans adjusted as appropriate to account for the earthquake impact. The health sector sub-projects will be supported by local health sector reconstruction plans which aim to restore access to core services of the population. The education sector sub-projects will be directly supported by the education sector reconstruction plans that aim to restore and enhance access to public education in selected earthquake affected counties. 6. The project will support the following principal types of investments: (a) the repair and reconstruction of assets in situ that were damaged by the earthquake; (b) the strengthening of assets in situ that may or may not have been damaged by the earthquake as a means of mitigating against seismic and flood hazards; (c) construction of assets in new locations when the damaged assets cannot be rebuilt in situ; and, in a limited number of cases, (d) construction and/or expansion of assets in new locations to serve people who, as a result of the earthquake, must relocate from highly hazard-prone areas. A program containing a mix of all these types of investments, with clear emphasis on categories (a) and (b) above, is considered both necessary and prudent to ensure a balance between reconstruction and long-term sustainable economic recovery in the project areas. 61. The updated seismic codes and standards were reviewed at appraisal and assessed by the Bank team as being equivalent to international standards; these will be applied under the project to ensure the sustainability and safety of sub-project assets. Moreover, the project will support the provincial and local governments aim to implement a strategy of core health facilities in the province that will serve as key service providers in the event of future disasters, drawing good practice from the World Health Organization (WHO) Safe Hospital Standards, as appropriate. 2

23 Economic Study of the Project Area 62. The project will support reconstruction in 27 severely-affected counties. This accounts for 73 of the population, 8.6 of GDP, and 8 of the revenues of the severely-affected counties. Economic conditions vary widely in the project counties with per capita GDP ranging from RMB 2,4 (US$ 35) in Gansu s Xihe County to RMB 3,27 (US$4,425) in Fucheng urban district in Mianyang, an intermediate city near Chengdu, the capital of Sichuan. While these disparities are large, overall equality in per capita GDP was gradually improving before the earthquake: the Gini coefficient in 26 was.365 compared to.416 in An indication of the relative economic impact of the earthquake on project counties is the total estimated infrastructure reconstruction cost as a percent of GDP in 26. These vary widely from 98.6 in Liangdang County in Gansu to 25 in the Mianyang Urban Area. This suggests that: (a) the infrastructure losses in some project counties will affect local economies far more severely than others; (b) the importance of reconstruction to short and medium term (5 years) economic growth will vary significantly; and (c) the sustainability of economic growth in jurisdictions that are likely to rely heavily on infrastructure reconstruction in the next 3-5 years could be tenuous. Financial Management and Disbursement 64. A financial management assessment was conducted in accordance with the Bank s Operational Policies and Guidelines. As this project will use a framework approach, the Bank will assess the adequacy of the FM arrangements in-line with the FM framework for each sub-project proposed by the provinces before it is approved. Adequacy (both ex-ante and ex-post) will be determined through compliance with a set of financial management criteria as established in the Financial Management Manual (FMM), which forms part of the OM. 65. Financial management risk is defined as the risk that World Bank loan proceeds will not be used for the purposes intended and is a combination of country, sector and project specific risk factors. Taking into account the risk mitigation measures proposed under the project, a substantial financial management risk rating has been assigned to the project at the appraisal stage due to the: a) a large number of counties, many of which do not have experience with Bank-financed projects, that will be involved in implementing and accounting the sub-projects; b) reduced ex-ante procedures and requirements to satisfy the need for a quick emergency response; and c) the agreement that the loan will be repaid by GoC and made available to each province without requiring any repayment, fees or charges. 66. Overall funds management for the project will be the responsibility of the Sichuan Provincial Finance Department (SPFD) and the Gansu Provincial Finance Department (GPFD). However, consistent with other Bank projects in China, the finance bureaus (at all levels) within the provinces will be responsible for the funds flow and payment to the lo Data in this paragraph is calculated fiom the 2 and 26 Provincial Statistical Year books 21

24 contractors. The Bank loan proceeds will flow from the Bank to three US dollar designated accounts (DA), two for Sichuan (one for infrastructure and one for health) and one for Gansu ) to be set up at and managed by the SPFD and GPFD. For Sichuan, the Bank loan will flow from the DAs managed by SPFD to the municipal finance bureaus, to the county finance bureaus, and then to the contractors. For Gansu, the Bank loan will flow from the DA managed by GPFD to the Longnan Municipal Finance Bureau, to the county finance bureaus and then to the contractors. Note that depending on the situation, payments can also be made by either the provincial finance bureaus or the municipal finance bureaus directly to the contractors without the need to disburse through the next lower finance bureau level. Each DA will be solely used to finance eligible project expenditures. Four disbursement methods are available for the project: advance, reimbursement, direct payment, and special commitment. 67. County PIUs will be responsible for accounting and reporting of their respective sub-projects. County PIUs will be the lowest level responsible for recording project activities, and separate accounting books will be established for this purpose. Project funds will be audited semi-annually by Sichuan Provincial Audit Office and Gansu Provincial Audit Office for their respective provincial sub-projects. These semi-annual audit reports will be due to the Bank within 6 days after the end of each semi-annual period. More details on financial management and disbursement arrangements are in Annex 4. Procurement 68. Consistent with OPBP 8., a simplified procurement capacity assessment has been carried out for both the Sichuan and Gansu parts of the project. A streamlined and more simplified approach to procurement has been agreed upon, which is consistent with the principles and objectives of the Bank's Procurement and Consultant Guidelines. Annex 5 describes in more detail the proposed procurement arrangements. Given the framework approach for this project, specific contract packaging has not yet been determined. An initial procurement plan for the first 6 months of project implementation has been developed and agreed upon. The overall procurement risk rating for both the Sichuan and Gansu parts is high. 69. Sichuan Province: Procurement implementation will be conducted by the county PIUs under the management of the Construction PMO, who will employ a tendering agent to assist the county PIUs and PPMO. For sub-projects under the health component, two tendering agents (one for civil works and one for medical equipment) will be hired by the Health PPMO to carry out all procurement activities. Though the two PPMOs (construction and health) have prior experience in the procurement of Bank-financed projects, the majority of county PIUs have not previously implemented Bank-financed projects. Both PPMO and PIU procurement staff will require initial procurement training followed by further periodic training sessions during implementation. Procurement capacity building will also be achieved by outsourcing assistance from experienced procurement agents. In order to meet the tight schedule for this project, the bidding processes for the tendering agents and design institutes will proceed on a retroactive or advanced contracting basis. 22

25 7. Gansu Province: A municipal PMO will be established within Longnan Municipality to be responsible for project implementation. The procurement staff has not yet been recruited, but Longnan Municipal Government has confirmed that it will recruit the relevant staff once the institutional arrangements have been approved at the municipal level. To the extent possible, the staff to be recruited will have experience in procurement from working on Bank-financed projects in the region. The Gansu Provincial Finance Department has confirmed that a procurement agent will be hired to support procurement activities. The existing Prefecture Tendering Management Office has more than eight years experience in procurement supervision under the local procurement procedures. 71. Similar to Sichuan, the Longnan Municipal PMO will require initial procurement training followed by further periodic training sessions during implementation. Also, additional capacity building will be achieved by outsourcing assistance from experienced procurement agents, design institutes, and construction supervision consultants. Again, in order to meet the tight schedule for this project, the bidding processes for the tendering agents and design institutes will proceed on a retroactive or advanced contracting basis. Retroactive financing 72. Consistent with OP/BP 8. and at the request of the Borrower, retroactive financing is expected to be used, but is likely to be less than 2 of the Bank loan. Services and facilities that are consistent with the overall project framework and that have been reconstructed after May 12,28 to facilitate early recovery from the earthquake may be considered for retroactive financing under the project. In addition, early works for sub-projects to be financed by the project will also be eligible for retroactive financing. 73. During appraisal, the Bank team agreed with GoC and the provinces that retroactive financed activities would also be selected and screened according to the project framework and the requirements of the OM. Anti-Corruption 74. The GoC and the provinces of Sichuan and Gansu have agreed to carry out the project in accordance with the provisions of the Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, dated October 15, 26. Safeguards 75. Consistent with the Procedural Guidelines for OP/BP 8. operations, an Environmental and Social Screening and Assessment Framework (ESSAF) has been prepared and will be incorporated into the Operations Manual. The ESSAF is designed to streamline safeguard procedures and make operational the appropriate safeguard instruments while ensuring full compliance with Bank Safeguard Policies. Procedures, processes, and other instruments developed in the ESSAF are built upon country, regional 23

26 and local regulations, institutions and knowledge, to ensure maximum ownership of the process and compliance by the Borrower and the beneficiaries. 76. The project is considered Category A because it is anticipated that a limited number of Category A sub-projects may appear during screening. 77. Consistent with the overall framework approach adopted for this project, the mitigation measures to manage environmental and social impacts will be designed based upon the significance of each sub-project. Safeguards requirements for investments with limited foreseen impacts will be handled through simplified instruments and standardized environmental and social management procedures, and greater focus on implementation. For investments that are considered to have potentially significant impacts or higher risks, detailed environmental and social assessment will be completed by the Borrower and reviewed by the Bank. 78. The ESSAF defines procedures for: (a) screening sub-projects for their potential environmental and social impacts; (b) identifying applicable domestic laws and regulations and Bank policies; (c) preparing relevant safeguards documents/instruments to comply with these laws and policies; (d) carrying out consultation and disclosure of draft and final safeguards documents; and (e) monitoring and reporting. Moreover, it defines the roles and responsibilities of the Borrower, the provinces and counties in implementation and supervision of sub-projects. Consultations on the ESSAF were held during Bank missions to Sichuan on November 27,28 and January 6 to 8,29; and in Gansu on December 2,28 and January 5 to 1,29. The ESSAF was disclosed in InfoShop on January 13, Each PPMO in Sichuan and the Municipal PMO in Gansu would be responsible for safeguards screening, for proposing the categorization of each sub-project, and for appraising and supervising the safeguards instruments. Country PIUs would be responsible for preparing and implementing all safeguards instruments. Both PPMOs, Municipal PMO and county PIU safeguards staff will require periodic training sessions during implementation. In Sichuan, the first training was conducted by the PPMO Social Specialist on December 16,28, and further training will be conducted by Bank staff in February 29. Initial training was conducted in Gansu by Bank staff in January 29. Safeguards capacity building will also be achieved by outsourcing assistance from experienced environmental and social consultants. 8. During sub-project screening, preparation and appraisal, the Bank team will be responsible for the following: For all Category A sub-projects, and for sub-projects requiring full resettlement action plans (RAPS), Ethnic Minority Community Plans (EMCP), Environmental Management Plans (EMPs) and/or Dam Safety Plans (DSPs), the Bank team will: (a) confirm the safeguards screening and documentation requirements; (b) provide advice to the PPMOs and Municipal PMO on the preparation of documents; and, (c) conduct prior review and clearance of all safeguards documentation. 24

