Jiangxi Pingxiang Integrated Rural–Urban Infrastructure ...

Technical Assistance Consultant’s Report

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.

Project Number: 47030-001 November 2015

People's Republic of China: Jiangxi Pingxiang Integrated Rural-Urban Infrastructure Development—Final Report: Main Report and Appendixes (Financed by the ADB's Technical Assistance Special Fund and Cofinanced by the Multi-Donor Trust Fund under the Water Financing Partnership Facility)

Prepared by

AECOM Asia Company Ltd.

Hong Kong, China

For Pingxiang Municipal Government

Jiangxi Pingxiang Integrated Rural-Urban Infrastructure Development Project

Final Report: Main Report and Appendices

November 2015

Asian Development Bank Technical Assistance (TA-8451 PRC)


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TABLE OF CONTENTS

TABLE OF CONTENTS ......................................................................................................................................... I

LIST OF FIGURES ............................................................................................................................................. IV

LIST OF TABLES ............................................................................................................................................... V

ABBREVIATIONS ............................................................................................................................................ VI

CURRENCIES................................................................................................................................................... IX

WEIGHTS AND MEASURES ............................................................................................................................. IX

NOTES ............................................................................................................................................................ IX

MAPS ............................................................................................................................................................ X

KNOWLEDGE PRODUCT: SPONGE CITY ........................................................................................... XIII

1 PINGXIANG PPTA ................................................................................................................................ 1

1.1 OBJECTIVES OF THE TECHNICAL ASSISTANCE (TA) .............................................................................................. 1

1.2 CONDUCT OF THE PPTA ............................................................................................................................... 1

1.3 TRAINING PROVIDED BY PPTA CONSULTANTS................................................................................................... 3

1.4 PPTA COOPERATION WITH LOCAL DESIGN INSTITUTES........................................................................................ 4

1.5 ORGANIZATION OF THE REPORT ...................................................................................................................... 5

2 INTRODUCTION TO THE PROJECT LOCATION ............................................................................. 7

2.1 PEOPLE’S REPUBLIC OF CHINA ........................................................................................................................ 7

2.2 JIANGXI PROVINCE ....................................................................................................................................... 7

2.3 PINGXIANG MUNICIPALITY ............................................................................................................................. 8

3 SECTOR ANALYSIS ........................................................................................................................... 15

3.1 INTRODUCTION ......................................................................................................................................... 15

PART I: URBANIZATION ........................................................................................................................................... 15

3.2 URBANIZATION IN THE PRC ......................................................................................................................... 15

3.3 URBAN-RURAL INTEGRATION IN JIANGXI PROVINCE .......................................................................................... 21

3.4 URBAN-RURAL INTEGRATION IN PINGXIANG MUNICIPALITY ............................................................................... 25

PART II: FLOOD MANAGEMENT AND WASTEWATER TREATMENT INFRASTRUCTURE ............................................................ 26

3.5 FLOOD MANAGEMENT................................................................................................................................ 26

3.6 WASTEWATER TREATMENT.......................................................................................................................... 30

PART III: SMALL TOWNS AND VILLAGE INFRASTRUCTURE ............................................................................................... 33

3.7 GOALS FOR SMALL TOWN INFRASTRUCTURE ................................................................................................... 33

3.8 VILLAGES.................................................................................................................................................. 33

3.9 RURAL WATER SUPPLY ............................................................................................................................... 34

3.10 RURAL WASTEWATER AND SOLID WASTE DISPOSAL ......................................................................................... 34

3.11 RURAL ROADS ........................................................................................................................................... 35

PART IV: GOVERNMENT INSTITUTIONS RELEVANT TO THE PROJECT ................................................................................. 37

3.12 NATIONAL ORGANIZATIONS FOR RURAL PUBLIC SERVICES AND ENVIRONMENTAL MANAGEMENT .............................. 37

3.13 INTERFACE BETWEEN NATIONAL, PROVINCIAL AND LOCAL GOVERNMENTS ............................................................ 38

4 PINGXIANG’S DEVELOPMENT AND INFRASTRUCTURE PLANS ............................................. 40

4.1 OVERALL DEVELOPMENT STRATEGY ............................................................................................................... 40

4.2 URBAN MASTER PLANNING ......................................................................................................................... 42


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4.3 INFRASTRUCTURE PLANNING ........................................................................................................................ 45

4.4 OTHER DEVELOPMENT PROJECTS UNDER INTERNATIONAL FINANCE INSTITUTIONS.................................................. 47

5 THE PROPOSED PROJECT .............................................................................................................. 48

5.1 PROJECT RATIONALE .................................................................................................................................. 48

5.2 PROJECT ALTERNATIVE ................................................................................................................................ 50

5.3 IMPACT, OUTCOME AND OUTPUTS OF THE PROJECT ......................................................................................... 50

5.4 ADB CATEGORIZATIONS OF THE PROJECT ....................................................................................................... 53

5.5 ADB COUNTRY PARTNERSHIP STRATEGY WITH THE PRC ................................................................................... 53

5.6 CONTRIBUTION TO THE ADB RESULTS FRAMEWORK ......................................................................................... 54

5.7 PROJECT IMPLEMENTATION PERIOD .............................................................................................................. 54

5.8 INVESTMENT AND FINANCING PLANS ............................................................................................................. 55

6 COMPONENT #1: INTEGRATED RIVER REHABILITATION AND FLOOD RISK REDUCTION

57

6.1 EXISTING CONDITIONS ................................................................................................................................ 57

6.2 BASIS OF DESIGN ....................................................................................................................................... 57

6.3 RIVER COMPONENT DESIGN ........................................................................................................................ 59

6.4 BENEFITS OF THE RIVER COMPONENT ............................................................................................................ 67

6.5 BENEFICIARIES OF THE RIVER COMPONENT ..................................................................................................... 67

6.6 IMPLEMENTATION AND OPERATIONS AND MAINTENANCE CONSIDERATIONS ......................................................... 68

7 COMPONENT #2: WASTEWATER COLLECTION AND TREATMENT ........................................ 69


7.2 WASTEWATER COMPONENT ........................................................................................................................ 69

7.3 ANALYSIS OF ALTERNATIVES ......................................................................................................................... 70

7.4 BENEFITS OF THE WASTEWATER COMPONENT ................................................................................................. 72

7.5 BENEFICIARIES OF THE WASTEWATER COMPONENT .......................................................................................... 73

8 COMPONENT #3: RURAL-URBAN ROAD ...................................................................................... 74


8.2 PROPOSED ROAD ....................................................................................................................................... 74

8.3 ROAD DESIGN ........................................................................................................................................... 74

8.4 EVALUATION OF ALTERNATIVES .................................................................................................................... 76

8.5 BENEFITS OF THE ROAD COMPONENT ............................................................................................................ 77

8.6 BENEFICIARIES OF THE ROAD COMPONENT ..................................................................................................... 79

8.7 IMPLEMENTATION AND MAINTENANCE OF THE ROAD COMPONENT ..................................................................... 81

9 COMPONENT #4: PROJECT MANAGEMENT SUPPORT AND CAPACITY DEVELOPMENT . 82

9.1 PROJECT IMPLEMENTATION START-UP SUPPORT ............................................................................................. 82

9.2 PROJECT MANAGEMENT SUPPORT DURING LOAN IMPLEMENTATION ................................................................... 83

9.3 INSTITUTIONAL STRENGTHENING AND CAPACITY BUILDING ................................................................................ 83

9.4 IMPLEMENTATION OF GENDER ACTION PLAN AND SOCIAL DEVELOPMENT ACTION PLAN ......................................... 84

9.5 EXTERNAL MONITORING ............................................................................................................................. 85

9.6 TRAINING AND STUDIES .............................................................................................................................. 86

10 IMPLEMENTATION ARRANGEMENTS AND CAPACITY BUILDING ...................................... 88

10.1 INSTITUTIONAL ARRANGEMENTS OF THE PROJECT ............................................................................................ 88

10.2 PROJECT LEADING GROUP ........................................................................................................................... 89

10.3 PROJECT MANAGEMENT OFFICE ................................................................................................................... 89


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10.4 IMPLEMENTATION ARRANGEMENT AT PROJECT DISTRICT/COUNTIES ................................................................... 91

10.5 ANALYSIS OF OVERALL ARRANGEMENTS ......................................................................................................... 93

10.6 WATER AND WASTEWATER SECTOR MANAGEMENT ARRANGEMENTS IN PINGXIANG .............................................. 93

10.7 OPERATIONS AND MAINTENANCE ARRANGEMENT FOR PROJECT COMPONENTS ..................................................... 94

11 SAFEGUARDS ANALYSIS ............................................................................................................ 97

11.1 ENVIRONMENTAL ANALYSIS ......................................................................................................................... 97

11.2 LAND ACQUISITION AND RESETTLEMENT ...................................................................................................... 101

11.3 INVESTIGATION OF ETHNIC MINORITIES IN THE PROJECT AREA .......................................................................... 107

12 POVERTY AND SOCIAL ANALYSIS .......................................................................................... 109

12.1 DATA COLLECTION ................................................................................................................................... 109

12.2 POVERTY ANALYSIS .................................................................................................................................. 110

12.3 POVERTY REDUCTION ............................................................................................................................... 112

12.4 IMPACTS OF THE PROJECT ON POVERTY REDUCTION AND GENDER ..................................................................... 112

12.5 SOCIAL DEVELOPMENT ACTION PLAN .......................................................................................................... 113

12.6 GENDER ACTION PLAN .............................................................................................................................. 113

12.7 OTHER POVERTY AND SOCIAL ISSUES ........................................................................................................... 114

12.8 OVERALL PROJECT BENEFITS ...................................................................................................................... 114

13 FINANCIAL ANALYSIS ................................................................................................................ 117

13.1 INTRODUCTION ....................................................................................................................................... 117

13.2 FINANCIAL SUSTAINABILITY ANALYSIS .......................................................................................................... 117

13.3 WASTEWATER TREATMENT COMPONENT ..................................................................................................... 119

14 ECONOMIC ANALYSIS ................................................................................................................ 123

14.1 MACROECONOMIC AND SECTOR CONTEXT .................................................................................................... 123

14.2 RATIONALE ............................................................................................................................................. 123

14.3 PROJECT DESCRIPTION AND LEAST-COST OPTIONS ANALYSIS ............................................................................ 124

14.4 ECONOMIC ANALYSIS................................................................................................................................ 125

14.5 FLOOD RISK MANAGEMENT AND RIVER REHABILITATION COMPONENT BENEFITS ................................................. 125

14.6 WASTEWATER COMPONENT BENEFITS ......................................................................................................... 125

14.7 RURAL–URBAN ROAD COMPONENT BENEFITS............................................................................................... 126

14.8 EVALUATION ........................................................................................................................................... 127

15 PROJECT IMPLEMENTATION .................................................................................................... 129

APPENDICES

APPENDIX A: DESIGN AND MONITORING FRAMEWORK

APPENDIX B: INSTITUTIONAL AND CAPACITY BUILDING ANALYSIS

APPENDIX C: SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY

APPENDIX D: SOCIAL DEVELOPMENT ACTION PLAN

APPENDIX E: GENDER ACTION PLAN

APPENDIX F: FINANCIAL ANALYSIS

APPENDIX G: ECONOMIC ANALYSIS


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APPENDIX H: RISK ASSESSMENT AND RISK MANAGEMENT PLAN

APPENDIX I: DETAILS OF WORLD BANK PROJECT IN LUXI COUNTY

SUPPLEMENTARY DOCUMENTS

SD1: INTEGRATED RIVER REHABILITATION AND FLOOD RISK MANAGEMENT – AN

INTEGRATED AND ECOLOGICAL APPROACH CONTRIBUTION TO PINGXIANG AS A

SPONGE CITY PILOT IN THE PRC

SD2: ENGINEERING TECHNICAL ANALYSIS OF THE WASTEWATER COMPONENT

SD3: ENGINEERING TECHNICAL ANALYSIS OF THE ROAD COMPONENT

SD4: POVERTY AND SOCIAL ANALYSIS

SD5: ENVIRONMENTAL IMPACT ASSESSMENT AND ENVIRONMENTAL MANAGEMENT PLAN

LIST OF FIGURES

FIGURE 2-1 PINGXIANG ROAD NETWORK (2014) ........................................................................................... 10

FIGURE 3-1 URBANIZATION RATE IN PRC ...................................................................................................... 16

FIGURE 3-2 RELOCATION TRENDS IN THE PRC (1978 – 2012) .................................................................... 17

FIGURE 3-3 RURAL-URBAN INTEGRATION IN THE PRC .................................................................................. 19

FIGURE 3-4 DIFFERENCES BETWEEN URBAN RESIDENT POPULATION AND URBAN HUKOU POPULATION .. 20

FIGURE 3-5 DIAGRAM OF JIANGXI PROVINCE’S URBANIZATION STRATEGY ................................................. 22

FIGURE 3-6 DEVELOPMENT PRIORITY ZONES IN JIANGXI PROVINCE ............................................................ 25

FIGURE 3-7 CUMULATIVE DAMAGE FROM FLOODING IN THE PRC (2000-2010) .......................................... 28

FIGURE 3-8 WASTEWATER DISCHARGE VS URBANIZATION RATE IN THE PRC (2010-12) ........................... 31

FIGURE 3-9 WASTEWATER TREATMENT RATES IN THE PRC (2010) ............................................................ 31

FIGURE 3-10 WASTEWATER SEWER PIPELINES WITHIN AND CLOSE TO THE RIVER................................... 32

FIGURE 3-11 STATE (NATIONAL) LEVEL GOVERNMENT ............................................................................... 39

FIGURE 3-12 PRC GOVERNMENT ORGANIZATION AND RELATIONSHIPS ..................................................... 39

FIGURE 4-1 POSITIONING OF PINGXIANG ........................................................................................................ 41

FIGURE 4-2 PINGXIANG URBAN SYSTEM PLAN ............................................................................................... 43

FIGURE 4-3 PINGXIANG HIGHWAY NETWORK PLAN ........................................................................................ 44

FIGURE 5-1 PINGXIANG PROBLEM TREE ANALYSIS ....................................................................................... 49

FIGURE 5-2 PINGXIANG PROJECT IMPLEMENTATION SCHEDULE ................................................................... 55

FIGURE 6-1 TYPICAL RIVER CROSS-SECTION ................................................................................................ 59

FIGURE 6-2 PROPOSED RIPARIAN RE-VEGETATION ALONG BAIMA AND LIAN RIVERS .................................. 64

FIGURE 6-3 PROPOSED RIPARIAN RE-VEGETATION ALONG THE YUAN RIVER ............................................. 66

FIGURE 7-1 SCHEMATIC OF CARROUSEL OXIDATION DITCH ......................................................................... 72

FIGURE 8-1 PROPOSED ROAD ......................................................................................................................... 74

FIGURE 8-2 INDUSTRIAL PARKS CLOSE TO THE PROPOSED ROAD ................................................................ 78

FIGURE 8-3 LOCATIONS OF SCHOOLS IN THE ROAD PROJECT AREA ............................................................. 79

FIGURE 8-4 TOWNS AND TOWNSHIPS WITHIN 1-KM OF THE PROPOSED ROAD ............................................. 80

FIGURE 8-5 POPULATION OF ADMINISTRATIVE VILLAGES WITHIN 1 KM OF PROPOSED ROAD ...................... 80

FIGURE 10-1 OVERALL INSTITUTIONAL ARRANGEMENTS IN PINGXIANG ....................................................... 88

FIGURE 10-2 PROPOSED ORGANIZATION AND STAFFING OF PINGXIANG PMO ........................................... 90

FIGURE 11-1 COMMUNITY INFORMATION DISCLOSURE POSTER .................................................................. 97

FIGURE 11-2 ENVIRONMENTAL GRIEVANCE REDRESS MECHANISM .......................................................... 100

FIGURE 15-1 JIANGXI-PINGXIANG FLOW OF FUNDS .................................................................................... 130


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LIST OF TABLES

TABLE 1-1 PPTA TEAM .................................................................................................................................... 2

TABLE 1-2 TRAINING PROVIDED BY PPTA ...................................................................................................... 4

TABLE 2-1 JIANGXI PROVINCE BASIC DATA (2013) ........................................................................................ 7

TABLE 2-2 PINGXIANG MUNICIPALITY ADMINISTRATIVE UNITS, AREA, AND POPULATION 2012 .................... 8

TABLE 2-3 PINGXIANG MUNICIPALITY MAJOR ECONOMIC INDICATORS (2012) .............................................. 8

TABLE 2-4 PINGXIANG ROADS (2013) ............................................................................................................. 9

TABLE 2-5 KEY PARAMETERS FOR PRC, JIANGXI PROVINCE, AND PINGXIANG ........................................... 11

TABLE 2-7 SHANGLI WATER WORKS .............................................................................................................. 13

TABLE 2-8 XIANGDONG DISTRICT WATER SUPPLY PLANTS ......................................................................... 14

TABLE 3-1 CHANGES IN URBAN INFRASTRUCTURE AND MUNICIPAL FACILITIES IN PRC CITIES ................. 17

TABLE 3-2 KEY TARGETS IN THE JIANGXI PROVINCE NEW-TYPE URBANIZATION PLAN (2014-2020) ........ 23

TABLE 3-3 JIANGXI PROVINCE DEVELOPMENT PRIORITY ZONE PLAN .......................................................... 24

TABLE 3-4 TOWNS, TOWNSHIPS, AND VILLAGES IN SUB-PROJECT AREAS ............................................. 26

TABLE 3-5 IMPACTS OF RECENT FLOODING IN THE PRC ............................................................................. 27

TABLE 3-6 PRC URBAN FLOOD CONTROL STANDARDS ............................................................................... 30

TABLE 3-7 PRC RURAL FLOOD CONTROL STANDARDS ............................................................................... 30

TABLE 3-8 WASTEWATER TARIFF STANDARDS IN JIANGXI ........................................................................... 32

TABLE 3-10 HIGHWAY STOCK IN JIANGXI’S PREFECTURE-LEVEL CITIES (END OF 2012) .............................. 36

TABLE 3-11 NATIONAL ORGANIZATIONS AND RESPONSIBILITIES IN THE RURAL SECTOR ............................. 37

TABLE 4-1 SELECTED GOALS FROM PINGXIANG 12TH FYP AND THE PINGXIANG RESOURCE-DEPLETED

TRANSITIONAL DEVELOPMENT PLAN .......................................................................................................... 42

TABLE 4-2 REGIONAL DEVELOPMENT STRATEGIES ...................................................................................... 45

TABLE 4-3 PINGXIANG WATER SUPPLY PLANS ............................................................................................. 46

TABLE 4-4 PINGXIANG WASTEWATER TREATMENT PLANS—URBAN AREAS ............................................... 46

TABLE 4-5 PINGXIANG MUNICIPAL SOLID WASTE PLANS ............................................................................. 46

TABLE 4-6 PINGXIANG FLOOD CONTROL STANDARDS FROM MASTER PLANS ............................................ 47

TABLE 5-1 PROJECT INFRASTRUCTURE COMPONENTS ................................................................................ 51

TABLE 5-2 PROJECT INVESTMENT PLAN ($USD MILLION) ............................................................................ 55

TABLE 5-3 FINANCING PLAN ($USD MILLION) ............................................................................................... 56

TABLE 6-1 FLOOD CONTROL DESIGN STANDARDS FOR PROJECT RIVERS .................................................. 58

TABLE 6-2 GOVERNMENT PLANS RELEVANT TO RIVER REHABILITATION ..................................................... 59

TABLE 6-3 PINGXIANG RIVER COMPONENT ................................................................................................... 61

TABLE 6-4 PRESERVATION OF WETLAND AREAS AS NATURAL FLOODPLAINS (LIANHUA) ........................... 65

TABLE 6-5 SUMMARY OF PROPOSED RIPARIAN RE-VEGETATION IN LUXI COUNTY ..................................... 65

TABLE 6-6 YUAN RIVER WETLAND PARK ...................................................................................................... 66

TABLE 6-7 ESTIMATES OF DIRECT BENEFICIARIES OF THE RIVER COMPONENT .......................................... 68

TABLE 6-8 IMPLEMENTATION AND O&M AGENCIES FOR RIVER COMPONENT .............................................. 68

TABLE 7-1 PINGXIANG WASTEWATER COMPONENT...................................................................................... 69

TABLE 7-2 ASSUMPTIONS FOR WASTEWATER PROJECTIONS....................................................................... 70

TABLE 7-3 SUMMARY OF ALTERNATIVES CONSIDERED FOR WASTEWATER COMPONENT .......................... 70

TABLE 7-4 RECOMMENDED WASTEWATER PIPES ......................................................................................... 71

TABLE 7-5 ESTIMATED INFLUENT PARAMETERS............................................................................................ 71

TABLE 7-6 ESTIMATED POLLUTION REDUCTION FROM THE WASTEWATER COMPONENT1 .......................... 73

TABLE 7-7 ESTIMATED DIRECT BENEFICIARIES OF WASTEWATER COMPONENT (2020) ............................ 73

TABLE 8-1 ROAD LENGTH BY SUB-PROJECT ................................................................................................ 75

TABLE 8-2 TECHNICAL DESIGN PARAMETERS OF THE ROAD ........................................................................ 75


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TABLE 8-3 PROPOSED ROAD PAVEMENT FOR CARRIAGEWAY ..................................................................... 76

TABLE 8-4 BASIC INFORMATION OF INDUSTRIAL PARKS ALONG THE PROPOSED ROAD ............................. 77

TABLE 8-5 ESTIMATED BENEFICIARY AREA AND POPULATION OF THE ROAD COMPONENT ........................ 81

TABLE 8-6 IMPLEMENTATION AND O&M FOR PINGXIANG ROAD COMPONENT ............................................. 81

TABLE 9-1 OVERVIEW OF CONSULTING SERVICE ......................................................................................... 82

TABLE 10-1 PINGXIANG PMO ......................................................................................................................... 89

TABLE 10-2 DETAILS OF PIUS ......................................................................................................................... 92

TABLE 10-3 PINGXIANG WATER AND WASTEWATER COMPANIES ................................................................. 94

TABLE 11-1 DOMESTIC ENVIRONMENTAL DELIVERABLES FOR THE PROJECT ............................................... 98

TABLE 11-2 RESETTLEMENT COSTS AS OF 28 APRIL 2015 (UNITS CNY1,000) ......................................... 102

TABLE 11-3 RESETTLEMENT POLICIES AND REGULATIONS IN THE PRC ..................................................... 103

TABLE 11-4 IDENTIFICATION OF ETHNIC MINORITIES ................................................................................... 107

TABLE 12-1 RURAL AND URBAN MLS IN THE PROJECT AREA IN OCTOBER 2013 ...................................... 110

TABLE 12-2 ESTIMATED POOR POPULATION IN THE PRC, JIANGXI, AND PINGXIANG ................................. 111

TABLE 12-3 URBAN MINIMUM LIVING STANDARD (MLS) IN THE PROJECT AREA (OCT. 2013) .................. 111

TABLE 12-4 RURAL MLS IN THE PROJECT AREA IN OCTOBER 2013 .......................................................... 111

TABLE 12-5 ESTIMATED NUMBER AND TYPES OF JOBS GENERATED BY THE PROJECT DURING

CONSTRUCTION ......................................................................................................................................... 114

TABLE 12-6 ESTIMATED NUMBER AND TYPES OF JOBS GENERATED BY THE PROJECT DURING OPERATIONS

115

TABLE 13-1 PROJECT COUNTERPART FUNDING, OPERATION AND MAINTENANCE EXPENSE, AND DEBT

SERVICE AS A PERCENTAGE OF REVENUE (CNY MILLION) ...................................................................... 118

TABLE 13-2 FINANCIAL SUSTAINABILITY FOR WASTEWATER TREATMENT PLANTS ..................................... 120

TABLE 13-3 CURRENT WATER SUPPLY, TARIFF, AND ESTIMATED REVENUE ............................................. 121

TABLE 13-4 WASTEWATER TARIFF AFFORDABILITY ..................................................................................... 122

TABLE 14-1 TRAFFIC ON THE PROJECT ROAD, 2021–2040 ........................................................................ 126

TABLE 14-2 SUBCOMPONENT EVALUATION RESULTS .................................................................................. 127

TABLE 14-3 EVALUATION OF ALL COMPONENTS .......................................................................................... 127

TABLE 14-4 SENSITIVITY TEST RESULTS ...................................................................................................... 128

TABLE 15-1 IMPLEMENTATION ARRANGEMENTS ........................................................................................... 129

TABLE 15-2 SUMMARY OF RISKS AND MITIGATING MEASURES ................................................................... 131

ABBREVIATIONS

AADT Annual Average Daily Traffic

AECOM AECOM Asia Company Ltd.

ADB Asian Development Bank

BCR Benefit Cost Ratio

CIF Cost Insurance Freight

CDM Clean Development Mechanism

CERT Roads Safety Education Team

CEST Community Environment Supervision Team

CESMT Community Environmental Supervision & Monitoring Team

CEIA Consolidated Environmental Impact Assessment

CF Conversion Factor


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CNY China Yuan (also known as Renminbi)

CPLG County Project Leading Groups

CPS Country Partnership Strategy

CV Contingent Valuation

CWG China Water Affairs Group Limited

CZT Changsha-Zhuzhou-Xiangtan Extended Metropolitan Region

DI Design Institute

DMF Design and Monitoring Framework

DRC Development and Reform Commission

EA Executing Agency

EEM External Environment Monitor

EIA Environmental Impact Assessment

EIR Environmental Impact Reports

EIT Environmental Impact Tables

EIRR Economic Internal Rate of Return

EMP Environmental Management Plan

EPB Environmental Protection Bureau

FAO Food and Agriculture Organization

FCUP Foreign Capital Utilization Plan

FGD Focus Group Discussion

FIRR Financial Internal Rate of Return

FBC Financial Base Cost

FMA Financial Management Assessment

FMAQ Financial Management Assessment Questionnaire

FR Final Report

FSR Feasibility Study Report

FYP Five-Year Period

GDP Gross Domestic Product

GIS Geographical Information System

HDM4 Highway Development and Management 4 (software package)

HH Household

HHQ Household Questionnaire

IA Implementing Agency

ICQ Internal Control Questionnaire

IDC Interest During Construction

IRI International Roughness Index

IRR Internal Rate of Return

LAR Land Acquisition and Resettlement


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LIBOR London Interbank Offered Rate

MEP Ministry of Environmental Protection

MLS Minimum Living Standard

MO Moving Observer

MOA Ministry of Agriculture

MOF Ministry of Finance

MOT Ministry of Transport

MOHURD Ministry of Housing and Urban-Rural Development

MRM Management Review Meeting

MSW Municipal Solid Waste

MWR Ministry of Water Resources

NDRC National Development and Reform Commission

NPV Net Present Value

NRCR National Research Centre for Resettlement

O&M Operation and Maintenance

OD Origin and Destination

PAM Project Administration Manual

PCSE Passenger Car Space Equivalent

PCU Passenger Car Unit

PDRC Province Development Reform Commission

PHMB Pingxiang Highway Management Bureau

PIU Project Implementation Units

PLG Project Leading Group

PMG Pingxiang Municipal Government

PMO Project Management Office

PPMS Project Performance Monitoring System

PPP Public-Private-Partnership

PPTA Project Preparatory Technical Assistance

PRC People's Republic of China

PSA Poverty and Social Assessment

PUCIDC Pingxiang Urban Construction Investment and Development Corporation

RAC Road Agency Cost

RCP Reinforced Concrete Pipe

RP Resettlement Plan

RRP Report and Recommendation of the President

RPMP Reinforced Plastic Mortar Pipe

RUC Road User Cost

SAR Special Administrative Region


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SDAP Social Development Action Plan

SERF Shadow Exchange Rate Factor

SFCDRH State Flood Control and Drought Relief Headquarters

SOE State Owned Enterprise

SPS Safeguard Policy Statement

SPRSS Summary Poverty Reduction and Social Strategy

SWCR Soil and Water Conservation Reports

TA Technical Assistance

TBD To Be Determined

TOR Terms of Reference

USD United States Dollar

VAT Value Added Tax

VOC Vehicle Operating Cost

WAB Water Affairs Bureau

WACC Weighted Average Cost of Capital

WTP Willingness to Pay or Water Treatment Plant

WW Wastewater

WWTP Wastewater Treatment Plant

CURRENCIES

Currency unit = Chinese Yuan

CNY1.00 = $0.1629 US$1.00 = CNY6.14

WEIGHTS and MEASURES

ha hectare = 10,000 m2

kg kilogram (1000 grams)

km kilometer (1000 meters)

km2 square kilometers = 100 ha

m, m2 meters, square meters

m3/day cubic meters per day

mg/L milligrams per Liter

mu Chinese unit of area (15 mu = 1 hectare)

t ton = 1000 kilograms

NOTES

(i) The People‘s Republic of China fiscal year (FY) ends on 31 December

(ii) In this report, "$" refers to US dollars


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MAPS

Map M-1 Administrative Divisions in Pingxiang Municipality


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Map M-2 Project Rivers

Jinshan River

Lishui River

Ecological

WetlandPing

shui River

Lianjiang River Baima River

Yuan River

Tankou River

Xinhua River

Shangli

Anyuan

Xiangdong

Lianhua

Luxi

N

Pingshui River


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Map M-3 Project Locations


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KNOWLEDGE PRODUCT: SPONGE CITY

In December 2013 People’s Republic of China (PRC) President Xi Jinping spoke about “building Sponge Cities where stormwater can be naturally conserved, infiltrated, and purified”.1 A sponge is a natural or artificial material, light in weight, which is able to take in and hold liquid such as water. A Sponge City captures stormwater and uses it to supplement existing water supply.

In October 2014 the Ministry of Housing and Urban-Rural Development issued a “Technical Guide on the Construction of a Sponge City - Construction of Low Impact Stormwater Drainage System (Trial)”. On 2 April 2015 Pingxiang was named as one of 16 PRC cities to be a Pilot Sponge City2 3

Pingxiang Municipality uses funds from the central and local government to pilot sponge city infrastructure development for the urban core area and the new development district north of the urban core. The ADB project will focus on piloting sponge city design principles and green infrastructure development in the four key sub-centers and the respective river areas of influence of Pingxiang Municipality in Xiangdong District urban center, Lianhua County (county seat), Luxi County (county seat), and Shangli County (county seat and Tongmu township). The ADB funded infrastructure components have a holistic approach to sponge city infrastructure design. The integrated river rehabilitation and flood risk management component (river component) has various features and water management functions including green embankments, publicly accessible river greenways, floodplain protection, wetlands rehabilitation, and wetland parks for stormwater retention. The wastewater component will also free up drainage pipes to be exclusively used for rainwater runoff. In addition, the river component in Xiangdong District will directly contribute to the sponge city pilot’s objective of achieving a 1/50 year flood control standard in the Pingshui River.

Cities have large areas of land covered by hard, impervious surfaces, such as bitumen, concrete, and buildings. This results in increased amounts of stormwater run-off during rain storms. The traditional response to managing stormwater run-off has been to convey the stormwater away from the urban area using gray infrastructure4.

In the PRC the drainage systems of a city are generally divided into two separate systems: (1) urban drainage network and (2) urban flood control system. The urban drainage network is the underground drainage network in the city, whereas the urban flood control system refers to rivers, channels, lakes, and receiving waters for the city. These two systems are typically managed by different government departments 5 and designed against different

1 http://journal.hep.com.cn/laf/EN/Y2015/V3/I2/22#1

2 In January 2015, the Ministries of Finance, Housing and Urban-Rural Development, and Water Resources

initiated a competition to select pilot Sponges Cities. Over 100 cities

applied.http://jjs.mof.gov.cn/zhuantilanmu/xxczh/201504/t20150402_1211843.html

3 The Economic Construction Division of Ministry of Finance, the Urban Construction Division of Ministry of

Housing and Urban-Rural Development, and the Planning Division of Ministry of Water Resources jointly issued

the following official documents on how to conduct the sponge city evaluation work: Announcement about the

Central Finance’s support on Conducting Pilot Sponge City Construction [CaiJian (2014) No. 838] and

Announcement about To Organize the Application for the Pilot Sponge City [CaiBanJian (2015) No.4].

4 Gray Infrastructure is a term used by urban planners to describe street gutters, storm sewers, stormwater drainage channels and other traditional methods of dealing with rainwater. 5 In the PRC the Ministry of Water Resources (MWR) is the key national agency responsible for planning, construction and management of structural flood control works and the Ministry for Housing and Urban-Rural Development (MOHURD) is responsible for providing policy and planning guidance to local and municipal governments on stormwater drainage management. Thus the municipal Water Resources Bureau is responsible for flood control while the Urban Construction Bureau is responsible for urban drainage.

http://journal.hep.com.cn/laf/EN/Y2015/V3/I2/22#1

http://jjs.mof.gov.cn/zhuantilanmu/xxczh/201504/t20150402_1211843.html


AECOM Asia Company Limited xiv Asian Development Bank

design standards. In general, the urban flood control system has a higher design standard. There are many locations when the rainstorms are higher than the design capacity of the urban drainage network such that the excessive runoff cannot go into the underground drainage system, causing local overland flow of stormwater, which is called “urban waterlogging” in the PRC6.

A combination of circumstances – expected increase in stormwater volume resulting from climate change; cost and lack of space to build stormwater infrastructure; and shortages of water suitable for domestic use – have caused a re-consideration of stormwater from a nuisance requiring rapid disposal to being a resource.

Urban stormwater in several developed countries is now managed as part of an ecologically sustainable development approach that integrates land use planning, urban landscape architecture, water resources management, and urban drainage infrastructure. In Australia, this approach is referred to as Water Sensitive Urban Design; in the USA as “green infrastructure” or “low impact development” (LID) practices 7 ; in Europe and the UK, Sustainable Urban Development principles.

Green infrastructure facilitates retention, penetration, and preservation of stormwater. It includes rainwater harvesting; bio-retention areas8 and rain gardens9; porous pavement for parking lots, driveways, and sidewalks; green parks with flood-tolerant plants.

Green infrastructure requires planning, design, and maintenance. For example rain gardens should be located 2.5 to 3 meters away from buildings to avoid moisture around the building foundation. Vegetation should be suitable for rainwater retention. A bio-retention area needs10 pre-treatment of urban runoff to filter out coarse sediments and debris and a border of small gravel stones to spread flow evenly and catch larger particles.

Green infrastructure is not maintenance-free. All vegetation needs periodic pruning and removal of dead and decaying plants. Accumulated trash must be removed because it degrades performance by interfering with water flow and penetration.

The Pingxiang Municipality Sponge City Urban Construction Pilot, using national funds from the pilot program and additional local government resources, is planned for a 33 km2 area that is susceptible to flooding in the urban core area and in the new development district north of the urban core. Construction during the three-year period of 2015-2017 is planned in three different areas: (i) flood prone areas of the old urban district: (ii) commercial and administrative centers of the new development district; and (iii) Tianzhong Lake and its surrounding areas. The pilot, estimated to cost 460 million CNY, will be funded by both central government subsidies and local funds. Works will include permeable pavements, green roofs, sunken greenbelts, vegetated swales, bio-retention ponds, detention tanks and

6 “Urban Stormwater Management and Waterlogging Disaster Prevention”, Asian Development Bank ADTA No.7839 PRC, AECOM, December 2012 7 Supplementary Report #2. “Non-Structural Methods for Urban Water Quality and Flooding”. Anhui Huainan Urban Water Systems Integrated Rehabilitation Project, ADB Project No. TA-8094PRC. AECOM Asia Co. Ltd. July 2013.

8 http://buildgreen.ufl.edu/Fact_sheet_Bioretention_Basins_Rain_Gardens.pdf

9 http://www.lowimpactdevelopment.org/raingarden_design/whatisaraingarden.htm

10 http://water.epa.gov/polwaste/npdes/swbmp/Bioretention-Rain-Gardens.cfm

http://buildgreen.ufl.edu/Fact_sheet_Bioretention_Basins_Rain_Gardens.pdf

http://www.lowimpactdevelopment.org/raingarden_design/whatisaraingarden.htm

http://water.epa.gov/polwaste/npdes/swbmp/Bioretention-Rain-Gardens.cfm


AECOM Asia Company Limited xv Asian Development Bank

other green "sponge bodies" to slow the release of stormwater into drainage systems and to promote groundwater recharge11. The overall goals of the pilot are as follows:

Annual runoff volume control rate of 75% (i.e. no runoff is produced when daily precipitation is lower than 22.8 mm);

Drainage standard of 1/30 year (i.e. flooding/waterlogging will not occur during a 1/30 year storm);

Flood control standard of 1/50 year for the main trunk of the Pingshui River and 1/20 year for its tributaries;

12% stormwater utilization rate; and

Class III water quality standards for rivers in the pilot areas.

11 http://kanbao.pxrbs.com/html/20150626_51441.html


AECOM Asia Company Limited 1 Asian Development Bank

1 PINGXIANG PPTA

1. Asian Development Bank (ADB) is preparing to implement the PRC: Jiangxi Pingxiang Integrated Rural-Urban Infrastructure Development Project [the Project]. The primary themes are environmental sustainability and economic growth. The expected project impact will be socially inclusive and environmentally sustainable rural-urban development in Pingxiang. The intended project outcome will be improved environmental infrastructure services and ecologically sound river basin management.

2. The proposed project is included in ADB’s Country Operations Business Plan PRC 2013–2015 and the 2015 lending pipeline for the PRC. In March 2014 ADB appointed AECOM Asia Company Ltd. (AECOM) as the Project Preparatory Technical Assistance (PPTA) Consultant. The Project has four components: (1) Integrated River Rehabilitation and Flood Risk Management; (2) Wastewater Collection and Treatment; (3) Rural –Urban Transport; and (4) Project Management Support and Capacity Development.

3. The Pingxiang Municipal Government (PMG) will be the Executing Agency (EA). A Project Leading Group (PLG) established under the PMG for the project will provide overall guidance for PPTA implementation.The Project is located primarily12 in (1) Lianhua County; (2) Luxi County; (3) Shangli County; and (4) Xiangdong District, whose governments will act as the project implementing agencies (IA).

4. The kick-off meeting for PPTA Phase 2 was held in Pingxiang City on 15 April 2014. ADB Progress Missions were held 23 - 30 June 2014, 17 – 22 December 2014, and 2–6 February 2015. Loan Fact Finding was held 23 – 1 April 2015. The ADB Management Review Meeting (MRM) was held 22 May 2015.

1.1 Objectives of the Technical Assistance (TA)

5. The PPTA developed a Project design for a proposed loan which responds to the clients’ needs and fulfills ADB requirements and safeguard policies.

6. The major output of the PPTA was due diligence for an investment program as agreed upon between ADB and the PMG. The PPTA addressed the following aspects related to the project: (i) technical feasibility of the project; (ii) due diligence on the economic and financial feasibility of the project; (iii) safeguard requirements; (iv) social survey and consultations; (v) plan to develop capacity of the PMG for project management; and (vi) project documents, including safeguard documents and ADB’s Report And Recommendations of the President (RRP) including its appendices and linked documents.

7. The PPTA was planned to be implemented over eight months from 11 April 2014 to 10 December 2014, however it was extended past March 201513 due to delays in receiving the Feasibility Study Reports (FSR) and the MRM schedule.

1.2 Conduct of the PPTA

8. The PPTA was carried out in two phases. The PPTA Phase 1 focused on the Project components of (i) strategic urban-rural integration in Pingxiang; (ii) integrated flood risk management and ecological rehabilitation of the rivers14; (iii) economic assessment of the road component; and (iv) water safety plans. It started 6 January 2014 and Draft Final Report was completed in October 2014.

12 A small portion of the road component is located in Anyuan District 13 Month of loan fact-finding mission 14 Phase 1 hydrologist continued support during the Phase 2 PPTA, while the Phase 1 ecologist’s role was taken by the Phase 2 team through additional staffing described in Section 3.1.



9. Phase 1 consultants helped narrow down the scope of work for the project in preparation for Phase 2. They conducted meetings and site visits to potential locations of infrastructure projects (water supply, wastewater management, solid waste, road, and river rehabilitation) in order to finalize a draft list of priority projects for the Design Institute (DI) to begin preparing Feasibility Study Reports (FSRs). Selection of appropriate sub-components aimed to maximize synergies between the various components (e.g. the wastewater treatment and the river rehabilitation components).

10. The list of sub-components was finalized during an ADB PPTA Progress Review Mission on 23 – 30 June 2014, during which the government decided to remove the solid waste and water supply components. The main reasons were the involvement of private sector partners in these sectors with agreements already under negotiation. A cause for further delay of the PPTA was the lack of topographic surveys as basis for the design for the FSRs, which consequently triggered delays in the preparation of the domestic Environmental Impact Assessments (EIA) and Resettlement Plans (RP).

11. The Phase 2 of the PPTA focused on cooperation and coordination with the DIs, providing recommendations on strategy, project design and technical solutions based on international best practices, required due diligence examination of the proposed infrastructure, and preparing the documentation ADB requires to evaluate the Loan. Table 1-1 lists the PPTA Phase 1 and Phase 2 Teams.

Table 1-1 PPTA Team

PHASE 1 SPECIALISTS

Name Position

International Specialists

Philippe Bergeron

Flood Risk Management, Hydrology and Ecological Infrastructure Specialist / Team Leader

Edward Lemon Urban and Regional Planner and Land Use Specialist

National Specialists

Shengbin Liu Water Resources Management Specialist/Deputy Team Leader

Chuanze Li Hydrologist and Flood Risk Management Specialist

Haohan Wu Ecological Infrastructure Design and Biodiversity Specialist

PHASE 2 SPECIALISTS

Name Position

International Specialists

Sher Singh Municipal Engineer/Utility Management Specialist and Team Leader

Alan Kwok Environmental Specialist

Chen Shaojun Poverty, Social, and Gender Specialist

Chen Shouling River Rehabilitation Specialist

Tim Yates Infrastructure Economist

Amy Yeh Integrated River Basin Management Specialist

Ma Yue Governance and Institutional Capacity Development Specialist

National Specialists

Yan Wei Water Supply and Sanitation Specialist and Deputy Team Leader

Zhang Anjie Solid Waste Management Specialist

Sidun Xiong Ecological Planner

Yan Lu Road and Traffic Specialist

Yuan Jingwei Environmental Specialist



Mao Miankui Poverty Social and Gender Specialist

Dong Ming Resettlement Specialist

Li Mingjian Infrastructure Finance Specialist

Dai Xiaojun Project Management and Procurement Specialist

Other

Sam Zhang Project Coordinator

Simon Sun Project Director

12. The ADB team provided valuable guidance to the PPTA consultants and input to the TA. The full ADB team15 is listed as follows:

Team leader S. Rau, Urban Development Specialist, East Asian Department (EARD) Team members R. Benigno, Senior Operations Assistant, EARD

C. Chu, Senior Portfolio Management Officer, People’s Republic of China Resident Mission, EARD M. Dela Cruz, Associate Project Officer, EARD M. Gupta, Principal Safeguards Specialist (Resettlement), EARD Y. Hirao, Financial Control Specialist, Controller’s Department S. Kawazu, Senior Counsel, Office of the General Counsel K.-J. Kim, Senior Transport Specialist, EARD K. Koiso, Procurement Specialist, Operations Services and Financial Management Department U. Kumar, Economist, Economic Research and Regional Cooperation Department A. Morel, Environment Specialist, EARD S. Robertson, Natural Resources and Agriculture Specialist, EARD G. Tadevosyan, Safeguards Specialist, EARD Y. Zhou, Senior Water Resources Specialist, EARD L. Zou, Principal Financial Management Specialist, EARD

1.3 Training Provided By PPTA Consultants

13. The PPTA consultants provided training to the PMO, EA, and IAs on ADB procedures and requirements for: (a) safeguards (environmental, social, resettlement); (b) Design and Monitoring Framework and Project Monitoring System; (c) financial borrowing and reporting; (d) procurement; and (e) anti-corruption, as shown in Table 1-2.

14. The consultants also provided training to staff of the DI, EIA, and RP institutes.

15 Source: ADB Report And Recommendations of the President to the Board of Directors.



Table 1-2 Training Provided by PPTA

No. Date Location Topic Organization Receiving the

Training

Number of Participants

2014

1 30-Jun Pingxiang PMO

ADB social safeguard policies and RP preparation

Staff from PMO and county/district PMOs

20

2 15-Jul Hohai University

Project introduction and RP preparation

Staff from the DI 15

3 18-Sep

Tianjin

Survey of existing conditions in project rivers

DI 8 Design principles and approaches for the integrated river rehabilitation and flood risk management, particularly ecological embankment design and floodplain preservation

4 16 - 17

Oct Tianjin

Design of typical embankment types and sections for all 8 river projects

DI 8

5 28 Oct Pingxiang

ADB loan categories; financial terms; budget formats; financial management assessment; calculations

EA 4

6 17

Dec Pingxiang

ADB procurement procedures and requirements

PMO, municipal financial bureau, development and reform commission (DRC), county/district PMOs and agencies,

15

7 20

Dec Pingxiang

ADB safeguards and resettlement policies, resettlement planning, implementation and resettlement monitoring and evaluation

PMO and relevant local government agencies

20

2015

8 4 Feb Pingxiang ADB resettlement requirements (during discussions of each sub-project’s resettlement issues)

PMO and Local Government

20

9 4 Feb Pingxiang ADB environmental monitoring and reporting requirements

PMO and IA 8

10 27 Mar Pingxiang ADB requirements for advanced contracting and retroactive financing

PMO, IA, DRC, Finance Bureau

10

Training on preparation of Water Safety Plans was provided to the local government and water utility

staff in 2014 and 2015 by two individual Phase 1 Consultants and resulted in Draft Water Safety

Plans on the county and district level.

1.4 PPTA Cooperation with Local Design Institutes

15. The PMO and IAs engaged local design institutes to prepare studies required for domestic approval procedures including feasibility study reports, environmental impact assessments and resettlement plans. The PPTA consultants cooperated closely with these domestic institutes and advised these on international best practices and ADB policy



requirements on technical, financial, economic, procurement, environmental, and resettlement aspects of the project preparation.

16. The PMO appointed the North China Municipal Engineering Design and Research Institute, located in Tianjin, as the DI to prepare the FSRs for the Project. The FSRs must have domestic approval and this was provided by the Jiangxi Province Development Reform Commission (PDRC). After a separate tendering process, a selected DI will prepare detailed design documents including technical specifications and drawings. During the feasibility design phase, the DI’s compensation is determined as a percentage of construction costs, so the DI does not invest a lot of effort in developing plans and studies for infrastructure that will not be constructed.

17. In March 2014 the PMO selected the National Research Centre for Resettlement (NRCR) in the School of Public Administration of Hohai University, located in Nanjing, to prepare the RPs. The formal contract was signed in June 2014. Draft RPs were prepared, reviewed, discussed and the final RPs were submitted in May 2015.

18. The PMO signed the contract with Jiangxi Provincial Academy of Environmental Sciences (located in Nanchang) to prepare the domestic EIA on 30 May 2014. The Institute prepared Environmental Impact Reports (EIR) and Environmental Impact Tables (EIT), all of which were approved by the Pingxiang Municipal Environmental Protection Bureau (EPB). One EIR is required per project sub-component, where sub-component refers to a specific infrastructure, e.g. Pingshui River infrastructure, wastewater in Luxi; etc. Using the EIR and EIT the PPTA prepared a Consolidated Environmental Impact Assessment and an Environment Management Plan (EMP). The draft consolidated EIA was discussed on 28 April 2015 at ADB headquarters in Manila during a Community of Peers meeting and posted on the ADB website in April 2015.

1.5 Organization of the Report

19. This Report is organized as follows:

Section 2 introduces the Project location including Jiangxi Province, Pingxiang

Municipality, and the four counties/districts (sub-project areas).

Section 3 is the Sector Analysis which is presented in four parts.

Part I: Urbanization in the PRC;

Part II: Flood control and wastewater treatment, which are two of the Project’s

components;

Part III: Rural infrastructure in county towns and villages for water supply, wastewater

treatment, solid waste management, and roads; Part IV: PRC national level

institutions relevant to the Project and the relationship between national, provincial,

and local government entities.

Section 4 describes Pingxiang’s development and infrastructure plans relevant to Project

components.

Section 5 describes the proposed Project including project rationale, impacts and

outcomes, ADB Categorizations, as well as the investment and financing plans.

Sections 6, 7, 8, and 9 provide details about each of the four components:

i. Integrated River Rehabilitation and Flood Risk Reduction ii. Wastewater Collection and Treatment



iii. Rural-Urban Road iv. Project Management Support and Capacity Development

Section 10 describes the implementation arrangements and analysis of capacity building

requirements.

Section 11 summarizes the safeguards analysis, including assessment of environment

impacts, land acquisition and resettlement impacts, and investigation of ethnic minorities

in the project area.

Section 12 summarizes the poverty and social analysis. The Summary Poverty

Reduction and Social Strategy, Social Development Action Plan, and Gender Action

Plan are provided in the appendices.

Section 13 is the financial analysis and Section 14 the economic analysis. For non-

revenue generating components (river and road), the financial analysis assessed the

financial sustainability of local governments to repay loan principal and interest. For the

revenue generating component (wastewater), the financial analysis compared expected

revenues with operating costs to determine cost recovery for operations and

maintenance. The economic analysis used cost-benefit analysis and calculated the

Economic Internal Rate of Return (EIRR).

Section 15 discusses project implementation arrangements. The Project’s Risk

Assessment and Risk Management Plan is included as an appendix to this report while

other documents such as the procurement plan, packages, and assessment of capacity

and risk are in the Project Administration Manual.



2 INTRODUCTION TO THE PROJECT LOCATION

2.1 People’s Republic of China

20. The PRC has a population of about 1.367 billion (largest in the world), a landmass of 9.6 million square kilometers (third-largest country in the world) and an economy with Gross Domestic Product (GDP) of US$8 trillion (2nd largest in the world). Over 50% of the PRC population live in locations classified as urban.

21. The PRC is organized into 34 province-level divisions. Prefectures are administrative subdivisions of provincial level divisions and there are 333 prefecture-level divisions within which there are counties, towns, and villages.

2.2 Jiangxi Province

22. Jiangxi Province is located in the southeast region of the PRC. It is a land-locked province, bordering Anhui to the north, Zhejiang to the northeast, Fujian to the east, Guangdong to the south, Hunan to the west, and Hubei to the northwest.

23. The Gan River flows the entire length of the province from south to north. It enters Poyang Lake in the north, the largest freshwater lake of China, which empties into the Yangtze River, which forms part of the northern border of Jiangxi Province. The Poyang Lake watershed (catchment area) is 162,225 km², overlaps with about 97% of the Province, and includes 96 of the 100 counties within Jiangxi Province.

24. Jiangxi is rich in natural resources including minerals, water, and timber. In 2012, smelting and pressing of ferrous and non-ferrous metal accounted for 24% of the gross industrial output.16 Hong Kong is the largest source of foreign direct investment in Jiangxi. The Province attracts manufacturing plants relocating from the coastal region.

Table 2-1 Jiangxi Province Basic Data (2013)

Area (km2) 166,900

Population (2012) 45 million

GDP (CNY Billion) 1294.9

Per Capita GDP (CNY) 28,800

GDP Component Billion CNY % of Total

Primary (Agriculture) 152 12%

Secondary (Industry and Construction) 694.3 54%

Tertiary (Services) 448.6 35%

Source: http://china-trade-research.hktdc.com/business-news/article/Fast-Facts/Jiangxi-

Market-Profile/ff/en/1/1X000000/1X06BV96.htm

GDP is defined as the total market value of all final goods and services produced in a country

in a given year, equal to total consumer, investment and government spending, plus the value

of exports, minus the value of imports.

CNY = Chinese Yuan

16 Hong Kong Trade Development Council, 27 Feb 2014, available at http://china-trade-research.hktdc.com/business-news/article/Fast-Facts/Jiangxi-Market-Profile/ff/en/1/1X000000/1X06BV96.htm

http://china-trade-research.hktdc.com/business-news/article/Fast-Facts/Jiangxi-Market-Profile/ff/en/1/1X000000/1X06BV96.htm







25. Jiangxi is divided into eleven prefecture-level divisions. Nanchang is the provincial capital. The population is about equally divided between urban and rural.

2.3 Pingxiang Municipality

26. Pingxiang is a prefecture level municipality of Jiangxi Province that is located in the western part of Jiangxi at the boundary with Hunan Province. 94% of the land area in Pingxiang is mountainous and hilly with only 6% as level plains. It is predominantly rural. Table 2-2 provides area and population data and Map M-1 shows locations of the counties and districts.

Table 2-2 Pingxiang Municipality Administrative Units, Area, and Population 2012

Pingxiang Administrative Unit

Area Population (2012)

(km2) Male Female Total Non-rural population

Rural % Rural

Anyuan District 212 231,349 230,906 462,255 240,589 119,202 26%

Xiangdong District 853 184,247 176,986 361,233 108,968 300,118 83%

Lianhua County 1062 119,399 118,899 238,298 43,142 225,541 95%

Luxi County 963 132,785 127,522 260,307 47,547 250,191 96%

Shangli County 712 226,410 217,836 444,246 58,603 430,013 97%

New Development District 58 53,716 53,903 107,619 - - -

Total 3860 947,906 926,052 1,873,958 498,849 1,325,065

% of Total 51% 49% 27% 73%

Note: Sum of Non-rural and Rural population is slightly less than sum of male-female population

Source: Pingxiang Municipality Statistical Yearbook 2013

27. Pingxiang is a major coal and iron production base in Jiangxi Province. Heavy industry dominates the city's industrial sector and includes coal mining, construction materials, ceramics, metallurgy, machinery, pharmaceuticals and agricultural products processing.

Table 2-3 Pingxiang Municipality Major Economic Indicators (2012)

GDP (CNY billion) 73.31

GDP Composition

Primary Industry (agriculture) 7.2%

Secondary Industry (Industry & Construction) 60.8%

Tertiary Industry (service) 32%

GDP Per Capita (CNY) 38,584

CNY = Renminbi; GDP = Gross Development Project Source: Pingxiang Economic and Social Development Report 2012

http://china-trade-research.hktdc.com/business-news/article/Fast-Facts/Pingxiang-

Jiangxi-City-Information/ff/en/1/1X000000/1X09VZ21.htm

2.3.1 Pingxiang Rivers

28. Pingxiang is at the headwaters of six major rivers that belong to two major river systems: (a), the Xiang River system including Lishui River, Pingshui River; and Caoshui

http://china-trade-research.hktdc.com/business-news/article/Fast-Facts/Pingxiang-Jiangxi-City-Information/ff/en/1/1X000000/1X09VZ21.htm

http://china-trade-research.hktdc.com/business-news/article/Fast-Facts/Pingxiang-Jiangxi-City-Information/ff/en/1/1X000000/1X09VZ21.htm



River; and (b) the Gan River system including the Lianjiang River, Yuan River and Lukou River.

29. Pingxiang is a headwater jurisdiction, meaning that rivers originate within the municipality borders. They are therefore pristine and unpolluted in their most upper reaches but accumulate pollution as they pass human settlements and industrial sites and as a result discharge significantly polluted waters to downstream jurisdictions in Hunan Province and other Jiangxi Municipalities. Reasons for this situation include: (i) the absence of wastewater collection and treatment system for residential, commercial, or industrial buildings in most communities, (ii) the presence of some wastewater collection mains in the river bed or along the river banks in larger urban communities (Pingxiang, Xiangdong, Luxi) that allow domestic wastewater to infiltrate into the river waters especially at the building connection level, (iii) improper rural solid waste dumping sites along many river banks especially near bridges and river crossing dams, (iv) agricultural non-point source pollution from fertilizer and pesticide runoff from farmland located along the river, (v) discharge of waste from decentralized livestock and poultry farms in rural areas. Several farms upstream of water reservoirs used or planned to be used for drinking water purposes also discharge untreated farm wastewater into the reservoirs.

2.3.2 Pingxiang Road/Rail Network

30. Table 2-4 summarizes data about roads in Pingxiang and Figure 2-1 illustrates the road network. National Highway G319 crosses east-west as does the Shanghai-Kunming (Yunnan Province) Expressway while Provincial Highway S320 runs north-south.

Table 2-4 Pingxiang Roads (2013)

Unit Total Maintained by Province

Maintained by City/County

% Maintained by City/County

Technical Class

Class 1 km 51.48 51.48 N/A 0

Class 2 km 387.41 205.19 182.22 47%

Class 3 km 254.84 70.42 184.42 72%

Class 4 km 4,601.33 80.08 4,521.25 98%

Lower km 1,163.15 9.92 1,153.24 99%

Road Maintenance km 6,758.22 417.08 6041.12 94%

Road Planting km 3,489.46 546.79 2,942.67 84%

Bridges (permanent) number 983.00 165.00 818.00 83%

length (m) 39,011.90 5,934.72 33,077.18 85%

Dilapidated Bridges number 217 39.0 178 82%

% of total 22% 24% 22%

length (m) 81,933.70 74,779.06 7,154.64 9%

Source: Pingxiang Municipality 2013 Year Book Note: Road classes in the PRC are based on transportation capacity, number of cities it connects to and quality of road. Typical road life (years) are: Class 1, 20 years; Class 2, 15 years; Class 3 and Class 4, 10 years.



Figure 2-1 Pingxiang Road Network (2014)

Source: Figure 69 of Pingxiang Phase 1 Draft Final Report to ADB, October 2014

31. Similar to other locations in the PRC, several local roads in Pingxiang are encroached upon by informal, street-side commercial activity that narrows the effective width of lanes and creates congestion bottlenecks.

32. The railroads crossing Pingxiang are the Shanghai-Kunming Railway and Shanghai-Kunming High-speed Railway. The high-speed railroad station is located to the north of Pingxiang urban area and has been operational since September 2014.

2.3.3 Summary of Key Parameters for PRC, Jiangxi Province, and Pingxiang

33. Table 2-5 summarizes relevant parameters for the PRC, Jiangxi Province, and Pingxiang Municipality for year 2012.



Table 2-5 Key Parameters for PRC, Jiangxi Province, and Pingxiang

Parameter Units PRC Jiangxi Pingxiang

Population 0000 135,404 4,504 187

Urban Population 0000 71,182 2,140 60

Percent of Population that is urban % 53% 48% 32%

Water Supply

Urban Water Supply Capacity 0000 m3/d 27,177 436 24.5

Water Supply Volume capacity 0000 m3/year 9,919,715 159,104 8,943

Urban water supply pipelines km 591,872 11,831 668

Water supply volume 0000 m3/year 5,230,326 94,600 5019

Operation rate% 53% 59% 56%

Residents with access 0000 persons 41,027 888 66

Wastewater

Urban wastewater treatment capacity 0000 m3/d 13,693 226 11.5

Urban wastewater pipelines km 439,080 9,500 485

Road

Road Length km 327,081 6,500 451

Sources: National Statistics Bureau for PRC and Jiangxi Province and the Pingxiang Yearbook 2013



2.3.4 Project Counties and Districts

Lianhua County

34. Lianhua County is located to the south of Pingxiang Municipality, at north latitude of 26° 57 ' and east longitude of 113° 46'. The size of the county is about 58 km from north to south, 38 km from east to west with total area of 1,072 square kilometers, including 223,000 mu of farmland and 1.12 million mu of mountain area. The terrain of the county is hilly and mountainous. The elevation is high in the north, east and west; and low in the middle and south. The county jurisdiction includes 8 townships, 5 towns, 1 cultivation farm, 157 administrative villages. The population in 2012 was 238,298 of which 84% was rural.

35. The climate in Lianhua County is a subtropical monsoon humid climate with adequate light, abundant rainfall, four distinct seasons, and a mild climate. The county has an average annual temperature of 17.5°C; average frost-free period of 284 days, average rainfall of 1600-1700 mm, and annual average sunshine 1697.4 hours.

36. Lianhua County is rich in mineral resources. It is one of the 100 coal production counties in the PRC. It is also the production base of oil-tea, ducks, and geese in Jiangxi.

37. Table 2-6 summarizes the waterworks in Lianhua County.

Table 2-6 Lianhua County Waterworks

Waterworks Name Fanglou Lukou Lianfang Hushang

Supply Capacity (t/d) 850 700 800 600

Water Source Surface Water

Treatment Plant Area (m2) 3200 2600 1600 2200

Annual Supply Amount (1000 tons) 31 25.6 29.2 21.9

Water Supply Rate 90% 92% 91% 88%

Source: FSR for Lianhua County Water Supply Project t/d = tons per day = cubic meter per day

Luxi County

38. Luxi County is located in the eastern part of Pingxiang Municipality. It is at the upstream of the Yuan River catchment, covering an area of 968 km2. The southeast of the county is the Wugong mountain area while the county’s northwest area is flat. The county has a forest coverage rate of 67% and a forest area of 516,000 mu. Yuan River is the major river in Luxi. It originates from Wugong Mountain, running through 5 townships and 4 towns within Luxi County and then flows east through Yichun, Xinyu, Zhangshu and finally flowing into the Gan River. In 2014, the Shankouyan Reservoir on the Yuan became the main water source in Luxi.

39. Luxi County is located in the North Temperate Zone and has a subtropical, humid monsoon climate with distinct seasons, sufficient sunlight and abundant rainfall. Annual average temperature is 17.2 ℃. Average annual rainfall is 1665.4 mm.

40. There are five towns and four townships in the County including Luxi, Shangbu, Xuanfeng, Nankeng, Yinhe, Changfeng, Xinquan, Zhangjiafang and Yuannan. Total population in year 2012 was 260,307 of which 84% were rural.

41. Luxi County has more than 30 kinds of mineral resources including porcelain clay deposits of more than 1 billion tons. Industries include electric porcelain, coal, building



materials, fireworks, food, hydropower, chemical, shoes, clothing, textiles, energy, photovoltaic materials, and machinery manufacturing.

Shangli County

42. Shangli County is located at northern part of Pingxiang Municipality, and has an area of area of 721 km2. The county borders Hunan province to the north and west, Yichun Municipality to the east, Xiangdong District, Anyuan District and Luxi County to the south.

43. The terrain of the county is dominated by hills and low mountains, which comprise about 70% of the total area. The mountains are located in the north-east part of the county. Yangqi Mountain is the highest with a peak elevation of 947.4m. Pingshui River and Lishui River are the two major rivers in Shangli County, originating from the eastern and northern sides of Yangqi Mountain, flowing from north to south and east to west, receiving water from 16 tributaries in Shangli County and finally flowing into the Xiang River in Hunan Province. The rivers serve as sources of irrigation water and drinking water for the local people.

44. Shangli County has a subtropical, moist monsoon climate, with an average temperature of 17-18℃. The 1 in 10 year peak precipitation within 24 hours is 205.2mm. Soil types include mainly red soil and paddy soil. The vegetation is subtropical evergreen broad-leaved forest with green cover rate of 60%. The green coverage rate in urban constructed area is 35.8%. Soil erosion type is mainly hydraulic and allowable soil loss is 500 t/km2. Shangli County is designated as key area for soil erosion prevention and water conservation.

45. Shangli had a total population of 444,246 in 2012 of which 88% was rural. The population growth rate is reported to be 8.39%. In 2012, the annual GDP in Shangli was 12.562 billion CNY, including annual agricultural output of 2.04 billion CNY (an increase of 5% year-on-year). Annual per capita income was 18,983 CNY in the urban area and 8,391 CNY in the rural area (14% and 23.8% year-on-year increase, respectively).

46. Shangli is rich in mineral resources. There are more than 150 mineral deposits including coal, lead, iron, gold, copper, sulphur, phosphorus, and porcelain clay. The coal deposit is over 80 million tons, and lead deposit is more than 15 million tons. Shangli is a comprehensive agricultural economy demonstration area. Agricultural products include tea-oil, vegetables, melons, ginger, Chinese chestnut, dogs, sheep, mountain jujube cake, etc. Major industries in Shangli includes fireworks, coal, building materials, ceramics, food, machinery, chemical industry, and clothing.

47. Waterworks in Shangli County are summarized in Table 2-7.

Table 2-7 Shangli Water works

Water Works Name Tongmu Jiguanshan Nanyuan Changping

Supply Capacity (t/d) 3000 2000 1400 4500

Source: FSR for Shangli County Water Supply Project t/d = tons per day = cubic meter per day

Xiangdong District

48. Xiangdong District is located in the western part of Pingxiang Municipality. It has an area of 853 km2 with 15% agricultural land and 64% forests. The total annual rainfall level ranges from 1100 to 1980 mm. The Pingshui River flows through the District from east to west and into the Xiang River. The 2012 population was 361,233 of which 73% were classified rural.



49. Xiangdong is called the "West Gate" of Jiangxi Province because it is the western-most county of the province and several major transportation lines pass through it, including the Shanghai-Kunming railway, National Roads 319 (north-south) and 320 (east-west), and the Shanghai-Kunming motor vehicle expressway.

50. Table 2-8 describes the current situation of water supply in Xiangdong District.

Table 2-8 Xiangdong District Water Supply Plants

Water Plant Location Water Source

Capacity

(m3/day)

Year in Service

Service Area

Shen Jing #1 Xiangdong Middle School

Groundwater 5000 1979

Central Urban

Shen Jing #2 Quanhulong Groundwater 5000 1983

Central Urban

Lengtanwan Lengtanwan Niutou Mountain

Pingshui River

5000 2000 Urban and Suburbs

Source: FSR for Xiangdong District Water Supply Project t/d = tons per day = cubic meter per day



3 SECTOR ANALYSIS

3.1 Introduction

51. This sector analysis is in four parts. Part I starts with an explanation of urbanization, which is a driving force in the development of the PRC and its current economy, and then discusses small town development and rural-urban integration as two approaches for urbanization. Part II discusses flood and wastewater management in the PRC and Jiangxi. Part III describes rural infrastructure for water supply, wastewater and solid waste treatment, and roads. Part IV lists government institutions at national level that are relevant to the project and shows the relationship among national, provincial, and local government agencies.

Part I: Urbanization17

52. Urbanization is a population shift from rural to urban. There is no internationally agreed definition of either rural or urban. Typically a country defines “urban population” based on population density (people per unit of land) or administratively, e.g. defining an area as a city; and then calculates the rural population by subtracting urban population from the total population.

53. Urban population growth mostly results from rural to urban migration: either the movement of people from countryside to cities, or the physical expansion of the urban city into the surrounding rural area.

54. Rural to urban migration can be driven by push and pull factors:

a) Push factors force or encourage people to move away from an area. Examples of push factors are war, natural disasters (e.g. famine, drought, flooding), and a lack of employment opportunities.

b) Pull factors encourage people to move to an area. Examples include the chance of a better job, better access to education and services, and a higher standard of living.

55. Physical expansion of the urban area by annexing spatially unstructured, lower density villages creates problem when it takes place without master planning and without properly integrating or expanding public works infrastructure and services.

3.2 Urbanization in the PRC

56. Urbanization in the PRC has occurred rapidly over the last few decades (Figure 3-1). In 1990 the urban percentage of the total population was 26.4% and in 2000 it was 36.2%. By 2012, urban residents accounted for 52.6% of the total population of 1354 million.

57. Over the years the PRC government has used different criteria to classify urban and rural populations. The most recent definition is by the National Bureau of Statistics effective in March 2006. This definition uses the smallest scale in the Chinese administrative hierarchy: statutory resident committees and villages; and it includes villages in outer urban

17 Key sources for this section were the PPTA Phase 1 Draft Final Report on Development Trends and Prospects for Rural-Urban Integration; and “Strategic Options for Urbanization in the PRC: Key Findings”, ADB Manila, 2013.



and suburban areas that are “directly connected” to municipal infrastructure and that receive public services from urban municipalities18.

Figure 3-1 Urbanization Rate in PRC

Source: PRC New Type Urbanization Plan (2014-2020)

58. The Chinese government has made urbanization a national priority.

In November 2012 the General Secretary of the Communist Party of China and President of the PRC, Xi Jinping, announced a new policy for urbanization---from “urbanization of land” to “urbanization of population”. The new PRC leadership is planning a balanced growth strategy to close the gap between urban and rural areas. Rather than pursue urbanization focused on development, the PRC will help rural residents achieve a standard of living equivalent to that of urban dwellers.

On 16 March 2014 Premier Li Keqiang’s State Council and the central committee of the Communist Party released the “National New-type Urbanization Plan (2014-2020),” which aims for 60% of the PRC population to be living in cities by 2020. “Domestic demand is the fundamental impetus for China’s development, and the greatest potential for expanding domestic demand lies in urbanization.”19

59. In the PRC the term urbanization implies an expansion of existing urban cores to accommodate rural to urban migration, i.e. construction of urban infrastructure and expansion of public services (e.g. education, health care) to serve a larger population20. The expansion of urban infrastructure over the last decade or so has been remarkable and ambitious targets continue to be set, as shown in Table 3-1.

18 2009. Lamia Kamal-Chaoui, Edward Leman, and Zhang Rufei “Urban Trends and Policy in China”, OECD Regional Development Working Papers, 2009/1 http://www.oecd.org/china/42607972.pdf 19 http://www.businessweek.com/articles/2014-03-20/china-wants-its-people-in-the-cities 20 Mi Shih, “Making Rural China Urban”, 18 June 2013, http://www.thechinastory.org/2013/06/making-rural-china-urban/

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http://www.oecd.org/china/42607972.pdf

http://www.thechinastory.org/2013/06/making-rural-china-urban/




Table 3-1 Changes in Urban Infrastructure and Municipal Facilities in PRC Cities

Factor 2000 2012 2020

Municipal Water Supply Coverage Rate 81.7% 90%

Municipal Wastewater Treatment Rate 34.3% 87.3% 95%

Road Area per Capita (m2) 6.1 14.4

Park/Green Space Per Capita (m2) 3.7 12.3

Number of Regular Secondary Schools 14473 17333

Number of Hospital Beds (per 10,000 people) 142.6 273.3


60. Urbanization in the PRC is predominantly the result of rural migration to locations with job opportunities and with better services (utilities, health, school, etc.). See Figure 3-2. This migration is not sustainable because the urban centers are becoming too crowded. Two approaches to reducing migration are to develop the small towns where potential migrants now live and/or to integrate the rural areas surrounding or close to the urban centers.

Figure 3-2 Relocation Trends in the PRC (1978 – 2012)

Source: http://www.nature.com/news/society-realizing-china-s-urban-dream-1.15151

(data from PRC Statistical Yearbook)

3.2.1 Economic Reasons for Urbanization

61. The primary motivation for promoting urbanization is to change the PRC’s economic structure by creating growth based on domestic demand for products instead of relying on exports. Potential urban residents create new opportunities for construction companies, public transportation, utilities, and household appliance makers21.

62. “Urbanization creates business opportunities mainly in two aspects: (1) increased demand for new cities, transportation infrastructure projects, facilities related to

21 Ian Johnson. 2013. “China’s Great Uprooting: Moving 250 Million Into Cities”. The New York Times. June 15. http://www.nytimes.com/2013/06/16/world/asia/chinas-great-uprooting-moving-250-million-into-cities.html?pagewanted=all&_r=0

http://www.nature.com/news/society-realizing-china-s-urban-dream-1.15151

http://www.nytimes.com/2013/06/16/world/asia/chinas-great-uprooting-moving-250-million-into-cities.html?pagewanted=all&_r=0

http://www.nytimes.com/2013/06/16/world/asia/chinas-great-uprooting-moving-250-million-into-cities.html?pagewanted=all&_r=0



environmental business, and technology; and (2) creation of mega-city regions that connect rural small cities, second-tier medium cities, and first-tier big cities. As each mega-city region focuses on its own core functions and nurturing of industries, the local service industries, such as convention and exhibition, logistics, and distribution, have new growth opportunities.”22

63. In terms of economic output the industrial and service sectors have higher GDP than the agricultural sector, so increasing the number of industrial and service sector workers can create economic growth.

3.2.2 Small Town Development23,24

64. Rapid urbanization in the PRC will continue to accelerate as people living in rural areas will move to towns and cities where there are more jobs and where infrastructure services can be provided more efficiently and economically. However the PRC’s existing 661 larger cities cannot absorb this large number of people.

65. Small town development can facilitate urbanization. However, there have been widespread development problems in Chinese small cities and towns: (a) the lack of scientific regional development planning; (b) the lack of coordination with social and economic development plans and land utilization plans; (c) the lack of investment in infrastructure, e.g. flood protection, road construction, water supply and wastewater treatment; and (d) lack of financing channels for infrastructure.

66. Small town development represents a large economic, social, and political agenda in the PRC, and is integral to the PRC strategy of inclusive growth and balanced rural and urban development. PRC's 12th Five Year Plan (FYP)(2011-2015) emphasizes small city and town development as a means to provide a higher standard of living to rural migrants, without exacerbating pressures on infrastructure and other problems afflicting large cities. Small towns are expected to provide a necessary bridge for the transition from a rural to urban society, absorbing labor from the countryside, as well as supporting rural industries that contribute a major share of PRC's economic growth.

67. ADB has previous experience with Small Town Development including TA No. 4959-PRC: Hebei, Liaoning, and Shanxi Provinces Small Cities and Towns Development Demonstration Sector Project (2008 and on-going); and PRC 42012-01 Chongqing Urban-Rural Infrastructure Development Demonstration Project

68. The development of county-towns and key towns are an essential part of the small town development strategy. A county-town is the town in which the county government is based. Key towns are economic centers within a county that have a special role in urbanization and development of surrounding rural areas. The national list of key towns was first developed in 2004 and last updated in 2014. There are now 3675 key towns across the country.

