Document of The World Bank Report No: 30467-CHA IMPLEMENTATION COMPLETION REPORT (SCL-39870) ON A LOAN IN THE AMOUNT OF US$250 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A SECOND SHANGHAI SEWERAGE PROJECT December 29, 2004 Urban Development Sector Unit East Asia and Pacific Region CURRENCY EQUIVALENTS (Exchange Rate Effective June 30, 2004) Currency Unit = Yuan Y1.0 = US$ 0.12 US$ 1 = Y8.3 METRIC SYSTEM FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS APL Adaptable Lending Program BOD Biological Oxygen Demand BOT Build-Operate-Transfer CAS Country Assistance Strategy COD Chemical Oxygen Demand DRA Design, Review and Advisory (consultants) EIA Environmental Impact Assessment GDP Gross Domestic Product GOC Government of China ICB International Competitive Bidding NCB National Competitive Bidding PCCP Pre-stressed Cement Concrete Pipe PMO Project Management Office RAP Resettlement Action Plan SAR Staff Appraisal Report SARS Severe Acute Respiratory Syndrome SEP Shanghai Environment Project SEMC Shanghai Environmental Monitoring Center SEPB Shanghai Environmental Pollution Board SFB Shanghai Finance Bureau SHUEP Shanghai Urban Environment Program SM Shanghai Municipality SMG Shanghai Municipal Government SMSC Shanghai Municipal Sewerage Company SSC Shanghai Sewerage Company SSP1 Shanghai Sewerage Project SSP2 Second Shanghai Sewerage Project SSPCC Shanghai Sewerage Project Construction Company SUDIC Shanghai Urban Construction & Development General Corporation SWA Shanghai Water Authority SWAOD Shanghai Water Asset Operations Company SWEC Shanghai Water Environment Construction Company YDER Yangtze Delta Economic Region Vice President: Mr. Jemal-ud-din Kassum, EAPVP Country Director: Mr. David Dollar, EACCF Sector Director: Mr. Keshav Varma, EASUR Task Team Leader: Mr. Mats Andersson, EASUR CHINA SECOND SHANGHAI SEWERAGE PROJECT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 5 5. Major Factors Affecting Implementation and Outcome 10 6. Sustainability 11 7. Bank and Borrower Performance 13 8. Lessons Learned 17 9. Partner Comments 17 10. Additional Information 18 Annex 1. Key Performance Indicators/Log Frame Matrix 19 Annex 2. Project Costs and Financing 23 Annex 3. Economic Costs and Benefits 25 Annex 4. Bank Inputs 26 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 29 Annex 6. Ratings of Bank and Borrower Performance 30 Annex 7. List of Supporting Documents 31 Project ID: P003648 Project Name: Second Shanghai Sewerage Project Team Leader: Mats Andersson TL Unit: EASUR ICR Type: Core ICR Report Date: December 29, 2004 1. Project Data Name: Second Shanghai Sewerage Project L/C/TF Number: SCL-39870 Country/Department: CHINA Region: East Asia and Pacific Region Sector/subsector: Sewerage (90%); Sanitation (10%) Theme: Pollution management and environmental health (P); Access to urban services and housing (P); Municipal governance and institution building (S) KEY DATES Original Revised/Actual PCD: 09/29/1994 Effective: 08/09/1996 Appraisal: 06/21/1995 MTR: Approval: 03/21/1996 Closing: 06/30/2002 06/30/2004 Borrower/Implementing Agency: People's Republic of China/Shanghai Municipal Sewerage Company Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Russell Cheetham Country Director: David R. Dollar Nicholas Hope Sector Manager: Keshav Varma Katherina Sierra Team Leader at ICR: Mats Andersson Geoffrey Read ICR Primary Author: Terry Hall 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: HL Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: HS S Project at Risk at Any Time: No 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: Background: Shanghai Municipality (SM) is China's most important industrial area and is a major center of commerce, trade, finance and science. At appraisal, the Yangtze Delta Economic Region (YDER) comprising SM and three adjoining provinces, with a population of about 200 million people, accounted for about 22 percent of the national domestic product (GDP). Rapid urban growth was causing increased domestic and industrial wastewater discharges. Recognizing the significant environmental damage caused by uncontrolled wastewater, the Government of China (GOC) targeted Shanghai for environmental management improvement. Shanghai Municipal Government (SMG) recognized that sustained protection of the environment was a pre-requisite for long-term economic growth and investing in environment protection was a high priority. Shanghai embarked on a program of infrastructure reforms, and a wastewater management strategy was formulated, comprising a phased investment program, to be managed by a financially sustainable utility company. GOC requested support for Shanghai's long-term environmental protection program. This project was part of that long-term program which started with Shanghai Sewerage Project (Loan 2794/Credit 1779-CHA), and the Shanghai Environment Project (Loan 3711-CHA). Objectives. The principal objective was to provide a safe environmental setting for the long-term growth of Shanghai, enabling sustained economic and industrial growth. Specific objectives were to: (a) enhance wastewater and storm water management through expanding wastewater collection, treatment and disposal capacity, and storm water drainage facilities; (b) reduce urban pollution impact, while facilitating pollution control; (c) improve wastewater utility financial and operational management; and (d) strengthen sector institutions through training, feasibility studies, and future investment project preparation in the environment area. Assessment of Objectives. This project supported the Bank Group's Country Assistance Strategy (CAS) in 1995 which supported urban environmental management by enhancing environmental protection, and assisting with infrastructure development at municipal and regional levels. GOC continued to attach high priority to environmental protection, targeting industrialized cities and regions like Shanghai. Strengthening the financial and operational management of the sector institution was particularly important in this project, since the SMSC had only recently established when SSP2 was under preparation. Capacity building and institutional strengthening were therefore important