27 For Category B sub-projects that do not require RAPS, EMCPs, EMPs andor DSPs: the Bank team will: (a) confirm the safeguards screening and documentation requirements; (b) provide advice when requested by the PMOS on the preparation of documents ; and, (c) carry out post-review of safeguards documents on a selective basis during supervision missions. For C sub-projects: No review required by the World Bank. 81. During implementation of the sub-projects, the Bank team will conduct regular supervision missions (initially every 3 months), including site visits and review of monitoring reports. 82. The following safeguards policies will be or are likely to be triggered by the project: 83, OP/BP 4.1 Environmental Assessment: While most of proposed sub-projects are likely to focus on the repair, rehabilitation, reconstruction and upgrading (where necessary) of damaged infrastructure, the project will also finance some expansion and new construction of infrastructure, such as roads, bridges, water supply and wastewater collection and treatment facilities, and solid waste collection and disposal. However, such sub-projects will only constitute a small number of the total project activities and will only be included after careful analysis of options, including environmental and social considerations, and when the proposed facilities are clearly necessary and beneficial to achieve the longer-term development objectives of the area. 84. OP/BP 4.4 Natural Habitats: Field visits and the location of potential subprojects in urban areas indicate that natural habitats are unlikely to be adversely affected. Nevertheless, all sub-project proposals will be screened for potential adverse impacts on critical and non-critical natural habitats and suitable mitigation measures if any needed will be prepared as part of the sub-project specific EA and EMP. 85. OP/BP 4. I1 Physical Cultural Resources: Sub-projects will be reviewed for their potential impact on physical cultural resources (PCR). Procedures for identification and treatment of discovered artifacts, as well as chance-find procedures will be included in standard bidding documents. 86. OP/BP 4.12 Involuntary Resettlement: Various sub-projects are likely to trigger OP/BP Resettlement impacts generally consist of permanent and temporary land acquisition, structure demolition, etc. The ESSAF includes procedures for identifying eligible project-affected people, determining compensation, exploring and implementing rehabilitation measures, as well as management and monitoring. 87. OP/BP 4. I O Indigenous Peoples: Based on the field visits and initial discussions with local minority experts in the project areas, it is not foreseen that this policy will be triggered. However, since sub-projects are not yet selected, and given the characteristics of the project area, each sub-project will be screened according to OPBP 4.1 during the sub-project screening and evaluation process. If, during screening, it is determined that 25

28 OPh3P4.1 is triggered by any particular sub-project, an Ethnic Minority Community Plan (EMCP) will be prepared by the Borrower and reviewed by the Bank team. 88. OP/BP 4.37 Safety of Dams: There is a possibility that sub-projects in the water supply sector may trigger this policy. If any such sub-projects are identified during screening, all decisions on dam safety requirements will be made with the concurrence of the Bank. If, during screening, it is determined that OP/BP 4.37 is triggered by any particular sub-project, a Dam Safety Plan (DSP) will be prepared by the Borrower and reviewed by the Bank. Lessons Learned from Past Emergency Operations 89. The Bank is the largest financier of post-disaster recovery and reconstruction worldwide and brings to bear a range of lessons based on these experiences across many regions. These have been incorporated into the project design. 9. Technical codes and standards utilized should be resilient to natural hazards. Previous projects have shown that upstream consideration of technical standards during the design phase in order to rebuild to higher standards that adequately factor in seismic and other hazard risks is important. A lesson from the Hebei Earthquake Reconstruction Project was the introduction of seismic-resistant construction methods, and training and dissemination of these practices. The type of design and construction methods should be tailored to local conditions and utilize appropriate reconstruction material and practices. The newly issued national seismic building codes, standards and specifications will be applied throughout the project, and as needed, global best practices and experiences of seismic engineering will be introduced into the design of sub-projects. Technical assistance and international expertise in this area will be provided to ensure compliance. 91. The capacity of existing government institutions should be utilized and enhanced as necessary to manage the reconstruction program. As the project design, appraisal and implementation timeframes are shorter than normal investment programs, it is essential that existing implementation systems and PMOs be leveraged as much as possible. The provinces have functional PMOs that have managed Bank financed projects and they are knowledgeable of Bank processes and procedures. Nonetheless, significant capacity building of the PMOs will be required so that they can manage such a large project efficiently, and with full compliance with Bank fiduciary and safeguards policies. 92. Emergency projects are often slow to disburse during implementation. According to the 26 evaluation report by the International Evaluation Group (IEG) on World Bank Assistance for Natural Disasters, past emergency loans and credits in other countries have tended to be slow to disburse after Board approval. As it is impossible to anticipate every investment in advance of implementation, a framework approach has been developed to determine areas of investment and it is intended that sub-projects will be prepared in a sequential manner based on their readiness. 93. More intensive supervision is required during implementation. The preparation period for emergency loans is shorter than for normal investment programs, with many 26

29 details left to be determined during the implementation phase. To address the evolving conditions of the program, close support and supervision will be provided during project implementation, with intensive and focused efforts during the first eighteen months. E. IMPLEMENTATION ARRANGEMENTS AND FINANCING PLAN Institutional Arrangements 94. The reconstruction programs within Sichuan and Gansu Provinces are each led by a provincial leading group, chaired by an Executive Vice-Governor with a Vice-Governor as the deputy chairman. In both provinces the provincial leading group has assigned the role of coordinating the internationally financed projects to the respective provincial finance departments and provincial DRCs. 95. For detailed project implementation, and to utilize the capacity and experience of existing PPMOs within the Sichuan Provincial Government, Sichuan will utilize two existing PPMOs, each headed by a Director, one reporting to the Provincial Construction Commission and the other reporting to the Provincial Health Bureau. Staff of these PMOS will be principally drawn from the parent bureaus. Both PPMOs have extensive experience in the design and implementation of Bank-financed projects. County level PLGs and PIUs are being established in the project counties, in a similar manner to the provincial level. In Gansu, the Provincial Government has established one multi-sectoral Municipal PMO within the Longnan Municipal Government, responsible for all three sectors within the project. 96. In both provinces, the PMO and PIU responsibilities will include: (a) managing, facilitating, coordinating and monitoring all aspects of project preparation and implementation activities; (b) procurement; (c) tracking and reporting of project expenditures; (d) safeguards compliance; (e) quality assurance and monitoring; and, ( progress reporting to the provincial government, the State Council and the Bank through consolidation of information provided by county governments. 97. In terms of quality assurance and compliance of built assets, technical assistance will be provided through the project to ensure compliance with the updated seismic codes. The task team will supervise this aspect of the project closely, and will conduct ex post reviews of sub-projects through selective sampling. Project Costs and Financing Plan 98. As per OP 8., 1 of eligible project investments will be financed, including civil works, goods and consulting services, which include project design, procurement, construction supervision and monitoring. Some counterpart financing will be raised by the local governments to cover costs of expenditures that GoC has requested would not be financed from loan proceeds, including land acquisition and resettlement compensation, and some preparation costs. The Front-End Fee will be paid by the Ministry of Finance. 27

30 99. The estimated project costs and Bank financing are detailed below: Table 2: Project costs Component Part 1 - Sichuan Recovery Program Infrastructure Health Project Support Total US$ million Bank financing US$ million Part 2 - Gansu Recovery Program Infrastructure Health Education Project Support Total Project Costs ~~ ~ ~~ Front-end Fee of.25 1,811. Total Financing Required Supervision 1. Consistent with OPh3P8. and the risks identified for this project, the Bank will carry out quarterly project implementation support and supervision missions for at least the first 18 months of project implementation and on six-monthly intervals thereafter. The missions, which will be coordinated from the Beijing office, will provide all necessary support to ensure full compliance with fiduciary and safeguards policies. The Bank will ensure appropriate levels of budgetary support to ensure that this plan can be implemented in a sustainable manner. Monitoring and Evaluation 11. The monitoring and evaluation arrangements for the project have been developed to ensure that outputs and outcomes are measurable and are able to inform the implementation process to make adjustments as needed. Key outcome and intermediate indicators and targets are presented in Annex 2. For those indicators that measure project outcomes against pre-earthquake levels, the baseline data of conditions before the earthquake is readily available from statistical analysis. l1 All amounts in this table, including the front-end fee, are rounded to the nearest thousand US$. The accurate dollar amounts specified in the Loan Agreement will prevail. 28

31 Closing date 12. The loan closing date will be June 3,214. F. PROJECT RISKS AND MITIGATING MEASURES 13. Due to the large size of the loan and the framework approach, which is being used for the first time in China, several project risks have been identified. Mitigation measures have been designed for all identified risks, but overall the project risk is rated as substantial. Institutional Initial capacity of the PMOs and PIUs insufficient to manage the Bank-supported project given its size, geographical spread and timeframe Ineffective coordination with other development partners and donors supporting recovery efforts in Sichuan and Gansu Local level capacity weakened by earthquake Fiduciary and Safeguards Slow initial disbursement due to need to select, screen and appraise subprojects during implementation Initial assessment of capacities to support project implementation Grant mobilized to finance international consultants that will provide project management support to PMOs and PIUs Initial and regular training of project staff by Bank staff Quarterly Bank supervision mission to support PMOs and PIUs during selection, screening, implementation and quality assurance PPMOs with experience in Bank-financed projects Scope of individual sub-project not complex Coordinate internationally financed projects through Provincial PLGs Hold regular meetings at the provincialkounty levels with other agencies Ensure ongoing communication with international donors at the national level Incorporate capacity building as part of recovery initiatives Project framework provides clear criteria for subproject selection Screening Forms will be developed and included in the OM International consultants will assist PMOs expedite screening, preparation and appraisal. Quarterly Bank supervision missions will support the review and approval of sub-projects and assist in resolving bottlenecks Substantial Modest Substantial Substantial 29

32 Inadequate use of funds Inadequate compliance with Bank procurement requirements Inadequate compliance with Bank policies leads to significant environmental or social impacts Technical Designs or construction quality assurance of reconstructed facilities insufficient to meet updated seismic codes and standards Sustainable operation of constructed assets by local governments Overall Risk Rating provinces will be responsible for the funds flow and payments FM framework with ex-ante and ex-post arrangements and control measures, to be implemented with quarterly Bank supervision missions Format, content and timing requirements of financial statements well defmed in FMM Country PIUs to follow accounting policies and regulations documented in FMM Initial capacity assessment defines staffing needs Outsourcing of experienced tendering agents Initial and regular project staff training at all levels provided by Bank staff Clear framework for procurement method thresholds Initial capacity assessment defines staffing needs Increased Bank supervision, including quarterly supervision missions and posting of Bank PAS in Sichuan province Environmental and Social Screening and Assessment Framework provides clear criteria for upstream safeguards assessment of sub-projects Category A sub-projects to receive dedicated attention during supervision with all required environmental and social safeguards documents prior reviewed and cleared by the Bank Quarterly Bank supervision mission with detailed field visits and post-review of assessment, analyses and implementation measures Required contractual clauses to construction companies on safeguards issues Use of fiameworks and processes used in other Bank projects that have been approved and tested Substantial Modest Support for technical design, quality assurance and Modest supervision provided through the project and by international consultants International consultants coordinate construction supervision activities and certified international supervision agent conduct specific site supervision of key works Quarterly Bank supervision reviews designs and conducts spot checks of construction quality procedures and sub-projects Ensure sufficient operations and maintenance plans are Modest in place for project financed assets Provide critical capacity building as part of the project Substantial 3