22 Park Jin-hyung. 2013. “New Market Entry Strategy Into China Under Xi Jinping” CHINDIA Quarterly, vol. 10 (2013 Spring) https://www.posri.re.kr/issue/download_ajax/file_id/5427 or https://www.posri.re.kr/issue/quarterly 23 A key source for this section was: 2013. The World Bank Report No: 73408-CN “Project Appraisal Document on A Proposed Loan of US$150 Million To The PRC For A Jiangxi Poyang Lake Basin And Ecological Economic Zone Small Town Development Project, February 7, 2013 24 A key source for this section was: 2013. The World Bank Project Information Document Concept Stage Report No.: PIDC1006, “Zhejiang Rural Areas and Small Towns Water and Sanitation Improvement Project (P133018)”, 06-Nov-2013



3.2.3 Urban-Rural Integration25,26

69. “The new PRC policy for urbanization is called chengzhenhua (城镇化, literally ‘city-

and town-ification’) which considers towns and villages as potential sites of transformation from rural entity to urban…The larger goal and rationale underpinning chengzhenhua is urban-rural integration. The official discourse describes this goal as breaking the urban-rural duality structure.”27

70. As detailed in the Pingxiang Phase 1 Interim Report, there are four principal ways to promote rural-urban integration in the PRC28. These are shown in Figure 3-3.

Figure 3-3 Rural-Urban Integration in the PRC

Source: Chreod Ltd. (2014) in Pingxiang Phase I Draft Interim Report to ADB (June 2014)

25 A key source for this section was: 2013. “Strategic Options for Urbanization in the PRC”, Asian Development Bank, Manila 26 A key source for this section was: 2014. Appendix 8 of the Phase 1 Pingxiang Draft Interim Report to ADB, June 2014 27 Mi Shih, “Making Rural China Urban”, 18 June 2013, http://www.thechinastory.org/2013/06/making-rural-china-urban/ 28 The Phase 1 Draft Final Report (October 2014) expanded the methods of rural-urban integration from 4 to 8.

The additional methods are variations of the four methods discussed above so are not included here.





71. The first is rural to urban migration. This is on-going in the PRC and has resulted within the same city of two different classes of people: those with urban hukou29 (household registration) and those without. There are currently discussions among various central government agencies to allow rural migrants to settle in cities with hukou rights equal to the urban residents and if implemented this will require considerable public investment in infrastructure, education, and social security.

Figure 3-4 Differences Between Urban Resident Population and Urban Hukou

Population


72. The second approach is to make satellite cities of the towns surrounding the core city and facilitate daily commuting by adequate roads, access to motor vehicles, and public transit (bus, train). Typically the satellite town should be within one hour or less commuting time, equivalent to about a radius of 50 kilometers from the urban core.

73. The third approach is to integrate rural and urban supply chains by having towns produce goods and services needed in the core city. International experience shows that towns within a two-hour travel time to the core city can supply goods and services on a daily basis (two hours to travel to market; two hours to unload and process; two hours to return to the town). This is equivalent to about a radius of 100 km around the urban core. This approach requires towns to have physical accessibility to the core city, physical mobility (trucks), and that they produce goods and services that are of acceptable quality to urban consumers and producers.

74. The fourth approach is to promote re-location of industries and residences into surrounding towns thus transforming into suburbs. This approach requires a skilled town-based workforce, serviced land, infrastructure services comparable to those in the core city, and physical accessibility.

75. There is one more approach: the urban area annexing spatially unstructured, lower density villages in suburban areas. This is not really integration; it is subsuming and

29 Each Chinese citizen is classified as “rural” or “urban” in a specific geographic administrative unit. The designation is recorded in a document called hukou. “Rural migrant labor” (nongmingong) are treated legally as part of the rural hukou population, even though they may have worked and lived in an urban area for many years. Thus they are urban labor carrying rural hukou and not entitled to urban benefits.

Urb

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generally acknowledged as a problem when it takes place without master planning and without financial investment to connect or upgrade infrastructure.

3.2.4 Economic Impacts of Urban-Rural Integration

76. Recent research30 by the World Bank and China’s Development Research Center identified 49 metropolitan regions (“agglomeration economies”) in the PRC that met the criteria for approaches 2 and 3 described in section 3.2.3. These regions typically:

are anchored on the urban districts of statutory cities with over 1 million non-farming residents;

spill over to capture non-farming populations and enterprises in towns and cities in adjacent counties and county-level cities that are connected by good quality roads (e.g. national highway with road quality above Class 3);

are comprised of the core city and adjacent counties or county-level cities generally within a 50 km radius of the center of the core city, representing a notional 1-hour travel time; and

have an extended hinterland within a 2-hour drive time from which daily deliveries can be made to the metropolitan core city (approx. 100 km radius).

77. In year 2010 these 49 metropolitan regions produced 57% of the PRC’s GDP, 32% of the PRC’s population and 54% of its migrants. 31

3.3 Urban-Rural Integration in Jiangxi Province

3.3.1 Jiangxi Province’s Urbanization Strategy

78. For Jiangxi Province the 12th Five Year Urbanization Plan specifically stipulates that the urbanization rate of Jiangxi Province would be promoted from 44.8% in 2010 to 52.8% in 2015, and the annual average population growth rate of the whole province would be controlled at 0.78%. The specific actions include establishment of main functional zones, promotion of coordinated regional development, and orderly promotion of urbanization.

79. As shown in Figure 3-6, the provincial urbanization plan is based on the development of:

“One cluster” – Poyang Lake Ecological Urban Belt, focusing on the integration of Nanchang and Jiujiang cities and supported by Jingdezhen, Yingtan, Xinyu, and Fuzhou;

“Two strips” – o East-west development axis anchored by the Shanghai-Yunnan high speed

rail – including the Xin River Valley Urban Cluster to the east, and the Xin-Yi-Ping Urban Cluster to the west;

o North-south development axis anchored by the Beijing-Hong Kong high speed rail.

“Three districts” – composed of three growth poles of Nanchang, Jiujiang, and Ganzhou; and

“Four urban agglomerations” – Jingdezhen, Fuzhou, Ruijin, and Sannan urban agglomerations.

30 Source: Chreod Ltd. (2014) in Pingxiang Phase I Draft Interim Report to ADB (June 2014)

31 Ibid.



Figure 3-5 Diagram of Jiangxi Province’s Urbanization Strategy

80. In the plan, Pingxiang is part of the Xin-Yi-Ping urban (Xinyu-Yichun-Pingxiang) cluster, and is positioned as a central city for economic cooperation with Hunan Province, including the Changsha-Zhuzhou-Xiangtan urban cluster. On the national level, it is designated as a demonstration area for the restructuring of resource-based cities. On the provincial level, it is designated as an important city for “new industrialization”32 and also a key center of tourism, commerce, and culture.

81. The focus of Jiangxi Province is the Poyang Lake Urban Belt which, due to distance, does not include Pingxiang. Poyang Lake is the largest freshwater lake in the PRC. In December 2009 the State Council approved the Poyang Lake Eco-economic Zone Plan as part of its National Strategy. This plan includes all three aspects of a sustainable development: environmental protection, social aspects, and economic growth. The Poyang

32 Industrialization that is high-tech, economically effective, low in resource consumption and pollution generation, and utilizes local advantages in labor and resources.



Lake Eco-economic Zone is located in the North of the province covering a total area of 51,200 km2 (30% of the province). The area covers three large cities and 38 counties with a population of more than 20 million inhabitants (about 45% of the province’s population). Investment in this economic zone accounts for more than half of the provincial total in the 12th FYP.

82. However one of the province’s key strategies – carefully integrate urban and rural development, particularly the provision of basic public services, to strengthen peri-urban economies – is relevant to Pingxiang.

83. In 2013 the average per capita net income for rural residents of Jiangxi Province was CNY 7,828 CNY and for urban residents CNY19,860, about 2.5 times higher.33

3.3.2 Jiangxi Province New-Type Urbanization Plan (2014-2020)

84. In June 2014, Jiangxi Province issued its New-Type Urbanization Plan in line with the national plan, outlining strategies and goals for future urbanization in the province. Specific targets set forth in the plan are presented in Table 3-2.

Table 3-2 Key Targets in the Jiangxi Province New-Type Urbanization Plan (2014-2020)

2012 2020

Urbanization Rate1

% Urban Residents % Urban Hukou Holders

47.51% 26.96%

Close to 60% Around 40%

County-Town and Key towns Public Water Supply Coverage Rate Wastewater Treatment Rate for County Towns Wastewater Treatment Rate for Key towns

>85% Around 88% Around 80%

Note 1. National targets for urbanization rate are 60% urban residents and 45% urban hukou holders.

85. The new-type urbanization plan also confirms the development priority zones in Jiangxi Province. The zoning plan categorizes the province’s 100 counties/cities into three different types of function zones based on their development priority: (i) urbanization/industrialization; (ii) agricultural production; or (iii) provision of ecological services. The latter two are considered restricted development zones, where industrial activity is allowed only in an amount that does affect agriculture or ecological services. A fourth function zone is designated for protected areas such as nature reserves, where development is prohibited.

86. Table 3-3 summarizes the number of counties and cities for each functional zone for the Jiangxi Province and Figure 3-5 shows their locations.

33 2014. “Jiangxi Province 2013” by Sophie Lu.

http://www.sinoptic.ch/guangzhou/pdf/2014/20140130_Fact.sheet_Jiangxi.Province.pdf



Table 3-3 Jiangxi Province Development Priority Zone Plan

Function Zone Type

Description Number of Counties/Cities

% of Total Provincial Land Area

National

Level1

Provincial level

Key Development Zone

Priority area for urbanization and industrialization, due to high development potential and environmental/resource carrying capacity.

18 17 20.4%

Key Ecological Function Zone (Restricted Development Zone)

Priority area for increasing the provision of ecological services, with sensitive or valuable ecosystems and low environmental/resource carrying capacity. Large-scale, high intensity urbanization and industrialization should be restricted in these areas.

9 23 35.9%

Key Agricultural Production Zone (Restricted Development Zone)

Priority area for increased agricultural production, with large areas of arable land and good conditions for agricultural development. Large-scale, high intensity urbanization and industrialization should be restricted in these areas.

33 0 43.7%

No-Development Zone

Important ecological function zones where industrialization and urbanization are prohibited, including nature reserves, scenic areas, forest parks, heritage sites, geological parks, flood detention areas, source waters.

Scattered points

1. National level means that the particular function zone is significant at the national level.



Figure 3-6 Development Priority Zones in Jiangxi Province

87. Pingxiang’s Luxi and Lianhua counties are designated as provincial level ecological function zones, Shangli is a national level key agricultural production zone, and Xiangdong District is a provincial level key development zone. Urban-Rural Integration in Pingxiang Municipality

88. There are 70 county-towns and 124 key towns in Jiangxi Province. Of these, three county-towns and six key towns34 are in Pingxiang Municipality.

34 Jiangxi Province county towns and key towns in Pingxiang Municipality are: Anyuan Township, Anyuan County;

Xiabu Township, Xiangdong; Qinting and Fanglou Townships in Lianhua County; Tongmu Township, Shangli County; and Shangbu Township in Luxi County.



89. The overall strategy for the Pingxiang Municipality is to develop a system of urban settlements that include sub-regional hubs in the county-towns of Lianhua, Shangli, and Luxi counties. Towns around these hubs would be developed.

90. Table 3-4 shows the number of towns, townships, and villages in the Project area. The difference between towns and townships appears to be a matter of size. Villages, as explained in section 3.5, are the lowest sub-division of government.

Table 3-4 Towns, Townships, and Villages in Sub-Project Areas

Sub-Project Number of Towns Number of Townships Number of Villages

Lianhua 5 8 157

Luxi 5 4 136

Shangli 6 3 163

Xiangdong 8 2 132

91. Towns and townships in the Project area are currently rural but becoming more urbanized. New houses are being constructed; rural roads are more heavily trafficked; quantities of wastewater and solid wastes are increasing. The environmental impact of increased population and inadequate infrastructure in the Project area is magnified because it is the headwaters for rivers that are the water supply for downstream inhabitants. The inadequate infrastructure further increases the gap in public services between countryside and city residents. Improving public services in the towns and townships and access to urban centers induces people to continue to live in rural areas.

92. Referring to the urban-rural integration approaches described in Section 3.2.3, Pingxiang Municipality is applying the second approach of making satellite cities of the towns surrounding the core city, which may have the effect of reducing the movement of people from countryside to city areas. The ADB Project supports this by funding environmental services that will enhance living in the rural areas

Part II: Flood Management and Wastewater Treatment Infrastructure

3.4 Flood Management

93. A flood is defined as an overflowing of water onto land that is normally dry. As water falls to the earth in the form of rain or snow, it seeps into the ground. When the ground is frozen or the surface impervious with asphalt, concrete, or buildings or the soil is already saturated and cannot absorb the water faster than it falls from the sky, then water running downhill into channels and streams begins to "pile up", eventually overrunning the sides of those channels. Common types of flooding relevant to the Project are:

a) Overbank flooding: Filled to capacity because of heavy rain or melting snow, the water within a river overflows its banks and spreads across the land around it.

b) Flash floods: characterized by a rapid rise of fast-moving water that can carry debris, increasing the potential to damage structures and injure people.

94. Flooding may be caused by human actions. For example a weak or improperly constructed dam can fail, creating a flash flood in downstream regions. Bridge abutments and pipe lines crossing a river can create blockages causing water to pile up. Illegal garbage dumping and encroachment reduce the water channel carrying capacity.



3.4.1 Historical Flood Data for the PRC

95. In the PRC disaster data can only be released or published by a government authority or the authorized government administration. For flooding since 2006 data is published in the Bulletin of Flood and Drought Disasters in the PRC. Data is organized according to location and damage without distinction between urban or rural regions. Table 3-7 summarizes recent data to indicate the scale of flooding impacts in the PRC.

Table 3-5 Impacts of Recent Flooding in the PRC

Period People Affected (million)

Estimated Number of Fatalities

Other Data

2014 (through October)

77 712 36 million evacuated; 249,000 houses destroyed

2013 120 774 with 374 missing Losses of 315 billion CNY

2010 230 3000 (1000 missing) Losses of 350 billion CNY

Source: From http://floodlist.com

96. Between the years 2000 to 2010 it is estimated that flooding affected 128.3 million people and 10.6 million hectares of farmland per year on average, leading to direct losses of 98.9 billion CNY per year on average. Estimates of cumulative losses by province are presented in Figure 3-10. Two-thirds of fatalities during this period occurred in small to medium-sized riversheds.

http://floodlist.com/



Figure 3-7 Cumulative Damage from Flooding in the PRC (2000-2010)

Data from: 2011, Zhang et al. Comprehensive Analysis of Flood Damages in the PRC from 2000-2010. Journal of

Economics of Water Resources. Vol 29, No.5, pg. 5. September.

3.4.2 Institutional Arrangements for Flood Control35

97. The laws and regulations that govern flood control and disaster management in the PRC are the Water Law (1988) and Flood Control Law (1997). Flood management in the PRC is administered in two main areas: flood control and emergency response.

35 2012. “Flood Risk Management in the PRC”, Yoshiaki Kobayashi and John W. Porter, ADB Manila, 2012.

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98. The Ministry of Water Resources (MWR) is the primary national agency responsible for planning, construction and management of structural flood control works in designated major rivers. Working under the MWR, River Basin Commissions have been established to implement water management and flood protection within the seven major river basins. At the provincial level, the Department of Water Resources undertake the same role as the MWR.

99. The National Development Reform Commission (NDRC) formulates and implements strategies for national social and economic development. It therefore interacts with the MWR in regard to flood control projects of national significance.

100. The State Flood Control and Drought Relief Headquarters (SFCDRH) is responsible for national flood emergency response. This includes the main responsibility for flood forecasting and warning systems. The SFCDRH assumes responsibility for the operation of flood control works during the flood season under alert and emergency conditions. Flood Control and Drought Relief Headquarters also exist at provincial and local levels of government, where they are responsible for flood emergency response within their jurisdiction.

101. Local and municipal government responsibilities for flood control works are linked to the requirements of basin wide/river flood control plans and master plans. Local governments are generally responsible for the operation and maintenance of flood control works within their jurisdiction. Where works span more than one local government area, provincial governments are responsible.

3.4.3 Policy Direction for Flood Control

102. Floods are natural events that can never be fully controlled. Flood protection measures are classified as structural or non-structural. The key characteristic of a non-structural approach is that it modifies susceptibility to flooding, as opposed to simply attempting to control flooding through structural methods such as dams, levees, and channels.

103. “Flood risk” is the product of hazard, exposure, and vulnerability. Flood hazard can be modified by structural measures such as dikes, dams, and diversions. Exposure can be managed by land use controls. Vulnerability cannot be eliminated but mitigated by flood mapping, forecasting, and early warning.

104. In 1998, flooding of the Yangtze and Songhua-Liao river basins killed 3,500, with monetary losses estimated at $30 billion. As a result of this event the PRC Government announced a policy that moves toward natural resource management as a long-term, holistic way of flood plain management, shifting from dependence on structural measures for reducing flood damage to a balanced approach using both structural and nonstructural measures.

105. Water-related projects are currently a top priority for infrastructure development in the PRC. In the first document issued by the State Council in 2011, the central government set forth policy directions for accelerating water reform in the following 5-10 years. Besides management of water use and water quality, the document also emphasizes the importance flood control and emergency response. In particular, it promotes the rehabilitation of medium to small rivers to protect flood-prone areas with high population density, including reinforcing embankments and dredging. It also promotes capacity building for flood monitoring and early warning systems, as well as the establishment of flood control and drought relief service teams at county and village levels. These goals were also echoed in the 12th FYP for Water Resource Development.



106. National standards for flood control used to guide infrastructure design are provided in Table 3-6 and Table 3-7.

Table 3-6 PRC Urban Flood Control Standards

Class Importance of City Urban Population (units of 10,000)

Flood Control Standard Recurrence Period (years)

I Extremely Important ≥150 ≥200

II Important 150 – 50 200-100

III Medium 50-20 100-50

IV Regular ≤20 50-20

Table 3-7 PRC Rural Flood Control Standards

Class Population in Protection Area (10,000)

Farmland in Protection Area (10,000 mu)

Flood Control Standard Recurrence Period (years)

I ≥150 ≥300 100-50

II 150-50 300-100 50-30

III 50-20 100-30 30-20

IV ≤20 ≤30 20-10

Flood Control Goals in Jiangxi Province

107. In line with the national plan, the Jiangxi Province 12th FYP for Water Resource Development, sets goals for flood control for 2015, including:

Achieving flood control standards for the major cities in the province: Nanchang (1/200 flood), Jiujiang (1954 flood), Jingdezhen and the other 9 municipalities (1/50 year flood);

Constructing embankments meeting 1/20 flood control standards for urban areas in key counties and county-level cities and for farmland protection areas larger than 50,000 mu;

Achieving 1/10 – 1/20 flood control standards for medium to small rivers in key areas;

Reduce flood losses as a percent of GDP to 1% or lower.

108. In addition, the plan promotes establishing development controls along rivers and lakes to prevent urban development in flood-prone areas, and to integrate flood control, stormwater management, ecological protection, and urban landscaping to build “ecologically civilized” cities.

3.5 Wastewater Treatment

109. Figure 3-7 shows a rising trend in domestic wastewater discharge that reflects a similar rise in urbanization rates during the period between 2000 to 2012:



Figure 3-8 Wastewater Discharge vs Urbanization Rate in the PRC (2010-12)

Source: 2014. Feng Hu, Debra Tan and Inna Lazareva, “Eight Facts on China’s Wastewater” China

Water Risk, March 12, 2014 - http://chinawaterrisk.org/resources/analysis-reviews/8-facts-on-china-

wastewater/

110. The PRC 12th FYP sets the wastewater treatment rate at 85% for cities, 70% for counties, and 30% for townships.

111. Like other places in the PRC, the main challenge for domestic wastewater treatment in Jiangxi Province is the low collection rates in older built-up areas. These areas are mostly served by combined sewers that discharge directly to surface water bodies. Conversion to separate sanitary sewer systems or interception of the combined sewage can be either infeasible or too costly due to building density. Jiangxi Province started installing separate sanitary sewers around 2000, but currently most sewers discharging to WWTPs are combined sewers that carry both wastewater and stormwater.

Figure 3-9 Wastewater Treatment Rates in the PRC (2010)

Source: Ministry of Housing and Urban-Rural Development, 2012. PRC Urban Drainage and Wastewater Treatment Status Report (2006-2010). Cities are in blue and County-towns are in orange color. Dashed lines show national averages.

Cities: 82.3%

County-Towns: 60.1%

http://chinawaterrisk.org/resources/analysis-reviews/8-facts-on-china-wastewater/

http://chinawaterrisk.org/resources/analysis-reviews/8-facts-on-china-wastewater/



112. In many areas, particularly at the county-town level, sewer construction lags far behind treatment plant construction. Many WWTPs cannot operate effectively or even sit idle, either receiving no wastewater, or wastewater diluted by stormwater. A common solution now is to use the limited funds to build sewer pipes inside the river to intercept the wastewater from combined sewers. Sometimes there are interceptor pipes along both riverbanks, other times there is one pipe directly buried in the riverbed to serve both sides of the river (see figure). These pipes have risks of exfiltration and infiltration and are detrimental for the river itself, but are regarded as a quick fix to transmit at least some wastewater to WWTPs for treatment.

Figure 3-10 Wastewater Sewer Pipelines Within and Close to the River

Photos from Tankou River, tributary of the Yuan River, Luxi County.

113. Dilute wastewater is one of the major issues affecting treatment efficiency of urban WWTPs since wastewater and rainwater are typically collected and treated together. Typical influent COD concentrations in Jiangxi are around 220 mg/L, which is significantly lower than the 300 mg/L design standard. The problem is reflected in the fact that many “operational” WWTPs are not yet producing sludge, indicating that the biological processes are not functioning.

3.5.1 Wastewater Tariffs

114. Following provincial requirements, urban WWTPs in Jiangxi are operated through Public Private Partnership (PPP) agreements with Jiangxi Hongcheng Waterworks Co., Ltd.

115. In 2010, the provincial government established standard wastewater tariff collection requirements across the entire province (Table 3-8).

Table 3-8 Wastewater Tariff Standards in Jiangxi

Wastewater Type Tariff Standard (CNY/m3)

Residential Domestic Wastewater 0.8 – 0.9

Untreated Industrial Wastewater Discharging to Municipal Sewers

0.8

Pretreated Industrial Wastewater Discharging to Municipal Sewers

0.12 (15% of 0.8)

Source: Jiangxi DRC, 2010. Notice on Uniform Adjustment of Wastewater Tariff Standards in Jiangxi Province.

116. In January 2015 the PRC announced36 that domestic wastewater tariffs nationwide must reach CNY0.95/m³ in urban areas and CNY0.85/m³ in rural areas by the end of 2016. Minimum non-residential wastewater tariffs will also increase to CNY1.40/m³ for urban users

36 http://www.globalwaterintel.com/news/2015/5/china-steps-wastewater-tariff-reform.html?source=email

http://www.globalwaterintel.com/news/2015/5/china-steps-wastewater-tariff-reform.html?source=email



and CNY1.20/m³ for rural users. The government also urged cities, counties and towns without wastewater treatment plants to bring the necessary infrastructure online by the end of 2017.

Part III: Small Towns and Village Infrastructure

3.6 Goals for Small Town Infrastructure

117. Small town development is an important urbanization strategy in the PRC and is supported by infrastructure improvements in county-towns (i.e. the county capital) and key towns. The following targets were set in the National New-Type Urbanization Plan (2014-2020):

Achieve 85% public water supply system coverage;

Achieve 85% wastewater treatment rate for county-towns and 70% for key towns through centralized wastewater treatment plants or decentralized ecological treatment methods (see Figure 3-8 for county-town treatment rates in 2010);

Achieve proper solid waste treatment and disposal in county-towns; establish solid waste collection and transfer systems in key towns;

Integrate urban-rural transportation network, connect county-towns to high level roads (Class II or above) and develop public transportation in key towns.

3.7 Villages37

118. Villages in the PRC are self-governed by villagers' committees which are fully staffed by local villagers. Village leadership includes a committee of village administrative officers (who are elected by villagers, comprising the village head, deputy, accountant and other committee members) and also key members of the Communist Party in the village (who are appointed by party officials from inside and outside of the village). These village leaders together are responsible for managing village affairs on a day-to-day basis, undertaking village projects, and sometimes acting as the agents of upper level governments for government-led activities in the village.

119. In recent years, PRC’s county governments are charged with the responsibility of promoting long-term rural development and one of the responsibilities is to improve infrastructure quality in villages. In particular, county governments are given access to fiscal resources so that they can incorporate higher technical standards in the infrastructure design when making finance decisions about village projects. In comparison, when the villages finance most of the infrastructure cost themselves, the pressure on the village leaders to build village infrastructure up to certain quality standard is much lower.

120. Township level governments between the village and the county oversee activities in the villages and work with both the village leaders and county governments to promote village development. When county governments invest in villages in the PRC, township governments, being reasonably close to the villages, sometimes manage these government-funded village projects. In other cases, township governments simply transfer the funds from counties to villages and ask village leaders to manage the projects themselves. Township governments are rarely able to finance village projects. Because of the fiscal reform of the past decade, townships in all but the richest areas of the PRC have been denied access to fiscal resources.

37 2013. Ho Lun Wong, Renfu Luo, Linxiu Zhang, and Scott Rozelle: “Providing Quality Infrastructure in Rural Villages: The Case of Rural Roads in China”, Journal of Development Economics 103, 262–274.



121. Village leaders would prefer high quality infrastructure projects over low quality ones, but there are two main obstacles. First, because village leaders are local villagers that typically lack the knowledge and experience to produce high quality infrastructure. Second, some village leaders may be more concerned about costs than quality. It is not easy for village leaders to raise funds from local villagers. For some village projects, the leaders have to seek outside loans and service debts long after the project is completed.

3.8 Rural Water Supply38

122. Household access to improved water supply and water sources has significantly increased in rural areas of the PRC over the past 20 years. The population receiving piped water supply and access to public taps increased from 271 million in 1990 to 682 million in 2010. However at the end of year 2010 there were still about 300 million people in rural areas without safe drinking water.

123. Rural water supply programs include the Mother Cisterns Project (2001–2011) and Chinese Safe Drinking Water Project (2005–2015), which aim to provide safe drinking water to all rural residents before 2015. During the 12th five-year period, the Chinese government planned to invest about CNY 170 billion to improve drinking water safety for these 300 million rural residents as well as over 100,000 rural schools.

124. Rural domestic water consumption in the PRC is highly affected by water supply patterns, the characteristics of heads of households, vegetable gardening, and the use of water appliances. Despite considerably improved water supply facilities and living standards in rural areas over the past two decades, traditional lifestyles and household habits (low use of water appliances and preference for vegetable gardening) continue to significantly affect domestic water consumption.

3.9 Rural Wastewater and Solid Waste Disposal39

125. It is estimated that the rural areas of the PRC produce more than 9000 million tons of domestic wastewater and 280 million tons of domestic solid waste a year. The majority of the more than 600,000 villages of self-governance in the PRC have not built supporting facilities for collection and treatment of rural domestic wastewater, nor for collection, transportation, and disposal of domestic solid wastes. As most of the rural areas do not have adequate environmental protection infrastructures, uncontrolled discharge of untreated domestic wastewater and solid waste result in pollution of the rural environment.

126. While septic tanks have been widely used in villages where sewerage collection and treatment is unavailable, inappropriate construction and maintenance has led many of them to operate without a bottom liner allowing pollutants to leak and subsequently potentially contaminate the soil and groundwater.

127. Discharge of untreated human wastewater pollutes shallow groundwater and receiving water streams, lakes, and rivers. This deteriorates water quality and creates health risks since the receiving waters are often used as a source of drinking water, for bathing and laundry, and for fishing.

38 2013. “Factors Affecting Domestic Water Consumption in Rural Households upon Access to Improved Water Supply: Insights from the Wei River Basin, China”, by Liangxin Fan, Guobin Liu, Fei Wang, Violette Geissen, and Coen J. Ritsema; published: August 16, 2013 DOI: 10.1371/journal.pone.0071977. http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0071977

39 2014. “Policy and Management System Development for Rural Environmental Protection in The People’s Republic of China”, AECOM Interim Report for ADB TA 8445PRC, 9 June 2014. See section 2.1.

http://www.plosone.org/article/info%3Adoi%2F10.1371%2Fjournal.pone.0071977



128. Rural wastewater is typically discharged in two ways. In dry rural areas (e.g. northern China), urine and fecal material (blackwater) are discharged into dry toilets and domestic wastewater from cleaning and bathing (greywater) is applied to gardens or agricultural fields. In rural areas with developed water systems (e.g. middle and southern areas of China) both blackwater and greywater are discharged into ditches and ponds surrounding the houses.

129. Rural household solid waste is buried, dumped, or burned in open fields or along roads and rivers. This can destroy vegetation, kill microbes in the soil, weaken soil fertility, change the features and structure of soil, and pollute the air and water. Trash dumps attract pests such as flies, mosquitoes, rats, and cockroaches which create a health risk to local residents.

130. According to the “Three Fixed Program” issued by the State Council, the Ministry of Environmental Protection is assigned duties and responsibilities concerning management and policy guidance of rural domestic wastewater and domestic solid waste. Regulations and policies promulgated by the national and local governments regarding rural domestic wastewater and solid waste treatment technologies and project management are mainly in three categories:

i. technical policies for pollution control and guidelines for best feasible technologies for pollution control;

ii. technical specifications for environmental pollution control projects and supervision and management of facility operation; and

iii. technical standards for environmental engineering.

131. Funds for control of rural domestic wastewater and solid waste mainly rely on special public projects arranged by the national government. In 2009, the Ministry of Finance and the Ministry of Environmental Protection promulgated the “Provisional Methods for Management of the Central Government Special Fund for Rural Environmental Protection”. In many rural areas there is no tariff mechanism for households and other contributors to rural domestic wastewater and solid waste. Similar to people elsewhere in the world, rural residents usually do not want to pay for disposing their wastes, and considering their low economic status, may not be able to afford to pay for domestic wastewater and solid waste control.

3.10 Rural Roads40

132. Roads may be classified by standard (e.g. alignment, width, number of lanes), pavement type (e.g. bituminous or unpaved) or by network function (e.g. inter-urban, village roads). The term “rural road” refers to network function and usually refers to roads that join small urban centers (say fewer than 2,000 to 5,000 inhabitants) or which connect small urban centers to higher classes of road, larger market towns and urban centers.

133. In the PRC, road lengths are not reported by network function, but by class, which is primarily determined by traffic volume (see Table 3-9) and sometimes by pavement quality. Road designation is functional, however: the prefixes G, S and X refer to state, provincial and county roads respectively. Designations are reviewed every 3-5 years and it is not uncommon for county roads to be upgraded to provincial roads and re-numbered.

40 2014. The World Bank Report No: PAD423 for Proposed Loan of US$150 million to the PRC for a Guiyang Rural Roads Project (P129401), January 31, 2014. http://www-

wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2014/02/19/000442464_20140219

102812/Rendered/PDF/PAD4230P129401010Box382144B00OUO090.pdf

app:ds:cockroach

http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2014/02/19/000442464_20140219102812/Rendered/PDF/PAD4230P129401010Box382144B00OUO090.pdf





Table 3-9 PRC Highway Classification

Class Annual Average Daily Traffic

Road Type

Expressway Above 15000 Multi-lane highway with interchanges

Class 1 Above 15000 Multi-lane highway with interchanges as needed

Class 2 5000 – 15000 Two-lane highway

Class 3 2000 – 6000 Two-lane highway for automotive and non-automotive vehicles

Class 4 Below 2000 (Two-lane) Below 400 (Single lane)

Single or two-lane highway for automotive and non-automotive vehicles

Source: PRC Ministry of Transportation, 2014. Technical Standard of Highway Engineering (JTG B01-2014)

134. Most of the roads in the project road corridor are county roads and functionally would also be termed rural roads as they link small centers or link small centers to higher class roads. The proposed project road has hybrid functionality. On the one hand it links small settlements and to that extent would be referred to as rural, while on the other it links two G roads, thereby assuming the functions of a higher class road. It is expected to be designated as a county road.

135. Broadly speaking, class IV and unclassified roads are often taken as “rural” (see for example World Bank PAD423 for the Guiyang Rural Roads Project (P129401), January 31, 2014). Using this definition, it is evident that most roads in Pingxiang and Jiangxi are rural – see the table below. In fact, of all the Jiangxi prefecture-level cities, Pingxiang’s highway stock has the highest proportion of rural roads.

Table 3-10 Highway Stock in Jiangxi’s Prefecture-Level Cities (end of 2012)

Administrative Area

Highway Stock, km

Total Expressway Class I

Class II

Class III

Class IV

Unclassified Class IV & below as %

total

Jiangxi 150,595 4,229 1,543 9,540 9,497 95,523 30,263 84%

Nanchang 10,853 342 107 623 452 7,579 1,750 86%

Jingdezhen 4,595 199 43 342 378 2,988 645 79%

Pingxiang 6,817 61 52 371 273 4,597 1,463 89%

Jiujiang 18,970 480 184 879 1,213 10,968 5,246 85%

Xinyu 4,317 128 43 319 333 2,547 947 81%

Yingtan 4,015 89 40 130 465 2,371 920 82%

Ganzhou 28,160 947 261 1,813 1,239 18,166 5,734 85%

Ji'an 21,717 528 177 1,613 1,267 16,171 1,961 83%

Yichun 17,761 354 243 1,463 1,221 10,229 4,251 82%

Fuzhou 13,949 483 172 568 1,126 9,189 2,411 83%

Shangrao 19,441 618 221 1,419 1,530 10,718 4,935 81%

Source: Jiangxi Statistical Yearbook for 2013

136. Transport sector policy is guided by the 12th FYP, which takes forward the agenda of sustainable development initiated by the 11th FYP. Amongst other targets, the plan aims to achieve a total length of 3.9 million km paved rural roads in the PRC by the end of 2015. According to this plan, the strategy for rural roads development is to:

(i) improve the infrastructure and facilities for rural roads, including reconstruction of bridges and provision of safety and safeguard facilities, in order to enhance climate-linked risks and improve the traffic safety; and



(ii) improve the overall condition of rural roads network, including county and township roads, in order to upgrade the comprehensive service capacity of the rural roads network.

137. Rural transport objectives are set forth in the Jiangxi Province 12th FYP for Highway and Waterway Transportation Development:

Reduce travel time from county-towns to highways to 30 minutes;

Increase the ratio of Class II provincial roads to 90% and increase the rate of “excellent roads” to 85%;

Increase the ratio of Class III county roads to 50% and the ratio of Class IV village roads to 80%;

Improve the rural passenger transport network, establish a bus system for 100% of townships and 92% of administrative villages;

Establish integrated rural road service stations with passenger terminals in 85% of townships, to support rural logistics.

Rural road network length to reach 140,000 km (compared to 126,000 km in 2010).

138. Traffic bureaus at county level are responsible for the maintenance of the rural road network with support from the township and village levels. Provincial maintenance subsidies are provided for rural road maintenance, but counterpart funding from prefecture and county level are also required. Rural road maintenance costs are divided into two parts: routine maintenance costs financed by city and county governments; and periodic maintenance, financed by provincial government (through the transportation department, which is responsible for determining the integrated annual road maintenance plan and allocating maintenance funds).

139. Rehabilitation maintenance of national and provincial roads has traditionally been based on CNY50,000 and CNY30,000 per km for national and provincial roads respectively. This allocation is not strictly adhered to, however, and allocations are made by the provincial finance department to the local finance bureaus based on available fuel tax allocations, previous maintenance budgets and inflation factors.

140. Rural, local (difang) roads connecting counties to other counties and to townships and villages are funded partly through central transfers and the special Highway Construction Fund (gonglu jianshe jijin), which is a subsidy offered by the central government.

Part IV: Government Institutions Relevant to the Project

3.11 National Organizations for Rural Public Services and Environmental Management

141. Table 3-10 lists the major national organizations involved in rural public services and rural environmental management relevant to the Project. The national ministries provide regulations, guidelines, and technical standards while local government is responsible for actual implementation. The NRDC provides approval for application of the ADB Loan.

Table 3-11 National Organizations and Responsibilities in the Rural Sector

National Organization Responsibility

Ministry of Housing, Rural and Urban Development (MOHURD)

Rural public utility services---water supply, urban drainage, environmental sanitation, district heating and wastewater treatment

Ministry of Water Resources Guidance for water supply, wastewater, and water



(MWR) conservancy in rural areas.

Prevention of flood and drought disasters.

Ministry of Transport (MOT) Strategies, policies, plans, guidance for highways and roads

Ministry of Environmental Protection (MOEP)

Sets standards for drinking water quality and wastewater discharge

National Development and Reform Commission (NDRC)

(i) Approval of all major capital investment projects ; and (ii) economic regulation and price management.

State Flood Control and Drought Relief Headquarters (SFCDRH)

Emergency response (flood fighting). Can assume operational management of flood control works during flood season

Ministry of Agriculture Strategies, policies, plans, and guidance for agriculture and rural economic development, including technical standards for agricultural industries

3.12 Interface between National, Provincial and Local Governments

142. As determined by the PRC Constitution, the government is divided into central and local levels, with the relevant Ministry at the national level supervising the various departments and functions performed at local level. These supervisory arrangements have traditionally led to the establishment of lower level agencies in local governments that mirror and report to respective higher level central government agencies. Figure 3-11 shows the relevant levels of Government are: Provinces; Municipalities (or Prefectures); Urban Districts, counties and county level cities; town or township.

143. In Jiangxi Province government structures closely replicate the national level structure, and the duties of relevant departments are similar to those of their national-level counterparts. At city level the allocation of responsibilities between the different levels of government depends on the size of the city, with smaller cities and towns having simpler, more rationalized arrangements than in medium sized or larger cities. It is at the city or county level that most all public services and infrastructure are implemented and managed. Town/township governments under the county level typically do not have administrative responsibilities for such infrastructure, even when the infrastructure is located in their jurisdiction 41 . Figure 3-12 illustrates the relationships between the different levels of government and distinguishes between the line of direct accountability and functional supervision.

41 Towns/township and village governments typically lack the institutional and financial capacity to manage public infrastructure. See Section 3.7.



Figure 3-11 State (National) Level Government

Figure 3-12 PRC Government Organization and Relationships

The State Council

Premier

Special Adminstrative Regions (Hong Kong and Macau) Vice Premier State Council Conference

NDRC MWR MOEP MOHURD MOF MOT Other Ministries

Autonomous Regions

City Governments(at all levels)

ProvincialGovernments


DirectlyAdministrative Governments


PRC State Government

Ministries and State Level Agencies

Provincial Level Governments

Provincial Level Bureaus and Agencies

Municipal Level Governments

Municipal Level Bureaus and Agencies

District and County Level Governments

District and County Level Bureaus

KEY

Founctional Supervision and Reporting

Line Accountability



4 PINGXIANG’S DEVELOPMENT AND INFRASTRUCTURE PLANS

4.1 Overall Development Strategy

4.1.1 Positioning

144. Jiangxi’s development strategy 42 , outlined in the provincial 12th FYP, designates Pingxiang as a “new-type” of industrialized city; an important tourism, commercial, and cultural city; and a central city connecting Jiangxi and Hunan provinces. Pingxiang’s 12th FYP recognizes four major opportunities for future socio-economic growth in the municipality:

1. Increased connectivity through the new high-speed rail. With completion of the Wuhan-Guangzhou Railway, Pingxiang is now within 2 hours of Guangzhou and is an important connection between Western Jiangxi and the Pearl River (Zhujiang) Delta. With completion of the Hangzhou-Nanchang-Changsha high-speed rail, Pingxiang is now one of the stops along a critical corridor between the Yangtze River Delta region and the Changsha-Zhuzhou-Xiangtan (Changzhutan) region. Travel times to Changsha and Nanchang have also been cut to half an hour and an hour, respectively.

2. Industrial transfer from the eastern seaboard to the central provinces. The Rise of Central China Plan, which promotes accelerated development of Central China by shifting labor-intensive industries from the eastern seaboard to central provinces, including Jiangxi, can bring more investment opportunities to Pingxiang.

3. Increased support from the national government for resource depleted cities. Pingxiang will utilize preferential policies of the national government to support the optimization of its industrial structure and the transition towards a circular, low carbon economy.

4. Proximity to the Mid-Yangtze Mega-City Cluster. The Mid-Yangtze Mega-City Cluster, comprising the Wuhan Urban Cluster, Changzhutan Urban Cluster and the Poyang Lake Rim Urban Cluster, was established in April 2015 to facilitate integrated development of the three regions (also known as the Central Triangle). Although Pingxiang is not included in these urban clusters, its location between the Changzhutan Urban Cluster and the Poyang Lake Rim Urban Cluster (see Figure 4-1) should provide opportunities for development. The relationship between Pingxiang and the Changzhutan Region in particular, including recommendations for integration, is discussed in depth in the PPTA Phase 1 Draft Final Report on Development Trends and Prospects for Rural-Urban Integration.

42 See 3.3.1 3.3



Figure 4-1 Positioning of Pingxiang

Source: Poyang Lake Eco-Economic Zone Plan. Note: the Poyang Lake Eco-Economic Zone overlaps geographically with the Poyang Lake Rim Urban Cluster.

4.1.2 Resource Depletion and Economic Transformation

145. Pingxiang’s economy is resource-based and has five traditional pillar industries: coal, porcelain, fireworks, building materials, and metallurgy. With coal distributed throughout 40% of the land area in Pingxiang, it is one of the oldest industrial mining cities in the country, providing 280 million tons of raw coal between 1950 and 2007. However, these coal reserves have been continuously dwindling. Of the 119 million tons of coal reserves remaining under the Pingxiang Mining Group, only 35% are recoverable, and it is estimated that most of the coal mines in Pingxiang will be shut down by 201843.

146. In 2008, Pingxiang was among the first 12 cities in the country to be listed as a resource-depleted city, and has consequently received financial support from the central government to transition its economy and promote sustainable development. In 2008, Pingxiang developed its Resource-Depleted City Economic Transition Plan (2008-2015), listing approximately 150 projects related to industry, urban infrastructure, energy, agriculture, tourism, and public services, including county-town wastewater treatment and Pingshui River flood control projects. In, 2013, the Pingxiang Resource-Depleted Transitional Development Plan (2013-2020) was developed, outlining goals for promoting sustainable socio-economic development and improving the urban ecological environment.

43 Pingxiang Resource-Depleted City Economic Transition Plan (2008-2015)



147. The Pingxiang 12th FYP and the Transitional Development Plan have aligned objectives. They both promote development of five emerging industries: new energy, new materials, bio-medicine, advanced equipment manufacturing, and modern service industry.

148. As part of the process of transforming and upgrading its economy, Pingxiang also promotes (a) resource conservation and environmental protection in both industrialization and agricultural production; and (b) integrated urban-rural development to raise the living standards of its residents.

149. At the same time, Pingxiang also plans to develop into a well-known tourist destination by developing “red” (revolutionary), nature-based, and cultural tourist attractions.

150. Several development goals relevant to this Project are provided in Table 4-1.

Table 4-1 Selected Goals from Pingxiang 12th FYP and the Pingxiang Resource-

Depleted Transitional Development Plan

Category Parameters 2010 2012 Targets

2015 2020

Economic Development

Total GDP (100 million CNY)

733.1

above 1,000

15,000

Total GDP per Capita (CNY) 39,100 50,000 75,000

Socio-economic Structure and Development

Ratio of Primary: Secondary: Tertiary Sectors

8.1:62.5:29.4 4:63:33

Added Value of Tertiary Sector

234 335 550

Urbanization Rate (%) 57% >60%

Population (104) 189.9 197

Urban Annual Net Income per Capita (CNY)

21257 24070 37000

Rural Annual Net Income Per Capita (CNY)

9999.5 12520 19000

Environmental Resources

Forest Coverage Rate (%) 63.5 63.51 63.51 65

Urban Domestic Garbage Treatment Rate (%)

81.6 90 95

Urban Sewage Treatment Rate (%)

75.8 85 90

General Industrial Solid Waste Comprehensive Utilization (%)

96.5 99 99.5

COD and Ammonia Nitrogen Discharge

- According to provincial top-down targets

Source: Pingxiang Resource-Depleted Transitional Development Plan (2013-2020)

CNY = Chinese Yuan; COD = Chemical Oxygen Demand; GDP = Gross Development Product

4.2 Urban Master Planning

151. The overall strategy for the Pingxiang Municipality is to develop a five-tiered system of urban settlement comprised of (a) a ‘core metropolitan area’ anchored on the existing city, (b) sub-regional hubs in the county-towns of Lianhua, Shangli, and Luxi counties, (c) nine key towns; (d) ten ”ordinary” towns, and (e) a series of townships. This is shown in Figure 4-2.



Figure 4-2 Pingxiang Urban System Plan

Source: Pingxiang Urban Master Plan (2008-2020) Large, red circle in the middle is Pingxiang urban center. Medium, orange circles are county-towns. Small, blue circles are key towns, small magenta circles are ordinary towns, and small gray circles are townships.

152. The Pingxiang Municipal Integrated Transport Plan closely follows the urban master plan. The plan proposes a ring road to connect Luxi Town to the rest of the metropolitan area and a north-south expressway between Shangli and Lianhua (Figure 4-3).

153. Urban master plans have been developed for the urban area (main and secondary), the three county-towns, as well as key towns and townships. These plans outline strategies and goals related to land-use and spatial planning, as well as infrastructure such as water supply, wastewater treatment, flood control, solid waste management. Overall development strategies for the county-towns and districts are outlined in Table 4-2.



Figure 4-3 Pingxiang Highway Network Plan

Source: Pingxiang Municipal Transport Bureau (from the Pingxiang Integrated Transport Plan, 2012)

Trunk Highway

Arterial Highway

Railway



Table 4-2 Regional Development Strategies

County/ District

Positioning Development Goals 2020 Target Urban Population

Anyuan District and New Development Zone

Main urban area

Non-pollution primary, secondary, and high-tech industries in the New Development Zone;

Advanced equipment manufacturing and new energy industries in Anyuan District;

Revolutionary (“red”) tourism.

630,000

Xiangdong District

Secondary urban area

Chemical, ceramics, metallurgy, building materials, modern logistics and warehousing industries;

Integrate with and absorb development pressures in Anyuan District (primary urban area)

170,000

Shangli County

Comprehensive city, frontier border town (with Hunan)

Fireworks, food, and building materials industries 120,000

Luxi County Ecological and tourism “garden” city

Power generation, industrial porcelain, photovoltaics, green food processing, new materials industries; Tourism, including revolutionary, cultural, and ecological attractions.

100,000

Lianhua County

Ecological city; Trade and industrial town

Building materials, energy, mining, green agriculture, trade and commerce industries; Tourism, including revolutionary, cultural, and ecological attractions.

100,000

Source: Pingxiang Municipality 12th FYP and Pingxiang Urban Master Plan.

4.3 Infrastructure Planning

154. Targets in the Pingxiang 12th FYP relevant to rural-urban infrastructure include:

Improving the road network between counties, townships and villages;

Improving flood control infrastructure in the urban and county-town areas;

Implementing rehabilitation projects for medium to small riversheds, including the Luxi section of the Yuan River, the Lishui River, the Xiashankou section of the Pingshui River, the outlet of the Xinhua River, etc.

Expanding the wastewater collection systems (including separation of wastewater and stormwater sewers) and accelerating wastewater treatment plant construction and upgrade for urban areas, county-towns, and key towns (including demonstration constructed wetlands as small-scale treatment systems); and

Improving urban greenscape and aesthetic values.

155. Goals and plans for infrastructure development are outlined in urban master plans and are further detailed in sector-specific plans including:

Pingxiang Municipality Master Plan (2008-2020)

Special Plan for Urban Water Supply in Pingxiang (2010-2020)

Pingxiang Urban Flood Control Plan (2011)

Xiangdong District Master Plan (2007-2020)

Special Plan for Urban Water Supply in Xiangdong (2013-2020)

Special Plan for Xiangdong County Urban Drainage (2013-2020)

Luxi County Master Plan (2007-2020)

Luxi County Urban Flood Control Plan (2012)

Luxi County Urban Drainage Plan



Lianhua County Master Plan (2011-2030)

Lianhua County Urban Flood Control Plan (2012)

Shangli County Master Plan (2007-2020)

156. Infrastructure development plans for each region are summarized in the tables below. All targets are for 2020, except for Lianhua, which has a 2030 planning horizon.

Table 4-3 Pingxiang Water Supply Plans

Region Towns

No. of

Existing WTPs

Water Supply Coverage

Supply Capacity (m3/d)

Projected Water Demand (m3/d)

Projected Water Supply Coverage

Projected Supply Capacity (m3/d)

No. of Planned WTPs

Central Urban Area

Anyuan 2 93% 147,000 560,000

100% 580,000

4

Xiangdong 1 - 23,000 - 1

Lianhua

County Town

1 100%

20,000

60,000

40,000 2 Other Towns

- -

Luxi

County Town

1

-

30,000 45,000 100% 45,000 1

Other Towns

- - - 90% - -

Shangli

County Town

1 -

30,000 72,000

-

70,000 1

Other Towns

- -

7

m3/d = cubic meters per day; WTP = Water Treatment Plant

Table 4-4 Pingxiang Wastewater Treatment Plans—Urban Areas

Region Existing WWTP

Treatment Capacity (m3/d)

Planned WWTPs

Projected Treatment Rate

Projected Treatment Capacity (m3/d)

Central Urban Area 1 50,000 2 100% 440,000

Luxi County-Town 1 3000 1 90% 33,000

Xiangdong County-Town

1 10,000 1 >85% 73,300

Lianhua County-Town 1 15,000 2 50,000

Shangli County-Town 1 15,000 1 30,000

Totals 5 93,000

7

m3/d = cubic meters per day; WWTP = Wastewater Treatment Plant

Table 4-5 Pingxiang Municipal Solid Waste Plans

Region Goals

Central Urban Area 100% proper treatment of garbage and feces; garbage removal mechanization and semi-mechanization rate of 100%; degree of



Region Goals

mechanization of road sweeping more than 80%.

Xiangdong District Renewable resources planning area to achieve a 15% recycling rate, and a garbage collection and transfer volume of 122 t/day by 2020.

Luxi County-Town

City garbage mechanization and semi-mechanization rate of 80% (short term) and 100% (long term). City garbage container collection rate of 70% (short term), 100% (long term). Garbage treatment rate of 60% short-term, 95% long-term. Mechanized road sweeping coverage rate of 30% short-term, 60% long-term.

Lianhua County-Town

Implement domestic solid waste collection, transfer, compression, and classification. Achieve compressed transfer rate of 90%, degree of mechanization of domestic garbage handling of 100%, proper garbage treatment rate of 100%.

Shangli County-Town Three new transfer stations, urban garbage collection rate of 100%.

Table 4-6 Pingxiang Flood Control Standards from Master Plans

Region Current Flood Standard

(Recurrence Period)

Target Flood Standard

(Recurrence Period)

Central Urban Area <20 100

Xiangdong District <10 50

Luxi County-Town 2~5 (20 year for Yuan River) 20

Lianhua County-Town 2~5 20

Shangli County-Town <20 20

Data in this table is for urban areas. Rural areas have a target flood standard of 10-year recurrence

period.

4.4 Other Development Projects Under International Finance Institutions

157. Luxi County is currently implementing three sub-projects under the World Bank-financed “Jiangxi Poyang Lake Basin and Ecological Economic Zone Small Town Development Demonstration Project”. The sub-projects involve road, flood control, and water supply improvements and do not overlap with the ADB project. See Appendix I for more details.



5 THE PROPOSED PROJECT

5.1 Project Rationale

158. On 27 May 2014 the PPTA Phase 2 Consultants facilitated a discussion with the Project counties and district to identify their key development and environmental problems. The results are summarized in the form of a Problem Tree shown in Figure 5-1. The key development problems reported by the governments are: lack of access to basic services including clean water supply, sanitation, roads, and flood protection to support balanced urban-rural development.

159. The infrastructure proposed for the ADB Loan includes integrated river rehabilitation and flood risk management; wastewater collection and treatment; and a rural-urban road. This infrastructure helps resolve some of the problems by:

a. improving safety by reducing flood hazards while preserving as much as possible the natural riparian areas and flood plains;

b. reducing surface water pollution thus improving water quality; and c. developing better road access for local villagers to urban markets, to travel to urban

areas and nearby industrial parks for work, and to encourage tourism in the rural areas.

160. The infrastructure promotes rural-urban integration by improving living conditions in the rural area thus reducing the need for rural residents to migrate to cities. This is the second approach to rural-urban integration discussed in Section 3.2.3, i.e. make satellite cities of the towns surrounding the core city. For this Project the Pingxiang urban area is the “core city” while the county-towns are “satellite cities”.

161. Based on the identified problems shown in the problem tree and the infrastructure proposed for the ADB Loan, the main overarching goal of the proposed Project can be defined as: the promotion of environmentally sustainable and socially inclusive, integrated rural and urban development in Pingxiang Municipality through the improvements of urban and rural infrastructure and their sustainable operation and maintenance.

162. Project sub-components are inter-connected to the intended wide area impact, namely successful urbanization and economic development. They enhance the efficacy of policies designed to improve rural incomes in line with the 12th FYP, and transform the municipality into an area with higher value-added employment opportunities. This is important because Pingxiang Municipality is a low wage industrial economy, historically dependent on mining and associated industries.44

163. The Project supports Pingxiang’s New-Type Urbanization Plan (2014-2020), which proposes to integrate the planning of socio-economic development, land utilization, and urban-rural development; expand the rural coverage of public finance; improve rural infrastructure and public services; establish a social security system and a basic public service system that covers both urban and rural residents; and promote urban-rural integration.

44 The exception to this within the Municipality is its poorest county, Lianhua, where the share of GDP represented by agriculture remains at 18 percent (2012 data). Pingxiang’s average manufacturing wage in 2012 was only CNY31,000 per year, compared with CNY70,000 in nearby Changsha.



Figure 5-1 Pingxiang Problem Tree Analysis



5.2 Project Alternative

164. Without the Loan the local governments will not have sufficient funds to proceed with this type of infrastructure. The alternatives of “doing nothing” are: (a) continued and increased outflow of wastewater into rivers which are water sources to downstream users; (b) continued river flooding; (c) riverbank scouring and erosion; and (d) limited economic development likely to result in migration to other urban areas in the region.

5.3 Impact, Outcome and Outputs of the Project

165. Project sub-components will improve rural physical infrastructure development. It is intended that each beneficiary area will see improvements in wastewater collection and/or treatment, and flood risk management. The proposed class II road links Shangli and Luxi counties. It adds capacity to an existing corridor that carries very little through-traffic at present, being served by minor roads with very poor alignments and pavement quality. It will improve access to the main east-west corridor for rural populations in the north-east of Pingxiang municipality and reduce road user costs for traffic diverting between two congested trunk roads, the G319 and G320.

166. The project impacts will be improved integrated and green urban–rural development; and improved socio-economic wellbeing of residents in cities, townships, and villages in Pingxiang municipality and Jiangxi Province.

167. At the outcome level, sub-components will serve the intended wide area impact by (i) reducing the costs of flood damage and increase recreational and other land-use opportunities within flood plains, (ii) reducing the negative externalities associated with wastewater discharge and (iii) reducing road user (i.e. supply-chain) costs for trips between rural and urban areas and for those diverting between the G319 and G320.

168. The Project has four component outputs located in four sub-projects (Lianhua, Luxi, and Shangli Counties, and Xiangdong District)45:

169. Output 1: Flood risk management and river rehabilitation improved and integrated. This component comprises works on 71 km of eight rural–urban rivers in Lianhua, Luxi, and Shangli counties; and Xiangdong District including (i) river widening and removal of sediments, (ii) new and rehabilitated embankments, (iii) about 90 hectares (ha) of riparian revegetation, (iv) about 46 ha of wetland protection and rehabilitation, (v) construction or reconstruction of 35 small adaptable weirs for farmland irrigation, and (vi) construction of two new pedestrian bridges (Lianhua and Luxi) and reconstruction of one local bridge (Luxi). Nonstructural measures included in output 4 enhance the effectiveness of the flood protection infrastructure.46

170. Output 2: Wastewater collection and treatment improved. This component includes improvement and expansion of sewer pipe networks in sub-centers of Lianhua County and Xiangdong District and construction of two sewer networks and WWTPs in two townships. A total of about 184 km of new sewer mains, secondary sewers, and interceptors will be installed.47 A new WWTP and pump station with 5,000 cubic meters (m3) per day

45 Note that outputs are subject to change during detailed design, so quantities and scope of work are indicative only. 46 It will meet government requirements for flood protection for (i) urban areas for 20-year flood events (occurring once every 20 years), (ii) rural villages for 10-year flood events, and (iii) farmland for 5-year flood events. 47 Sewer connections of titled properties will be installed by property owners or developers. For all other

households, connections will be installed under the project.



capacity will be built in Xuanfeng Town in Luxi County, and a new WWTP and pump station with 2,500 m3 per day capacity will be built in Tongmu Town in Shangli County.48

171. Output 3: Rural–urban linkages improved. This component includes a 44 km rural–urban class II road with a width of 10 meters (m), six bridges with a total length of 953 m, and a 482 m tunnel. The road is one of the four bypass roads in the Pingxiang Integrated Transport Plan (2012)49. The road will link towns and villages to urban and industrial areas in Luxi and Shangli counties, and Anyuan District; and expand the existing road network in the project area to improve traffic capacity, and reduce transport costs and travel time for people and goods.

172. Output 4: Inclusive capacity in project planning and management and in urban–rural integration developed. Loan implementation consultants will support project management, monitoring, and evaluation. They will carry out capacity development programs, study tours, policy dialogue, and stakeholder consultation on (i) procurement and financial management; (ii) urban–rural flood risk management and climate resilience partnership (i.e., development of flood early warning systems, disaster response plans, and guidance on water resource management plans); (iii) ecological river management supporting sustainable urban–rural sponge city development; (iv) wastewater management system design, construction, management, operation, and service and tariff reform; and rural wastewater and sanitation; (v) rural road and traffic safety, sustainable rural–urban transport, and public transport management; and (vi) urban–rural development and governance partnership development.

173. Table 5-1 lists the proposed infrastructure works and map M-3 shows their location. There are three infrastructure components located in four sub-centers with a total of 13 project sub-components. The infrastructure components are discussed in Report Sections 6, 7, and 8.

Table 5-1 Project Infrastructure Components

Subcomponent Description

Component 1: Flood risk management and river rehabilitation improved and integrated

Lianhua County

Lianjiang River

Rehabilitation of 16.79 km river length; 28.4 km of new embankment/revetment in total; 28.4

km of toe zone protection in total; 17.2 ha of wetland on Lian River and 30 ha at the

confluence of Lian River and Baima River are protected as floodplain, and an ecological

restoration park of 19 ha; estimated dredging volume of 503,700 m3 (includes Baima River)

within the total wetland area there is 10.6 ha of revegetation, and additional 9.1 ha for Lian

River riparian revegetation; construction of 2 new hydraulic weirs for irrigation; and

construction of 1 pedestrian bridge

Lianhua County

Baima River


km of toe zone protection in total; and 5 ha for riparian revegetation

Luxi County

Yuan River

Rehabilitation of 7.6 km river length; 15.2 km of new embankment/revetment in total; 43 ha

of revegetation area, including 2.4 ha of river wetland, 4 ha of a wetland park at the

confluence, and 1.25 ha of artificial island; 15.2 km of toe zone protection in total; estimated

dredging volume of 365,287 m3; reconstruction of 4 hydraulic weirs; construction of 1

pedestrian bridge; 0.8 km of sewer piping relocation/separation; and removal and

48 The Xuanfeng Town WWTP will also serve Yinhe Town. The two towns have combined water supply systems

with 8,000 m3 per day total capacity. Tongmu town has water supply capacity of 3,000 m3 per day.

49 See Figure 4-3.



Subcomponent Description

Component 1: Flood risk management and river rehabilitation improved and integrated

construction of 20 sewer inspection wells

Luxi County

Tankou River

Rehabilitation of 3.27 km river length; 6.5 km of new embankment/revetment in total; 3.4 ha

of revegetation, including 0.6 ha of river wetland; 6.5 km of toe zone protection in total;

estimated dredging volume of 58,602 m3; construction/reconstruction of 5 hydraulic weirs for

irrigation; 1.2 km of sewer piping relocation/separation; and removal and construction of 35

sewer inspection wells

Luxi County

Xinhua River

Rehabilitation of 3.15 km river length; 6.2 km of new embankment/revetment in total; 4.2 ha

of revegetation, including 0.6 ha of river wetland; 6.2 km of toe zone protection in total;

estimated dredging volume of 94,115 m3; construction/reconstruction of 3 hydraulic weirs for

irrigation; construction of 1 pedestrian/local bridge reconstruction; 2.5 km of sewer piping

relocation/separation; and removal and construction of 50 sewer inspection wells

Shangli County

Lishui River

Rehabilitation of 10.1 km river length; 20.2 km new embankment/revetment in total; 20.2 km

of toe zone protection; 2.7 ha of revegetation on the embankment; estimated dredging

volume of 222,200 m3; and construction/reconstruction of 2 hydraulic weirs for irrigation

Shangli County

Jinshan River


ha of revegetation on the embankment; 33.4 km of toe zone protection in total; estimated

dredging volume of 183,433 m3; and construction/reconstruction of 19 hydraulic weirs for

irrigation

Xiangdong District

Pingshui River


ha of revegetation on the embankment; 11.5 km of toe zone protection in total; estimated

dredging volume of 750,846 m3; and 5.5 km of sewer pipe relocation/separation

Component 2: Wastewater collection and treatment improved

Lianhua County City Improvement and expansion of 52 km of wastewater mains, and 32 km of secondary main

pipes flowing to an existing WWTP

Luxi County, Yinhe,

Xuanfeng Towns

Improvement and expansion of 25.7 km wastewater pipes; and construction of 5,000 m3/day

capacity WWTP that serve Xuanfeng and Yinhe town in Luxi County

Shangli County

Tongmu Town

Construction of a 2,500 m3/day WWTP with 20.28 km of wastewater pipes that will cover

Tongmu town; and construction of a 2,500 m3/day pump station

Xiangdong District

Urban Area

Improvement and expansion of 35.5 km sewer mains and 18 km of secondary main pipes

flowing to a WWTP built by local government

Component 3: Rural–urban linkages improved

Shangli County, Luxi

County, and Anyuan

District

Construction of rural-urban class II road with a length of 44 km connecting Shangli and Luxi

Counties and passing through Anyuan District; civil works include 1,734,000 m2 of earth fill

and 3,697,000 m2 of earth cut; 361.7 km2 of pavement; road width of 10 m; 3 bridges; 135

culverts; 1 tunnel of 482 m in total; and 6 main intersections (including 1 railway crossing)

and 42 local intersections

Anyuan road section will be financed by the local government.

ha = hectare, km = kilometer, km2 = square kilometer, m = meter, m2 = square meter, m3 = cubic meter, m3/day =

cubic meter per day, WWTP = wastewater treatment plant.

Note that outputs are subject to change during detailed design, so quantities and scope of work are indicative only.



5.4 ADB Categorizations of the Project

174. The Project’s thematic classification is capacity development; environmental sustainability; and social development and effective gender mainstreaming.

175. ADB Safeguard Categories are:

a) Environment: A.

b) Resettlement: A

c) Indigenous People: C.

See Section 11 Safeguards Analysis for details.

176. ADB categorizes the Project as “effective gender mainstreaming”.

5.5 ADB Country Partnership Strategy with the PRC

177. The project supports the PRC’s 12th FYP and the National New-Type Urbanization Plan (2014–2020)50 by contributing to balanced urbanization with livable, eco-efficient, and inclusive cities; as well as Pingxiang’s development, flood risk management, infrastructure, and transportation plans.

178. The Project is aligned with the ADB’s 2011-2015 country partnership strategy (CPS) for the PRC that is supporting sustainable and environment-friendly urban development. The Project aims at providing innovative and value adding solutions as emphasized in ADB’s Country Operations and Business Plan 2012-2014 for the PRC by integrating ecological infrastructure, flood management, and watershed management in a rural and urban context.

179. This Project comes under CPS Pillar 1: Inclusive Growth and CPS Pillar 2: Environmentally Sustainable Growth. Under Pillar 1 ADB will promote integrated rural and urban development by closing the gap between rural and urban infrastructure development, and by improving physical linkages between rural and urban areas. For Pillar II, ADB will help enhance environmental sustainability in rural areas through improvements wastewater collection and treatment and integrated river rehabilitation.

180. The project includes two of the four PRC priority sectors that ADB is supporting: (a) natural resources and agriculture i.e. flood management; and (b) urban development, i.e. access to municipal services improved and wastewater treatment increased.

50 This plan will serve as a blueprint for urbanization policies in the PRC’s 13th Five-Year Plan.



5.6 Contribution to the ADB Results Framework51

No. Level 2 Results Framework

Indicators

(Outputs and Outcomes)

Targets Methods and/or Comments

1 Land improved through

irrigation, drainage, and/or

flood management (ha)

29,300 Flood risk managed; and embankments,

revetments, toe zone protection built in Lianhua,

Luxi, and Shangli counties and in Xiangdong

District

2 Households with reduced flood

risk (number)

67,000 Flood risk managed and embankments built

protecting urban areas against once-in-twenty year

flood

3 Wastewater treatment

capacity added or improved

(m3/day)

7,500 Wastewater treatment plants built in Luxi and

Shangli counties

4 Households with new or

improved sanitation (number)

60,500 Connection of current and projected new resident

population to sewer pipe network

5 Rural-urban roads built and

upgraded (km)

44 Class II rural-urban road constructed or

rehabilitated in Shangli and Luxi counties and in

Anyuan District

6 Beneficiaries from rural-urban

road

247,000 Approximate number of residents currently within

two-kilometer distance to the new road

ha = hectare, HH = households, km = kilometer, m3/day = cubic meter per day.

Source: Asian Development Bank.

5.7 Project Implementation Period

181. The planned dates for loan signing and loan effectiveness are 15 December 2015 and 15 February 2016, respectively. Construction is assumed to take place over a four year period from 2016 through the first quarter of 2020. Commissioning and start-up is expected to be completed during 2020. Figure 5-2 shows the proposed implementation schedule

51 This is one of the Jiangxi-Pingxiang RRP Linked Documents.



Figure 5-2 Pingxiang Project Implementation Schedule

5.8 Investment and Financing Plans

182. The Project will be financed by a loan from ADB in the amount of US$150 million and counterpart funding from the Pingxiang Municipality.

183. The project investment cost is estimated at $361.24 million, including taxes and duties of $10.43 million. The total cost includes physical and price contingencies and financial charges during implementation.

Table 5-2 Project Investment Plan ($USD million)

Item Amount a

A. Base Cost b

1. Output 1: Flood risk management and river rehabilitation improved and integrated 186.85

2. Output 2: Wastewater collection and treatment improved 38.43

3. Output 3: Rural–urban linkages improved 76.43

4. Output 4: Inclusive capacity in project planning and management and in urban–rural

integration developed 2.80

Subtotal (A) 304.51

B. Contingencies c 47.79

C. Financing Charges During Implementation d 8.94

Total (A+B+C) 361.24

a Includes $10.43 million in taxes, of which the government assumes $5.03 million and the Asian Development Bank (ADB) $5.4 million. The following principles were followed in determining the amount of taxes and duties to be financed by ADB: (i) the amount is within reasonable country thresholds, (ii) the amount does not represent an excessive share of the project investment plan, (iii) taxes and duties apply only to ADB-financed expenditures, and (iv) the financing of the taxes and duties is relevant to the success of the project. b In January 2015 prices. c Physical contingencies computed at 5% of the base cost. Price contingencies computed at 4.16% on foreign exchange costs and 9.37% on local currency costs. d Includes interest and commitment charges. Interest during construction for ADB loan has been computed at the 5-year US dollar fixed swap rate plus a spread of 0.50% and maturity premium of 0.10%. Commitment charge for the ADB loan is 0.15% per year to be charged on the undisbursed loan amount. Source: Asian Development Bank estimates.

184. The government has requested a loan of $150 million from ADB’s ordinary capital resources to help finance the project. The loan will have a 25-year term, including a grace

Task Starts Ends 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3

Project Implementation Mar-16 Mar-20

Initial Assistance Oct-15 Feb-16

Project Implementation Assistance Mar-16 Mar-20

Detailed Engineering Design Oct-15 Sep-16

Bidding Documents and Tendering Jan-16 Dec-18

Civil Works Construction Apr-16 Jun-19

Equipment Installation Apr-16 Jun-19

Training and Studies Jul-16 Jun-19

Post Evaluation Apr-20 Sep-20

202120202015 2016 2017 2018 2019



period of 5 years; follow the straight-line repayment method; and have an annual interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility, a commitment charge of 0.15% per year (the interest and other charges during construction to be capitalized in the loan), and such other terms and conditions set forth in the draft loan and project agreements.52

185. The loan will finance civil works (94%), equipment (4%), capacity development (2%), and other eligible expenditures. The local governments will finance the balance of costs not financed by ADB, including the cost of land acquisition and resettlement, design, site supervision, and project management. The PRC Ministry of Finance will relend the entire loan to the Jiangxi provincial government, which will onlend the loan proceeds to the PMG, which will onlend to the county and district governments on the same terms and conditions as the ADB loan. The county and district governments will bear the foreign exchange and interest rate variation risks in proportion to the loan amount they receive. The indicative flow of funds and the lending arrangements are provided in the project administration manual (PAM).

Table 5-3 Financing Plan ($USD million)

Source Amount %

Asian Development Bank $150.00 42%

Pingxiang municipal government, county, and district governments a

$211.24 58%

Total $361.24 100%

a Lianhua: $36.57 million; Luxi: $51.68 million; Shangli: $33.65 million; Xiangdong: $25.57

million; Pingxiang: $63.53 million for road and $0.24 million for capacity development.

Source: Asian Development Bank estimates.

186. The Government of the PRC has provided ADB with (i) the reasons for its decision to borrow under ADB’s LIBOR-based lending facility based on these terms and conditions, and (ii) an undertaking that these choices were its own independent decision and not made in reliance on any communication or advice from ADB.

52 Based on the above choice of loan terms, the average maturity is 15.25 years, and the maturity premium payable to ADB is 0.10% per annum.



6 COMPONENT #1: INTEGRATED RIVER REHABILITATION AND FLOOD RISK REDUCTION53

6.1 Existing Conditions

187. The Project Rivers in the four project counties/districts in Pingxiang share similar problems. Most of the rivers do not have adequate flood and erosion protecting embankments and existing riverbanks in most river sections only protect against 1/2 - 1/5 year floods. Accumulation of sediment in the rivers over time has raised riverbed elevations, further reducing flood discharge capacities. Sedimentation is especially severe behind the many concrete dams constructed along the rivers for water abstraction. These dams, as well as abandoned bridges, uncontrolled vegetative growth, and sewer manholes in the rivers also impede flows during flood events.

188. The overall river environment and ecology has deteriorated in urban areas and near rural settlements as development encroaches upon wetland areas and floodplains. Riverbank erosion and degradation is serious in some river sections. Garbage dumps are commonly observed in the riverine areas, particularly in rural areas without municipal solid waste collection systems. Wastewater collection rates are still low in Pingxiang, which means that wastewater is often discharged untreated into the rivers. Where sewer systems do exist, interceptor mains are buried directly in the river, creating risks to water quality.

6.2 Basis of Design

6.2.1 Design Approach

189. The overall design approach to river rehabilitation that has been encouraged by ADB54 and the PPTA consultants since the beginning of the project is one that promotes a harmonious relationship between humans and the environment by:

Preserving natural flood plains where possible to reduce flood vulnerability and protect wetland ecosystems;

Restoring riparian buffers and vegetation to protect river water quality and enhance biodiversity;

Applying ecological methods to embankment and revetment design to reduce overall flood risk and mimic natural riverine environments;

Minimizing modification of river hydro-morphology, such as channelization and dredging.

190. This design philosophy is in line with international best practices, recommendations by ADB55, and also the concept of ecological civilization that is being promoted by the PRC central government. Improvement of the ecological environment is particularly important in Lianhua and Luxi, which have been designated as provincial level ecological function zones. This designation in effect means that their economies should focus on providing ecological

53 Detailed technical analysis of the project components are provided in the Engineering Technical Analysis Report.

54 ADB Project Team Leader Stefan Rau conducted a training session to the government in August 2013 on principles of ecological river rehabilitation and flood risk management, showing benefits of the integrated and ecological approach using international state of the art project cases. He arranged training sessions by the PPTA phase 1 consultants over a two week period in February 2014, which were held in Luxi County with participation of the PMO as well as concerned officials from the Pingxiang municipal, county, and district governments. 55 Kobayashi, Yoshiaki and John W. Porter. Flood risk management in the People’s Republic of China: Learning to Live with Flood Risk. Asian Development Bank, 2012.



services as a priority, and restrict large scale and high intensity urbanization and industrialization activities.