initiatives in SSP2. These initiatives also helped Shanghai prepare for its further long-term environmental development programs, including the Shanghai Urban Environment Project (SHUEP), currently in progress under the three-phase Adaptable Program Loan (APL) (Ln. 4705-CHA). While the objectives were realistic and clear, and responsive to Shanghai's needs, they were at the same time very challenging taking into consideration the size and complexity of facilities to be constructed, and the limited experience in China at the time of this kind of comprehensive sector improvement projects. - 2 - 3.2 Revised Objective: N/A. 3.3 Original Components: The project included the following components: Sewerage and Sanitation Improvements ($531.2 million). Construction of trunk conveyor, secondary sewers, and pumping facilities with a supporting program of wastewater flow management, connections and collection for domestic, industrial and enterprise systems; Wastewater Treatment and Disposal Systems ($83.2 million). Construction of pretreatment, effluent pumping facilities, and a marine outfall for a flow capacity of about 1.7 Mm3/d at Bailonggang, and rehabilitation of existing sewerage systems; Institutional Development and Training ($18.9 million). Supporting and strengthening project management, wastewater operations and management systems; wastewater system rehabilitation, monitoring technology and data management; pollution control; and training, feasibility studies and future project preparation. Assessment of Design. All components were interlinked and clearly addressed the objective of the project. The components comprised priority investments identified within the Shanghai Sewerage Master Plan and were consistent with earlier works carried out in SSP1 and SEP. Lessons learned from SSP1 and SEP were factored into SSP2. These included: (a) the linking of physical works with early actions to address institutional development and financial soundness of SMSC (a wastewater tariff of Y0.14/m3 for domestic consumers was introduced prior to "effectiveness"; (b) extensive use of thrust boring technology for sewer construction to minimize disruption in congested built-up areas; (c) improved design of joints in trunk conveyors to control leakage; and (d) careful attention to corrosion control on steelwork items; and (e) the importance of thorough project preparation. All components were to be implemented initially by SMSC. Although recently established at that time through the amalgamation of the former Shanghai Sewage Company (SSC) and Shanghai Sewerage Project Construction Company (SSPCC), SMSC had experience in implementing and operating similar investments, and thereby capable of implementing SSP2. SSP1 was successfully completed by SSPCC and operating as of 1995. The wastewater component of SEP, which began implementation in 1994, was also executed very successfully by SMSC staff. 3.4 Revised Components: The following additional investments were implemented using project cost savings identified in 1998. These additional investments were consistent with the project objectives and did not result in a restructuring. They deepened the achievement of the project objectives. Puxi Mid Line Sewer ($32.4 million). This covered the Puxi Middle Block area (see p. 58 of the SAR), and Beicai area of Pudong, with a total catchment area of 10.8 km 2. The additional - 3 - system provided service to some 615,000 people (about 5% of Shanghai population) and wastewater collection was enhanced by some 300,000 m3/d. Pudong Link Sewers ($54.2 million). This is located in the service area of SSP2 in Pudong and extended the collection area of the main conveyor sewer. The works comprised link sewers and pump stations in 10 locations; rehabilitation of storm water pump stations; interception of wastewater from about 32 industrial enterprises; and from Yangsi and Chuansha townships covering about 24 km2. Bailonggang Wastewater Treatment Plant ($53.1 million). This component comprised the construction of chemically enhanced primary treatment and sludge disposal works of 1.2 Mm3/d capacity, located on reclaimed land at Bailonggang next to the outfall pump station and preliminary treatment facility (which had been completed in the original scope of SSP2). Assessment of Design. The designs were prepared by local/foreign municipal design institutes and consultants to provide least-cost solutions, enhancing the project benefits. Satisfactory Environmental Impact Assessment (EIA) and Resettlement Action Plans (RAPs) were provided for all additional components. 3.5 Quality at Entry: The Quality at Entry is considered highly satisfactory for the following reasons: Environment-related sector work carried out by the Bank included a number of urban sector surveys which identified major environmental issues, their causes, and remedies for addressing them. The resulting program of operations assessed institutional capacity and service delivery. These strategies were supported in nine urban environment, water supply and sanitation projects, of which SSP2 was one. SSP2 was consistent with the CAS, which emphasized institutional development, including organizational strengthening of the Shanghai Municipal Sewerage Company (SMSC), financial capacity building and investments in the southern part of Shanghai's wastewater management system. Referring to the specific objectives, the project was designed to enhance the capacity of the city's wastewater collection, treatment and disposal system by 1.7 Mm3/day covering an area of some 240 km2, with significant reductions in urban pollution (this would represent a challenging undertaking in any country of the world). SSP2 was the third environmental intervention in Shanghai supported by the Bank and fully responded to GOC and SMG sector priorities (see Section 3.1). GOC recognized that industry was a major source of pollution in China and with its heavy industrial base, Shanghai was targeted for environmental improvements. SMG also recognized that sustained protection of the environment was a pre-requisite for long-term economic growth. SSP2 was an interim investment within Shanghai's long-term program to alleviate environmental degradation, focusing