33 G. TERMS AND CONDITIONS FOR PROJECT FINANCING 14. The lending instrument is an Emergency Recovery Loan. The Loan will be a single currency, variable spread loan, with a maturity of 3 years inclusive of 5 years grace and a front end fee of.25. The loan amount is US$ 71. million. 15. In addition to the standard covenants relating to implementation arrangements, reporting, fiduciary requirements, etc., the following specific conditions are included in the loan agreements: Negotiations and Board presentation: None Effectiveness: None Disbursement: (a) Payment of the Front-End Fee; (b) Adoption of the Operations Manual, including the ESSAF and the FMM, by Sichuan and Gansu Provinces; (c) Approval of sub-projects by the Bank and the Government and, (d) Adoption of the Procurement Plan by Sichuan and Gansu Provinces. Implementation: The Provinces will: (a) maintain the Provincial Project Leading Groups, the Project Management Offices and local Project Implementing Units throughout the period of the project for the purpose of managing, coordinating and monitoring the implementation of the project; (b) apply the OM, the ESSAF and the FMM in carrying out the project;(c) ensure that sub-projects meet agreed eligibility criteria and are prepared taking into account the Bank's comments, and in those cases where the Bank's prior review is required, implement sub-projects after the Bank has provided its approval; (d) implement sub-projects in accordance with implementation plans to be prepared, and plans to mitigate any adverse environmental and social impacts to be prepared pursuant to the ESSAF; and (e) carry out capacity building and technical assistance activities in accordance with proposals developed by the Provinces and approved by the Bank. 31

34 Annex 1: Detailed Description of Project Components CHINA: Wenchuan Earthquake Recovery Project 1. The project is divided into two provincial parts: one for Sichuan and one for Gansu. A description of the components is given below, followed by a summary of the process for selecting, screening and appraising sub-projects during implementation. Part 1 - Sichuan Recovery Program (Estimated Total US$531.5 million, Bank loan US$51 million) will finance infrastructure and health sub-projects in several municipalities Infrastructure (Bank loan US$432.4 million) - This component will finance reconstruction and appropriate expansion of infrastructure in about 16 counties in the five municipalities of Mianyang, Guangyuan, Bazhong, Nanchong and Ya an. The following sectors will be eligible for support: roads and bridges, water supply, wastewater and drainage systems, municipal solid waste collection and disposal, flood control, slope protection and stabilization, and restoration of waterways Health (Bank loan US$57.6 million) - This component will finance reconstruction and appropriate expansion of health services in about 19 counties in the seven municipalities of Mianyang, Guangyuan, Bazhong, Nanchong, Ya an, Chengdu and Deyang. The component focuses primarily on rural health service restoration. Typical facilities may include: township health centers, and county level health facilities Project support (Bank loan US$2. million) will finance training, capacity building and engineering costs of sub-projects such as social assessments, design, surveys, procurement support, safeguards compliance, project management support, construction supervision, quality assurance, monitoring and reporting. Part 2 - Gansu Recovery Program (Estimated Total US$26.7 million, Bank loan US$ 2 million) will finance infrastructure, health and education sub-projects in seven project counties of Longnan Municipality with a focus on Cheng, Hui, and Xihe Counties Infrastructure (Bank loan US$13.3 million) - This component will finance reconstruction and appropriate expansion of infrastructure in about 7 counties in Longnan Municipality. The following sectors will be eligible for support: roads and bridges, bus depots, water supply, wastewater and drainage systems, municipal solid waste collection and disposal, slope protection and stabilization, restoration of waterways and district heating Health (Bank loan UW32.3 million) - This component will finance reconstruction and, appropriate expansion of health services. The component focuses primarily on restoration of health services and facilities at municipal, county and township level with necessary equipment. 32

35 2.3 - Education (Bank loan US33.4 million) - This component will finance (a) the reconstruction, and appropriate expansion of primary, secondary, and vocational/technical school facilities, (b) the provision of necessary equipment (laboratories, libraries, etc.).the component directly supports the Education Sector Reconstruction Plans that aim to restore and enhance access to public education in selected earthquake affected counties in Gansu Project support (Bank loan US$4. million) will finance training, capacity building and engineering costs of sub-projects such as social assessments, surveys, design, procurement support, safeguards compliance, project management support, construction supervision, quality assurance, monitoring and reporting. 2. Sub-project delivery process. The project uses a framework approach, which is a flexible project design used when the principles of a project and the criteria for subproject selection are determined before appraisal, but not all individual investments can be selected and appraised before Board approval. 3. A sub-project is defined as an activity, or grouping of like activities that are located within a single county and are within one of the primary sectors (infrastructure, health or education) covered by the project. Sub-projects are bound by the legal requirements of the project, including fiduciary and safeguards. Three general types of sub-projects are likely to be included: (a) those eligible for retroactive financing under the project, (b) straightforward reconstructionhehabilitation projects, and (c) more complex investments that require a longer timeframe and more detailed preparation. 4. To determine the initial investment pipeline, both the Sichuan and Gansu Provincial Governments; with the support of the Central Government and a group of experts, have undertaken initial damage and needs assessments and have prepared the Masterplan. From the Masterplan, the county governments will propose appropriate priority activities to be included in the project. These activities will be stand alone single activity sub-proj ects or grouped into multi-activity sub-proj ects and screened by the PPMOs (in Sichuan) and the Municipal PMO (in Gansu) according to the agreed project selection criteria including ESSAF screening criteria established in the Operations Manual (OM). The Bank, the Provincial Government, and the Central Government will approve the sub-projects prior to disbursement. 33

36 Annex 2: Results Framework and Monitoring CHINA: Wenchuan Earthquake Recovery Project To restore essential infrastructure, health, and education services to at least levels existing prior to the Wenchuan Earthquake, and to provide for appropriate expansion of services, while reducing the vulnerability to seismic and flood hazards and building capacity of local governments to manage the recovery program. Percentage of project roads with traffic restored to pre-earthquake levels Percentage of county towns with water supply services that are at a minimum restored to pre-earthquake levels Percentage of reconstructed (a) county health facilities and (b) township health facilities that reach bed occupancy rates not below 27 levels. Percentage of reconstructed (a) primary and (b) secondary schools that reach enrollment rates of (a) 99 and (b) SO, respectively To ensure reconstructed assets are utilized by project beneficiaries To reduce earthquake affected communities vulnerability to future disasters 1: Infrastructure Objective: to restore and enhance infrastructure (e.g., water supply, roads, solid waste, embankments, etc.) 2: Health Objective: to restore core health facilities in affected provinces, paying particular attention to the needs of the poor andlor newly vulnerable arising from the earthauake 3: Education Objective: to rehabilitate education facilities in Gansu 4. Capacity Building Objective to build capacity of local governments to manage the reconstruction program. Percentage of total project infrastructure assets (measured by sector with appropriate indicators) built to applicable government standards that address flood and seismic hazards Percentage of total number of project health facilities built to applicable government standards that address flood and seismic hazards Percentage of restored project health facilities that are fully equipped according to government standards Percentage of total number of project schools built to applicable government standards that address flood and seismic hazards Percentage of restored project schools that are fully equipped according to government standards Percentage of PMOPIU staff trained in project management processes for earthquake reconstruction efforts. To inform the Government on the progress of project implementation To adjust the project strategy if required 34

37

38 E 8 3 a 9 E 8 a e 3 - ti 4 d z i 3 ti 4 d z i d 8 i 3 a ti &. d a i 8 cl 5 4 d 5 4 d x E: - v, b h E: - QI x E: v, v, 12 E: s v, v, 1 12 IA \o v, E:

39 Annex 3: Summary of Estimated Project Costs CHINA: Wenchuan Earthquake Recovery Project 1. The estimated project costs and Bank financing are detailed below: Component ~ Part I - Sichuan Recovery Program Infrastructure Health Project support Total US$ million Bank financing US$ million Part 2 - Gansu Recovery Program Infrastructure Health Education Project support Total Project Costs Front-end Fee of.25 1,812. Total Financing Required Project activities eligible for Bank financing will include: civil works, goods and consulting services, which include project design, procurement, construction supervision, monitoring and limited capacity building. Counterpart funding will be raised by the local governments to cover costs of expenditures that the GoC has requested would not be financed from loan proceeds, including land acquisition and resettlement compensation, and some preparation costs. The Front-End Fee will be paid by the Ministry of Finance. '' All amounts in this table, including the front-end fee, are rounded to the nearest thousand US$. The accurate dollar amounts specified in the Loan Agreement will prevail. 37

40 Annex 4: Financial Management and Disbursement Arrangements Executive Summary CHINA: Wenchuan Earthquake Recovery Project 1. A Financial Management (FM) assessment was completed as part of the preparation process of the China - Wenchuan Earthquake Recovery Project. The objective of this FM assessment was to evaluate current project FM arrangements and to design additional essential FM control and implementation arrangements (FM Framework) that are simple, flexible, and easy to monitor. The assessment was performed in accordance with OPBP 1.2, Financial Management Practices in World Bank-Financed Investment Operations issued by the Financial Management Sector Board on November 3,25 and Guidelines: Financial Management Aspects of Emergency Operations Processed under OPBP 8.OO. 2. Financial management risk is defined as the risk that World Bank loan proceeds will not be used for the purposes intended and is a combination of country, sector and project specific risk factors. Taking into account the risk mitigation measures proposed under the project, a substantial financial management risk rating was assigned to the project at the appraisal stage due to the: a) a large number of counties, many of which do not have experience with Bank-financed projects, that will be involved in implementing and accounting for the various different sub-projects that will be selected; b) reduced exante procedures and requirements to satisfy the need for a quick emergency response; and c) the agreement that the loan will be repaid by GoC and made available to each province without requiring any repayment, fees or charges. 3. The estimated cost of the proposed project is approximately US$ 74 million (Sichuan - US$ million, Gansu - US$26.7 million and front-end fee of US$ million). Eligible expenditures under the project will be 1 YO financed by the Bank loan of US$71 million. The loan proceeds will flow from the Bank into three US dollar denominated project DAs, two for Sichuan (one for infrastructure and one for health) and one for Gansu, to be set up at and managed by SPFD and GPFD. The Bank loan agreement will be signed between the Bank and the People s Republic of China through MoF. Audit Arrangements 4. The Bank requires that project financial statements be audited in accordance with standards acceptable to the Bank. In line with other Bank financed projects in China, the project will be audited in accordance with International Auditing Standards and the Government Auditing Standards of the People s Republic of China. The Sichuan Provincial Audit Office (SPAO) and the Gansu Provincial Audit Office (GPAO) have been identified and delegated by the China National Audit Office (CNAO) as auditors for the project. Audit opinions will be issued under the names of these provincial audit offices. Project funds will be audited semi-annually by SPAO and GPAO for their respective provincial activities. The Bank currently accepts audit reports issued by China National Audit Office (CNAO) or provincial audit offices for which CNAO is ultimately responsible. 38