6.2.2 Design Criteria

191. There are multiple objectives of the integrated flood risk management and river rehabilitation component, including:

Improvement of flood discharge capacities and flood protection standards (see Table 6-3);

Restoration of riparian buffers and vegetation;

Protection against riverbed/bank scouring and erosion;

Improvement of the overall water environment (including public accessibility) and ecological values.

Table 6-1 Flood Control Design Standards for Project Rivers

County/ District River Flood Control Standard

Lianhua Lian, Baima, and Qin Rivers 1/20 year for urban areas; 1/10 year for rural areas

1/5 year for farmland

Luxi Yuan, Tankou, and Xinhua Rivers

1/20 year

Floodplain for some farmland area

Shangli Lishui and Jinshan Rivers 1/10 year

1/5 year for farmland

Xiangdong Pingshui River 1/20 year

192. The target flood control standard for the project rivers is one in twenty years (1/20) for urban areas; one in ten years (1/10) in rural areas; and one in five years (1/5) for farmland56. The flood control design standards are in line with the local governments’ urban master plans and flood control plans (see Table 6-2).

193. Government standards for rural areas, however, are provided as guidelines only and can be adjusted based on local needs and conditions. For the Jinshan, Lishui, and upstream sections of the Tankou River, which mostly run through rural farmland, a lower flood control standard was used to reduce the cost of flood control infrastructure. Based on PPTA discussions with local officials in Shangli and Lianhua, a 1/5 year flood control standard was deemed adequate for rural areas in those counties. For the upper Tankou River in Luxi County (upstream from the new 320 bridge), it was agreed that the surrounding farmland will act as natural flood plain and that flood control standards would not be raised in this river section57.

194. The extent of riparian area to be included in the proposed river rehabilitation projects was determined based on green space or road boundaries delineated in urban master plans.

56 A 1/20 year flood has a 5% probability of occurring; a 1/10 year flood has 10% probability of occurring; and a 1/5 year flood has a 20% probability of occurring.

57 For farm land preserved as natural flood plains (or with low flood protection standards), flood resilient farming will be promoted through the Project as part of the capacity development component (see Section 9.3 and details in the Project Administration Manual).



Table 6-2 Government Plans Relevant to River Rehabilitation

County/ District

Rivers Relevant Government Plans Target Flood Control Standard

Lianhua Lian, Baima, and Qin Rivers

Lianhua County-Town Flood Control and Stormwater Management Plan (2012)

Lianhua Master Plan (2011-2030)

1/20 year for urban areas and 1/10 year for rural areas

Luxi Yuan, Xinhua, and Tankou Rivers

Luxi Urban Master Plan (2007-2020)

Luxi Yuan River Upstream Scenic Belt Urban Design and Landscape Plan (2013)

Luxi Urban Flood Control Plan (2012)

1/20 year

Shangli Lishui and Jinshan Rivers1

--- ---

Xiangdong Pingshui River Pingxiang Urban Master Plan (2008-2020)

Pingxiang Urban Flood Control Plan (2011)

1/20 year

1. Jinshan and Lishui Rivers flow primarily through rural areas of Shangli, so have not been included in the county’s existing urban master plans or flood control plans. However, rehabilitation of small and medium rivers is now a high priority in the county due to the disastrous May 25, 2014 flood event and the county government has requested support from the provincial government for flood control infrastructure.

6.3 River Component Design

6.3.1 Overview

195. The proposed scope of work to achieve the objectives described above include:

River widening and dredging;

Repair/construction of embankment, revetment, and toe protection;

Planting of aquatic plants and riparian vegetation;

Removal and reconstruction of hydraulic weirs

Replacement or separation of in-stream sewer interceptors;

Other ancillary work such as embankment roads, riverside walkways, and bridge construction.

196. An overview of the proposed works for the eight project rivers is provided in Table 6-3. Figure 6-1 shows two typical river cross-section designs under the project. The upper figure shows a typical design where embankments are built further inland to preserve existing floodplains and shoreline vegetation (occurring in more rural areas with lower flood protection requirements). The lower figure shows a typical design where engineered embankments are built along existing shorelines (occurring mostly in urban areas with relatively high flood protection requirements).



Figure 6-1 Typical River Cross-Sections



Table 6-3 Pingxiang River Component

Sub-Project Lianhua County Luxi County1

Shangli County Xiangdong

District

Sub-Component Lian River

& Qin River Baima River

Yuan River

Tankou River

Xinhua River

Lishui River

Jinshan River

Pingshui

River1 Total

Length of Riverworks (km) 16.79 7.72 7.6 3.27 3.15 10.1 16.69 5.75 71.07

Estimated Earthworks for River Widening (million m3) 1.39 0.51 0.16 0.11 0.24 0.45 0.22 0.21 3.29

Estimated Dredging Volumes (m3) 503,700 365,287 58,602 222,200 183,433 750,846 2,084,068

New Embankment / Revetment

(km)2 28.4 6.44 15.2 6.5 6.2 20.2 33.4 11.5 127.84

Toe Zone Protection (km) 33.8 7.7 15.2 6.5 6.2 16.3 26 11.5 123.2

Number of Hydraulic Weirs Removed (and not replaced) 2 2 0 0 0 0 0 0 4

Number of Hydraulic Weirs Reconstructed or Constructed 2 0 4 5 3 2 19 0 35

Number of New Bridges 1 0 1 - 1 - - - 3

Sewage Piping Relocation/Separation (km) - - 0.8 1.2 2.5 - - 5.5 10

Riparian Wetlands and Embankment Re-vegetation (ha) 66.2

43

3.4 plus 12.5

4.2 2.7 1.7 1.2 135

Source: River FSRs km = kilometer; m = meter; m3 = cubic meter

1. To minimize impact on aquatic life, there will be no construction on rivers in Luxi County from March to June and no construction on the Pingshui River from April to June. 2. For some rivers the length of embankment/revetment is more than the length of riverworks because in some locations both sides (river and land) of the embankment are

prepared.



6.3.2 Design of River Cross Sections, Embankments, and Revetments

197. To meet flood control standards, the cross-sectional area for most sections of the rivers will be increased by (a) embankment construction next to existing riverbanks; and/or (b) widening and dredging of the existing river channels.

198. The first approach preserves the natural form of the river and existing vegetation by building embankments away from the existing riverbank, but creates an artificial barrier between the river and its flood plain during large flood events. Without resettlement, this approach is not feasible in areas where there is development on or near the riverbank. Additionally, the new embankment may take up valuable land that may be needed for other uses such as agriculture. The height of such embankments may also be constrained by stormwater drainage considerations and aesthetics.

199. The second approach in effect artificially channelizes the river through widening and/or dredging. This takes up less land, but may lead to increased flow velocities and erosive forces both within the channelized section and further downstream. Existing vegetation and other aquatic ecosystems are also destroyed in the process.

200. In this Project, the first approach is preferred in areas where there are ecological assets worthy of protection (such as riverbank vegetation) and where there is adequate room to extend river boundaries. In areas where riverbanks are already eroded or degraded, widening may be an acceptable option.

201. Embankment designs for the Project Rivers can generally be categorized into hard retaining walls, sloped embankments, and various combinations of the two. Concrete, stone masonry, interlocking blocks, or dry stone were selected for hard revetment. Interlocking blocks, permeable interlocking concrete pavers, gabion, riprap or grass were selected for soft, or ecological revetment. Approximately 22% of new embankment will utilize hard revetment; 58% will utilize soft revetment; and 19% will use a combination of both. Toe protection using riprap, gabion, or gravel will also be added along all river sections to protect against riverbed scouring and degradation.

202. An important consideration for the river component is that land is needed to widen rivers and construct embankments to meet flood control requirements. Although the design will minimize involuntary resettlement as much as possible, flood control requirements cannot be met without demolishing existing houses built on urban riverbanks, particularly for the Xinhua and Tankou Rivers. In addition, resettlement in some areas may be necessary to create the riparian green space outlined in existing urban master plans. In rural areas, the new embankments will need to occupy some existing farmland adjacent to the rivers.

6.3.3 Dredging

203. Dredging is proposed for almost all sections of the rivers to:

a) Remove sediment that has accumulated over time, particularly behind existing dams; b) Deepen the river for flood control purposes; and c) Engineer a linear stream gradient.

204. A dry method of dredging will be used for Project Rivers in Luxi and Shangli Counties due to small size and close proximity to urban areas. A coffer dam will be built around the areas and a mechanical excavator will be used. For Project Rivers in Lianhua County and Xiangdong District a mechanical dredger will be placed in the river. Based on an evaluation of four different types, the DI selected cutter suction mechanical dredger.

205. Based on cost considerations, dredged sediments will be dried naturally (i.e. sun, wind, gravity). Samples will be analyzed for hazardous and toxic chemicals. If none are



found, then the dredged material will be used to fill low spots and build up berms. If harmful substances are present, then the material will be disposed at a sanitary landfill.

6.3.4 Dam Removal/Reconstruction

206. Existing concrete dams are used to hold water for irrigation, industrial, and drinking water uses. Since these concrete dams have no mechanism for releasing water downstream, they create a flow impediment to flood waters, accumulate sediments, and increase riverbed elevation. These dams will be removed or replaced by adjustable weirs. Four types of weirs were considered by the DI who selected hydraulic elevator weirs due to low cost and high reliability. Under this project, 4 existing dams will be removed without replacement and 36 will be replaced by adjustable weirs (33 hydraulic elevator weirs and 3 overflow weirs). The majority of weirs (19) are on the Jinshan River (Shangli County) for irrigation use.

6.3.5 Sewer Pipe Replacement/Separation

207. In several urban locations sewer interceptors have been installed within the river due to lack of space along river banks and to minimize construction costs. These sewers intercept combined wastewater and stormwater from urban drainage pipes and transmit them to the wastewater treatment plants. The presence of sewer piping and manholes in the river not only impacts flood discharge, but also poses risks of exfiltration and infiltration. The former would affect river water quality while the latter would potentially send clean water to the WWTP, lowering the effectiveness of wastewater treatment. As part of this component, 10 km of existing sewer interceptors and manholes in the river sections will be relocated/replaced and concrete-encased to reduce their flood control and water quality impacts.

6.3.6 Wetlands and Riparian Re-vegetation

208. Native wetland plant species will be planted from the toe zone to the top of the embankments in all project rivers, including grasses, shrubs, and trees, as well as submerged, floating, and emergent aquatic plants. These plants will enhance ecological and biodiversity values, and also act as a buffer for agricultural non-point source pollution in rural areas.

209. Besides re-vegetation of embankments, Lianhua and Luxi counties are also planning to re-vegetate a wider riparian zone along the rivers for ecological and recreational purposes, as described below.

Lianhua County Re-Vegetation

210. Riparian re-vegetation along a 12.8-km stretch of the Baima and Lian Rivers is included in the Project scope, as shown in Figure 6-2.



Figure 6-2 Proposed Riparian Re-vegetation Along Baima and Lian Rivers

211. Riparian re-vegetation will increase ecological values and help create a buffer between the river and potential pollution sources. At the same time, it will also be a valuable resource for citizens to experience nature and gain awareness of the importance of ecological protection. Under this sub-component, a 17.2 ha wetland area at the confluence of the Qin and Lian Rivers will be restored, protected, and designated as the “Tangdu Natural Wetland Park”. This wetland area will serve as an ecological park for public recreation and education as well as a natural flood plain during floods (see Table 6-4). Works proposed under this project include vegetation, access roads, footpaths, and other infrastructure for the park.

212. In addition, a 19-ha wetland area near Tangxia Village downstream of confluence of Qin River and Lian River will also be restored and protected as a natural floodplain (see Table 6-4).

213. The ADB-financed river project also contributes to the establishment of the Lian River Ecological Landscape Park at the confluence of the Baima and Lian Rivers, which will be even further enhanced by the county government in the future. This park is included in the Lianhua County Urban Master Plan (2008-2020) and the Jiangxi Lianhua Provincial Wetland Park Master Plan (draft for approval completed in 2010).

Tangdu

Ecological

Wetlands

Lian River

Ecological

WetlandsLian

River Ecological

Wetlands



Table 6-4 Preservation of Wetland Areas as Natural Floodplains (Lianhua)

Wetland Area Area (ha)

1/5 year Flooded Area (ha)



Area of Re-vegetation

(m2)

Ecological Wetland at confluence of Qin River and Lian River

17.2 5.4 9.7 17.2 91,000

Ecological Wetland at confluence of Baima River and Lian River

30 15.8 21.7 30 49,800

Waterfront Recreation Park, near Tangxia Village, downstream of confluence of Qin River and Lian River

19 5.2 11.8 19 105,941

Total 66.2 246,741

Source: FSR ha = hectare; m2 = square meter

Note: Earth embankments will be constructed on the other side of the parks to protect nearby

settlements.

Luxi County

214. Riparian re-vegetation along the Yuan, Xinhua, and Tankou River is proposed for the entire length of river rehabilitation, as summarized in Table 6-5. In addition, creation of an artificial island is proposed at the confluence of the three rivers.

Table 6-5 Summary of Proposed Riparian Re-vegetation in Luxi County

River Length of Riparian Vegetation (km)

Width of Riparian Vegetation (m)

Area of Re-vegetation (m2)

Yuan River 7.6 5 - 650 891,277

Xinhua River 3.15 3 - 5 42,840

Tankou River 3.27 2 - 5 34,556

Artificial Island at River Confluence - - 12,520

Total 14.02 981,193

215. Luxi County plans to designate 43 ha of the Yuan River riparian area as a wetland park in order to guarantee continued ecological protection and restoration of the wetlands, as well as to provide a scenic area for citizens to appreciate nature. This park is included in the Luxi Urban Master Plan (2007 - 2020) and the Luxi Yuan River Upstream Scenic Belt Urban Design and Landscape Plan (2013). A separate design institute has already developed a design for the park (see Table 6-6 and Figure 6-3), parts of which will be financed under this Project. During the ADB Safeguards Mission it was agreed that the scope of development of cultural tourism resources unrelated to wetlands rehabilitation and restoration would not be included in the Project58.

58 MOU of the PPTA Interim Safeguards Review Mission for TA8451-PRC: Jiangxi Pingxiang Integrated Rural–Urban Infrastructure Development Project, 2–6 February 2015.



Figure 6-3 Proposed Riparian Re-vegetation Along the Yuan River

Table 6-6 Yuan River Wetland Park

Zone Area (ha)

Key Functions Planned Works1

Forest Water Gap Park Zone

5 Restore and protect the forests and build up natural landscaping.

Forest restoration along the river Landscaping Parks along Yuan River Water front platform and walkways

Ecological Park Zone

20 Preserve the wild riparian condition and restore selected vegetation for a high quality of aesthetics.

Restore river riparian Plant Chinese traditional flowers Various view points as leisure area

Urban Riparian Ecological Zone

14 Combine with urban flood control and urban greenscape to provide an area for leisure and recreation

Recreation areas for local residents Landscaping and vegetation along the residential area

Yuan River Riparian Restoration and Rehabilitation Zone

4 Restore riparian areas while conducting scientific research and monitoring, and convert area to a protection and conservation zone

Restore riparian system Release fish Small islands restoration at the confluent of the Yuan, Xinhua and Tankou River. Plant wetland plants

1. Includes overall plans for the park. The portion to be supported by the ADB loan can be various.

Source: FSR ha = hectare

6.3.7 Public Amenities

216. Embankment and riparian buffer design under this Project includes riverside paths to enhance public accessibility to river greenways (with the exception of wetlands conservation areas). During the ADB Safeguards Mission it was agreed that an adequate number of waste bins will be included in the designs and budgets for all river projects and that the bins would be placed at distances appropriate for pedestrian use. Project Component #4 includes



capacity building and awareness raising campaigns for solid waste management and behavioral change to enhance environmental consciousness.

6.4 Benefits of the River Component

217. Alleviating flood risk for the project area. By increasing the flood discharge capacities of the project rivers, this component will provide flood protection (1/20 year for urban; 1/10 year for rural areas; 1/5 year for farmland) for residents, property, farmland, and infrastructure within the flood plains of the project rivers. This will reduce risks of injury and death, losses of property and crop damage, and losses of income from the time spent to respond and recover from flood events.

218. Improving river water quality and environment. This component will have immediate impacts on water quality by removal of solid waste and sludge along the rivers and riverbanks. New revetments and toe protection will reduce riverbank erosion and sedimentation in the Project Rivers, contributing to both improved water quality and flood discharge capacities. Replacement and separation of existing sewer interceptors in the river will help to reduce leakage of wastewater into the river. In addition, vegetated embankments and riparian re-vegetation will reduce non-point source pollution to some extent (e.g. from agricultural and urban runoff). These improvements to the river environment will also likely cause behavioral changes towards the river, increasing people’s tendency to protect rather than to pollute it.

219. Improving riverine and riparian ecology and biodiversity. Re-vegetation of riparian buffers and the use of ecological revetments along the project rivers will improve the habitat conditions for flora and fauna and contribute to higher levels of biodiversity in the project area.

220. Increasing real estate values and recreational opportunities for the project areas. Following the three benefits described above, the results of the river component may lead to increased real estate and property values in areas that were previously vulnerable to flooding, and near rivers that had poor environmental conditions. Improvements in the riverine environment will enhance the overall image of urban areas, and will offer residents and tourists more opportunities to experience nature and appreciate the importance of ecological protection. Improved public accessibility to river greenways will contribute to pedestrian and bicycle networks in urban and rural areas, creating a healthy environment for exercise and recreation.

6.5 Beneficiaries of the River Component

221. Direct beneficiaries of improvements to the riverine and riparian environment live near the river, and are assumed to also live within the flood protection area.

222. The number of direct beneficiaries of this component can be estimated by determining the number of people residing within the existing inundation area of the project rivers at a 1/10 (rural) or 1/20 (urban) year flood. Results are summarized in Table 6-7.

223. Indirect beneficiaries of the river component could include the entire population of the project counties/district, who can enjoy the ecological services and recreational opportunities provided by the rivers.



Table 6-7 Estimates of Direct Beneficiaries of the River Component

Sub-Project

River Design Flood (years) Flood

Inundation Area (km2)

Population Within Flood Inundation Area (10,000

people)

Lianhua Lian and Qin

1/20 for urban areas; 1/10 for rural areas1/5 for farmland area

13.8 11.58 Baima

Luxi Yuan and Tankou

1/20 for urban areas; 1/10 for rural areas

2.5 4.8

Xinhua 1/20 for urban areas; 2.6

Shangli Lishui 1/10 for rural areas; 1/5 for farmland area

2.4 1.8

Jinshan 5.4 5.6

Xiangdong Pingshui 1/20 for all areas 2.6 7.1

29.3 30.88

Source: FSR ha = hectare; km2 = square kilometer; mu = Chinese unit for land area

Note: At 4.6 persons per household, number of HH protected is about 67,000.

6.6 Implementation and Operations and Maintenance Considerations

224. Table 6-8 lists the Project Implementation Units (PIU) and the agencies responsible for operations and maintenance (O&M) after construction. Daily inspection of river embankments is decentralized to the local level (town/township or village level).

Table 6-8 Implementation and O&M Agencies for River Component

Sub-Project PIU Work Unit of the Water Affairs Bureau Responsible for O&M

Lianhua County Water Affairs Bureau Embankment Management Station

Luxi County Water Affairs Bureau River Course and Embankment Management Station

Shangli County Water Affairs Bureau River Course Management Station

Xiangdong District District Government River Course Management Station (to be confirmed)



7 COMPONENT #2: WASTEWATER COLLECTION AND TREATMENT


225. There are many buildings not connected to the sewer system in the Project area. Human waste from these buildings discharges to septic tanks from which the waste percolates into the ground water. In several locations the wastewater collection system is incomplete and wastewater is discharged into nearby drainage ditches that flow into the rivers. The rivers in the Project area are sources of drinking water for local residents and downstream users.

7.2 Wastewater Component

226. This component will improve river water quality by reducing pollution from untreated wastewater. There are four wastewater sub-components, one in each sub-project. They are included in the County/District Master Plans.

Table 7-1 Pingxiang Wastewater Component

Sub-Component

No.

Sub-Project

Location Estimated Population

(2020)

WW Collection

Pipes

Pumping Station

WW Treatment

Plant

Receiving Waterbody

LH-WW1 Lianhua Lianhua County Town

110,000 84 km gravity flow

--- Lian River

LX-WW2 Luxi Xuanfeng Town and Yinhe Town

25,000 26 km 5,000 m3/d

5,000 m3/d Yuan River

SL-WW3 Shangli Tongmu Town

40,000 20 km 2,500 m3/d

2,500 m3/d Lishui River

XD-WW5 Xiangdong Xiangdong District

150,000 54 km see below --- Pingshui River

Source: Feasibility Study Reports of January 2015 prepared by Design Institute WW = Wastewater Lianhua has current population of about 80,000 while Xiangdong has 70,000.

227. Existing wastewater treatment plants (WWTPs) in Lianhua and Xiangdong will be expanded to handle the increased wastewater volumes as part of separate projects funded by the local government. The Lianhua WWTP will be expanded by Lianhua County from 15,000 to 30,000 m3/day. It is operated by the Jiangxi Hongcheng Waterworks Co, Ltd, a provincial state-owned enterprise that provides wastewater treatment throughout the Province. The existing WWTP in Xiangdong will be expanded by Xiangdong District from 10,000 to 70,000 m3/d.

228. Linkage with Government Plans. The proposed infrastructure is already part of the local governments’ master plans. The wastewater component will help the local governments to reach targets for sewer system coverage, achieve a treatment standard of Grade 1B, and convert combined sewers to separate sanitary and storm sewers.

229. The DI used population estimates from the local government master plans to estimate the volume of wastewater to be collected and treated. The DI applied the following parameters to estimate wastewater volume.



Table 7-2 Assumptions for Wastewater Projections

Sub-

Component No.

Liters/Capita/Day

(Lpcd)

Diurnal Changes in Water

Consumption

Wastewater Discharge

Coefficient

LH-WW1 230 1.3 0.80

LX-WW2 150 1.2 0.80

SL-WW3 180 1.2 0.80

XD-WW5 210 1.3 0.85

Notes:

Lianhua and Xiangdong are city level and the consumption includes residential, commercial, and social. Luxi and Shangli are town level and the per capita consumption reflects estimated residential use.

Diurnal Changes in Water Consumption compares daytime to nighttime use. A factor of 1.2 means 20% more water is used during the daytime.

Wastewater Discharge Coefficient is the ratio of water supply that is discharged as wastewater. The higher the ratio the larger the volume of water going to the sewer system. It is assumed that Xiangdong, because it is more urbanized, has more hard surfaces and less outdoor yard space than in the counties.

7.3 Analysis of Alternatives

230. Table 7-3 summarizes the alternatives evaluated by the DI in designing the wastewater collection, treatment, and sludge disposal systems for the four sub-projects.

Table 7-3 Summary of Alternatives Considered for Wastewater Component

Wastewater System Element

Alternatives Evaluation

Collection System Pipes

Layout For Lianhua and Luxi, evaluated two options and selected the one avoiding deep burial of pipe, thus reducing construction costs.

Pipe Material For all four sub-projects, evaluated 5 different pipe materials and based on cost and familiarity of use, selected HDPE for <600mm and RCP for >600mm.

Wastewater Pump Station (WWPS)

Site For Xuanfeng (Luxi County) and Tongmu (Shangli County) Towns, the location is based on pipe layout and hydraulic calculations; the size is based on the design flow rate of the WWTP. The number (minimum 2) and size of pumps will be developed during detailed design.

Wastewater Treatment Plant (WWTP)

Site Two sites were evaluated for Xuanfeng (Luxi County) and same for Tongmu (Shangli County)

Process Evaluated Oxidation Ditch (OD) and AAO (anaerobic–anoxic–oxic). Selected OD due to ease of O&M, familiarity, and lower cost.

Disinfection Evaluated 5 methods and selected ultra-violet.

Odor Control Evaluated 3 methods and selected biological process based on high performance, high loading rate, and low cost.

Wastewater Sludge Processing

Process Evaluated one-step vs. two-step; selected one-step (i.e. concentrating and dewatering in one step).

Dewatering Equipment

Evaluated 4 different mechanical devices and selected centrifuge.



Wastewater System Element

Alternatives Evaluation

Disposal Evaluated land application and landfill disposal; selected landfill disposal; however at time of disposal, the sludge will be analyzed for presence of toxic chemicals and if none, then land application will be considered.

Source: Design Institute FSRs HDPE = High Density Polyethylene; mm = millimeter; RCP = reinforced concrete pipe

231. The DI evaluated alternative locations for collection system pipelines and for locations of new WWTPs.

232. For wastewater collection pipes the DI evaluated reinforced concrete pipe, steel, PVC, HDPE, and reinforced plastic mortar pipe. Recommendations are summarized in Table 7-4.

Table 7-4 Recommended Wastewater Pipes

Pipe Diameter Type of Pipe

Greater than 600 mm RCP or HDPE Hollow-Wall Winding

Less than 600 mm RCP or HDPE Double Wall Corrugated

Under Pressure (e.g. Pump Station) Steel Pipe

233. Measured data on wastewater influent characteristics is not available so the DI estimated the influent characteristics based on typical urban values from the PRC Water Supply and Drainage Manual and from other WWTPs in Jiangxi Province. Influent parameters are shown in Table 7-5.

Table 7-5 Estimated Influent Parameters

Wastewater Treatment Plant CODCr BOD5 SS NH3-N TN TP

Xuanfeng WWTP (domestic, industrial ≤ 350 ≤ 175 ≤ 275 ≤ 33 ≤ 50 ≤ 6.5

Tongmu WWTP (Domestic) ≤ 200 ≤ 150 ≤ 150 ≤ 20 ≤ 30 ≤ 4.5

CODCr = Chemical Oxygen Demand by Chromium Reflux Method; BOD5 = Biological Oxygen Demand, 5 –day; SS = Suspended Solids; NH3-N = Ammonia Nitrogen, TN = Total Nitrogen; TP = Total Phosphorus

pH is assumed to be 6～9 for both WWTP.

234. Wastewater will be treated to PRC Grade 1B standards (GB18918-2002). For new WWTPs the DI evaluated AAO and Carrousel oxidation ditch treatment processes. Both processes are widely used in the PRC and can achieve the required effluent water quality. DI recommended Carrousel oxidation ditch which requires less space, is easier to operate, and is already in use in Luxi County Town. The complete treatment process includes grit removal and screening; oxidation ditch; secondary sedimentation tank; and ultra-violet disinfection. Sludge from the oxidation ditch will go to ponds for thickening then dewatering using mechanical equipment.



Figure 7-1 Schematic of Carrousel Oxidation Ditch

235. The DI has included an internal control system PLC (programmable logic controller) within the new WWTPs. There is a central control room that receives real time process status and monitoring data from each treatment unit, which includes an alert system and data storage. This is similar to SCADA in that it monitors the system, but does not enable operators to make adjustments remotely. For this type of small system remote adjustment is not needed and if present adds a layer of complexity in terms of maintenance.

236. Wastewater disinfection alternative methods evaluated include liquid chlorine, chlorine dioxide, sodium hypochlorite, ozone, and UV disinfection. The DI recommended using UV disinfection process which has high efficiency, requires small area, is less hazardous, and does not create a risk for aquatic flora or fauna59. UV lamps no longer operable must be disposed as hazardous waste.

237. For sludge dewatering the DI compared frame dryer; centrifuge; dewatering screw press; and belt thickener. The DI selected a centrifuge but this needs to be discussed because it is an expensive option and belt thickener, as used elsewhere in Pingxiang Municipality, may be preferable. Sludge from the Luxi and Shangli WWTP is proposed to be disposed of at a nearby landfill. PMO must confirm the landfills will accept the sewage sludge. Assuming there are no toxic chemicals in the sludge, it should be suitable as a soil amendment for landscape irrigation and riverbank vegetation.

7.4 Benefits of the Wastewater Component

238. By reducing the direct discharge of untreated wastewater, the wastewater component will:

Increase the number of people directly connected to a municipal wastewater system – This component will expand the service area of urban wastewater services and increase the wastewater collection and treatment rates in the project area.

Improve sanitation conditions in the project area – The component will reduce the amount of wastewater directly discharged into the open environment and surface water bodies. This will contribute to overall improvements in quality of life for residents (elimination of foul odors, pests, etc.), increased real estate values from

59 Chlorine is hazardous to fish and aquatic plants so typical procedure is to de-chlorinate (using for example sulfur dioxide) immediately before discharge into the receiving water. De-chlorination requires additional chemicals and equipment; hence higher costs.



improved environmental conditions, and reduced expenses and risks from water-borne diseases.

Improve river water quality – Estimates of pollution reduction as a result of improved wastewater collection and treatment systems are shown in Table 7-6. This will improve local and downstream river water quality, benefiting domestic, industrial, agricultural, and recreational water users, as well as river ecology and aesthetics.

Table 7-6 Estimated Pollution Reduction from the Wastewater Component1

Pollutant Estimated Pollution Reduction After Project (t/year)

Luxi Xuangfeng WWTP

(Yuan River)

Shangli Tongmu WWTP

(Jinshan River)

COD 529 128

BOD 283 119

Suspended solids 465 119

Ammonia nitrogen 46 11

Total nitrogen 55 9

Total phosphorus 10 3

Source: PPTA estimates. Note pollution reduction to the Lian River in Lianhua County and the Pingshui River

Xiangdong District has not been estimated at this stage since only wastewater collection is included in the project

component.

BOD = Biological Oxygen Demand; COD = Chemical Oxygen Demand; t/year = ton per year.

7.5 Beneficiaries of the Wastewater Component

239. The Project will increase wastewater treatment capacity by 7,500 m3/day in Luxi and Shangli Counties.

240. Direct beneficiaries of the wastewater component are estimated based on the planned service populations of the wastewater collection and treatment systems of the project. Preliminary estimates of these are presented in Table 7-7. The number of new connections to the expanded wastewater collection systems in the Lianhua and Xiangdong county-towns are difficult to estimate because it is a function of the number of buildings that will be in the service area in the year 2020.

Table 7-7 Estimated Direct Beneficiaries of Wastewater Component (2020)

Sub-Project Estimated Year 2020 Population Estimated Year 2020 Households

Lianhua 110,000 24,000

Luxi 28,000 5,000

Shangli 16,000 3,000

Xiangdong 65,000 14,000

Total 219,000 46,000

Note: Pingxiang Statistical Year Book shows estimated HH size is 4.6 persons

Source: PPTA Consultants

241. Indirect beneficiaries of the wastewater component include the population living immediately downstream of the wastewater treatment plant. This is estimated to be on the order of 60,000 people, equivalent to an additional 13,000 households.



8 COMPONENT #3: RURAL-URBAN ROAD


242. Roads are the most widely used mode of transportation in Pingxiang. A highway network has been formed in Pingxiang, with roads class III and lower comprising 80% of the total length. Existing roads in the Project area are narrow, wandering, and deteriorated. In Shangli County some of the existing roads are severely damaged by truck traffic servicing local rock quarries.

8.2 Proposed Road

243. The proposed road is a secondary highway listed in the “Pingxiang Integrated Transport Plan 2012” and part of the Municipal Highway Network Plan (see Figure 4-3). It is located in the northeast of Pingxiang, in a mountainous area, and serves as a link between Shangli County and Luxi County, making it easier for residents in the area to travel to Pingxiang urban area. The proposed road will complement the existing highway network, which basically consists of an east-west and a north-south highway.

The proposed road is a 44.013km long, 10m wide Class II road. The two-lane road (one lane per

direction) has a carriageway width of 2 x 3.5m; hard shoulder width of 2 x 0.75m; and earth

shoulder width of 2 x 0.75m. There are three bridges; one single tube tunnel of length 482m; 6

main intersections; and 42 local intersections. Side ditches will be provided for drainage. Asphalt

concrete surface is adopted for pavement design because (a) it is relatively easy to apply and

repair; (b) it produces less traffic noise compared with rigid cement concrete; (c) has relatively low

cost.

Figure 8-1 Proposed Road

8.3 Road Design

244. The proposed road will connect Shangli county and Luxi county directly. It starts from Jiguanshan in Shangli County in the northwest, and ends at Xuanfeng town in Luxi County in the southeast. The proposed road is routed to pass through four township government seats,



connecting Gaokeng, Anyuan, and Luxi Towns; Luxi Industrial Park; and Shangli Industrial Park.

Table 8-1 Road Length by Sub-Project

Location Kilometers % of Total

Shangli County 25.2 57%

Anyuan District 4.6 10%

Luxi County 14.2 32%

44.0

Source: Road FSR and Resettlement Plan

245. The road is aligned northwest to southeast direction along valleys, ridges, and low-lying hillsides to follow the landform and to avoid farmland and houses as much as possible. The new road follows approximately 2km of an existing road while the remainder is new road.

246. Traffic Count Data. There were two sources of traffic count data that were used to inform the design of the road: (a) Annual Average Daily Traffic (AADT) data collected by traffic counts in year 2010 that were converted to Passenger Car Units per day (pcu/day); and (b) traffic counts in October 2014 at selected road segments for 12 hours, including morning and evening peak hours. The traffic count results indicate that the largest share of vehicles on national and provincial roads in the Project area is motorcycles, followed by cars and light trucks.

247. Origin-Destination (OD). A total of 15 traffic zones are identified and trip generation and attraction among the zones were forecasted. According to the traffic counts and turning movement observed, the base year OD matrix was developed. Total trips made among the zones are estimated at 44,803 per day, comprising internal trips of 9,857 per day; outbound trips of 32,706 per day, and through trips of 2,240 per day. OD data shows that number of internal and through trips is relatively low.

248. Road Capacity Design. The design road capacity was determined based on AADT (pcu/day) data collected by traffic counts and applied using an ‘indirect forecast method’, also called ‘growth rate method’, which is based on assumptions of future traffic growth together with average GDP growth.

249. Technical design parameters were selected in accordance with relevant national codes and design specifications.

Table 8-2 Technical Design Parameters of the Road

No. Parameter Unit Criteria

1 Total Length Km 43.956

2 Route length/straight-line distance

- 1.477

3 Average Turning Point Per Kilometer

- 1.840

4 Minimum Radius For Horizontal Curve

m/section 130/1

5 Total Length of Horizontal Curve

m 22735.846

7 Percentage of Horizontal Curve In Total Length

% 51.657

8 Maximum Linear Length m/section 1125.447/1

9 Maximum Longitudinal % 6



No. Parameter Unit Criteria

Grade sections 11

10 Minimum Slope Length m/section 220/1

11 Total Length of Vertical Curve

m 19533.217

12 Percentage of Vertical Curve In Total Length

% 38.771

13 Average Number of Vertical Slope Change Per Kilometer

－ 2.155

14 Minimum Radius of Vertical Curve (Convex)

m/sections 1500/3

15 Minimum Radius of Vertical Curve (Concave)

m/sections 1500/3

Source: FSR km = kilometer; m = meter; % = percent

250. In consideration of anticipated truck traffic load, total thickness of the road is 66 centimeters (cm). Table 8-2 shows the road layers from top to bottom.

Table 8-3 Proposed Road Pavement for Carriageway

Layer (Top to Bottom) Thickness (cm)

Fine-graded asphalt concrete (AC-13) 4

Medium-graded asphalt concrete (AC-16) 6

Cement stabilized gravel 36

Cement and lime stabilized sand and gravel 20

Total 66

251. For drainage, it is proposed to use roadside open ditches with gravity flow and discharge into nearby water bodies. Open earth ditches will be used for most sections of the road based on low cost and ease of construction and maintenance. Where the road passes through built-up areas and pedestrian activity is intense, a concrete slab covered ditch is proposed to reduce space requirements and to provide for pedestrian safety.

252. At the feasibility study stage, only typical and standard safety designs have been provided. A road safety audit of the preliminary design should be conducted by an independent auditor during detailed engineering design. In particular the safety audit should include intersections of the road with existing county and village roads because where a lower standard road joins a higher standard road, travel speed is significantly different.

253. Design of signage, lighting, bus stops, etc. is not yet developed. Through the Social Development Action Plan (SDAP) there will be development of road safety education campaigns. The Pingxiang Transport Bureau has made an initial bus route plan that should be discussed with local residents during implementation of the SDAP.

8.4 Evaluation of Alternatives

254. Alignment. (a) Two routes were proposed and one designated as the South Route was preferred since it connects the more developed Gaokeng Town in Anyuan District with Luxi Town, thus providing a better linkage between rural and urban communities and facilitating local employment and market activities. (b) For the section overpassing the Shanghai-Kunming Expressway two alternatives were evaluated: at-grade intersection vs. a grade-separated interchange. The at-grade intersection was recommended due to lower



cost with safety mitigated by traffic calming measures. (c) Two alignment alternatives were studied for the section in Luxi County at Yinhe and Xuanfeng Town. The route selected has slightly higher cost, but requires less farmland acquisition, less earthwork cut and fill, and provides better access.

255. Pavement. Asphalt concrete surface was selected over rigid cement concrete based on cost. For sub-course, cement stabilized gravel was selected over lime fly-ash gravel.

256. Drainage. The FSR evaluated earth ditch; mortar rubble stone trapezoid ditch; pre-cast concrete trapezoid ditch; and concrete slab cover rectangular ditch. Earth ditch and concrete-slab cover were recommended.

257. Sub-grade and Ground Treatment. In the FSR different ground treatment measures are proposed according to different ground conditions. During detailed engineering design there will be further geo-technical studies to provide data for design.

8.5 Benefits of the Road Component

258. Improving the local road network and traffic conditions. Existing roads in the project area are not well connected due to complex topographic conditions or separation by major highways and railways. The road component will connect existing roads in the project area into a network and improve traffic capacity, thereby reducing transport costs for the local population and for materials and products. Analysis of reduced travel times can be found in the Phase 1 Road report. Besides savings in terms of fuel and time, the proposed road would also lead to improvements in overall travel conditions, minimizing discomfort, nausea etc.

259. Establishing links in industrial supply chains. There are at least seven industrial parks of different sizes and types along the proposed road, as shown in Table 8-3 and Figure 8-2. The road will help to establishing upstream and downstream links in industrial supply chains, including electronics, ceramics, machining, equipment manufacturing, new materials, and cement industries in the region.

Table 8-4 Basic Information of Industrial Parks along the Proposed Road

Name Main industries Level and Current Size

No. of People Employed (Planned)

Short Term Long Term

Pingxiang Economic and Technical Development zone

Machinery, electronics, apparel making

State-level, large

67,283 a 73,420

Shangli County Industrial Park

New energy sources, new materials, equipment manufacturing Province-

level, medium

4,000 – 5,000

6,000 – 10,000

Chishan Town Industrial Park

New energy sources, new materials, equipment manufacturing

5,000 10,000

Luxi County Industrial Park

Building materials, electronics, machinery, ceramics, chemicals

Province-level, medium

55,000 100,000

Yuannan Xiang Industrial Park

Coal, fireworks and firecrackers

Province-level, small

10,000 15,000

Xuanfeng Town Biological Industry Park

Modern biology Province-level, small

30,000 53,000

Yinhe Town Modern Modern agriculture Province- 8,000 18,000



Name Main industries Level and Current Size

No. of People Employed (Planned)

Short Term Long Term

Agriculture Park level, small

a. Current number of employees.

Source: PPTA Poverty and Social Report; Table 54 in that report for details about each of the Industrial Parks.

Figure 8-2 Industrial Parks Close to the Proposed Road

Source: PPTA Poverty and Social Report.

260. Improving access to public services. Improving the accessibility and mobility of the project area will provide better access for local medical treatment, employment, and education etc. For example, currently there are a great number of local primary and secondary schools scattered in this area (Figure 8-3). Due to difficult terrain and substandard roads, however, parents and children have huge difficulties reaching these schools, especially during the rainy season. The proposed road will improve the conditions and provide all-weather access to schools and other public facilities.

261. Promoting the integration of local tourism resources and accelerating tourism development. The proposed road will greatly improve access to Shangli’s Yangqi Mountain Scenic Area, a National Class 4A scenic area, which is currently underdeveloped due to traffic restrictions and unsound infrastructure. The road will enable integration of Yangqi Mountain Scenic Area with other complementary tourism resources in the area, including the Wugong Mountain Scenic Area in Luxi, and the Mingyue Mountain Scenic Area in Yichun, forming a regional network of tourism resources.

262. Attracting investment in local agricultural production by improving access to markets. While there is some large-scale farming and contracting of land for agricultural production, agricultural activity around the proposed road is dominated by subsidence



farming. The hills and mountains also have some tea oil plantations that are low in productivity, but many are also left barren. By improving the cost and efficiency of transporting agricultural products to the market, the proposed road will help attract investment in large-scale farming and redevelopment of tea tree plantations and orchards in the region, which are currently hindered by transportation restrictions.

263. Improving the capacity of regional disaster response and relief. The complex geological conditions in the project area have made it prone to natural disasters such as landslides, mudslides, and ground subsidence. Currently, the project area lacks adequate emergency access. Large vehicles cannot reach disaster stricken areas. The proposed road will improve rescue and emergency response times to the area thus reducing the risks to loss of human life and property.

Figure 8-3 Locations of Schools in the Road Project Area

LEGEND： Proposed Road alignment School

8.6 Beneficiaries of the Road Component

264. Method 1. The immediate beneficiary area would be a corridor of 48 ‘natural’ villages (concentrated settlements) within one kilometer of the proposed road (Figure 8-4). The total population of the corridor is estimated by County officials to be 106,295 (Figure 8-5).



Figure 8-4 Towns and Townships within 1-km of the Proposed Road

Source: “Pingxiang Phase 1 Consultant Final Report: Pingxiang Road Component”, Edward Leman

of Chreod Ltd., 26 February 2015

Figure 8-5 Population of Administrative Villages within 1 Km of Proposed Road

Source: “Pingxiang Phase 1 Consultant Final Report: Pingxiang Road Component”, Edward Leman of Chreod Ltd., 26 February 2015. Data comes from Shangli County and Luxi County officials.

y-axis (vertical) is the village administrative number.

265. The 106,295 residents along the road corridor are expected to directly benefit from improved accessibility to markets, employment, schools, and healthcare facilities in Anyuan District, Shangli Town, and Luxi Town. Most will be within a 30-minute drive time to center of Anyuan District or to Luxi and Shangli Towns. Road safety would also be improved as a result of the proposed road.

3,942

8,362

2,000

2,000

3,763

4,777

5,378

4,813

1,590

4,800

1,500

1,900

800

1,600

2,500

1,300

1,400

2,348

2,872

4,885

3,070

3,670

3,750

3,085

5,085

4,045

3,908

5,600

2,220

1,400

2,480

5,452

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000

1816

1813

1815

404

1809

1810, 1808,1811

1805

256

485

484

848

483

480

843

846

845

905

906

857

833

834

840

869

867

866

872

106

98

105

375

103

857-906

population, 2014

Vil

lag

e #



266. Method 2. Since the proposed road will be part of a wider transportation network, there may be direct beneficiaries beyond nearby villages and towns. It may also be reasonable to assume that everyone in the townships through which the road passes will benefit from it. Using this method, the number of beneficiaries of the proposed road is estimated to be on the order of 248,000.

Table 8-5 Estimated Beneficiary Area and Population of the Road Component

Project District/County Directly Affected Area Affected population

Shangli County

Jiguan Township

Dongyuan Township

Chishan Town

31491

57546

53793

Anyuan District Gaokeng Town (part)1 10000

Luxi County

Yinhe Town

Xuanfeng Town

Yuannan Township

42596

36528

15867

Total 247,821

Rural-Urban Transport affects Peijia and Nanmu Villages, Gaokeng Town mainly, but their accurate population data is unavailable. It is estimated from other similar villages that their total population does not exceed 10,000.

8.7 Implementation and Maintenance of the Road Component

267. Table 8-6 lists the organizations responsible for implementation and O&M.

Table 8-6 Implementation and O&M for Pingxiang Road Component

Sub-Project PIU O&M

Luxi Pingxiang Municipal Transport Bureau

Road Management Company under Luxi County Government

Shangli Shangli County Transportation Bureau

(1) The road passes through Shangli County, Anyuan District (4 km) and Luxi County. The costs will be allocated among the three according to proportion of road length. For the short portion of the road within Anyuan District, the local government plans to make an agreement with Luxi County for it to assist with maintenance.

(2) Part of the proposed road under this Project is classified as a Provincial level road and will be maintained by the Pingxiang Highway Bureau. O&M for this portion will be financed by Jiangxi Province.

(3) The portion of the road within Luxi is classified as a county level road and Luxi Road Management Bureau will be responsible for its daily maintenance. The fund is mainly provided by Luxi county government with support of 7000CNY/km from the provincial government. For large-scale repair and maintenance work the county government will apply for funding to the relevant departments of PMG or Jiangxi Province.



9 COMPONENT #4: PROJECT MANAGEMENT SUPPORT AND CAPACITY DEVELOPMENT

268. Consulting services are required for (i) project implementation start-up support; (ii) project management support during loan implementation; (iii) institutional strengthening and capacity building; (iv) external monitoring; and (v) training and studies.

Table 9-1 Overview of Consulting Service

No. Package Name Details

1. Financed by the ADB loan

CS1 Project implementation consulting services for project management support and capacity development

International firm with international and national experts, an international team leader and national deputy team leader. Selected by PMO in coordination with the PIUs through ADB’s QCBS (90:10) selection method. Expected duration: Full time during first 3 years and intermittent for last 2 years. Financed by the loan.

CS2 External social and resettlement monitoring services

National firm selected by PMO in coordination with the PIUs through ADB’s CQS selection method. Expected duration: Intermittent from project start to 2 years after resettlement is completed.

CS3 External environment monitoring services

National firm selected by PMO in coordination with the PIUs through ADB’s CQS selection method. Intermittent from project start to end of 4th year

CS4 Project implementation startup support consulting services

Individual consultants: Engineer, project manager, procurement expert Expected duration: about 4 months Selected by PMO in coordination with the PIUs through ADB’s ICS selection method

2. Financed by counterpart resources

A National design institutes Each PIU will engage and finance domestic design institutes to carry out preliminary and detailed design. The PIUs will each recruit one design institute for river rehabilitation and one design institute for wastewater subcomponent. A design institute will be engaged by the PMG transport bureau to carry out design of the road component. Domestic procurement regulations will be followed.

B National tendering agency

The PMO in coordination with the PIUs will engage a domestic tendering agency with experience on ICB and NCB bidding for ADB projects. Domestic procurement regulations will be followed.

C National construction supervision engineers

The PIUs will engage a domestic consultant one each for each works contract following domestic regulations on supervision engineers and domestic procurement regulations. Expected duration: one month before construction starts to one month after completion

ADB = Asian Development Bank, CQS = consultant’s qualifications selection, ICB = international competitive bidding, ICS = individual consultant selection, NCB = national competitive bidding, PIU = project implementation unit, PMG = Pingxiang municipal government, PMO = project management office, QCBS = quality- and cost-based selection. Source: Table 11 in the Pingxiang Project Administration Manual, Sep 2015

269. Advance contracting and retroactive financing will be used for consulting services contracts.

9.1 Project Implementation Start-Up Support

270. Consulting services for initial project implementation start-up support will be engaged by the PMO through individual consultant selection method (ICS) for individual consultants. The time period is before Loan Effectiveness so all costs will be paid by the EA and IAs.

271. Duties include:

i. Assisting the PMO in procuring the tendering company;



ii. Providing the PMO and the IAs with management and technical assistance to assure all the activities are planned and prepared in accordance with relevant ADB policies, procedures and guidelines;

iii. Providing support for advance contracting, and review of bidding documents for procurement of civil works and goods;

iv. Assisting the PMO and IAs in start-up of land acquisition and resettlement and in initial establishment of internal resettlement monitoring systems;

v. Providing advice and assistance to the PMO and the IAs to ensure compliance with requirements for documentation and record keeping as specified in the loan agreement and project agreement.

9.2 Project Management Support During Loan Implementation

272. Project management support will be provided by three different firms: (a) National Tendering Agency; (b) National Construction Supervision Company; and (c) International Consulting Firm.

273. National Tendering Agency. Duties will be to prepare tender documents and conduct tender in accordance with ADB Guidelines and PRC laws and regulations. It will be a National firm selected by PMO in accordance with PRC regulations. Costs of this activity are paid for by EA and IAs. All the procurement activities will be organized by the Pingxiang Public Resource Trading Center for the ADB loan project implementation.

274. National Construction Supervision. Duties will be to (i) supervise infrastructure construction on behalf of the IAs; (ii) Verify bills of quantities and contractor invoices and recommend payments. It will be a national firm selected by each IA in accordance with PRC regulations. Costs of this TA will be paid for by each IA.

275. Project Management. An international consulting firm will be recruited by the PMO using the quality- and cost-based selection (QCBS) method with a 90:10 ratio of quality–to-cost ratio and using a full technical proposal procedure. Duties will include:

(1) Providing project management support covering all aspects of project implementation to assist the PMO, IAs, and PIUs;

(2) Supporting procurement of works, goods, and consulting services including

coordination of technical specifications and drawings (prepared by the Design Institute) and tendering documents (prepared by the procurement agency);

terms of reference (TOR) for consultancies;

coordination with ADB to announce tender; and

monitoring and reporting tendering progress.

(3) Assisting financial monitoring, auditing, and reporting; coordinating disbursements with ADB; preparing withdrawal / replenishment applications.

(4) Establishing and maintaining the Project Performance Management System (PPMS) including project progress reporting; environmental, resettlement and social and gender plan implementation, reporting, and indicator data collection.

9.3 Institutional Strengthening and Capacity Building

276. Institutional strengthening and capacity building will be provided by the international consulting company responsible for Project Management services through short term



technical assistance (SSTA) specialists. The goal is to prepare local governments to make full use of the ADB-funded infrastructure for the benefit of the people served and to properly operate and maintain the infrastructure to assure its long life.

277. The Project Management firm will prepare Terms of Reference (TOR), get concurrence from the EA and IA, and then recruit consultants to provide the SSTA.

278. Proposed SSTA includes:

1) capacity building for urban-rural flood risk management planning; development and implementation of flood early warning systems for the counties; disaster response plans and community disaster and climate resilience action plans; flood resilient farming;

2) ecological river and river environment management capacity development; community awareness and action plans towards environmentally conscious behavior change including aspects of river riparian landscape, wetlands and river park and vegetation maintenance, environmental pollution, reduction of farmland non-point source pollution, solid waste management and other river ecology aspects;

3) capacity development on small scale village-level wastewater treatment technologies and improved septic tank design and management and improvement actions; wastewater and sanitation awareness raising programs; and review and public consultations on wastewater tariff reform;

4) capacity development in wastewater utility management, operation, and service provision

5) capacity development on intelligent rural-urban transport management, public transport, semi-public transport, and road safety including community awareness campaigns and training on road safety; and

6) capacity development on urban-rural development planning and socio-economic development so that more benefits and synergies can be generated from the Project.

9.4 Implementation of Gender Action Plan and Social Development Action Plan

Done By: Social Development and Community Participation (SDCP) Specialist

Selected By: Not Applicable [individual is part of Project Management Consultancy]

Duties:

(i) assist PMO, IA, and PIU to implement the Pingxiang Project Gender Action Plan (GAP) and the SDAP

(ii) assist with establishment of pilot Community Environment Supervision and Road Safety Education Teams (CERT), including recruiting, training, and program support;

(iii) assist with establishment of community-based groups in each pilot community to assist the CERT, including recruiting, training, and program support;

(iv) develop and implement a roll-out for the CERT in each of the selected pilot communities; and

(v) develop a Community Participation Manual with the assistance of the CERTs.



9.5 External Monitoring

279. Independent monitors for (a) environmental impact and (b) land acquisition and resettlement will be recruited by PMO.

9.5.1 External Monitoring of Environmental Impacts

Done By: External Monitoring Agency (EMA) (typically a national firm)

Selected By: Local Shopping

Duties:

(i) assist the PMO, IAs and PIUs to establish a project-level environmental management system, consisting of relevant staffing, inspection, monitoring, grievance redress mechanism, and reporting;

(ii) assess the project components’ environmental readiness prior to implementation based on the readiness indicators defined in Table EMP-6 in the EMP1;

(iii) assist PMO to update the EMP including the mitigation measures and environmental monitoring program therein, based on the detailed engineering design and submit for executing agency and ADB’s clearance and disclosure;

(iv) assist PIUs in contracting of environment supervision consultants (ESC) for each civil works contract;

(v) review and clear site EMPs;

(vi) assist the PMO and PIUs to establish a grievance redress mechanism (GRM), and provide training for the GRM access points;

(vii) conduct independent verification of the project’s environmental management performance, undertake site visits as required, identify any environment-related implementation issues, propose necessary corrective actions, reflect these in a corrective action plan;

(viii) contract local environmental monitoring stations (EMS) or other licensed institutes to conduct environmental impact monitoring according to requirements specified in the EMP during construction (Table EMP-6); coordinate the external environmental impact monitoring (excluding fish monitoring); compare the predicted with the actual environmental impacts, assessing the effectiveness of the mitigation measures, and suggesting enhancement measures, as required;

(ix) prepare semiannual environmental monitoring and progress reports to ADB;

(x) prior to midterm review mission, provide support to PMO and PIUs in organizing public meetings in the project city/towns to present and discuss EMP implementation progress, solicit community opinions and concerns, and agree on required corrective actions;

(xi) prior to project completion, organize surveys in the project city/town to assess community satisfaction with project implementation, project outputs, and EMP implementation performance, and document the results in the project completion report (PCR);

(xii) provide input of environmental protection to progress report, midterm report, project completion report, and other project required documents; and service completion report.

1 See Supplementary Document 5



Duration: starting approximately June 2016 to end of construction (about 4 years)

Inputs: 20 Person-Months (PM)

9.5.2 External Monitoring of Land Acquisition and Resettlement (LAR)

Done By: External Monitoring Agency (EMA) (typically a national firm)

Selected By: Local Shopping

Duties:

(i) assist the PMO, IAs and PIUs to establish a project-level resettlement and social development management system, consisting of relevant staffing, inspection, monitoring, grievance redress mechanism, and reporting on the project safeguards and social issues based on the RPs, GAP and SDAP, and provide support for their implementation;

(ii) assess the project components’ resettlement readiness prior to implementation;

(iii) assist PIUs in contracting of environment supervision consultants (ESC) for each civil works contract;

(iv) assist the PMO and PIUs to ensure the implementation of GAP and SDAP requirements through consultations, workshops and group discussions;

(v) assist the PMO and PIUs to establish a Grievance Redress Mechanism (GRM), and provide training for the GRM access points;

(vi) prepare semiannual resettlement and social monitoring and progress reports to ADB;

(vii) prior to midterm review mission, provide support to PMO and PIUs in organizing public meetings in the project city/towns to present and discuss RP implementation progress, solicit community opinions and concerns, and agree on required corrective actions;

(viii) prior to project completion, organize surveys in the project city/town to assess community satisfaction with project implementation, project outputs, and RP implementation performance, and document the results in the project completion report (PCR);

(ix) provide input on resettlement plan implementation, gender and social development action plan to progress report, midterm report, project completion report, and other project required documents.

Duration: starting approximately June 2016 and continuing two years after LAR completed

Inputs: 38 Person-Months (PM) with most input during the first two years, then less

after the LAR is completed

Prerequisite: ADB Safeguard Policy Statement (SPS) requires that RPs must be updated

after project’s approval and the approval of detail design before starting land

acquisition and resettlement

9.6 Training and Studies

280. As part of their scope of work the Project Management Consultant will draft a program of domestic study tours to locations with best practices for flood risk management, ecological



river management, rural town wastewater management, and rural road safety management, as well as locations of other ADB projects with similar Project Management requirements, e.g. ADB Chongqing Urban and Rural Infrastructure Development II Project.



10 IMPLEMENTATION ARRANGEMENTS AND CAPACITY BUILDING

281. This section describes (i) Pingxiang arrangements for Project development, implementation, and operation; and (ii) summary of assessments of local IAs and recommendations for improving their capacity to perform their duties for the Project.

10.1 Institutional Arrangements of the Project

282. The overall institutional arrangements in Pingxiang, as relevant to the Project preparations and implementation are shown in Figure 10-1.

Figure 10-1 Overall Institutional Arrangements in Pingxiang

283. Executing Agency (EA): Pingxiang Municipal Government (PMG) is the Executing Agency (EA) responsible for the implementation of the entire Project. PMG established (i) Pingxiang ADB Project Leading Group; and (ii) Pingxiang ADB Project Management Office (PMO) which is situated at Pingxiang Urban Construction Investment and Development Corporation (PUCIDC).



10.2 Project Leading Group

284. The Project Leading Group (PLG) was established at Pingxiang Municipal level in 2011 (Pingfuban [2011] No. 55). It is headed by the Vice Mayor, PMG and comprises representatives of Pingxiang Finance Bureau (PFB), development and reform commission (PDRC), construction committee, planning and housing bureau, land resource bureau, water affairs bureau, and Pingxiang Urban Construction and Investment Development Company (PUCIDC), technical experts, and other agencies.

285. The main responsibilities of the Municipal Level PLG are to

Provide strategic guidance and technical advice

Facilitate urban-rural coordination in planning, management, and operation of infrastructure and services

Meet at least once every 6 months until project completion

10.3 Project Management Office

286. The Project Management Office (PMO), which is situated at Pingxiang Urban Construction Investment and Development Corporation (PUCIDC), has been established under the PLG. Responsibilities of PMO will include:

Implementing day-to-day activities of the project and provide coordination support for preparation and implementation of project components;

Reporting the project implementation progress and compliance monitoring to ADB;

Submitting annual audit reports and financial statements of PMG, and IA to ADB;

Procuring project management consulting services;

Engaging external environment, and resettlement and social monitoring agencies;

Submitting withdrawal applications to ADB;

Submitting bid documents, bid evaluation reports and other necessary documentation to ADB for necessary approval; and

Implementing the capacity development component of the project.

Table 10-1 Pingxiang PMO

Position Name Regular Assignment

Director Tang Liping Pingxiang Municipal Government/Vice Secretary of General

Executive Deputy Director

Huang Jian PUCIDC / Deputy Director

Deputy Director

Wang Yong Pingxiang Municipal DRC/Deputy Director

Chen Shuixiang

Pingxiang Municipal Finance Bureau/Deputy Director

Li Xiaoyong Pingxiang Municipal Transport Bureau/ Deputy Director

Members

Liao Huihui Pingxiang Municipal Government

Qiu Weiping Pingxiang Municipal Development and Reform Commission/ Section Director

Xiao Xixi Pingxiang Municipal Finance Bureau/ Staff Member

Zhou Kan PUCIDC




Wan Lu PUCIDC/Staff Member

Wang Hong PUCIDC/Staff Member

Source: Pingxiang PMO

PUCIDC = Pingxiang Urban Construction Investment and Development Corporation

287. Currently there is no clear institutional setup for the PMO. Existing staff continue their regular assignment for the PUCIDC and work on the ADB Project on a part time basis. During the ADB project implementation stage, there must be a more clearly defined division setup and delineation of responsibility. The following institutional setup for the PMO and responsibilities of each office was proposed and accepted by the PMO.

Figure 10-2 Proposed Organization and Staffing of Pingxiang PMO

288. Under the PMO, there are three departments, namely Finance Department, Engineering and Procurement Department, and Comprehensive Department. Key roles of each department are as follows:

289. Finance Office is responsible for guidance and supervision of withdrawal application and disbursement, establishment of financial management and accounting system and internal audit system; guidance for PIUs to prepare financial statements, assistance for annual financial audits, etc.

290. Engineering and Procurement Office is responsible for collection of data and information relevant to the Project, variation order approval, contract management, procurement plan update, coordination with tendering company and consulting company, etc. Some members of this Department are seconded from the implementing agencies.

291. Comprehensive Office is responsible for daily administration of PMO and development of project management methods, coordination of land acquisition and resettlement, environmental monitoring, etc. Additional experts will be hired if needed.

Director: Tang LipingPingxiang Municipal Gov.

Finance Office Engineering and Procurement Office

Deputy DirectorsHuang Jian (Deputy Director of PUCIDC)

Wang Yong (PDRC)Chen Shuixiang (PFB)

Li Xiaoyong (PTB)

ComprehensiveOffice

2 Staff

3 Staff (Staff from PIUs will participate in procurement)

3 Staff or More if Needed(including one Environmental Specialist and Resettlement

Specialist)



292. Implementing Agencies (IAs). The county governments of Lianhua, Luxi, and Shangli via the County Finance Bureau, and Xiangdong via the District Finance Bureau, will assume responsibility for the ADB loan and also arrange local counterpart funding and give assurances that adequate O&M budgets will be available. Therefore, Lianhua, Luxi, and Shangli counties and Xiangdong District are project IAs.

10.3.1 Analysis of PMO

293. PMO directors are all permanent staff of various government departments such as PFB, PDRC, Pingxiang Transport Bureau, and PUCIDC, who are seconded to the PMO on a part-time basis. Involvement of these departments is critical to project preparation and implementation. PMO staff are all permanent staff of PUCIDC and on part time basis as well. They have to deal with other projects under PUCIDC and the work load is quite heavy. None of the staff have been involved in foreign funded projects, but they have strong capacity for implementing domestic funded projects for infrastructure construction. Moreover, the lack of experience in ADB and other foreign funded projects can be mitigated through the use of suitably experienced tendering companies and the provision of consulting services to support project implementation. PMO is now under-staffed and they will recruit new staff from the market or from IAs.

294. There is no working staff in the PMO from the transport sector. It is suggested to transfer a working staff from Pingxiang Transport Bureau to PMO to take the lead on coordinating the road project.

295. Another aspect of this arrangement is that all procurement activities will be centrally organized and coordinated by the PMO rather than by individual IAs. The PMO will lead and be responsible for all procurement activities, including designing contract packages, preparing procurement documents, calling for bid, implementing bid evaluation and awarding, and managing the contracts during implementation. IAs will participate in procurement either by their seconded staff to PMO or by provision of expertise during the procurement.

296. Local governments are responsible for implementing land acquisition and resettlement of the Project, but the PMO will assume responsibility for overall coordination. This makes good use of the leadership of the PLG because issues related to land acquisition and resettlement are always complicated and need more involvement of senior government officers.

10.4 Implementation Arrangement at Project District/Counties

297. District/County Project Leading Groups (CPLG) have been established for each project district/county. The main responsibilities of the CPLGs are to: take leadership, coordinate and supervise the implementation of the subprojects of the county, and deal with project issues if needed. Lists of the CPLG members are provided in Appendix B and the Project Administration Manual (PAM).

298. Xiangdong District and Luxi County also established project management offices to coordinate internal issues (land acquisition, resettlement, inter-department issues, etc.), supervise implementation of sub-projects, and review and approval of withdrawal applications. The county/district PMOs have similar responsibilities of Pingxiang PMO but at county level and are mainly responsible for coordination and supervision of the project implementation on behalf CPLG.

299. Project Implementation Units (PIU) are established under the sector administrative authorities and led by a vice mayor of the county with support from relevant agencies for each project county/district (Table 10-2). For Lianhua, Luxi, and Shangli, the PIU will be established under the sector administrative authorities and led by a vice mayor of the county.



300. For the Rural-Urban Transport subproject, PMG decided to set up the PIU at the municipal level (Pingxiang Transport Bureau) with participation and support of the Transport Bureaus of Luxi County and Shangli County.

Table 10-2 Details of PIUs

Sub-project

Sub-components Leading Agencies of PIUs

Lianhua

Lianjiang and Baima Rivers Integrated Flood Risk Management Lianhua Water Affair Bureau

Wastewater Sewer Pipe Network

Luxi

Yuan, Xinhua and Tankou Rivers Integrated Flood Risk Management

Luxi Water Affair Bureau

Wastewater: WWTP, Sewers, Pump Station

Luxi Housing, Urban & Rural Development Bureau

Shangli

Lishui and Jinshan Rivers Integrated Flood Risk Management Shangli Water Affair Bureau

Wastewater: WWTP

Xiangdong

Pingshui River Integrated Flood Risk Management Xiangdong Water Affair Bureau


Pingxiang Rural–Urban Transport Pingxiang Transport Bureau

Source: PPTA interview with PMG and Local Government Officials.

10.4.1 Analysis of IAs and PIUs

301. PIUs will be established under sector administrative authorities of the district/counties with supports from other relevant agencies. This is their current practice for government funded projects. The project district/county government issued the document to set up PIUs and specified: 1) that this PIU will be a temporary legal entity to be responsible for project construction and coordination; 2) a vice mayor of the county will be the leader of the PIU; 3) which bureau will be the leading agency; and 4) staffing arrangements. Most staff of PIUs will be permanent staff from government agencies. Depending on the complexity of the project, PIUs may be staffed with 10 members or more with key members from the leading bureau. PIUs will consist of engineers, financial staff, procurement staff, resettlement specialist and environmental specialist, etc. Additional staff may be hired from market if PIUs are under-staffed.

302. The IAs have extensive past experience in the construction of urban infrastructure, although mostly domestically funded. However, risks potentially created by a lack of capacity or experience in specific technical areas still exist and can be mitigated by the appointment of suitably experienced Design Institutes (DI) and construction supervision companies. Similarly, the lack of experience in ADB and other foreign funded projects can be mitigated through the use of suitably experienced national tendering companies and the provision of consulting services to support project implementation

303. Therefore, conceptually at least, the proposed implementation arrangements are considered suitable and make best use of the existing local expertise.



10.5 Analysis of Overall Arrangements

304. The proposed project implementation arrangements are similar to those adopted by most ADB projects in the PRC and are therefore well proven. They are compatible with the hierarchical structure of government in the PRC and are similar to those used in past ADB financed urban development projects in Jiangxi Province. However, roles and responsibilities, and staffing in the PMO and PIUs need to be confirmed and significant capacity building will be needed throughout the project. In addition, the PMO is a private company that has no ownership of any of the project components, which are currently within county/district governments. Lack of incentives may result in weak commitment and affect implementation of the project.

10.6 Water and Wastewater Sector Management Arrangements in Pingxiang

305. Management of the water sector in Pingxiang is different from other places in the PRC where the water sector is managed by different agencies. Usually water supply and wastewater is managed by the construction authority and water resources by the water resource bureau. However, only one agency, the Pingxiang Water Affairs Bureau (WAB) is responsible for water management and protection in Pingxiang. The main responsibilities of the Pingxiang WAB include:

Unified management of water resources in Pingxiang (water in air, ground water and surface water); preparation and supervision of water supply plan, water allocation; unified management of water supply and drainage; water supply, wastewater treatment and reuse; implementation of water licensing system and water resource tariff system;

Water conservation;

Water resource protection;

Enforcement of water laws and regulations;

Development of economic adjustment measures of water sector;

Organization and guidance of management and protection for water resource infrastructure, waterbodies and their shorelines; sector management for water related construction projects; safety supervision;

Guidance of rural water infrastructure projects and hydropower generation;

Prevention of soil and water erosion;

Daily management of flood control and drought relief.

306. Following this arrangement, Shangli, Xiangdong and Lianhua have local WABs at the district/county level. In Luxi, however, the wastewater and water supply sectors are managed by the Luxi Housing, Urban & Rural Development Bureau, while water resources (rivers, reservoirs) are managed by the Luxi WAB.

10.6.1 Analysis of Water and Wastewater Sector Management

307. Generally, PMG has integrated management of the water sector under the Pingxiang Water Affairs Bureau (WAB), which is a good starting point. Private sector participation has been introduced to provide water supply and wastewater treatment services for core urban areas and county-towns. Involvement of private sector is beneficial to improving effectiveness of water supply and wastewater treatment in terms of technologies, management, and funds. O&M of sewers are provided by local governments. Separation of O&M of sewers and wastewater treatment is common in the PRC. Although the responsibilities are directly related to Pingxiang WAB, the integration and coordination of water sector in practice in terms of planning, reuse of wastewater, water conservation, etc. is not very strong.



10.7 Operations and Maintenance Arrangement for Project Components

10.7.1 WWTPs and Sewer Networks

308. Currently, all districts and county-towns have urban water supply and wastewater treatment systems, which involve public-private-partnership (PPP) arrangements (Table 10-3).

Table 10-3 Pingxiang Water and Wastewater Companies

Administrative Unit Water Supply Wastewater

Anyuan District

[urban core of Pingxiang] China Water Group

Jiangxi Hongcheng

Waterworks Co,

Ltd. with

headquarters in

Nanchang

Lianhua County Jiangxi Provincial Water Conservancy Investment Group

Luxi County China Water Group

Shangli County China Water Group

Xiangdong District Jiangxi Provincial Water Conservancy Investment Group

309. In July 2011, the China Water Affairs Group Limited (CWG) (中国水务集团有限公司)

acquired 51% of the tap water production and supply in Pingxiang Urban Area. Now CWG has majority ownership in the water supply companies serving Pingxiang urban areas, Luxi County, and Shangli County. Note each of the three local governments have a separate local water supply company, each with an agreement with the private companies. The terms of agreement are probably different for each local government. The Jiangxi Provincial Water

Conservancy Investment Group Corp2 (江西省水利投资集团有限公司), founded in 2008,

signed an agreement with local governments for 60% of the water supply companies serving Lianhua County and Xiangdong District.

310. Jiangxi Hongcheng Waterworks Co, Ltd. ( 江西洪城水业股份有限公司 ) 3 with

headquarters in Nanchang, the capital of Jiangxi Province, is currently responsible for all wastewater treatment in Pingxiang, under a TOT (transfer-operate-transfer) model. The company operates all WWTPs under a 30-year concession agreement. According to local officials, cooperation with Hongcheng Waterworks on wastewater services was a requirement by the provincial government for all county-towns throughout Jiangxi Province.

311. Wastewater sewer pipes in county-towns are installed and operated by local governments, with different responsible entities:

Lianhua: sewers are managed by Lianhua WAB while the Lianhua Urban Management Bureau is responsible for inspection of stormwater pipelines.

Luxi: sewers are managed by Luxi Housing, Urban & Rural Development Bureau while the Luxi Urban Management Bureau is responsible for inspection of stormwater pipelines..

Shangli: WWTP and sewer mains are managed by Shangli WAB and sewage collection pipes are managed by Shangli Housing, Urban & Rural Development Bureau.

2 http://www.jxsltz.com/Article/jxstgyjt/gyjtgsjj/201205/465.html 3 http://www.jxhcsy.com/mainpages/default.aspx

http://www.jxhcsy.com/mainpages/default.aspx



Xiangdong District: sewer mains are managed by Xiangdong WAB and sewage collection pipes are managed by Xiangdong Housing, Urban & Rural Development Bureau.

No special teams for daily inspection and O&M for sewers have been established within the counties. Small repairs and maintenance of pipes are conducted on an on-call basis and large repairs or maintenance activities usually are outsourced.

312. Currently, private companies are not involved with water supply and wastewater services in rural townships and villages.

313. In rural areas of Pingxiang, only county-towns have wastewater services. With the exception of constructed wetlands treatment plants, which are not operating well from our understanding, the WWTPs constructed under this Project will be the first ones at the town level. Currently, no arrangement for O&M of WWTPs and sewers for towns exist.

10.7.2 River Works

314. It is clearly specified that management and O&M of river works is the responsibility of county/district WAB, which as administrative agencies provide guidance, support and organize large-scale maintenance activities. Daily inspection of river embankments is decentralized to the local level (town/township or even village level). The following divisions under WAB of each county will take the administrative responsibilities for O&M.

(1) Lianhua WAB: Embankment Management Station

(2) Luxi WAB: River Course and Embankment Management Station,

(3) Shangli WAB: River Course Management Station;

(4) Xiangdong WAB: River Course Management Station (to be confirmed).

315. County governments can apply for financing by the Ministry of Water Resources to support the O&M of river embankments.

316. No significant issues have been identified for the current arrangement. It is important to link the inspection arrangements with the flood control plan. Capacity building for grass-roots staff should be emphasized, such as how to identify signs of failure and reporting procedures to relevant agencies. The Pingxiang WAB is currently developing standardized Methods for River Course Management and the draft is ready for consultation.

10.7.3 Roads

317. Pingxiang Highway Management Bureau (PHMB) has been assigned the duty to maintain state level roads, provincial level roads, and county level roads, some of which were originally maintained by the Province. Adequate funds will be allocated by Jiangxi Province and PMG for the additional road constructed under the Project, as they may need to procure equipment or hire more workers.

318. Anyuan Branch is now responsible for maintenance of about 116km roads including all state level roads and provincial level roads and some county level roads and town level roads within Anyuan District and Pingxiang Economic Development Zone. It has 4 maintenance teams, 1 road surface maintenance center, and 4 functional departments and 102 staff including 37 well educated staff (college and above). However, regarding maintenance of the portion of the road within Anyuan District borders, the local government plans to make an agreement with Luxi County for maintenance.



319. Shangli Branch is now responsible for maintenance of about 81km roads including provincial level roads and some county level roads within Shangli County. It has 3 maintenance teams and 4 functional departments and 79 staff including 27 well educated staff (college and above). Regarding maintenance of the additional 26km road under the Project, it will cause increase of staff and procurement of new equipment. PHMB will be responsible for staff recruitment and equipment procurement by considering road maintenance needs throughout the whole municipality.