on wastewater collection, treatment and disposal, and institutional strengthening of SMSC. At the outset, SMG set up a high level Leading Group and a Project Office, headed up by a senior manager from the former SSPCC. Experienced technical and management staff was assigned from SMSC. SMG benefited from the deployment of substantial international and local - 4 - consultant support during preparation. The Bank staff were already working with SMG on SSP1 and the team of senior professionals deployed on project identification were well versed with Shanghai's sector institutions and issues. Thorough strategic discussions were held to ensure the most effective long-term solutions for Shanghai. All components were interlinked to support the GOC and SMG sector objectives of significant environmental improvement. The Bank's safeguard policies were fully satisfied. By appraisal, all feasibility studies and modeling of the Yangtze (Changjiang) estuary were complete, and detailed designs for all components were well advanced. Drafts of tender documents covering some 40 percent of the investment program were ready at negotiations. Risks identified at project appraisal were: delays by SMG in implementing wastewater tariffs and in addressing institutional reform in SMSC; construction difficulties at Bailonggang outfall site; delays by SMG in implementing institutional development and training; and, the need for sustained investment to meet the long-term wastewater management strategy. The assumptions made in the SAR were reasonable, and the risk assessment was largely accurate. Mitigation included: a wastewater tariff increase in 1996 for domestic consumers (a condition of effectiveness); an Engineering Review Panel; technical assistance to provide management and financial strengthening for SMSC (support began before loan effectiveness); and provision of funds for future project preparation to encourage continued implementation of the long-term program. These measures proved adequate. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The project objectives were addressed in a very comprehensive way and its outcome is rated satisfactory. All objectives were achieved and the physical components exceeded expectations. See Annex 1 for details. Regarding Objective (a), enhance wastewater and storm water management, chemically enhanced primary treatment (not included in the original project scope) was provided at Bailonggang, to control the phosphorus load discharged to the Changjiang estuary. Additional link sewers and storm water pump station rehabilitations were provided, thus enhancing collection capacity. The additional works were originally planned as a subsequent project, but construction was brought forward to utilize cost saving in SSP2. Although studies done during project preparation showed that pretreatment alone would meet China's Standards for Discharge to Fresh Waters in the short term, it was agreed to move towards controlling of pollutants on a "total load" basis. The chemically enhanced primary treatment facility at Bialonggang was designed to contain the phosphorus load to the Changjiang from Shanghai at less than projected year 2000 levels (18 tonnes/day). This is important in connection with the control of the nutrient status in Hangzhou Bay. At appraisal, it was estimated that the first tranche of primary treatment of 0.86Mm3/d capacity would be needed first by year 2005. SMG has now provided a facility of 50 percent greater capacity, and one year ahead of schedule, responding to increased needs due to higher economic and population growth than expected at that time. Regarding Objective (b), urban pollution reduction and control, monitoring was defined in the SAR although base-line parameter values were not agreed with the Borrower (despite many - 5 - mission discussions). However, based on information provided in the Borrower's "Review Statement on Environmental Impact" (Annex 7), SSP2 has contributed substantially to reducing urban pollution. The service area of 289 km2 (including Minhang/Wujing area) serves a population of 4.1 million (about 25 percent of the population). The average wastewater flow collection rate has increased from 0.75 Mm3/d in 2000 to 1.04 Mm3/d by 2003 (39 percent growth). However, comparison of planned and actual intercepted wastewater flow in year 2003 shows that the flow collected in Pudong is only about 35 percent of the projected short-term figure due to unforeseen changes in land use development plans; the actual wastewater flow rate is lower than the original design assumptions; the construction of local sewer networks is lagging behind the main interceptor sewers built in SSP2; and, some enterprises still prefer to discharge wastewater into surface waterways. This indicates a need for SMG to ensure closer coordination with local authorities for timely utilization of trunk sewers, possibly including mandatory regulation. Nevertheless, the number of SMSC customers increased by 37 percent from 1.57 million in 1999 to 2.16 million in 2003. Monitoring of the water quality at Bailonggang Pre-treatment Works shows that the inlet and outlet effluent quality is similar. This is expected since preliminary treatment only removes gross solids and grit. However, pollution loads were reduced substantially on commissioning of the primary treatment plant in mid-2004. Operating data for August, 2004 showed significant reduction in Biological & Chemical Oxygen Demand (BOD and COD), suspended solids and phosphorus; the plant was performing within its design parameters (see Annex 1a). The impact of SSP2 on surface water quality in the Huangpu River and other waterways in the project area is difficult to assess when compared with the time bound parameters given in the SAR (see SAR Annex 11 on page 100). The overall water quality in the Huangpu was projected to improve from Class IV in 1996 to III by year 1999. General waterway improvements were projected from Class V to IV over the same period. General comparison with the actual situation is however not feasible. In order to assess the impact of SSP2, the SMG has compared the value of critical pollution indicators at a number of stations along the Huangpu river