41 5. The semi-annual audit reports of project financial statements for both Sichuan and Gansu Provinces will be due to the Bank within 6 days after the end of each calendar semester period. Since Sichuan has two PPMOs (one under the Provincial Construction Commission and the other under the Provincial Health Bureau), Sichuan will submit two project audit reports, covering each semi-annual period for each PPMO s responsible sub-project activities. Additionally the SPFD will review the accuracy and completeness of the project financial statements prior to the Sichuan PPMOs submission of the audit reports to the Bank. For Gansu there will only be one audit report covering all of Gansu s project activities for each semi-annual period. The project financial statements will be prepared by the Longnan Municipal PMO who will then submit it to the GPFD for review. GPFD will be responsible for submitting the audit report to the Bank. The responsible agency for semi-annual audit reports and due dates is summarized as follows: Audit Report Sichuan - project consolidated financial statements (two audit reports) Gansu - project consolidated financial statements (one audit 1 reuort) Risk Assessment and Mitigation Submitted by Sichuan PPMOs GPFD Due date 6 days after end of each calendar semester period 6 days after end of each I calendar semester period 6. The following risks with corresponding mitigating measures have been identified during the assessment: Risk Inherent Risk Country level Entity Level Risk Incorporated Risk Risk Rating Mitigating Measures Rating after before Mitigating Mi tigating Measures Measures Modest High Dialogue with related government entities and technical assistance from the Bank will continue to help the government to improve its public sector financial management. Specific to this project, semi-annual audit requirements by government auditors and more intense FM supervision will reduce the risk that project funds are not used for their intended purposes. For those areas where the government system can not be used, the Bank s specific requirements will be embedded into the.. project FM system. A number of the counties/municipalities involved do not have experience with Bank projects. To mitigate this risk, finance bureaus (at all levels) of the provinces will be Modest Substantial 39

42 Project Level Control Risk Budgeting High High I responsible for the funds flow and payment to contractors while accounting and financial reporting will be the PIUsPMO s responsibility. In addition, the FMM and welldesigned training sessions will be provided to project financial staff during project implementation. A Bank loan of US$7 1 million covering two provinces with project activities yet to be appraised yields a high risk project. However, the FM framework with sets of ex-ante and expost arrangements/controls measures will mitigate this risk. Ex-post arrangements include the separation of funds management by finance bureaus and accountinglfinancial reporting by PIUsPMOs and semi-annual fullscope audits by government auditors. Substantial Substantial Accounting High provide the Bank with these reports. County PIUs will be the lowest level Substantial Internal Control I High supervision will be performed. Detail internal controls procedures covering request, review, approval, certification, supervision and reporting have been established within the project. These procedures are detailed in the FMM and include such items as prior approval required for all sub-projects by the central and provincial governments and the Bank before implementation, majority of civil works payments made directly from the finance bureaus to the contractors, separate project bank Modest 4

43 Funds Flow Financial Reporting Auditing Overall Substantial High Substantial High municipality and county), and the requirements to prepare semi-annual project financial reports. Increased reliance will also be placed on the external audits that will be conducted semiannually. In addition, related government agencies at central and provincial levels will be conducting frequent supervisions and heavily scrutinizing these project activities. Separate project bank accounts for Bank funds will be opened by each municipal finance department. Advanced payment to the municipal finance bureaus will help project implementation and shorten the disbursement cycle. Under most circumstances, project funds will flow directly from the finance bureaus to the contractors. PIUs and PMOS will not handle anv Droiect funds. The format, content and timing requirements of financial statements have been stipulated in the FMM. The reports have been simplified and the project financial statements will be submitted to the Bank by Sichuan PPMOs and GPFD for their respective provincial activities. These reports will be reviewed and scrutinized by the FMS as part of pro-ject supervision - (using - both field and desk reviews). The external auditors, SPA and GPAO have experience with auditing several Bank projects. The auditors will be required to conduct fullscope audits covering all project locations. The full-scope audits will encompass coverage over contract implementation, including physical certification (both quantity and quality) of constructed assets as compared to the reports, and verification of contract payments. Audit reports will be provided to the Bank more frequently (calendar semester) and are due within 6 days of the end of the calendar semester period instead of the current practice of 6 months. To meet these requirements, the audit reports have been simplified. As agreed with the auditors, these audit reports only need to be provided to the Bank in Chinese. Modest Substantial Modest Subs tan tial Therefore, the overall FM risk rating assigned to this project is Substantial, provided the proposed mitigating measures are carried out. The FMS will monitor the effectiveness of the measures and its affect on project FM risks during project implementation. 41

44 Funds Flow and Disbursement Arrangements 7. Four disbursement methods are available for the project: advance, reimbursement, direct payment, special commitment. Supporting documents required for Bank disbursement under different disbursement methods will be documented in the Disbursement Letter issued by the Bank. 8. Three US dollar DAs, two for Sichuan (one for infrastructure and one for health) and one for Gansu will be opened and managed by the two provincial finance bureaus (SPFD and GPFD). The ceiling of the three DAs will be variable, and will be determined by the Bank from time to time on the basis of the six month cash forecast provided by each province. Under most circumstances, the Bank loan will flow from the DA managed by the PFB to the municipal finance bureaus, and then to the contractors. However, if the counties first prepay the contractors with their own funds, they will receive reimbursement from the municipal finance bureaus through the county finance bureaus. For goods procured by Sichuan PPMOs, SPFD will pay the contractors from the DA directly. 9. Supporting documents for applications for reimbursement and reports on the use of the DA advances will consist of tailored SOEs for all expenditures. Applications for direct payment will be supported by records evidencing eligible expenditures, for example, copies of receipts and supplier invoices. 1. While advances will be made based on estimates and plans, the Bank loan would be disbursed against eligible expenditures (taxes inclusive) as in the following table: IBRD Loan Allocated Percentage of Category Amount Expenditures (in USD million) to be financed 1. Sichuan Infrastructure (a) Goods, and works for Sub-projects under Part 1.1 of the Project (b) Consultants services and training under Part 1.3 of the Project Health (c) Goods, and works for Sub-projects under Part 1.2 of the Project (d) Consultants services and training under Part 1.3 of the Project 2. Gansu (a) Goods, and works for Sub-projects under Parts 2.1,2.2 and 2.3 of the project (b) Consultants services and training 4. 1 under Part 2.4 of the Project Total 71 42

45 1 1. Retroactive financing will be applied for this project. The date of eligible expenditures and the amount for the retroactive financing will be determined according to the Bank s policy and specified in the loan agreement. 12. The project includes three disbursement conditions: Payment of the Front-End Fee; Adoption of the Operations Manual, including the ESSAF, Procurement Plan, and the FMM, by Sichuan and Gansu Provinces; Approval of sub-projects by the Bank and the Government. 13. To better meet the needs of this operation, the project will advance funds from the DAs managed by SPFD and GPFD to the special operating accounts managed by municipal finance bureaus (Sichuan) and to the Longnan Municipal Finance Bureau (Gansu), respectively. Advance funds will not exceed 3 of the total investments of the approved sub-projects, at that time, at each municipality (Sichuan) and at the Longnan Municipal (Gansu) level. Supporting documents, evidencing that the advance funds are used for the intended purposes will be retained at the county PIUs. The use of further advances will be reported to the provincial finance bureaus by the submission of a) tailored SOEs and b) statement of special operating accounts. These will be reconciled with the DA when the withdrawal application is submitted by the municipal finance bureau. 14. Sichuan SPFD will be directly responsible for the management, maintenance and reconciliation of their provincial DA activities. Supporting documents required for Bank disbursements will be prepared and submitted by respective county PIUs through the county finance bureau for approval and verification before sending to their respective municipal PMO. Once the municipal PMO reviews and approves these documents, it will submit them to their respective municipal finance bureau for approval and verification. After receiving approval from the municipal finance bureau, the requested funds will be paid by the municipal finance bureau to the contractors. Municipal finance bureaus should regularly request replenishment to its special operating account from the DA managed by the PFB. Before sending the withdrawal application to SPFD, the documents should be reviewed and approved by the PPMO. Once approved by the provincial finance bureau, the requested funds will be replenished to the special operating account managed by the municipal finance bureau. SPFD will then submit the WA for Sichuan province activities to the Bank. 15. The flow of funds and withdrawal applications (WAS) for Sichuan Province is shown below: 43

46 1c I I I I - I Sichuan PPMOs A 4 I I I SPFD - v Municipal FB WA Flow County FB - Contractor/ b Gansu - GPFD will be directly responsible for the management, maintenance and reconciliation of their provincial DA activities. Supporting documents required for Bank disbursements will be prepared and submitted by the respective county PIUs through the county finance bureau for approval and verification before sending to Longnan municipal PMO. Once the Longnan municipal PMO review and approve these documents, it will submit them to Longnan municipal finance bureau for verification and approval. After receiving approval from Longnan municipal finance bureau, the requested funds will be paid by the Longnan municipal finance bureau to the contractors. Longnan municipal finance bureau should regularly request replenishment to its special operating account from the DA managed by GPFD. Once approved by GPFD, the requested funds will be replenished to the special operating account managed by Longnan municipal finance bureau. GPFD will then submit the WA for Gansu province activities to the Bank. 17. The flow of funds and withdrawal applications (WAS) for Gansu Province is shown below: 44

47 L World Bank 4 1 I I I I I I I WA Flow Funds Flow County PIU b County FB Contractor/ Supplier During project implementation, the FMS will closely monitor the efficiency and effectiveness of the approval and disbursement processes. Financial Management and Reporting Arrangements Implementing Agencies 19. Refer to Annex 6 for detailed discussion of the implementation arrangements. Budgeting 2. A standardized/simple project component annual plan with progress report has been designed for the project which will ease project budgeting, execution, and monitoring. In order to monitor the timely implementation of activities, the PMOS will conduct variance analysis semi-annually. The consolidated semi-annual variance analysis should be furnished to the Bank as part of the semi-annual progress reports. 21. As discussed above, the project will advance funds from DA to the municipal finance bureaus (Sichuan) and Longnan Municipal Finance Bureau (Gansu). The requested amount from the DA will be supported by semi-annual forecast for usage of funds, which will be prepared based on the budget and work plan. Variance analysis of actual versus forecast will also be required. The requirement will be detailed in the FMM. 45

48 Accounting 22. The administration, accounting and reporting of the project will be set up in accordance with a simplified version of the requirements from Circular #13: Accounting Regulations for World Bank Financed Projects issued in January 2 by MoF. These simplified requirements will be documented in the FMM and will provide adequate but simplified instructions of accounting treatment of project activities and covers the following: Simplified chart of account Detailed accounting instructions for project accounts utilized Standard set of project financial statements Instructions on the preparation of project financial statements 23. The standard set of project financial statements mentioned above includes the following: Balance sheet of the project Statement of uses of fund by project components and contracts Statement of designated accounts Notes to the financial statements 24. Each county PIU or municipal PMO will manage, monitor and maintain its respective project accounting records for the sub-project it executes. Original supporting documents for project activities will be retained by each county PIU or municipal PMO. 25. Adequate project accounting staff is one of the factors critical to successful implementation of project financial management. Since the specific project activities have yet to be determined, the staffing requirements for eligibility to implement project activities have been established within the FM framework. Given most county PIUs do not have previous experience with Bank projects, training should be provided to all the project financial staff before project implementation. 26. To strengthen financial management capacity and achieve consistent quality of accounting work, a project FMM has been prepared and will be part of the OM. The FMM will provide detailed guidelines on financial management including internal controls, accounting procedures, fund and asset management, withdrawal application procedures, financial reporting and auditing arrangements, etc. 27. The project will use computerized project software package or manual books but the decision on what to use will be made by the individual PIUs. The task team will monitor the accounting process especially during the initial stages to ensure complete and accurate financial information is provided in a timely manner. Internal Control and Internal Auditing 28. The related accounting policy, procedures and regulations were issued by MoF, but the requirements procedures are reduced and simplified for this project. Central, 46