320. Luxi Rural Road Maintenance Ltd. Company under Luxi Transport Bureau will be responsible for county level road of the Project (14.2km) within Luxi. Luxi County government will provide O&M funds according to specified standards (3,000CNY/km/year). It is now responsible for maintenance of about 80km rural roads and has less than 10 staff. This company will need additional staff and equipment to perform all the duties assigned under the Project.



11 SAFEGUARDS ANALYSIS

11.1 Environmental Analysis

11.1.1 Environmental Report Requirements

321. The Project is classified by ADB as Category A for environment. For all Category A projects, the ADB Environment Policy requires public consultation at least twice: (i) during the early stages of EIR field work; and (ii) when the draft EIR report is available and prior to loan appraisal by ADB. During September 2014 the domestic EIA institute conducted the first round of information disclosure to solicit public comments and suggestions on project and terms of reference for the EIA.

Figure 11-1 Community Information Disclosure Poster

322. A comprehensive Environmental Impact Assessment (EIA) report, which includes an Environmental Management Plan (EMP), was prepared according to requirements set forth in ADB’s Safeguard Policy Statement (SPS) of 2009. The EIA must be posted on the ADB web site 120 days prior to ADB Board Consideration and this was done on 10 May 2015.

323. The EIA report was prepared based on information provided in domestic Environmental Impact Reports (EIR) and Environmental Impact Tables (EIT) prepared by the Jiangxi Provincial Environmental Protection Science Research Institute (JPEPSEI) as shown in Table 11-1. The number of domestic environmental deliverables (four EIRs and eight EITs) and how they are organized are based on domestic approval requirements. According to the Jiangxi Classification of EIA Approval ([2012]6 issued by Jiangxi Provincial Government), the domestic EIA reports were submitted to Pingxiang Municipal Environmental Protection Bureau (EPB) for review and approval.



Table 11-1 Domestic Environmental Deliverables for the Project

Location Number Sub-

component Number

Description Type of

Deliverable

Pingxiang 1 PX-RD Rural-urban transport EIR

Lianhua 2

LH-RR1, LH-RR2

Lianjiang River and Baima River integrated flood risk management

EIR

3 LH-WW1 Lianhua County wastewater collection piping EIT

Luxi

4 LX-WW2 Yinhe Town and Xuanfeng Town wastewater treatment plants

EIT

5 LX-WW2 Luxi County wastewater collection piping EIT

6 LX-RR3, LX-RR4, LX-RR5

Yuan River, Xinhua River and Tankou River integrated flood risk management

EIR

Shangli

7 SL-WW3 Tongmu Town wastewater treatment plant EIT

8 SL-WW3 Tongmu Town wastewater collection piping EIT

9 SL-RR6 Lishui River integrated flood risk management EIT

10 SL-RR7 Jinshan River integrated flood risk management

EIT

Xiangdong

11 XD-WW5 Xiangdong City wastewater collection piping EIT

12 XD-RR8 Pingshui River integrated flood risk management

EIR

EIR = Environmental Impact Report; EIT = Environmental Impact Tables

11.1.2 Fishery Resources Assessment

324. National Aquatic Germplasm 4 Resources Conservation Areas are established to protect aquatic germplasm resources and their habitats, breeding areas, spawning sites, feeding sites and migration routes for species with significant economic/genetic/ecological values approved by State of Council and Ministry of Agriculture (MoA). Between 2007 and 2014, 428 National Aquatic Germplasm Resources Conservation Areas were established in the PRC.

325. Pingshui River National Aquatic Germplasm Resources Conservation Area was one of the first approved in 17th December 2009 (MoA, 1308) mainly to protect Xenocypris davidi Bleeker, Plagiognathops microlepis, Pelteobagrus fulvidraco, Cyprinus carpio and Carassius auratus auratus. There is also a provincial-level conservation area for the Pingxiang Red Transparent Crucian Carp in the Yuan River.

326. The river components of the Project include stretches along the Pingshui River and Yuan River that are designated as conservation areas, so specific fishery resources assessments were required5 as part of the EIA process. Fishery resource assessments6 for both rivers were approved in April 2015 by the Jiangxi Province Agriculture Department. The assessment results and mitigation measures were incorporated into the domestic EIA and Project EIA.

4 A germplasm is a collection of genetic resources for an organism. For plants, the germplasm may be stored as a seed collection. Genetic material of animals as well as plants may be stored in a gene bank. 5 Interim Measures for Aquatic Germplasm Resources Conservation Area Management (MoA, 2011) and Notice on Further Strengthening the Protection of Aquatic Resources Management and Environmental Impact Assessment (MoA and MEP, August 2013). 6 In accordance with Interim Measures for the Management of Aquatic Germplasm Resources Conservation Zone (2011, MoA) and Guideline for the preparation of the Impact Assessment Report of Construction Project relating to National Aquatic Germplasm Resources Conservation Zone (2014, MoA).



11.1.3 Road Environmental Issues

327. The Yangqishan Scenic Area Management Committee confirmed that the road will not encroach on the special zone of the municipal-level Yangqishan Scenic Area, classified as International Union for the Conservation of Nature Category V reserve (protected landscape) and classified for natural monument protection under the PRC’s nature reserves classification system

11.1.4 EMP Implementation Arrangements

328. The responsibilities for environmental management and supervision during the various stages of implementation of the project are defined in the EMP7 which is included in the PAM and will be updated at the end of the detailed design. The EMP will also be included as a separate annex in all bidding and contract documents. The contractors will be made aware of their obligations to implement the EMP and to budget EMP implementation costs in their proposals. PMG (through the PMO) and the implementing agencies (through the PIUs) will assume overall responsibility for implementing, supervising, monitoring and reporting on the EMP. Their capacity to implement the EMP, as well as the capacity of the PIUs to manage project facilities, will be strengthened through capacity building and training activities defined in the EMP. PMO and the PIUs will appoint qualified staff to coordinate and monitor EMP implementation. These will be supported by environment management and sector specialists contracted by the PMO.

11.1.5 Grievance Redress Mechanism (GRM).

329. Grievances related to environmental safeguards may arise during construction and operation of the project. The PMO will establish an environmental GRM including GRM hotline, coordinated by the EMP Coordinator. Local GRM access points will include the contractors, PIUs, and the local EPBs. The GRM will follow the procedure and timeframe defined below. The external environment monitor (EEM) will provide training on the GRM to ensure that responsibilities and procedures are clear. The steps are described below:

(i) Step 1. For environmental problems during the construction stage, affected persons can register their complaints directly with contractors. Affected persons may also file their complaints through a project complaint hotline to be established by the PMO, with a designated person in charge of handling complaints, and advertised at the main entrance to each construction site. Each contractor is required to document all complaints and to respond to complainants in writing within 1 week about their proposed solutions and how they will be implemented. If a problem is resolved and the complainant (i.e. the impacted person making the complaint) is satisfied with the solution, the grievance handling ends here. Contractors are required to report complaints received, handled, resolved, and unresolved to the CSC, ESC and PIU monthly (through the monthly progress reports).

(ii) Step 2. For environmental problems that could not be resolved at the contractor level, the affected person can take the grievance to the PIU. On receiving complaints, the PIU will (i) document the complaint into a complaints register; (ii) send a copy of the complaint to the environmental staff of the PMO; and (iii) reply in writing within 14 calendar days describing the proposed solution and how it will be implemented. The results (the complainant is satisfied or unsatisfied) is documented in the complaint register and reported to the PMO quarterly.

7 Any revisions of the EMP will be disclosed in compliance with Public Communications Policy (2011).

http://en.wikipedia.org/wiki/Protected_landscape



(iii) Step 3. If the affected person is not satisfied with the solutions proposed in the step 2, he or she can, upon receiving the reply, take the grievance directly to the PMO. The PMO must immediately inform ADB of the complaint. After discussing the complaint and potential solutions in a multi-stakeholder consultation meeting among PMO, the EEM, the loan implementation consultant, relevant agencies and EPB, the affected person, and the contractor, the PMO must provide the complainant with a clear and understandable reply within 14 calendar days, and record it into the complaint register.

Figure 11-2 Environmental Grievance Redress Mechanism

ADB = Asian Development Bank, EPB = Environmental Protection Bureau, PMO = project management office.

ADB

For information and

consultation

Multi-stakeholder

consultation meeting



11.2 Land Acquisition and Resettlement

11.2.1 Resettlement Plan (RP) Preparation

330. The project is classified as category A for involuntary resettlement according to ADB’s Safeguard Policy Statement (SPS, 2009).

331. Hohai University Resettlement Center was contracted by the PMO to prepare five Resettlement Plans: one for each sub-project (river and wastewater components) and one for the road component. The RP have been prepared in line with ADB’s SPS and related laws and regulations of Pingxiang Municipality, Jiangxi Province, and the PRC. In order to avoid or minimize land acquisition and resettlement, consultations with local officials, village committees, village groups and APs were undertaken during the RP preparation stage.

332. The updated RP were submitted to ADB May 2015 and disclosed on the ADB website. The RP and its implementation are designed to ensure that the Affected People (AP) will be better-off, or at least not worse-off, as a result of the Project. The PMG will endorse the RPs and disclose the relevant information to the affected persons after its completion.

11.2.2 Resettlement Impacts and Costs

333. The project will acquire 171.02 ha of land, of which 115.61 ha is farmland, affecting 3,379 households with 13,672 persons. There will be temporary occupation of 122.53 ha of land. About 262 households and 1,022 persons will lose 51,636.57 square meters of residential housing and 3,309 square meters of small shops. A total of 4,207 households with 17,045 persons will be affected by the project, out of which 1,059 households with 4,327 persons will lose more than 10% of their productive assets and/or will be physically displaced. Nearly 325 households with 395 persons are vulnerable and 13 belong to ethnic groups.

334. Land acquisition and resettlement costs will be financed by PMG. Costs for semiannual external resettlement monitoring and evaluation will be financed by the ADB loan.



Table 11-2 Resettlement Costs as of 28 April 2015 (units CNY1,000)

Cost Item

Category Lianhua County

Luxi County

Shangli County

Road Component

Xiangdong District

Total Resettlement

% of Total

1 Basic Resettlement Cost

5307 25215 32231 23707 19864 106325 44%

1.1 Rural Land Acquisition

3958 19845 21312 13262 9788 68164

1.2 Temporary Land Occupation

196 367 713 2010 345 3631

1.3

Rural Dwelling House Demolition

1134 3373 9912 7688 8001 30108

1.4

Urban Dwelling House Demolition

0 571 0 0 155 726

1.5 Non-Dwelling House Demolition

0 1019 261 707 1276 3262

1.6 Attachments 20 42 33 40 299 433

2

Assistance Fund For Vulnerable Groups

53 252 322 237 199 1063 0.4%

3 Management Fee For Land Acquisition

212 504 1289 474 397 2877 1%

4

RP Preparation And Resettlement Monitoring

103 252 322 237 199 1113 0.5%

4.1 RP Preparation

37 126 161 119 99 542

4.2 Resettlement Monitoring

67 126 161 119 99 572

5 Training Cost

27 126 161 119 99 532 0.2%

6 Taxes And Fees

3897 28744 25095 38331 15441 111509 46%

6.1

Reclamation Fee For Cultivated Land

1014 7068 6091 7425 2859 24457

6.2

New Construction Land Use Fees

1352 9424 9850 9901 4574 35101

6.3

Cultivated Land Occupation Tax

1520 12099 9132 19762 7589 50102

6.4 Vegetation Recovery

10 153 23 1243 418 1848

Sum Of 1~6 9599 55095 59421 63105 36199 223419 92%

7 Contingency 874 5014 5407 5743 3294 20331 8%

8 Total 10473 60108 64828 68848 39493 243750



11.2.3 Implementation Arrangements

335. The PMO will be responsible for the implementation of the project, reporting overall progress, and communications between ADB and PMG. Land acquisition, house demolition, and resettlement will be implemented by the IAs and the local governments. A grievance procedure has been established for the AP. The PMO will submit an internal monitoring report semi-annually to ADB reporting the progress of resettlement implementation. Further, the PMO will engage an external monitoring institute who will submit external semi-annual monitoring reports to ADB during resettlement implementation and annually for two years after completion of resettlement.

336. Compensation for lost assets and allowances will be at replacement costs and will be paid to affected persons prior to displacement. Resettlement information booklets were disclosed to the community, village offices, and to affected persons in the local language in April 2015. Each PIU will have at least one fulltime resettlement staff member to carry out internal monitoring and supervision. The IAs possess adequate capacity to implement land acquisition and resettlement. Training on ADB’s involuntary resettlement policy and procedures will be provided to ensure proper implementation. A GRM will be established (see section 11.2.7) and an independent agency will be engaged to conduct semiannual external monitoring and evaluation.

337. For people unavoidably affected, the resettlement objective is to achieve equal or better income and living standards in line with not only the Chinese laws and regulations, but also ADB’s Resettlement Policies, especially ADB’s Safeguard Policy Statement (SPS) 2009.

Table 11-3 Resettlement Policies and Regulations in the PRC

POLICIES Effective Date

NATIONAL POLICIES

Law of Land Administration of the PRC August 28, 2004

Decision on Reinforcing Reform in Land Administration by the State

Council (State Council [2004] No. 28) October 21, 2004

Ministry of Land Resources (MLR) Guidelines on Improving Land

Acquisition and Relocation Regulations (MLR Document No. 238) November 3, 2004

Guidelines on Provisions for cultivated land occupation tax(issued by

the State Council of PRC No. 511) January 1, 2008

Guidelines on improving the work of employment training and social

security for affected persons by Land Acquisition (Ministry of Labor

Security )

April 10, 2006

PROVINCIAL POLICIES AND LOCAL POLICES

Measures of Jiangxi Province for the Implementation of the Land

Administration Law of the PRC (Amended) April 29, 2000

Notice of the Uniform AAOV Rates and Location-based Integrated Land

Prices for Land Compensation of Jiangxi Province (GPG [2010] No.126) December 6, 2010

Notice of the Jiangxi Provincial Government on Issuing the Measures of

Jiangxi Province for the Dispute coordination decision of Land

requisition compensation and resettlement standards (JPG [2007]

No.23)

September, 14,

2007



POLICIES Effective Date

Notice of the Jiangxi Provincial Government on forwarding the further

improvement of the primary endowment insurance for land expropriated

farmers issued by JXHRSS and other departments. (JPG [2014] No.12)

April 9, 2014

Pingxiang Municipal People's Government Office on the issuance of

City, landless farmers social security guidance notice (Lian Gov. [2011]

No. 3)

January 14, 2011

Lianhua County People's Government on the adjustment of the County's

land requisition compensation standard (Lian Gov. [2011] No. 10) 2011

On the issuance of the Interim Measures Lianhua County landless

farmers social security notification(Lian Gov. [2012] NO. 4) March 13, 2012

On the issuance of the Interim Measures Lianhua County land

acquisition notice(Lian Gov. [2012] No. 17 ) August 31, 2012

Lianhua County Urban Construction housing levy of compensation and

resettlement plan

December 25,

2011

Lianhua County People's Government on further strengthening land

management notice March 17, 2011

Notice of the people's government on Issuing the Measures for the

social security of Land-loss farmers in Xiangdong (XPG [2012] No.10) 2012

Notice of the Xiangdong district people's government office on Issuing

the work coordination plan of the expropriation of lands and houses on

the upgrading project of S533 road Wuli to Tongtian part (XGO〔2014〕No.43)

2014

338. Based on consultations with EA, PMO, IAs, local governments, and affected persons, and general practices in the project area, a set of resettlement principles is agreed to be adopted. These include:

i) avoid or minimize resettlement wherever feasible;

ii) the compensation and titles gained by the APs shall at least enable them to maintain the same living standards as “without project” or even better;

iii) APs should derive some direct benefits from the Project;

iv) all APs, regardless of the legal titles, shall be entitled to get compensation and demolition assistance;

v) the resettlement compensation shall ensure all APs to at least maintain the living standards as before;

vi) if the remaining land after land acquisition fails to safeguard the livelihood of the APs, compensation in forms of cash or land replacement, plus other necessary profit-earning activities shall be provided for the APs;

vii) the APs shall have good understanding of the qualification, means and standards of compensation, livelihood and restoration plan as well as project construction arrangement etc., and participate in the implementation of the resettlement plan;

viii) no land acquisition shall proceed before the APs are satisfied with schemes for compensation and resettlement;



ix) the compensation and resettlement operations shall be monitored by the EA and an independent organization;

x) vulnerable groups (including women) shall receive special assistance and treatment so that they can live better; and

xi) The resettlement budget shall be enough to cover all aspects that are caused by project construction and operation.

11.2.4 Resettlement and Rehabilitation

339. In order to minimize the resettlement impacts to APs and restore their living standards, detailed programs of restoration and relocation have been arranged in each RP. People can choose the available programs according to their requirements. In general, the main measures for income rehabilitation include: cash crops planting, livestock raising and seeking work outside. Also, assistance measures include employment in project construction, provision of skills training (at least 50% for women), advice for starting small businesses and employment information for all APs. Through these measures, all APs can maintain or acquire more stable incomes to restore and enhance their living standards.

340. Regarding the relocation of residential housing demolition, the affected households will receive compensation at replacement cost for the lost structures and attachments without consideration of depreciation. All displaced households will be allocated a free house plot with basic services (water, electricity, TV cable, telephone line, and road access). For non-residential buildings and structures, which are auxiliary structures and will be affected slightly, the affected owners will be compensated with cash at replacement cost for the lost structure.

341. Temporary land occupation will be mainly caused by dredging and wastewater collection systems. For dredging, waste ditches and wasteland have been selected during the Project preparation in accordance with environmental regulations. For the construction of wastewater collection system, the sewers will be laid on the existing roads with pipe jacking construction or wasteland. Thus far, no LAR will be required.

342. In addition, special attention will be paid to vulnerable groups for their resettlement and rehabilitation. Vulnerable groups will receive additional assistance from the Project: (i) setting up of special supporting funds managed by IAs (ii) priorities of provisions of potential employment opportunities and skill training to seriously affected vulnerable groups, especially women.

11.2.5 Compensation Standard

343. Based on the policies, guidelines and principals listed above, the entitlement matrix for the Project has been formulated and confirmed by the IAs. For land acquisition, compensation fees include a land compensation fee and a resettlement subsidy. The land acquisition compensation is determined based on Notice of the Uniform AAOV Rates and Location-based Integrated Land Prices for Land Compensation of Jiangxi Province (GPG [2010] No.126).

344. For house demolition, compensation will be paid to owners. The compensation will comprise the house location price, replacement costs, compensation for auxiliary facilities and decorations, and other subsidies including transition subsidy, movement subsidy, etc.

345. Compensation for young crops, trees, other facilities, and temporary impacts will be paid directly to APs. Income losses resulting from reduced production/sales and wages caused by the Project will also be assessed and compensated. In addition, both men and women are entitled to sign the land acquisition and house demolition contract and obtain the payments.



346. Detailed measurement surveys will be conducted in each village group, and the compensation contracts will be negotiated and signed with affected village groups, households, and property owners. On this basis, the final costs will be adjusted. There is a physical and price contingency of 10% to manage such changes.

11.2.6 Resettlement Implementation, Schedule, Monitoring and Evaluation

347. PMG will entrust the PMO to assume the overall responsibility for resettlement management and supervision. A social, environment and resettlement office within PMO will coordinate the planning, implementation, financing and reporting of land acquisition and resettlement. The pertinent and county and district governments have established PIUs which will be responsible for the resettlement management and supervision. To ensure smooth implementation of the RPs, a training program will be organized for EA, PMO, IA, PIU, and relevant local government resettlement officers by the PMO before land acquisition and resettlement.

348. The resettlement implementation schedules for the Project have been prepared based on the project preparation and construction timetable. No land acquisition or demolition shall start until RPs are updated based on detailed designs and approved by ADB. It is anticipated that land acquisition and house demolition will start in 2016 and be completed by the end of 2018.

349. Internal and external resettlement monitoring mechanisms are agreed to be established during project implementation. A TOR for monitoring and evaluation including monitoring methodologies has been drafted and attached to each RP. Internal resettlement progress supervision and monitoring will be carried out by the PMO and the county/district PMOs to ensure compliance with the provisions of the RP. An independent agency will be entrusted to conduct semi-annual monitoring and annual evaluation of overall project LAR activity until two years after the completion of LAR. External monitoring reports will be forwarded directly to both the PMO and ADB.

11.2.7 Involuntary Resettlement Grievance Redress Mechanism

350. Resettlement safeguards related complaints or disputes will be handled in accordance with the joint GRM established for the project. The basic grievance redress system is as follows:

Stage 1: If any right of an AP is infringed on with respect to LAR resettlement,

he/she may report to the village committee, and either the AP or the village

committee may solve the appeal in consultation with the township government

within 2 weeks.

Stage 2: If the grievant is dissatisfied with the reply of Stage 1, he/she may file an

appeal with the county/district PMOs within one month of receipt of the above

reply, which shall make a disposition within two weeks.

Stage 3: If the grievant is still dissatisfied with the disposition of Stage 2, he/she

may file an appeal with the Pingxiang PMO within one month of receipt of the

above disposition, which shall give a reply within two weeks.

Stage 4: If the grievant is still dissatisfied with the disposition of Stage 3, he/she

may file an action in a civil court in accordance with the Civil Procedure Law of

the PRC after receiving the arbitration award.

351. If any AP does not accept the GRM then he/she could apply to the civil court directly.



352. APs can also submit complaints to ADB which will be handled by the Project Team. If an AP is still not satisfied and believes they have been harmed due to non-compliance with ADB policy, they may submit a complaint to ADB’s Office of Special Project Facility or Office of Compliance Review in accordance with ADB’s Accountability Mechanism8.

353. All grievances, oral or written, will be reported to ADB in internal and external resettlement monitoring reports.

354. All agencies will accept grievances and appeals from the APs for free, and costs so reasonably incurred will be disbursed from the contingencies. The above procedure will remain effective throughout the entire construction phase so that the APs can use it to solve relevant issues. The above appeal channel will be disclosed to the APs via the RIB and mass media.

11.3 Investigation of Ethnic Minorities in the Project Area

355. According to the data of the 6th national census in 2010, the PRC had a minority population of 112 million, accounting for 8.4% of the total and Jiangxi Province had a minority population of 152,411, accounting for 0.34% of its total population. Jiangxi Province’s main ethnic minority is She, distributed mainly in 7 townships9, all of which are outside the project area.

356. According to the data of the 6th national census in 2010, Pingxiang City had a minority population of 3,497, accounting for 0.19%. The city’s minority population has moved into the area mainly by employment, marriage, and education.

357. Generally, the minority population of Pingxiang City is extremely scattered, and differs little from the Han population in terms of language, customs, lifestyle, production and social security.

358. Conclusion: It is not necessary to prepare an Ethnic Minority Development Plan.

Table 11-4 Identification of Ethnic Minorities

Impact on ethnic minorities Unclear Yes No

Is there any ethnic minority in the project area? X

Does this ethnic minority maintains unique customs and

economic patterns, and is therefore disadvantaged? X

Will the Project restrict their economic and social

activities, and make them disadvantaged gradually? X

Will the Project change their economic, social and

cultural institutions? X

Will the Project disturb their regular community life? X

Will the Project have any positive impact on their health,

education, livelihoods or social security? X

8 For further information see: http://www.adb.org/Accountability-Mechanism/default.asp. 9 These seven She Xiangs are Zhangping She Xiang, Guixi City, Yingtan City; Taiyuan and Huangbi She Xiangs, Qianshan County, Shangrao City; Longgang She Xiang, Yongfeng County, Yong’an City; Chitu She Xiang, Nankang City, Ganzhou City; Donggu She Xiang, Qingyuan District, Ji’an City; and Jinzhu She Xiang, Le’an County, Fuzhou City.

http://www.adb.org/Accountability-Mechanism/default.asp



Impact on ethnic minorities Unclear Yes No

Will the Project have any negative impact on their

health, education, livelihoods or social security? X

Will the Project change or weaken their traditional self-

perceptions, customs and cultural traditions? X



12 POVERTY AND SOCIAL ANALYSIS

359. The objectives of the poverty and social analysis are to: i) fully inform the local public of basic project information freely through public participation; ii) investigate and learn the local socio-economic profile, public needs and appeals, and the Project’s potential social impacts and risks; iii) evaluate the role of the Project in promoting local socio-economic development and poverty reduction, and improving livelihoods of poor population; iv) evaluate the Project’s potential impacts on ethnic minorities, women and other vulnerable groups, and how to promote their participation in the Project and improve their livelihoods; and v) propose an action plan based on the identified impacts and risks.

360. The poverty and social analysis (see Supplementary Document 5) has been conducted under the guiding framework on social development, gender, poverty reduction, ethnic minorities, resettlement, and public participation in ADB’s Handbook on Social Analysis: A Working Document (2007), ADB Guidelines for Gender Mainstreaming Categories in ADB Project, and Safeguard Policy Statement (2009).

361. Appendix C is the Summary Poverty Reduction and Social Strategy (SPRSS). This is one of the Jiangxi-Pingxiang RRP Linked Documents.

12.1 Data Collection

362. The methods and tools used in this analysis include: 1) literature review; 2) questionnaire survey; 3) Focus Group Discussion (FGD); 4) key informant interview; 5) stakeholder discussion; and 6) rapid participatory appraisal.

363. Questionnaire Survey: In the questionnaire survey of the Project, a mixed quota and random sampling method was used on the following principles: 1) The survey sites and subjects relate directly to a component of the Project, or benefit or suffer from the Project; and 2) Several survey site (village or community) are selected around each river in the Project, and 10-15 subjects (heads of households or their spouses) selected randomly at each site.

364. The questionnaire survey was pre-tested in Xiangdong District on August 11-12, 2014, with 15 copies of the survey questionnaire. The formal survey was conducted during August 16-31, 2014, with 730 copies distributed and 705 valid copies recovered, accounting for 97%.

a) 71% of the sample is classified rural.

b) Only 43.5% of the respondents are heads of households. This is because heads of households in the project area are mostly adult men, and many of them work outside.

c) 52.7% of the respondents are females and 47.5% males.

d) Respondents range from 18 years to 75 years, averaging 44 years.

e) 55% admitted to being totally unaware of the Project

365. Focus Group Discussion (FGD): Over 40 FGDs of different types and sizes were held in total, involving over 300 persons, including PMO members, staff members of relevant government departments, local urban and rural residents, village and community workers, officials of industrial parks and enterprises, etc.

366. Stakeholder Discussion: Over 10 stakeholder discussions were held in total to address potential key issues in the Project through participation and consultation.



12.2 Poverty Analysis

367. The rural poor population as measured by the poverty line includes the rural Minimum Living Standard (MLS) population and the rural Five Guarantee Population.

a. The PRC rural poverty line is 2,300 yuan per capita per annum

b. The PRC rural MLS standard 106.4 yuan per capita per month

c. Rural Five-Guarantee: food, clothing (e.g. cotton-padded clothes to keep warm in winter), housing, medical care, and burial

368. There is no nationwide standard for urban poverty so the population below the urban MLS is used. Currently the urban MLS standard is 241.3 yuan per capita per month.

369. MLS is determined by the local government based on their level of economic development, so there are differences among counties and cities. These differences can be seen in Table 12-1.

Table 12-1 Rural and Urban MLS in the Project Area in October 2013

Division Rural MLS Standard (yuan)

Urban MLS Standard (yuan)

PRC 106.43 241.34

Jiangxi Province 124.58 238.42

Pingxiang City 120.05 235.98

Anyuan District 120.00 236

Xiangdong District 119.96 235.93

Lianhua County 119.94 236.13

Shangli County 120.11 235.87

Luxi County 120.21 235.98

370. Poverty profile of Pingxiang Municipality. Luoxiao Mountain area is one of the 14 key destitute areas in the new round of development-oriented poverty reduction of the PRC, where Lianhua County of Pingxiang is one of them. There are 19 province-level key towns for development-oriented poverty reduction in Pingxiang, including 9 in Lianhua County, 5 in Luxi County, 4 in Shangli County and one in Xiangdong District. These towns are located mainly in mountain areas. In addition, there are 123 province-level key villages for development-oriented poverty reduction in Pingxiang, including 76 in Lianhua County, 19 in Shangli County, 14 in Luxi County and 6 in Xiangdong District. These villages include state-level key villages for development-oriented poverty reduction, all in Lianhua County.

371. Based on the current poverty standard of CNY 2,300 (farmers’ net income), in 2013, Jiangxi Province had a rural poor population of 3.28 million with rural poverty incidence of 14.2%, urban poverty incidence 4.4%, and overall poverty incidence 9.4%, all higher than the national averages (7.6%), but much lower than the averages of Pingxiang City, with rural poverty incidence of 28.5%, urban poverty incidence 5.5%, and overall poverty incidence 13.9%.



Table 12-2 Estimated Poor Population in the PRC, Jiangxi, and Pingxiang

2013

PRC Jiangxi Pingxiang

Gross population (0,000) 136072 4522.2 188.15

Rural population (0,000) 62961 2312.2 68.77

Rural Poor population (0,000) 8249 328 19.60

Rural poverty incidence 13.1% 14.2% 28.5%

Urban population (0,000) 73111 2210 119.38

Urban MLS population (0,000) 2,078 98 6.52

Urban poverty incidence 2.8% 4.4% 5.5%

Total poor population (0,000) 10327 426 26.12

Overall poverty incidence 7.6% 9.4% 13.9%

Table 12-3 Urban Minimum Living Standard (MLS) in the Project Area (Oct. 2013)

Division Urban MLS population

Urban MLS households

Accumulated expenditure on urban MLS (0,000 CNY)

Urban MLS standard (CNY)

PRC 20,776,348 11,001,136 5,080,870.50 241.34

Jiangxi Province 975,246 451,286 233,262.30 238.42

Pingxiang City 65,158 27,785 15,375.80 235.98

Anyuan District 31,632 12,438 7,465.10 236

Xiangdong District 13,608 6,733 3,210.60 235.93

Lianhua County 3,667 1,407 865.90 236.13

Shangli County 6,293 2,644 1,484.30 235.87

Luxi County 9,958 4,563 2,349.90 235.98

Table 12-4 Rural MLS in the Project Area in October 2013

Division Rural MLS population

Rural MLS households

Accumulated expenditure on rural MLS (0,000 CNY)

Rural MLS standard (CNY)

PRC 53558055 28888397 5669525.3 106.43

Jiangxi Province 1503352 625312 187280.6 124.58

Pingxiang City 57312 23100 6880.4 120.05

Anyuan District 5056 1906 606.7 120.00

Xiangdong District 13550 6159 1625.4 119.96

Lianhua County 9963 3324 1195.0 119.94

Shangli County 18343 7313 2203.1 120.11

Luxi County 10400 4398 1250.2 120.21

372. In the survey, many respondents regard themselves as part of the poor population though their income is not low. 41.5% of the respondents think they belong to the low or



minimum income class, and only 1.4% think they belong to the high income class. The main reasons for perceptions of poverty are lack of a stable income source, the shortage of employment skills and the shortage of labor. The shortage of land resources and poor traffic conditions are not recognized by most respondents as indicators of poverty.

12.3 Poverty Reduction

373. In 2014, the PMG issued a notice on poverty reduction, requiring that rural development-oriented poverty reduction should be accelerated in the following ways: 1) assistance for poor rural households; 2) poverty reduction for resettlement; 3) re-employment training for poor residents; 4) income increase for poor rural households through cooperative business operations; 5) infrastructure construction in poor areas; and 6) improvement of basic public services in poor areas.

374. Based on the above strategy, the PMG would invest 200,000 CNY in each state-level poor village or 100,000 CNY in each province-level poor village annually for infrastructure and environmental sanitation improvement, and farmers’ training from public finance.

375. In addition to the above, conventional measures for urban poor population in the project area also include: 1) urban and rural MLS subsidies, disaster relief subsidies, etc.; 2) major disease relief; 3) farmers’ training; and 4) assistance for poor women.

376. The most effective method for poverty reduction is to promote economic development and offer more job opportunities. In addition to industrial upgrading and transformation, labor-intensive industries from eastern China in recent years have shifted to industrial parks in Pingxiang City, offering numerous job opportunities to local surplus labor. “Almost all urban and rural respondents think that it is easy to find a job locally as long as one is not stupid, not lazy, and healthy.” [interview during HH survey]

12.4 Impacts of the Project on Poverty Reduction and Gender

377. By addressing key challenges of flooding, river pollution, untreated wastewater, and lack of rural-urban linkages in a connected and holistic manner, the Project will support the growth of four subcenters in Lianhua, Luxi, and Shangli counties, and Xiangdong District, as well as two key townships in Luxi and Shangli counties. These strengthened subcenters will bring jobs, goods, assets, and public and private services within the commuting distance of more villages and townships, enabling more inclusive growth that is likely to benefit the poor.

378. More specifically, improvements in the environment and public services brought about by the Project are expected to promote local poverty reduction in the following ways:

The improved water environment will improve public health and reduce incidences of epidemic diseases arising from river pollution, thereby alleviating the potential pressure on poor households and reducing poverty incidence;

The river component will reduce the probability of floods and potential financial losses for vulnerable groups, especially urban and rural residents living in low-lying areas;

The road component will not only improve the transportation infrastructure, but also offer more development opportunities to nearby urban and rural residents, especially poor population lacking effective skills and having low educational levels;

At the construction and operation management stages of the Project, many jobs will be generated, in which unskilled jobs will be first made available to local poor population;



Although the Project is a public infrastructure project, it plays a crucial role in promoting long-term local economic and social development, because it will improve the local investment environment, thereby generating more job opportunities, so that poor population can also gain from the overall project benefits.

As part of the capacity building component, farmers will receive training in flood-resilient farming techniques, which will likely reduce crop damages from floods and potentially increase their incomes.

379. There is no significant gender difference in Project benefits. Typically women have greater exposure to wastewater and poor water quality in rivers because they do house and yard work. For some this means clothes washing in near-by rivers and streams. Women will also benefit from the jobs created through the ADB project.

12.5 Social Development Action Plan

380. Social Risks and Social Development Action Plan. Possible social risks that could arise from the Project are: (i) lack of consultation with residents for the location of the wastewater treatment plants and sludge disposal sites; (ii) risk of land acquisition and involuntary resettlement; (iii) risk of construction safety to local residents during project implementation; (iv) risk of catching an infectious disease and HIV; (v) risk of failure to realize the project objectives due to improper management or subsequent maintenance; (vii) risk of poor public awareness on environmental and road safety. See Pingxiang Social Development Action Plan (SDAP) at Appendix D.

381. Community Environment Supervision Team (CEST) and Roads Safety Education Team (CERT) are planned to work with local residents to (a) develop and implement community environment management rules and roads safety education program to promote changes of public behavior toward the environment and conduct roads safety education or dissemination. The CEST consists of at least three community representatives, including at least one woman. It will be established as a trial for three years in three typical urban communities and three rural communities that are seriously affected by water pollution and access to public roads. This would be a capacity building component of the Project implemented by the PMO with assistance of Township officials where CERT are located. Each team member would be paid 600 CNY per month (about $100 at 2014 exchange rate) and each team would be granted a public welfare activity fund of CNY10,000. Team members are selected for terms of two to three years and can serve no more than two terms.

382. The CERT will also be the lead for development of the Community Participation Manual under the guidance of the community participation specialist. Written in Chinese language it is intended to provide guidelines for community residents to meet together to discuss the issues facing their communities, incentive measures, and priorities for short-term improvements to submit to the local government, i.e. a bottom-up planning approach. This action will be included into SDAP.

12.6 Gender Action Plan

383. Gender Action Plan. The project is categorized as effective gender mainstreaming. In 2013, the female population of Pingxiang City was 939,000, accounting for 48.8% of the city’s population. In recent years, the protection of women’s rights and interests, and their development have been generally excellent in the project area. Both boys and girls of schooling age have an enrollment rate of 100% at the elementary education stage, and there is no significant gender difference in terms of enrollment rate at the higher education stage. In addition, men and women enjoy equal medical security, over 95% of women are covered under the rural new-type cooperative medical insurance or basic medical insurance for urban residents. However, the level of public participation of local women is much lower than that



of men. Less than 15% of leaders of governments and functional departments at or above the township level are women, and this percentage is even less than 10% at the village level.

384. Information on women’s needs and expectations for the Project has been collected from the FGDs and questionnaire survey. In general, there is no statistically significant difference between the male and female respondents in comments on each component. However, since women play a more important role in housework, they are more likely to access and/or use public infrastructure; and the lack of adequate/reliable public transport; wastewater treatment systems and flood control measures have a disproportionately negative impact on women.

385. As such, a Gender Action Plan (GAP) was prepared on the basis of consultation with related stakeholders, and is one of the Jiangxi-Pingxiang RRP Linked Documents (see Appendix E).

12.7 Other Poverty and Social Issues

386. Public Health and HIV. The Project may pose public health and HIV risks. According to the municipal center for disease prevention and control, there is no serious infectious disease in the city now and the major communicable disease is the flu. Infectious disease control is a high priority, health supervision is effective, and there are strict hygienic requirements on all construction sites. There is a special reporting and investigation system for infectious diseases, and infectious diseases are properly controlled. In order to avoid potential infectious disease and HIV risks, it is advised to include infectious disease and HIV control in the environmental management plan.

387. Labor Issues. As discussed in Section 12.8, the construction and operation stages of the project create temporary and permanent jobs. 30% of these unskilled jobs and public welfare jobs will be made available first to women and other poor people in the project area. In addition, the Shangli-Luxi road will stimulate production at seven industrial parks within the road network and is expected to create new jobs. The PMO will collaborate with the Labor and Social Security Bureau to ensure that contractors will employ local labor and meet target employment percentages for the poor and women. The contractors will be required to meet workers’ entitlement as outlined in national, provincial and municipal laws and regulations specified in project assurances.

12.8 Overall Project Benefits10

388. Creation of new job opportunities. The project will provide new employment opportunities during project implementation and subsequent operations and maintenance of project facilities. According to preliminary estimates of employment opportunities by the DI (Table 12-5 and Table 12-6), it is estimated that the Project will generate 3830 jobs during the implementation phase, of which 125 jobs are suitable for females, and 187 jobs during the operations phase, of which 73 are suitable for females. Based on results of the household survey, local residents have strong willingness and capacity to take jobs generated by the Project.

Table 12-5 Estimated Number and Types of Jobs Generated by the Project During

Construction

Sub-Project Component Skilled Jobs Unskilled Jobs

Total Total

Lianhua County Integrated Flood Management 900 70

10 Specific benefits of each component are discussed in sections 6, 7, and 8.



Sub-Project Component Skilled Jobs Unskilled Jobs

Total Total

Wastewater Treatment 90 10

Luxi County Integrated Flood Management 800 50


Shangli County Integrated Flood Management 900 80


Xiangdong District Integrated Flood Management 500 30


Shangli-Luxi Rural-Urban Road 150 750

Total 3610 1020

Source: Design Institute

Table 12-6 Estimated Number and Types of Jobs Generated by the Project During

Operations

Number

Component Skilled Unskilled

Lianhua County Integrated Flood Management 25 10


Luxi County Integrated Flood Management 16 3


Shangli County Integrated Flood Management 20 5


Xiangdong District Integrated Flood Management 12 3


Shangli-Luxi Rural-Urban Road 2 10

Total 151 46

Source: Design Institute

389. Improved public health. Improvements to wastewater collection and treatment, river quality, and the overall river environment are expected to reduce risk of exposure to water pollutants, water-borne pathogens, air pollution, and vectors of disease such as mosquitos. These benefits to public health are difficult to quantify, particularly since records of public health and disease incurrence in rural areas are limited or unavailable and there are a variety of causes of gastro-intestinal diseases. Potential benefits, however, are recognized by the public. According to the results of the household survey, 74% of respondents think that with the improvement of the water environment, incidences of common diseases like gastrointestinal and respiratory diseases will decrease. For residents served by the road component, public health will also benefit through improved accessibility to hospitals and clinics.

390. Increased real estate and property values in certain areas. Market values of property and real estate are determined mainly by geographic location, public policies, and market supply. However, under equal conditions, a better surrounding environment means higher values. The wastewater and integrated flood risk management components will not only address local water pollution, but also improve the overall environment of the project area by improving water quality and increasing greenery. These improvements will likely lead to increased real estate values, particularly in areas near the project rivers. The road



component is also likely to lead to appreciation of land values along the proposed road due to improved accessibility.



13 FINANCIAL ANALYSIS

13.1 Introduction

391. The financial analysis for the proposed project was undertaken in accordance with ADB policies and guidelines.11 A financial sustainability analysis was carried out to assess the entire project, including all project components, and a financial analysis was conducted for the wastewater treatment component, which has a cost-recovery objective.

13.2 Financial Sustainability Analysis

392. The financial performance of project-related entities was analyzed to determine their financial capacity to provide the cash requirements for all components, including counterpart funding during construction, O&M, and debt service during operation. Local governments will provide counterpart funding and assume ADB loans to ensure project completion, and thereafter pay debt service for the ADB loan.

393. Local government revenue and expenditure data for 2009–2013 was analyzed and projected forward to 2040 to assess capital structure, internal fund generation to support current operations, debt-service capacity, and ability to finance all components after construction. During 2009–2013, transfers from national and provincial governments averaged 56% of total local government revenues; the highest proportion (66%) was received by Lianhua County, which is a national poverty county.

394. Project counterpart funding, O&M expenses, and debt service as a percentage of revenue for local governments are in Table 13-1. During 2016–2020, the average annual counterpart funding as percent of revenues ranges from 0.6% (Xiangdong) to 1.7% (Luxi County). In the first year of debt service (2021), repayment ranges from 1% in Xiangdong District to 3.2% in Lianhua County. During 2021–2040, the annual debt service as a percentage of revenues declines based on expected growth of local government revenues. By 2030, debt service as a percentage of revenues is less than 0.3% for all four local governments. These findings indicate acceptable fiscal risk, because the municipal government fiscal revenues are expected to grow in line with economic development.

395. Local governments will finance recurring O&M costs. During 2021–2040, average annual O&M costs are less than 0.05% of annual revenues. Based on the funding sources identified during project preparation (including new budgets, subsidies, and allocated financing), all subprojects will have sufficient funds available for O&M.

11 ADB. 2014. Financial Management, Cost Estimates, Financial Analysis, and Financial Performance Indicators. Operations Manual. OMG2/BP. Manila; ADB. 2005. Financial Management and Analysis of Projects. Manila; ADB. 2009. Financial Due Diligence: A Methodology Note. Manila.



Table 13-1 Project Counterpart Funding, Operation and Maintenance Expense, and

Debt Service as a Percentage of Revenue (CNY million)

Item 2016 2017 2018 2019 2020 2021 2025 2030 2035 2040

Lianhua County

Revenues 2,662 3,249 3,966 4,841 5,909 7,213 16,012 43,391 117,583 318,635

Counterpart 50 62 74 28 12

O&M cost 4 4 5 6 6

Debt service 229 183 126 69 11

Total requirement 50 62 74 28 12 233 187 131 74 18

% of revenues 1.9% 1.9% 1.9% 0.6% 0.2% 3.2% 1.2% 0.3% 0.06% 0.01%

Luxi County

Revenues 3,864 4,798 5,956 7,395 9,181 11,399 27,082 79,887 235,646 695,098

Counterpart 114 118 139 51 22

O&M cost 4 4 5 5 6

Debt service 310 248 171 93 16


% of revenues 2.9% 2.5% 2.3% 0.7% 0.2% 2.8% 0.9% 0.2% 0.04% 0.0%

Shangli County

Revenues 4,984 6,271 7,890 9,928 12,491 15,717 39,390 124,214 391,701 1,235,199

Counterpart 154 99 116 42 18

O&M cost 4 4 5 5 6

Debt service 251 201 138 75 13


% of revenues 3.1% 1.6% 1.5% 0.4% 0.2% 1.6% 0.5% 0.1% 0.02% 0.0%

Xiangdong District

Revenues 4,047 5,023 6,233 7,734 9,598 11,911 28,244 83,115 244,584 719,742


O&M cost 2 3 3 4 4

Debt service 113 90 62 34 6


% of revenues 1.5% 0.7% 0.6% 0.2% 0.1% 1.0% 0.3% 0.08% 0.02% 0.0%

Total for all four local governments



Item 2016 2017 2018 2019 2020 2021 2025 2030 2035 2040

Revenues 15,557 19,341 24,045 29,898 37,179 46,240 110,728 330,607 989,514 2,968,674

Requirements 379 313 368 135 59 916 737 514 291 68

Requirements as %

revenues 2.4% 1.6% 1.5% 0.5% 0.2% 2.0% 0.7% 0.2% 0.0% 0.0%

CNY = yuan, O&M = operation and maintenance. Source: Asian Development Bank estimates.

13.3 Wastewater Treatment Component

396. The wastewater component makes up about 11% of the total project cost. It consists of collection system and wastewater treatment plants (WWTPs) in Tongmu and Xuanfeng. The Xuanfeng WWTP (5,000 cubic meters [m3]/day) will reduce pollution loadings to the Yuan River in Luxi County, and the Tongmu WWTP (2,500 m3/day) to the Lishui River in Shangli County. This component is an integral part of the project to achieve the overall project outcome and impact. The WWTPs are needed to protect public health and reduce environmental pollution (the Yuan and Lishui rivers are sources of drinking water for downstream communities). The PRC 12th FYP sets the wastewater treatment rate at 70% for counties and 30% for townships.

397. Financial sustainability. In the PRC, the collection system (consisting of pipelines, manholes, and pump stations) is considered a public good, with the capital and operating costs paid by the local governments. Wastewater treatment is considered a commercial activity and a tariff is charged to recover some of the costs. While the WWTP component has a cost-recovery objective, the low treatment capacity of the WWTPs (especially the Tongmu WWTP) is a constraint for financial viability of the investment. Initial financial evaluation determined that at the nationally specified rural wastewater tariff rate of CNY0.85/m3, full cost recovery of the capital investment plus O&M costs is not possible, given the small scale of the WWTPs.12 The current tariff level can only support 20% of the WWTP investment cost and 100% of the O&M cost. To achieve full cost recovery of both capital and recurrent costs, a tariff of CNY3.5/m3 would be required, which is unrealistic to implement in the short or medium term.

398. An analysis of the recurrent cost to operate and maintain the WWTPs has therefore been carried out. The wastewater tariff will be incremental revenue to the local governments once the WWTPs begin operating. The analysis concludes that tariff revenue generated from this component can adequately fund O&M costs. The operating margin estimated based on current tariff levels and full O&M cost recovery is 16% for Tongmu WWTP, and 22% for Xuanfeng WWTP. This component will generate a positive operating margin even under a stress scenario (a 10% reduction of tariff revenue and 5% increase in O&M costs); the wastewater tariff coverage of recurrent costs under the base case and stress scenarios is in Table 13-2.

12 In 2010, Jiangxi Province set the current wastewater tariff at CNY0.80/m3 for residential customers throughout Pingxiang municipality. The National Development and Reform Commission specified that by December 2016 the nationwide rural wastewater tariff will be CNY0.85/m3, and the urban wastewater tariff CNY0.95/m³. Minimum non-residential wastewater tariffs will also increase, to CNY1.40/m³ for urban users and CNY1.20/m³ for rural users.



Table 13-2 Financial Sustainability for Wastewater Treatment Plants

Unit Tongmu Xuanfeng

Base Case

Capacity m3/d 2,500 5,000

Tariff CNY/m3 0.85 0.85

Annual revenue CNY’0,000 78 155

Annual O&M

Electricity 19 35

Chemicals 3 7

Salary and welfare 9 18

Repairs 16 27

Maintenance 3 5

Administration 15 28

Annual O&M CNY’0,000 65 121

Operating margin % 16% 22%

O&M cost/m3 CNY/m3 0.71 0.66

Low Case

Stress test: -10% revenue and +5% O&M




O&M cost/m3 CNY/m3 0.75 0.69

CNY = yuan, m3 = cubic meter, m3/d = cubic meter per day, O&M = operation and maintenance.


399. In Jiangxi Province, Jiangxi Hongcheng Waterworks Company (the Company) is responsible for wastewater treatment in the province’s major cities and county towns under a transfer–operate–transfer model with a 30-year concession agreement. There is no requirement for the Company to operate the two project WWTPs in towns; given their small scale, such operation is not appealing to the Company. The local government is prepared to staff and operate the WWTPs; this could be conducted via a service contract between the towns and the Company, in which the company provides training and weekly visits by their staff operating WWTPs in nearby county towns. The WWTPs will not become operational



until 2020, leaving sufficient time for the local government to make the necessary arrangements.13

400. Water supply and tariff affordability. Currently, all district and county-level towns (i.e., local government capitols) have water supply and wastewater treatment. Water supply companies serving the Pingxiang urban areas, and Luxi and Shangli counties are 51% owned by the China Water Affairs Group. In Lianhua County and Xiangdong District, the Jiangxi Provincial Water Conservancy Investment Group controls 60% of the water supply companies. Residential water supply tariffs are CNY1.5/m3 in Lianhua, Luxi, and Shangli counties and CNY1.6/m3 in Xiangdong District (Table 13-3).

Table 13-3 Current Water Supply, Tariff, and Estimated Revenue

County Town

Current Residential Water Consumption

Water

supply Population Households Connected

Per

Household

Town

Total Revenue

(m3/day)

(no. of

people) (no.) (%) (m3/month) (m3/day) (CNY/month)

Luxi

Xuanfeng 3,000

18,000 5,625

80% 15

2,250 100,000

Yinhe 5,000

Shangli Tongmu 3,000 10,000 3,125 1,250 56,000

CNY = yuan; m3 = cubic meter.

Notes:

1. Family size from PPTA Poverty and Social Analysis Study is 3.2 which is used in this analysis since it

is specific for the towns. The Pingxiang Statistical Yearbook lists 4.6 but that is for broader area.

2. Water tariff in Luxi and Shangli counties is CNY1.5/m3.

3. Assumed average urban household consumption rates are used to estimate total residential water

and wastewater services.


401. WWTPs have been built in all county towns. The current wastewater tariff (CNY0.80/m3) was established in 2010 based on directives from Jiangxi Province. It is charged only in locations with wastewater services. When increasing water or wastewater tariffs, the water supply company requests a water tariff increase; costs are reviewed by the local government price bureau to determine whether the increase is appropriate. There is at least one public hearing. The water supply company prepares a report, which is reviewed by the local government, and if approved sent to the Pingxiang Municipal Development and Reform Commission for final approval.

402. The tariff analysis includes assessments of affordability for project beneficiaries. The primary social objective of water and wastewater tariff structures should be to ensure that all members of the community have access to these services without placing an undue burden on household finances. For the purpose of estimating residential consumption of water and wastewater services, it is assumed that utilization is 15 m3/month in urban centers and 10 m3/month in rural areas. Volumetric residential water tariffs in the project towns where

13 The Risk Assessment and Risk Management Plan (accessible from the list of linked documents in Appendix 2 of the Report and Recommendation of the President) includes the change in ownership.



WWTPs will be constructed are currently CNY1.5/m3. For new customers there is an initial fee (CNY1,000 for urban and CNY600 for rural residents) as a contribution towards water supply network capacity, management, and water meter costs. Table 13-4 shows the initial fee defrayed over 5 years at an annual interest rate of 12%. Wastewater tariffs used in this analysis are CNY0.85/m3, the level the National Development and Reform Commission has specified to be implemented by December 2016. Disposable household incomes are based on the household socioeconomic survey.14

Table 13-4 Wastewater Tariff Affordability

Household

group

Monthly

disposable

income

(CNY)

Water

consumption

(m3/month)

Water and

wastewater

bill

(CNY/month)

% of income

for existing

customers

Initial fee

(CNY/month)

Total

(CNY/month)

% of income

for new

customers

Wastewater tariff = CNY0.85/m3

Urban (average) 5,650 15 35 0.6 22 57 1.0

Rural (rural) 2,660 10 24 0.9 13 37 1.4

Lowest quartile 2,100 10 24 1.1 13 37 1.7

CNY = yuan, m3 = ,cubic meter Source: Asian Development Bank estimates.

403. Table 13-4 shows that a wastewater tariff of CNY0.85/m3 results in a water and wastewater monthly bill that is less than 2% of urban and rural disposable income. Local governments will annually review water and wastewater tariffs to assess affordability and provide assistance to lower-income people through the minimum living standards program.

14 November 2014. Jiangxi-Pingxiang Poverty and Social Analysis by PPTA Team (available as supplementary

document to this report).



14 ECONOMIC ANALYSIS

14.1 Macroeconomic and Sector Context

404. The project is located in Pingxiang municipality, a poverty-stricken and resource-depleted coal mining city in Jiangxi Province, in the PRC. Pingxiang municipality covers a total area of 3,827 square kilometers (km), with hills, mountains, and plains. The municipality’s population is 1,870,000, with 597,000 residents in Anyuan district’s urban area, the municipality’s core city. Pingxiang has a low-wage industrial economy, and is historically dependent on mining and associated industries. The urbanization ratio is at 31.6%, significantly lower than the national average of 53.7%, and there is significant rural poverty (18.6%).15 Lianhua County is a national poverty county, and within the municipality there are 113 designated poverty villages.16

405. In 2008, Pingxiang was among 12 cities in the PRC to be classified as a resource-depleted city eligible for central government support for economic and industrial transformation. The Pingxiang municipal government Resource-Depleted Transitional Development Plan (2013–2020) promotes sustainable socioeconomic development. The overall urban–rural development strategy of Pingxiang municipal government includes plans to develop an expanded central urban core area in Anyuan and Xiangdong districts, and three subcenters in Lianhua, Luxi, and Shangli counties. Infrastructure linkages are needed to enable stronger commuting relationships and reduce rural–urban migration.

14.2 Rationale

406. Flood risk reduction is a top priority for Pingxiang, because both flood frequency and severity have increased significantly especially since 1998. A major flood affected Pingxiang on 25 May 2014 and caused severe damage to public safety and health, and massive loss of assets and income.17 Present flood defense levels along the rivers are low. Flow capacity is affected by sediment accumulation, uncontrolled vegetation, and obstructions. The overall river environment has deteriorated in urban areas and near rural settlements as development has encroached on wetland areas and floodplains. Riverbank erosion and degradation are serious in some river sections. Illegal solid waste disposal at the riverbanks is common, particularly in rural areas.

407. Most domestic wastewater is untreated, and wastewater from mining and industry, and non-point source pollutants contribute to poor surface water quality. Many urban areas and towns and villages lack or have incomplete wastewater systems and currently use poorly managed septic tanks, with effluent being discharged into rivers, or percolating into the ground water. Some of Pingxiang’s rivers are drinking water sources, and water pollution consequently poses serious risks to public health.

15 All figures related to Pingxiang are sourced from: Pingxiang Municipal Government. 2012. Pingxiang Statistical Yearbook, 2011. Pingxiang. The poverty threshold is based on the national standard of CNY2,300 per year.

16 In 2011, Pingxiang’s average urban income was CNY18,646, compared to the national average of CNY21,810. 17 Floods in 1998, 2001, 2002, 2010 and 2014 affected 496,000 people and caused the collapse of 2,682

houses, with significant economic losses in the agricultural sector because of flooded farmland.



408. Pingxiang’s rural areas suffer from limited access to markets, jobs, training, education, and services in towns and cities. The lack of roads and public transport is a major constraint to improving rural opportunities, incomes, and livelihoods. Except for the main east–west and north–south corridors that are served by highways and national roads, many existing rural roads in Pingxiang are narrow and poorly maintained.

14.3 Project Description and Least-Cost Options Analysis

409. The proposed project will support infrastructure and capacity building to address pressing development challenges, including flooding, degraded river environments, the low wastewater treatment rate, and lack of rural–urban connectivity. The project will enhance environmental sustainability in urban and rural areas through improvements in wastewater collection and treatment and water safety. The infrastructure supported by the project includes integrated flood risk management and river rehabilitation, wastewater collection networks and wastewater treatment facilities, and a rural–urban road18.

410. Output 1: Flood risk management and river rehabilitation improved and integrated. This component comprises works on 71 km of eight rural–urban rivers in Lianhua, Luxi, and Shangli counties; and Xiangdong District including (i) river widening and removal of sediments, (ii) new and rehabilitated embankments, (iii) about 90 hectares of riparian revegetation, (iv) about 46 hectares of wetland protection and rehabilitation, (v) construction or reconstruction of 35 small adaptable weirs for farmland irrigation, and (vi) construction of two new pedestrian bridges (Lianhua and Luxi) and reconstruction of one local bridge (Luxi). Nonstructural measures included in output 4 enhance the effectiveness of the flood protection infrastructure.19

411. Output 2: Wastewater collection and treatment improved. This component includes improvement and expansion of sewer pipe networks in subcenters of Lianhua County and Xiangdong District and construction of two sewer networks and WWTPs in two townships. A total of about 184 km of new sewer mains, secondary sewers, and interceptors will be installed.20 A new WWTP and pump station with 5,000 cubic meters (m3) per day capacity will be built in Xuanfeng Town in Luxi County, and a new WWTP and pump station with 2,500 m3 per day capacity will be built in Tongmu Town in Shangli County.

412. Output 3: Rural–urban linkages improved. This component includes a 44 km rural–urban class II road with a width of 10 meters (m), six bridges with a total length of 953 m, and a 482 m tunnel. The road is one of the four bypass roads in the Pingxiang Integrated Transport Plan (2012). The road will link towns and villages to urban and industrial areas in Luxi and Shangli counties, and Anyuan District; and expand the existing road network in the project area to improve traffic capacity, and reduce transport costs and travel time for people

18 See also Section 5.3. 19 It will meet government requirements for flood protection for (i) urban areas for 20-year flood events (occurring

once every 20 years), (ii) rural villages for 10-year flood events, and (iii) farmland for 5-year flood events. 20 Sewer connections of titled properties will be installed by property owners or developers. For all other

households, connections will be installed under the project.



and goods. Alternative road alignments were considered and an unnecessary grade-separated junction was eliminated during the review.

14.4 Economic Analysis

413. The analysis is in accordance with ADB guidelines and other good practice guides.21 All predicted project costs and benefits are measured in 2014 economic prices. An exchange rate of CNY6.21 = $1 and the world price system have been used. Traded goods are measured at world prices. Construction costs are largely non-traded and are converted to world prices using a standard conversion factor (SCF) of 0.98. Land is valued at its compensation price less taxes, times the SCF. Unskilled labor is treated as being in surplus and is converted to economic prices using a shadow wage rate factor of 0.8 and the SCF. Skilled labor is treated as scarce and converted using the SCF. Labor costs are assumed to rise by 1% annually in real terms throughout the evaluation period, a common assumption in economic evaluation. Real wages in the PRC have risen faster, but the position in individual work units is more complex and depends on changes in productivity and hiring practices. The price of fuel is based on forecast crude oil prices from 2015 to 2025. Construction takes place over an assumed 5-year period (2016–2020); the evaluation period is 25 years from start of operation. Physical contingencies are set at 5%.

14.5 Flood Risk Management and River Rehabilitation Component Benefits

414. Quantified benefits are based on average avoided annual flood damage to tangible assets. In addition, there are non-quantified benefits, including environmental improvements to the river, water quality and riparian ecology and protected wetlands; benefits for residents and agri-tourists from the recreational value of the riverfront greenway system with continuous pathways; and intangible benefits in the form of reduced anxiety and illness. The average annual damage avoided is estimated by (i) using historic reference-case flood-event damage and estimates of flood probabilities to construct a reference case damage-frequency curve, (ii) constructing a project damage-frequency curve for each alternative level of flood defense, and (iii) calculating the area between the curves for each project case and the reference case. Historic event damage at each site is based on values provided by local governments (in almost all cases for 2014), standardized using values transposed from estimates elsewhere in the PRC.

415. Most survey respondents rated the 2014 flood as the most damaging. Using national flood damage data for 2000–2010, an extreme value distribution was used to estimate the return period of the 2014 damage at 13 years. Event damage at other return periods is estimated from flood envelopes generated by the design institute. In all cases, it is assumed that the first damage occurs at a return period of 5 years.

14.6 Wastewater Component Benefits

416. The contingent valuation technique was used to quantify benefits from the wastewater component using results of closed-ended contingent valuation questions during the household social survey. Two contingent valuation questions were asked: (i) willingness to pay (WTP) a one-time charge to connect, and (ii) WTP a monthly amount following connection. The mean WTP to connect through a one-time charge is CNY850 (spread over 5 years in the evaluation), with mean WTP through a monthly payment of CNY15/month.22 The latter is close to the actual wastewater charge, currently CNY0.8/m3 for residential

21 ADB. 1997. Guidelines for the Economic Analysis of Projects. Manila. 22 Mean WTP is estimated using a probit regression approach. It involves deriving a regression between the

dependent binary WTP and regressors such as bid amount and household income.



consumers in most towns in Jiangxi. The relevant population for each subcomponent is the number of direct beneficiary households.

417. Beyond the significant number of direct beneficiaries, all residents of the four cities and towns as well as downstream communities will benefit from the improved river environment and water quality. In the absence of any project survey results, values were taken from results of several comparable WTP scenarios elsewhere in the PRC, and a mean WTP for improved environmental water quality of CNY10/month was used. The comparable WTP scenarios for 2011–2013 related to lake and watercourse rehabilitation are included in the consultant report. The benefits they enjoy are referred to as non-user benefits.

418. With increased income, people’s WTP for improved wastewater management and improved river water quality may increase. It is assumed that WTP grows at an annual rate of 4% per year, applied at intervals of 5 years, implying an income elasticity of 0.2–0.39. Increasing WTP is supported by substantial tariff increases since 2008, and in January 2015 the government announced that domestic wastewater tariffs nationwide must reach CNY0.95/m³ in urban areas by the end of 2016. The current tariff for residential wastewater in Pingxiang is CNY0.80/m³. The new tariff will represent an increase of 19% for urban residents, and 6% for rural residents. Residents connecting to Xuanfeng and Tongmu WWTPs are charged a tariff; there was no tariff previously, as these are new facilities.

14.7 Rural–Urban Road Component Benefits

419. Benefits are savings in road user costs (RUCs) for normal traffic and generated traffic benefits. The main benefit is RUC savings from traffic diversion from national highways G319 and G320. RUCs comprise vehicle cost and travel time savings. Accident cost savings are not included for lack of reference-case data. RUCs and non-investment road agency costs are calculated using HDM4 (a highway evaluation software package). The “rule of half” is used to value benefits for generated traffic. The evaluation adopts a network approach, whereby total transport costs are compared across a limited network with and without the rural–urban road.

420. Traffic. Existing project road corridor weighted average traffic is very low—about 260 vehicles/day (v/d), excluding motorcycles. The expected source of traffic that will divert to the project road is two congested trunk roads: G319 has 12,500 v/d, and the G320 10,200 v/d. Diverted traffic is estimated from a turning count at the G319–G320 junction; 3,200 v/d (excluding motorcycles) now make the turn; it is conservatively estimated that 1,400 v/d will use the new road. Price elasticities of –0.3 and –0.2 are applied to changes in perceived cost to estimate percentages of generated traffic at 18% for passenger and 12% for goods traffic; these are applied to the reference-case traffic on minor project area roads. Forecast normal and generated traffic on the road is in Table 1. Normal traffic growth is estimated based on gross domestic product growth and income elasticities. Goods traffic is projected to rise at 4.0% per annum to 2030, and thereafter at 3.0%. Projected passenger vehicle traffic increase is 7.1% to 2020, 6.0% to 2030, and 4.0% thereafter. A ramp-up during 2021–2024 is assumed.

Table 14-1 Traffic on the Project Road, 2021–2040

Item 2021 2024 2030 2035 2040

Vehicles/day excluding motorcycles 1,149 3,242 3,851 4,244 4,676




14.8 Evaluation

421. The overall project is economically viable (EIRR of 17.8%); individual EIRRs are 18.6% (river component), 12.4% (wastewater component), and 18.8% (road component). Only the Lianhua wastewater subcomponent has an EIRR below 12% (at 9.7%, not including non-quantified benefits). Lianhua is a national-level poverty county, targeted for development-oriented poverty reduction. Base case and sensitivity evaluation are shown below.

Table 14-2 Subcomponent Evaluation Results

Components

Flood risk management and river

rehabilitation Wastewater collection and treatment

Roa

d All

Subcomponen

ts

Lianhu

a

Lux

i

Shang

li

(Lishui

)

Shangli

(Jinsha

n)

Xiangdon

g

Lianhu

a

Luxi

(Xuanfen

g)

Shangli

(Tongm

u)

Xiangdon

g

NPV (CNY

million) 12.5 175 95.6 3.3 156 (10.9) 5.3 7.1 5.5 254 704

EIRR (%) 12.9 18.

6 28.6 12.4 25.4 9.7 13.0 13.9 13.4 18.8

17.

8

CNY = yuan, EIRR = economic internal rate of return, NPV = net present value. In ( ) indicates negative number Source: Asian Development Bank estimates.

Table 14-3 Evaluation of All Components

Year Investment & O&M Costs (CNY million) Benefits (CNY million) Net benefit

(CNY million) River (1) WW (2) Road (3) River (1) WW (2) Road (3) 2016 48.2 12.3 22.2 0.0 0.0 0.0 (83.0) 2017 133.0 39.0 63.0 0.0 0.0 0.0 (238.0) 2018 241.1 73.9 132.9 0.0 0.0 0.0 (448.0) 2019 252.7 76.0 132.9 0.0 0.0 0.0 (462.0) 2020 289.3 45.1 88.7 129.0 0.0 0.0 (294.0) 2021 1.3 1.1 0.1 164.0 22.3 57.0 241.0 2022 1.3 1.6 0.1 173.0 26.3 76.0 272.0 2023 1.3 1.9 0.1 182.0 39.1 94.0 312.0 2024 1.3 2.0 0.1 192.0 39.1 111.0 338.0 2025 6.9 2.1 0.1 203.0 41.0 115.0 350.0 2026 1.4 2.2 0.1 214.0 40.3 121.0 371.0 2027 1.4 2.3 0.1 225.0 38.5 129.0 389.0 2028 1.4 2.4 0.1 237.0 44.6 138.0 416.0 2029 1.4 2.4 0.1 250.0 43.4 148.0 438.0 2030 7.0 2.3 0.1 264.0 42.7 161.0 458.0 2031 1.4 9.1 0.1 269.0 42.6 169.0 470.0 2032 1.4 2.3 5.6 275.0 42.6 173.0 481.0 2033 1.5 2.4 0.1 281.0 51.8 192.0 520.0 2034 1.5 2.4 0.1 286.0 51.9 162.0 496.0 2035 7.1 2.4 0.1 292.0 52.4 166.0 501.0 2036 1.5 2.4 0.1 299.0 52.8 155.0 502.0 2037 1.5 2.4 0.1 305.0 53.2 156.0 510.0 2038 1.5 2.5 0.1 311.0 65.3 153.0 525.0 2039 1.6 2.5 2.2 318.0 65.9 153.0 531.0 2040 7.2 2.5 7.9 324.0 66.5 154.0 528.0 2041 1.6 9.1 0.1 331.0 64.2 200.0 584.0 2042 1.6 2.5 0.1 338.0 64.6 209.0 607.0 2043 1.6 2.5 0.1 345.0 79.0 218.0 638.0 2044 1.6 2.5 2.2 353.0 79.4 229.0 655.0 2045 (282) (71.4) (133) 360.0 79.9 242.0 1,168 PVs at 12% EIRR

646.0 177.0 297.0 1,088.0 184.0 554.0 704.0 17.8%

( ) = negative, EIRR = economic internal rate of return, O&M = operation and maintenance, PVs = present values, WW = wastewater.




Table 14-4 Sensitivity Test Results

River Wastewater Road All

Test

EIRR

%

NPV

(CNY million)

EIRR

%

NPV

(CNY million)

EIRR

%

NPV

(CNY million)

EIRR

%

NPV

(CNY million)

Base case 18.6 443 12.4 7.1 18.8 254 17.8 704

Costs +20% 16.1 314 10.6 (28.3) 16.6 194 15.4 480

Benefits –20% 15.5 225 10.2 (29.7) 16.1 143 14.9 339

Costs +20% & benefits –20% 13.3 96 8.5 (65.0) 14.1 84 12.9 115

Switching value on costs, % 65% 10% 85% 65%

Switching value on benefits, % 60% 91% 54% 61%

CNY = yuan, EIRR = economic internal rate of return, NPV = net present value.

In ( ) indicates negative number


422. The project switching value for a cost overrun is 65%, and 61% for a decrease in consumer benefits. The degree of uncertainty of the economic analysis is high for wastewater subcomponents but low for the road. This is shown by the switching values for the wastewater subcomponent, indicating vulnerability to relatively small adverse shifts in costs or benefits.

423. A distributional analysis estimating the project's economic net present value that benefits the poor yields a poverty impact ratio of 0.3, i.e., the poor receive 30% of benefits.

424. Fiscal sustainability. The project is financially sustainable with average annual O&M costs as a percent of revenues of less than 0.05%. Further details are in the Financial Analysis.23

23 Financial Analysis (accessible from the list of linked documents in Appendix 2).



15 PROJECT IMPLEMENTATION

425. Implementation details for the Project are in the Project Administration Manual which is one of the Linked Documents to the RRP. Table 15-1 summarizes the implementation arrangements.

Table 15-1 Implementation Arrangements

Aspects Arrangements

Implementation period December 2015–December 2020

Estimated completion date Completion date: 31 December 2020; Loan closing date: 30 June 2021

Management

(i) Oversight body Jiangxi provincial government, led by director general, JPDRC; with senior officials

from JPAD, JPDRC, JPEPB, JPFD, JPTD, and JPWRD

(ii) Executing agency Pingxiang municipal government

(iii) Implementing

agencies

County governments of (i) Lianhua, (ii) Luxi, and (iii) Shangli; (iv) Xiangdong district

government; and (v) Pingxiang municipal transport bureau

(iv) Implementation units (i) Lianhua water affairs bureau (river and wastewater components), (ii) Luxi water

affairs bureau (river component), (iii) Luxi housing and construction bureau

(wastewater component), (iv) Shangli water affairs bureau (river and wastewater

components), (v) Xiangdong water affairs bureau (river and wastewater

components), and (vi) Pingxiang municipal transport bureau (rural–urban road)

Procurement National competitive bidding 19 contracts $226.7 million

Quality- and cost-based selection

(90:10)

226 person-months $2.0 million

Consulting services Consultants’ qualification selection 58 person-months $0.4 million

Individual consultant selection 10 person-months $0.1 million

Advance contracting and

retroactive financing

Advance contracting and retroactive financing will be used for (i) six consulting

services contracts, (ii) civil works contract for Anyuan section of the road, (iii) Luxi

Yuan River rehabilitation (package 2), and (iv) Xuanfeng Town (Luxi County)

WWTP.

Disbursement The loan proceeds will be disbursed in accordance with ADB's Loan Disbursement

Handbook (2015, as amended from time to time) and detailed arrangements

agreed upon between the government and ADB.

ADB = Asian Development Bank, JPAD = Jiangxi provincial agriculture department, JPDRC = Jiangxi provincial

development and reform commission, JPEPB = Jiangxi provincial environmental protection bureau, JPFD =

Jiangxi provincial finance department, JPTD = Jiangxi provincial transport department, JPWRD = Jiangxi

provincial water resources department, WWTP = wastewater treatment plant.


426. The Flow of Funds is shown in Figure 15-1.



Figure 15-1 Jiangxi-Pingxiang Flow of Funds

Asian Development Bank

Jiangxi Provincial Government (Provincial Finance Department)

ADB Loan Imprest Account in US Dollar, Pass-through-account in CNY

River project implementation units:

Led by water affairs bureaus of Lianhua, Luxi, and Shangli counties and

Xiangdong District

Contractors, Suppliers and Consultants

Wastewater project implementation units:

Led by water affairs bureaus of Lianhua and Shangli

counties, Xiangdong District, and Xuanfeng

township government (Luxi)

Borrower: Ministry of Finance, People’s Republic of China

Loan, Relending, Onlending Loan repayment

Project management office (PMO)

Claim for Payment/ Withdrawal application

Payment

Executing Agency: Pingxiang Municipal Government

(Municipal Finance Bureau, Pass-through-account)

Implementing Agencies: Lianhua, Luxi, and Shangli county

governments, Xiangdong district government (District/county finance bureaus, Pass-through-accounts)

Transport bureau of Pingxiang municipality

in coordination with Luxi and Shangli counties and

Anyuan District

Jiangxi Pingxiang Integrated Rural-Urban Infrastructure Development


427. Major risks and mitigating measures are detailed in the risk assessment and risk management plan (Appendix H of this Report) and summarized in Table 15-2. The integrated benefits and impacts are expected to outweigh the costs.

Table 15-2 Summary of Risks and Mitigating Measures

Risks Mitigating Measures

Lack of knowledge about

ADB financial

management policies and

procedures

Training for PMO and PIU staff on ADB payment policy, accounting, and

financial reporting requirements will be provided prior to loan effectiveness; a

system of written financial policies and manuals to guide PMO and PIU staff

will be developed.