from 1996 to 2002. (Details are given in Annex 1a.) While some parameters have improved through 2002, others have varied. Overall the water quality in the Huangpu is reported to be "somewhat improved". Ammonia remains in the range of Class IV and V (sometimes worse than Class V). However, the total nitrogen remains worse than Class V at all stations. This situation is influenced by upstream discharges beyond the control of SMG. The rivers in Pudong were also monitored from 1996 to 2002 in 16 stations. The Pudong Canal and Chuangyang River are reported with improved water quality and the pollution in Zhangjia Bang is reduced. Little change is observed in other rivers, possibly caused by the low wastewater collection rate in Pudong area (see details in Annex 1a). The project helped significantly to contain the threat of deterioration of the water quality in this area of rapid growth in population as well as economic activity. Water quality at the Bailonggang outfall was monitored from 1996 to 2002. Water quality in the inter-tidal zone in this area is much improved as a result of the submarine outfall discharge provided by SSP2. Little overall change in water quality is reported however. Following commissioning of the primary wastewater treatment plant in mid-2004, further improvement in - 6 - overall water quality is likely. Water quality in the Changjiang is monitored at cross sections adjacent to the location of the submerged outfall. No deterioration in water quality is reported. Objective (c). SMSC's financial performance substantially exceeded the targets covenanted in the Project Agreements through 2002, supported by timely and substantial wastewater tariff adjustments. (In 2002, the domestic wastewater tariff was Y0.70/m3 compared with Y0.02/m3 at appraisal in 1996!) However, SMSC did not fully meet its covenanted target in 2003 regarding return on assets ( -5.2 percent was reported compared with a target of +10 percent). The debt service ratio of 0.71 for 2003 was also below the targeted minimum of 1.3. This was due to a lack of tariff adjustment since 2002; and disbursements under SSP2. The wastewater tariffs were sufficiently raised in August 2004 following extensive public discussions. Recent projection by SMSC shows satisfactory compliance from 2004 onwards. Note: The current domestic tariff is Y0.9/m3 for water usage up to 15 m3/month and Y1.0/m3 above that figure. The non-domestic tariff has been split into three categories in the range Y1.1, 1.2 and 1.4/m3 for public institutions, industrial/commercial users, and heavy polluters respectively. Objective (d). The sector institutions have benefited from extensive training on utility and infrastructure management, and geographic information system support. In total some 270 personnel benefited under this component. SMG's sector reforms introduced in 1999 have effected major strengthening of the wastewater sector institutions. Some 120 senior and mid-level managers attended overseas training in financial and operational management in SSP2 (60 person-months). Improvement of staff skills resulting from in-country training was also an important output from SSP2. Operational staff was trained at the SMSC Training Center. The construction management consultant and equipment suppliers also provided important skills training for SMSC's operatives. Social Objectives (Safeguards). Resettlement involved both households and enterprises, and was carried out satisfactorily, in compliance with Chinese and World Bank guidelines. Land acquisition totaled 3.5 hectares affecting 1400 families and 211 enterprises. Some 634 persons needed re-employment. These figures were much lower than projections given in the SAR and resulted in lower implementation costs. Reasons were improved project design, minimizing land acquisition (e.g. re-alignment of some trunk sewers); SSP2 was planned together with other engineering works (road re-alignment), and some land costs were included in these other works built before SSP2; and use of tunneling technology which reduced the impact on farmland. For details, see Review Statement on Environmental Impact for Shanghai Sewerage Project Phase II (Annex 7). 4.2 Outputs by components: This section describes the physical outputs of the investment components. The overall project rating is satisfactory. Sewerage and Sanitation Improvements: Satisfactory. Major investments were successfully completed and operations began in 1998. The trunk sewer system had an initial capacity of 1.7 Mm3/d, collecting wastewater flows from some 240 km2 of Pudong and Puxi areas of the city. Wastewater flows from the Wujing/Minhang conveyor system, funded in SEP, are also intercepted into this system, and conveyed to Bailonggang for treatment and disposal to the - 7 - Changjiang through a submarine outfall. The present discharge from the Wujing/Minhang system is about 0.4 Mm3/d. Full capacity (0.7 Mm3/d) is likely to be reached in 2008 upon completion of tertiary sewers. Ultimately the Bailonggang system would cater for the long-term flow of about 3.0 Mm3/d projected for year 2020. Utilization of the system has been increasing annually since 1999. In 2003 the flow was 0.97 to 1.20 Mm3/d, reflecting improved strong water management. Pre-stressed concrete pipes (PCCP) were used very successfully over about 10% of the total 41 km length of the conveyor system, being the first such application on a sewerage project in China. High quality construction was maintained throughout and SMG received a national level Golden Award for the quality of construction. The Puxi Mid Line system and link sewers were added to enhance flow collection in parts of Pudong. These sub-components were successfully completed and began operation in early 2004. The outcome further deepens the achievement of the project in addressing the wastewater and storm water objective defined in the SAR (see indicators in Annex 1). Wastewater Treatment and Disposal Systems: Satisfactory. The original works were completed satisfactorily and operations began in 1999 along with the conveyor system outlined above. Bearing in mind the difficulties encountered in the outfall construction in SSP1, SMG appointed an Engineering Advisory