49 provincial and municipal government issued numerous regulations to strengthen the supervision and management of the emergency construction finds. All the requirements including the internal control arrangements are documented in the FMM to uniformly align the financial management and disbursement requirements among all the PIUsPMOs. There is no formal independent Internal Audit department for the project. However, this will not impact on the project s financial management as the management and monitoring from various levels of finance bureaus and PMOsPIUs and the semiannual external audits will ensure that financial management controls are functioning appropriately. In addition, the PLG includes members from the supervision bureau and audit office. Government auditors are required to supervise all the reconstruction funds. Fin an cia1 Reporting 29. The format and content of the project financial statements to be included in the semi-annual audit reports have been simplified, standardized and agreed between the Bank and all parties concerned. 3. For Sichuan, county PIUs will prepare their own semi-annual financial statements, which will be reviewed and consolidated by their respective municipal PMOs. The respective municipal PMOs will then submit their financial statements to their respective PPMOs (Sichuan) who will review and consolidate their relevant municipal financial statements. SPFD will review the accuracy and completeness of the project financial statements prior to the Sichuan PPMOs submission of the audit reports to the Bank. For Gansu, consolidation of the Gansu semi-annual project financial statements will be conducted by the Longnan Municipal PMO who will then submit the project financial statements to GPFD for review. GPFD will then conduct their review and then be responsible for submission of the audit report to the Bank Supervision Plan 3 1. The supervision strategy for this project is based on its FM risk rating, which will be evaluated on regular basis by the FMS, in consultation with the task team leader. Since this is an emergency operation, and the overall FM risk rating for this project is substantial at this stage, it is envisaged that the FMS supervises more frequently during the early stages of project implementation. In addition, the FMS will review the semiannual audit reports and progress reports and follow-up on material issues. 47

50 A. General Annex 5: Procurement Arrangements CHINA: Wenchuan Earthquake Recovery Project 1. Procurement for the proposed project will be implemented in accordance with the World Bank's "Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 24; Revised October 26 and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers'' dated May 24, Revised October 26, and the provisions stipulated in the Legal Agreement. 2. The proposed project will be processed under a framework approach and in accordance with the Bank's policy OP/BP8.: Rapid Response to Crises and Emergencies, which provides for emergency operations to be processed under accelerated, consolidated and simplified procedures that are subject to streamlined exante requirements to facilitate rapid delivery of emergency assistance. The streamlined procurement procedures will be based on a simplified and flexible approach and will authorize the delegation to the Bank's China country office a higher than normal level of local fiduciary review. However, the applied procedures will remain consistent with the principles and objectives of the Bank's procurement and consultant guidelines. 3. Procurement of Works: It is proposed that National Competitive Bidding (NCB) procedures will be applied for works contracts estimated to cost less than US$25. million. The majority of works contracts under this project will be significantly less than this amount. Works contracts with an estimated value of less than US$ 5, will be procured in accordance with Shopping procedures. Under NCB procedures the procurement of works will be undertaken using the Bank approved Chinese Model Bidding Documents (dated May 1997 and issued by the MOF). Force Account (FA), that is, construction by the use of the Borrower's own personnel and equipment may be applied where justified, in accordance with the requirements of paragraph 3.8 of the procurement guidelines. 4. The Shopping and FA procurement documentation will be prepared by the PMOS and subject to the Bank's prior review. 5. Procurement of Goods: It is proposed that contracts for Goods estimated to cost more than US$2. million per contract shall be procured under ICB procedures. NCB procedures will be applied for goods contracts estimated to cost less than US$2. million. Goods contracts with an estimated value of less than US$ 3, will be subject to shopping procedures. Across all sector components there may be a small goods requirement for necessary office equipment and facilities for the project institutional strengthening purposes. 6. The procurement of goods will be undertaken using the Bank's Sample Bidding Documents (SBD) for all ICB procurement and the Bank approved Chinese Model Bidding Document for all NCB contracts. 48

51 7. Simplified Procedures for NCB Bidding: Under NCB procedures for procurement of civil works and goods, accelerated bid times of 14 days will apply for urgent requirements. Longer bid times of up to 3 days will be applied for less urgent requirements. Determination of the appropriate bidding times will take into consideration the capacity of local firms to prepare responsive bids within a short period of time. For small contracts for civil works and goods, the preparation of bids by small and mediumsize contractors or suppliers will be accelerated by waiving the bid security requirement and replacing it with the requirement for a bid declaration from the bidder in accordance with paragraph 2.14 of the procurement guidelines. 8. Selection of Consultants: Consulting services under this project will include: project preparation, project management, project design services, construction supervision, independent monitoring on resettlement and environment during the construction, and possibly training programs. 9. Consulting services for firms will be procured under Quality Cost Based Selection (QCBS) or Quality Based Selection (QBS) procedures. Services for the project estimated to cost less than US$2, equivalent per contract will be procured under selection based on Consultants Qualifications (CQS) procedures. Services for tasks that meet the requirements set forth in 5.1 of the Consultant Guideline may be procured under Individual Consultants procedures in accordance with the provisions of paragraphs 5.1 through 5.4 of the Consultant Guidelines. 1. Shortlists of consultants for contracts estimated to cost below a country-specific threshold to be determined by the Bank may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. The Bank s Standard Request for Proposals for Selection of Consultants (May 24) will be used for assignments subject to international competition. It is proposed that where, following appropriate notification and market sourcing, the shortlist fails to meet the requirements of paragraph 2.6 of the consultant Guidelines, a waiver may be sought to the composition of the shortlist. The waiver will be subject to the Bank s review on a case by case basis Single-source selection (SSS) of consulting firms in accordance with the requirements of paragraph 3.1 (b) of the Consultant Guidelines may be used only if it presents a clear advantage over competition for consulting services required during the period of time immediately following the emergency situation. Firms that are already working in the country and that have a proven track record in similar assignments may be the most suitable option for the start-up activities. Consultants selected on a single-source basis may be given the right to participate in future assignments under the same project provided that there is no conflict of interest with the tasks performed under the initial contract. However, for future or downstream assignments, any available information must be shared with all consultants to ensure a level playing field. Single-source selection shall be subject to the Bank s prior review. 12. Retroactive Financing: The retroactive financing requirement for the proposed project is expected to be less than 2 of the loan amount. 49

52 13. The scope of contracts for consideration under retroactive financing are expected to be of relatively low value and comprise mainly of emergency small works including demolition, repairing, reinforcing, slope treatment, water draining and minor road construction and reconstruction and consultants services primarily related to project design. The Bank has been informed that the procurement of these contracts was conducted through the application of competitive bidding, shopping or force account, procedures conducted under the applicable domestic laws and regulations. Payments due under the contracts were financed, or are to be financed, through the government budget payment system. To establish whether these contracts are eligible for Bank financing each contract will be subject to an ex post review of the applied procurement process to establish whether it was conducted in accordance with the requirements of the Bank s procurement guidelines or as otherwise accepted by the Bank. The procurement ex post review will be conducted prior to sub-project screening confirmation by the Bank B. Assessment of the Agency s Capacity to Implement Procurement 14. A simplified procurement capacity assessment for both the Sichuan and Gansu parts of this loan has been carried out by the Bank s combined preparation-appraisal missions to Sichuan and Gansu provinces. Sichuan Province 15. Procurement implementation will be conducted by the county PIUs under the management of the Construction PMO, who will employ a tendering agent to assist the county PIUs and PPMO. For sub-projects under the health component, county PIUs, each staffed with 1 to 3 staff members exclusively working on procurement, will be responsible for civil works procurement, while the Health PPMO will be responsible for goods procurement. 16. The Sichuan PPMOs have implemented or are in the process of implementing other Bank-financed projects: The Sichuan Urban Environment and Sichuan Urban Development projects are being implemented under the supervision of the construction sector PPMO. The Health V, VI and VI11 projects are being implemented under the Health sector PPMO. Both PPMOs have performed well in implementing the Bank financed projects in accordance with the requirements of the Bank procurement guidelines. Therefore, while the two PPMOs (construction and health) have prior experience in the procurement of Bank-financed projects, the majority of county PIUs have not previously implemented Bank-financed projects. Both PPMO and PIU procurement staff will require initial procurement training prior to project launch followed by further periodic training sessions during implementation. Procurement capacity building will also be achieved by outsourcing assistance from experienced procurement agents. 17. Key risks. The key risk associated with procurement for implementation under the Sichuan part of the project is the large number of county/district PIUs and their lack of experience with procurement under Bank financed projects. The corrective measures which have been agreed are: 5

53 Experienced tendering companies are to be recruited for project procurement implementation; and Training on the Bank s procurement policies and procedures will be provided by the Bank to the PPMOPIU initially and then periodically. The initial training was conducted in January 29 by Bank staff. Gansu Province 18. All project counties in Gansu Province are located within Longnan Municipality. According to the proposed institutional arrangement, a single PMO within Longnan Municipality will be established and it will responsible for project implementation. The Gansu Provincial Government has completed or is currently implementing several Bankfinanced projects in the Longnan Municipality: Basic Education in Western Areas Project (on-going), Gansu and Inner Mongolia Poverty Reduction Project (closed in 26), Basic Health Service Project (closed in 27), and Tuberculosis Control (on-going). These projects constructed health and education facilities similar to those planned for this project. 19. The procurement staff has not yet been recruited, but Longnan Municipal Government has confirmed that they will recruit the relevant staff once the institutional arrangements have been approved at the municipal level. The staff that will be recruited will, to the extent possible, have experience in procurement from working on Bankfinanced projects in the region. The Gansu Provincial Finance Department has confirmed that a procurement agent will be hired to support procurement activities. The existing Prefecture Tendering Management Office has more than eight years experience in procurement supervision under the local procurement procedures and will be involved in the procurement supervision for this project. Similar to Sichuan, the Gansu PMO will require initial procurement training prior to project launch followed by further periodic training sessions during implementation. 2. Key risks. The key risk associated with procurement for implementation under the Gansu part is a lack of experience at the Longnan Municipal level PMO with procurement under Bank financed projects. The corrective measures which have been agreed are: An experienced tendering company will be recruited for project procurement implementation; and Training on the Bank s procurement policies and procedures will be provided by the Bank to the PMO initially and then periodically. The initial training is scheduled for February

54 Overall Procurement Risk 21. The overall procurement risk rating for procurement under both the Sichuan and Gansu parts of the proposed project is considered to be high. C. Procurement Plan 22. To facilitate rapid implementation, contracts will be procured in accordance with the urgency of their requirement under the framework. The first group of contracts to be financed under the loan will be defined in the initial project Procurement Plan (the Plan). The Plan will indicate: e e e e the different procurement methods or consultant selection methods, estimated costs, contracts subject to prior review by the Bank, and the contract award time frame. 23. The Plan will be updated at least every six months or as required to reflect the actual project implementation performance needs and institutional capacity improvements. 24. The initial procurement plan covering the first six months of project implementation has been prepared by the Borrower based upon guidance from the Bank during the Bank s combined preparation-appraisal mission and has been agreed between the Bank and the Government. D. Frequency of Procurement Supervision 25. In addition to the prior review to be carried out by the Bank, the capacity assessment of the Implementing Agency has recommended that supervision missions should be carried out once every 3 months for the first 18 months followed by once every 6 months thereafter. 52