The improved rivers

under the project

deteriorate due to illegal

solid waste dumping

Waste bins are included as part of the investment; local governments will

ensure solid waste is properly collected in rural and urban areas and

transported to adequate transfer and final disposal sites. Community-based

environment supervision and roads safety education teams will work with

local residents to develop and implement community environment

management rules that promote behavior change.

Buildings and

communities fail to

connect to the project

sanitary sewers

Sewer connections will be installed by building and community owners with

legal title, in accordance with the Urban Wastewater Discharge Permit

Management Method issued by the Ministry of Construction (Order No.

152)—an assurance is included in the project agreement. All other

households and communities will be connected under the project and

financed by the ADB loan.

Failure to regularly

inspect and maintain the

road

Through a loan covenant, ADB will require the county traffic bureaus to

complete periodic written inspection reports and submit these to ADB as part

of loan reporting.

ADB = Asian Development Bank, PIU = project implementation unit, PMO = project management office.


===end of report===


AECOM Asia Company Ltd A-1 Asian Development Bank

APPENDIX A: DESIGN AND MONITORING FRAMEWORK1

Project Results Chain

Performance Indicators with Targets and Baselines

Data Sources and Reporting Mechanisms Risks

Outcome By 2020 Living conditions of rural and urban residents using integrated infrastructure in Pingxiang improved

a. Land protected from 20-year floods (occurring once in 20 years) increased to 2,860 ha, benefitting 308,000 people (2013 baseline: 630 ha)

b. New public river greenways

benefitting about 400,000 residents in four subcenters (2013 baseline: 0)

c. Wastewater collection and

treatment in counties and district increased to 80.0%, benefitting a total of about 175,000 residents (2013 baseline: 75.8%, N.A.)

d. Travel on the new rural roads

reaches 6,900 pcu/day, benefitting 247,000 rural residents (2013 baseline: 0)

a. Annual reports by PMG and local government agencies

b. PMG and local

government statistical yearbooks

c. Project completion

report and progress reports

d. Social and

environmental monitoring reports

New pollution sources and pollutants increase surface water pollution

Outputs 1. Flood risk

management and river rehabilitation improved and integrated

By 2020 1a. 71 km of river works, widening

and sediment removal; construction of 128 km of flood protection embankments, revetments and toe zone protection; construction of 35 small adaptable weirs for farmland irrigation; revegetation of 90 ha of riparian landscape; rehabilitation of 46 ha of wetland; and construction and/or reconstruction of 3 pedestrian or local bridges completed (2013 baseline: 0)

1b. 3,300 jobs provided during

project construction and 90 jobs during operations, of which 30% are first made available for women (output 1) (2013 baseline: 0)

1a.Annual reports by

PMG and local government agencies, project completion report and progress reports, and site inspection reports

1b.Social and


Unexpected labor and materials price escalations Implementation of land acquisition and resettlement plans faces unforeseen delays and cost escalation

1 This is the final DMF based on ADB’s Report and Recommendations of the President, as approved by the ADB Board of Directors on 21 September 2015.

Impacts the project is aligned with: Integrated and green urban–rural development in Pingxiang municipality and Jiangxi Province improved (PRC National New-Type Urbanization Plan, 2014–2020) Socioeconomic wellbeing of residents in cities, townships, and villages in Pingxiang municipality and Jiangxi Province improved (project derived)






2. Wastewater collection and treatment improved

By 2020 2a. Lianhua County sewer installed

(length of about 52 km for sewer mains and 32 km for secondary sewer pipes) (2013 baseline: 0)

2b. WWTP and pump station in Xuanfeng Town (Luxi County) constructed (5,000 m3/d capacity); sewer pipes in Xuanfeng and Yinhe towns installed (total length of 25.7 km) (2013 baseline: 0)

2c. WWTP and pump station in Tongmu Town (Shangli County) constructed (2,500 m3/d capacity); sewer pipes installed (total length of 20.3 km) (2013 baseline: 0)

2d. Xiangdong District new sewer pipes installed (total length of 54.5 km) (2013 baseline: 0)

2a.Annual reports by

agencies of PMG and local governments concerned

2b.Project completion


2c.Site inspection reports 2d. ADB mission MOUs

3. Rural–urban linkages improved

By 2020 3. 44-km class II rural–urban road

constructed and operational, with 6 bridges (total length of about 953 m), and 1 tunnel (length of about 482 m) (2013 baseline: 0)

Annual reports by PMG and local government agencies Project completion report and progress reports

4. Inclusive capacity in project planning and management and in urban–rural integration developed

By 2019 4a. Project management office and

four project implementation units with improved scores in financial and procurement management assessments (2013 baseline: N.A.)

4b. At least 5 training programs with

at least 50 participants and 5 study tours with at least 50 participants carried out (2013 baseline: 0)

4c. At least 5 awareness-raising

campaigns and stakeholder participation and training sessions —on flood risk, environment, water pollution reduction, improved farming, sanitation, road safety, and policy dialogue on wastewater tariffs—implemented, with up to 50% of participants women (2013 baseline: 0)

4d. Community-based environment

supervision and road safety

4a.Project completion


4b.ADB mission MOUs 4c.Social and


4d.Social and

environmental






education teams active in at least 12 communities, with 30% of participants women (2013 baseline: 0)

monitoring reports

Key Activities with Milestones Output 1. Flood risk management and river rehabilitation improved and integrated 1.1 Complete detailed design and bidding documents by Q3 2016 1.2 Award contracts by Q4 2016 and Q4 2017 1.3 Complete land acquisition and resettlement plan implementation by Q4 2016 and Q4 2017 1.4 Complete civil works including river dredging; sewer pipe relocation, where applicable; interceptor

pipe installation, where applicable; toe zone protection; embankment and pathway construction; and landscaping and planting of riparian and wetlands vegetation by Q1 2020

Output 2. Wastewater collection and treatment improved 2.1 Complete detailed design and bidding documents by Q3 2016 2.2 Award contracts by Q4 2016 2.3 Complete land acquisition and resettlement plan implementation by Q4 2017 2.4 Complete civil works for sewer pipe installation by Q4 2019 2.5 Complete civil works and equipment installation commissioning of WWTPs by Q4 2019 Output 3. Rural–urban linkages improved 3.1 Complete detailed design and bidding documents by Q3 2016 3.2 Award contracts by Q4 2016 3.3 Complete land acquisition and resettlement plan implementation by Q4 2017 3.4 Complete civil works for road construction by Q4 2019 Output 4. Inclusive capacity in project planning and management and in urban–rural integration

developed 4.1 Recruit loan implementation consultant by Q4 2015 4.2 Recruit external resettlement monitoring and evaluation consultant by Q2 2016 4.3 Establish project performance management system, project management support, and monitoring

and evaluation and quarterly progress reporting from Q1 2016 to Q4 2020 4.4 Support implementation of land acquisition and resettlement plan and submit semiannual reports from

Q1 2016 to Q2 2020 4.5 Support implementation of environmental management plan, social development action plan, and

gender action plan and submit semiannual monitoring reports from Q1 2016 to Q4 2020 4.6 Carry out training programs, policy dialogue, study tours, and awareness-raising campaigns from Q1

2016 to Q4 2020 4.7 Submit project completion report by Q2 2021

Inputs ADB: $150,000,000 Government: $211,240,000

Assumptions for Partner Financing Not applicable.

ADB = Asian Development Bank, PRC = People’s Republic of China, ha = hectare, km = kilometer, m = meter, m3/day = cubic meter per day, MOU = memorandum of understanding, N.A. = not applicable, pcu/day = passenger car unit per day, PMG = Pingxiang municipal government, Q = quarter, WWTP = wastewater treatment plant. Source: Asian Development Bank.


AECOM Asia Company Ltd B-1 Asian Development Bank

APPENDIX B: INSTITUTIONAL AND CAPACITY BUILDING NEEDS

1 Introduction

1. This appendix describes and analyses the institutional set up for the Jiangxi Pingxiang Integrated Rural-Urban Infrastructure Development Project (the Project) to be implemented, under the direction of the Pingxiang Municipal Government (PMG). The objectives of the analysis are to ensure that the project is sound in terms of institutional arrangements and the capacity of relevant agencies is adequate to provide effective implementation and financial management during the construction stage and sustainable operations and maintenance (O&M) of the project facilities.

2. The main institutional and capacity building work undertaken in the PPTA to date has been as follows:

Reviewed institutional arrangements and organizational structure of PMG, PMO, and the IAs and assessed their capacities in infrastructure projects development, implementation, O&M, financial management and procurement, transparency and governance; identified gaps; and assess governance risk.

Assessed capacity development needs for PMG, PMO, IAs, and other concerned agencies, and designed a comprehensive capacity development program for relevant project components.

Proposed organizational structure improvements to facilitate efficient and effective project implementation.

Proposed governance risk mitigation measures and undertake steps to implement those related to capacity development.

Completed financial management assessment.

Completed the procurement capacity analysis and assessment;

Conducted workshops for procurement, financial management, PPMS, etc.

2 PRC Sector Level Analysis

2.1 National Arrangements for Urban & Rural Environmental Management

3. A consolidated urban and rural environmental management system operates according to the scope of duties of the ministries as determined by the State Council.

4. The Ministry of Housing, Rural and Urban Development (MOHURD) has regulatory responsibilities for urban management and public utility services, including, water supply, urban drainage, environmental sanitation, district heating and wastewater treatment but most of these responsibilities are delegated to local governments at various levels. MOHURD is only directly responsible for developing urban development strategies, medium and long-term development planning, and providing guidance for urban management and the provision of the related public utility services.

5. The Ministry of Water Resources (MWR) is the leading ministry for water resource management and has overall responsibilities for water resource development and utilization, water resource protection, water amount allocation and coordination, water saving, soil and water conservation, drought relief and flood control, river pollution control etc. MWR also provides guidance for water supply, wastewater, and water conservancy in rural areas. In general, MWR takes the lead for the management of important rivers (like Yellow River, Yangtze River, Liao River, etc) and lakes and delegate the responsibilities of medium and small rivers and lakes to local governments at all levels.



6. Ministry of Transport has regulatory responsibilities for transport, including highways/roads, waterways, but similar to MOHURD, most of these responsibilities are delegated to local governments at various levels. MOT is only directly responsible for developing transport development strategies, medium and long-term development planning, making policies and providing guidance for transport investment, management, and supervising transport safety, construction quality, etc. MOT also undertakes operation and maintenance of key facilities.

7. The National Development and Reform Commission (NDRC), as a multi-functional administration department of the State Council, is responsible for overall coordination of economic policy implementation, including energy saving and resource utilization. NDRC has two responsibilities that directly impact on the Project. Firstly, all major capital investment projects must be approved by NDRC (or by local DRCs in accordance with procedures stipulated by NDRC), which examines project feasibility, technical viability, and financing before giving project approval. The second very important role of NDRC is in economic regulation and price management. Basically NDRC acts as the senior national pricing regulator, although in practice pricing decisions for local urban services are delegated to the Provincial or Municipal level and NDRC restricts itself to major pricing decisions of national significance and providing regulatory guidelines for local governments to follow with respect to their pricing decisions, and in respect of preferential taxation policies to promote efficient resource utilization.

8. The Ministry of Finance, along with NDRC and MOHURD and MOT, plays a key role in the establishment of financing and cost recovery strategies for urban management.

9. The Ministry of Environmental Protection (MOEP) supervises water quality of industrial discharge and municipal sewage discharge.

10. It can be seen from this regulatory framework that several agencies at national level get involved in urban development and environmental improvements. Figure 1 indicates the relationships between the State level agencies with key responsibilities relating to urban development and the provision of public services to urban residents.

2.2 Interface between National and Local Governments

11. As determined by the PRC Constitution, the government is divided into central and local levels, with the relevant Ministry at the national level supervising the various departments and functions performed at local level. These supervisory arrangements have traditionally led to the establishment of lower level agencies in local governments that mirror and report to respective higher level central government agencies. For urban and rural management the relevant levels of Government are: Provinces (including Autonomous Regions such as Xinjiang, and the four Directly-managed Municipalities of Beijing, Shanghai, Tianjin and Chongqing); Municipalities (or Prefectures); Urban Districts, counties and county level cities, and the lowest level is town or township.

12. At the provincial/autonomous regional level, such as Jiangxi Province where Pingxiang Municipality is under its jurisdiction, government structures closely replicate the national level structure, and the duties of relevant departments concerned with the urban environment are also similar to those of their national-level counterparts. At city level the allocation of responsibilities between the different levels of government depends on the size of the city, with smaller cities and towns having simpler, more rationalized arrangements than in medium sized or larger cities. It is at the city or county level that almost all urban services and infrastructure provision is planned and implemented. Figure 2 illustrates the relationships between the different levels of government and, distinguishes between the line of direct accountability and functional supervision.



Figure 1 :Overview of State Level Government with Emphasis on Urban Management

The State Council

Premier

Special Administrative Regions (Hong Kong and Macau) Vice Premier State Council

Conference

NDRC MWR MOEP MOHURD

MOF MOT Other Ministries

Autonomous Regions

City Governments (at all levels)

Provincial Governments


Directly Administrativ

e Governments




Figure 2: Overview of PRC Government Organization and Relationships

PRC State Government

Ministries and State Level Agencies

Provincial Level Governments

Provincial Level Bureaus and Agencies

Municipal Level Governments

Municipal Level Bureaus and Agencies

District and County Level

Governments

District and County Level

Bureaus

KEY

Functional Supervision and Reporting

Line Accountability



2.3 National Arrangements for Flood Control

13. One the main functions of Ministry of Water Resource (MWR) is responsible for prevention of flood and drought disasters. MWR undertakes the daily management of the State Flood Control and Drought Relief Headquarter, organizes, coordinates, supervises, and directs the work of flood control and drought relief, implements dispatches for major rivers and lakes and important water works for flood control and drought relief purposes and allocate water for emergency purpose, develops and implements national emergency response plan for flood control and drought relief.

14. The State Flood Control and Drought Relief Headquarters (SFCDRH), is responsible for emergency response (flood management and response) and can assume operational management of flood control works during flood season. SFCDRH is headed by vice Premier with members of ministries. During the flood season, whenever hydrological conditions trigger nominated alert levels, the SFCDRH assumes responsibility and command for operational decisions. Emergency response for flood management and response and rescue operations during floods are organized by SFCDRH, with participation from many other Ministries.

15. MWR established River Basin Commissions for seven major river basins, namely the Yellow River, the Yangtze River, the Hai river basin, the Huai river basin, the Pearl River, the SongLiao river basin and Taihu Lake basin. The River Basin Commissions are functional units of the MWR, and have responsibility to formulate plans for water resources management and flood control in their respective river basins. River Basin Commissions, through their own Flood Control Headquarters, also assume operational decisions for management of flood control works on behalf of the central government when flood alerts require.

16. Flood Control and Drought Relief Headquarters also exist at provincial and local levels of government, where they are responsible for flood emergency response within their jurisdiction. In principle, local governments are responsible for operation and maintenance of works within their administrative boundaries; provincial level governments are responsible for operation and maintenance of works crossing more than one local government area; and operation and maintenance of works that span more than one province are undertaken by central government.

Figure 3 Institutional Arrangements For Flood Control in the PRC

Central Government (Executive Agency)The Sate

Council

Flood Control and Drought Relief Headquarters at River

Basin Level

Flood Control and Drought Relief Headquarter at

province level

State Flood Control and Drought Relief Headquarter (SFCDRH)

Flood Control and Drought Relief Headquarter at city

level

Flood Control and Drought Relief Headquarter at

county level



3 Institutional Arrangements in Pingxiang

3.1 Overview

17. Project implementation will involve numerous government agencies from the municipality and districts. As the Executing Agency of the Project, Pingxiang Municipal Government (PMG) established (i) Pingxiang ADB Project Leading Group; and (ii) Pingxiang ADB Project Management Office (PMO) which is situated at Pingxiang Urban Construction Investment and Development Corporation (PUCIDC).

18. The overall institutional arrangements in Pingxiang, as relevant to the Project preparations and implementation are shown in Figure 4 below.

Figure 4: Overall institutional arrangements in Pingxiang

19. Executing Agency (EA): Pingxiang Municipal Government (PMG) is the Executing Agency (EA) responsible for the preparation and implementation of the entire Project.

20. Project Leading Group (PLG) was established at Pingxiang Municipal level in 2011 (Pingfuban [2011] No. 55). The main responsibilities of the Municipal Level PLG are to take the leadership, coordinate and supervise the implementation of the ADB Project, and deal with project issues if needed. The following Table lists the members of the PLG.

21. Implementation Agencies (IAs): district/county governments of Xiangdong, Lianhua, Luxi and Shangli via the County Finance Bureau will assume responsibility for ADB loan and also arrange local counterpart funding and give assurances on adequate O&M budgets being available. Xiangdong District and Lianhua, Luxi, and Shangli counties are the project implementation agencies.



Table 1: Project Leading Group

Name Agency

Group Leader

Qi Yuanhuang Executive Deputy Mayor, PMG

Deputy Group Leaders

Yi Lixin Vice Secretary of General, PMG General Manager,

Group Members

Yu Pingjiang Director, Finance Office of PMG

Wang Yong Deputy Director, PDRC

Huang Xianghua Leader, Discipline Group, PFB

Zhong Xingyong Deputy Director, Pingxiang Construction Bureau

Huang Jianhui Deputy Director, Pingxiang House Management Bureau

He Bogui Deputy Director, Pingxiang Land Resource Bureau

Liu Min Deputy Director, Pingxiang Planning Bureau

He Deqing Director, PUCIDC

22. Project Management Office (PMO) has been established to account to PLG, which is situated at Pingxiang Urban Construction Investment and Development Corporation (PUCIDC). Responsibilities of PMO include:

Implementing day-to-day activities of the project and provide coordination support for preparation and implementation of project components;

Reporting the project implementation progress and compliance monitoring to ADB;

Submitting annual audit reports and financial statements of PMG, and IA to ADB;

Procuring project management consulting services;

Engaging external environment, and resettlement and social monitoring agencies;

Submitting withdrawal applications to ADB;

Submitting bid documents, bid evaluation reports and other necessary documentation to ADB for necessary approval; and

Implementing the capacity development component of the project.

23. Table 2 lists the members of Pingxiang PMO.

Table 2: Pingxiang PMO


Director Tang Liping Pingxiang Municipal Government/Vice Secretary of General

Executive Deputy Director

Huang Jian PUCIDC/ Deputy Director

Deputy Directors

Wang Yong Pingxiang Municipal DRC/Deputy Director

Chen Shuixiang

Pingxiang Municipal Finance Bureau/Deputy Director

Li Xiaoyong Pingxiang Municipal Transport Bureau/ Deputy Director

Members Liao Huihui Pingxiang Municipal Government




Qiu Weiping Pingxiang Municipal Development and Reform Commission/ Section Director

Xiao Xixi Pingxiang Municipal Finance Bureau/ Staff Member

Zhou Kan PUCIDC/Staff Member

Wan Lu PUCIDC/Staff Member

Wang Hong PUCIDC/Staff Member

Source: Pingxiang PMO; PUCIDC = Pingxiang Urban Construction Investment and Development Corporation

24. Ms. Tang Liping is the Director (Part time) of PMO and is also Vice Secretary of General of PMG. Mr. Huang Jian is the Executive Deputy Director, and is also deputy director of PUCIDC. Additionally, there are another three directors are seconded from PDRC, PFB and Pingxiang Transport Bureau on part time basis.

PMO staff sit in their department of PUCIDC and worked on ADB project on part time basis. There was no clear institutional setup for PMO. During ADB project implementation stage, more clearly defined division setup and responsibility description will be needed. The following institutional setup for PMO and responsibilities of each office are proposed and accepted by PMO.

Figure 3: Organization and Staffing of PMO

25. Under PMO, three offices are set up, namely Finance Office, Engineering and Procurement Office, and Comprehensive Office.

26. Key roles of each department are as follows:

27. Finance Office is responsible for guidance and supervision of withdraw application and disbursement, establishment of financial management and accounting system and internal audit system; guidance for IAs to prepare financial statement, assistance for annual financial audit; etc.

28. Engineering and Procurement Office is responsible for collection of data and information relevant to the Project, variation order approval, and supervision of contract management, procurement plan update, coordination with tendering company and consulting company, etc. Some members of this Department should be seconded from the implementation agencies.

Director: Tang LipingPingxiang Municipal Gov.

Finance Office Engineering and Procurement Office

Deputy DirectorsHuang Jian (Deputy Director of PUCIDC)

Wang Yong (PDRC)Chen Shuixiang (PFB)

Li Xiaoyong (PTB)

ComprehensiveOffice

2 Staff

3 Staff (Staff from PIUs will participate in procurement)

3 Staff or More if Needed(including one Environmental Specialist and Resettlement

Specialist)



29. Comprehensive Office is responsible for daily administration of PMO and development of project management methods, coordination of land acquisition and resettlement, environmental monitoring, etc. Additional experts will be hired if needed.

3.2 Implementation Arrangement at Project District/Counties

30. County Project Leading Groups (CPLG) were also established for each project district/county. The main responsibilities of the CPLGs are to: take leadership, coordinate and supervise the implementation of the subprojects of the county, and deal with project issues if needed. The following table lists the members of the leading groups.

Table 3: Details of CPLG Members

Lianhua County Project Leading Group

Leader Liu Hailin County Committee, Executive Vice Mayor of County

Vice Leader He Tianhua Vice Mayor of County

Xu Shengfeng Vice Mayor of County

Member

Zhu Liang Deputy Director of the County Government Office

He Hong Director of the County Water Authority

Li Siguang Deputy Director of the County Finance Bureau、

General Manager of National Investment Company

Zhu Zhiyuan Deputy Director of the County Commission of Reform and Development

Liu Huihao Deputy Director of the County Land Resources Bureau

He Haiyuan Deputy Director of the County Housing Construction Bureau

Guo Linhui Deputy Director of the County Supervision Bureau

Liu Jianqing Deputy Director of the County Department of Transportation

Tang Tao Deputy Director of the County Environmental Protection Agency

Zhu Qian Deputy Director of the County Farm Bureau

Li Ming Deputy Director of the County Forestry Bureau

Guo Jianchun Director of the County State-owned Assets Management Center

Liu Xinrong Party committee member of the Qinting Town Executive Deputy Mayor

Chen Yanfei Party committee member of the Shengfang Town Executive Deputy Mayor

Li Sishu Party committee member of the Liangfang Town Executive Deputy Mayor

Zhu Jian Party committee member of the Hetang Town Executive Deputy Mayor

Luxi County Project Leading Group

Leader Shuiqing Li Executive Vice Mayor of County

Vice Leader Liu Zongping Vice Mayor of County

Member

Zhang Mensheng

Deputy Director of the County Development and Reform Commission

Wang Bin Deputy Director of the County Planning Board



Luxi County Project Leading Group

Liu Zhongyuan Deputy Director of the County Finance Bureau

Kong Xiangzao Deputy Director of the County Land Resources Bureau

Yan Chunhua Deputy Director of the County Forestry Bureau

Yi Lianchen Deputy Director of the County Water Authority

Shi Chugao Deputy Director of the County Supervision Bureau

Zheng Dong Deputy Director of the County Environmental Protection Agency

Tan Ruinian Deputy Director of the County Authority

Peng Hongtao Executive Deputy Mayor of Luxi Town

Fu Jiachuan Executive Deputy Mayor of Shangbu Town

Po Guanghu Director of Justice Bureau of the Xuanfeng Town

Wang Qisheng Deputy Mayor of Nankeng Town

Ouyang Fengbo Executive Deputy Mayor of the Yinhe Town

Peng Cong Maintenance of stability Staff of Changfeng Town

He Yong Executive Deputy Mayor of Xinquan Town

Wu Sizhong Executive Deputy Mayor of Zhangjiafang Town

Zeng Hongliang Director of Justice Bureau of the Yuannan Town

Shangli County Project Leading Group

Leader Yi Gang Vice Mayor of County

Executive Deputy Leader

Li Maoqing County Vice Chairman, Manager of Jiahe Investment Company

Deputy Leader

Xiao Zhipeng Deputy director of the county Office

Zhong Qiuping Assistant Manager of Jiahe Investment Company

Member

Zhou Jianbin Deputy Director of the County Supervision Bureau

Liu Bo Deputy Director of the County Development and Reform Commission

Liu Xing Deputy Director of the County Finance Bureau

Liu Qi Deputy Director of the County Land Resources Bureau

Wen Xin Deputy Director of the County Housing Construction Bureau

Chen Xinhong Deputy Director of the County Planning Board

He Gangwen Deputy Director of the County Water Authority

Du Guifu Senior Staff of the County Environmental Protection Agency

Sun Tailin Center Director of the County solid waste sanitary landfill treatment

Zeng Huilin Deputy Senior Staff of the County Farmers Office

Xiangdong District Project Leading Group

Leader Wang Zhicai Deputy Mayor of District

Member Huang Gaosheng

Deputy Director of the District Development and Reform Commission



Xiangdong District Project Leading Group

Liu Chuanhuan Deputy Director of the District Finance Bureau

Zhang Huanqing Deputy Director of the District Housing Construction Bureau

Lai Qiang Party member of the District Housing Construction Bureau

Qiu Xinke Deputy Director of the District Environmental Protection Agency

Ding Yonghua District Director of sanitation

Wang Sheng District water company manager

Wang Sifeng Officer of the District Water authority

31. Xiangdong District and Luxi County also established county/district project management offices to coordinate internal issues (land acquisition, resettlement, inter-department issues, etc.), supervise implementation of sub-projects, and review and approval of withdrawal applications. The county/district PMOs will duplicate responsibility of PMO at county level and are mainly responsible for coordination and supervision of the project implementation on behalf CPLG.

32. Project implementation units (PIUs) are established under the sector administrative authorities and led by a vice mayor of the county with supports from relevant agencies.

33. Project Implementation Units (PIU) will be established for each project county/district, as well as the road component (Table 4). For Lianhua, Luxi, and Shangli, the PIU will be established under the sector administrative authorities and led by the director of the authority or a vice mayor of the county .

Table 4: Details of PIUs

Counties Sub-components Leading Agencies of PIUs

Lianhua

Lianjiang and Baima Rivers Integrated Flood Risk Management Lianhua Water Affair Bureau Wastewater Sewer Pipe Network

Luxi

Yuan, Xinhua and Tankou Rivers Integrated Flood Risk Management

Luxi Water Affair Bureau

Wastewater: WWTP, Sewers, Pump Station

Luxi Xuanfeng Town (including Luxi Housing, Urban & Rural Development Bureau)

Shangli

Lishui and Jinshan Rivers Integrated Flood Risk Management Shangli Water Affair Bureau

Wastewater: WWTP

Xiangdong

Pingshui River Integrated Flood Risk Management Xiangdong Water Affair Bureau


Pingxiang Rural–Urban Transport Pingxiang Transport Bureau

34. As for the Rural-Urban Transport subproject, PMG decided to set up the PIU at the municipal level (Pingxiang Transport Bureau) with participation and supports of transport bureaus of Luxi County and Shangli County.

3.3 Water Sector Management Arrangements

Management of the water sector of Pingxiang is different from other places in the PRC where the water sector is managed by different agencies. Usually water supply and wastewater in PRC is managed by the construction authority and water resources by the water resource bureau. However, only one agency, the Pingxiang Water Affairs Bureau (PWAB) is responsible for water management and protection in Pingxiang. The main responsibilities of the PWAB include:



Unified management water resources of Pingxiang (water in air, ground water and surface water); preparation and supervision of water supply plan, water allocation; unified management of water supply and drainage; water supply, wastewater treatment and reuse; implementation of water licensing system and water resource tariff system;

Water conservation;

Water resource protection;

Enforcement of water laws and regulations;

Development of economic adjustment measures of water sector;

Organization and guidance of management and protection for water resource infrastructure, water bodies and the shorelines; sector management for water related construction projects; safety supervision;

Guidance of rural water infrastructure projects and hydropower generation;

Prevention of soil and water erosion;

Daily management of flood control and drought relief.

35. Following this arrangement, Shangli, Xiangdong and Lianhua have local WABs at the district/county level. In Luxi, however, the wastewater and water supply sectors are managed by the Luxi Housing, Urban & Rural Development Bureau, while water resources (rivers, reservoirs) are managed by the Luxi WAB. Luxi expressed that they will integrate the management water sector in Luxi WAB in the near future.

3.4 Operations and Maintenance Arrangement for Project Components

3.4.1 WWTPs and sewer networks

36. Currently, all districts and county-towns have urban water supply and wastewater treatment systems, which involve public-private-partnership (PPP) arrangements

Table 5: Pingxiang Water and Wastewater Companies

Administrative Unit Water Supply Wastewater

Anyuan District [urban core of Pingxiang]

China Water Group

Jiangxi Hongcheng Waterworks Co, Ltd. with headquarters in Nanchang

Lianhua County Jiangxi Provincial Water Conservancy Investment Group

Luxi County China Water Group

Shangli County China Water Group

Xiangdong District Jiangxi Provincial Water Conservancy Investment Group

37. In July 2011, the China Water Affairs Group Limited (CWG) acquired 51% of the tap water production and supply in Pingxiang Urban Area. Now CWG has majority ownership in the water supply companies serving Pingxiang urban areas, Luxi County, and Shangli County. Note each of the three local governments have a separate local water supply company, each with an agreement with the private companies. The terms of agreement are probably different for each local government. The Jiangxi Provincial Water Conservancy Investment Group Corp 2 , founded in 2008, signed an agreement with local governments for 60% of the water supply companies serving Lianhua County and Xiangdong District.

38. Jiangxi Hongcheng Waterworks Co, Ltd.3 with headquarters in Nanchang, the capital of Jiangxi Province, is currently responsible for all wastewater treatment in Pingxiang, under a TOT (transfer-

2 http://www.jxsltz.com/Article/jxstgyjt/gyjtgsjj/201205/465.html 3 http://www.jxhcsy.com/mainpages/default.aspx

http://www.jxhcsy.com/mainpages/default.aspx



operate-transfer) model. The company operates all WWTPs under a 30-year concession agreement. According to local officials, cooperation with Hongcheng Waterworks on wastewater services was a requirement by the provincial government for all county-towns throughout Jiangxi Province.

Wastewater sewer pipes in county-towns are installed and operated by local governments, with different responsible entities:

Lianhua: sewers are managed by Lianhua WAB.

Luxi: sewers are managed by Luxi Housing, Urban & Rural Development Bureau.

Shangli: WWTP and sewer mains are managed by Shangli WAB and sewage collection pipes are managed by Shangli Housing, Urban & Rural Development Bureau.

Xiangdong District: sewer mains are managed by Xiangdong WAB and sewage collection pipes are managed by Xiangdong Housing, Urban & Rural Development Bureau.

39. No special labor team has been established within the counties for daily supervision and O&M of sewers. Small repairs or maintenances of pipes are on on-call basis and large repairs or maintenances usually are outsourced.

40. Currently private companies are not involved with water supply and wastewater services in rural townships and villages.

41. In rural areas of Pingxiang, only county-towns have wastewater services. The WWTPs constructed under this Project will be the first ones in towns of the county. Currently, no arrangement for O&M of WWTPs and sewers for towns exist.

3.4.2 River works

It is clearly specified that management and O&M of river works is the responsibility of county/district water affairs bureaus (WAB), which as administrative agencies provide guidance, support and organize large-scale maintenance activities. Daily inspection of river embankments is decentralized to the local level governments (town/township or even village level). The following divisions under WAB of each county take the administrative responsibilities:

(1) Lianhua WAB: River Course Management Office (2) Luxi WAB: River Course and Embankment Management Station, (3) Shangli WAB: River Course Management Station; 42. Xiangdong WAB: River Course Management Station.

43. County governments can apply for financing by the Ministry of Water Resources to support the O&M of river embankments. Similar to O&M of sewers, small repairs or maintenances of river embankment are on on-call basis and the required fund is provided by county fiscal budget. Large repairs or maintenance activities usually are contracted out and special funds may be provided by the county or other sources via application.

44. The management of the river environment and floodplains also involves many other government sectors including the environmental protection bureaus (responsible for controlling pollution sources to the rivers) and planning bureaus (for green space planning). As promoted by this Project, agricultural bureaus should also be involved to reduce non-point source pollution from farmland and to facilitate training on flood-resilient enhanced crop growing.

3.4.3 Roads

45. About 4.6km road in Anyuan District and 25.2km road in Shangli County under this Project is classified as Provincial level road and will be maintained by the Pingxiang Highway Management Bureau (PHMB). O&M for this portion will be financed by Jiangxi Provincial Government. The portion of the road within Luxi County (14.2km) is classified as county level road and Luxi Rural Road Maintenance Ltd. Company, which is 100% state owned company under Luxi Transport Bureau, will be responsible for its daily maintenance. The fund for daily operation at about 3000yuan/km/year will be provided by Luxi county government. As for large-scale repair and maintenance work, the county government will apply for funding from relevant departments of PMG or Jiangxi Province.



4 Analysis of Proposed Arrangements

4.1 Analysis of Overall Arrangements

46. The proposed project implementation arrangements except PMO setting are similar to those adopted by most ADB projects in the PRC and are therefore well proven. They are compatible with the hierarchical structure of government in the PRC and are similar to those used for the earlier ADB financed urban development projects in Jiangxi Province.

47. PMO sitting in a state owned company (PUCIDC) is special arrangement in Pingxiang.

Although PMO plays coordination and management roles and doesn’t have ownership on any

investment project, it, on behalf of PMG, can use the resources of PUCIDC, such as experienced engineers, financial staff, facilities, etc to support the implement of the Project.



Figure 6: Overall Implementation Arrangements of the Project

4.1.1 Analysis of Project Leading Group and County Project Leading Groups

48. Projects can encounter delays and implementation delays for a number of reasons. Strong and

effective institutional arrangements for project implementation can help reduce the risk of delay –

especially if the institutional arrangements facilitate the resolution of implementation issues. Whilst personalities and the leadership ability of key officials will be very important (and is not easy to analyze in an objective way) the political status and composition of the project management organization has also been shown to be a critical factor when major implementation difficulties arise.

49. As stated in Section 3, a project leading group (PLG) has been established by the EA. However, this was done three years ago and the PLG may no longer meet the current needs of this

Represented by

PRC State

Government

Jiangxi Provincial

Government

Advice and Monitoring Consulting Services RP Monitoring Institute Env Monitoring Institute Auditing Bureau

Implementation Support from Local Design Institutes, Construction Supervision Companies,

Resettlement Agencies and others as required.

Asian Development

Bank

Civil Work Contractors, Materials & Equipment

Suppliers

Pingxiang Municipal Government (EA)

IAs

Project Leading Group

PUCIDC/PMO

Development Partnership

Xiangdong District Government Lianhua County Government

Luxi County Government Shangli County Government

PIUs in Xiangdong, Lianhua,

Luxi and Shangli Counties



Project. Some key agencies and key members are absent, for example, Pingxiang Transport Bureau, Pingxiang Water Resource Bureau, Mayors of the project district/counties, etc. It should be emphasized that the political status of the PLG and broad representation by senior leaders are very important for resolving inter-departmental and cross functional issues and for ensuring that all key government stakeholders are involved. It is suggested that the EA strengthen the PLG with participation of key agencies and members.

50. County leading group has been established by the IAs with participation of all key government agencies of the county. This arrangement helps to resolve inter-departmental issues within the county.

4.1.2 Analysis of PMO

51. PMO directors are all permanent staff of various government departments such as PFB, PDRC, Pingxiang Transport Bureau, and PUCIDC, who are seconded to the PMO on part-time basis. And the key role of these directors is to Involvement of these departments is critical to project preparation and implementation. PMO staff are all permanent staff of PUCIDC and on part time basis as well. They have to deal with other projects under PUCIDC and the work load is quite heavy. None of the staff have been involved in foreign funded projects, but they have strong capacity for implementing domestic funded projects for infrastructure construction. Moreover, the lack of experience in ADB and other foreign funded projects can be mitigated through the use of suitably experienced tendering companies and the provision of consulting services to support project implementation. PMO is now under-staffed and they will recruit new staff from the market or from IAs.

52. There is no working staff in the PMO from the transport sector. It is suggested to transfer a working staff from Pingxiang Transport Bureau to PMO to take the lead on coordinating the road project.

53. Another aspect of this arrangement is that all procurement activities of this Project will be centrally organized and coordinated by the PMO rather than by individual IAs. PMO will lead and be responsible for all procurement activities, including designing contract packages, preparing procurement documents, calling for bid, implementing bid evaluation and awarding, and managing the contracts during implementation. IAs will participate in procurement either by their seconded staff to PMO or by provision of expertise during the procurement.

54. In addition, land acquisition and resettlement of the Project will also be coordinated by PMO, which can make best use of the leadership of the PLG because issues related to land acquisition and resettlement are always complicated and need more involvement of senior government officers.

55. PMO should be staffed with an environmental specialist to supervise and coordinate implementation of EMP.

4.1.3 Analysis of IAs and PIUs

56. PIUs will be established under sector administrative authorities of the district/counties with supports from other relevant agencies. This is their current practice for government funded projects. The project district/county government issued the document to set up PIUs and specified that: 1) this PIU will be a temporary legal entity to be responsible for project construction and coordination; 2) a vice mayor of the county or director of the leading agency will be the leader of the PIU; 3) which bureau will be the leading agency; and 4) staffing. Most staff of PIUs are permanent staff from government agencies. And depending on complexity of the project, PIUs may be staffed with 10 members or more with key members from the leading bureau. PIU consists of engineers, financial staff, procurement staff, resettlement specialist, etc., etc. Additional staff may be hired from market if PIUs are under staffed. However, it noticed that no environmental specialist is staffed in the PIUs. It would be good assign a special staff in the PIUs who has experience of environmental protection and will coordination implementation of EMP and work with external environmental monitoring agency on environmental monitoring.

57. The IAs have extensive past experience in the construction of urban infrastructure, although mostly domestically funded. However, risks potentially created by a lack of capacity or experience in specific technical areas still exist and can be mitigated by the appointment of suitably experienced



Design Institutes (DI) and construction supervision companies. This will be important. Similarly, the lack of experience in ADB and other foreign funded projects can be mitigated through the use of suitably experienced tendering companies and the provision of consulting services to support project implementation.

58. Therefore, conceptually at least, the proposed implementation arrangements are considered suitable and make best use of the existing local expertise.

4.2 Analysis of O&M Arrangements

4.2.1 Rivers

59. Daily inspection of river embankment is decentralized to local level governments (towns/townships or even village level). No significant issue is identified for the current arrangement. It is important to link the inspection arrangement with flood control plan. Capacity building for grass-roots staff should be emphasized, such as how to identify signs of failures and reporting procedures to relevant agencies. The Pingxiang WAB is currently developing standardized Methods for River Course Management and the draft is ready for consultation.

4.2.2 Roads

O&M arrangement of roads is clear. Pingxiang Highway Management Bureau (PHMB) has been assigned the duty to maintain state level roads, provincial level roads, and some county level roads but originally maintained by the Province. Adequate funds will be allocated by Jiangxi Province and PMG for the additional provincial level road constructed under the Project. PHMB has two branches in Anyuan District and Shangli County.

60. Anyuan Branch is now responsible for maintenance of about 116km roads including all state level roads and provincial level roads and some county level roads and town level roads within Anyuan District and Pingxiang Economic Development Zone. It has 4 maintenance teams, 1 road surface maintenance center, and 4 functional departments and 102 staff including 37 well educated staff (college and above). Regarding maintenance of the 4km additional road under the Project, it will not cause increase of staff and procurement of new equipment.

61. Shangli Branch is now responsible for maintenance of about 81km roads including provincial level roads and some county level roads within Shangli County. It has 3 maintenance teams and 4 functional departments and 79 staff including 27 well educated staff (college and above). Regarding maintenance of the 26km additional road under the Project, it will cause increase of staff and procurement of new equipment. PHMB will be responsible for staff recruiting and equipment procurement by taking considerations of all roads maintenance of Pingxiang.

62. Luxi Rural Road Maintenance Ltd. Company under Luxi Transport Bureau will be responsible for county level road of the Project (14.2km) within Luxi. Luxi County government will provide O&M funds according to specified standards (3,000CNY/km/year). It is now responsible for maintenance of about 80km rural roads and has less than 10 staff. Obviously, this company will need additional staff and equipment to perform all responsibilities assigned under the Project.

4.2.3 WWTPs and Sewers

63. Some findings regarding to O&M arrangements of WWTP and sewers are summarized below:

Water sector management in Luxi county still follows traditional institutional arrangements, where WAB manages water resources and water supply, while the Luxi Housing, Urban and Rural Development Bureau manages wastewater treatment;

Different departments are responsible for the operations of wastewater sewers and stormwater pipelines, for example, in Luxi and Lianhua, the Urban Management Bureau is responsible for inspection of stormwater pipelines.



Maintenance of main sewers and secondary and tertiary sewers in some counties (Xiangdong and Shangli for example) is performed by different agencies;

Management of wastewater services in rural areas, especially in the towns/townships which are not county-towns is not clear in Pingxiang. This is also a common challenge elsewhere in PRC. Luxi and Shangli governments have not made the decision on the O&M arrangement of Xuanfeng and Tongmu WWTPs. If the services are not to be outsourced by following current arrangement with private sector (Jiangxi Hongcheng Waterworks Co, Ltd.), intensive capacity building for operational and management staff will be needed even before construction of WWTP.

Further studies or technical assistance may be needed to help local governments (town/township) select the best arrangement for the O&M of WWTP and sewers.

4.2.4 Analysis of Water Sector Management

64. Generally, PMG integrated the management of water sector under the obligation of Pingxiang Water Affairs Bureau (PWAB), which is a good starting point. Private sectors are introduced to provide water supply and wastewater treatment services for core urban areas and county-towns. Involvement of private sector is beneficial to improve effectiveness of water supply and wastewater treatment in terms of technologies, management, and funds. O&M of sewers are provided by local governments. Separation of O&M of sewers and wastewater treatment is common in PRC. Although the responsibilities of water sector management are integrated to PWAB, the integration and coordination of water sector in practice in terms of planning, reuse of wastewater, water saving, etc. are not very strong.

5 Assessment of Procurement Arrangement and Capacity

65. This assessment is based on an internal control questionnaire (ICQ) approach in accordance with ADB project administration instructions and model ICQ documentation. Specifically, the

assessment process seeks to (i) evaluate the adequacy of EA/PMO’s existing processes adopted

for procurement and their ability to comply with ADB’s Procurement Guidelines (2010), as amended

from time to time), (ii) identify the need for capacity building and training for the EA / PMO during

project implementation stage to develop staff’s competence in areas relating to procurement, and

(iii) define the appropriate level of review, either prior or post by ADB. The completed documentation is included in SD11.

66. Public procurement in the PRC has to be carried out in accordance with the PRC bidding law, which stipulates the use of competitive procedures. PRC Government has also issued regulations on anti-corruption and fraud prevention measures in public procurement. Based on these national regulations, Jiangxi Province issued a series of bidding management methods for selection of contractor, construction supervision, design institute of building, Municipal Infrastructure projects. PMO, IAs and PIUs are well familiar with these requirements and their practical application.

67. There is one significant gap in the PRC bidding law and associated arrangements that is relevant to the Project procurement, and this relates to the procurement of consulting services. This form of procurement is outside the scope of the PRC bidding law.

68. All procurement under the Project will be carried out in accordance with ADB procurement guidelines and the ADB guidelines will be applied where these impose stricter or slightly different standards than the PRC bidding law. However there is no fundamental conflict between the PRC law and ADB procurement guidelines and for the procurement of consulting services, which lie outside the PRC law, the ADB guidelines will be applied in full.

69. It is normal practice in the PRC for suitably qualified design institutes (DIs) to prepare technical specifications for all engineering related contracts, including for goods and equipment. This arrangement will apply for the Project.

70. For larger contracts it is normal practice to engage a professional tendering company to manage the procurement process on the project owner’s behalf. The services normally include pre-



qualification (where needed), preparation of the commercial sections of bidding documents, drafting of procurement notices, issue of bidding documents, advice/supervision on contract evaluation, and advice/supervision of contract negotiations and in final contract preparation. During the Project’s implementation it is proposed that the PMO engages professional tendering companies with previous ADB experience to support them in the procurement process.

71. As regulated, the bidding and procurement information, including Invitation for Express of Interest (EOI) and Request for Proposal (RFP), has to be advertised to public using public website and/or newspapers. At municipal level, there is an opened computer platform for publish procurement information related to procurement. The bids are evaluated by a group of experts who are randomly selected from the government’s expert database. PRC government recognizes the risk of corruption in public procurement and has established anti-corruption (discipline inspection) offices at all levels of government, whose work includes the supervision and audit of procurement activities. It is commonplace for representatives of these offices to send representatives to attend bid openings and evaluations.

72. Key findings of the procurement assessment include:

PMO will organize and coordinate all procurement activities under this Project with participation of PIUs and supports of tendering company;

Staff of PMO and PIUs have never been involved in foreign funded projects and have little knowledge of the ADB’s guidelines. However, they are familiar with domestic procurement procedures and requirements and have some experiences;

A procurement agent will be engaged to assist the procurement process, including the preparation of bidding and contract documents.

Bid evaluation is conducted under strictly controlled procedures with independent experts involved;

PMO has sufficient skills and equipment to manage information relating to the project procurement;

Record keeping and documentation is adequate;

Procedures are provided for equal treatment of all bidders;

Anti-corruption measures and supervision are provided for. However, there is no standard statement of ethics and those involved with procurement are not required to declare any potential conflict of interest;

PMO is now under-staffed and will be equipped with experienced staff if needed.

73. Main recommendations are:

Training in ADB procurement procedures will be provided to the PMO, PIUs, DIs and tendering companies. This training included key parts of the ADB procurement guidelines with particular emphasis on where these diverge from typical national arrangements. Governance and anti-corruption measures should be fully integrated into the training.

Once the project procurement plan is finalized, detailed procurement procedures will need to be issued by PMO, together with training in their application. In order to support PMO in the development of such procedures and the associated training, it is proposed that an individual domestic consultant be engaged to advise and support the EA and the IAs in the period between the end of the main PPTA work and loan effectiveness.

Subsequent to loan effectiveness, as part of the Project’s capacity building component, there will be an international consulting company appointed to provide implementation support. This support will include design and bidding document review, procurement advice and training, and attendance at bid opening and evaluations.



Where appropriate, specific requirements of the loan and project agreements will be included in bidding and contract documents to impose relevant conditions on contractors or to inform them of certain matters.

74. Based on the above arrangements, the safeguards identified, it is concluded that procurement capacity and the procedural arrangements in place are adequate to facilitate full compliance with ADB procurement guidelines and the risk of incorrect procurement is acceptably low.

75. Some measures are proposed to safeguard the Project’s procurement:

Training and Capacity Building

76. Training in ADB procurement procedures has been provided to PMO, some staff of IA and PIUs during this PPTA. This training included key parts of the ADB procurement guidelines with particular emphasis on where these diverge from typical national arrangements. Further training sessions will need to be arranged however and any appointed DIs and tendering companies should be asked to send their relevant staff for this training. Governance and anti-corruption measures should be fully integrated into the training.

77. Subsequent to loan effectiveness, as part of the Project’s capacity building component, there

will be an international consulting company appointed to provide implementation support. This support will include design and bidding document review, procurement advice and training, and attendance at bid opening and evaluations. In order to ensure continuity of advice to PMO IA, and PIUs, it has been agreed that the appointment of the loan implementation consultant be subject to advance procurement action.

Risk Mitigation

78. Risk mitigation measures to reduce procurement and corruption risk have been agreed with PMO and the IA at the loan-fact-finding stage and are documented in the Project Risk Management Plan.

ADB Review

79. ADB will undertake a prior review of the model form of bidding/contract documents ahead of the first ADB funded contract being procured and for other key procurement packages as specified in the procurement plan. ADB will also receive bid evaluation reports for all ADB funded contracts and for selected contracts (such as the appointment of the project management consultants) ADB will require prior review of the draft contract before this becomes effective. Regular six monthly ADB supervisory missions will include a review of procurement activity and the loan and project agreements will provide the normal right of ADB inspection and audit access.

Use of Contract Terms to Safeguard ADB Interests:

80. Where appropriate, specific requirements of the loan and project agreements will be included in bidding and contract documents to impose relevant conditions on contractors or to inform them of certain matters. Examples include the requirement on contractors to warn and educate their staff on

the dangers of HIV/AIDS and STIs, ADB’s audit and inspection rights, insurance requirements,

compliance with ADB’s gender policies, and the consequences of corrupt practices.

6 Assessment of Financial Management

81. Financial management assessment (FMA) of the Executing Agency (EA) and Implementing

Agencies (IAs) have been conducted for the Project in accordance with ADB’s Guidelines for the

Financial Management and Analysis of Projects4 and the publication Financial Due Diligence - A Methodology Note. 5 The FMA includes review of the staff of finance, accounting policies and procedures (segregation of duties, budgeting system, payments, policies and procedures, cash and

4Financial Management and Analysis of Projects. ADB. 2005. 5Financial Due Diligence A Methodology Note. ADB. 2009.



banking, safeguarding assets), internal and external auditing, reporting and monitoring, funds flow arrangement, and information systems. The instrument used for the assessment was Asian

Development Bank’s (ADB) financial management assessment questionnaire (FMAQ).

82. The Jiangxi Provincial Finance Department (JPFD) will operate and administer the imprest account of the project and will be responsible for withdrawal applications and withdrawals of the ADB loan. HPFD has many years’ experience in these activities and in the general financial oversight of ADB and WB funded projects.

83. PFB has adequate financial staff, accounting policies and procedures, internal and external controls, audit arrangements, and reporting system. It has limited experience in World Bank and ADB projects. Therefore, proper training and support will be required on ADB policies and procedures, including procurement, disbursement and project management.

84. PFB has sound financial management systems which can meet the minimum financial management requirements for their current activities. There are 3 staff in the Foreign Economic and Financial Division. They have experience in financial management of local large capital projects and foreign-funded projects. Proper training and support will be required at EA level on ADB policies and procedures, including procurement, disbursement and project management.

85. PMO shared the staff of financial department with PUCIDC. The chief of the financial office of PMO was seconded from PFB on part time basis, while there are another two accountants. One is chief accountant with required qualification and experience. The other is bookkeeper. A series of financial management regulations will be compiled along with the implementation progress of the project.

86. Finance bureaus of IAs have sound financial management systems and adequate staff which can meet the minimum financial management requirements for their current activities. They have experience with local large capital projects and but have no experience with foreign-funded projects. Proper training and support will also be required at IA level on ADB policies and procedures, including procurement, disbursement and project management. And external financial management assistance will be required.

87. All PIUs will will assign proper person to keep project financial statement in good order.

88. Specifically, the FMA recommends capacity development measures to ensure that the EA, IA and PIUs are able to meet the project’s financial management requirements. It was agreed that the EA, IA and PIUs will strengthen their financial management capability to manage the project, including (i) undertaking training, particularly in ADB policy and procedural requirements; and (ii) seeking external financial management assistance as needed.

89. The assessment concluded that the financial management capacity of EA and IAs is adequate for the implementation of the Project, and training in ADB procedures will be required in procurement, disbursement, project management, and accounting systems. Issues or risks/deficiencies associated with the entity’s financial management systems are identified where necessary capacity development measures are recommended to ensure that the IAs are able to meet the subproject’s accounting and reporting requirements.

7 Assessment of Institutional Arrangement for Flood Management and Response

90. In order to strengthen the capacity of emergency response and prevent and reduce natural disasters and incidents, PMG established Pingxiang Municipal Public Emergency Response Committee, under which there are 18 special emergency response headquarters including Pingxiang Flood Control and Drought Relief Headquarters (FCDRH). This committee is headed by a mayor and composed of different government department. Office of Pingxiang FCDRH is situated at PWAB. At county level, by mirroring the arrangement of flood management and response at municipal level, county water resource bureau are the leading agency for flood management and response in the county.



91. PMG established Pingxiang Disaster Reduction Committee as the comprehensive coordination agency for natural disaster rescue and emergency response. This committee takes lead to provide assistance and rescue for natural disasters.

92. PMG issued Drought and Flood Fighting Emergency Response Plan and Natural Disaster Rescue Emergency Response Plan.

Pingxiang Drought and Flood Fighting Emergency Response Plan

93. This Plan applies to flood management and response in Pingxiang. It defines the classifications of pre-warning levels, responsibilities of different agencies and staff, response procedures, guarantee measures, post event handling, etc.

94. Pingxiang Natural Disaster Rescue Emergency Response Plan

95. This plan is developed to establish emergency assistance system and operation mechanism for dealing with major natural disasters. It defines the organizational arrangement; preparation of emergency response in terms of funds, materials, communication and information, equipment of disaster rescue, human power, social mobilization, shelters, technologies, pre-warning and prevention, information management, response of pre-warning, response of emergencies, post-disaster assistance and recovery/reconstruction, etc. the response applies to natural disasters with Zixing administrative area. It covers organization arrangement and responsibilities, prevention and pre-warning system, response for different level emergencies, security measures, aftercare, drilling, and supervision and management, etc.

96. The two emergency response plans are comprehensive and cover all necessary information. The coordination among different agencies, regular drills, and adequate funding are the key for successful implementation.

8 Assessment of Capacity Building Needs

97. Capacity building needs have been identified by the following processes:

Needs identified in the feasibility study reports By the TA Consultant based on their previous experience In consultation with IAs and PIUs for the various project facilities. Broader stakeholder consultation to identify shortcomings in current services and related

urban management issues in the project area.

98. As part of this process questionnaires to assess existing capacity and potential needs were issued to all relevant project agencies and replies have been received from all of them. The results have been analyzed and are provided in the relevant segments of this Section.

8.1 Lessons Learned from Other Capacity Building

99. The IAs and PIUs have little experience with ADB or World Bank Financed project and did not implement any capacity building projects before. Only Luxi County implemented one World Bank loan project similar to the one proposed in this Project. The feedback from the experience gained through other capacity building undertaken by AECOM has included the following lessons of potential relevance to the Project:

Project consulting services are most useful to local IA/PIUs in the early stages of loan implementation. This especially applies where an IA/PIU has no previous experience in the implementation of an ADB funded project. In some cases delays in the procurement of consultants has therefore compromised their effectiveness.

Project consulting services have not always been efficiently utilized. Supervision of consultants needs to be reinforced. Poor terms of reference can compromise the effectiveness of consulting services. Capacity building must be relevant to recipients and they must be fully consulted in its

design.



Capacity building needs to respond to policy developments rather than anticipate them. Implementation of institutional reforms (such as establishing a new government agency

for eco-compensation program) is a lengthy process and difficult to achieve except where the reforms in question are part of a government sponsored reform program.

8.2 Assessment of IAs/PIUs Capacity Building Needs

100. Given the considerations that the IAs/PIUs have no previous experience in ADB project implementation and low capacity of local design institute is observed, the following consulting support may be required:

Design review

Setting up initial procurement systems, including preparation of model contract documents that contain all project specific clauses

Procurement support (especially tender document review), with particular emphasis on compliance with ADB procedures

Support on construction management (progress tracking, potential contract variations, contract claims, resolving unforeseen technical issues etc in compliance with ADB procedures)

Asset commissioning and handover

Establishing project accounting and financial reporting systems and any necessary ongoing support in financial reporting

Operate PPMS

Guidance in the preparation of progress reporting

Establishing environmental reporting systems and preparation of regular environmental reports, together with advice on environmental monitoring issues and support in the updating of environmental plans where required

Establishment of internal resettlement monitoring systems and preparation of regular progress reports, together with advice on resettlement plan implementation issues and support in the updating of RPs (when necessary)

Design of suitable public awareness programs and their implementation including:

Environmental Awareness and motivating environmentally responsible behavior

Personal hygiene and public health awareness

Road Safety Awareness

HIV/AIDS and STIs awareness and prevention

Mobilizing Community Participation and Awareness in the Project 101. Training in:

Project management

Project planning

Supervision of Consultants and getting the best from them

ADB project reporting requirements

ADB procurement guidelines

ADB disbursement procedures

Project accounting with specific emphasis on the ADB requirements for foreign funded projects

Governance and Anti-corruption procedures

ADB Safeguard policies, their practical application and compliance monitoring

Application of 3R policies and making improvements in the efficiency of resource utilization.

Design review

Contract management

Asset commissioning

Capital investment planning and appraisal

Management training including, business planning, performance management, organizational design, quality management and information management

Financial management including: o Cost control of public utility services o Financial control of capital projects o Financial planning



o Budgeting and budgetary control o Management of financial risk

102. The following needs summarize those identified by PPTA team in relation to general organizational capacity building needs:

Management capacity building including: o Governance and anti-corruption o Human resources management o Performance measurement o Quality management

Financial capacity building including: o Financial management o Budgeting and budgetary control o Management of financial risk

Generic operations and maintenance capacity building including: o Asset management o Preparation of operational procedures

9 Proposed Project Capacity Building

9.1 Objectives of the Capacity Building

Overall Scope and objectives of the capacity building

103. The overall objective of the capacity building is to enhance the prospects that the Project achieves its intended impact in a timely manner and in compliance with relevant PRC laws/regulations and ADB policies/procedures. The scope of capacity to achieve this encompasses:

Enhancing project management and implementation capacity

Enhancing the capacity of O&M units to provide for sustainable operations

Promoting inclusiveness and value added

Project Management and Implementation Support Objectives

104. The objectives of this part of the capacity building are to assist the PMO, IA, PIUs and others involved in the Project to improve their ability to successfully implement the components of the Project. Specifically these include:

The development of realistic and well considered project plans and project management systems

The improvement of efficiency of procurement in accordance with ADB procedures

The development of effective engineering design and construction supervision systems to facilitate adherence to quality standards and completion targets

The assessment of project effectiveness including monitoring and compliance with relevant ADB safeguard policies (social and environmental)

Establishing and maintaining proper records, accounts, financial controls and governance systems for the Project

Project progress and performance reporting

Advice on compliance with covenants in the project agreement and on the incorporation of applicable policy initiatives

Project Sustainability Objectives

105. The objectives of this part of the capacity building are to ensure that the IAs and PIUs have adequate and relevant management, financial, technical and operations capacity to provide services that are:

Fully funded



Meet user expectations in terms of levels of service and cost

Adopt “best practice” operating standards and procedures

Compatible with 3R and climate mitigation policies

Public Awareness Objectives

106. The objectives of this part of the capacity building are to develop public education programs (and assist in their implementation) to promote environmentally friendly, climate friendly, and energy

efficient living on the part of the cities’ residents. Such programs should consider and incorporate:

The contribution urban planning and municipal services make to environmental protection and lifestyle improvement

Environmental and public health awareness

The role of individual residents

Meeting resident’s expectations through effective mechanisms of public consultation and engagement.

Social and Economic Development Objectives

107. The objectives of this part of the capacity building, which will be achieved through supporting the implementation of the social safeguard plans (SAP, GAP, and RPs) are to maximize the opportunities the Project creates for:

Facilitating increased local employment. This employment generation to be viewed in the context of the broader social and economic development the project will make possible.

Providing pathways for improved living conditions and lifestyle improvements with particular emphasis on the poor and otherwise disadvantaged segments of society.

Special Studies and Advice

108. The objectives of this part of the capacity building is to work with the city to address key issues they face in the sectors being supported under the project and more generally to enhance awareness and means of mitigation from climate change impact. Subject to resource availability, specific issues identified for potential review under the capacity building are:

Flood Risk Management;

Ecological River Management;

Wastewater Operation, Maintenance, and Service Provision;

Village Level Wastewater Management;

Rural-Urban Transport Management;

Urban-Rural Development Planning.

9.2 Overview of the Proposed Capacity Building Program

109. The capacity building necessary to achieve a successful project implementation and eventual outcome can be categorized into the following:

Support during project implementation

Strengthening of O&M agencies to give assurance on project sustainability, and

Creating “value added” from the Project

110. In addition there is an extensive training need that is cross-cutting across all aspects of the capacity building. The specific capacity building needs identified under each of these categories are as follows:

Support during project implementation

Design review and support to local DIs



Procurement support (tender document preparation, bid evaluation etc), with particular emphasis on compliance with ADB procedures

Support on construction management (progress tracking, potential contract variations, contract claims, resolving unforeseen technical issues etc)

Establishing project accounting and financial reporting systems and ongoing support in financial reporting

Advice on environmental monitoring and updating of the EMP

Advice on resettlement plan implementation (including internal monitoring)

Implementation of PPMS and support in progress reporting to ADB. Strengthening of O&M capacity to give assurance on project sustainability

Financial Sustainability

Financial management strengthening, with particular emphasis on budgeting, cost control and financial planning

Operational Sustainability

Preparation of operational procedures (to meet ISO 9000 requirements)

Asset management

Integrated wetland management

Use of Outsourcing (where appropriate)

Use of PPP Creating “value added” from the Project

Improving public consultation and engagement

Encouraging behavior change in looking after the local environment

Maximizing local job creation to best utilize the leverage of economic stimulus created by the Project

Enhancing community health awareness (including HIV/AIDS and STIs)

Enhancing gender awareness

Promoting water conservation, energy efficiency and climate change awareness.

Identification and implementation of 3R initiatives (reduce, reuse, and recycling of waste)

Improvements in drainage planning

Improvements in flood warning and non-structural measures Training

Domestic study tours to view best Chinese practice in the different sectors of the Project

Seminars and workshops in Huainan on all areas of the capacity building

On the job training (such as on the O&M of new project facilities)

Extended training or work placements within the PRC (e.g. at technical training schools or work placements at best practice units in larger cities)

9.3 Assessment of Training Needs

111. Training will be an important cross-cutting theme in the capacity building efforts and whilst many training needs can be readily foreseen, others will only be identified in detail as the capacity building work is undertaken.

112. Consultation with the PMO, IAs, and PIUs and with other stakeholders has identified a general assessment of training needs in Table 6. In addition, training to relevant government agencies in enhancing public education and public awareness have also been identified in these discussions. An outline training plan has also been prepared and is included in Annex 1 to this SD.

Table 6: Assessment of Training Needs



Potential Area of Training PMO IAs/PIUs O&M

Section A: Project Implementation Training

Project Management Yes Yes

Project Planning Yes

ADB Procurement Guidelines Yes Yes

Bidding Document Preparation Yes Yes

Bid Evaluation and Contract Negotiations Yes Yes

Contract Management Yes Yes

Construction Supervision Yes Yes

Construction Safety Yes Yes

ADB loan document requirements Yes Yes

ADB Reporting Requirements Yes Yes

Project Performance Monitoring Yes Yes

Disbursement Procedures Yes Yes

Asset Commissioning and Handover Yes Yes

ADB Safeguards Policies Yes Yes

Resettlement Monitoring and Reporting

Implementing Social, Ethnic Minority and Gender Action Plans

Yes Yes

Environmental Monitoring Yes Yes

Section B: Management Training

Public Utility Management Yes

Strategic Planning Yes

Capital Investment Planning & Appraisal Yes

Training Needs Assessment Yes Yes

Information Management (IM) and MIS development Yes Yes

Computer and IT Skills Training Yes Yes

Quality Management Systems Yes Yes

Design of Private Investment Projects (PSI) Yes

Section C: Financial Training

Financial Accounting Yes Yes

Cost Control of public utility operations Yes Yes

Budget preparation and budgetary control Yes Yes

Financial Management Yes Yes

Financial Planning Yes Yes

Corporate financing options Yes Yes

Management of financial risk (including use of swaps, hedging and other derivatives)

Yes Yes

Internal Auditing and internal controls Yes Yes

Computerization of Financial systems (use of accounting software etc)

Yes

Design of Tariff structures Yes

Section D Operations & Maintenance Training

1. Generic Operational Training Needs

Asset recording procedures (including GIS) Yes Yes

Asset maintenance and maintenance planning Yes Yes

Operational Health & Safety Yes Yes

Energy conservation and management Yes Yes

Preparation of operational procedures Yes Yes

Improving Customer Service Yes Yes

2. Wastewater Operations Training

WWTP Operations Yes Yes

Sewer systems Yes Yes

Wastewater pumping station operation, inspection and maintenance,

Yes Yes

Sludge treatment and disposal Yes Yes

Industrial Pollution Control Yes Yes

Sampling and Laboratory procedures Yes Yes



Wastewater Reuse Yes Yes

Repair of revetments Yes Yes

Sediment removal Yes Yes

Maintenance of landscape Yes Yes

3. River Rehabilitation

Dredging Operations Yes Yes

Contaminated sediment disposal Yes Yes

Inspections of river embankment Yes Yes

Ecological methods for protection of embankment Yes Yes

Pre-warning and emergency responsive plan Yes Yes

Application of non-structure measures Yes Yes

4. Road Management

Road safety and accident prevention Yes Yes

Traffic control Yes Yes

Section E: Other Project Related Training

Gender awareness Yes Yes

Public Private Partnerships

Mobilizing Community Participation and Awareness in the Project

Yes Yes

Environmental Awareness and motivating environmentally responsible behaviour

Yes Yes

Road Safety Awareness Yes Yes

Concept of water security and preparation of water security plan

Yes

HIV & STD awareness and prevention Yes Yes

9.4 Reporting and Timetable

113. The capacity building should ideally be programmed for a period of five years duration to last for the whole implementation period. However, it is anticipated that the most intensive period for capacity building would be during the first three years of project implementation. The PMO will

prepare a capacity building plan for ADB’s approval at the beginning of the implementation stage

based on the training needs done by the PPTA consultants. Project Management Consultant may help PMO on the training plan.

114. The provider of the project implementation consulting services should be appointed as soon as possible after loan effectiveness and should be required to provide the following reports:

An inception report (within two month of commencement)

Quarterly progress reports compatible with PMG’s reporting obligations to ADB

Safeguards monitoring reports compatible with PMG’s reporting obligations to ADB

A completion report that is compatible with PMG’s reporting obligation to ADB at the conclusion of project implementation (assuming physical works are completed within 5 years as currently envisaged)

10 Conclusions and Recommendations

10.1 Overall Project Implementation Arrangements

115. Pingxiang Municipal Government (PMG) as the designated Executing Agency for the Project has established a high level project leading group (PLG) and a multi-disciplined project management office (PMO). This arrangement and structure are commonly used in the PRC and has been shown to be conceptually sound. The PLG will provide overall project direction and resolve issues that cannot be dealt with at the working level, and a multi-disciplined PMO will undertake project coordination.

116. PMO will lead and be responsible for all procurement activities, including designing contract packages, preparing procurement documents, calling for bid, implementing bid evaluation and awarding, and managing the contracts during implementation. PIUs will closely participate in



procurement either by their seconded staff to PMO or by provision of expertise during the procurement.

117. IAs with support from PMO will also coordinate land acquisition and resettlement of the Project, which can make best use of the leadership of the PLG because issues related to land acquisition and resettlement are always complicated and need more involvement of senior government officers.

118. IAs will assign an environmental staff and resettlement staff to coordinate and supervise relevant works such as implementation of EMP and RP. It is suggested PIUs to engage a full-time environment specialist, who will work closely with each agency and ensure EMP is implemented by the monitoring station and construction management companies respectively.

119. Due to the lack of experience of ADB project, there is therefore a clear need for capacity building in ADB requirements and procedures for the implementation phase of the Project. Assessments made in relation to procurement capacity, financial management and project management experience of IAs and PIUs together the anti-corruption mechanisms that exist have rendered satisfactory results.

120. The IAs and PIUs all have extensive experience of domestic construction projects in respective areas. And only Luxi County has past experience on foreign funded projects but not the others.

121. Most leading agencies of PIUs will also take O&M responsibilities after the Project completion, which are currently responsible for the provision of the relevant urban service and thus gives both continuity and utilizes existing capacity. This also gives a solid base for the further O&M capacity building that is needed.

122. It is therefore concluded that subject to capacity building in selected areas, both the institutional arrangement and the implementation capacity of the PMO, IAs and PIUs is fully conducive to a successful project implementation.

10.2 Capacity Building Needs and Proposals

123. This appendix contains quite extensive capacity building proposals which are considered a very important safeguard to the achievement of ultimate project success and which complement the proposed physical investments. Annex 1 provides a draft training plan. Consultant Terms of Reference are in the Project Administration Manual.

10.3 Recommendations

124. The proposed ADB finance Project covers many different aspects and involves many agencies. Leadership of PMG is fundamental to the success of the Project. Coordination among different government agencies is also very important. Capacity building for implementation staff and awareness of participants are key elements.

125. The following recommendations are provided for the PMG’s consideration.

PMG may consider bringing in more key agencies to strengthen the leader of PLG.

PMO staffing should be stabilized and strengthened with engineers, procurement officer, resettlement specialist. PMO should be staffed with an environmental specialist to supervise and coordinate implementation of EMP.

PIUs in each district/county should also staffed with resettlement specialist and environmental specialist to be responsible for implementation RP and EMP respectively.

Wastewater management in rural areas is still almost blank in Pingxiang. Further studies should be carried out to select best arrangements, including tariff setting, government subsidy, organization capacity building, etc.

PMG may consider complete water sector integrated management in Luxi County.

More studies on pre-warning, non-structure measures for flood control could be carried out



Annex 1: Draft Training Plan for Project Implementation

Area of Training

Training Methods Year of Implem.

Duration Priority Note

Train the trainers

Workshop Seminar Study tour

On-job training

days

Project Implementation Training

Project management

√ √ 1 2

M

Project Planning

√

1 M

ADB procurement guidelines

√ √ 1 1 H

Bidding document preparation

√

√

√ 1

2

M

Bid evaluation and contract negotiations

√ √ 1 L

Contract management

√ √ 1 L

Construction supervision

√ √

√ 1 1

H

Construction safety

√ √ 1 H

ADB Loan document requirements

√ √

√ 1 1

M

ADB reporting requirement

√ √ 1 H

Project performance monitoring

√ √ 1 1 H

Disbursement procedures

√ √ 1 2

M

Asset commissioning and handover

√ √ 1 M

ADB safeguard policies

√ √ 1

2

H

Resettlement monitoring and reporting

√

√

√ 1 H

Implementing social, ethnic minority and gender action plans

√ √ 1 H

Environmental monitoring

√ √ 1 H

Management Training

Public Utility Management

√

2

5

H by

professional organization

Strategic Planning

2 H

Capital Investment Planning & Appraisal

2 M

Training Needs Assessment

2 M



Area of Training



Train the trainers


On-job training

days

Information Management (IM) and MIS development

2 M

Computer and IT Skills Training

2 M

Quality Management Systems

2 H

Design of Private Investment Projects (PSI)

2 H

Financial Training

Financial Accounting

√

2

5

H

by professional organization

Cost Control of public utility operations 2 H

Budget preparation and budgetary control 2 H

Financial Management 2 H

Financial Planning 2 H

Corporate financing options 2 H

Management of financial risk (including use of swaps, hedging and other derivatives)

2 H

Internal Auditing and internal controls 2 H

Computerization of Financial systems (use of accounting software etc)

2 H

Design of Tariff structures 2 M

Operations & Maintenance Training

Asset recording procedures (including GIS)

√

3

2

M

by professional organization

Asset maintenance and maintenance planning

3 M

Operational Health & Safety 3 L

Energy conservation and management 3 L

Preparation of operational procedures 3 M

Improving customer service 3 L

WWTP operations √ 3 1 H



Area of Training



Train the trainers


On-job training

days

Sewerage systems, inspection and maintenance

√ √ 3

1

H

Wastewater pumping station operation, inspection and maintenance √ √ 3

H

Sludge treatment and disposal √ √ 3 1 H

Industrial Pollution Control √ 3 1 L

Sampling and Laboratory procedures √ 3 1 M

Wastewater Reuse √ √ 3 1 M

Repair of revetments √

√ 3

1

H

Sediment removal

√ 3 H

Maintenance of landscape

√ √ 3 H

Dredging Operations

√

√

1

2

H

Contaminated sediment disposal

√

1 H

Inspections of river embankment

1 H

Ecological methods for protection of embankment

√

1

2

H

Pre-warning and emergency responsive plan √

1 H

Application of non-structure measures

1 H

Road safety and accident prevention √

1 2

H

Traffic control

1 H

Other Training

Gender awareness

√ √

1

2

M

Public Private Partnerships

Mobilizing community participation and awareness in the project 1 M

Environmental awareness and motivating environmentally responsible behavior 1 M



Area of Training



Train the trainers


On-job training

days

Road safety awareness 1 L

HIV & STD awareness and prevention 1 L

Concept of water security and preparation of water security plan

√ √

1 1 M

Concept of climate change and the impact

√ √

1 1 L


AECOM Asia Company Ltd C-1 Asian Development Bank

APPENDIX C: SUMMARY POVERTY REDUCTION AND SOCIAL STRATEGY6

Country: People’s Republic of China Project Title: Jiangxi Pingxiang Integrated Rural-Urban Infrastructure Development

Lending/Financing Modality:

Project Department/ Division:

East Asia Department Urban and Social Sectors Division

I. POVERTY AND SOCIAL ANALYSIS AND STRATEGY

Targeting classification: General intervention

A. Links to the National Poverty Reduction and Inclusive Growth Strategy and Country Partnership Strategy

Pingxiang municipality is located in western Jiangxi province, in the People’s Republic of China (PRC), with a land area of 3,827 square kilometers and a total population of 1.87 million (4.16% of Jiangxi); Shangli County accounts for 25.4% of Pingxiang’s population, Anyuan District 23.9%, Xiangdong District 21.3%, Luxi County 15.5%, and Lianhua County 13.9%. The overall poverty incidence in Pingxiang is 13.88%, which is higher than that of Jiangxi (9.41%) and the national average (7.59%). Pingxiang is an important resource-based city in southern PRC, with coal, iron ore, and limestone as its main minerals. It is experiencing mineral resource depletion, serious environmental degradation, and outdated industries. As one of 12 designated resource-depleted cities in the PRC, Pingxiang receives support for economic restructuring and environmental protection. Pingxiang lacks investments in urban and rural flood protection infrastructure, water environment management, wastewater and sanitation, and rural–urban linkages. Pingxiang’s major rivers face challenges of silting and pollution. The frequency of floods has risen in recent years, posing great risks to local residents and property, especially the poor who tend to reside close to rivers. The project will promote environmentally sustainable and socially inclusive urbanization with balanced urban–rural integration through improvements to urban and rural infrastructure and operations. The project will contribute to poverty reduction through river rehabilitation, road network construction, ecological restoration and rehabilitation, community services to improve overall environmental conditions, and infrastructure development.