Panel (funded through Australian grant assistance), to ensure rigorous quality control of the submarine outfall design and construction. The length of the submarine outfall was reduced substantially by land reclamation along the shore of the Yangtze (Changjiang) estuary. Spiral grit removal was adopted in the pre-treatment works, the first such application of this size in China. This technology was proposed by the contractor and accepted by SWEC, saving space, reducing energy costs and improving civil works economy. The original scope of work included rehabilitation of existing wastewater treatment facilities totaling about 255,000 m3/d capacity at plants in Quyang, Tianshan and Longhua as work was done in SEP utilizing project cost savings. Plant rehabilitation was completed in Longhua, Quyang, Sitang and Tianshan catchments, with a total capacity of about 200,000 m3/d. (See ICR Report #25717-CHA). As mentioned earlier, a chemically enhanced primary treatment facility of 1.2 Mm3/d capacity was added to the project in 2000 and commissioned in 2004. Institutional Development and Training: Satisfactory. SMG remained fully committed throughout the project to the program of institutional development. The institutional organization of the sector was reformed in 2004 by establishing the Shanghai Water Authority (SWA), with overall responsibility for the planning and coordination of all water sector management policies and interventions throughout Shanghai Municipality. This was one of the first such initiatives in China. The institutional development and training program was largely completed. While the loan allocation was reduced from $18.9 million to about $6.0 million, this program attracted about US$6 million of bilateral grant funding from several countries (including Australia, Canada, France, Norway and Japan), who supported a number of the technical assistance activities - 8 - identified in the SAR (see details in Annex 2c). For example, the Government of Japan provided grant funds ($0.9 million) for preparation of the Bank funded SHUEP, APL1 (currently under implementation). 4.3 Net Present Value/Economic rate of return: Overall, this was successfully achieved. At appraisal, the SAR strategy focused on establishing economic least-cost options for each component, and provided rigorous analyses of such options. An economic rate of return was not calculated because of the difficulty and time-consuming efforts required to obtain reliable quantified estimates of the benefits from the project. These included improved quality of surface water in Shanghai, and, as a consequence, enhanced value for drinking, industrial and agricultural use, whilst minimizing health risks. 4.4 Financial rate of return: A financial rate of return was not estimated at appraisal. 4.5 Institutional development impact: The project's institutional development impact is rated Substantial. Shanghai was one of the first cities in China to establish a Municipal Water Authority, consolidating within one authority, the responsibilities for all water related affairs. SMSC was reorganized into three regional operating companies. The Shanghai Water and Environment Construction Company (SWEC) also reports to SWA. The Shanghai Water Assets Operation and Development Company (SWAOD) was established under the Shanghai Urban Construction & Development General Corporation (SUDIC), and is responsible for sector asset management and financing. The regional operational companies can respond more readily to customer needs and will support the long-term sustainability of the sector by managing sewerage operations with greater efficiency. SMSC remains under SWA to manage and coordinate the sewerage sector. SWEC evolved into a construction engineering consultancy firm. SWA has introduced competitive mechanisms for sector operations, including foreign and local non-government financing, and appropriate tariff levels in conjunction with reduced operating costs. Domestic and international private sector enterprises are now involved through concessions or ownership in the wastewater sector in Shanghai. Prior to 2002, the master plans for water supply and wastewater were separately prepared by different agencies or companies, based on excessively high water consumption figures. Recent master plan revisions, prepared under the direction of SWA, have adopted lower consumption figures to more closely reflect reality. The city is now using digitized networks and related data-bases. All core city utilities and other agencies now have available a common digitized base map for planning, operations and maintenance - a major achievement for a mega-city. Senior officials from SMSC have also gained international exposure in state-of-the-art city and wastewater management techniques, thus enhancing Shanghai's strategic development planning capacity. Sixty person-months of overseas management training were provided in SSP2. During implementation, wastewater tariffs were increased four times, most recently in 2002, and again in August 2004, securing the financial autonomy of the operating companies. SMSC maintained satisfactory compliance with its financial covenants through 2002. Projections prepared by SMSC in 2004 show satisfactory compliance from 2004 onwards (SHUEP has the - 9 - same financial covenants as SSP2). Details are given in Annex 1a. Sector institutions have been strengthened through broad training activities on utility company, infrastructure, utility accounting and management information systems, and environmental management. The project included 10 such sub-components, enhancing the capability of the project related government agencies (see also Section 4.1). Until recently, environmental monitoring for SSP2 was carried out by the SMSC (under SWA); and the Shanghai Environmental Monitoring Center (SEMC) under the Shanghai Environmental Protection Bureau (SEPB), resulting in some duplication of effort. This was rectified by SMG in mid-2004 when the monitoring responsibilities of SMSC and SEMC were redefined so that SMSC deals with monitoring of discharges and SEMC is responsible for monitoring the effluent-receiving water bodies. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: 5.1 Factors outside the control of government or implementing agency: Both domestic and foreign inflation rates varied substantially from the values estimated at appraisal. The annual domestic inflation rate was projected to decline gradually from 10.6 to 6.2 percent from 1996-2001. In fact, the index declined from 8.3 to ­1.4 percent between 1996 and 1999 and remained negative through 2002. Foreign inflation showed a similar trend. An annual 2.6 percent was projected through 2001, whereas substantial negative values (varying between ­7.0 and ­0.2 percent/year) were posted throughout this period. These departures all contributed to project costs. The final costs (bid price plus variations) for major civil works and equipment contracts were consistently much lower than the SAR estimates (averaging 40 percent lower), based on base cost plus contingency allowances in the SAR. Lower than anticipated inflation figures and the lack of interest from foreign bidders for civil works contracts contributed to the low prices. Despite the relatively high International Competitive Bidding (ICB) threshold of US$10 million (compared with $3 million in SSP1), the ICB for civil works contracts attracted no interest from foreign bidders; all contracts were awarded to local firms. Another factor was the Severe Acute Respiratory Syndrome (SARS) virus in 2003. It caused delays in commissioning the main contracts for the Bailonggang primary treatment facility, and resulted in a need for a second extension of the loan closing date. 5.2 Factors generally subject to government control: Government Commitment: SMG maintained strong commitment to the project throughout. This was a major contributor to the project's success. The Project Office was maintained and adequately staffed, and management continuity was maintained. 5.3 Factors generally subject to implementing agency control: SMSC Commitment/Performance: SMSC maintained high commitment throughout the project and provided effective management for the project. Design institutes, consultants and selected procurement agencies for ICB contracts were engaged in a timely manner and provided competent professional support. The SMSC team was staffed with senior professional specialists - 10 - and its management remained consistent throughout the project. In 2000 SWEC was established with a "Project Office" responsible for managing SSP2, and staffed with professionals from SMSC. 5.4 Costs and financing: Costs: The final project cost is $594.8 million, including interest during construction. This is 11.1 percent lower than the original cost estimate of $667.9 million (including the three additional components costing $139.7 million). Based on the original scope of the project, the final cost is only some 68 percent of the SAR estimate. The project was prepared during a period of high and volatile inflation with large variations between foreign and local price contingency projections (see details in Section 5.1 above). It became clear during implementation that the submitted tender figures for major contracts were substantially lower than the SAR estimates, and that a large portion of the loan (estimated around $100 million in 1998) would remain unused at the end of the project. The reasons included: (a) domestic competitiveness and lack of international interest in bidding for civil works; (b) inflation projections over-estimated in the SAR; and (c) government unit-rates over-estimating market prices. As a result, the SMG proposed, and the Bank accepted that, rather than cancel some $100 million of the loan, to: (a) increase the disbursement rate for civil works from 56 to 75 percent (tentatively agreed to in the minutes of negotiations); and (b) the inclusion of additional sub-components already defined in the Shanghai Wastewater Master Plan and consistent with enhancing the project objectives. Three new sub-components were added. In order to allow adequate time for implementation of the added investments, the project closing date was extended for a total period of two years. The second extension arose due to the incidence of Severe Acute Respiratory Syndrome (SARS) virus in 2003 (see above). Regarding technical assistance and training see Section 4.5 above. Finance: The overall project was implemented 11.1 percent below the appraisal estimate. The final amount of loan disbursed was $240.9 million; with an un-disbursed amount of $9.1 million which was cancelled in October 2004. The Bank financed 40.5 percent of total project cost, more or less unchanged from the figure of 39.5 percent estimated at appraisal 6. Sustainability 6.1 Rationale for sustainability rating: 6.1 Rationale for sustainability rating: Overall, the project's sustainability is rated highly likely. All the physical components were successfully completed and are fully operational. SMG remains fully committed to environmental protection and improvement, with the on-going Bank-funded SHUEP further supporting that objective. Support for a stronger market orientation for municipal service pricing and innovative financing of wastewater services is provided in SHUEP. High quality construction was maintained throughout and operations and maintenance (O&M) is a high priority with ample budget. SMSC and the wastewater operating companies have benefited from the institutional changes introduced in the sector since 2000. The SSP2 assets are held by SMSC and day to day operations arae contracted by SMSC to the concerned operating companies. Competitive mechanisms introduced in the sector by SMG have helped in the drive towards operational - 11 - efficiency improvements. SMG and SMSC management teams remain committed to continued service improvements. A recent tariff change (28 percent increase), effective August, 2004 will further sustain the financial health of SMSC. Chinese contractors gained experienced in soft ground tunneling and thrust boring technologies, and were able to undertake these higher technology contracts very successfully. Monitoring & Evaluation. Monitoring of the project outcome and impact was raised many times by the Bank throughout implementation. Although base-line data were not defined in the SAR or during early implementation, a