55 Thresholds for Procurement Methods and Prior Review Expenditure Contract Value Threshold Procurement Contracts Subject to Prior Review Category (US$ thousand) Method (US$ thousand ) 1. Works Equal to or Above 25, ICB All contracts (if any) Less than 25, NCB All contracts equal to or above 1, Less than 5 Shopping First contract of each county FA / DC All contracts 2. Goods Equal to or Above 2, ICB All contracts Less than 2, NCB All contracts equal to or above 5 Less than 3 Shopping First contract of each county DC All contracts 3. Services Equal to or above 2 (firms) QCBS / QBS All contracts Less than 2 (firms) CQS No prior review. Individual consultant Other All contracts equal to or above $5, Single-source selection (SSS) Other All contracts Overall Procurement Risk Assessment: Frequency of procurement supervision missions proposed: Note: High One every 3 months for the first 18 months (includes special procurement supervision for postreview/audits). Thereafter once every 6 months ICB = International Competitive Bidding NCB = National Competitive Bidding FA = Force Account DC = Direct Contracting QCBS Quality Cost based Selection QBS = Quality-based Selection CQS= Selection Based on Consultants Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc. 53

56 Annex 6: Implementation and Monitoring Arrangements CHINA: Wenchuan Earthquake Recovery Project State level 1. Consistent with the management structure for World Bank financed programs in China MoF and NDRC will play key roles in this project. MoF will maintain a contact for the project within the International Department I, to manage the financial aspects of the project and to act as the primary liaison with the Bank. NDRC, through the Foreign Capital Department will carry out its program management function, especially to ensure the efficient approval of sub-projects during project implementation. Sichuan Province 2. The Sichuan Provincial Government has established a Sichuan Provincial Reconstruction Financing Leading Group (SPLG) in October 28 to guide the implementation of all domestic and internationally financed reconstruction projects, including, but not limited to the Bank-financed project. The SPLG is chaired by the Executive Vice-Governor and the deputy chairman of the SPLG is a Vice-Governor. The Sichuan Development and Reform Commission (SDRC), Sichuan Provincial Finance Department (SPFD), Sichuan Audit Bureau, Sichuan Supervision Bureau, Sichuan Construction Commission (SCC), Sichuan Provincial Health Department (SPHD), Sichuan Land Resources Bureau, and Sichuan Environmental Protection Bureau plus other relevant sector bureaus are members of the SPLG. 3. The SPLG has assigned the SDRC and SPFD to coordinate the internationally financed reconstruction projects SDRC will be responsible for overall project coordination, in particular for ensuring that the project is consistent with the national reconstruction plans. SPFD will act as the primary liaison for the Bank.. 4. The SPLG has nominated the SCC as the implementing agency for the infrastructure component in Sichuan. The SCC will utilize the previously established Provincial Project Management Office (PPMO) which was established in 1996 and has experience as the PPMO of the Sichuan Urban Environment Project (SUEP) and the Sichuan Urban Development Project (SUDP). The PPMO is staffed with specialists responsible for safeguards, procurement, technical review, etc. The role of the PPMO includes: (a) overall project coordination, management and monitoring; (b) annual budget preparation; (c) proj ect-wide quality assurance; (d) preparation of progress reports for Sichuan Provincial Government and the Bank, and; (e) procurement management. Municipal PMOS and County PIUS have been established in each respective county construction bureau responsible for project management, design, procurement, construction supervision and reporting for sub-projects within their jurisdictions 5. The SPLG has nominated the SPHD as the implementing agency for the health component in Sichuan. The Health Bureau has established a Bureau Leading Group (BLG) to facilitate leadership, management and coordination of the Health component. 54

57 Further, the SPHD will utilize the previously established PPMO which was established in the 199s and has experience as the PPMO of the Basic Health Services Project. Within the PPMO, responsibilities have been assigned for overall management, coordination, procurement, and financial management. The PPMO is responsible for: (a) coordinating municipalities and counties; (b) procurement; (c) financial management, and; (d) reporting. Municipal PMOS and County PIUs have been established in each respective county health bureau responsible for project management, design, procurement, construction supervision and reporting for sub-projects within their jurisdictions. 6. Both PPMOs will be strengthened by engaging additional staff for the implementation stage of the project. Training for PPMO staff is included in the project. The provincial government will ensure that the PPMOs are provided with adequate support to carry out their responsibilities. To assist in the strengthening of the PPMOs' capacity, the Government of France has offered a FASEP Grant to the GoC to finance a consortium of international consultants that would work as an integral part of the PPMOs to help them fulfill their obligations under the project. 7. The PPMOs will engage a limited number of Class A cornpanie~,'~ financed by the project, to prepare the feasibility studies, environmental assessments and project designs. It is envisaged that a total of about three design institutes will be employed to carry out all the design for the infrastructure component in Sichuan. One or two design institutes will be employed to carry out the designs for the health component. Each design institute will work across multiple counties to facilitate quality control and to ensure that appropriately updated seismic and other standards are fully incorporated into project designs. Similar arrangements will be put in place for tendering management and construction supervision. Particular attention will be given to quality assurance including field construction supervision, which for the infrastructure component will be handled by a total of approximately three Class A certified construction supervision companies contracted by the PPMO and financed through the project. Similar arrangements will be put in place for the health component. The terms of reference for the construction supervisors will include, inter alia, ensuring quality workmanship, compliance with contract requirements, and verification of documentation and physical inspection of works for progress claims. Gansu Province 8. The reconstruction program within Gansu Province is led by a Provincial Leading Group (PLG), chaired by a Vice-Governor and including Directors of the Provincial Planning, Finance, Audit, Supervision, Construction, Civil Affairs, Health and Education Departments, and the Provincial Government's Office. This leading group will set project policy and guide implementation. The leading group has assigned the role of coordinating the international financing projects to the GPFD and GPDRC.. l3 Design institutes in China are registered by sector in accordance with their capacity to deliver projects of varying size and complexity. Class A design institutes are those who have the capacity to for the largest most complex projects in their sector. 55

58 9. The Longnan Municipal Government (LMG) is the implementing agency for the Gansu part of the project. The LMG has established a municipal Project Management Office (PMO) to manage the project in all three sectors: infrastructure, health and education. The PMO will be staffed with specialists responsible for safeguards, procurement, and technical review. The role of the PMO includes: (a) overall project coordination, management and monitoring; (b) annual budget preparation; (c) projectwide quality assurance; (d) preparation of progress reports for Longnan Municipal and Gansu Provincial Governments and the Bank; and (e) procurement management. Existing county implementing units will be used to deliver the project. To the extent possible, staff currently managing Bank financed programs will be heavily drawn on in setting up these arrangements. For instance, the education subcomponent would fully utilize the current institutional airangements, procedures and expertise from the ongoing Basic Education in Western Areas Project (BEWAP) which covers Kang and Xihe Counties. In addition, expertise and experience will be drawn from the Gansu and Inner Mongolia Poverty Project, which closed in 26, the ongoing Basic Education in Western Areas Project and the ongoing Tuberculosis Control project to the greatest extent possible. 1. The Gansu Provincial Government and the Longnan Municipal Government will ensure that the PPMOs are provided with adequate support to carry out their responsibilities. To assist in the strengthening of the PMOS capacity, the Government of France has offered a FASEP Grant to the GoC to finance a consortium of international consultants that would work as an integral part of the PMO to help them fulfill their obligations under the project. 56

59 Annex 7: Project Team Members CHINA: Wenchuan Earthquake Recovery Project Sichuan Team Name Title Unit Mara Warwick Task Team Leader EASCS Abhas Jha James Reichert Chaogang Wang Chongwu Sun Shiyong Wang Yi Dong Zoe Trohanis Ji You Xiaoke Zhai Hongkun Yang Geoffrey Read Jianming Zhao Betty Hanan Ian Morris Edward Leman Eleanor Dougoud Chunxiang Zhang Regional Disaster Coordinator Senior Infrastructure Specialist Senior Social Development Specialist Senior Environmental Specialist Senior Health Specialist Senior Financial Management Specialist Infrastructure SpecialistDisaster Specialist Urban Specialist Transport Specialist Procurement Specialist Urban Infrastructure and Water Specialist Seismic Engineering Specialist Health Implementation Specialist Health Specialist Economic analysis/ Mapping Specialist Operations Officer Senior Program Assistant EASUR EASCS EASCS EASCS EASHD EAPCO EASUR EASCS EASCS Consultant Consultant Consultant Consultant Consultant Consultant Consultant EACCF Vellet Fernandes Program Assistant EASUR Gansu Team Name Title Unit John Scales Co-Task Team Leader EASCS Gailius J. Draugelis Senior Energy Specialist EASCS Chaohua Zhang Senior Social Development Specialist SASDI Haixia Li Senior Financial Management Specialist EAPCO Wenlai Zhang Senior Transport Specialist EASCS Sing Cho Urban Specialist EASCS Xujun Liu Procurement Specialist EAPCO Songling Yao Social Development Specialist EASCS Ning Yang Environmental Specialist EASCS Liping Xiao Education Specialist EASHD John Smithson Urban Infrastructure and Water Specialist Consultant Jipei Feng Energy Specialist Consultant Rufei Zhang Economic analysis/ Mapping Consultant Shuo Zhang Health Specialist EASHD Emmanuel Py Young Professional EASTE Lei Wu Team Assistant EACCF 57

60 Annex 8: Environmental and Social Safeguards Framework CHINA: Wenchuan Earthquake Recovery Project 1. An Environmental and Social Screening and Assessment Framework (ESSAF) has been developed in accordance with OP/BP 8., The framework provides the objectives, principles, project appraisal process and procedures, institutional and implementation arrangements, as well as public participation and grievances redress mechanisms to screen and address environmental and social safeguard issues arising from proposed sub-projects. The ESSAF will be included in the project Operations Manual and is referenced in the project s legal agreements. 2. Environmental and social issues. The social and environmental impacts of subprojects are expected to vary in terms of scale and type, leading to a range of safeguard planning and implementation requirements. Potential sub-projects include the reconstruction and construction of infrastructure such as roads, bridges, urban infrastructure (water, wastewater, and solid waste) as well as health facilities and schools. Many of these sub-projects will likely be located in county seats and towns though some may be in rural areas. Retroactive financing of previously completed or ongoing works related to the impacts of the Wenchuan Earthquake may be proposed. 3. Country and World Bank Policies. China has established policies, laws, regulations and implementation guidelines guiding the treatment of environmental and social impacts of projects. These are issued by central and local governments, including some that are specific to the Wenchuan Earthquake reconstruction program. The ESSAF has been developed in compliance with relevant Chinese laws, regulations and Bank policies. 4. World Bank safeguard policies that will be or are likely to be triggered include: e e e e e e OP/BP 4.1 Environmental Assessment OP/BP 4.4 Natural Habitats OP/BP Physical Cultural Resources OP/BP 4.12 Involuntary Resettlement OP/BP 4.37 Safety of Dams OP/BP 4.1 Indigenous Peoples 5. ESSAF procedures. Environmental and social impact screening, mitigation and management measures development and implementation will follow these steps described in the ESSAF: Step 1 - Identification of sub-projects according to the selection criteria; Step 2 - Screening for potential environmental and social safeguard impacts and determination of safeguards documents required according to Chinese regulations and World Bank policies; 58