The project is aligned with the country partnership strategy of the Asian Development Bank (ADB), 2011–2015 for the PRC, targeting environmentally sustainable and balanced urban-rural development; and is included in ADB’s Country Operations and Business Plan, 2015–2017 for the PRC.a The project will also help promote balanced regional development in the PRC, thereby supporting the National New-Type Urbanization Plan (2014–2020) and the urbanization plans of Jiangxi Province and Pingxiang municipality (2014–2020), which emphasize establishment of a social security system and a basic public service system that covers both urban and rural residents, and promote urban–rural integration.

B. Results from the Poverty and Social Analysis during PPTA or Due Diligence

1. Key poverty and social issues. There are 14 contiguous destitute regions in the PRC, covering 680 counties.b

Luoxiao Mountain area is one of the 14 key destitute areas in the PRC’s new round of development-oriented poverty reduction, which includes Lianhua County of Pingxiang. There are 19 provincial-level key townships for development-oriented poverty reduction in Pingxiang, including 9 in Lianhua County, 5 in Luxi County, 4 in Shangli County, and 1 in Xiangdong District. These townships are located mainly in mountainous areas. In addition, there are 113 provincial-level key villages for development-oriented poverty reduction in Pingxiang, including 76 in Lianhua County, 19 in Shangli County, 14 in Luxi County, and 6 in Xiangdong District. These villages include state-level key villages for development-oriented poverty reduction, all of which are in Lianhua County. Based on the current poverty standard of CNY2,300 (annual net income of farmers) in 2013, Jiangxi province had a poor rural population of 3.28 million, a rural poverty incidence of 14.19%, an urban poverty incidence of 4.41%, and an overall poverty incidence of 9.41%; all are above the national average of 7.59%, but below averages for Pingxiang municipality (rural poverty incidence of 28.5%, urban poverty incidence of 5.46%, and overall poverty incidence of 13.88%).The poor population lives mainly in extremely mountainous areas. The main reasons for poverty are a shortage of natural resources, unemployment,

effects of major diseases， flood disasters，a lack of employable skills, and poor road connectivity and public

services.

2. Beneficiaries. The direct beneficiary area involves all four project districts and counties. The project will reduce

flood risk for a population of about 308,000, including about 37,000 poor people; provide improved wastewater services for 175,000 residents; and benefit an estimated population of 247,000 residents who live within 2 km of the rural–urban road.

3. Impact channels. The direct impact of the project will be (i) enhanced public infrastructure and an improved

environment for local residents, thereby enriching their quality of life and health; (ii) increased value of local land and real estate; (iii) creation of skilled and unskilled job opportunities during construction and operation of the infrastructure; (iv) promotion of construction and manufacturing jobs from linking and expanding industrial parks near the road; (v) increased protection from flooding for nearby residents; and (vi) enhanced community awareness regarding environmental protection, road safety, and flood risk management through public education.

6 This is the final Summary Poverty Reduction and Social Strategy based on ADB’s Report and Recommendations of the President, as approved by the ADB Board of Directors on 21 September 2015.



4. Other social and poverty issues. The governments of Pingxiang municipality and the project counties agreed to

(i) establish rural solid waste collection and management systems to improve the environment of rural communities, and (ii) provide job opportunities (with priority given to women and/or poor people) in seven industrial parks along the proposed roads.

5. Design features. The project design responds to issues raised by the poverty and social analysis. Key design

features include (i) creation of job opportunities for the poor and women; (ii) establishment of six pilot community-based environment supervision and roads safety education teams and community-based groups to conduct consultation, education, and management; (iii) strengthened public participation and information disclosure, such as project information, resettlement policies and plans, and environmental assessment reports and an implementation plan; (iv) public awareness education programs (e.g., on road safety, environment protection, and flood risk management); and (v) establishment of a grievance redress mechanism. The actions in the social development action plan (SDAP) and gender action plan (GAP) will mitigate adverse impacts and increase the positive impacts of the project. The executing and implementing agencies will implement these plans in collaboration with other stakeholders during project implementation.

II. PARTICIPATION AND EMPOWERING THE POOR

1. Participatory approaches and project activities. Extensive consultations with representatives of affected

residences, women, the poor, the elderly, workers, enterprise owners, villages, communities, and government agencies were conducted during project design. In total, 730 people were surveyed and 40 focus group discussions (FGDs) held, with 500 participants. In addition, a number of key informant interviews and stakeholders workshops were also held with the executing agency, implementing agencies, and various bureaus during preparation of the resettlement plan and environmental management plan. 2. The women’s federations of Pingxiang municipality and Lianhua, Luxi, and Shangli counties will coordinate with the

Pingxiang project management office (PMO) to assist in organizing several consultative, advocacy, and training activities for the project’s subcomponents. Furthermore, community-based environment supervision and roads safety education teams and community-based groups will be set up to foster consultation and participation. 3. Civil society organizations. During project design, women’s federations in Pingxiang and project counties held

key informants’ interviews and workshops. They will continue to be involved during project implementation, and a suitable budget, monitoring and evaluation program, and capacity building activities were designed to support their participation. 4. The following forms of civil society organization participation are envisaged during project implementation, rated as high (H), medium (M), low (L), or not applicable (NA).

Information gathering and sharing (M) Consultation (M) Collaboration (L) Partnership 5. Participation plan.

Yes. No. Participation and consultation activities are incorporated into the SDAP and GAP.

III. GENDER AND DEVELOPMENT

Gender mainstreaming category: Effective gender mainstreaming

A. Key issues. According to the Statistical Yearbook 2013 of Jiangxi Province, the female population of Pingxiang

municipality was 939,000, or 48.8% of the total population.c Especially since 2005 the protection and development of women’s rights and interests has been generally excellent in the project area. The elementary enrollment rate of both boys and girls of school age is 100%, and there is no significant gender difference in the higher education enrollment rate. Men and women enjoy equal medical security; over 95% of women are covered under the new rural cooperative medical insurance or under basic medical insurance for urban residents. However, the level of public participation by local women is much lower than that of men. Not more than 15% of the leaders of governments and functional departments at or above the township level are women, and the proportion is less than 10% at the village level. Women’s needs and expectations related to the project were ascertained through FGDs and a questionnaire survey. In general, there is no statistically significant difference in the opinions of male and female respondents regarding the project components. However, because women have a more important role in housework, they are more likely to access and/or use public infrastructure; the lack of adequate and reliable public transport, wastewater collection and treatment systems, and flood control systems have a disproportionately negative impact on women, especially in rural areas. FGDs reveal women are interested in gaining skills through training that improves their non-farming employment opportunities, and the women consulted consider the improvements in traffic safety and access to transport facilities to be provided under the project as important benefits.

B. Key actions.

Gender action plan Other actions or measures No action or measure The GAP includes specific targets for women in employment, training, and participation, and the government has assured ADB that the GAP will be implemented. In addition to adequate staffing and training for the PMO and the implementing agency, women will be provided with (i) job opportunities during and after project implementation; (ii) a consultation and awareness-raising education program, including training on labor law, labor protection, and labor security program; (iii) opportunities to participate in community management and decision-making processes; and (iv) opportunities to participate in project design and public hearing activities. The design and monitoring framework, GAP, and SDAP include sex-disaggregated data and indicators.



IV. ADDRESSING SOCIAL SAFEGUARD ISSUES

A. Involuntary Resettlement Safeguard Category: A B C FI

1. Key impacts. The project will have significant land acquisition and resettlement impacts, and thus is classified as

category A for involuntary resettlement. A total of five resettlement plans were prepared. The project will acquire a total of 171.02 hectares (ha) of rural land, of which 115.61 ha are farmland; 122.53 ha (1,837.9 mu) of land will be temporary occupied.d The project will demolish 51,636.57 square meters of residential houses and 3,309 square meters of small business shops.

A total of 17,045 persons will be affected by the project; of these, 4,327 persons will lose more than 10% of their productive assets and/or will be physically displaced. The estimated land acquisition and resettlement cost is CNY245.81 million. 2. Strategy to address the impacts. Resettlement plans were prepared in line with ADB’s Safeguard Policy

Statement (2009) and relevant laws and regulations of the PRC. The plans were endorsed by Pingxiang municipal government and each county government and disclosed to the affected people in the local language. Compensation will be paid to the affected persons for all assets affected by either permanent or temporary impacts, at full replacement cost. The PMO and implementing agencies will coordinate implementation of the project and report progress to ADB. The land resources bureau in each county or district will carry out land acquisition, house demolition, and implementation of the resettlement plans. A grievance redress procedure has been established for the affected people. The PMO and implementing agencies will engage an external monitoring institute to independently verify adherence to provisions of resettlement plans.

3. Plan or other actions

Resettlement plan (five) Resettlement framework

Environmental and social management system arrangement No action

Combined resettlement and indigenous peoples plan Combined resettlement framework and indigenous peoples

planning framework Social impact matrix

B. Indigenous Peoples Safeguard Category: A B C FI

1. Key impacts. There are no ethnic minority households (communities) affected by the project.

Is broad community support triggered? Yes No

2. Strategy to address the impacts. There are no ethnic minority households (communities) affected by the project.

3. Plan or other actions

Indigenous peoples plan Indigenous peoples planning framework Environmental and social management system

arrangement

Social impact matrix No action

Combined resettlement plan and indigenous peoples plan Combined resettlement framework and indigenous peoples

planning framework Indigenous peoples plan elements integrated in project with

a summary

V. ADDRESSING OTHER SOCIAL RISKS

A. Risks in the Labor Market

1. Relevance of the project for the country’s or region’s or sector’s labor market.

unemployment underemployment retrenchment core labor standards (L)

2. Labor market impact. About 43,600 skilled and 1,000 unskilled jobs will be generated during project construction

phase. Also, 150 skilled jobs and 50 unskilled jobs (e.g., for maintenance, cleaners, and landscaping workers) will be created during the operational phase. The Shangli–Luxi road connection will attract more enterprises to settle in the seven industrial parks; it is expected these enterprises will generate 210,000 job opportunities in the industrial parks along the road.

B. Affordability. The wastewater collection system improvements will result in increased tariffs. Currently the cost is

included in the rate for wastewater treatment, which is CNY0.85 per cubic meter of water used. An affordability analysis showed that a wastewater tariff of CNY0.85 per cubic meter results in water and wastewater costs consuming less than 2% of urban and rural disposable income. Key measures to ensure affordability include: (i) loan assurances to maintain subsidies for poor households, including rural poor households, with an annual review of tariffs and fees, including an assessment on their impact on the poor; and (ii) inclusion of women and the poor among resident representatives (to account for at least 50% of all participants in public hearings on tariff increases).

C. Communicable Diseases and Other Social Risks 1. The impact of the following risks are rated as high (H), medium (M), low (L), or not applicable (NA):

Communicable diseases (L) Human trafficking (NA) Others -Flooding of farmland. Some farmland may be particularly prone to flooding. The project includes a disaster preparedness system and flood resilient farming to offset this potential risk.

2. Describe the related risks of the project on people in project area. The environmental management plan, GAP,

SDAP, and loan assurances require dissemination of information on HIV/AIDS and sexually transmitted infections at construction sites for all new employees upon engagement. This will be done in collaboration with the Center for Disease Control of Pingxiang and related counties. Clauses regarding HIV/AIDS, sexually transmitted infections, and other communicable disease will be included in contract bidding documents.



VI. MONITORING AND EVALUATION

1. Targets and indicators. Targets are: 30% of skilled and unskilled laborers will be low-income people, and 30%

female; 50% of participants in awareness education and other information campaigns will be female. The design and monitoring framework, GAP, and SDAP targets and indicators were discussed and confirmed with the PMO and relevant organizations. A comprehensive project performance monitoring system and the social and gender monitoring indicators were developed to systematically generate data on the project’s social and gender aspects, in consultation with the implementing agency and with the assistance of consultants. 2. Required human resources. A social development, gender and community participation consultant and a

resettlement consultant (input of 26 person-months) are budgeted under the project implementation consultant. Terms of reference outlining their roles are included in the project administration manual (PAM). The GAP and SDAP require that staff in the PMO and executing agency be allocated for GAP and SDAP oversight and implementation. 3. Information in PAM. The PAM outlines poverty, social, and gender issues; these are included in the GAP and

SDAP. 4. Monitoring tools. During project implementation, results of internal GAP and SDAP monitoring will be

incorporated in the project performance monitoring system report. Data sources will include the project management information system, official statistics, and social surveys and research. a ADB. 2012. Country Partnership Strategy: People’s Republic of China, 2011–2015. Manila; and ADB. 2015. Country

Operations Business Plan: People’s Republic of China, 2015–2017. Manila.

b The State Council of the People's Republic of China: 2011, Outline for Development-Oriented Poverty Reduction for China’s Rural Areas (2011–2020).Beijing.

c Statistical Bureau of Jiangxi Province. 2014. Jiangxi Statistical Yearbook. Nanchang. d A mu is a Chinese unit of measurement (1 mu = 666.7 square meters).



AECOM Asia Company Ltd D-1 Asian Development Bank

APPENDIX D: SOCIAL DEVELOPMENT ACTION PLAN7

Actions or Activities Target and Indicators Responsible

Agencies Timeline Budget and Cost

Output 1: Flood risk management and river rehabilitation improved and integrated

Public awareness campaign and information disclosure on DPS in the communities and schools

Environmental awareness and public health knowledge education for communities and schools.

Public cleaning of rivers’ neighborhood areas twice a year with involvement of communities and schools

Identifying the location of safety warnings, isolation facilities and garbage bins along the river in consultation with residents

Improving the solid waste collection by providing garbage bins along the rivers Lianhua, Shangli Luxi Counties and Xiangdong district

Number, type, and frequency of awareness activities provided.

Number and % of participants (disaggregated by sex and target groups – schools, communities) Gender sensitive awareness materials for DPS prepared

No and % of people participating in the cleaning of the river (disaggregated by sex and target groups – schools, communities)

No and % of people participating in the consultation meeting (sex disaggregated)

50% female and 30% poor people participation in all awareness, education programs and consultations.

Number of bins provided

PMOs, Design agency, Water Resources Bureau, Health Bureau, Environmental Protection Bureau, All China Women’s Federation, Poverty Alleviation Office

2015- 2019

Financial budget of the local governments The project’s DED cost

Output 2: Wastewater collection and treatment improved

Optimizing locations for newly constructed WWTP Selecting suitable locations for sludge disposal and transportation to

minimize negative impacts on residents Public hearings will be held for wastewater tariff Ensure provision of subsidies to Minimum Living Security (MLS)

people for wastewater tariff

Information disclosure to and consultation with residents in Xuanfeng township and Xichun township with 50% female and 30% poor participation

Community committees collect comments from residents with 50% female and 30% low income participation

Number and % of participants in the public hearings with 50% female and 40% low income people participation

Number and % of MLS people subsidized, (sex-disaggregated)

PMO, Planning bureau, Design Agency, Construction Bureau, Price Bureau, HB, ESB, ACWF, PAO

2015- 2019

Financial budget of the local government The project’s DED cost

Output 3: Rural–urban linkages improved

Improving design and location of bus stops, crosswalks, traffic signals, and other traffic facilities on roads, and setting up warning signs or isolation facilities on dangerous segments.

Traffic safety awareness education program for residents in Shangli

Consultation with community residents on identification of bus stops, traffic signs, etc.

Public traffic safety awareness and

PMO, Municipal Traffic Police Department, mass media, ACWF

2015- 2019

The project’s DED cost

7 This is the final Social Development Action Plan based on ADB’s Report and Recommendations of the President, as approved by the ADB Board of Directors on 21 September 2015.





and Luxi Counties

education program for residents and schools in counties

50% female and 30% poor people participation in consultations, awareness and education.

Output 4: Inclusive capacity in project planning and management and in urban–rural integration developed

Recruitment of Social Development, Gender and Community Participation (SDGCP) specialist as part of the loan implementation consultant

The PMO and IAs assign at least one social development specialist to be responsible for the implementation and reporting of the SDAP and GAP

PMO and implementing agencies’ staff are trained to ensure effective implementation of the project, particularly SDAP and GAP

Sex-disaggregated data will be collected by the PPMS to ensure the monitoring, evaluation and reporting of the SDAP and GAP.

A SDGCP with 12 person-months input during project loan stage will be recruited

One SDS from PMO and each IA for managing and coordinating GAP and SDAP work

100% staff of PMO and implementing agencies receive the training on SDAP and GAP (at least 30% women representatives in all trainings) – baseline is 10 %.

Indicators involving social development and gender in PPMS

Semiannual monitoring reports on SDAP and GAP implementations

PMO, local PMOs , IAs, SDGCP

2015- 2019

Budget of the capacity building component CNY50,000/year x 5 years = CNY250,000

Outputs 1–3: Generating job opportunities

Generate 3610 skilled and 1020 unskilled jobs at the construction stage.

Generate 151 skilled and 46 unskilled jobs (maintenance, cleaners, landscaping workers etc.) at the operation stage.

30% of which are first made available to the poor and 30% to women; (Baseline for female construction workers 10 %)

30% of which are first made available to the low income and 30% to women.

Agencies responsible: PMO,

IAs, Contractor Assisting agencies:

Labor and Social Security Bureau, Poverty Alleviation Office, Civil affairs bureau, Women’s Federation

2015- 2018

Project construction and operation funds

Outputs 1–3: Measures to reduce potential risks

Include HIV/AIDS and other communicable disease clauses into contract bidding documents

Public health and HIV/AIDS/STIs and sexual harassment prevention education program conducted to contractors and community residents

Health measures for construction workers (e.g., setting up a temporary infirmary, using local medical resources) are established

Conduct publicity activities on HIV/AIDS, sexual harassment, e.g.,

Terms of construction contract and implementation

Public health and HIV/AIDS/STIs and sexual harassment prevention training courses and number of trainees (disaggregated by sex and target groups)

Number and type of health measures Forms of publicity on HIV/AIDS and

Industry and Enterprises Bureau Contractor, Centre for Disease Control, PMO, ACWF

2015- 2017

Funds under the construction contract, (CNY50,000 per year) and and administrative cost of CDC





brochures, posters and picture albums sexual harassment prevention at the construction stage, e.g., number of brochures, posters, and picture albums distributed

All Outputs: Establishing a public consultation and participation mechanism

Establishment of Community Environment Supervision and Road Safety Education team (CERT) as a pilot for three years to (a) develop and implement public awareness and education programs on community disaster preparedness, environment management, and rules and roads safety to promote changes of public behavior

Establishment of community-based groups (CBG) in each pilot community to assist the CERT to implement the social and environmental protection measure identified by SDAP and EMP

Training of CERT and CBG on disaster preparedness, environmental sanitation, public health, community participation, roads safety and other social development skills related to the project.

Development of Community Participation Manual by SDGCP specialist together with CERT to guide the implementation of social, gender, and environmental protection measures

Development of action plan and implementation manual for roll out of the CERT mechanism in all project related communities

Number and percentage of community residents in 3 urban and 3 rural communities have the basic knowledge of community disaster preparedness, environment management rules. 80% women residents have relevant knowledge.

Three members in three urban and three rural communities with 30% of poor people and 30% - women participation.

One community-based group in each pilot community with at least 5 members where 50% are female and 30% poor people

Number, type, and frequency of training provided to the CERT and community-based groups

The community participation manual is available.

Action plan and implementation manual on CERT model roll-out are available

Number and % of community committees’ members trained for establishment of CERT, at least 30 % female participation

PMOs , IAs , selected town/ township ,village / community committees, ACWF, Contractor, PAO, Design Agency, Civil Affairs Bureau ,PMO, Planning Bureau, HB, ESB

2015- 2019

Cost for the recruitment training, and payment to the members of the CERT will be included in the Project Management Consultancy budget that is funded by the ADB loan. CNY159,600/year x 3 years = CNY478,800

ACWF= All China Women’s Federation; CERT = community environment supervision and roads safety education team; CBG=community-based groups; CNY = yuan; DED = detailed engineering design; DPS= disaster (flood risks) preparedness system; EMP = environmental monitoring plan; EPB= environmental protection bureau; GAP = gender action plan; HB= health bureau; IA = implementing agency; IP = industrial park; LAR = land acquisition and resettlement; M&E = monitoring and evaluation; MLS = minimum living security; PAO=poverty alleviation office; PMG=Pingxiang Municipal Government; PMO = Pingxiang project management office; PPMS = project performance management system; RP = resettlement plan; SDAP = social development action plan; SDGCP= social development, gender and community participation.


AECOM Asia Company Ltd E-1 Asian Development Bank

APPENDIX E: GENDER ACTION PLAN8

Proposed Actions Target and Indicators Responsible


Output 1: Flood risk management and river rehabilitation improved and integrated

Conduct public awareness campaign and information disclosure on (i) DPS (flood risks) and (ii) environmental health in the communities and schools

Conduct public cleaning of rivers’ neighborhood areas twice a year with involvement of communities and schools

Identify location of safety warnings, isolation facilities and garbage bins along the river in consultation with residents

Number and % of participants with 50% female participation

Gender sensitivity awareness materials for DPS available

Number and % of people participating in the cleaning of the river with 50% female participation

No and % of people participating in the consultation meeting with 50% female participation

PMOs, design institute, water resources bureau, health bureau, EPB, ACWF, PAO

2015– 2019

Financial budget of the local government Project DED cost

Output 2: Wastewater collection and treatment improved

Optimize location of newly constructed WWTP Hold public hearings on wastewater tariff

Information disclosure to and consultation with residents in Xuanfeng Town and Xichun Town with 50% female participation

Number and % of participants in the public hearings with 50% female participation

PMO, planning bureau, design institute, construction bureau, price bureau, health bureau, EPB, ACWF, PAO

2015– 2019

Financial budget of the local government Project DED cost

Output 3: Rural–urban linkages improved

Improve design and identify locations of bus stops, crosswalks, traffic signals, and other traffic facilities on roads, and set up warning signs or isolation facilities on dangerous segments

Conduct traffic safety awareness education program for residents in Luxi and Shangli counties

Integrate gender-responsive physical design features in road rehabilitation

Consultation with community residents on identification of bus stops, traffic signs, etc. with 50% female participation

Public traffic safety awareness and education program for residents and schools in counties, including 50% female participants

Number and type of completed gender-responsive design features that address safety risks and increase access for female users and children

PMO, municipal traffic police department, mass media, ACWF, communities

2015– 2019

Project DED cost

Output 4: Inclusive capacity in project planning and management, and urban–rural integration developed

Recruit a SDGCP specialist as part of the loan implementation consultant

The PMO and implementing agencies assign at least one SDS to be responsible for the implementation and reporting of GAP and SDAP

PMO and implementing agencies’ staff are trained to

A SDGCP specialist (national) with 14 person-months input will be recruited

One SDS from PMO and each implementing agency to manage and coordinate GAP and SDAP activities

100% staff of PMO and implementing

PMO, local implementing agencies, SDGCP specialist

2015– 2019

Budget of the capacity building component CNY50,000/ year * 5 years = CNY250,000

8 This is the final Gender Action Plan based on ADB’s Report and Recommendations of the President, as approved by the ADB Board of Directors on 21 September 2015.


AECOM Asia Company Ltd E-2 Asian Development Bank

Proposed Actions Target and Indicators Responsible


ensure effective implementation of the project, particularly GAP and SDAP

Sex-disaggregated data will be collected in the management information system to ensure the monitoring, evaluation, and reporting of the GAP and SDAP

agencies receives training on GAP and SDAP (at least 30% women representatives in all trainings) (Baseline is 10%)

Semiannual monitoring reports on GAP and SDAP

For all outputs: Generating job opportunities

Generate 3,610 skilled and 1,020 unskilled jobs at the construction stage

Generate 151 skilled and 46 unskilled jobs (maintenance, cleaners, landscaping workers, etc.) at the operation stage

Develop project related job skills of women through training and workshop

Formulate outreach/advertisement program to contractors to recruit women

30% of which are first made available to women (Baseline is 10%)

30% of which are first made available to women (Baseline is 20%)

Numbers of female laborers receiving training (40% female participants)

Number and contents of advertisement programs

PMO, implementing agencies, contractor, labor and social security bureau, PAO, civil affairs bureau, ACWF

2015– 2018

Project construction and operation funds

For all outputs: Establishing a public consultation and participation mechanism

Establish CERT for public awareness and education programs on community disaster preparedness, environment management rules and roads safety to promote improved public behavior

Establish community-based groups in each pilot community to assist the CERT to implement the social and environmental protection measure identified by SDAP and EMP

80% women in 3 urban and 3 rural communities have basic knowledge of community disaster preparedness, environment management rules

CERT is composed of 3 members in 3 urban and 3 rural communities with 30% women participation

CERT is active in at least 12 communities including 30% women participation by 2019

One community-based group in each pilot community with at least 5 members of which 50% are female

PMOs, implementing agencies, selected township, village/community committees, ACWF, contractor, PAO, design institute, civil affairs bureau, planning bureau, health bureau, environmental sanitation bureau

2015– 2019

Project budget of CNY159,600/ year x 3 years = CNY478,800

ACWF = All China Women’s Federation, CERT = community environment supervision and roads safety education team, CNY = yuan, DED = detailed engineering design, DPS = disaster preparedness system, EMP = environmental management plan, EPB = environmental protection bureau, GAP = gender action plan, PAO = poverty alleviation office, PMO = project management office, SDAP = social development action plan, SDGCP = social development, gender, and community participation, SDS = social development specialist, WWTP = wastewater treatment plant.



AECOM Asia Company Ltd F-1 Asian Development Bank

APPENDIX F: FINANCIAL ANALYSIS9

1 Introduction

1. The financial analysis for the proposed project was undertaken in accordance with Asian Development Bank (ADB) policies and guidelines. 10 A financial sustainability analysis was carried out to assess the entire project, including all project components, and a financial analysis was conducted for the wastewater treatment component, which has a cost-recovery objective. A financial management assessment (FMA) was conducted for the Project in accordance with ADB’s Guidelines for the Financial Management and Analysis of Projects11 and the publication Financial Due Diligence – A Methodology Note.12

2 Financial Sustainability Analysis

2. The financial performance of project-related entities was analyzed to determine their financial capacity to provide the cash requirements for all components, including counterpart funding during construction, operation and maintenance (O&M), and debt service during operation. Local governments will provide counterpart funding and assume ADB loans to ensure project completion, and thereafter pay debt service for the ADB loan. 3. Past income and expenses. Government revenue comes from two sources:

#1: Revenue generated from within the local government, such as real estate tax, local business tax, other fees and charges, as well as economic enterprises operating income.

#2: External sources of income, generally from higher levels of government, as well as contributions from all forms of loans and borrowings, e.g. bank loans.

Expenditures include personnel (i.e. staff salaries and benefits), maintenance, management fees, operating expenses, capital expenditures and expenditures for general public services, education, public safety, environmental protection, agriculture, forestry and water, transportation, and debt service.

4. The approach:

Step 1: study past income-generating capacity 2009 to 2013 to determine the share of revenue from higher-level government (national origin), and supported by the spending of these revenues.

Step 2: based on past income-generating capacity, evaluate each local government’s capacity to provide counterpart funds to implement the project.

Step 3: assess revenue of the local government at the time of the loan repayment period to determine if it exceeds LG’s financial ability to support operations and maintenance and debt and their other obligations.

5. Local government revenue and expenditure data for 2009–2013 was analyzed and projected forward to 2040 to assess capital structure, internal fund generation to support current operations, debt-service capacity, and ability to finance all components after construction.

9 This financial analysis is consistent with that presented in the ADB’s Report and Recommendations of the President (including corresponding linked documents), as approved by the ADB Board of Directors on 21 September 2015. 10 ADB. 2014. Financial Management, Cost Estimates, Financial Analysis, and Financial Performance Indicators.

Operations Manual. OMG2/BP. Manila; ADB. 2005. Financial Management and Analysis of Projects. Manila; ADB. 2009. Financial Due Diligence: A Methodology Note. Manila.

11 Financial Management and Analysis of Projects. ADB. 2005. 12 Financial Due Diligence A Methodology Note. ADB. 2009.



During 2009–2013, transfers from national and provincial governments averaged 56% of total local government revenues; the highest proportion (66%) was received by Lianhua County, which is a national poverty county. 6. Project counterpart funding, O&M expenses, and debt service as a percentage of revenue for local governments are in Table 1. During 2016–2020, the average annual counterpart funding as percent of revenues ranges from 0.6% (Xiangdong) to 1.7% (Luxi County). In the first year of debt service (2021), repayment ranges from 1% in Xiangdong District to 3.2% in Lianhua County. During 2021–2040, the annual debt service as a percentage of revenues declines based on expected growth of local government revenues. By 2030, debt service as a percentage of revenues is less than 0.3% for all four local governments. These findings indicate acceptable fiscal risk, because the municipal government fiscal revenues are expected to grow in line with economic development. 7. Local governments will finance recurring O&M costs. During 2021–2040, average annual O&M costs are less than 0.05% of annual revenues. Based on the funding sources identified during project preparation (including new budgets, subsidies, and allocated financing), all subprojects will have sufficient funds available for O&M.

Table 1: Project Counterpart Funding, Operation and Maintenance Expense, and Debt Service as a Percentage of Revenue

(CNY million) Item 2016 2017 2018 2019 2020 2021 2025 2030 2035 2040

Lianhua County

Revenues 2,662 3,249 3,966 4,841 5,909 7,213 16,012 43,391 117,583 318,635


O&M cost 4 4 5 6 6

Debt service 229 183 126 69 11


% of revenues 1.9% 1.9% 1.9% 0.6% 0.2% 3.2% 1.2% 0.3% 0.06% 0.01%

Luxi County

Revenues 3,864 4,798 5,956 7,395 9,181 11,399 27,082 79,887 235,646 695,098

Counterpart 114 118 139 51 22

O&M cost 4 4 5 5 6

Debt service 310 248 171 93 16


% of revenues 2.9% 2.5% 2.3% 0.7% 0.2% 2.8% 0.9% 0.2% 0.04% 0.0%

Shangli County

Revenues 4,984 6,271 7,890 9,928 12,491 15,717 39,390 124,214 391,701 1,235,199

Counterpart 154 99 116 42 18

O&M cost 4 4 5 5 6

Debt service 251 201 138 75 13


% of revenues 3.1% 1.6% 1.5% 0.4% 0.2% 1.6% 0.5% 0.1% 0.02% 0.0%

Xiangdong District

Revenues 4,047 5,023 6,233 7,734 9,598 11,911 28,244 83,115 244,584 719,742


O&M cost 2 3 3 4 4

Debt service 113 90 62 34 6


% of revenues 1.5% 0.7% 0.6% 0.2% 0.1% 1.0% 0.3% 0.08% 0.02% 0.0%

Total for all four local governments

Revenues 15,557 19,341 24,045 29,898 37,179 46,240 110,728 330,607 989,514 2,968,674

Requirements 379 313 368 135 59 916 737 514 291 68



Item 2016 2017 2018 2019 2020 2021 2025 2030 2035 2040

Requirements as % revenues

2.4% 1.6% 1.5% 0.5% 0.2% 2.0% 0.7% 0.2% 0.0% 0.0%

CNY = yuan, O&M = operation and maintenance. Source: Asian Development Bank estimates.

3 Wastewater Treatment Component

8. The wastewater component makes up about 11% of the total project cost. It consists of collection system and wastewater treatment plants (WWTPs) in Tongmu and Xuanfeng. The Xuanfeng WWTP (5,000 cubic meters [m3]/day) will reduce pollution loadings to the Yuan River in Luxi County, and the Tongmu WWTP (2,500 m3/day) to the Lishui River in Shangli County. This component is an integral part of the project to achieve the overall project outcome and impact. The WWTPs are needed to protect public health and reduce environmental pollution (the Yuan and Lishui rivers are sources of drinking water for downstream communities). The People’s Republic of China 12th Five-Year Plan sets the wastewater treatment rate at 70% for counties and 30% for townships. 9. Weighted Average Cost of Capital. The nominal cost of equity was calculated at 8.0%, assuming a risk-free rate of return of 6.0% plus a 2.0% margin. Income tax is assumed at a preferential tax rate with the WACC calculated on an after-tax basis. The other assumptions are domestic inflation rate of 3.0% and international inflation rate of 1.4%. The computed WACC for the component is 3.0% for Tongmu WWTP and 3.1% for Xuanfeng WWTP (Table 2).

Table 2: Calculation of the Weighted Average Cost of Capital

Tongmu WWTP (Shangli County)

Xuanfeng WWTP (Luxi County

Financial component ADB Counterpart

Fund ADB

Counterpart Fund

A. Amount (CNY10,000) 1,692.26 1,650.71 2,525.16 2,785.41

B. Weighting 50.62% 49.38% 47.55% 52.45%

C. Nominal cost 3.47% 8.00% 3.47% 8.00%

D. Income tax rate (preferential tax rate) 25%

25%

E. Tax-adjusted nominal cost [C x (1 - D)] 2.60% 8.00% 2.60% 8.00%

F. Inflation rate 1.40% 3.00% 1.40% 3.00%

G. Real cost [(1+E) / (1+F) - 1] 1.19% 4.85% 1.19% 4.85%

H. Weighted component of WACC 0.60% 2.40% 0.56% 2.55%

Weighted Average Cost Of Capital 3.00% 3.11%

Source: Asian Development Bank Estimates

WWTP = wastewater treatment plant

10. Financial sustainability. In the People’s Republic of China, the collection system (consisting of pipelines, manholes, and pump stations) is considered a public good, with the capital and operating costs paid by the local governments. Wastewater treatment is considered a commercial activity and a tariff is charged to recover some of the costs. While the WWTP component has a cost-recovery objective, the low treatment capacity of the WWTPs (especially the Tongmu WWTP) is a constraint for financial viability of the investment. Initial financial evaluation determined that at the nationally specified rural wastewater tariff rate of CNY0.85/m3, full cost recovery of the capital investment plus O&M costs is not possible, given the small scale of the WWTPs.13 The current tariff level can only support 20% of the WWTP investment cost

13 In 2010, Jiangxi Province set the current wastewater tariff at CNY0.80/m3 for residential customers throughout

Pingxiang municipality. The National Development and Reform Commission specified that by December 2016 the nationwide rural wastewater tariff will be CNY0.85/m3, and the urban wastewater tariff CNY0.95/m³. Minimum non-residential wastewater tariffs will also increase, to CNY1.40/m³ for urban users and CNY1.20/m³ for rural users.



and 100% of the O&M cost. To achieve full cost recovery of both capital and recurrent costs, a tariff of CNY3.5/m3 would be required, which is unrealistic to implement in the short or medium term. 11. An analysis of the recurrent cost to operate and maintain the WWTPs has therefore been carried out. The wastewater tariff will be incremental revenue to the local governments once the WWTPs begin operating. The analysis concludes that tariff revenue generated from this component can adequately fund O&M costs. The operating margin estimated based on current tariff levels and full O&M cost recovery is 16% for Tongmu WWTP, and 22% for Xuanfeng WWTP. This component will generate a positive operating margin even under a stress scenario (a 10% reduction of tariff revenue and 5% increase in O&M costs); the wastewater tariff coverage of recurrent costs under the base case and stress scenarios is in Table 3.

Table 3: Financial Sustainability for Wastewater Treatment Plants

Unit Tongmu Xuanfeng

Base Case

Capacity m3/d 2,500 5,000

Tariff CNY/m3 0.85 0.85


Annual O&M

Electricity 19 35

Chemicals 3 7

Salary and welfare 9 18

Repairs 16 27

Maintenance 3 5

Administration 15 28



O&M cost/m3 CNY/m3 0.71 0.66

Low Case

Stress test: -10% revenue and +5% O&M




O&M cost/m3 CNY/m3 0.75 0.69

CNY = yuan, m3 = cubic meter, m3/d = cubic meter per day, O&M = operation and maintenance. Source: Asian Development Bank estimates.

12. In Jiangxi Province, Jiangxi Hongcheng Waterworks Company (the Company) is responsible for wastewater treatment in the province’s major cities and county towns under a transfer–operate–transfer model with a 30-year concession agreement. There is no requirement for the Company to operate the two project WWTPs in towns; given their small scale, such operation is not appealing to the Company. The local government is prepared to staff and operate the WWTPs; this could be conducted via a service contract between the towns and the Company, in which the company provides training and weekly visits by their staff operating WWTPs in nearby county towns. The WWTPs will not become operational until 2020, leaving sufficient time for the local government to make the necessary arrangements.14 13. Water supply and tariff affordability. Currently, all district and county-level towns (i.e., local government capitols) have water supply and wastewater treatment. Water supply

14 The Risk Assessment and Risk Management Plan (accessible from the list of linked documents in Appendix 2 of

the Report and Recommendation of the President) includes the change in ownership.



companies serving the Pingxiang urban areas, and Luxi and Shangli counties are 51% owned by the China Water Affairs Group. In Lianhua County and Xiangdong District, the Jiangxi Provincial Water Conservancy Investment Group controls 60% of the water supply companies. Residential water supply tariffs are CNY1.5/m3 in Lianhua, Luxi, and Shangli counties and CNY1.6/m3 in Xiangdong District (Table 4).

Table 4: Current Water Supply, Tariff, and Estimated Revenue

County Town

Current Residential Water Consumption Water

supply Population Households Connected Per

Household Town Total Revenue

(m3/day) (no. of people) (no.) (%) (m3/month) (m3/day) (CNY/month)

Luxi Xuanfeng 3,000

18,000 5,625 80% 15

2,250 100,000 Yinhe 5,000

Shangli Tongmu 3,000 10,000 3,125 1,250 56,000

CNY = yuan; m3 = cubic meter. Notes: 1. Family size (from Poverty and Social Analysis Study) is 3.2.

2. Water tariff in Luxi and Shangli counties is CNY1.5/m3. 3. Assumed average urban household consumption rates are used to estimate total residential water and

wastewater services. Source: Asian Development Bank estimates.

14. WWTPs have been built in all county towns. The current wastewater tariff (CNY0.80/m3) was established in 2010 based on directives from Jiangxi Province. It is charged only in locations with wastewater services. When increasing water or wastewater tariffs, the water supply company requests a water tariff increase; costs are reviewed by the local government price bureau to determine whether the increase is appropriate. There is at least one public hearing. The water supply company prepares a report, which is reviewed by the local government, and if approved sent to the Pingxiang Municipal Development and Reform Commission for final approval. 15. The tariff analysis includes assessments of affordability for project beneficiaries. The primary social objective of water and wastewater tariff structures should be to ensure that all members of the community have access to these services without placing an undue burden on household finances. For the purpose of estimating residential consumption of water and wastewater services, it is assumed that utilization is 15 m3/month in urban centers and 10 m3/month in rural areas. Volumetric residential water tariffs in the project towns where WWTPs will be constructed are currently CNY1.5/m3. For new customers there is an initial fee (CNY1,000 for urban and CNY600 for rural residents) as a contribution towards water supply network capacity, management, and water meter costs. Table 4 shows the initial fee defrayed over 5 years at an annual interest rate of 12%. Wastewater tariffs used in this analysis are CNY0.85/m3, the level the National Development and Reform Commission has specified to be implemented by December 2016. Disposable household incomes are based on the household socioeconomic survey.15

Table 5: Wastewater Tariff Affordability

Household group

Monthly disposable

income

(CNY)

Water consumption

(m3/month)

Water and wastewater

bill

(CNY/month)

% of income for existing customers

Initial fee

(CNY/month)

Total

(CNY/month)

% of income for new

customers

Wastewater tariff = CNY0.85/m3

Urban (average) 5,650 15 35 0.6 22 57 1.0

Rural (rural) 2,660 10 24 0.9 13 37 1.4

Lowest quartile 2,100 10 24 1.1 13 37 1.7

CNY = yuan, m3 = ,cubic meter

15 Jiangxi-Pingxiang Poverty and Social Analysis, November 2014.




16. Table 5 shows that a wastewater tariff of CNY0.85/m3 results in a water and wastewater monthly bill that is less than 2% of urban and rural disposable income. Local governments will annually review water and wastewater tariffs to assess affordability and provide assistance to lower-income people through the minimum living standards program.

4 Financial Management Assessment

17. The financial management assessment (FMA) was conducted in October 2014. The FMA considered the capacity of Pingxiang Municipal Government, Pingxiang Urban Construction and Investment Development Company (PUCIDC), Lianhua County Government, Luxi County Government, Shangli County Government, and Xiangdong District Government. The FMA included funds-flow arrangements, staffing, accounting and financial reporting systems, financial information systems, and internal and external auditing arrangements. These are the financial management activities that the executing agency/implementing agencies will do during project implementation. Results of the questionnaire are in the FMA supplementary document. 18. Based on the assessment, the key financial management risks identified are the lack of knowledge about ADB financial management policies and procedures, lack of standardized procedures, and inadequate budget planning process for project implementation. Given the participation and support from the county and district finance bureaus, it is concluded that the overall pre-mitigation financial management risk of executing agency and implementing agencies is “moderate”. Adequate preparatory project training can mitigate the risk and the executing agency and implementing agencies have agreed to implement an action plan to address the deficiencies.

Table 6: Financial Management Action Plan

Key Risks Activities to Mitigate Risks Responsible Timeline

PMO and PIU staff are not qualified

Develop written job descriptions including knowledge, skills, and ability required for the positions

Project implementation

consultant

Prior to loan effectiveness

PMO and PIU staff unfamiliar with ADB policies and procedures for financial management of ADB loans

Conduct training on ADB's payment policy, accounting, and financial reporting requirements

No standardized procedures Develop a system of written financial policies and manuals to guide PMO and PIU staff

Inadequate budget planning for PMO and PIU

PMO and each PIU will prepare a budget for project implementation and update annually

Changes in PMO/PIU staffing Hire replacements according to updated job descriptions; provide initial training

Project implementation

consultant

During loan implementation

Staff forget proper procedures Targeted (staff and subject) refresher training

Financial records are lost Back-up equipment and procedures for electronic files and paper (hard) documents; computer security procedures (e.g., password, antivirus software)

Accuracy of financial records Regular and timely reporting to ADB; periodic external audit

ADB = Asian Development Bank, PMO = project management office, PIU = project implementation unit. Notes:

1. Staffing of the project implementation consultant includes a domestic financial specialist. Qualifications for the specialist include familiarity and experience with projects financed by ADB loan. The specialist will update financial documents related to the project; assist in the development of financial management procedures in accordance with ADB policies and procedures; and provide training to PMO and PIU staff. For example, the Financial Specialist will work with PMO and PIU financial staff to develop the step-by-step procedures, forms, and timelines for receiving, reviewing, approving, and paying contactor invoices; properly recording payment; and records storage and retention.

2. The project implementation consultant will assist the PMO and each PIU to prepare 5-year budgets (the length of project implementation). Local governments should provide adequate funding (listed as a loan covenant). Budget should be updated annually based on the previous year experience.

3. County and district finance bureaus will also extend their help and support and they are part of the PIU team.




19. Through Component 4, Project Management Support and Capacity Development; a loan implementation consultant (LIC) will be hired. The LIC will include financial and accounting and procurement specialists who will provide training on financial management, accounting, auditing and procurement and support during implementation. Training will include county and district finance bureaus who are part of the PIU team and cover the following topics:

(i) financial management and reporting;

(ii) budget preparation and oversight;

(iii) disbursement procedures;

(iv) financial audit process and requirements;

(v) proper use and accounting of the imprest accounts and subaccounts; and

(vi) other relevant areas as identified by the consultants during implementation.



Annex 1: Details about Pingxiang Wastewater Tariff and FIRR Summary The wastewater tariff is only for treatment, not collection system

Wastewater tariff by December 2016 in rural areas should be CNY0.85 per cubic meter

For Pingxiang proposed wastewater treatment plants this tariff rate is more than sufficient to cover 100% of operations and maintenance (O&M) costs but only a portion of the capital costs.

Pingxiang WWTP are 2500 m3/d and 5000 m3/d. This small size affects the ability to recover capital costs. A tariff on the order of 3.5m3/d. This small size affects the ability to recover capital costs. A tariff on the PRC Approach to Wastewater (WW) Tariff Collection system consisting of pipelines, manholes, and pump stations is considered a public good

and the capital costs and operating costs are paid by local government.

The wastewater tariff pays for treatment which is considered a commercial activity.

Tariffs are set by local government.

Discussion of WW Tariffs Largest cities have higher tariff rates than rural areas. One reason for this is that PRC regulations require wastewater treatment plant (WWTP) in large cities to reach Grade 1A standards, while WWTP in rural areas, require only Grade 1B standards. The difference is that Grade 1A requires higher removal of nitrogen and phosphorus. [GB18918-2002 "Urban Sewage Treatment Plant Pollutant Discharge Standards]. To upgrade Class 1B to Class 1A, the cost is approximately 600~800 CNY per cubic meter. And there is about additional 0.2 CNY/m3 for operational costs including chemicals, electricity, and processing additional volumes of sludge. From Yuanta, “Industry Update for China Water and Waste Treatment Sector”, 18 Aug 2011 “rom Yuanta, “Industry Update for China Water and Waste Treatment Sect3 in 2001 to RMB0.78/m3 in 2010 for the 36 largest cities, representing an 11% compound annual growth rate over this period.10 “riod.10 for the 36 largest cities, representing an 11% compound annual growth rate over this pludge.ruction and sludge disposal) or RMB1.7/ton (including pipeline construction and sludge disposal costs), based on the national grade 1B discharge standard.” [1 ton = 1 cubic meter = 1000 liters]

Analysis of Pingxiang WW Tariffs Using data from the FIRR model, the table below shows CNY0.40 per cubic meter operating cost for Tongmu WWTP and CNY0.43/m3 for Xuanfeng WWTP. This is easily covered by the nationally specified WW tariff of CNY0.85/m3 for rural areas.

Parameter units Tongmu Xuanfeng

Size m3/d 2500 5000

Operating Expenses (OPEX)

CNY/year 363,930 783,281

CNY/day 997 2,146

CNY/m3 0.40 0.43

Source: O&M data used in the Pingxiang FIRR Calculation


AECOM Asia Company Ltd G-1 Asian Development Bank

APPENDIX G: ECONOMIC ANALYSIS16

TABLE OF CONTENTS

1 INTRODUCTION AND RATIONALE

1.1 INTRODUCTION 1.2 ECONOMIC RATIONALE 1.3 THE PROJECT AND ITS ECONOMIC RATIONALE 1.4 POLICY ISSUES; FUNGIBILITY 1.5 HOUSEHOLD SURVEY

2 INTRODUCTION TO EVALUATION

2.1 BASIS 2.2 ADJUSTMENT OF COSTS 2.3 INVESTMENT COSTS 2.4 OPERATION AND MAINTENANCE EXPENSES 2.5 POPULATION

3 BENEFITS OF WASTEWATER SUB-COMPONENTS

3.1 METHODOLOGY 3.2 MEAN WILLINGNESS TO PAY (WTP) TO CONNECT 3.3 MEAN WTP FOLLOWING CONNECTION 3.4 MEAN WTP FOR IMPROVED WASTEWATER COLLECTION AND TREATMENT 3.5 MEAN WTP FOR IMPROVED DOWNSTREAM WATER QUALITY (NON-USER BENEFIT) 3.6 RELEVANT POPULATIONS 3.7 INCREASE OF WTP OVER TIME 3.8 DEMAND ANALYSIS

4 BENEFITS OF FRMR SUB-COMPONENTS

4.1 INTRODUCTION 4.2 NATURE OF ECONOMIC FLOOD LOSSES 4.3 EVENT DAMAGE VALUATION 4.4 BENEFITS OF AN IMPROVED RIPARIAN ENVIRONMENT 4.5 HISTORIC EVENT DAMAGE 4.6 TOTAL DAMAGE ESTIMATES

5 BENEFITS OF THE ROAD SUB-COMPONENT

5.1 INTRODUCTION 5.2 VEHICLE OPERATING COSTS 5.3 JOURNEY TIME SAVINGS 5.4 FATALITY, INJURY AND CRASH COST SAVINGS 5.5 GENERATED TRAFFIC BENEFITS 5.6 OTHER COSTS AND SUMMARY OF ECONOMIC VALUES 5.7 USER INDICATORS 5.8 TRAFFIC FORECASTS (DEMAND ANALYSIS)

6 EVALUATION OF WASTEWATER SUB-COMPONENTS

6.1 EVALUATION OF WW SUB-COMPONENTS 6.2 COMBINED EVALUATION OF WW SUB-COMPONENTS; SENSITIVITY 6.3 AFFORDABILITY

7 EVALUATION OF FRMR SUB-COMPONENTS

7.1 INTRODUCTION 7.2 COST-EFFECTIVENESS 7.3 SUMMARY OF EVALUATIONS 7.4 EVALUATIONS OF INDIVIDUAL SUB-COMPONENTS 7.5 COMBINED EVALUATIONS OF ALL FRMR SUB-COMPONENTS; SENSITIVITY

16 This economic analysis is consistent with that presented in the ADB’s Report and Recommendations of the President (including corresponding linked documents), as approved by the ADB Board of Directors on 21 September 2015.



8 EVALUATION OF THE ROAD SUB-COMPONENT

8.1 INTRODUCTION 8.2 COST-EFFECTIVENESS 8.3 MODELLED NETWORKS 8.4 EVALUATION – LUXI TOWN DIVERSION

9 COMBINED EVALUATION OF ALL SUB-COMPONENTS

9.1 COMBINED EVALUATION 9.2 SENSITIVITY 9.3 DISTRIBUTIONAL ANALYSIS

LIST OF FIGURES FIGURE 1 GDP PER HEAD, PINGXIANG COUNTIES, 2009 AND 2012

FIGURE 2 SHARE OF PLC GDP BY COUNTY, 2012

FIGURE 3 PROPENSITY TO CONNECT

FIGURE 4 PROPENSITY TO PAY MONTHLY AMOUNT FOLLOWING CONNECTION

FIGURE 5 STRUCTURAL DAMAGE TO DWELLINGS

FIGURE 6 EV1 PLOT OF HISTORIC FLOOD DAMAGE

FIGURE 7 FLOOD DEFENSE BENEFITS

FIGURE 8 PROPOSED ROAD AND EXISTING NETWORK

FIGURE 9 PROJECT ROAD: FORECAST TRAFFIC

LIST OF TABLES TABLE 1 HOUSEHOLD SURVEY: NUMBERS OF RESPONDENTS

TABLE 3 CALCULATION OF STANDARD CONVERSION FACTOR (SCF)

TABLE 2 CONVERSION FACTORS FOR ENVIRONMENTAL PROJECTS

TABLE 3 CALCULATION OF STANDARD CONVERSION FACTOR (SCF)

TABLE 4 WASTEWATER PROJECT INVESTMENT COSTS IN CNYM

TABLE 5 FRMR SUB-COMPONENT INVESTMENT COSTS (2014 CNYM)

TABLE 6 ROAD SUB-COMPONENT INVESTMENT COSTS (2014 CNYM)

TABLE 7 WW OPERATIONS AND MAINTENANCE: UNIT COSTS

TABLE 8 FRMR OPERATION AND MAINTENANCE COSTS

TABLE 9 REPRESENTATIVE UNIT MAINTENANCE COSTS

TABLE 10 HDM4 MAINTENANCE COST PARAMETERS

TABLE 11 PINGXIANG URBAN AND RURAL POPULATIONS, 2000 TO 2012

TABLE 12 WTP TO CONNECT - PROBIT REGRESSION RESULTS

TABLE 13 WTP A MONTHLY AMOUNT - PROBIT REGRESSION RESULTS

TABLE 14 WTP VALUES FOR IMPROVED WATER QUALITY

TABLE 15 BENEFICIARY POPULATIONS, WATER QUALITY IMPROVEMENTS

TABLE 16 WWTP CAPACITY CALCULATIONS

TABLE 17 NATIONAL AND ADJUSTED JIANGXI FLOOD DAMAGE, 2000-2010

TABLE 18 BENEFITS OF RIPARIAN IMPROVEMENTS

TABLE 19 LIANHUA EVENT DAMAGE ESTIMATES

TABLE 20 XIANGDONG EVENT DAMAGE ESTIMATES

TABLE 21 SHANGLI EVENT DAMAGE ESTIMATES

TABLE 22 LUXI EVENT DAMAGE ESTIMATES

TABLE 23 EVENT DAMAGE SCALING FACTORS

TABLE 24 AVERAGE ANNUAL DAMAGE (AAD) FROM FLOODING

TABLE 25 REPRESENTATIVE VEHICLES

TABLE 26 VEHICLE CHARACTERISTICS

TABLE 27 FUEL COSTS

TABLE 28 LABOR COSTS

TABLE 29 ECONOMIC VALUES OF VEHICLES, TIRES, LABOR AND TIME

TABLE 30 ROAD USER COST (RUC) SUMMARY



TABLE 31 OPERATING SPEEDS

TABLE 32 MOTORIZED VEHICLE CLASSIFICATION USED IN TRAFFIC COUNTS

TABLE 33 G320 TRAFFIC, 2000-2013

TABLE 34 G319 TRAFFIC, 2014

TABLE 35 MOVING OBSERVER (MO) COUNTS, 23 OCT 2014

TABLE 36 12H CLASSIFIED COUNTS, 29 OCT 2014

TABLE 37 ADOPTED 2014 TRAFFIC ON PROJECT AREA ROADS

TABLE 38 BASE YEAR TRAFFIC ON REFERENCE CASE NETWORK

TABLE 39 DIVERTED TRAFFIC AT 2014 DEMAND LEVELS

TABLE 40 NORMAL TRAFFIC GROWTH: SUMMARY OF ADOPTED RATES

TABLE 41 NORMAL AND GENERATED TRAFFIC ON PROJECT ROAD, 2021-2040

TABLE 42 LIANHUA WASTEWATER: ECONOMIC EVALUATION IN CNYM

TABLE 43 TONGMU (SHANGLI) WW: ECONOMIC EVALUATION IN CNYM

TABLE 44 XUANFENG (LUXI) WW: ECONOMIC EVALUATION IN CNYM

TABLE 45 XIANGDONG WW SUB-COMPONENT: ECONOMIC EVALUATION IN CNYM

TABLE 46 ECONOMIC EVALUATION OF ALL WW SUB-COMPONENTS

TABLE 47 SENSITIVITY TEST RESULTS – WW SUB-COMPONENTS

TABLE 48 AFFORDABILITY

TABLE 49 SUMMARY OF FRMR EVALUATIONS

TABLE 50 LIANHUA FRMR EVALUATION

TABLE 51 XIANGDONG FRMR EVALUATION

TABLE 52 LISHUI FRMR EVALUATION

TABLE 53 JINSHAN FRMR EVALUATION

TABLE 54 LUXI FRMR EVALUATION

TABLE 55 COMBINED FRMR EVALUATION

TABLE 56 SENSITIVITY TEST RESULTS – FRMR SUB-COMPONENTS

TABLE 57 MODELLED NETWORKS

TABLE 58 EVALUATION OF PROPOSED ROAD, 2014 CNYM

TABLE 59 EVALUATION OF ALL COMPONENTS

TABLE 60 SENSITIVITY TEST RESULTS

TABLE 61 BENEFITS DISTRIBUTION: POVERTY IMPACT RATIO



1 INTRODUCTION AND RATIONALE

1.1 Introduction

1. This appendix describes the economic evaluation of project components and their economic rationale. It also set out the necessary economic background for the economic evaluation.

2. Pingxiang Municipal Government (PMG) plans the construction of four wastewater subcomponents, eight integrated flood risk management (IFRM) subcomponents and a rural-urban class II link road. The immediate beneficiary areas lie within three rural counties (Lianhua, Luxi and Shangli) and one urban district (Xiangdong). It is intended that each should receive improved wastewater collection and/or wastewater treatment, and improved flood risk management. The proposed class II road links Shangli and Luxi counties and will improve access to the main east-west corridor for rural populations in the north-east of Pingxiang prefecture level city's urban area (PLCUA).

3. The analysis in the draft road FSR was of little value as the traffic used in the analysis was not based on observed traffic; the FSR consultants neither carried out an origin-destination (OD) survey nor did they undertake any local traffic counts. This was remedied to some extent by the PPTA consultants, who in late October arranged for the Pingxiang Transportation Bureau (PTB) to carry out a limited program of 12h classified counts and a turning movement count as a substitute for an OD survey. The PPTA consultants also undertook their own moving observer (MO) counts. In early November the PPTA consultants received an updated FSR. Apparently based on the classified counts requested by the PPTA consultants, the updated FSR contains an OD matrix. This matrix does not appear to be based on roadside interviews; rather it has been back-calculated from the limited additional 12h counts using a transport planning model.

4. The Integrated Flood Risk Management (IFRM) documentation contains very little water depth-damage data. There is no attempt to quantify expected damage with and without the project. Neither the IFRM nor the wastewater FSRs contains and economic analysis.

1.2 Economic rationale

1.2.1 National context

5. The government projects a 4 percent increase in urbanization during the 12th Five-Year Plan period of 2011-2015. This implies an annual net increase of the urban population of about 10 million. Acceleration of urban development is a priority under the plan and investments of around US$1 trillion in urban infrastructure are expected during the period. Infrastructure and services will be developed particularly in small and medium-sized cities; urban management will be improved at all levels. The government is also prioritizing a process of urbanization and urban development that provides the greatest economic and social benefits across the country, as well as safeguarding the environment. A high priority is also accorded to making all cities livable by improving the urban environment, including efforts to improve municipal and social services, reduce pollution and improve land use.

6. The plan emphasizes small city and town development as a means to provide a higher standard of living to rural migrants without exacerbating the infrastructural and other problems afflicting large cities. Small towns are expected to provide a necessary bridge for the transition from a rural to an urban society, absorbing labor from the countryside, as well as supporting rural industries that contribute a major share of PRC's economic growth. Jiangxi Province has been selected to demonstrate this new small-town orientated development approach.

1.2.2 Pingxiang economy

7. The implementation of wastewater collection and treatment, flood alleviation and rural-urban link roads are adjunctive and in some cases necessary (though not sufficient) conditions for successful urbanization and economic development. The comparator areas for Pingxiang PLC used in the extensive work carried out during phase 1 of the current PPTA (and reported in version 2 of their June 2014 interim report) are the Changsha-Zhuzhou-Xiangtan Extended Metropolitan Region (CZT) and two of its administrative units, Changsha PLC and Changsha PLCUA.



8. Much is made in the phase 1 PPTA interim report of the agglomeration benefits of the CZT. Agglomeration benefits arise when the costs of being crowded (high rents, wages and congestion) are outweighed by the benefits of urban co-location by related businesses (access to concentrated markets, a large and relevantly qualified labor pool, knowledge spillovers, etc.). In the case of Changsha the example cited is that of construction equipment.

9. By way of contrast, Pingxiang PLC is essentially a low wage industrial economy, historically dependent on mining and associated industries. The exception to this within the PLC is represented by its poorest county, Lianhua, where the share of GDP represented by agriculture remains at 18 percent (2012 data). The average manufacturing wage in 2012 was CNY31,000 per year, compared with CNY70,000 in Changsha PLCUA.

10. To summarize:

over the period 2000-2010 the populations of Pingxiang PLCUA and the three counties barely grew (see table 1 in annex 2 of the phase 1 interim report). For the PLC as a whole the compound annual growth rate was 0.73 percent (Changsha PLCUA: 3.8 percent). Although the urban population of the PLC grew significantly over this period (5.0 percent), the phase 1 PPTA concludes that this arose from administrative urbanization and not a wave of rural migration to its larger towns and urban neighborhoods

in GDP per head terms, Lianhua emerges as the poorest area and is a nationally designated poverty county. Of all the PLC counties it has the lowest absolute GDP per head, the lowest recent growth rate and is the most dependent on the primary sector (i.e. agriculture). See figures 1 and 2

Shangli has enjoyed the highest growth rate in recent years (figure 1) and, apart from the central district of Xiangdong has the largest commercial share of GDP (figure 2). Testament to this is traffic congestion on the G319 and the extensive industrial and business estates that stretch northwards from the G60

in terms of regional and national comparisons, only Lianhua was below the Jiangxi 2012 provincial average of CNY28,750 and only Anyuan was above the PRC average of CNY42,580

at the PLC level, the structure of the economy is characterized by a shift away from the primary sector (agriculture), whose share of PLC GDP has dropped from 14.4 percent in 2000 to 7.2 percent in 2012, and a similar growth (54.3 to 60.8 percent) in the secondary sector (industry, including construction). The share represented by services (the tertiary sector) has barely grown over the same period

manufacturing employment in 2012 was dominated by coal mining, non-metallic minerals, chemicals, ceramics and steel-rolling, which together accounted for 68 percent of manufacturing employment (in businesses with an output greater than CNY5m). Pingxiang Iron & Steel has approximately 15,000 employees and is based in Anyuan (hence Anyuan's large industrial share of GDP). Shangli (and Liuyang, further north along the G319) are both nationally noted centers of fireworks manufacture



Figure 1 GDP per head, Pingxiang counties, 2009 and 2012

Figure 2 Share of PLC GDP by county, 2012

11. Coal mining was established in Pingxiang in the early years of the 20th century and has a prominent place in the history of the CPC. The mines are now said to be depleted although observation confirms that they are still operating. The railway from Anyuan to Zhouzhou was originally built in 1903-5 to carry coking coal for onwards transport to steelworks in the Wuhan area.

12. This east-west corridor remains the principal transport corridor through Pingxiang, now occupied by the G320 and the G60 expressway (completely opened in 2008) and since December 2014 a high speed rail line. Journey time via the G60 to Zhuzhou (approximately 100km) is approximately 75 minutes by car. With completion of the S89 Changsha-Liuyang-Pingxiang expressway (expected in 2015) the journey to Changsha urban area from Pingxiang urban area (approximately 150km) will take around 120 minutes. The S89 will (depending on the locations of intersections) improve access to the CZT urban centers for residents of Shangli and to a much lesser extent Luxi. It will also divert some traffic from the congested G319 north-south highway that connects Shangli and Pingxiang urban centers.

0

10,000

20,000

30,000

40,000

50,000

60,000

2009 2012

GD

P/he

ad, c

urre

nt C

NY

Anyuan (13%)

Xiangdong (13%)

Luxi (13%)

Shangli (17%)

Lianhua (12%)

Estimated realGDP/hd growth rates shown in brackets

0%

10%

20%

30%

40%

50%

60%

70%

Anyuan Xiangdong Luxi Shangli Lianhua

Perc

ent o

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Primary

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1.3 The project and its economic rationale

1.3.1 Wide area rationale

13. Project sub-components are grouped together under the heading "integrated rural-urban infrastructure". In PRC, rural-urban integration is multi-faceted. In the context of the proposed ADB project it refers to efforts to improve rural physical development. Physical development is an output measure. At the outcome level, sub-components will also:

reduce the costs of flood damage and increase recreational and other land-use opportunities within flood plains

reduce negative externalities experienced in the immediate and downstream areas (e.g. untreated wastewater discharges having deleterious consequences for a downstream urban environment and possibly for its water supply)

in the case of the proposed road project, reduce road user (i.e. supply-chain) costs for trips between rural and urban areas and those diverting from the G319 and G320.

14. The phase 1 PPTA evidently expected the wider impact of these investments to be promotion of the relocation and start-up of businesses to and within suburban and rural areas, and to improve access to the CZT's agglomeration economy. Indeed they may assist access to the CZT, but, with the exception of Lianhua, much of Pingxiang PLC, especially along the G320 corridor, already enjoys low transport costs to the CZT (which will reduce further with completion of the Changsha--Liuyang--Pingxiang expressway). But while it has transport advantages, Pingxiang PLC is held back from agglomeration benefits by its low levels of educational attainment when compared with Changsha PLCUA and by low proportions of working age population.

15. Thus, while individual sub-components may achieve their intended local micro-economic outcomes, it may be erroneous to conclude that they will do much to restructure the local economy.

1.3.2 Wastewater sub-components

16. All wastewater sub-components reduce the negative externalities associated with the discharge of untreated or inadequately treated sewage into receiving water courses, many of which are headwaters. In the cases of Luxi, Shangli and to some extent Xiangdong, urban and rural communities will benefit from first-time mains sewerage and wastewater treatment. In the case of Lianhua, a largely urban population will benefit from separate foul sewerage.

1.3.3 Flood risk management and river (FRMR) sub-components

17. Flood damage seriously affects income levels and the quality of life, especially in low income, uninsured rural and urban settlements. The intangible consequences of flooding (anxiety, poor health) should also not be overlooked. The proposed sub-components will considerably reduce (but not eliminate) expected flood damage. In conjunction with the wastewater sub-components there will be a marked improvement in the wider riparian and riverine environment.

1.3.4 Road sub-component

18. The road does not have a single over-arching rationale. It functions as a link road, an upgrade and a new alignment to improve market access. PTB's view is that its link road function is its primary role.

19. At the network level it links the G319 south of Shangli urban center (at Guanxia village) and the G320 at Xuanfeng. For traffic for whom this corridor exactly matches their desire line, the proposed road reduces the total distance by 5km (from 49km to 44km). Passenger vehicles, in particular, will divert to the new road. Also, traffic wishing to join or leave the G60 at the Luxi interchange and whose trip ends are around Xuanfeng are likely to use the new road in preference to the G320 as it would reduce the distance from 22 to 12km. For traffic whose trip ends are, respectively, close to Luxi center and Shangli center, the proposed road is longer (by approximately 3km) than the existing road, but despite this will offer significant journey time savings and attract diverted traffic.

20. For its first 20km from the G319 the proposed road roughly follows a series of county and provincial roads, often cutting between the NW-SE orientated valleys that are the natural lines of



communication and are the predominant transport corridors. There are two busy town centers along this section, Dongyuang and Chishan; existing traffic is approximately 700 veh/day. The provision of a new road will reduce transport costs in this corridor and lead to substantial generated traffic (admittedly from a low base).

21. The remaining 24km also cut across existing valley lines to join the G320 opposite a new industrial estate on the outskirts of Xuanfeng. There is very little existing through traffic between Chishan and the G320 east of Luxi. Existing roads mostly have degraded concrete pavements but their alignments are akin to those of a mountain track. The population within the corridor is sparse and poor and there are no public transport services. The provision of a class II road across challenging terrain to link rural Shangli and parts of rural Luxi to employment opportunities in Luxi center and Xuanfeng/Yinhe will certainly generate traffic and indirectly contribute to additional jobs.

1.4 Policy issues; fungibility

22. The proposed project is consistent with PRC's first "National Plan on New Urbanization (2014-2020)", promulgated on 16 March, 2014. The guiding philosophy of this plan is: "changing the model of urbanization by putting people-centered urbanization first and gradually advancing the conversion of migrant population into urban citizens. Using city clusters as the main form, we must promote the coordinated development of small and medium-sized cities and small towns and use the overall carrying capacity as support to make urbanization more sustainable."

23. Relevant local policies include the Pingxiang Municipality Master Plan (2008-20) and the Pingxiang Resource-Depleted Transitional Development Plan (2013-20). The proposals are also consistent with:

special plans for urban water supply in Pingxiang (2010-20) and Xiangdong (2013-20)

special plan for Xiangdong county urban drainage (2013-20)

master plans for Luxi county (2007-20), Lianhua county (2011-30) and Shangli county (2007-20)

24. The proposed project road is listed in the Pingxiang Integrated Transport Plan 2012.

25. To the best of the PPTA consultants' knowledge there are no potential conflicts with local policies and procedures or those of other foreign aid agencies in Jiangxi province.

26. The fungibility of development partner (DP) assistance has been a concern to the development community since the 1990s. Development assistance is said to be fungible when the recipient would have undertaken the project anyway and the consequence of the aid is to release resources for the government to spend on other items. With so-called perfect fungibility DP funds effectively finance the government's marginal project, not the one that the funds are nominally intended for. Hence the argument that development assistance might as well be budget assistance.

27. Uncertainty over the counterfactual makes it difficult to determine whether assistance is fungible or not. In the case of Pingxiang it must be unlikely that the wastewater and flood defense sub-components in Lianhua, Luxi and Shangli would go ahead in the short to medium term without ADB support. There is more doubt over the proposed road, as the PTB makes it clear that it would be built through to Xuanfeng regardless of ADB support. There would of course be no ADB technical assistance without the ADB project.

28. In conclusion, while there may be some fungibility, it is offset by (a) swifter project execution with ADB support, (b) better project design and (c) ADB's TA support.

1.5 Household survey

1.5.1 Sample size

29. A social survey of approximately 700 households was undertaken by the PPTA consultants in late August 2014. Within the survey were questions related to willingness to pay (WTP) for wastewater improvements, experience of flooding incidents and household transport and travel behavior. Questions on a particular topic if the respondent lived in an area likely to benefit from an associated project. The table below indicates the scale of the survey. The actual numbers of valid responses used in any particular analysis are likely to be lower than the numbers shown.



Table 7 Household survey: numbers of respondents

Lianhua Luxi Shangli Xiangdong

Total 176 184 194 151

Water supply & wastewater 176 181 154 151

Transport - 163 79 -

Flooding 176 141 115 152

1.5.2 Sample characteristics

30. Annual median household income across the entire sample is CNY35,000 and the average CNY47,000. The average household size is 4.6, implying median and average incomes per head of CNY7,600 and CNY10,200. Lower and upper quartile household incomes are CNY25,000 and CNY55,000; the lowest decile is CNY15,000. Average incomes did not vary significantly as a function of location, nor did they depend on whether the respondent lived in an urban or rural area. The average household size is considerably higher than any appearing in published statistics (according to which the Pingxiang PLC average household size in 2012 was 3.7 - see table 11).

31. The average sample income of CNY47,000 quoted above is consistent with average urban and rural disposable incomes reported in the Interim Poverty and Social Analysis (PSA) of CNY67,809 and CNY31,898 respectively (table 89 of the PSA).

32. Ignoring outliers, reported average monthly household water consumption for all households with internal plumbing is 12m3, equivalent to 85 liters per head per day (lcd); household location is not a significant explanatory factor. The standard deviation of monthly household consumption is 8.6m3, implying high variability.

33. Household water consumption is a key parameter in the design of the wastewater sub-components, which are predominantly intended to treat household sewage. 85lcd / 12m3 per month is a rather lower value than that commonly used for design purposes and certainly lower than that used in the draft WW FSRs here. For comparison:

an ADB working paper (no 201, 2010) reported monthly use in Fuzhou City in 2009 of 16m3 and an average household size of 3.7, implying 140lcd. Income levels were several times higher than those in the project areas and appliance ownership probably much greater

a PPTA in Huainan (Anhui Huainan Urban Water Systems Integrated Rehabilitation Project, 2013) took monthly use of 13-17m3

a PPTA in Hubei (Hubei Enshi Qing River Upstream Environmental Rehabilitation Project, 2013) reported monthly use of 14.6 to 17.6m3 for low and average income households respectively

34. Fifty percent of households claim that they experience flooding during heavy rain. The proportion is highest in Shangli (70 percent) and lowest in Luxi (39 percent). Although 50 percent report flooding, only 37 percent say that flooding is frequent or very frequent; again Shangli is worst affected (61 percent) and Luxi least (21 percent). Only 32 respondents (5.5 percent) say that their house was flooded, but 16 percent report crop loss or damage.

35. Respondents were asked about their "flood of memory". Seventeen percent report that 2014 was the worst, followed by 2009 (3 percent) and 1982 (2 percent).

36. The river sub-components may generate enhanced recreational opportunities. Respondents were not asked to place a value on changes in such opportunities, but were asked about their attitudes to the river environment. Of 580 responses, 240 (41 percent) said that their first choice for the best use of land alongside the river was as parks or recreational green space. This was the modal response, followed by 178 (31 percent) favoring agricultural land. Those favoring building on riparian land formed a small minority (16, or 3 percent).

37. Vehicle ownership is surprisingly high. Fifty-seven respondents own either a car or truck, equivalent to 53 per 1,000 head of population (compared with 45 for Jiangxi province in 2012). Forty-six own a car, equivalent to 43 per 1,000 (compared with 34 per 1,000 in Jiangxi in 2012).