comprehensive environmental monitoring program was completed. SMSC (under SWA) has carried out water quality and quantity measurements on the discharges to the conveying systems of SSP2 (as part of SMSC's overall monitoring program). The Shanghai Environmental Monitoring Center (SEMC), under Shanghai Environmental Protection Bureau (SEPB), has monitored the impact of SSP2 on the receiving water bodies. The Bailonggong area was covered by both agencies. Consequently, the monitoring program was very effective. Duplication of effort existed though, requiring closer collaboration and information sharing between agencies. This was addressed by SMG in 2004 when the responsibilities of SEPB and SWA were redefined. Timely sharing of information and access of SMSC's environmental data should be closely followed up by SMG. 6.2 Transition arrangement to regular operations: The original physical components of SSP2 have been successfully operating since 1999. As mentioned above, following the institutional restructuring of the sector by SMG, SMSC retained responsibility for O&M of wastewater assets across the city. Currently day-to-day O&M are contracted by SMSC to the three wastewater operating companies set up in 1999. The wastewater component of SEP is also operated by SMSC. The operating companies are all staffed with personnel transferred from SMSC, thus bringing existing operational skills to these new companies. Staff training is given high priority by SMSC (see Section 4.1). This arrangement ensures that the transition of the project to regular operations is smooth and that the staff are equipped with the necessary skills to operate and maintain the new facilities. This is an important issue in Shanghai where innovative technologies are encouraged. SMSC and the operating companies are well equipped to meet these challenges. Financial: In SSP2, SMSC consistently outperformed its covenanted financial targets by substantial margins, except in 2003. SMSC's satisfactory financial performance depends on timely and appropriate adjustments to its tariff structure being sanctioned by SMG and the continued receipt of other operating revenues. Currently the tariffs are: domestic Y0.9/m3 and non-domestic Y1.1 to 1.4/m3 depending on consumer category. This will be adequate through 2006. SMG is developing innovative arrangements to effect further economies in wastewater operations, including service/management contracts and concession arrangements. Care needs to be taken to ensure that existing operational skills do not erode under such arrangements. The establishment of an independent mechanism for setting charges for wastewater services is also being considered by SMG. These initiatives are all supported under the on-going SHUEP. - 12 - 7. Bank and Borrower Performance Bank 7.1 Lending: The Bank's performance is rated as highly satisfactory. The Bank fielded a highly experienced team of senior sector specialists, very familiar with Shanghai and its environmental sector issues. The team worked closely with the Government Project Office staff and its foreign and local consultant teams throughout. Identification: In 1986 the Bank carried out an optimal wastewater management strategy study comprising a two-phased investment program, to be managed by a financially sustainable wastewater utility company. Phase 1 of the program covered the period 1987 ­ 95; and Phase II includes three stages to accommodate wastewater flows up to year 2020. Supported by the Bank, SMG is following this strategy with the ultimate objective to raise the quality of water in the network of city canals and the Huangpu river. The works in SSP2 comprised part of the Phase II program and the project design conformed with GOC and SMG sector policies and the Bank's CAS. A strong collaborative relationship already existed between Bank and concerned Borrower staff as a result of completed and on-going sector projects in Shanghai. Preparation: In addition to experiences in China, the Bank team was able to draw on experiences from other major environmental projects in the East Asia region. Regular interventions by the Bank team enabled preparation to proceed in accordance with an ambitious program defined by SMG. The work at this time was expedited through the timely appointment by SMG of foreign/local design review and advisory consultants (with financial support from governments of Australia, Canada, Denmark, France and Norway) and municipal engineering design bureaus. These professionals, working together with the Bank team, enabled this phase of the project to proceed smoothly. The bilateral support for project preparation totaled US$5 million. Appraisal: The project was appraised in mid-1995. At that time, all procurement arrangements were finalized, contract packages determined, and tender documents completed for about 40 percent of the program. The preparations for technical assistance (TA) and training activities were well advanced. Bilateral funding was attracted from a number of sources to support TA initiatives related to the project (e.g. Technical Review Panel and Pilot Treatment Studies). Although project monitoring indicators were included in the SAR, the base-line data were not defined by the Borrower. The project was reviewed thoroughly based on the Bank's safeguard policies at the time, with EAs and RAPs forming basis for subsequent monitoring. 7.2 Supervision: The performance of the Bank during project supervision is rated satisfactory. During its life, the project had only two task managers, so a high degree of institutional memory was maintained. A - 13 - total of 19 supervision missions were undertaken, averaging every five months. Based on the available information (in files and from Borrower discussions) the issue of low contract prices was identified in the early stages of the project, although discussions on this subject and how to deal with it, extended over many months. In 2000 SMG proposed: (a) an increase in the disbursement percentage for civil works from 56 to 75; and (b) introduction of additional sewerage and wastewater treatment components, consistent with SMG's sector strategy and the project objectives. This proposal was agreed by the Bank (see details in Section 5.4). In retrospect, the need for 24 months extension of the loan closing date to complete the additional works could possibly have been reduced, taking into account that the additional components were satisfactorily implemented. A Bank supervision mission in November, 2003 drew to the attention of the Borrower that disbursements were still very slow, possibly leading to cancellation of substantial undisbursed loan funds at the end of the project. In the event, $9.1 million remained un-disbursed when the loan closed. 