61 Step 3 - Review of the safeguards screening by World Bank; Step 4 - Preparation of safeguard documents, consultation and disclosure; Step 5 - Review and clearance of the safeguard documents within the government or/and by the Bank; Step 6 - Implementation of agreed actions; and supervision, monitoring, and evaluation 6. Impacts screening. The PMOs and their environmental and social safeguard specialists will screen each sub-project to determine the applicable Chinese national laws and regulations, World Bank safeguards policies and the corresponding safeguard instruments (EA/EIA, EMCP, RAP, DSP) which need to be prepared and implemented. Screening tools will be included in the Operations Manual. Because the evaluation of the expected environmental and social impacts requires specialized technical skills, PMOs will employ qualified environmental and social specialists as well as consultants to assist them in this task. 7. The results of the screening will determine the categorization and the type of safeguards documents that will be required for each sub-project. The Bank will review and confirm the safeguards screening of all sub-projects based on the information provided by the PMOs in the screening summary. Review of the screening of projects that are Category A and/or that require RAPS, EMCPs and DSPs may require site visitation or additional review by the Bank. Reviews of the screening of other projects will be conducted by the Bank on a selective basis to verify that the screening tools and choice of documents are being applied appropriately and consistently. 8. Environmental screening and environmental instruments. With respect to environmental screening of sub-projects, the national regulations and World Bank policies are considered on the whole to be closely-related; both are impact-based and will require the PMOs to identify and assess potential impacts to environmental components such as water, air, land and natural habitats and biodiversity. On the basis of this screening, the PMOs will propose a Category (A, B or Cy according to World Bank policies) and appropriate environmental instruments based on Chinese national regulations (EIA, Simplified EIA, Environmental registration) supplemented with EMPs and other instruments as required to meet the requirements of World Bank safeguards policies. 9. Social screening and instruments. Every sub-project will be screened by the PMOs for social impacts, including: (a) the need, if any, for land acquisition and involuntary resettlement (permanent or temporary); (b) the population to be affected; and, (c) whether there is an ethnic minority community that would be affected by the subproject (as determined through a review the demographic information in the sub-project areas). The PMO will use the screening tool in the Operations Manual to determine the significance of these impacts and identify the Social Safeguards documents that need to be prepared, which may include a resettlement action plan (RAP), an Environmental Management Plan (EMP), Cultural Property Management Plan (CPMP), a Dam Safety 59

62 Plan (DSP), a social assessment (SA) and/or an Ethnic Minority Community Plan (EMCP). In addition to any requirements to meet World Bank policies, the PMOs will also screen the sub-projects for national/provincial laws and regulations regarding land acquisition and involuntary resettlement. 1. In those cases where the environmental andor social safeguards documentation required by the Chinese regulations are not equivalent in depth and scope to those required by the World Bank safeguard policy requirements, the latter will apply. 11. Development and review of safeguards instruments. Once the screening and safeguards documentation requirements are agreed by the Bank and confirmed by the government, the county PIUs, with assistance from the PMOs, will develop detailed safeguard documents and impact mitigation measures. 12. Safeguard documents will be subject to consultation and disclosure in an accessible place, in a timely manner, in a form and language understandable to key stakeholders, prior to the finalization of the said documents. Particular attention will be given to ensure affected persons receive adequate time and ready access to draft documents before consultation takes place. 13. Consultation for Category A projects and projects that require RAPs, SA or EMCPs will be undertaken at least twice during the preparation: at the beginning of the preparation of documents to scope environmental and social issues as well as prior to finalization of the safeguards documents in order to take into account public concerns before submitting final documents to the Bank. 14. All documents for Category A projects and documents for projects requiring RAPs, DSPs and EMCPs will be subject to appraisal by the Bank prior to approval of the sub-project. Documents for other projects will be reviewed on a selective basis by the Bank during project supervision. 15. Information disclosure and public consultation are important and necessary in sub-project preparation and implementation. These enable sub-project affected people and other stakeholders to participate in and contribute to the sub-project planning and implementation, and thereby help minimize sub-project adverse impacts and maximize sub-project benefits. The level of public consultation and the scope of information dissemination should be commensurate with the environmental category of the subproject and the significance of the social impacts. 16. Information to be disclosed should include, at a minimum: sub-project design, impacts, and proposed mitigation measures. During the design and implementation phases, this information should be updated and continually made available to stakeholders. Disclosure means could vary, but may include posters, booklets, newspapers, the internet, and community meetings. All safeguard documents should be disclosed at a public place accessible to affected groups and other stakeholders prior to consultation to establish the basis for meaningful consultation. Disclosure and consultation mechanisms should be planned and detailed in the safeguard documents. 6

63 17. Grievance redress. A grievance redress mechanism for the project is necessary for addressing legitimate concerns of affected individuals and groups who may consider themselves deprived of appropriate treatment under the project. The mechanism would include (i) a recording and reporting system, including grievances filed both verbally and in writing, (ii) designated staff with responsibility at various levels of governments, and (iii) a time frame to address the filed grievances. This mechanism should be detailed in the sub-project safeguards documents. The grievance redress mechanism will be regularly monitored and evaluated by the PMO during implementation. 18. Implementation arrangements. The PPMOs (Sichuan) and Municipal PMO (Gansu) will assume overall responsibility for supervising and managing safeguard planning and implementation and will provide technical guidance to the county PIUs. The county PIUs will be responsible for the planning, design and implementation of individual sub-projects and therefore, county PIUs will be responsible for developing the necessary safeguard measures. Safeguards measures will be reviewed and cleared by the government as required by the Chinese regulations. The county PIUs will be responsible for the implementation of the safeguard measures under the direction and supervision of the PMOs. 19. Capacity building program. Ensuring the appropriate level of safeguard support through capacity building at the provincial and local levels is critical to the success of the project. As such, a three step capacity building program will be developed: 1. The PMOs will determine staffing needs for each level and begin recruitment of additional staff, At the same time training requirements will be identified. 2. The provincial governments, with support from the Bank, will develop a set of planning and implementation tools and guidelines based upon the ESSAF, including adapting the technical annexes of the framework as needed to reflect individual needs. 3. As early as possible, and with assistance from the Bank, a project-wide training program will be developed and implemented for all safeguards staff. 2. Supervision and monitoring. The PMOs will be responsible for supervising the implementation of the agreed safeguard documents and reporting to the Bank on compliance with the ESSAF. As part of regular quarterly supervision missions, the Bank team will visit selected project areas to provide assistance during the preparation and implementation of safeguards documents. The PMOs will engage qualified consulting firms to monitor the planning and implementation of the environmental and social safeguard documents. Monitoring reports will be submitted to the provincial governments and the Bank. 21. Retroactive financed projects. For sub-projects that already completed construction prior to the appraisal mission in October 28 which will be financed retroactively, or sub-proj ects that commenced construction prior to the appraisal mission, a due diligence post-review will be carried out for both environmental and social impacts as specified in the ESSAF. Disbursement will only occur once the due diligence, ex-post review is completed. 61

64 Annex 9: Economic Background CHINA: Wenchuan Earthquake Recovery Project 1. The GoC reports that 237 counties and districts were affected by the Wenchuan Earthquake, containing a total population of 115 million. Of these, ten counties and districts have been designated as extremely affected, 41 as severely affected. The balance experienced a lesser degree of damage. l4 Extremely affected counties had a total registered population of 3.6 million in 26, while the population of severely affected counties and districts was million. 2. The project will support reconstruction in 27 severely affected counties that accounted for 73 of the population, 8.6 of GDP, and 8 of on-budget revenues of the severely affected counties in 26. Economic conditions vary widely in project areas, with per capita GDP ranging from RMB 2,4 (US$351) in Gansu s Xihe County to RMB 3,27 (US$4,425) in Fucheng urban district in Mianyang, an intermediate city near Chengdu, the capital of Sichuan. While these disparities are large, overall equality in per capita GDP was gradually improving before the Wenchuan Earthquake; the Gini coefficient in 26 was.365 compared to.416 in Although the Government estimates a total economic loss of RMB billion (US$123 billion) from the earthquake in extremely and severely affected counties, final estimates of economic losses have not yet been released for individual counties and districts. A proxy indicator is the total estimated cost of infrastructure reconstruction that has been provisionally reported for each county and district by the government as part of the draft Urban Infrastructure Master Plans for Sichuan and Gansu. These reconstruction costs are, on a per capita basis over the total reconstruction period, RMB 4,459 (US$ 652) for extremely affected counties, and RMB 1,85 (US$264) for severely affected counties, reflecting the large difference in scale and intensity of damage in these two areas. In the project counties, per capita infrastructure reconstruction costs range from RMB 5,266 (US$77) in the Mianyang Urban Area to RMB 976 (US$143) in Gansu s Kang County. 4. A rough indicator of the relative economic impact of the earthquake on individual counties is the total estimated infrastructure reconstruction cost as a percent of GDP in 26. These also vary widely from 98.6 in Liangdang County in Gansu to 25 in the Mianyang Urban Area, suggesting that: a) infrastructure losses in some project jurisdictions will affect local economies much more severely than others; b) the importance of reconstruction to short and medium term economic growth will vary significantly; and c) the sustainability of economic growth in jurisdictions that are likely to rely heavily on infrastructure reconstruction in the next three to five years could be tenuous. l4 This taxonomy of affected areas is based on an assessment by Government of: 1) intensity of the earthquake; 2) density of landslides; 3) casualty rate; 4) ratio of displaced residents; and 5) number of collapsed dwellings. 62

65 5. The earthquake will likely cause significant reductions in economic output in many project areas in However, GDP growth will increase rapidly in 29 through 211 due to reconstruction investments. Output during this period could therefore mask pre-earthquake structural weaknesses in many local economies. While severely affected areas reconstruct, the rest of the region is likely to continue to grow, creating an even greater lag for reconstructing economies and greater inequality moving forward. This underscores the need to focus investments, after basic reconstruction needs are addressed, on infrastructure that will facilitate increased access to input and output markets for affected areas, and that provide higher levels of infrastructure service than before the earthquake to enable localities to keep up with unaffected counties and districts. 6. A significant constraint to realizing economic benefits from project investments is the fiscal capacity of counties and districts to operate and maintain completed infrastructure. There are large differences in capacity, suggested by the scale of infrastructure reconstruction costs relative to on-budget revenues. Total reconstruction costs are an average of 11.5 times local on-budget revenues (26) in project jurisdictions in Gansu and 5.6 times in Sichuan. In Gansu s Liangdang County, infrastructure reconstruction will cost 38 times the county s on-budget revenue in To address this issue, project investments will be carefully screened as per the Operations Manual to ensure investments will be well-targeted to reducing inequality and contributing to longer-term sustainable economic recovery. Screening will also include an assessment of local governments fiscal capacities to sustain investments io infrastructure operations and maintenance. Is Data on employment losses and damage to firms at the county/district levels were not available at the time of appraisal. 63