38. The reported return trip rate to Pingxiang urban center is 0.10 per household per day, of which 45 percent are for work purposes. For Shangli residents the trip rate is 0.13 while for Luxi it is 0.08. The trip rate is no lower for those reporting that access is "difficult" or "very difficult". Trip rates to Shangli and Luxi urban centers are also assessed. Overall, the trip rate is 0.11, but with an apparent large difference between the two counties: Shangli households make 0.05 trips to Shangli center, while those in Luxi make 0.22 trips to Luxi center. Sample sizes are small, so caution in drawing conclusions is advised. On balance, though, it seems that Luxi residents tend to visit their local center, while Shangli residents visit Pingxiang center.

39. Using trip rates, estimates of the population within the corridor of the proposed road (put at 106,295 in the phase 1 PPTA), vehicle capacities and trip lengths it would be possible to make indicative estimates of local traffic expected to use the new road. Unfortunately, key questions concerning propensity on the part of Shangli residents to make trips to Luxi center or Xuanfeng were not put and so this approach was in the end not used.

40. Bus is the overwhelming mode of choice for all trips to Pingxiang urban center (80 percent of those responding). Buses were followed by cars (12 percent) and motor-cycles and electric cycles (8 percent). In the case of trips to the local center, buses (48 percent) were followed by motor-cycles and electric cycles (27 percent) and cars (12 percent).



2 INTRODUCTION TO EVALUATION

2.1 Basis

41. Project sub-components are, for practical evaluation purposes, independent. That is, the costs and benefits of each may be calculated in isolation. This approach probably understates the benefits of the FRMR and wastewater sub-components, where each contributes to an improved river environment and their combined value is greater than the sum of the individual values. Conditions over a 25 year period from the assumed year of completion (2021) are compared for at least two cases: a do minimum (reference) case and a project case.

42. The analysis is in accordance with ADB's Guidelines for the Economic Analysis of Projects (1997) and other good practice guides referred to below. All predicted project costs and benefits are measured in 2014 economic prices. The world price system is used.

43. Construction is assumed to take place over a five year period from 2016 to 2020. Where expenditure profiles appear in FSRs they are used; otherwise the PPTA consultants have made assumptions similar to those used in the FSRs. Physical contingencies of 5 percent are used throughout.

44. 12 percent is the discount rate conventionally applied by ADB and is applied here. (Neither the WW nor the FRMR FSRs contain any quantified economic analysis and therefore do not use a discount rate; the road FSR uses the usual Chinese rate of 8 percent).

2.2 Adjustment of costs

45. Traded goods are measured at world prices. The adopted official exchange rate is CNY6.21 = US$1. Construction costs are largely non-traded and are converted to world prices using a standard conversion factor (SCF) of 0.98. Land is valued at its compensation price less taxes times the SCF. Unskilled labor is treated as being in surplus and is converted to economic prices using a shadow wage rate factor of 0.8 and the SCF. (An extensive analysis supporting the shadow wage rate factor (SWRF) can be found in the economics appendix to PPTA 8424 (Hubei Enshi Qing Upstream Environment Rehabilitation Project)). Skilled labor is treated as scarce and converted using the SCF. Labor costs are assumed to rise at 1 percent annually in real terms throughout the evaluation period. This is a common assumption used in economic evaluation. In fact real wages in PRC have risen much faster than this, but the position in individual work units and enterprises is much more complex and depends on changes in productivity and hiring practices.

46. The standard conversion factor (SCF) of 0.98 is calculated as the average of values for 2008-12 using the ADB simplified method, set out in the table below.

Table 8 Calculation of Standard Conversion Factor (SCF)

2008 2009 2010 2011 2012

Imports of goods & services, US$ bn (cif) (Z) 1,132 1,004 1,396 1,742 1,819

Exports of goods & service, US$ bn (fob) (X) 1,429 1,202 1,578 1,899 2,049

Import duties, US$bn (TZ)a 179.0 150.8 205.4 280.0 310.0

Export subsidies, US$bn (SX) 84 95 108 142 165

Tax on production of exports, US$bn (TX)b 229 192 252 304 328

SCFc 0.99 0.98 0.98 0.97 0.96

Sources: PRC National Statistics 2009-13 for imports, exports and export tax rebates, IMF for duties 2008-10

Notes: (a) for 2011-12, import duties factored from PRC National Statistics data for VAT and consumption taxes on imports (b) estimated at 16 percent of exports (c) SCF = (X+Z)÷(Z+TZ+X-TX+SX)



47. For comparison a number of aggregate conversion factors for similar projects are shown in the table below.

Table 9 Conversion Factors For Environmental Projects

Study CF Source

Guangxi Baise Integrated Urban Environment Rehabilitation Project (PPTA 7620, 2012)

0.93 Taken from Jiangsu Yancheng Wetland Project, ADB (2012)

Hubei Huangshi Urban Pollution Control & Environmental Management Project (PPTA 7607, 2011)

0.987 Taken from previous ADB studies: Hai River Pollution Control (2011) and Tianjin Integrated Gasification Combined Cycle Power Plant Project (2009)

Anhui Huainan Urban Water Systems Integrated Rehabilitation Project (PPTA 8045, 2013)

0.93 Unclear

Hubei Enshi Qing River Upstream Environment Rehabilitaiton Project (PPTA 8424, 2013)

0.88-0.89

0.88-0.90

Civil works

O&M expenses

Source: PPTA consultants 48. Land and resettlement (LAR) costs represent approximately 7 percent of financial base costs. In the absence of a properly functioning market for land, financial costs are based on the compensation payments made to those affected. The total compensation paid has two main elements: a land compensation fee and a resettlement subsidy. In addition there is compensation for properties demolished, but in most cases the total amount is dominated by the land element. The amount due is based on a multiple of the average annual value of output (AAVO) over the most recent three years.

49. Ranges of multiples are laid down in the Land Administration Law of January 1999, amended in 2004 (for other laws and regulations affecting land acquisition, see project resettlement plans). Provincial authorities are free to choose multiples as long as they fall within the national ranges. The road sub-component has the largest single LAR cost of any sub-component and in this case approximately 95ha of agricultural land is acquired at a price of CNY139,000/ha.

50. ADB and IFPRI (International Food Policy Research Institute) have studied the rice value chain in

several Asian countries, including the PRC (“The Quiet Revolution in Staple Food Value Chains”, ADB

and IFPRI, 2012). They estimate the farmer “reward” (a reasonable proxy for net margin) at

US$375/ton. For a yield of 7 tonne per hectare (t/ha) and an evaluation period of 20 years, the PV of reward foregone at a 12 percent discount rate is thus approximately CNY120,000/ha. This being close to the actual compensation rate paid, it is concluded that deducting taxes from financial compensation payments is an adequate proxy for the opportunity cost of land. In the evaluation this net financial cost is scaled by the SCF.

51. A standard conversion factor (SCF) of 0.98 is calculated as the average of values for 2008-12 using the ADB simplified method, set out in the table below.

Table 10 Calculation of Standard Conversion Factor (SCF)

2008 2009 2010 2011 2012

Imports of goods & services, US$ bn (cif) (Z) 1,132 1,004 1,396 1,742 1,819

Exports of goods & service, US$ bn (fob) (X) 1,429 1,202 1,578 1,899 2,049

Import duties, US$bn (TZ)a 179.0 150.8 205.4 280.0 310.0

Export subsidies, US$bn (SX) 84 95 108 142 165

Tax on production of exports, US$bn (TX)b 229 192 252 304 328

SCFc 0.99 0.98 0.98 0.97 0.96

Sources: PRC National Statistics 2009-13 for imports, exports and export tax rebates, IMF for duties 2008-10

Notes: (a) for 2011-12, import duties factored from PRC National Statistics data for VAT and consumption taxes on imports (b) estimated at 16 percent of exports (c) SCF = (X+Z)÷(Z+TZ+X-TX+SX)



2.3 Investment costs


52. The table below is taken from the costs available at the time of the LFF in March 2015. In all cases the investment cost profile is taken from the FSRs and is 8%:20%:30%:35%:7% from 2016-20.

53. In the case of Xiangdong, Xuanfeng and Tongmu making additional connections will involve the construction of laterals at an estimated CNY1,300 per lateral (estimate based on 2m x CNY290/m under a road pavement plus 5m x CNY150/m not under a road). Each lateral is assumed to connect 30 people.



Table 11 Wastewater Project Investment Costs in CNYm

Sub-component Part I civil works costs

Total FBC excl LARa

LAR cost net of taxes & contingencies

Economic costb

WWTP cap, m3/d

Sewerage, km

WWTP CNY per m3/d

Sewerage CNY/m

WWTP Sewerage

Lianhua - 54.0 66.3 0.1 68.3 - 84 - 640

Tongmu (Shangli) 28.9 13.7 48.1 1.1 50.6 5,000 23 9,060 600

Xuanfeng (Luxi) 45.3 16.9 69.6 1.1 72.7 2,500 25 11,560 670

Xiangdong - 47.0 52.9 0.4 54.8 - 80 - 590

Source: FSRs and PPTA consultants’ estimates Notes: (a) FBC = financial base cost, LAR = land and resettlement cost; excl = excluding (b) economic cost = (FBC excl LAR x SCF + net LAR cost x SCF) plus 5% physical contingencies



2.3.2 FRMR sub-components

54. The following is taken from final DI and RP sources.

Table 12 FRMR Sub-Component Investment Costs (2014 CNYm)

Location FBC excl LARb

LAR cost net of taxes &

contingenciesc

Economic costd

Initial dredging FBCxSCF

Xiangdong 132 20.4 156 24.0

Shangli – Jinshan 111 20.6 135 4.8

Shangli – Lishui 62.4 12.7 77.3 5.0

Luxi 342 25.3 378 12.7

Lianhua 206 5.7 218 11.3

Source: final data from Design Institute (DI), final RP from the RP Institute and PPTA consultants’ estimates

Notes: (a) length of embankments and retaining walls (in some cases dredged lengths are substantially greater)

(b) excludes contingencies, interest during construction (IDC) and LAR costs

(c) economic cost = (FBC excl LAR x SCF + net LAR cost x SCF) plus 5% physical contingencies

55. The FSRs do not contain expenditure profiles. For this study the following profile is used:

5%:15%:25%:25%:30%. (The final year’s percentage is higher than usual because of initial

dredging).


56. Table 6 is adapted from information available at the time of the LFF in March 2015. The adopted expenditure profile is 5%:15%:30%:30%:20% from 2016 to 2020 inclusive.

Table 13 Road Sub-Component Investment Costs (2014 CNYm)

Source kma DI total cost

FBC excl LARb

LAR cost net of taxes &

contingencies

Economic costc

Economic cost/km

Jan 2015 revised FSR 44.0 509.0 406 25 443 10.1

Source: draft FSR and PPTA consultants’ estimates Notes: (a) project road length

(b) excludes contingencies, interest during construction (IDC) and LAR costs (c) economic cost = (FBC excl LAR x SCF + net LAR cost x SCF) plus 5% physical contingencies

2.3.4 Residual values

57. To account for the value of the project remaining at the end of the evaluation period, a negative cost is included at the end of the evaluation period equivalent to the remaining unused portion of the

project’s life (i.e. its residual value - RV).

58. For the WW sub-components two cases are distinguished, namely sub-components with both sewerage and a treatment works (Shangli and Luxi) and those with only sewerage. Assuming that the treatment works has a life of 25 years and the sewerage, land etc a life of 50 years this gives a weighted average life of 32 years and an RV of 22 percent. If there is no treatment works the RV works out at 50 percent. In practice rather lower and more conventional percentages are used: 20 and 40 percent respectively.

59. For the road sub-component it is assumed that land has a life of 100 years, earthworks 50 years, pavement 20 years, structures and others 25 years and equipment 5 years, a weighted average life of 45 years is obtained. At the end of a 25 year evaluation period this implies a residual value that is 44 percent of the initial investment cost. Conventionally, however, rather lower values are



used and 30 percent is adopted. The cost structure of the FRMR subcomponents is similar to that of the road and for them also a residual value of 30 percent is adopted.

2.4 Operation and maintenance expenses


60. Luxi and Shangli FSRs tabulate operating expenses but do not set out supporting assumptions (energy used, staffing levels, etc.). Neither the Lianhua nor the Xiandong FSR shows operating expenses. The PPTA consultants have therefore made their own estimates, set out below.

61. Expenses are conveniently broken down into:

sewerage maintenance

wastewater treatment works operation

62. Throughout it is assumed that monthly skilled and unskilled labor costs are CNY4,000 and CNY2,500 respectively and that they rise at 1 percent annually. Energy is costed at CNY0.7/kWh. The conversion to economic prices is based on adjusting the price of unskilled labor by the shadow wage rate factor and the SCF and skilled labor and energy by the SCF (see above).

Table 14 WW Operations and Maintenance: Unit Costs

Asset Cost item 2014 financial cost

2014 economic cost

Basis Evolution over evaluation

period

Sewerage Labor plus equipment

CNY3,600/km/yr CNY3,200/km/yr 2 skilled + 2 unskilled + 20% for equipment

Labor cost element rises at 1% p.a.

WWTP Energy CNY0.33/m3 CNY0.32/m3 0.47kWh/m3 and electrical energy at CNY0.7/kWh

No change

Labor - Luxi CNY0.52m/yr CNY0.46m/yr 4 skilled + 8 unskilled + 20% for materials

Rises at 1% p.a.

Labor - Shangli

CNY0.26m/yr CNY0.23m/yr 2 skilled + 4 unskilled + 20% for materials

Rises at 1% p.a.

Chemicals CNY0.10/m3 CNY0.10/m3 No change

Sludge transport

CNY0.06m (Luxi)

CNY0.07m (Tongmu)

FinancialxSCF See FSRs No change

Component replacement

10% x WWTP cost in year 10 and year 20

FinancialxSCF No change

Source: PPTA consultants

63. In the cases of Lianhua and Xiangdong, where infiltration will fall as a result of separating foul and stormwater sewerage, it is assumed that there will be no incremental WWTW energy costs.

2.4.2 FRMR sub-components

64. The FRMR FSRs do not show operating expenses and the PPTA consultants have therefore made their own estimates.



Table 15 FRMR Operation and Maintenance Costs

Activity Cost item 2014 financial cost

2014 economic cost

Basis Evolution over evaluation

period

Embankment maintenancea

Labor plus equipment

CNY0.14m/yr CNY0.12m/yr 1 skilled + 3 unskilled + 20% for equipmenta


Wetland maintenanceb

Labor plus equipment

CNY0.17m/yr CNY0.14m/yr 1 skilled + 4 unskilled + 20% for equipmentb


Periodic dredging

Plant & labor 10% x initial dredging every five years

As financial x SCF

PPTA technical team estimates

Highly uncertain: assumed constant at 2014 prices

Source: PPTA consultants’ estimates

Notes: (a) per FRMR sub-component

(b) for Lianhua (with the largest river vegetation area).All others taken as the same


FSR approach 65. The draft FSR includes maintenance expenses as follows:

routine maintenance starting at CNY6,000/km/year and rising at 5 percent annually

periodic maintenance is scheduled for year ten and apparently set at ten times the annual routine maintenance charge that would have been incurred in the same year. The amount shown is equivalent to CNY117,500/km

a management charge seemingly set at CNY5,000/km/year and, as with routine maintenance, rising at 5 percent annually. The basis for the management charge is not given. Such a charge would not normally be applied as part of an incremental cost

10.3.1.1 PPTA approach

66. Reliable estimates of road maintenance costs are notoriously difficult to obtain. Contractors’

bids are the best source but are difficult to obtain. The table below sets out some rates obtained from an ADB PPTA assignment in Yunnan; they are based on 2012 bid prices to which a nominal 20 percent have been added. They are adjusted by the SCF.

Table 16 Representative Unit Maintenance Costs

Seal AC 60mm AC 60mm + 170mm CTG

AC 80mm + 200mm CTG + 100mm sub-grade

Rate in CNY/m2 25 65 103 140

Source: PPTA consultants AC = asphalt cement; CTG = Cement Treated Gravel

Note: rates are at financial prices and include physical contingencies

67. The rates in table 8 imply approximately CNY450,000/km for a 6cm overlay on a 10m wide road and CNY175,000/km for a reseal.

68. HDM4 (the evaluation tool used17) requires detailed specification and costs of works per square meter and the intervention criteria that will trigger those works. Table 9 shows the values used for

17 HDM4 – Highway Development & Management – is a commercial highways evaluation software suite developed with initial support by ADB and other IFIs. It is the standard international highways



both project and reference cases. Use of table 9 parameters generates approximately the overlay and re-seal costs per km described above.

Table 17 HDM4 Maintenance Cost Parameters

Intervention Financial cost including

physical contingencies

Intervention criteria

60mm overlay CNY65/m2

Preparatory works:

- patching CNY15/m2

- crack sealing CNY5/m2

IRI>10, interval ≥5 years, first

intervention≥2021

Reseal CNY20/m2

Preparatory works:

- patching CNY15/m2

- crack sealing CNY5/m2

5%≤wide structural cracking≤15%,

average rut depth<20mm

Pothole patching CNY120/m2 Potholes>5/km

Drain clearing and

other off-carriageway

CNY5,000/km

Annual

69. Costs in the table above apply to all roads in the modelled network, with the exception of the minor county and provincial roads, for which the overlay intervention is omitted. Note that in practice the minor roads have concrete pavements, not handled by HDM4 and so adoption of bituminous maintenance standards is less than ideal. Fortunately the approximation has very little impact on the appraisal.

70. There is consensus that labor intensive minor road construction generates direct employment of 1,500-2,500 unskilled and semi-skilled labor-days per km and may account for 20-50 percent of total cost. Routine maintenance is labor intensive. Assuming 50 percent of routine maintenance is accounted for by direct unskilled labor, then the new road will generate around 40 labor-months per

year (=50% x CNY5,000/km x 44km ÷ CNY2,500/labor-month).

2.5 Population

71. Population is relevant to the demand for wastewater services and to the benefits of flood defense.

72. Detailed planning is confined to Pingxiang PLC’s defined “metropolitan area” of 1,300km2

that includes Luxi county, Anyuan and Xiangdong, but not Shangli or Lianhua. The metropolitan master plan expects a 2020 metropolitan population of 1.2-1.5m, implying annual growth of 0.9 and 3.1 percent respectively. Growth rates of around 3 percent are assumed in the draft FSRs for

Lianhua, Yinhe and Xuanfeng. Historically, only Piangxing’s urban area (PLCUA), comprising

Anyuan and Xiangdong, has shown growth rates that resemble master plan targets (the PLCUA annual growth rate from 2000 to 2010 was 1.3 percent). Selected population data are reproduced in the table below.

Table 18 Pingxiang Urban and Rural Populations, 2000 to 2012

County etc Town 2012 2010 2009 2008 2000 HH size, 2012

Annual growth rate, %a

Pingxiang PLC 1,873,958 1,854,515 1,724,732 3.7 0.69% (2000-12)

evaluation tool. It can be used to evaluate individual projects as well as road investment programs and strategies.



County etc Town 2012 2010 2009 2008 2000 HH size, 2012

Annual growth rate, %a

PLCUA 893,550 783,445 1.3% (2000-10)

Lianhua County 268,683 236,328 260,011 224,668 3.1 1.5% (2000-12)

Qinting town 65,089 61,033 2.8 2.2% (2009-12)

Lokou town 16,052 15,617 3.4 0.92% (2009-12)

Shengfang 15,614 15,253 3.3 0.8% (2009-12)

Shangli County 488,616 467,214 469,718 453,437 3.4 0.62% (2000-12)

Urban center 68,757 64,911 3.2 1.9% (2009-12)

Tongmu 79,361 77,258 3.5 0.90% (2009-12)

Luxi County 297,738 257,423 289,940 263,182 3.2 1.0% (2000-12)

Luxi town 69,996 67,423 3.0 1.3% (2009-12)

Xuanfeng 35,528 35,742 35,717 34,778 3.2 1.2% (2008-12)b

Yinhe 42,596 41,040 40,613 39,810 3.6

Xiandong District 409,086 399,622 3.1 0.78% (2009-12)

Urban center 74,394 73,172 2.8 0.55% (2009-12)

Sources: 2010 and 2000: phase 1 PPTA interim report, 2012; Pingxiang statistical yearbook, 2008-9 and 2013; county yearbooks

Notes: (a) compound growth rates in all cases (b) combined Yinhe and Xuanfeng growth rate

73. The table above presents a mixed picture. Some areas actually lost population between 2000 and 2010, while the strongest growth was in the urban areas (PLCUA, Shangli urban center and Luxi town). Lianhua County also grew strongly, probably driven by strong growth in Qinting town. The phase 1 PPTA reports a detailed analysis of growth between 2000 and 2010 down to street committee level. Overall they concluded that most gains were experienced along the G320 corridor, in Shangli urban center and in Qinting town, Lianhua. Based on their analysis and the table above a common growth rate of 2 percent is assumed for estimating the growth of populations in areas served by sewerage sub-components.



3 BENEFITS OF WASTEWATER SUB-COMPONENTS

3.1 Methodology

74. In the cases of Xiangdong and Lianhua the ADB sub-components will provide sewerage that will enable additional existing residential areas to connect to foul sewerage and an existing wastewater treatment works (WWTP) or an addition to existing works to be financed by local government. In the cases of Xuanfeng (Luxi) and Tongmu (Shangli) ADB propose financing both sewerage and a new WWTP.

75. In all cases the coverage will extend to both urban and rural areas. In general, households in urban areas already have septic tanks and rural areas do not. Of the sampled urban households only 15 percent do not have access to some form of formal wastewater arrangements, while 40 percent of

rural households had no such access (in this instance “urban” and “rural” refer to the nature of

the area rather than to registration).

76. The introduction of mains sewerage confers both use and non-use incremental benefits. Amongst use benefits are reduced privately incurred costs of maintaining septic tanks; amongst non-use benefits is the amenity value of improved quality in receiving watercourses. Whilst the former

could be valued as cost savings, revealed by consumers’ preference for connecting to mains

sewerage, the latter cannot be so valued.

77. The quality of water in a receiving watercourse has no market price; it is a non-marketed good.

Without public sector intervention, river water quality would be “sub-optimal”. The market would fail

to provide the quality that people want because they have no opportunity to express (“reveal”) their

preferences (except of course when buying property). In order to assess whether public sector

intervention is worthwhile, a simulated (“contingent”) market is devised. Contingent valuation

surveys simulate a market for such goods and obtain a value for them contingent on the market

described in the survey. A particular advantage of the technique is that it captures both “use” and

“non-use” values. Having this characteristic is particularly useful here.

78. The adopted procedure follows ADB recommended good practices as set out in ERD Technical Note No. 23 (Good Practices for Estimating Reliable Willingness-to-Pay Values in the Water Supply and Sanitation Sector, December 2007). The questionnaire was the subject of consultation with ADB staff in August 2014.

79. Three closed-ended CV questions were asked as part of the social survey (see sample details above): respondents were asked whether they would be willing to pay an additional sum for specified

improvements. The respondent is invited to answer “yes” or “no” to the particular amount

proposed. If a respondent indicated that they did not favor increased spending, this was taken as a WTP of zero. The range of proposed bid amounts should be such that very few are willing to pay more than the highest amount while almost all are willing to pay the lowest. All relate to incremental benefits.

80. The three CV questions were:

A (Q43(1)): WTP a one-off amount of CNY300/300-500/500-800/800-1,000 to be connected to mains sewerage (“WTP to connect”). This question was only put to respondents who did not already have formal wastewater arrangements

B (Q43(5)): WTP an additional monthly amount of CNY3/6/9/12 for continued wastewater treatment following connection to mains sewerage

C (Q42(1)): WTP an additional CNY3/6/9/12 per month for improved wastewater collection and treatment. This question was only put to respondents who already had formal wastewater arrangements

81. The two sewerage sub-components (Lianhua and Xiangdong) will reduce the volumes of stormwater entering the existing WWTPs and will therefore generate (small) non-incremental benefits of resource cost savings.



3.2 Mean Willingness To Pay (WTP) to connect

82. The first stage is to examine construct validity. An elementary test is to see whether the propensity to pay falls as the bid amount is increased. Figure 3 confirms that this is so (the curve is derived by fitting a logit regression).

Figure 3 Propensity to Connect

83. Having confirmed internal validity, the next stage is to find a good model for WTP and use it to estimate mean willingness to pay (and confidence limits and other statistics of interest). The dependent variable throughout is the binary variable WTP (1 means a WTP>0, 0 indicates a WTP=0). Both logit and probit models are widely used to derive a regression between the dependent binary WTP and regressors such as bid amount, household income, etc. Both models give similar results; the probit model is used here.

84. The survey throws up many potential explanatory variables, or regressors (household income, location, occupation, age, etc.). Many of these are approximately linearly related to each other (e.g. education and household income) and including them does little for the quality of the model. In this case the only regressor (in addition to the bid amount and the constant term) whose coefficient is significant at the 5 percent level is household income.

85. Table 10 shows the probit regression results.

Table 19 WTP to Connect - Probit Regression Results

i Regressor, Xi Coeff, Bi t-statistic [prob] Sample mean, Mi

1 Proposed bid (BID) -0.00103 -4.2104 [.000]

2 Household income (INC), CNY 0.5335x10-5 2.8177[0.005] 47,080

3 Regression constant (CONST) 0.6352 3.7343[.000] 1.00

Sample size, n 513

Goodness of fita 0.6335

0%

20%

40%

60%

80%

100%

0 250 500 750 1,000 1,500

Perc

ent r

espo

ndin

g po

sitiv

ely

Bid amount to connect, one-off CNY




SICb -339

Mean WTP (CNY/household)c at economic prices 850

Source: PPTA consultants using Microfit 5.0 Notes: (a) standard deviation of observed values about the estimated regression line

(b) Schwarz Information Criterion = measure of out of sample forecast performance (lower absolute values indicate better performance)

(c) calculated as -1 x (∑(Bi.Mi) for i=2 to 3)÷B2 = 0.890÷0.00103 = 864. CNY864xSCF = 847, say 850

86. The mean WTP to connect is CNY850. Confidence limits may be calculated using household income statistics but the range is so wide that this approach to sensitivity is not adopted. In the evaluation of sub-components the WTP to connect is spread over five years.

87. WTP tends to be anchored by actual charges. Urban households are generally not charged for connection to a sewer; it is provided or highly subsidized by local government. Rural households are more likely to have to pay, but there is no standard amount. For obvious reasons rural households tend to connect to mains sewers at a much slower rate than urban households.

3.3 Mean WTP following connection

88. The procedure follows that described for WTP to connect. As before, internal validity is indicated by figure 4 which shows WTP falling as the bid amount is increased.

Figure 4 Propensity To Pay Monthly Amount Following Connection

89. As before a probit regression is used and the only regressor (in addition to the bid amount and the constant term) whose coefficient is significant at the 5 percent level is household income.

90. Table 13 shows the probit regression results.

Table 20 WTP a Monthly Amount - Probit Regression Results


1 Proposed bid (BID) -0.092049 -4.1882[.000]

2 Household income (INC), CNY 0.4776x10-5 2.0681[0.039] 46,100

0%

20%

40%

60%

80%

100%

0 3 6 9 12 15 18 21

Perc

ent r

espo

ndin

g po

sitiv

ely

Bid amount in CNY/month




3 Regression constant (CONST) 1.1621 5.4254[.000] 1.00

Sample size, n 425

Goodness of fita 0.7318

SICb -245

Mean WTP (CNY/household/month)c at economic prices 15

Source: PPTA consultants using Microfit 5.0 (computer software available from Oxford (UK) University Press Notes: (a) standard deviation of observed values about the estimated regression line

(b) Schwarz Information Criterion = measure of out of sample forecast performance (lower absolute values indicate better performance) (c) calculated as -1 x (∑(Bi.Mi) for i=2 to 3)÷B2 = 1.3824÷0.092049 = 15.0. CNY15.0xSCF=14.7, say 15

91. The mean WTP monthly is CNY15.

92. In this case the mean WTP is probably anchored by actual charges. Throughout the study area the wastewater tariff is CNY0.8/m3. For a household billed for 12-15m3 of water per month the wastewater charge is CNY10-12. That the mean WTP is higher than this may either mean that respondents put a higher value on access to wastewater treatment than the amount charged, or that they are unaware of their monthly water use.

3.4 Mean WTP for improved wastewater collection and treatment

93. This question sought to elicit WTP for improved collection and treatment by those already connected.

94. Unfortunately, responses to this question fail the internal validity test. There is no propensity for positive responses to fall as the bid amount is raised and it is not possible to fit a satisfactory model. The mean of all the responses weighted by whether the respondent agreed to the bid amount is CNY5.6 per month. CNY5 is adopted, as it bears comparison with values in table 12 below.

3.5 Mean WTP for improved downstream water quality (non-user benefit)

95. A population wider than those connected to town WW systems has an interest in and benefits from improved river water quality.

96. No WTP questions were put on this topic and this therefore means recourse to benefits transfer as the only readily available approach. Table 12 sets out comparable WTP values from other sources. As can be seen, lakes generally attract higher WTPs than other water bodies, while the willingness of urban Fuzhou residents to pay to treat upstream livestock discharges is conspicuously low.

97. Given that the projects are in most cases intended to protect headwaters, a relatively high value is justified and CNY10 per month is taken.

Table 21 WTP Values for Improved Water Quality

Source Location, date WTP in CNY per household per

month

Characteristic valued

Annual household

income, CNYa

ADBb Fuzhou, 2009 CNY3/mon Payment for treatment of upstream agricultural pollution

36,000

PPTA 7607c

Hubei Huangshi 2011 CNY6/mon WW collection & treatment

45,000

PPTA 7607 c

Hubei Huangshi 2011 CNY24/mon Lake rehabilitation 45,000

PPTA Hubei Huanggang 2013 CNY12/mon Lake rehabilitation 40,000



Source Location, date WTP in CNY per household per

month

Characteristic valued

Annual household

income, CNYa

8151d

PPTA 8045e

Anhui Huainan 2012 CNY17/mon Improved WW collection & treatment; watercourse rehabilitation

35,000 (approx)

Source: PPTA consultants Notes: (a) inferred from report and applying to date of survey (b) Higher Water Tariffs for Less Pollution, ADB Economics working paper 201, May 2010

(c) Hubei Huangshi Urban Pollution Control and Environmental Management Project, PPTA economics appendix, 2011 (d) Hubei Huanggang Integrated Urban Environment Improvement Project, PPTA economics appendix, 2014 (e) Anhui Huainan Urban Water Systems Integrated Rehabilitation Project, PPTA economics appendix, 2013

3.6 Relevant populations

98. The populations benefiting from new connections to sewerage or from improved collection and

treatment arrangements are clear – they are the populations used to derive project flows and loads.

99. Any additional population benefiting from an improvement in river water quality is less easily established. Aggregating the benefits of environmental improvements across a relevant population is in fact a key problem in practical environmental economics. There is no straightforward approach to solving this problem without the luxury of large survey resources. Relevant considerations are:

the administrative jurisdiction of beneficiary towns and rural settlements is not the same as and is likely to be smaller than the economic jurisdiction (defined as all those who hold economic values regarding the project)

in principle we would expect WTP to decay with distance (although this intuitively reasonable assertion is confounded in the case of major environmental sites)

the split between use and non-use benefits. In principle, non-use benefits may be enjoyed by someone living anywhere and so their WTP should fall slowly (if at all) with distance

distance-decay functions will depend on the availability of substitutes and ease of access. Substitutes will, other things being equal, increase the rate of decay, while the net benefit enjoyed by users will also decrease as access becomes more difficult

100. Of the studies listed in the table above:

the Huainan PPTA applied WTP benefits to a population of 960,000. It is not clear which administrative or economic jurisdiction this applies to

the Hubei Huangshi PPTA applied WTP benefits to an estimate of the urban population of Huangshi City (around 800,000)

the Hubei Huanggang PPTA used a distance decay function to take account of reduced WTP away from the lake and applied the reduced WTP to the population of the counties and district adjacent to the lake (1.58m)

101. For this study the number of households taken is the number in the adjacent town downstream plus those in the beneficiary town who are not connected. This avoids the risk of double counting.

Table 22 Beneficiary Populations, Water Quality Improvements

Sub-component Towns 2012 household numbers (rounded)

Lianhua Qingting, Shengfang. Lokou 33,000

Luxi Xuanfeng, Yinhe, Luxi center 47,000

Shangli Tongmu, Jinshan 44,000



Sub-component Towns 2012 household numbers (rounded)

Xiangdong Xiangdong, Herao 39,000

Source: Pingxiang 2013 statistical yearbook

3.7 Increase of WTP over time

102. Theoretically, it is expected that WTP will increase with an individual's income (and fall if the availability of substitutes increases). There is empirical evidence to support this, including the regression results above, although there is little agreement on the scale of the effect, measured by income elasticity: the proportionate change in WTP per unit proportionate change in income. Czajkowski and Scasny recommend using an elasticity of one (Study on Benefits Transfer in an International Setting, Warsaw 2008). Leeworthy and Corsiglia of NOAA (Total Economic Value for Protecting and Restoring Hawaiian Coral Reef Ecosystems, Factsheet 3, 2011) found an income elasticity of 0.22. A study of WTP for water in Chongqing found only a weak relationship between income and WTP (A Willingness-To-Pay (WTP) Survey and Study for Water Tariff Reform in Western Chongqing, Chongqing University and Chongqing World Bank PMO, 2006).

103. The regression results here indicated that income is positively associated with WTP. This is a

static result and does not necessarily mean that the relationship holds if a particular household’s

income rises. In fact WTP to connect rose by 3 percent for a 10 percent increase in income (i.e. a notional income elasticity of 0.3) and WTP to pay once connected rose by 2 percent (elasticity of 0.2).

104. Urban and rural net incomes per head in Pingxiang have shown annual real increases of 12 to 17 percent over the period 2009-12 (see figure 1). In the base case it is assumed that WTP grows at an annual rate of 4 percent per year, implying an income elasticity of 0.2 to 0.3. Such increases are applied at intervals of five years.

105. The assumption of increasing WTP is supported by substantial increases in WW tariffs in PRC in recent years. An analysis by Global Water International (vol 10, issue 8, August 2009) showed a 35 percent average increase since 2008 across ten Chinese cities. The same source indicates that

minimum domestic wastewater tariffs must be at least CNY0.95/m³ in urban areas by the end of

2016. (For Pingxiang consumers this will represent a 19 percent nominal increase over current tariffs).

3.8 Demand analysis

106. The demand for wastewater services is expressed as dry weather flow (DWF) at the WWTP. It is a function of: residential and non-residential water use, the proportion returned to sewerage and infiltration into the sewers during dry periods. The table below shows:

for Xuanfeng and Tongmu, the point at which the forecast DWF is expected to meet WWTP capacity

for Lianhua, the DWF arising from connecting residential properties using the new laterals provided as part of the ADB project

for Xiangdong, an estimate of the DWF arising from the likely additional (non-ADB supported) connections

107. In all cases a population growth rate of 2 percent is assumed.

108. Although higher than the study sample reported lcd (see section 1.5), assumed average values in the table below are reasonable and in line with the findings of other studies. Assuming infiltration at 10 percent of DWF is a standard assumption. It is not entirely rational. Infiltration rates are not proportional to DWF, but assessing them on a more rational basis is well beyond the scope of this study.



Table 23 WWTP Capacity Calculations

Location WWTP capacity

m3/d

Point at which demand = capacity

Base pop (year)

Connected pop (year)

Av lcd Return rate x prop

collected

DWF excl infiltrationa

lcd

Res DWF, m3/db

Non res DWF m3/db

Total DWF m3/d

Xuanfeng 5,000 18,000

(2010) 24,600 (2029)

115 0.68 78.5 2,040 3,080 5,100

Tongmu 2,500 10,000 (2010)

18,000 (2045)

123 0.68 83.7 1,660 740 2,400

Lianhua 15,000d 81,000e

(2010)

172,000 (2040)

115 0.68 78.5 14,800 0 14,800

Xiangdong 10,000d 12,000 e (2010)

64,000 (2024)

115 0.68 78.5 5,600 0f 5,600

Source: FSR, PPTA calculations Notes: (a) DWF = average lcd x return rate x proportion collected (b) includes infiltration at 10% of DWF (c) WWTP DWF = (DWFxpopulation÷1,000 + non-residential demand) x (1 + infiltration factor) (d) existing WWTP (e) estimated connected population (f) no data available



4 BENEFITS OF FRMR SUB-COMPONENTS

4.1 Introduction

109. Historic floods at most project sites have been of short duration and taken place in May or June.

110. There are four stages to the estimation of flood alleviation benefits:

attach probabilities to a range of reference case flood event damage amounts

plot a damage-frequency curve such as figure 7

for each alternative level of flood defense, construct the project case damage-frequency curve by amending the reference case curve (again, see figure 7)

the expected annual benefit is the area between the project and reference case damage-frequency curves

111. In addition to the avoidance of damage, the proposed schemes will enhance the riparian environment. Estimates of the benefits of an improved environment are discussed below.

4.2 Nature of economic flood losses

112. Flood alleviation projects reduce expected flood damage costs, ideally to the point where the PV of the incremental reduction in damage costs is equal to the PV of the incremental increase in costs arising from an increase in defense standard. The costs of flood defense may be offset by the benefits of sites of environmental value (e.g. river vegetation lands) created as part of the defense works.

113. It is convenient to divide flood defense benefits into the avoidance of three types of damage:

direct damage

indirect damage

intangible losses

114. Direct damage is damage arising from physical contact between a physical asset and flood water within the flooded area. This definition is not as unambiguous as it might appear, but here it potentially includes:

loss of or damage to crops

damage to the fabric and contents or stock of residential and commercial property

losses arising from the interruption of business activities

loss of electrical power supplies from power stations

damage to highway pavements

115. Indirect damage is a secondary consequence of direct damage and includes:

emergency services costs

the costs of road diversions

116. Intangible losses arise from the non-financial impact on humans, namely stress, reduced health status (occasionally death) and the loss of memorabilia. Research carried out in the UK (see Flood and Coastal Defense Project Appraisal Guidance, Supplementary Note to Operating Authorities, Defra, July 2004) indicates that intangible losses can be as important as the direct material damages to homes and contents.

117. On receipt of a flood warning households and businesses may take avertive action, such as shifting possessions and stock to higher levels within the building. Avertive action is likely to be an economically efficient response provided flood warnings are themselves both reliable and timely.



118. There are three approaches to estimating the value of damage to a residential structure and its contents. The first, used for example in the UK and Germany, relies on absolute damage functions that relate damage (in monetary units per m2 of floor area) to flood depth. The functions factor in the type and age of structure and the socio-economic class of the residents; in addition there are factors that adjust for flood duration, polluted or high velocity water. The second approach is to use a relative damage function that relates water depth to damage as a percentage of reconstruction cost (or contents value). This the approach used, for example, in Australia. The third approach, adopted here, is to use historic flood damage costs (based perhaps on insurance claims) and relate them directly to probabilities of occurrence.

119. Figure 5 (next page) shows structural residential property damage as a factor times the damage at a depth of 0.6m. It is seen that damage is highly dependent on flooding depth and that the relationship is fairly consistent across regions.

120. The value of damage to commercial properties and stock is subject to more variability than that of residential properties. Structural type and the nature of the stock are more variable; businesses also have more options to locate their stock so as to minimize flood damage.

121. Damage to crops (in this case predominantly rice) is dependent on the crop’s development stage, the inundation depth and duration.

122. The only source for intangible losses (excluding death) is the 2004 UK reference cited above, which recommended a 2004 value of £200 per household per year. At 2014 prices the equivalent value is £265. Scaling this by 2013 PPP GDP per head (US$11,907÷US$38,452, source: World Bank indicators) and converting using the OER gives a PRC equivalent of CNY770 per household per year.

Figure 5 Structural Damage to Dwellings

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Dam

age

x da

mag

e at

0.6

m

Flood depth relative to threshold, m

UK - all dwellings

USA - FIA 1985 (Appelbaum)

Japan %

Bangladesh : house type 4

Australia - SMEC 1975

Canada- IBI/ECOS 84 sq m 2 storey

Taihu Basin, China



4.3 Event damage valuation

4.3.1 Data provided

123. In response to a request from the PPTA consultants, all four local governments completed flood loss templates or provided data in their own preferred format. In each case the data only cover one or two recent years.

124. The values recorded are less than ideal:

they are erratic: they imply an improbably wide range of unit values (damage per ha, dwelling or per m2) and some values lack credibility

they are of unknown provenance. They may be based on insurance claims, claims for compensation or on assessments by officials seeking to maximise grant contributions

with the exception of Shangli it is not clear whether the data relate to sub-component beneficiary areas

depth and duration of flooding are not recorded

4.3.2 Return period of historic damage

125. In most cases survey respondents stated that 2014 was the worst flood of memory, followed typically (but not always) by 2010. In two cases the draft FSRs asserted that 2010 was the flood of record. The view of the hydrology staff consultant is that 2014 may have had a return period of 20-50 years, but this is (understandably) based on rainfall rather than stage or discharge records, and certainly not on damage.

126. An alternative approach to making a rough assessment of the return period of 2014’s event

damage is to make use of national data. National data for 2000 to 2010 are available from Zhang et al: Comprehensive Analysis of Flood Damages in the PRC from 2000-2010. Journal of Economics of Water Resources, vol. 29 no. 5, September 2011 (in Chinese). The table below shows data from this paper. Annual national values of damage are scaled in three ways to make them relevant to the study analysis: (i) multiplied by 7.6 percent, this being the proportion Zhang attributes to Jiangxi province, (ii) brought to 2010 prices using national consumer price indices and (iii) adjusted for real terms growth in GDP as a proxy for the increase in the value of assets damaged.

127. The average annual damage (AAD) at 2014 prices and GDP levels for Jiangxi is CNY15.5bn.

Table 24 National and Adjusted Jiangxi Flood Damage, 2000-2010

Year PRC pop affected, m

PRC area, km2

Damage, current CNYm

Adjusted Jiangxi

damage, 2010 CNYma

EV1 probability

est, pib

EV1 reduced

variate, yic

2000 129.36 90,450 71,150 18,583 0.23 1.34

2001 110.87 71,376 62,307 14,965 0.41 0.64

2002 152.02 123,780 83,799 18,412 0.32 0.95

2003 193.27 190,280 119,040 23,266 0.14 1.89

2004 92.29 74,590 49,540 8,325 0.68 -0.13

2005 130.85 192,080 77,310 11,607 0.50 0.37

2006 72.61 81,015 60,910 7,995 0.77 -0.38

2007 135.83 104,633 84,530 9,354 0.59 0.11

2008 102.56 64,765 63,470 5,879 0.86 -0.68

2009 92.46 75,437 65,506 5,692 0.95 -1.09

2010 199.35 175,246 350,500 26,623 0.05 2.96



Sources: Zhang et al (see text for full reference), PPTA calculations Notes: (a) see text for details of adjustment (b) EV1 estimate of population frequency = (m-0.44)÷(n+0.12) where m=rank of data item (c) EV1 reduced variate = -ln(-ln(1-pi)) where ln = natural logarithm and p = probability

128. Adjusted event damage is shown below, plotted against the reduced variate. A line of best fit can be used to estimate the return period of the 2010 event. Linear (shown) and exponential lines were tried. They imply return periods of 16 and 11 years respectively. For the FRMR benefits assessments a return period of 13 years is taken.

Figure 6 EV1 Plot of Historic Flood Damage

4.3.3 Unit values adopted

129. In order to maintain consistency between damage estimates, a common set of unit damage values is used. Ideally, unit values should reflect the depth and duration of flooding, but this information is not available.

130. Reliable and geographically relevant values are hard to find. Xiangdong historic event data, one of the few to give square meters of damaged property, indicate CNY240/m2 for the 2010 event; bringing this to 2014 values gives CNY450/m2 (adjusting for prices, GDP and net fixed asset growth). Scaled by the SCF gives an economic value of CNY440/ m2. Data for 1997-9 from Huanggang, Hubei province (see PPTA 8151 Huanggang Integrated Urban Environment Improvement Project, 2013-14), again brought to 2014 values, averaged CNY375/m2.

131. The Huainan PPTA report (Anhui Huainan Urban Water Systems Integrated Rehabilitation Project, PPTA economics appendix, 2013) uses province-wide data that are, as those received here, erratic, although agricultural losses are tolerably consistent at around CNY10,000/ha using the world price system. Emergency services costs are given for two years and amount to 5 and 11 percent of direct losses.

132. The World Bank has compiled a report on the damage and losses suffered during the severe floods in Aceh, Indonesia, in late Dec 2006 (Aceh Flood: Damage and Loss Assessment, 2007). The average residential property damage and loss was US$2,500 per property, rising to US$3,500 if damage to energy supplies, roads and bridges and water and sanitation are included. Allowing for inflation, today’s equivalent value would be CNY28,000 per property or say CNY560/m2 (assuming 50m2 floor area). This value needs to be adjusted because:

0

5,000

10,000

15,000

20,000

25,000

30,000

-2.00 -1.00 0.00 1.00 2.00 3.00 4.00

Jian

gxi f

lood

dam

age,

201

0 pr

ices

, CN

Ym

Gumbel EV1 reduced variate



the Aceh damage was more severe than anything recently experienced in Pingxiang: 42,000 houses were damaged, of which 4,400 had to be replaced

PRC has a higher GDP per head: approximately 1.8 times as high when compared either on a 2012 PPP basis or using the World Bank’s atlas method GNI per head.

133. Taking these factors into account suggests a transposed value of CNY500/m2. However, for the study damage estimates, a lower value is used that is more in line with local estimates adjusted to economic prices, CNY400/m2. (In passing note that a comparable UK figure for flooding to a depth of 0.3-0.6m would be approximately CNY1,500/m2).

134. Agricultural losses in Aceh amounted to US$820/ha, equivalent to CNY7,000/ha at today’s prices, reasonably close to the Huainan value.

135. Based on the assessments above, the values adopted are:

CNY400/m2 for property and contents damage. Where both square meters and population are available, the implied areas per household are unrealistically low, suggesting that much of the apparently affected population is in reality barely affected. Where population is the only guide to residential property, a notional 20m2, and the appropriate town household size is used to convert population affected into floor area affected

CNY10,000/ha for agricultural loss. This is close to the Huainan and the World Bank values. It is somewhat less than the loss of gross margin at a rate of US$300/tonne and a yield of 7t/ha

traffic diversion loss. The length and duration of the diversion as given by local government are taken. The diversion damage is assessed as: 5,000 veh/day x RUC of CNY3/veh-km x km x days

highway pavement damage. The length given by local government multiplied by CNY0.6m/km

fatalities. The only fatalities recorded are two in Lianhua in 1995, although there may well have been others. This may have been the flood of record (see section on Lianhua historic events below), with an estimated 20 year return period. Aware of the danger of overstating the likelihood of a fatality caused by flooding, a single fatality has been assumed at return periods of 50 years and greater. A 2014 value of CNY3.01m is used (this is the value used in Chinese road safety investment studies)

intangible losses are added at a rate of CNY770/household/yr during the calculation of average annual damage, but are capped at 20 percent of tangible damage

emergency services costs are added at a rate of 5 percent of property losses

4.4 Benefits of an improved riparian environment

136. The proposed schemes will enhance the recreational and amenity value of the riparian environment; they aim to preserve any wetland areas as part of flood alleviation schemes.

137. As reported in section 1.5, the first choice of 41 percent of household survey respondents was to use the land alongside the river as parks or recreational spaces. It is therefore reasonable to suppose that they would place a value on riparian environmental improvements. Respondents were not asked to place a value on improvements, however, which dictates indirect approaches to valuation.

138. A literature search using the EVRI database (Environmental Valuation Reference Inventory, www.evri.ca) failed to locate any values that were clearly relevant to the proposed interventions (most Chinese studies relate to lake rehabilitation; one placed a value on urban parks in Guangzhou). The only readily available source of relevant values is a UK document: Guidance on the Assessment of Environmental and Social Costs and Benefits of Water Resources (Risk and Policy Analysts Ltd, 2003). This is a comprehensive survey of available data and methodologies. It includes results drawn from worldwide sources. Three studies cited in the guidance refer to river restoration schemes and seek to value both landscape and recreational improvements. The valuations have a wide range: at

UK 2001 prices they vary between £1.57 and £8.75 per adult visit, equivalent to CNY0.7 to CNY3.7 at

2014 PPP values.

http://www.evri.ca/



139. In order to convert values per visit into an annual benefits stream a prudent number of annual visitors of 140,000 is assumed (i.e. around 400 per day) for Lianhua, which has the largest wetland area and embankment length. For the other sub-components the value per visit is scaled by the area of wetland preserved or enhanced or the embankment length – see Table 18.

Table 25 Benefits of Riparian Improvements

Sub-component Wetland area, ha Embankment km

Value per visit, CNY

Annual benefit, CNYm

Lianhua 67 44 3.7 0.52

Luxi 23 - 1.3 0.18

Shangli - Lishui 0 2 0.2 0.02

Shangli – Jinshan 0 0.2 0 0

Xiangdong 5 5 0.4 0.06

Source: PPTA estimates and DI for wetland areas

4.5 Historic event damage

4.5.1 Lianhua historic event damage

140. Social survey respondents rated 2014 as the flood of memory (nine of 41 responses), closely followed by 1982 (eight responses) and 1995 (five responses). The draft FSR on the other hand states that 1995 was the worst historic flood but had a return period of less than 20 years. There were two fatalities during the 1995 flood. The same report quotes event damages as follows: CNY200m (1995), CNY15m (1982) and CNY10m (1972).

141. Meaningful flood damage data were provided by local government for 2014 (data for 2013 and 2012 lacked detail and could not be used).

142. The data are given for each individual town and village in the county. The aggregated data for the five towns are taken as the most relevant to the proposed schemes: Qinting, Lukou, Liangfeng, Shengfang and Fanglou. The table below shows damage data for 2014 and the values adopted in this study using the unit values above.

Table 26 Lianhua Event Damage Estimates

Damage category Unit 2014

Physical measure Study estimate CNYm

Res prop Pop 13,100 37.4

Agriculture ha 1,614 16.1

Diversion km-days 5b 0.08b

Water structure damage CNYm 6.4a

Emergency services 5% x prop 1.9

Total 62

Source: LG flood damage data and PPTA consultants Note: (a) not changed from the LG value

(b) 5km-days is PPTA assumption

4.5.2 Xiangdong historic event damage

143. Social survey respondents rated 2014 as the flood of memory (19 of 49 responses), closely followed by 2009 (11 responses) and 2010 (four responses). The draft FSR on the other hand states that 2010 was the worst historic flood.



144. Flood damage data were provided by local government for 2010 and 2014. When calculating average annual damage, the average of the two events is taken and assigned a return period of 15 years.

Table 27 Xiangdong Event Damage Estimates

Damage category

Unit Av of 2010 & 2014

Physical measure CNYm estimate

Res prop Pop 27,000 157

Agriculture ha 600 6.0

Diversion km-days 14 0.2

Road repair km 0.6 0.4

Emergency services

7.7

Total 171

Source: LG flood damage data and PPTA consultants

4.5.3 Shangli historic event damage

145. Unusually, almost all social survey respondents rated 2014 as the flood of memory (67 of 68 responses). The draft FSR on the other hand states that 2010 was the worst historic flood.

146. The draft FSR quotes flood damages as follows: CNY175m (2014), CNY32.6m (2010) and

CNY14m (2008). If 2014’s loss was five times that sustained in 2010 then clearly 2010 was not the

flood of memory.

147. Flood damage data were provided by local government for 2013 and 2014, separated into the

two beneficiary areas – Lishui and Jinshan. The damage sustained during 2013 seems to have been

tiny (no property damage is listed) and it was ignored in the analysis. Unfortunately, the data lack credibility. The flood plain of the Lishui is largely farmland and villages, but the local government data cite 15,000m2 of non-residential property sustaining CNY158m of damage. Given this doubt, Lishui damage estimates are set equal to those at Jinshan in the calculations that follow.

Table 28 Shangli event damage estimates

Damage category

Unit 2014 – Jinshan/Lishui


Res prop Pop 31,000 68.9

Agriculture ha 83 0.8

Diversion km-days

12 0.2

Road repair km 22 13.2

Emergency services

3.4

Total 87

Source: LG flood damage data and PPTA consultants Note: (a) includes substantial non-residential property, ignored in the study estimate



4.5.4 Luxi historic event damage

148. When asked about the flood of memory, survey respondents exhibited little consensus. Of 21 responses, six identified 2014, followed by 2009 (four responses) and 2010 (three responses). Event damage shown in the table below applies to the following settlements: Luxi town, Xuanfeng, Yinhe and Yuannanchang.

Table 29 Luxi Event Damage Estimates

Damage category Unit 2014


Res prop Pop 51,000 153

Agriculture ha 1,600 16.0

Road diversion km-days 7b 0.3

Water structure damage CNYm 34.0a

Emergency services 5% x prop 7.7

Total 211

Source: LG flood damage data and PPTA consultants Note: (a) local government estimate

(b) diversion incident marked in Luxi data but no value assigned. 7km-days is PPTA assumption

4.6 Total damage estimates

4.6.1 Introduction

149. The figure below shows reference and project case event damage plotted against probability. Purely illustratively it shows damage in the reference (without project) case starting at a return period (T) of 5 years (equivalent to an annual exceedance probability of 0.2). The project gives protection from T=20 years (probability of 0.05). The annual average (expected) benefit of the intervention is shaded gray. In this section estimates of the total (reference case) damage are presented, i.e. the PV of the annual damage represented by the total shaded area in the figure.

Figure 7 Flood Defense Benefits

0

50

100

150

200

250

300

0.500.200.100.050.020.01

Even

t da

mag

e in

CN

Ym

Probability/frequency per year (log scale)

Reference case(without project)

Project case

`



4.6.2 Event damage profiles

150. In order to construct damage-frequency profiles, 2014 event damages have to be scaled up and down for a range of return periods. The table below sets out the scaling factors adopted, taken from the interpretation of DI flood envelopes by local government officials.

Table 30 Event Damage Scaling Factors

Return period, years

5 10 13 20 50

Lianhua

Properties 0.30 0.72 1 1.12

Agricultural land 0.45 0.69 1 1.13

Roads 0.37 0.77 1 1.10

Adopted 0.35 0.72 1 1.12 1.55a

Xiangdong

Residential properties 0.21 0.46 1 1.23

Commercial & industrial 0.30 0.62 1 1.17

Land 0.40 0.79 1 1.09

Adopted 0.21 0.46 1 1.23 1.55a

Shangli – Lishui



Adopted 0.2 0.6 1 1.15 1.55a

Shangli – Jinshan



Adopted 0.25 0.62 1 1.15 1.55a

Luxi

Residential properties 0.36 0.73 1 1.11 1.78

Commercial & industrial 0.44 0.68 1 1.14 1.31

Agricultural land 0.59 0.83 1 1.07 2.57

Adopted 0.4 0.7 1 1.12 1.55

Source: local government estimates based on DI flood envelopes

Note: (a) taken as the same as Luxi

151. In all cases the first flood damage is taken as having a return period of 5 years. This is inevitably an approximation, but is lent support by (a) FSR reports of historic flood damage and (b) memories of the flood of record recorded during the household survey. The latter ranged from three events over the past four years (Luxi) to three over the past nineteen years (Lianhua).

152. Using event damage from section 4.5 and scaling factors from the table above, annual average damage (AAD) can be calculated. The table below shows opening AADs at 2014 prices (i.e. the values represent expected annual damage in 2014 in the absence of any improvement in flood defense).



Table 31 Average Annual Damage (AAD) from Flooding

Sub-component AAD, 2014 CNYm

Lianhua 17.3

Xiangdong 31.5

Shangli - Lishui 23.8

Shangli - Jinshan 17.5

Luxi 47.5

Source: PPTA calculations

Note: table shows opening AADs at 2014 prices with no improvement in flood defense



5 BENEFITS OF THE ROAD SUB-COMPONENT

5.1 Introduction

153. Costs and benefits include: (i) the economic costs of construction, (ii) the economic costs of operation and maintenance, (iii) savings in road user costs (RUCs), (iv) savings in the economic costs of accidents and (v) an estimate of the benefits of generated traffic. In this case the principal benefit is that of RUC savings accruing to traffic diverting from the congested G319 and G320 to the proposed road. Accident cost savings are not included for lack of reference case data and generated traffic benefits are omitted at this interim report stage.

154. For trip ends close to or east of Xuanfeng (and close to or north of Shangli center), the new road offers diverted traffic a distance saving of approximately 5km. For trip ends close to Luxi center the new road is approximately 3km longer than existing roads. In both cases, however, there are substantial RUC savings arising from travel on an uncongested road with a newly constructed pavement.

155. The tool used to calculate RUCs and non-investment road agency costs (RACs) is HDM4 (version 2.08).

156. The sections that follow describe the assumptions and calculations necessary to use HDM4.

5.2 Vehicle operating costs

5.2.1 Vehicle characteristics

157. Savings in road user costs (RUCs) comprise savings in VOCs and journey time costs. Traffic

forecasts (see below) are for eight motorized vehicle types. For the economic evaluation the “light

passenger” vehicle class is divided into two: a medium car category and a small bus category. The

former is assumed to account for 80 percent of the combined category.

158. Table 25 shows representative vehicles for which local price data were obtained as part of the

PPTA consultant’s earlier studies.



Table 32 Representative Vehicles

Vehicle types Models Price in CNY000

excluding taxes

1 Passenger car – compact

Xiali

Chery QQ

Benben /Auto

18-44

2 Passenger car- small VW Polo/Hyundai 40-83

3 Passenger car – medium Toyota Crown

Audi A6 55-210

4 SUVs

Changcheng M4

Toyota RAV4

Audi Q7

70-350

5 Bus (Seats>30) Jinlong

Yutong 330-560

6 Light bus and passenger van (fewer than 15 seats) Jinbei

Jinlong 34-130

7 Medium bus (15 – 30 seats) Jieou

Toyota Coaster 140-240

8 Small truck (less than or equal to 2 tons capacity) Dongfeng 70

9 Medium truck (2 axles with 2-7 ton capacity) Dongfeng 75-100

10 Large truck (3 or more axles with 7-14 ton capacity) Dongfeng

Jiefang 83-93

11 Articulated truck i.e. truck-trailer (greater than 14 tons capacity)

Jiefang 210-250

12 Motor-cycles, 125-150cm3 Jialing 5-7

Sources: consultants’ price surveys, 2012, updated 2014

159. Table 26 summarizes vehicle characteristics assumed for the present evaluation. Economic vehicle and tire costs are shown in table 25. They are based on market prices less taxes as follows: Value Added Tax (VAT, 17 percent), a tax depending on engine capacity (1 to 5 percent) and vehicle tax (10 percent), while new tires attract VAT, construction tax (3 percent) and education tax (7 percent). They are taken as closely approximating import border parity prices.

160. In the absence of design institute survey data, passenger numbers are taken from OD results of surveys carried out as part of other feasibility studies in PRC. Small passenger vehicles (cars and small buses) carry an average of 4-5 passengers, while medium buses carry approximately 26 passengers.



Table 33 Vehicle Characteristics

Vehicle class Motor-cycle Car Small bus Heavy passenger

vehicle

Light goods Medium goods Heavy goods Truck-trailer

HDM-4 base type Motor-cycle Car medium Minibus Bus medium Light truck Truck medium Truck heavy Art truck

Fuel type Gasoline Gasoline Gasoline Diesel Diesel Diesel Diesel Diesel

Number of tyres 2 4 4 6 6 10 12 18

Tyre type Radial Radial Radial Radial Radial Bias Bias Bias

Number of axles 2 2 2 2 2 3 4 5

Km/year 10,000 25,000 50,000 70,000 50,000 60,000 70,000 70,000

Hours driven/year 600 600 1,000 2,000 1,000 1,500 2,500 2,500

Working time, hours/yeara 1,500 1,200 2,000 3,000 2,000 3,000 5,000 5,000

Service life (year) 5 10 10 12 10 10 10 12

Average number of passengers 1.5 3 8 26 1.5 1 0 0

% time private use 50 50 10 0 20 0 0 0

Work related passenger trips, % 50 60 60 50 0 0 0 0

Gross vehicle weight, t 0.2 1.2 2.5 6 2 7.5 13 28

Source: manufacturers’ and consultant’s estimates Notes: (a) working time = driving time + time spent loading, unloading and waiting for work. Working time has to be specified for HDM-4. Large values used for cars and motor-cycles in order to

avoid spurious savings in time related VOCs



5.2.2 Fuel costs

161. Fuel costs are built up from FOB Brent crude oil prices. The World Bank’s latest commodity

price forecasts (January 2015) indicate a nominal price rising from US$57 in 2016 to US$105 in 2025. Deflated to 2014 prices using the MUV index implies an average value of US$71. Adopted costs are CNY5.2 and CNY5.0 per liter of gasoline and diesel respectively.

162. These values are lower than current pump prices excluding taxes. Pump prices in the project area in October 2014 were CNY6.94 (93 octane gasoline), CNY7.45 (97 octane) and CNY5.8 (diesel). Net of fuel taxes, 93 octane would be CNY5.9 and diesel CNY5.8.

Table 34 Fuel Costs

Unit Gasoline Diesel

Crude oila $/liter 0.45 0.45

Sea transport $/liter 0.03 0.03

Petrol refining: US$0.60/US gallon (3.785l) $/liter 0.15

Diesel refining: US$0.40/US gallon (3.785l) $/liter 0.11

Distribution and retail $/liter 0.20 0.20

Economic price at the pump $/liter 0.83 0.79

Economic price at the pump CNY/liter 5.2 5.0

Sources: Market statistics, US Dept. of Transportation, GTZ: International Fuel Prices 2005 Notes: (a) based on average FOB spot price of $71/bbl (1bbl = 159 liter) for 2015-25 (see text)

5.2.3 Labor costs

163. The costs of employing drivers, other crew members and maintenance staff are part of vehicle operating costs. Wages vary enormously; social costs are also not standard. The values in the table below are representative of wages plus social costs incurred during the employment of vehicle crews and maintenance labor. They are consistent with skilled wages reported for the project area (see section below).

Table 35 Labor Costs

CNY per annum CNY per hour,

economic prices

Driver and crew 37,000 19

Maintenance labor 37,000 19

Note: hourly rates assume 1,920 hours worked per year and an SCF of 0.98

5.3 Journey time savings

164. Values adopted for working and non-working journey time savings are also shown in table 25. The values placed by travelers on travel time savings are best established using revealed or stated preference surveys. In the absence of survey results it is usual to base values on incomes.

165. A wide range of incomes is reported in a wide range of sources. The official Jiangxi daily unskilled labor rate used in the FSRs is CNY50 (around CNY6/h). This is consistent with official statistics that for 2012 reported a representative range of total cash incomes from all sources for provinces in central China of CNY6-26 per hour, of which wages accounted for about 60 percent. For 2014 this implies wage income of CNY4-18/h. The upper end of this range is comparable to a migrant

worker’s basic wage in an electronics factory in an eastern province, but is lower than skilled pay in

the project area reported to be at least CNY3,500-5,000 (say CNY30/h) by the study poverty and social analysis. At the lower end the poverty and social analysis reports unskilled monthly wages of approximately CNY2,000 (CNY12/h). For comparison, the nominal Jiangxi GDP per head in 2012 was



CNY28,750, having grown at an annual average of 17 percent between 2006 and 2012. Assuming 20 percent nominal growth from 2012 to 2014 and a working year of 1,920h, giving a 2014 GDP per hour of CNY18.

166. For the HDM4 analysis car passengers are assumed to value working journey time savings at a rate of CNY50/h (i.e. somewhat higher than the skilled wage rate), dropping to CNY30 (small buses), CNY20 (buses) and CNY10 (passengers in trucks and on motor-cycles, for whom unskilled wage rates multiplied by the SWRF and the SCF are the assumed reference point). Non-working time is valued at 25 percent of working time.

167. The real value of passenger travel time will increase as income rises. The impact is significant. It is usually assumed that the value of journey time savings rises in line with GDP per head. If GDP per head rises at the lower of 5 percent or forecast GDP growth adjusted for population growth, a typical result is that EIRR rises by 5-6 percent when compared with the results of an evaluation that

makes no such allowance. HDM4 does not accommodate increases in time values – they are fixed in

real terms for the entire evaluation. There are ways around this. A conservative approach is simply to increase the single value of time such that its PV is the same as that of a value that increases at (say)

5 percent annually – conservative as it ignores the growth in passenger traffic. At this stage any real

changes in the value of travel time are ignored.

168. Goods in transit are unproductive – they represent inventory costs. Thus there is a value in

reducing travel times. This value can be substantial for that portion of goods that is time sensitive, i.e. where the shipper or recipient bears substantial costs arising from late collection or delivery, or when time savings make an additional trip possible in a working day. Even then cargo holding costs are quite low: for a load of 1 tonne with a value of CNY10,000 (roughly the unit retail value of a tonne of gasoline) and a discount rate of 12 percent, saving one hour is worth CNY0.14. Currently, most heavy goods traffic in the project area carry low unit value commodities (e.g. coal) and for the analysis CNY0.1/tonne-hour is adopted. Note that variations around values of this order have negligible impact on evaluation results.

5.4 Fatality, injury and crash cost savings

169. The proposed road will introduce a stream of fast traffic, including truck-trailers, into a largely rural environment. Other things being equal, higher speeds increase crash severity. However, the road will be much better designed than existing roads, with longer sight distances, hard shoulders and better signage. The G319 and G320 will become slightly less congested: the former is said to be highly accident-prone. These factors should reduce the incidence of crashes.

170. Pingxiang traffic police were asked to provide records of road crash fatalities and injuries at locations relevant to the proposed road. They provided a record from 2003-13, over which period 14 fatalities and 867 injuries were recorded. Using the standard values per fatality and injury currently in use in PRC (CNY3.01m and CNY0.75m respectively), the annual average crash cost is CNY59m. Crash locations are unclear, however, and their relevance to the proposed road quite uncertain.

171. Given the uncertainty over historic crash costs and the complexity of assessing the safety impact of the proposed road, it was decided not to incorporate crash costs in the appraisal.

5.5 Generated traffic benefits

172. Estimates of the volume of generated traffic are given in section 5.6.8 below.

173. The benefits of generated traffic are estimated using the usual “rule of a half”. They are

calculated for the Luxi diversion case only. The steps in the calculation are as follows:

RUCs per veh-km for passenger and goods vehicles are calculated for both the existing minor roads in the project area (links BC, CD and DE in table 54) and the project road (X1, X2 and X3 in the same table)

the benefit is calculated only for the 32km of project road sections X1 to X3

the benefit in a given year from 2021 is as follows:



ben = 0.5 x (RUC0-RUC1) x ref case traffic x % generated traffic x 32km x 365, where the subscripts 0 and 1 refer to reference and project cases respectively

174. The benefits thus calculated are small, being based only on existing traffic on the minor roads in the corridor. Typically they amount to approximately 5 percent of total benefits.

5.6 Other costs and summary of economic values

175. Vehicles owned to carry out official duties or earn a commercial return have associated administration costs such as managing vehicle crews, organizing the use of vehicles and scheduling maintenance. In the light of data from previous studies, these and other overhead costs are set at 5 percent of the sum of all (other) financial VOCs. Since the resources involved are mainly skilled labor, for which the shadow wage rate factor is unity, the economic and financial costs are effectively the same. As the benefits of lower accident rates are considered separately, insurance is not included as an economic relevant cost.

Table 36 Economic Values of Vehicles, Tires, Labor and Time

Vehicle class Unit Motor-cycle

Car Small bus

Heavy passenger

vehicle

Light goods

Medium goods

Heavy goods

Truck-trailer

Vehicle cost CNY 5,000 100,000 100,000 375,000 150,000 245,000 395,000 590,000

Replacement tire CNY 150 290 300 470 350 620 700 700

Maintenance labor CNY/h 10 19 19 19 19 19 19 19

Driver CNY/h 10 0 19 19 19 19 19 19

Driver’s helper CNY/h - - - 10 10 10 10 10

Total crew CNY/h 10 0 19 29 29 29 29 29

Annual overhead CNY 600 3,000 5,000 20,000 7,500 14,000 19,000 19,000

Passenger working time CNY/h 10 50 30 20 10 10 0 0

Passenger non-working time

CNY/h 3 12 8 5 3 3 0 0

Source: manufacturers’ and consultant’s estimates

5.7 User indicators

176. Tables 30 and 31 show RUCs and journey time values, all expressed in CNY/veh-km, for the reference and project case roads. It is seen that removing diverted traffic from the G319 makes a small difference to the RUCs of the remaining traffic, reducing them by just a few percent. The big differences are between the RUCs of G319 (and G320) traffic without diversion and the RUCs of the same vehicles on the project road. VOCs are reduced by 10-20 percent and journey time values by 30-40 percent. The change in operating speeds (table 31) explains the large difference in journey time values.

Table 37 Road User Cost (RUC) Summary

Road Reference case CNY/veh-km Project case CNY/veh-km

Car Small bus

LGV MGV Car Small bus

LGV MGV

G319 VOC 4.16 2.62 3.13 4.79 4.13 2.58 3.11 4.77

Time 2.88 4.72 0.15 0.11 2.78 4.56 0.15 0.11

Xiaojian-Chishan VOC 6.54 3.78 5.00 7.96 See project road

Time 4.14 6.76 0.24 0.19



Road Reference case CNY/veh-km Project case CNY/veh-km

Car Small bus

LGV MGV Car Small bus

LGV MGV

Project road VOC Not applicable 3.86 2.12 2.64 3.84

Time 1.81 2.95 0.11 0.08

Source: PPTA consultant’s HDM4 runs

Note: values shown are averages over the entire evaluation period

Table 38 Operating Speeds

Road Reference case km/h Project case km/h

Car Fleet Car Fleet

G319 VOC 40 28 42 29

Xiaojian-Chishan VOC 26 21 See project road

Project road VOC Not applicable 50 40

Source: PPTA consultant’s HDM4 runs VOC = Vehicle Operating Costs

Note: values shown are averages over the entire evaluation period

5.8 Traffic forecasts (demand analysis)

5.8.1 Vehicle classification

177. Official traffic counts (and therefore the FSRs) use a standard vehicle classification, shown below with the official passenger car unit (PCU) rating for each vehicle. Trucks carrying containers are often counted separately, and may be rigid or articulated vehicles, but are here included with truck-trailer combinations. HDM-4, the program used for economic evaluation, uses a slightly different measure, namely passenger car space equivalents (PCSEs), whose recommended values for a two or four lane road are also shown in the table. PCSEs are used in congestion calculations in HDM-4.



Table 39 Motorized vehicle classification used in traffic counts

Class PCUa PCSEb Ref in tables

Description

Light passenger vehicle

1.0 1.0 L Cars and small buses with a maximum of 19 seats. 2 axles; <6m

Heavy passenger vehicle

1.5 1.5 H Buses with >19 seats (axle configuration 12)

Light goods 1.0 1.3 L Light goods vehicles with two axles and rated load <2t (typical axle configuration 12)

Medium goods 1.5 1.5 M Medium goods vehicles (rigid) with two axles and rated loads 2-7t (typical axle configuration 1.2). 6-12m

Heavy goods 2.0 1.8 H Heavy goods vehicle with three or four axles (rigid) and rated loads 7-20t (typical axle configuration 11-22)

Truck-trailer combination

3.0 2.2 T Truck semi-trailer combination with typical axle configuration 1.2-222. Class includes trucks carrying containers and very heavy goods vehicles

Agricultural tractor

3.0 - - Treated as LGVs in traffic tabulations

Motorcycle 1.0 0.5 MC Includes motor-tricycles

Sources: (a) PRC standards, 2010, (b) table B1-1 of volume 4 of HDM-4 v2 documentation

5.8.2 Transport corridor and existing traffic conditions

178. The proposed road is intended to increase capacity in the corridor between Shangli center in the north-west and Xuanfeng, Luxi county, in the south-east. It crosses the established corridors that run along the opposite diagonal, between southern Shangli and Pingxiang center and the north-east of Pingxiang. The two corridors coincide over the central north-south 15km (starting at km7.5, where distances are measured on existing roads from the junction between the X158 and the G319 at Guanxia village). This is the principal source of existing demand for the proposed road. Figure 8 shows the proposed road and the existing network.

179. South-east of Chishan, a locally important town, there is little evidence of existing demand along the remaining corridor towards Xuanfeng: although the X123 that runs east-north-east from Chishan is busy (the PPTA moving observer (MO) count put traffic at 600-1,000 veh/day excluding motor-cycles), there is almost no through traffic using the X162 link across the hills dividing Shangli and Luxi counties. There is some local demand on the Luxi side of the hills, largely as a result of quarrying operations; averaged over the 17km distance either side of the hills, the PPTA MO count put traffic at 150-250 veh/day (again excluding motor-cycles).



Figure 8 Proposed Road and Existing Network

5.8.3 FSR estimates

180. The draft FSR’s traffic forecasts are of low quality. Despite the poor availability of relevant

historic data the DI appears not to have undertaken any traffic counts of their own and has not carried out an origin and destination (OD) survey, normally considered essential if justification for investment

in a road depends on RUC savings arising from diverted traffic – as clearly the authors of the FSR

believe.

181. In November 2014 an updated FSR arrived. Apparently inferred from the limited additional traffic data collected by PTB at the request of the PPTA consultants, the update contains an OD matrix and revised project road traffic estimates. The January 2015 revision made no changes to the November estimates.