66 Annex 1: Documents in the Project File CHINA: Wenchuan Earthquake Recovery Project 1. National Masterplan for the Rehabilitation and Reconstruction of Wenchuan Earthquake, State Council, August Directive for the Reconstruction of Urban Utilities and Infrastructure in Wenchuan Earthquake Affected Areas (draft), Ministry of Housing, Urban and Rural Construction and China Urban Planning and Design Research Institute, August Masterplan for the Post Wenchuan Earthquake Rehabilitation and Reconstruction in Gansu Province, Gansu Provincial Government, July Wenchuan Earthquake Affected Counties Database, Chreod Ltd., October World Bank Good Practice Notes in Earthquake Disaster Recovery and Reconstruction, July Natural Disaster Hotspots: A Global Risk Analysis, World Bank, Hazards of Nature, Risks to Development: An IEG Evaluation of World Bank Assistance for Natural Disasters, World Bank, Development Actions and the Rising Incidence of Disasters, Independent Evaluation Group, World Bank, Wenchuan Earthquake Recovery Project Environmental and Social Safeguards Screening and Assessment Framework (ESSAF), English (original) and Chinese (translated) Versions, Disclosed Version January 13,29 1. Wenchuan Earthquake Recovery Project Financial Management Manual (FMM), Chinese (original) and English (translated) Versions, November Wenchuan Earthquake Recovery Project Procurement Plan for Sichuan, First Batch, January Wenchuan Earthquake Recovery Project Procurement Plan for Gansu, First Batch, January 29 64

67 13. Annex 11 : Statement of Loans and Credits CHINA: Wenchuan Earthquake Recovery Project Original Amount in US$ Millions Difference between expected and actual disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd P CN-Jiangxi Shihutang Navi & 1 1 Hydropower PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO CN- Bengbu Integrated Environment Improv CN-Guiyang Transport CN-Shandong Flue Gas Desulfurization CN-Xi'an Sustainable Urban Transport CN-Gansu Cultural & Natural Heritage CN-Han River Urban Environment CN-Migrant Skills Dev. and Employment CN- Energy Efficiency Financing CN-Rural Health CN-Liaoning Med. Cities (LMC) Ill CN-Anhui Highway Rehab & Improvement CN-ShiZheng Railway CN-SHANDONG ENVMT 2 CN-GUANGDONGPRD2 CN-SICHUAN URBAN DEV CN-MSE Finance CN-W. Region Rural Water & Sanitation CN-3rd National Railway CN-Guangxi Integrated Forestry Dev CN-Fujian Highway Sector Investment CN-LIAONMG MED CITIES MFRAS 2 CN-Shaanxi Ankang Road Development CN-Heilongjiang Dairy CN-Liaoning Medium Cities Infrastructure CN-Fuzhou Nantai Island Peri-Urban Dev CN-5th Inland Waterways CN-Ecnomic Reform Implementation CN-IAIL 111 CN-3rd Jiangxi Hwy CN-HENAN TOWNS WATER CN-Renewable Energy I1 (CESP 11) CN-ChangjiangPearl River Watershed Reha CN-SHANGHAI URBAN APL2 CN - Poor Rural Communities Development oo

68 PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO PO CN-Renewable Energy Scale-up Program CN - Agricultural Technology Transfer CN-Inner Mongolia Highway & Trade Corrid CN-TAI BASIN URBAN ENVMT CN-CHONGQING SMALL CITIES CN-LIUZHOU ENVIRONMENT MGMT CN-HUNAN URBAN DEV CN-NINGBO WATER & ENVMT CN-4th Inland Waterways CN-Jiangxi Integrated Agric. Modern. CN-Gansu & Xinjiang Pastoral Development CN-ZHEJIANG URBAN ENVMT CN-Hubei Shiman Highway CN-Basic Education in Western Areas CN-Wuhan Urban Transport CN-GUANGDONGPRD UR ENVMT CN-3rd Xinjiang Hwy Project CN-TIANJIN URB DEV I1 CN-Yixing Pumped Storage Project CN-SHANGHAI URB ENVMT APL 1 CN-2nd Anhui Hwy CN-Hubei Hydropower Dev in Poor Areas CN-Sustainable Forestry Development CN-Tuberculosis Control Project CN-LIAO RIVER BASIN CN-Shijiazhuang Urban Transport CN-Yangtze Dike Strengthening CN-CHONGQING URBAN ENVMT CN-BEIJING ENVIRONMENT I1 CN-Accounting Reform & Development CN-Tec Coop Credit IV Ertan I1 Hydroelectric Project Total: 9, , oo

69 CHINA STATEMENT OF IFC s Held and Disbursed Portfolio In Millions of US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic ASIMCO ASIMCO BCCB BCIB BUFH Babei Babei Necktie Bank of Shanghai Bank of Shanghai Bank of Shanghai BioChina CDH China Fund CDH China I1 CDH Venture CT Holdings CUNA Mutual Capital Today Changyu Group Chengdu Huarong China Green Ener China Re Life China Walden Mgt Chinasoft Colony China Colony China GP Conch Dagang NewSpring Darong Deqingyuan Dynamic Fund Epure Fenglin Fenglin HJ MDF Five Star GDIH Great Infotech Hangzhou RCB HiSoft Tech HiSoft Tech IB

70 Jianpi Chenming Launch Tech Maanshan Carbon Maanshan Carbon Minsheng Minsheng & IB Minsheng Bank Minsheng Bank NCCB Nanjing Kumho Nanjing Kumho Neophotonics New China Life New Hope Newbridge Inv. North Andre PSAM RAK China Renaissance Sec Rongde SAC HK Holding SAIC SBCVC SEAF SSIF SH Keji IT SHCT SIBFI Shanghai Krupp Shanshui Group Shanxi SinoSpring Stora Enso Stora Enso Stora Enso TBK VeriSilicon Wanjie High-Tech Wumart XACB Xinao Gas Zhejiang Glass Zhengye-ADC Zhong Chen Zhongda-Yanjin oo oo oo oo Total portfolio:

71 Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. 22 SML 24 NCFL.2 27 Xinao CTC China Green.1 26 Launch Tech.1 25 MS Shipping.1 23 Peak Pacific 2.1 Total pending commitment:

72 ~ Louer-middle-income Annex 12: Country at a Glance CHINA: Wenchuan Earthquake Recovery Project POVERTY and SOCIAL Chlna 27 P puiatio n, mid-year (millions) 132. ON I per capita (Atlas mefhod, US$) 2,35 GNI(Aflasmethod, US biilions) 3,12.9 Avarage annual growth, 21.7 Population (V$.6 Laborforca ().9 Most recent estlmate (latest year available, 21.7) Po vert y (of popuiafion below nafio ne1 po verty line) Urban population (of fofaipopuiation) 42 Llfe expectancyat birth (pars) 72 Infant mortality (per f. live births) 2 Chiidmalnutrition (ofchlldmnunder5) 7 Access to an improvedwatersource (ofpopulation) 68 Literacy (ofpopulation age b+j Gross prlmaryenrollment (ofschool-agepopulation) Male m m Female KEY ECONOMIC RATIOS and LONG-TERM TRENDS m GDP (US$ billions) Gross capital formationigdp EVrtS Of goods and senices1gdp ' Gross domestic savingsigdp Gross national savingsigdp Current account balanceigdp. 3.9 Interest paymentsigdp.4.6 Total debtigdp Total debt senice/exports Present valueofdebt1gdp Present vaiueof debtlexports East Alia L Paclflc ,8 4,74.8 u m , Q ns 27.7 Lowermlddle- Income 3, , m m capita Life expectancy T I Access to improvedwatersourca -China Lowr-middle-income group Economic ratlos' Domestic savings Trade Gross primary Capital formation I I (averageannualgromh) GDP.3 9,5 116 GDP per capita no Emrts of goods and SBNIC~S ne.4 n group I' STRUCTURE of the ECONOMY (of GDP) Agriculture n7 industry Manufacturing services Household final consumption expenditure General gov't final consumption expenditure nz Imports Of goods andservices /Growth of capltal and ODP () 2 :t I ~ OB 7 -GCF -GDP I I (average annual gm Mh) Agriculture Industry Manufacturing services w T Growth of exports and Imports () 1 Household final consumption expenditure General gov't final consumption expenditure 6 95 x)9 *37 - O I Gross capital formation Q Exporlr --lnports Imports ofgoods andservices?a1 143 '82 I Note 27 data are preliminaryestimates This table was produced from the Development Economics LDB database 'Thediamonds showfourkeyindicators inthecountry(in bold) comparedwthits incomegroupaverage If dataare missing, thediamondwll be incomplete 7

73 ~ China ~ PRICES and GOVERNMENT FINANCE IS Domesllc prices (change) Consumer prices Implicit GDP deflator Inflation () Government flnsnce (of GDP, includes cunenf grants) Current revenue. 11 Current budget balance Overall surdlusideficit DPdeflator -9-CPI! TRADE (US$ millions) Totaleqorts (fob) Food Mineral fuels, lubricants, and related material! Manufactures Total imports (cif) Food Fuel and energy Capital goods Eqort price index (2O=WO) Import price index (2=WO) Terms of trade (2-WO) ,437 4,781 4,544 28,26 43,26 2, , ,792 v.75 8, , ,37 4,34,36 52, ts ,73 25,722 G,776 96, ,997 89,2 357,x /Export and Import levels (US$ mill.) Of OB 7 I Exporta m Imporla i Ii j! BALANCE of PAYM ENTS (US$ millions) Eqorts of goods and.senices 43,888 27,239 Imports of goods and services 43,95 64,46 Resource balance ,823 Net income Net current transfers ,143 Current account balance ,962 Financing items (net) Changes in net reserves Memo: R~SBN~S ,857 including gold (US$ millions) 22, ,439 Conversion rate (DEC, bcavus$) ,769 28,912 v ,867-2, ,812-2,.357, , Current account balance to GDP () 1 T I I OB O7 I EXTERNAL DEBT and RESOURCE FLOWS 1987 (US$ millions) Total debt outstanding and disbursed 35,34 IBRD 1427 IDA 133 Totaldebt service IBRD IDA ,697 8,239 7, , t2 81 Composition of net resourceflows Official grants Official creditors 828 4,315 Private creditors 5,482 8,4 Foreign direct investment (net inflows) 2,314 44,237 Portfolio equity(net inflows) 5,857 World Bank program Commitments Disbursements Pnncipal repayments Net flows Interest payments Net transfers 136 2, , t , ,997,151 27,877 1, ,5 78,95 42, , :omporltlon of 26 debt (US$ mlll.) A: lf,415 B: 9,997 D Q F 94,118 $. IBRD E- Bildusl I. IDA D. Other mltildwiii F. Private :-IMF - Short-tert Note This table was producedfrom the Development Economics LDB database 9/24/ 71

74 Annex 13: Maps CHINA: Wenchuan Earthquake Recovery Project 72

75 r r