5.8.4 Historic data

182. Historic traffic data on roads of relevance to the sub-component are confined to:

long records up to 2013 on the G320 at Luxi and at Baiyuan west of but close to Pingxiang urban center

one 24 hour count on the G319 just south of Shangli urban center undertaken by the Pingxiang transportation bureau in October 2014

183. Both records are tabulated below. Both are four lane class I highways close to Pingxiang center, dropping to two lanes further west and north respectively. In terms of traffic flow and fleet composition, both are similar. In passenger car space equivalent (PCSE) terms (not quite the same as the Chinese definition of PCU) each carries 12-15,000 PCSE/day, around the level where four lanes would normally be justified. The G319 is steep and the high proportion of slow moving trucks mean that it is more congested than the G320 (typical observed car operating speeds are 40-45km/h and



50-55km/h respectively). Both carry around 35 percent goods vehicles – a high proportion for a

national road.

184. The G319 has a high proportion of night-time goods traffic, with 40 percent of medium and heavy goods traffic travelling outside the 12h period 07h00-19h00, suggesting a high proportion of regional or long distance movements.

Table 40 G320 Traffic, 2000-2013

Year Passenger veh Goods vehicles AADTd AADTxe Pax Gds

MCa L H Lb M H Tc

G320 at Luxi West

2000 5,348 275 1,795 1,320 1,413 130 10,281 10,281 5,623 4,658

2001 6,862 1,334 1,598 1,321 1,599 136 12,850 12,850 8,196 4,654

2002 6,818 1,633 1,610 1,612 1,315 175 13,163 13,163 8,451 4,712

2003 6,774 1,543 1,895 1,507 1,551 139 13,409 13,409 8,317 5,092

2004 6,730 1,787 2,030 1,575 1,626 150 13,898 13,898 8,517 5,381

2005 6,686 2,031 2,167 1,643 1,701 161 14,389 14,389 8,717 5,672

2006 3,663 1,234 2,036 964 381 205 8,483 8,483 4,897 3,586

2007 4,950 360 1,949 972 511 216 8,958 8,958 5,310 3,648

2008 5,526 552 1,424 1,142 492 238 9,374 9,374 6,078 3,296

2009 6,374 112 1,289 1,120 494 224 9,613 9,613 6,486 3,127

2010 7,041 93 1,255 1,226 482 234 10,331 10,331 7,134 3,197

2011 5,432 5,682 142 939 847 321 524 13,887 8,455 5,824 2,631

2012 4,137 4,234 101 1,060 1,125 328 345 11,330 7,193 4,335 2,858

2013 4,224 5,167 110 1,465 1,009 475 354 12,804 8,580 5,277 3,303

Fleet %

62% 1.5%

14% 12%

4.6% 5.0% 100%

G320 at Baiyuan

2000 1,268 237 986 925 1,101 72 4,589 4,589 1,505 3,084

2001 2,397 181 856 1,723 1,425 1 6,583 6,583 2,578 4,005

2002 2,219 337 793 1,047 2,953 209 7,558 7,558 2,556 5,002

2003 2,370 331 942 1,367 2,534 135 7,679 7,679 2,701 4,978

2004 2,536 371 988 1,425 2,848 157 8,325 8,325 2,907 5,418

2005 2,701 412 1,054 1,482 2,673 179 8,501 8,501 3,113 5,388

2006 3,708 1,281 790 1,162 828 444 8,213 8,213 4,989 3,224

2007 3,887 1,198 782 1,005 731 155 7,758 7,758 5,085 2,673

2008 3,393 809 746 821 916 11 6,696 6,696 4,202 2,494

2009 5,049 726 1,109 1,174 1,063 74 9,195 9,195 5,775 3,420

2010 4,839 1,137 914 1,002 896 101 8,889 8,889 5,976 2,913

2011 5,228 5,664 717 1,100 1,035 943 323 15,010 9,782 6,381 3,401

2012 4,783 6,323 771 1,377 989 933 229 15,405 10,622 7,094 3,528

2013 3,930 7,049 846 1,688 1,157 864 183 15,717 11,787 7,895 3,892

Fleet %f

59% 7.3%

13% 10%

8.5% 2.3% 100%

Source: Transportation Bureau records, PPTA estimates



Notes: (a) blank indicates no records for motor-cycles (MC) (b) light goods – includes agricultural tractors (c) truck-trailers – includes container trucks and very heavy goods (d) AADT – average annual daily traffic in veh/day (both directions) (e) AADT excluding motor-cycles (f) fleet percentages of AADTx averaged over most recent three years

Table 41 G319 Traffic, 2014


L H Lb M H Tc

G319 at LiShui bridge

10.10.2014 8,664 99 1,448 918 863 496 12,488 12,488 8,763 3,725

Fleet % 69% 0.8% 12% 7.4% 6.9% 4.0% 100%

Source: Transportation Bureau 24h classified count on 10 Oct 2014 Notes: see table above

5.8.5 Project counts

185. Project counts were undertaken in late October 2014 as follows:

moving observer (MO) counts along the route of the proposed road, as far as this was possible

two 12h counts between Dongyuan and Chishan on the S309 and between Xiaojian and Dongyuan on the S313

a 12h turning movement count at the G319/G320 junction in central Pingxiang in order to estimate the potential for traffic to divert to the proposed road

186. MO counts are summarized in table 35 and the 12h counts in table 36.

Table 42 Moving Observer (MO) Counts, 23 Oct 2014

Road Approx km

km/h MC Passenger veh

Goods vehicles

Totala

X158-S313-G309-X592

Start to ChiShan

24b 27 510-800 170-260 180-280 860-1,340

X123

East from ChiShan

13 39 450-700 460-710 190-300 1,100-1,710

X123 over ridge to Luxi county

17 32 60-90 60-90 100-160 220-340

S229 access road from G320 at Luxi to G60

7 52 1,800-2,800 1,100-1,700 760-1,200 3,660-5,700

Source: PPTA consultants Notes: (a) ranges correspond to 1h:24h expansion factors of 8 and 12.5 (b) road works meant that a circuitous route to ChiShan was taken. The usual direct route is 22km 187. The two 12h counts on the Xiaojian-Chishan road are similar in terms of total traffic and fleet composition. Excluding motor-cycles, both are around twice as high as the MO counts. MO counts have low accuracy but they do tend to reflect demand between settlements, which is highly likely to use the new road, whereas there is a danger that the 12h counts have picked up a disproportionate share of local traffic. As a result, two thirds of the average of the two counts is taken as the basis for base year traffic, i.e. 740 veh/day (excluding motor-cycles). The number of motor-cycles is kept at 600 per day, close to the MO value.

188. The G319/G320 turning count is discussed under diverted traffic below.



Table 43 12h Classified Counts, 29 Oct 2014


MC L H Lb M H Tc

G319/G320 turning counts 29.10.2014 371 1,961 18 153 587 396 63 3,549 3,178 1,979 1,199

Fleet % 62% 1% 5% 18% 12% 2% 100%

Dongyuan-Chishan

29.10.2014 2,374 728 4 223 111 9 4 3,453 1,079 732 347

Fleet % 67% 0.4% 21% 10% 1% 0.4% 100%

Dongyuan-Xiaojian

29.10.2014 2,813 742 23 200 146 33 0 3,957 1,144 765 379

Fleet % 65% 2% 17% 13% 3% 0% 100%

Source: Transportation Bureau 12h classified counts on 29 Oct 2014 Notes: see table above 189. Adopted traffic for the Xiaojian-Chishan road and the X158 (G319 to Xiaojian) and X123 (through traffic from Chishan to Xuanfeng) roads is shown in the table below. There being so little traffic on the X158 and X123 the absolute numbers have little impact on the evaluation: the values shown are drawn from the MO counts. Weighted average project corridor traffic is 470 and 260 veh/day (including and excluding motor-cycles respectively).

Table 44 Adopted 2014 Traffic on Project Area Roads

Road Passenger veh Goods vehicles AADT AADTx

MC L H L M H T

Xiaojian-Chishan 600 492 9 142 86 14 1 1,344 744

G319-Xiaojian 60 60 0 5 5 0 0 130 70

Chishan-Xuanfenga 60 60 0 5 5 0 0 130 70

Source: PPTA MO counts and Transportation Bureau 12h classified counts on 29 Oct 2014 Note: (a) through traffic only

5.8.6 Base year (2016) traffic

190. The evaluation starts in 2016 and this is the base year for traffic. Traffic flows are rolled forwards from 2013 or 2014, as appropriate, using the growth rates in the table below. Estimates of traffic on the reference case network are shown in the table below. Weighted average project corridor traffic (links BC, CD and DE) is 290 veh/day (excluding motor-cycles).

Table 45 Base Year Traffic on Reference Case Network

Link reference

Road km km/ha 2016 AADTxb

AB G319 from G319/G320 junction to start of new road at Guanxia

19.8 40-45 14,080

BC X158 from G319 to Xiaojian 7.5 27 79

CD Xiaojian to Chishan 14.3 27 837

DE Chishan to Xuanfeng (through traffic only) 30 32 79

EF G320 from Xuanfeng to Luxi center 14.7 50-55 10,198

FG G320 from Luxi to G319/G320 junction 15 50-55 10,198

FXc S229 access road from G320 at Luxi to G60 7 52 3,215

Source: PPTA consultants Notes: (a) approximate speeds by PPTA survey vehicle (b) excluding motor-cycles



(c) link not used in this interim evaluation

5.8.7 Diverted traffic

191. In the absence of an OD survey, the sum of southbound G319 traffic turning left on to the G320 and westbound G320 traffic turning right on to the G319 is used to estimate diverted traffic. The relevant count is shown in table 36. Using a turning movement count has one advantage (that it is an observed preference rather than one that relies on inferences from stated preferences during an OD survey) and one disadvantage (that it tells us little about the trip ends of the observed traffic). In this case it is a sound basis provided estimates of traffic diversion are conservative. The G319/G320 intersection is to the north-east of Pingxiang center and relatively free of local traffic effects; traffic seeking to join the G60 will not make the observed turn at this junction.

192. In order to make allowances for the lack of trip end information, the first step is to remove vehicle classes unlikely to divert. Medium goods vehicles using both trunk roads tend to carry minerals (coal, aggregate etc) and can be assumed to be making short trips, as can motor-cycles. It is therefore assumed that diverted traffic comprises only passenger and light goods vehicles, all of which are comparatively sensitive to journey time savings. The second step is to take only a proportion of passenger and light goods vehicles: to err on the side of prudence, two-thirds of this traffic is taken, as shown in the table below. Furthermore, night-time traffic is ignored.

193. Diverted traffic is 11 percent of average traffic on both trunk roads (excluding motor-cycles), compared with 22 percent (falling over time to 18 percent) in the draft FSR.

Table 46 Diverted traffic at 2014 demand levels

Passenger veh Goods vehicles AADTd AADTxe Pax Gds

MC L H Lb M H Tc

0 1,314 12 103 0 0 0 1,429 1,429 1,426 103

Fleet % 92% 0.8% 7% 0% 0% 0% 100%

Source: PPTA consultants

194. In the modelling work described in the evaluation section it is assumed that:

diverted traffic grows at the same rate as normal traffic (see below)

diversion follows a ramp-up curve, taking three years to reach 100 percent: 25 percent on opening in 2021, followed by an additional 25 percent in 2022 and the final 50 percent in 2023

195. A single. pessimistic diversion case is examined in the evaluation, namely that all diverted traffic has its easterly trip end in or close to Luxi center, rather than further west in or east of Xuanfeng.

196. The November 2014 FSR update contains an OD matrix (apparently back-calculated from table 26 traffic counts using a transport planning model). The OD matrix appears at table 3-12 in the FSR update. Diverted traffic may be estimated from inter-zonal flows as follows:

zones close to Shangli: zones 2 (Shangli center) and 5 (south of Shangli center and including Guanxia village)

zones close to Luxi-Xuanfeng centers: zones 11 (Luxi town), 12 (Yinhe town), 13 (Xuanfeng town), 14 (south of Xuanfeng town) and 15 (Yichun)

197. Assigning inter-zonal traffic from zonal pairs 2-11, 2-12, 2-13, 2-14, 2-15 and 5-11, 5-12, 5-13, 5-14, 5-15 to the project road gives 1,745 PCU/day. If zones 14 and 15 are omitted, having a more tenuous claim to being sources of project road traffic, diverted traffic drops to 1,375 PCU/day. Precise conversion from PCU to veh/day excluding motor-cycles is not possible without knowing fleet



composition (which the FSR update does not give), but as a first approximation they are the same. Thus the updated FSR and the PPTA estimates above appear very close. However the final project road traffic that appears in table 3-21 of the Nov 2014 FSR update are much greater (see figure 9 below) for reasons that are unclear.

5.8.8 Generated traffic

198. Generated traffic, also known as induced traffic, comprises additional trips made as a result of a road upgrade, specifically as a result of a fall in transport costs. It is usually expressed as a percentage of normal traffic and usually applies more to passenger than to goods traffic. In this case the percentages will only apply to normal traffic that currently uses the X158/S309/X123 route.

199. The FSR consultants’ add 15 percent generated traffic to the diverted traffic. Diverted traffic

will experience a very small proportionate drop in perceived RUC and so their approach tends to exaggerate generated traffic benefits.

200. In this study the weighted average perceived passenger and goods vehicle RUCs in the reference and project cases are calculated and compared. The weighted average passenger vehicle perceived RUC in 2025 (mid-way through the evaluation) is CNY1.6/veh-km in the reference case (excluding motor-cycles) and CNY1.3/veh/km in the project case, a drop of 16 percent. For goods vehicles the comparable values are CNY1.9 and CNY1.7/veh-km, a drop of 11 percent.

201. Price elasticities are applied to changes in perceived cost in order to estimate percentages of

generated traffic. A wide range of elasticities can be found in the literature: a “most likely” range of

-0.1 to -1.1 for all day automobile traffic is quoted in Oum et al (World Bank, Jan 1990). Applying elasticities of -0.3 and -0.2 for passenger and goods traffic respectively implies generated traffic of 18 and 12 percent. These percentages are applied to reference case traffic on the minor roads in the project area (roads BC, CD and DE in table 53).

5.8.9 Normal traffic growth

202. The demand for transport is related to the output of the economy and is often expressed as a function of GDP per head or simply GDP:

203. eYkQ )(

204. where Q is some measure of demand for transport, k is a constant and e is the elasticity of demand for transport with respect to some measure of real economic activity, Y. Elasticity is the proportional change in demand per unit change in economic activity, so an elasticity of 0.2 implies a 2 percent growth in travel demand in response to a 10 percent increase in real economic activity.

205. Ideally, growth rates would be inferred from records of vehicle-km for traffic in the project corridor. Such records do not exist, however, and inferences have to be drawn from:

historic traffic

national and/or provincial passenger-km and tonne-km statistics

206. The problem is compounded when dealing with small roads carrying local traffic; one comparatively modest development (or, conversely, its collapse) can have a disproportionate effect on traffic levels.

207. In this case, the record of G320 traffic at Baiyuan shows a consistent growth pattern, at least for passenger traffic (the Luxi record is highly erratic and cannot be used).

208. The following relationship:

ln(traffic) = a x year no + b



209. where ln = natural logarithm; a is the annual growth rate, can be used to estimate a from historic data. Baiyuan passenger traffic data for 2001-13 have a least squares correlation coefficient of 0.93. A best fit straight line gives a growth rate of 10.2 percent. Jiangxi average annual GDP growth over the period 2005-12 was 12.8 percent and for PRC as a whole 10.6 percent, implying income elasticities of 0.8 (Jiangxi) and 0.96 (PRC). A similar picture emerges from analysis of Jiangxi highway passenger-km data: the annual average growth rate for 2005-12 is 9.4 percent (source: PPTA analysis of PRC national statistics).

210. It would be usual to apply a similar elasticity to GDP to arrive at an estimate of goods vehicle growth, but the historic goods traffic records at Baiyuan and Luxi show no convincing trend at all. At Luxi 2011-13 goods traffic is 40 percent lower than it was for 2000-2. At Baiyuan there is slightly more evidence of growth, with 4 percent per annum for the period 2006-13.

211. Short term ADB PRC GDP growth forecasts are 7.5 percent for 2014 followed by 7.4 percent for 2015 (source: ADB ADO Supplement July 2014). The IMF is a little more cautious for 2015, suggesting 7.3 percent (source: IMF WO 2014). Longer term forecasts are not widely available, although the OECD (Economic Outlook, 2013, vol. 2013/1) forecast 8.4 percent for 2012-17, 5.4 percent for 2018-30 and 2.1 percent thereafter.

212. Based on the arguments above, growth rates are adopted as shown below.

Table 47 Normal Traffic Growth: Summary Of Adopted Rates

2014-20 2021-30 2031

onwards

Goods 4.0% 4.0% 3.0%

Passenger 7.1% 6.0% 4.0%

Sources: PPTA consultants

213. Traffic on the G319 and G320 will, at assumed growth rates, reach levels that will cause serious congestion from around 2025. In practice capacity is likely to be added and this will not happen. If growth rates are left unchanged, the model used to evaluate the proposed road is likely to generate large and spurious benefits in the latter years of the evaluation. To obviate this, the growth rates shown in the table above are halved from 2025. The reduced rates are applied to the G319, G320 and to the proposed road.

5.8.10 Forecast project road traffic

214. Figure 8 shows forecast traffic on the project road and compares it with the forecasts in the draft FSR and the January 2015 update. The table below shows the adopted traffic in tabular form.



Figure 9 Project Road: Forecast Traffic

Table 48 Normal and Generated Traffic on Project Road, 2021-2040

2021 2024 2030 2035 2040

Normal traffic, veh/day 1,085 3,166 3,762 4,146 4,568

Generated traffic, veh/day 64 76 89 98 108

Total 1,149 3,242 3,851 4,244 4,676

Sources: PPTA consultants Note: traffic excludes motor-cycles

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Veh

icle

s o

r P

CU

/day

FSR update, PCU/day

Draft FSR PCU/day

PPTA PCU/day excl MC

PPTA veh/day excl MC

Ramp-up period 2021-24



6 EVALUATION OF WASTEWATER SUB-COMPONENTS

6.1 Evaluation of WW sub-components

6.1.1 Cost-effectiveness

215. For the sewerage elements of all sub-components cost-effectiveness considerations were applied by the DI to:

the choice of pipe material. Five alternatives were compared in the FSR: pre-stressed concrete, steel, uPVC, HDPE and reinforced concrete (RCP). Based on initial cost and familiarity, HDPE was chosen for <600mm and RCP for >600mm

pipework layout. For Lianhua and Xuanfeng, two options were evaluated. The option that avoids deep burial of pipes was chosen on grounds of initial cost

216. For the WWTP elements of Xuanfeng and Tongmu:

two alternative WWTP sites were compared

two alternative WW treatment processes were compared: oxidation ditch (OD) and anaerobic–anoxic–oxic (AAO). OD chosen on grounds of lower initial cost and ease of O&M

five alternative disinfection methods were compared; UV was chosen for environmental reasons

for odor control three alternatives were compared and a biological process chosen on grounds of performance, capacity for high loadings and low cost.

for sludge processing, two alternatives were compared: one-step and two-step. One-step was chosen

for de-watering, four alternative mechanical devices were compared. The centrifuge option was chosen

6.1.2 Lianhua WW sub-component

217. Sewerage in Lianhua urban center is combined; there is an existing WWTP with a DWF capacity of 15,000m3/day. The ADB sub-component will provide of 22km of mains sewers and 32kmof lateral pipes.

218. The evaluation assumes that:

85 percent of an existing urban population of 95,000 is connected. The urban population will grow at 2 percent per annum

the provision of lateral pipes will enable (a) an additional 137,000 people to be connected (see section 2.3.1 for the basis of this estimate) and (b) 100 percent of the urban population to be connected by 2023, subject to the WWTP capacity constraint (which is met in 2040)

incremental operating expenses comprise additional chemical, sludge transport and sewerage maintenance expenses as described in section 2. It is assumed that the reduction in infiltration arising from separation of foul and stormwater sewers will mean that there are no incremental energy costs

219. Annual growth rates of WTP values and numbers of households are described in earlier sections, as are investment costs and residual values.

220. The evaluation is shown in the table below; the EIRR is estimated at 9.7 percent, i.e. below the threshold. That said, there are distributional considerations: Lianhua county is a nationally designated poverty county (it has the lowest GDP per head of any county or district in Pingxiang) and is also one of one of the 592 state-level key counties for development-orientated poverty reduction.



Table 49 Lianhua Wastewater: Economic Evaluation in CNYm

Year Investment cost

Operating expenses

User benefits Non-user benefits

Net benefit

CNYm

2016 3.4 0.0 -3.4

2017 3.4 0.0 -3.4

2018 20.5 0.0 -20.5

2019 13.7 0.0 -13.7

2020 27.3 0.0 -27.3

2021 0.1 1.2 1.5 2.6

2022 0.1 2.3 1.2 3.4

2023 0.2 7.6 0.0 7.3

2024 0.2 5.2 0.0 4.9

2025 0.2 5.4 0.0 5.2

2026 0.3 5.7 0.0 5.4

2027 0.3 5.9 0.0 5.7

2028 0.3 7.6 0.0 7.3

2029 0.3 7.9 0.0 7.6

2030 0.3 8.2 0.0 7.9

2031 0.3 8.7 0.0 8.3

2032 0.3 8.9 0.0 8.6

2033 0.3 11.3 0.0 11.0

2034 0.3 11.7 0.0 11.4

2035 0.4 12.2 0.0 11.8

2036 0.4 12.7 0.0 12.3

2037 0.4 13.1 0.0 12.7

2038 0.4 16.5 0.0 16.2

2039 0.4 17.1 0.0 16.7

2040 0.4 17.8 0.0 17.3

2041 0.4 15.1 0.4 15.1

2042 0.4 15.1 0.8 15.5

2043 0.4 18.4 1.4 19.4

2044 0.4 18.4 1.9 19.9

2045 -27.3 0.4 18.4 2.4 47.7

PVs at 12%

43.6 1.1 32.3 1.6 -10.9

EIRR: 9.7%

6.1.3 Tongmu (Shangli) WW sub-component

221. Tongmu has no mains sewerage or waste-water treatment at present. The ADB sub-component will provide 23km of mains sewer and a WWTP with a (DWF) capacity of 2,500m3/day, but no laterals, whose costs are additional and are included in the evaluation.


the existing core urban population is 10,000 and will grow at 2 percent per annum



starting from 2021, the connected population will rise to 90 percent of the core urban population

non-user benefits accrue to the town populations of Tongmu and Jinshan less the connected population as a result of the project

non-residential WW demand will rise to 670m3/day (see section 3) by 2025. Total DWF is constrained to the WWTP capacity of 2,500m3/day

incremental operating expenses comprise additional energy, chemical, sludge transport and maintenance expenses as described in section 2

223. The evaluation is shown in the table below; the EIRR is estimated at 13.9 percent.

Table 50 Tongmu (Shangli) WW: Economic Evaluation in CNYm


Operating expenses


Net benefit

CNYm

2016 2.5 0.0 -2.5

2017 10.1 0.0 -10.1

2018 15.2 0.0 -15.2

2019 17.7 0.0 -17.7

2020 5.1 0.0 -5.1

2021 0.1 0.2 0.3 6.1 6.2

2022 0.1 0.2 0.7 6.1 6.5

2023 0.1 0.3 1.2 7.3 8.2

2024 0.1 0.3 1.7 7.3 8.5

2025 0.1 0.4 2.1 7.2 8.8

2026 0.1 0.4 2.1 7.1 8.8

2027 0.1 0.4 2.1 7.0 8.7

2028 0.1 0.5 2.6 8.5 10.6

2029 0.1 0.5 2.7 8.4 10.5

2030 0.5 2.5 8.3 10.3

2031 2.7 0.5 2.4 8.3 7.5

2032 0.5 2.3 8.3 10.1

2033 0.5 2.7 10.1 12.3

2034 0.5 2.6 10.1 12.1

2035 0.5 2.6 10.1 12.1

2036 0.5 2.6 10.0 12.1

2037 0.5 2.7 10.0 12.2

2038 0.5 3.3 12.2 14.9

2039 0.5 3.4 12.1 14.9

2040 0.6 3.4 12.1 14.9

2041 2.7 0.6 3.4 12.1 12.2

2042 0.6 3.5 12.0 15.0

2043 0.6 4.3 14.6 18.3

2044 0.6 4.4 14.6 18.4

2045 -10.1 0.6 4.4 14.5 28.5

PVs at 12%

35.7 1.7 8.6 35.9 7.1

EIRR: 13.9%



6.1.4 Xuanfeng (Luxi) WW sub-component

224. Xuanfeng and its neighboring town of Yinhe have no mains sewerage or waste-water treatment at present. The ADB project will provide 25km of mains sewer and a WWTP with a dry weather flow capacity of 5,000m3/day, but no laterals, whose costs are additional and are included in the evaluation.


the existing core urban population is 18,000 and will grow at 2 percent per annum

starting from 2021, the connected population will rise to 90 percent of the core urban population

non-user benefits accrue to the town populations of Xuanfeng and Yinhe less the connected population as a result of the project

non-residential WW demand will rise to 2,800m3/day (see section 3) by 2025. Total DWF is constrained to the WWTP capacity of 5,000m3/day

incremental operating expenses comprise additional energy, chemical, sludge transport and maintenance expenses as described in section 2


Table 51 Xuanfeng (Luxi) WW: Economic Evaluation in CNYm


Operating expenses


Net benefit

CNYm

2016 3.6 0.0 -3.6

2017 14.5 0.0 -14.5

2018 21.8 0.0 -21.8

2019 25.4 0.0 -25.4

2020 7.3 0.0 -7.3

2021 0.1 0.3 1.1 6.5 7.2

2022 0.1 0.5 2.3 6.4 8.1

2023 0.1 0.6 4.2 7.7 11.1

2024 0.1 0.8 5.6 7.6 12.2

2025 0.1 0.9 7.0 7.4 13.4

2026 0.1 1.0 6.7 7.3 12.9

2027 0.1 1.0 6.5 7.1 12.5

2028 0.1 1.0 7.6 8.5 14.9

2029 0.1 1.1 7.0 8.3 14.2

2030 1.1 6.2 8.3 13.4

2031 4.2 1.1 5.9 8.3 8.9

2032 1.1 5.7 8.2 12.8

2033 1.1 6.6 10.0 15.5




Operating expenses


Net benefit

CNYm

2034 1.1 6.5 9.9 15.3

2035 1.1 6.5 9.9 15.3

2036 1.1 6.5 9.9 15.2

2037 1.1 6.5 9.8 15.2

2038 1.1 7.9 11.9 18.7

2039 1.1 7.9 11.9 18.6

2040 1.1 7.9 11.8 18.5

2041 4.2 1.1 7.9 11.7 14.2

2042 1.1 7.9 11.7 18.4

2043 1.1 9.6 14.2 22.6

2044 1.1 9.6 14.1 22.5

2045 -14.5 1.1 9.6 14.0 37.0

PVs at 12%

51.4 3.7 24.1 36.4 5.3

EIRR: 13.0%

6.1.5 Xiangdong WW sub-component

227. Sewerage in Xiangdong urban center is combined; there is an existing WWTP with a DWF capacity of 10,000m3/day. The ADB sub-component will provide of 53km of mains sewers, but no laterals, whose additional costs are included in the evaluation.


approximately 12,000 people of an existing urban population of 74,000 are connected. The urban population will grow at 2 percent per annum and starting from 2021 the connected population will rise to 65,000 by 2024

incremental operating expenses comprise additional chemical, sludge transport and sewerage maintenance expenses as described in section 2. It is assumed that the reduction in infiltration arising from separation of foul and stormwater sewers will mean that there are no incremental energy costs

229. Annual growth rates of WTP values and numbers of households are described in earlier sections, as are investment costs and residual values.


Table 52 Xiangdong WW Sub-Component: Economic Evaluation in CNYm


Operating expenses


Net benefit

CNYm

2016 2.7 0.0 -2.7

2017 11.0 0.0 -11.0

2018 16.4 0.0 -16.4

2019 19.2 0.0 -19.2

2020 5.5 0.0 -5.5

2021 0.1 0.2 0.9 4.6 5.2

2022 0.3 0.3 3.6 3.7 6.7

2023 0.3 0.4 7.8 3.3 10.5




Operating expenses


Net benefit

CNYm

2024 0.1 0.4 9.0 2.9 11.4

2025 0.4 9.0 2.9 11.5

2026 0.4 8.5 2.9 11.0

2027 0.4 6.9 2.9 9.4

2028 0.4 6.4 3.5 9.5

2029 0.4 5.7 3.5 8.8

2030 0.4 5.7 3.5 8.8

2031 0.4 5.7 3.5 8.8

2032 0.4 5.7 3.5 8.8

2033 0.4 6.9 4.3 10.7

2034 0.4 6.9 4.3 10.7

2035 0.4 6.9 4.3 10.7

2036 0.4 6.9 4.3 10.7

2037 0.4 6.9 4.3 10.7

2038 0.4 8.4 5.2 13.2

2039 0.4 8.4 5.2 13.2

2040 0.4 8.4 5.2 13.2

2041 0.4 8.4 5.2 13.2

2042 0.4 8.4 5.2 13.2

2043 0.4 10.2 6.3 16.1

2044 0.4 10.2 6.3 16.1

2045 -21.9 0.4 10.2 6.3 38.0

PVs at 12%

37.8 1.6 28.3 16.6 5.5

EIRR: 13.4%

6.2 Combined evaluation of WW sub-components; sensitivity

6.2.1 Combined evaluation

231. Table 46 shows combined costs and benefits for all four subcomponents. The combined EIRR is 12.4 percent.

Table 53 Economic Evaluation of All WW Sub-Components


Operating expenses


Net benefit

CNYm

2016 12.3 0.0 -12.3

2017 39.0 0.0 -39.0

2018 73.9 0.0 -73.9

2019 76.0 0.0 -76.0

2020 45.1 0.0 -45.1

2021 0.2 0.8 3.6 18.7 21.2

2022 0.4 1.1 8.9 17.4 24.7

2023 0.5 1.5 20.8 18.3 37.1




Operating expenses


Net benefit

CNYm

2024 0.3 1.7 21.5 17.7 37.1

2025 0.2 1.9 23.6 17.5 38.9

2026 0.2 2.0 23.0 17.3 38.1

2027 0.2 2.1 21.4 17.0 36.2

2028 0.2 2.2 24.1 20.5 42.2

2029 0.2 2.2 23.2 20.2 41.0

2030 2.3 22.5 20.1 40.4

2031 6.9 2.3 22.6 20.1 33.4

2032 2.3 22.6 20.1 40.3

2033 2.3 27.5 24.3 49.5

2034 2.3 27.6 24.3 49.6

2035 2.4 28.1 24.2 50.0

2036 2.4 28.6 24.2 50.4

2037 2.4 29.1 24.1 50.8

2038 2.4 36.1 29.3 62.9

2039 2.5 36.7 29.2 63.4

2040 2.5 37.4 29.1 63.9

2041 6.9 2.5 34.8 29.4 54.7

2042 2.5 34.8 29.7 62.0

2043 2.5 42.4 36.6 76.4

2044 2.5 42.5 37.0 76.9

2045 -73.9 2.5 42.5 37.4 151

PVs at 12%

160 8.1 93.3 90.4 7.1

EIRR: 12.4%

6.2.2 Sensitivity

232. Table 47 shows conventional sensitivity test results for each sub-component and for all four sub-components.

Table 54 Sensitivity Test Results – WW Sub-components

Lianhua Tongmu Xuanfeng Xiangdong All

Test EIRR NPV,

CNYm EIRR

NPV, CNYm

EIRR NPV,

CNYm EIRR

NPV, CNYm

EIRR NPV,

CNYm

Base case 9.7% -10.9 13.9% 7.1 13.0% 5.3 13.4% 5.5 12.4% 7.1

Costs +20% 8.3% -19.8 11.9% -0.3 11.0% -5.7 11.5% -2.4 10.6% -28.3

Benefits -20% 8.0% -17.7 11.5% -1.8 10.6% -6.8 11.0% -3.5 10.2% -29.7

Costs +20% & benefits -20% 6.7% -26.6 9.7% -9.2 8.8% -17.8 9.3% -11.4 8.5% -65.0


6.3 Affordability

233. By convention, water and wastewater services are said to be affordable if household bills are less than five percent of disposable income.



234. Table 48 shows the calculation. Volumetric residential water and wastewater tariffs are currently CNY1.5 and CNY0.8 per m3 respectively. In addition there is an initial fee as a contribution towards network capacity, management, and water meter costs. The fee is CNY1,000 for urban and CNY600 for rural residents. In the table, the initial fee is defrayed over five years at an annual interest rate of 12 percent. Disposable household incomes are taken from table 89 of the interim PPTA poverty and social analysis.

235. For the purposes of the analysis the monthly consumption of water and wastewater services is 18m3. This is equivalent to approximately 200lcd. It is a conservative assumption and is considerably higher than both (a) volumes reported during the household survey and (b) volumes assumed during design of the WW sub-components.

236. The table demonstrates that, at current tariffs, expected bills are within five percent of average disposable incomes, i.e. they are affordable.

Table 55 Affordability

Household group

Monthly disposable

income, CNY

m3/month Water & WW bill,

CNY/mon

Initial fee,

CNY/mon

Total CNY/mon

Percent of income

Urban (average) 5,650 18 41 22 63 1.1%

Rural (rural) 2,660 18 41 13 54 2.0%

Lowest quartilea 2,100 18 41 13 54 2.6%

Lowest decilea 1,250 18 41 13 54 4.3%

Sources: Interim Social and Poverty Analysis; PPTA assumptions

Note: (a) from project household survey – see section 1.5



7 EVALUATION OF FRMR SUB-COMPONENTS

7.1 Introduction

237. Section 4.6 shows estimates of Annual Average Damage (AAD). In order to evaluate each sub-component it remains to:

estimate the proportion of flood loses averted by the investment

add intangible damage averted

add wetland benefits

estimate recurrent and periodic maintenance costs.

238. In all cases it is assumed that 50 percent of damage is averted in 2020 and in full from 2021. The value of the assets protected and intangible damage are assumed to rise in line with projected real GDP as follows: 7.4 percent (to 2017), 5.4 percent (to 2030), followed by 2.1 percent.

7.2 Cost-effectiveness

239. The main evidence for cost-effectiveness (actually economic efficiency in this case) is the choice of nominal protection level depending on the nature of the assets protected. The table below shows the return period applied to urban areas in each case. In general, 5, 10 and 20 year nominal protection levels are adopted for farmland, rural, and urban areas respectively.

240. Dredging is an important part of FRMR design and implementation. Four types of dredging equipment were compared: a cutter suction dredger, a trailing suction hopper dredger, an open suction dredger and a grab dredger. The cutter suction dredger was determined to be the most suitable among the four in view of the river sediment texture and because it causes less water pollution during dredging.

7.3 Summary of evaluations

241. The table below summarizes the evaluations shown individually in the following section. Freeboard of typically 30-40cm means that effective defense standards are higher than nominal standards, hence the adoption of higher return periods as the points from which damage is averted.

Table 56 Summary of FRMR Evaluations

Sub-component

Nominal urban defense

standard (yrs)

Return period from which damage averted

(yrs)

Households affected by

intangible loss

NPV in CNYm and EIRR%

Lianhua County

20 Between 20 & 50a 33,000 (Qinting, Lokou & Shenfang)

12.5m

12.9%

Xiangdong District

20 Between 20 & 50a 27,000 (Xiangdong urban center)

156m

25.4%

Lishui (Shangli)

10 20 11,500 (50% x Tongmu)

95.6m

28.6%

Jinshan (Shangli)

10 20 11,500 (50% x Tongmu)

3.3m

12.4%

Luxi County 20 Between 20 & 50a 21,000 (Luxi town) 175m

18.6%

Source: PPTA consultants’ calculations Note: (a) interpreted as 50% of the damage at T=50

CNYm = million Chinese Yuan; NPV = net present value



7.4 Evaluations of individual sub-components

242. The following tables set out the evaluations of each of the five sub-components. Each is identical in the sense that the same methodology, described in foregoing sections, is followed. None of the sub-components has an EIRR below the 12 percent threshold.

Table 57 Lianhua FRMR Evaluation

Year Project cost Tangible damage Intangible damage

Riparian benefits

Net benefit

CNYm Investment Maintenance Ref case Proj case Damage averted

2016 10.9 0.0 17.3 17.26 -10.9

2017 32.7 0.0 18.5 18.54 -32.7

2018 54.5 0.0 19.5 19.54 -54.5

2019 54.5 0.0 20.6 20.60 -54.5

2020 65.4 0.0 21.7 9.28 12.43 2.5 0.4 -50.1

2021 0.3 22.9 3.33 19.55 3.9 0.8 24.0

2022 0.3 24.1 3.51 20.61 4.1 0.8 25.3

2023 0.3 25.4 3.69 21.72 4.3 0.9 26.7

2024 0.3 26.8 3.89 22.90 4.6 0.9 28.1

2025 1.4 28.2 4.10 24.13 4.8 1.0 28.6

2026 0.3 29.8 4.33 25.44 5.1 1.0 31.3

2027 0.3 31.4 4.56 26.81 5.4 1.1 33.0

2028 0.3 33.1 4.81 28.26 5.7 1.1 34.8

2029 0.3 34.8 5.07 29.78 6.0 1.2 36.6

2030 1.4 36.7 5.34 31.39 6.3 1.3 37.6

2031 0.3 37.5 5.45 32.05 6.4 1.3 39.5

2032 0.3 38.3 5.57 32.72 6.5 1.3 40.3

2033 0.3 39.1 5.68 33.41 6.7 1.4 41.1

2034 0.3 39.9 5.80 34.11 6.8 1.4 42.0

2035 1.4 40.8 5.92 34.83 7.0 1.4 41.8

2036 0.3 41.6 6.05 35.56 7.1 1.4 43.8

2037 0.3 42.5 6.18 36.31 7.3 1.5 44.7

2038 0.3 43.4 6.31 37.07 7.4 1.5 45.7

2039 0.3 44.3 6.44 37.85 7.6 1.5 46.6

2040 1.4 45.2 6.57 38.64 7.7 1.6 46.5

2041 0.3 46.2 6.71 39.45 7.9 1.6 48.6

2042 0.3 47.1 6.85 40.28 8.1 1.6 49.6

2043 0.3 48.1 7.00 41.13 8.2 1.7 50.7

2044 0.4 49.1 7.14 41.99 8.4 1.7 51.7

2045 -65.4 1.4 50.2 7.29 42.87 8.6 1.7 117

PVs at 12%

144 2.1 211 83.0 128 25.6 5.1 12.5

EIRR 12.9%



Table 58 Xiangdong FRMR evaluation


Riparian benefits

Net benefit


2016 7.8 0.0 31.5 31.5 -7.8

2017 15.6 0.0 33.8 33.8 -15.6

2018 39.0 0.0 35.7 35.7 -39.0

2019 46.8 0.0 37.6 37.6 -46.8

2020 46.8 0.0 39.6 15.6 24.0 4.8 0.0 -17.9

2021 0.3 41.8 8.9 32.9 6.6 0.1 39.3

2022 0.3 44.0 9.4 34.7 6.9 0.1 41.4

2023 0.3 46.4 9.9 36.5 7.3 0.1 43.7

2024 0.3 48.9 10.4 38.5 7.7 0.1 46.0

2025 2.6 51.6 11.0 40.6 8.1 0.1 46.2

2026 0.3 54.3 11.6 42.8 8.6 0.1 51.2

2027 0.3 57.3 12.2 45.1 9.0 0.1 53.9

2028 0.3 60.4 12.8 47.5 9.5 0.1 56.9

2029 0.3 60.4 13.5 50.1 10.0 0.1 59.9

2030 2.7 60.4 14.3 52.8 10.6 0.1 60.8

2031 0.3 60.4 14.6 53.9 10.8 0.2 64.5

2032 0.3 60.4 14.9 55.0 11.0 0.2 65.9

2033 0.3 60.4 15.2 56.2 11.2 0.2 67.3

2034 0.3 60.4 15.5 56.2 11.5 0.2 68.7

2035 2.7 60.4 15.8 56.2 11.7 0.2 67.8

2036 0.3 60.4 16.2 56.2 12.0 0.2 71.6

2037 0.3 60.4 16.5 56.2 12.2 0.2 73.1

2038 0.3 60.4 16.8 56.2 12.5 0.2 74.7

2039 0.3 60.4 17.2 56.2 12.7 0.2 76.2

2040 2.7 60.4 17.6 56.2 13.0 0.2 75.5

2041 0.3 60.4 17.9 56.2 13.3 0.2 79.5

2042 0.3 60.4 18.3 56.2 13.5 0.2 81.1

2043 0.3 60.4 18.7 56.2 13.8 0.2 82.8

2044 0.4 60.4 19.1 56.2 14.1 0.2 84.6

2045 -46.8 2.7 60.4 19.5 56.2 14.4 0.2 131

PVs at 12%

102 3.0 385 168 217 43.4 0.6 156

EIRR 25.4%



Table 59 Lishui FRMR evaluation


Riparian benefits

Net benefit


2016 3.9 0.0 24 24 -3.9

2017 7.7 0.0 26 26 -7.7

2018 19.3 0.0 27 27 -19.3

2019 23.2 0.0 28 28 -23.2

2020 23.2 0.0 30 9.7 20.2 0.7 0.0 -2.3

2021 0.3 32 11.0 20.5 1.4 0.0 21.7

2022 0.3 33 11.6 21.6 1.5 0.0 22.9

2023 0.3 35 12.3 22.8 1.6 0.0 24.1

2024 0.3 37 12.9 24 1.7 0.0 25

2025 0.8 39 13.6 25 1.7 0.0 26

2026 0.3 41 14.4 27 1.8 0.0 28

2027 0.3 43 15.1 28 1.9 0.0 30

2028 0.3 46 16.0 30 2.0 0.0 31

2029 0.3 48 16.8 31 2.2 0.0 33

2030 0.8 51 17.7 33 2.3 0.0 34

2031 0.3 52 18.1 34 2.3 0.1 36

2032 0.3 53 18.5 34 2.4 0.1 36

2033 0.3 54 18.9 35 2.4 0.1 37

2034 0.3 55 19.3 36 2.5 0.1 38

2035 0.8 56 19.7 37 2.5 0.1 38

2036 0.3 57 20.1 37 2.6 0.1 40

2037 0.3 59 20.5 38 2.6 0.1 40

2038 0.3 60 20.9 39 2.7 0.1 41

2039 0.3 61 21.4 40 2.7 0.1 42

2040 0.8 62 21.8 41 2.8 0.1 43

2041 0.3 64 22.3 41 2.9 0.1 44

2042 0.3 65 23 42 2.9 0.1 45

2043 0.3 66 23 43 3.0 0.1 46

2044 0.4 68 24 44 3.0 0.1 47

2045 -23.2 0.8 69 24 45 3.1 0.1 71

PVs at 12%

50.5 1.7 291 153 138 9.1 0.2 95.6

EIRR 28.6%



Table 60 Jinshan FRMR evaluation


Riparian benefits

Net benefit


2016 6.8 0.0 17.5 17.5 -6.8

2017 20.3 0.0 18.8 18.8 -20.3

2018 33.8 0.0 19.9 19.9 -33.8

2019 33.8 0.0 20.9 20.9 -33.8

2020 40.5 0.0 22.1 5.3 16.8 3.4 0.0 -20.4

2021 -0.3 23.3 12.1 11.2 2.2 0.0 13.1

2022 -0.3 24.5 12.8 11.8 2.4 0.0 13.8

2023 -0.3 25.8 13.4 12.4 2.5 0.0 14.6

2024 -0.3 27.2 14.2 13.1 2.6 0.0 15.4

2025 -0.8 28.7 14.9 13.8 2.8 0.0 15.8

2026 -0.3 30.3 15.7 14.5 2.9 0.0 17.1

2027 -0.3 31.9 16.6 15.3 3.1 0.0 18.1

2028 -0.3 33.6 17.5 16.1 3.2 0.0 19.0

2029 -0.3 35.4 18.4 17.0 3.4 0.0 20.1

2030 -0.8 37.3 19.4 17.9 3.6 0.0 20.7

2031 -0.3 38.1 19.8 18.3 3.7 0.0 21.6

2032 -0.3 38.9 20.2 18.7 3.7 0.0 22.1

2033 -0.3 39.7 20.7 19.1 3.8 0.0 22.6

2034 -0.3 40.6 21.1 19.5 3.9 0.0 23.0

2035 -0.8 41.4 21.6 19.9 4.0 0.0 23.1

2036 -0.3 42.3 22.0 20.3 4.1 0.0 24.0

2037 -0.3 43.2 22.5 20.7 4.1 0.0 24.5

2038 -0.3 44.1 22.9 21.1 4.2 0.0 25.0

2039 -0.3 45.0 23.4 21.6 4.3 0.0 25.6

2040 -0.8 46.0 23.9 22.0 4.4 0.0 25.7

2041 -0.3 46.9 24.4 22.5 4.5 0.0 26.7

2042 -0.3 47.9 24.9 23.0 4.6 0.0 27.2

2043 -0.3 48.9 25.4 23.5 4.7 0.0 27.8

2044 -0.4 49.9 26.0 24.0 4.8 0.0 28.4

2045 -40.5 -0.8 51.0 26.5 24.5 4.9 0.0 69.0

PVs at 12%

89.3 1.6 214 136 79 15.7 0.0 3.3

EIRR 12.4%



Table 61 Luxi FRMR evaluation


Riparian benefits

Net benefit


2016 18.9 47 47 0.0 -18.9

2017 56.7 51 51 0.0 -56.7

2018 94.5 54 54 0.0 -94.5

2019 94.5 57 57 0.0 -94.5

2020 113 60 25 35 8.8 0.1 -69.4

2021 0.2 63 11 52 12.9 0.3 65

2022 0.2 66 12 55 13.6 0.3 68

2023 0.2 70 12 58 14.4 0.3 72

2024 0.2 74 13 61 15.2 0.3 76

2025 1.4 78 14 64 16.0 0.3 79

2026 0.2 82 14 67 16.8 0.4 84

2027 0.2 86 15 71 17.8 0.4 89

2028 0.2 91 16 75 18.7 0.4 94

2029 0.2 96 17 79 19.7 0.4 99

2030 1.4 101 18 83 20.8 0.4 103

2031 0.2 103 18 85 21.2 0.5 106

2032 0.2 105 19 87 21.7 0.5 109

2033 0.2 108 19 88 22.1 0.5 111

2034 0.2 110 19 90 22.6 0.5 113

2035 1.4 112 20 92 23.1 0.5 114

2036 0.2 114 20 94 23.5 0.5 118

2037 0.2 117 21 96 24.0 0.5 120

2038 0.2 119 21 98 24.5 0.5 123

2039 0.2 122 22 100 25.1 0.5 126

2040 1.4 124 22 102 25.6 0.5 127

2041 0.2 127 22 104 26.1 0.6 131

2042 0.2 130 23 107 26.7 0.6 134

2043 0.2 132 23 109 27.2 0.6 137

2044 0.2 135 24 111 27.8 0.6 139

2045 -113 1.5 138 24 114 28.4 0.6 255

PVs at 12%

256 1.7 580 240 340 85 1.8 175

EIRR 18.6%

7.5 Combined evaluations of all FRMR sub-components; sensitivity

7.5.1 Combined evaluation

243. The table below combines costs and benefits for all five sub-components to give a combined EIRR of 18.6 percent.



Table 62 Combined FRMR evaluation


Riparian benefits

Net benefit


2016 48.2 138 138 -48.2

2017 133 148 148 -133

2018 241 156 156 -241

2019 253 164 164 -253

2020 289 173 64 109 20.1 0.6 -160

2021 1.3 182 46 136 27.1 1.2 163

2022 1.3 192 49 143 28.5 1.3 172

2023 1.3 203 52 151 30.1 1.3 181

2024 1.3 214 54 159 31.7 1.4 191

2025 6.9 225 57 168 33.4 1.5 196

2026 1.4 237 60 177 35.2 1.6 212

2027 1.4 250 64 186 37.1 1.6 224

2028 1.4 264 67 196 39.1 1.7 236

2029 1.4 278 71 207 41.2 1.8 249

2030 7.0 293 75 218 43.5 1.9 257

2031 1.4 299 76 223 44.4 2.0 268

2032 1.4 305 78 227 45.3 2.0 273

2033 1.5 312 79 232 46.3 2.0 279

2034 1.5 318 81 237 47.2 2.1 285

2035 7.1 325 83 242 48.2 2.1 285

2036 1.5 332 85 247 49.2 2.2 297

2037 1.5 339 86 252 50.3 2.2 303

2038 1.5 346 88 258 51.3 2.3 310

2039 1.6 353 90 263 52.4 2.3 316

2040 7.2 360 92 269 53.5 2.4 317

2041 1.6 368 94 274 54.6 2.4 330

2042 1.6 376 96 280 55.8 2.5 337

2043 1.6 384 98 286 57.0 2.5 344

2044 1.6 392 100 292 58.2 2.6 351

2045 -289 7.2 400 102 298 59.4 2.6 642

PVs at 12%

636 10.0 1,682 780 902 179 7.7 443

EIRR 18.6%



7.5.2 Sensitivity

244. Table 56 shows conventional sensitivity test results for each sub-component and for all four sub-components. The viability of the whole component is robust in the face of adverse movements in costs and benefits. Jinshan and Lianhua are both vulnerable to adverse movements of either costs or benefits.

Table 63 Sensitivity Test Results – FRMR Sub-components

Test Lianhua Xiangdong Lishui Jinshan Luxi All

EIRR NPV,

CNYm EIRR

NPV, CNYm

EIRR NPV,

CNYm EIRR

NPV, CNYm

EIRR NPV,

CNYm EIRR

NPV, CNYm

Base case 12.9% 12.5 25.4% 156 28.6% 95.6 12.4% 3.3 18.6% 175 18.6% 443

Costs +20% 11.0% -16.8 22.1% 135 24.8% 85.2 10.4% -14.9 16.1% 125 16.1% 314

Benefits -20% 10.5% -19.3 21.4% 104 24.0% 66.1 10.0% -15.6 15.6% 90 15.5% 225

Costs +20%; benefits -20% 8.8% -48.5 18.5% 83 20.8% 55.6 8.2% -33.7 13.4% 39.6 13.3% 96




8 EVALUATION OF THE ROAD SUB-COMPONENT

8.1 Introduction

245. In view of the very low corridor demand at present (see section 3a and table 19 above) and reliance on diversion from the G319/G320 for project justification, the adopted approach seeks to:

estimate total transport cost (i.e. RUC plus recurrent road agency costs, RAC) for the reference and project case networks shown in the table 44 below using HDM4

calculate the change in total transport costs (TTC)

compare the change in TTC with the investment cost of the proposed road.

246. The January 2015 revision to the FSR reports an EIRR of 9.5 percent.

247. One, pessimistic diversion case is examined. This is the “Luxi town” case, which assumes

that all easterly trip ends are in or close to Luxi center, while the alternative, optimistic case, is the

“Xuanfeng” case, which assumes that all easterly trip ends are in or close to the Xuangfeng/Yinhe

area. The former is the more pessimistic as the RUC gains accruing to traffic continuing along section

X4 of the project road in preference to the G229/G320 (sections FX and EF) – a distance saving of

around 10km – are omitted.

8.2 Cost-effectiveness

248. Alternative alignments were considered at three sections along the proposed road: (i) between km22 and km30 (around Chishan), (ii) at the junction of the proposed road and the S229 G60 access road and (iii) from km38-km44, the final section where the road passes close to Yinhe and Xuanfeng towns. Adopted alternatives are as follows:

km22-km30: the recommended option offers improved access by taking the road closer to towns and villages and its financial base cost is CNY43m lower than the rejected alternative

S229 G60 access road: following comments on the draft FSR a costly grade-separated junction at the intersection of the project road and the S229 G60 access road has been dropped in favor of an at-grade junction, saving CNY7m

km38-km44: a higher cost alternative is recommended as it offers better access, there are fewer earthworks and much less resettlement. The cost penalty is CNY10m

249. In addition:

the proposed road is the appropriate class. A class II road is intended for 5-15,000 PCU/day. Using the PPTA consultants’ conservative traffic estimates, traffic would enter this range around 2035. If the DI’s forecasts are realized, however, traffic will reach 5,000 PCU/day on opening

the DI has used software to optimize horizontal and vertical alignment, balancing cut and fill to the extent possible while remaining consistent with class II design standards

8.3 Modelled networks

250. Table 57 summarizes the characteristics of the modelled networks. The project network essentially replaces the existing X and S roads. This is of course an approximation, as the new alignment will not in all cases completely replace the existing roads. No road condition or geometrical data are available; the assumed values shown in the table are chosen with a view to replicating observed vehicle speeds. Guidance on likely ranges can be found in HDM Manager Version 3.0: User-friendly Shell Environment for HDM (Rodrigo Archondo-Callao, World Bank, 1995).

Table 64 Modelled Networks



Link Road km Width (lanes)a

m

Initial IRIb

m/km

R&Fc

m/km

Horiz curvd 0/km

Speed limite

km/h

Roadside frictionf

Reference case

AB G319 from G319/G320 junction to new road

19.8 7+2(2) 10 50 500 60 0.85

BC X158 from G319 to Xiaojian

7.5 5+0(1) 15 120 600 30 0.7

CD Xiaojian to Chishan 14.3 5.5+0(1) 15 100 300 30 0.7

DE X123 to Xuanfeng/Luxi 30 5+0(1) 15 120 700 30 0.7

EF G320 from Xuanfeng to Luxi center (bypass)

14.7 7+2(2) 9 25 180 30 0.9

FG G320 from Luxi west to G319/G320 junction

15 7+2(2) 9 25 180 60 0.9

FXg S229 access road from G320 at Luxi to G60

7.7 15+3(4) 4 20 100 60 0.9

Project case

AB G319 from G319/G320 junction to new road

19.8 7+2(2) 10 50 500 60 0.85

EF G320 from Xuanfeng to Luxi center

14.7 7+2(2) 9 25 180 60 0.9

FG G320 from Luxi to G319/G320 junction

15 7+2(2) 9 25 180 60 0.9

FXg S229 access road from G320 at Luxi to G60

7.7 15+3(4) 4 20 100 60 0.9

X1 New alignment 7 7+2(2) 4 30 200 60 0.9

X2 New alignment 13.3 7+2(2) 4 30 200 60 0.9

X3 New alignment 11.7 7+2(2) 4 30 200 60 0.9

X4 New alignment 12 7+2(2) 4 30 200 60 0.9

Source: PPTA consultants Notes: (a) carriageway+shoulders (lanes) (b) international roughness index (c) cumulative rises + falls (d) horizontal curvature in deg/km (e) nominal speed limit (f) impact of roadside activities on predicted operating speed

(g) not modelled

8.4 Evaluation – Luxi town diversion

251. This case assumes that all diverted traffic has its easterly trip ends in or close to Luxi center. Investment costs of the proposed road are not changed, however. This is a pessimistic assumption: diverted traffic will derive fewer benefits from diversion while investment costs continue to include the section from Luxi to Xuanfeng.

252. The project case modelled network is slightly different from that in table 37:

X4 from the S229 junction to the eastern end at Xuanfeng is removed

X3 from Chishan to the S229 junction is extended by 6km to the G320/Luxi bypass junction, representing Luxi center

the eastern section of the G320 (link EF) is omitted from the analysis

253. Table 58 shows evaluation results. Essentially, the fall in RUCs (which account for almost all the change in TTCs) on the two trunk roads and the existing minor project area roads is greater than the RUCs and the investment and maintenance cost of the new road. Key to this are:



the drop in VOCs arising from diversion from congested roads with poor pavement conditions to an uncongested (and shorter) route on a new road

high vehicle operating speeds on the new road (see table 31)

254. The EIRR is 18.8 percent.

Table 65 Evaluation of Proposed Road, 2014 CNYm

Year Agency & user costs of proposed road

G319 & G320

Minor roads

Generated traffic

benefitsd

Net benefit

CNYm Investment cost

Maintenance cost

RUCa Drop in TTCb

Drop in TTCc

2016 22.2 0 0 0.0 -22.2

2017 66.4 0 0 0.0 -66.4

2018 133 0 0 0.0 -133

2019 133 0 0 0.0 -133

2020 88.6 0.1 0 0 0 0.0 -88.7

2021 0.1 73 55 73 1.8 56.4

2022 0.1 118 114 77 1.9 75.4

2023 0.1 163 172 82 2.0 93.6

2024 0.1 209 230 87 2.1 110

2025 0.1 217 240 90 2.2 115

2026 0.1 226 252 93 2.2 121

2027 0.1 235 266 96 2.2 129

2028 0.1 245 282 99 2.3 138

2029 0.1 255 300 102 2.3 148

2030 0.1 266 320 105 2.4 161

2031 0.1 275 335 107 2.4 169

2032 5.6 285 346 109 2.4 167

2033 0.1 261 338 112 2.7 192

2034 0.1 268 312 114 2.7 161

2035 0.1 275 317 121 2.8 166

2036 0.1 282 319 115 2.8 155

2037 0.1 290 321 122 2.8 155

2038 0.1 299 324 125 2.9 152

2039 2.2 308 331 127 2.9 151

2040 7.9 317 338 130 2.9 147

2041 0.1 285 348 133 3.4 200

2042 0.1 291 360 136 3.5 208

2043 0.1 298 374 139 3.5 219

2044 2.2 305 389 142 3.6 227

2045 -133 0.1 313 406 145 3.6 374

PVs at 12%

298 2.2 937 1,053 428 10.2 254

EIRR 18.8%

Source: PPTA consultant’s HDM4 runs Notes: (a) road user costs of traffic diverted to the project road from both trunk and minor roads

(b) drop in both road agency and road user costs on trunk roads as a result of diversion to the project road



(c) drop in both road agency and road user costs on minor roads as a result of diversion to the project road (d) traffic generated in existing corridor as result of a fall in perceived road user costs; based on percentages of normal traffic on minor roads in corridor



9 COMBINED EVALUATION OF ALL SUB-COMPONENTS

9.1 Combined evaluation

255. The table below shows the base case for all sub-components. The FRMR subcomponents contribute 63 percent of project NPV, followed by the road (36 percent) and the WW sub-components (1 percent).

Table 66 Evaluation of All Components

Year Investment & O&M costs Benefits Net benefit, CNYm

WW FRMR Road WW FRMR Road

2016 12.3 48.2 22.2 -83

2017 39.0 133.0 63.0 -238

2018 73.9 241.1 132.9 -448

2019 76.0 252.7 132.9 -462

2020 45.1 289.3 88.7 0.0 129 0 -294

2021 1.1 1.3 0.1 22.3 164 57 241

2022 1.6 1.3 0.1 26.3 173 76 272

2023 1.9 1.3 0.1 39.1 182 94 312

2024 2.0 1.3 0.1 39.1 192 111 338

2025 2.1 6.9 0.1 41.0 203 115 350

2026 2.2 1.4 0.1 40.3 214 121 371

2027 2.3 1.4 0.1 38.5 225 129 389

2028 2.4 1.4 0.1 44.6 237 138 416

2029 2.4 1.4 0.1 43.4 250 148 438

2030 2.3 7.0 0.1 42.7 264 161 458

2031 9.1 1.4 0.1 42.6 269 169 470

2032 2.3 1.4 5.6 42.6 275 173 481

2033 2.4 1.5 0.1 51.8 281 192 520

2034 2.4 1.5 0.1 51.9 286 162 496

2035 2.4 7.1 0.1 52.4 292 166 501

2036 2.4 1.5 0.1 52.8 299 155 502

2037 2.4 1.5 0.1 53.2 305 156 510

2038 2.5 1.5 0.1 65.3 311 153 525

2039 2.5 1.6 2.2 65.9 318 153 531

2040 2.5 7.2 7.9 66.5 324 154 528

2041 9.1 1.6 0.1 64.2 331 200 584

2042 2.5 1.6 0.1 64.6 338 209 607

2043 2.5 1.6 0.1 79.0 345 218 638

2044 2.5 1.6 2.2 79.4 353 229 655

2045 -71.4 -282 -133 79.9 360 242 1,168

PVs at 12%

177 646 297 184 1,089 554 704

EIRR 17.8%



9.2 Sensitivity

256. Sensitivity results are shown in the table below. Three sensitivity scenarios are tested. The switching value for a cost overrun is 65 percent. The switching value for a decrease in consumer

benefits is 61 percent. The degree of uncertainty of the project’s economic analysis is high for the

WW and FRMR sub-components. In the case of the WW sub-components benefits depend on uncertain numbers of additional sewerage connections, while the FRMR benefits depend on uncertain historic event damage assessments and damage-frequency relationships.

Table 67 Sensitivity Test Results

Test EIRR NPV, CNYm Switching value

Base case 17.8% 704

Costs +20% 15.4% 480 65%

Benefits -20% 14.9% 339 61%

Costs +20% & benefits -20% 12.9% 115


9.3 Distributional analysis

257. Conventional economic analysis judges the value of a project by its NPV - the amount by which benefits exceed costs at an appropriate economic discount rate. The NPV is also known as the project's "net benefit". Calculation of the NPV presumes a national boundary around the analysis: flows of money within the boundary (e.g. taxes) are regarded as "transfers" and are ignored, while flows across the boundary are regarded as resource flows, i.e. costs or benefits. If the boundary is instead drawn around the poor, then flows that were regarded as transfers when undertaking a national analysis must now be regarded as representing resource flows.

258. The poverty impact ratio (PIR) is the proportion of the project's (national) economic NPV that benefits the poor. The following calculation of the PIR follows the Handbook for Integrating Poverty Impact in Economic Analysis of Projects (ADB, July 2001) and recent practice in other PPTAs. As financial transactions change the incidence of benefits, input figures are taken from both the economic and the financial analyses. Calculation of the PIR requires a great many assumptions and its results are purely indicative.

259. Salient assumptions include:

a split between road users (consumer surplus) and truck and bus operators (producer surplus). This depends on the ability of the market to pass RUC savings on to users in the form of reduced prices. A conservative (i.e. pessimistic) assumption is made, namely that 60 percent of benefits pass to users, 30 percent to operators and 10 percent to government agencies as owners and operators of some vehicles

financial payments by new wastewater users are based on tariffs and consumption as used in the affordability analysis. It is assumed that tariffs do not change in real terms

the cost of unskilled labor (regarded as a poor beneficiary) is estimated as follows: o routine road maintenance as set out in section 2.4 o road construction at 10 percent of initial base cost excluding LAR costs o sewerage at 5 percent of initial base cost excluding LAR costs o wastewater treatment works and FRMR at 8 percent of initial base cost excluding

LAR costs o the unskilled element of routine maintenance of WW and FRMR sub-components as

set out in tables 7 and 8

the proportions of beneficiaries that are poor are taken as follows:(a) all local traffic and local generated traffic, (b) all unskilled labor, (c) 14 percent of WW and IFRM beneficiaries (taken from table 28 of the interim PSA report), (d) 8 percent of “government” (as the overall national poverty percentage from the same interim PSA table) and (e) none of the vehicle owners and operators.



260. The resulting calculation is shown in the table below; net flows to the poor are CNY236m and the PIR is 0.30. The PIR is held back because most of the road user benefits accrue to trunk road traffic that diverts to the new road, and there is no evidence that a significant proportion of the beneficiaries could be classified as poor.



Table 68 Benefits distribution: poverty impact ratio

Item Financial

PV Econ PV

Econ-Fin PV

Road users

Bus&truck operators

WW supply area

FRMR area Construction

labor Government Total

All values in 2014 CNYm

Benefits

Road

552 552 331 166

55 552

WW 38 189 151 0 0 151

0 151

IFRM

1,089 1,089 0 0

1,089

0 1,089

Total benefits 38 1,830 1,792 331 166 151 1,089 0 55 1,792

Costs

Capital and O&M -1,077 -922 155

155 155

Taxes, duties etc -53 0 53

53 53

Unskilled labor -193 -155 39

39

39

Total costs -1,323 -1,077 246 0 0 0 0 39 208 246

Net benefits -1,285 753 2,038 331 166 151 1,089 39 263 2,038

Gains and losses

331 166 151 1,089 39 -1,022 753

Total benefits

331 166 151 1,089 39 -1,022 753

Proportion to the poor

0.29 0.00 0.14 0.14 1.0 0.08

Net benefit to the poor

96 0.0 21 152 39 -82 226

Poverty Impact Ratio (PIR) = 0.30


AECOM Asia Company Ltd H-1 Asian Development Bank

APPENDIX H: RISK ASSESSMENT and RISK MANAGEMENT PLAN

Risk Description Risk

Assessment Mitigation Measures or Risk Management Plan

A. Executing agency and project management office: PMG

1. Public financial management risk

(i) The PMO and the implementing agencies have the capacity for project implementation but are less experienced in administering ADB-funded projects.

Medium During project preparation, capacity development workshops in procurement, financial management, resettlement, and environmental management will be conducted by the project preparatory technical assistance consultants.

During project implementation, the capacity of the PMO and the implementing agencies will be strengthened with the assistance of a project management consultant team.

(ii) Implementation of wastewater tariff adjustments is untimely, affecting the sustainability of wastewater collection and treatment.

High PMG will ensure that (i) the project is implemented as scheduled; (ii) wastewater tariffs rise progressively to provide revenue acceptable to ADB as sufficient to operate and maintain the infrastructure; (iii) a periodic review of tariffs and fees is undertaken in accordance with specified tariff-setting mechanisms; (iv) the impact of wastewater collection fees and tariffs on the poor is assessed and necessary subsidies are provided to ensure continued wastewater collection services; and (v) a public tariff consultation hearing is held to discuss wastewater tariffs with the affected people each time these are set or adjusted (an assurance is included in the project agreement).

2. Procurement and corruption risk

(i) PMO staff have no experience in ADB-financed projects and are unfamiliar with ADB procedures and requirements for procurement.

Medium During project implementation, the capacity of the PMO for procurement will be reinforced with the assistance of the project management consultant team.

The PMO will engage a national procurement agency that will conduct procurement for the PMO and the implementing agencies.

ADB will provide the PMO with instructions on procurement and relevant ADB templates in a timely manner through regular communication and fielding of review missions.

ADB will review representative NCB and all ICB procurement-related documents at key stages of the procurement process to ensure compliance with ADB’s procurement principles.

(ii) Poor governance and corruption may distort the development process

Medium ADB’s Anticorruption Policy (1998, as amended to date) will be explained to the PMG (the executing agency), implementing agencies, and other participating agencies.

PMG and implementing agencies will follow ADB’s governance and anticorruption policies and will mitigate governance and corruption risk by improving financial management, strengthening procurement systems, and combating corruption through preventive enforcement and investigative measures throughout project implementation.a





During project implementation, and especially review missions, ADB will review PMG and implementing agency governance performance.

Assurances for governance and anticorruption are included in the project agreement.

3. Change in ownership Medium PMG and the implementing agencies shall ensure that during project implementation (i) in the event of (a) any change in the ownership or control of project facilities; or (b) any sale, transfer or assignment of share or interest that results in a change of control in any agency owning or managing any project facilities is anticipated; (ii) they will cause the relevant agency to consult with ADB at least 6 months prior to the implementation of such change. PMG, through the implementing agencies, shall cause said agency to further ensure that the new controlling management of the concerned agency complies with (i) all project-related agreements executed between ADB and the Borrower or PMG, and (ii) the policies of ADB relevant to the project.

Other risks. Delays in project implementation

Medium Loan implementation consultants and capacity development specialists will support PMG and the implementing agencies with technical, supervisory, and managerial aspects.

B. Implementing agencies: Local governments of Lianhua, Luxi, Shangli, and Xiangdong

1. Public financial management risk. Staff of implementing agencies and PIUs are unfamiliar with ADB policies and procedures and lack standardized procedures to manage the ADB loan

Medium During project administration the loan consultant will provide training on ADB's payment policy, accounting, and financial reporting requirements, and guide the staff of implementing agencies and PIUs to develop a system of written financial policies and manuals

2. Procurement inefficiencies and corruption risk

Medium Procurement will be centralized at the PMO. Implementing agencies and PIUs will participate in developing specifications and work schedules and serve on the procurement committee.

3. Other risks. Delays in project implementation

Medium Upon loan approval, the implementing agencies and PIUs will recruit design institutes. A few months prior to loan effectiveness, pre-implementation consultants will assist in updating the resettlement plans. Loan implementation consultants will assist in scheduling and contracting.

C. Operating agencies: Project implementation units

Rivers. The improved rivers under the project deteriorate due to illegal solid waste dumping.

High Local government will ensure solid waste is properly collected in rural and urban areas and transported to adequate transfer and final disposal sites.

CERTs are planned to work with local residents to develop and implement community environment management rules to foster environmentally sustainable behavior. A CERT consists of at least three community representatives including at least one woman. A CERT will be established as a trial for 3 years in three typical urban communities and three rural communities located close to the project rivers. The CERT will raise the environmental awareness of





community residents with the goal of eliminating improper disposal of solid waste in channels.

Wastewater collection and treatment. Buildings and communities are not connected to project sanitary sewers.

Medium Where property owners or developers with legal title to buildings and communities can be identified, pipes connecting the buildings and communities to the sanitary sewers will be installed by the property owners or developers in accordance with the Urban Wastewater Discharge Permit Management Method issued by the Ministry of Construction (Order No. 152) (an assurance is included in the project agreement). For all other communities, connections to the sanitary sewers will be installed under the project and financed under the ADB loan.

WWTP operation and maintenance

Medium About 1 year prior to commissioning of the WWTP, the contractor will arrange training at a nearby WWTP county town for staff of Xuanfeng and Tongmu towns

Rural-urban road.

(i) There is no regular inspection and maintenance of roads.

(ii) Increase in traffic accidents due to higher vehicle speed on the project road, and friction with slow-moving local traffic.

Medium

Medium

Through a loan covenant, ADB will require the county traffic bureaus to complete periodic written inspection reports and submit these to ADB as part of loan reporting.

CERTs are planned to work with local residents to develop and implement road safety education programs, and promote safe behaviors by road users.

Overall Medium

ADB = Asian Development Bank, CERT = community-based environment supervision and roads safety education team, ICB = international competitive bidding, NCB = national competitive bidding, PIU = project implementation unit, PMG = Pingxiang municipal government, PMO = project management office, TA = technical assistance, WWTP = wastewater treatment plant. a ADB. 2006. Second Governance and Anticorruption Action Plan. Manila.



AECOM Asia Company Ltd I-1 Asian Development Bank

APPENDIX I: DETAILS OF WORLD BANK PROJECT IN LUXI COUNTY

Subproject Scope and scale of construction Details

Luxi County Yuanhe River East Urban Road Network Improvement Project

4.95km (including Yuanhe East Road 2.08km, Gaolou Road 0.86km, Zijing Road 0.83km and Huangzi Road 1.18km)

This subproject is located in the east of the Luxi county town, east of the Yuanhe River, between Renmin Central Road and Rijiang West Road, being a class III secondary trunk road, with a full length of 2,284m, 24m red line width. The direct beneficiary area of this subproject is the east of Luxi county town; it will also improve the traffic on both sides of the Yuanhe River in the whole Luxi county town, and between the Luxi county town and the outside.

Luxi County Yuanhe River Flood Bank Ecological Management Project

River channel from Dongzhou Bridge on National Highway 320 to Shankouyan Bridge in the Luxi county town, with a total dike length of about 6.0 km and a total basin area of 240 km2

THIS PROJECT CANCELLED. Jiangxi PPMO sent application to the World Bank to cancel the activities listed in LX-CW-02. The world Bank has agreed the application in principle. Source: Ximing Zhang

Senior Water Resources Specialist World Bank, Beijing Office Email, 20 April 2015

This subproject includes the Yuanhe River channel from Dongzhou Bridge on National Highway 320 in the upper Yuanhe River in the Luxi county town to Shankouyan Bridge, with a planned channel length 9150m (both sides), a total bank length of 5.232km and a total basin area of 240 km2. Improving the upper Yuanhe River provides a complete flood protection system will be formed to ensure local flood safety, beautify the urban environment and provide reliable guarantee for the economic development of Luxi County. This subproject will protect over 20,000 permanent residents and over 10,000 mu of farmland east of the Yuanhe River from floods, and provide an additional protection area of 25 km2, thereby protecting 153,000 people in and around the county town. The flood bank plus road design provides traffic convenience to nearby residents. Currently, all roads along the Yuanhe River are earth roads that would be muddy and rugged on rainy days, and are also narrow and unsafe. 3m wide flood bank sidewalks will be constructed on clay slopes. This bank design will improve road conditions and provide traffic convenience. This subproject also uses a combined road-bank design. These improvements will facilitate the traffic of nearby residents greatly.

Luxi County Water Supply System Improvement Project

Expansion of the urban waterworks and construction of main delivery pipelines of 5.9km, increase of daily supply capacity by 10,000 tons. (The Shankouyan Reservoir was completed and put into operation in May 2012.)

The proposed range of water supply of this subproject includes Xintian, Gexi, Jiangxia, Tangli, Gaolou, Dongyang, Nianfeng, Luxing, Liujiang and Linjiafang Villages in Luxi Town (about 21,000 people); all villages in Shangbu Town (about 30,000) and the north and west industrial parks of Luxi County.

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