7.3 Overall Bank performance: The overall Bank performance is rated satisfactory. Continuity of task management and professional input was maintained and a high degree of cooperation between SMSC and SWEC with Bank personnel was apparent throughout the project. The project did not however include any provision for a formal mid-term review. Performance monitoring needs careful attention throughout the project. Base-line data need to be determined and agreed with the Borrower during appraisal to ensure that the Borrower's staff understand and acknowledge the purpose of the monitoring process. Borrower 7.4 Preparation: The performance of the Borrower in prepartion is rated highly satisfactory as described in Section 3.6. From the outset, the SMG commitment was high. It appointed a high level committee to oversee preparation. SMSC was selected as the implementing agency and the Project Office was established within this company, staffed by senior sector professionals and supported by teams of local design consultants. Senior professionals from the former SSPCC organization were deployed on the project. These personnel provided experience gained from implementing SSP1. SMG also engaged consultants (funded by the governments of Canada, France and Norway) to provide Design Review and Advisory Services. The consultancy team was staffed by senior sector specialists who critically reviewed options to ensure least-cost appropriate designs. The timely appointment of consultants and municipal design bureaus enabled the very ambitious SMG project preparation schedule to be maintained, while providing high quality design outputs. The combination of local and foreign expertise worked well to enable preparation to proceed smoothly through appraisal. The project was ready for implementation at loan effectiveness, although delays in implementation occurred while SMG reviewed alternative culvert technologies. SMG was well justified in selecting a pre-cast pipeline option for parts of the culvert construction. After a delayed start the construction proceeded quickly. SMG significantly recognized the sector institutionally as notes in para. 4.5. While a required review process by the Ministry of Foreign Trade Economic Corporation (MOFTEC) of all ICB - 14 - goods contracts was not included in the implementation program in the SAR, the awarding of contracts did not seem unduly delayed. The recent introduction of electronic mail communication helped to control the procurement processing time. While tender documents for the main conveyor contracts were substantially complete at loan negotiations, the construction was delayed by some 12 months due to: (a) in Pudong, the conveyor alignment followed the route of new road construction. Pudong was developing rapidly at that time and the exact location of the conveyors could not be finalized until the road positions were determined; and (b) SMG wished to consider the use of pre-stressed concrete pipes (PCCP) as an alternative to the in-situ box culvert construction traditionally adopted for the trunk conveyors in Shanghai. After these issues were resolved, construction accelerated the investment was commissioned and operations began in 1999 (ahead of schedule). Resettlement Action Plans and Environmental Impact Assessment reports were an integral part of the preparation process, together with financial and economic considerations. The design strategy focused on the preparation of least-cost economic and financial options rather than estimating likely rates of return. 7.5 Government implementation performance: The Government implementation performance is rated satisfactory. Throughout, the government has remained fully committed to its sector policies emphasizing importance of environmental protection. SSP2 was designed to enhance the capacity of the city's wastewater collection and treatment, and contribute to a reduction in urban pollution, which was done. In 2000, SMG established the Shanghai Water Authority (SWA) with responsibility for overall planning and coordination of all water sector policies and interventions in Shanghai. Shanghai Water Environment Construction Company (SWEC) was established within this reform. SWEC was staffed with former SSPCC employees and given responsibility for the Project Management Office (PMO) for SSP2. Thus SMG retained its institutional memory during the remaining implementation period of SSP2, since the concerned personnel in SWEC had many years experience of Bank-funded projects dating from SSP1. SMSC retained all operating responsibility for sewerage assets. Operation and maintenance of the various facilities is now contracted by SMSC to the Northern, Central and Southern Wastewater Operating Companies. These regional operational companies are designed to respond more readily to customer needs and to support the long-term sustainability of the sector through greater efficiency. SWA has introduced competitive mechanisms for operation in the sector, including foreign and local non-government financing, and appropriate tariff levels in conjunction with reduction in operating costs. Domestic and international private sector enterprises are involved through concessions or ownership in the wastewater sector in Shanghai. Shanghai was one of the first cities in China to establish a Municipal Water Authority, consolidating within one authority, the responsibilities for all water related affairs in the municipality, including water supply, sewerage and water resources. Three different bureaus, namely the Public Utilities Bureau, the Municipal Engineering Bureau and the Water Resources Bureau, previously carried out these responsibilities respectively. SMSC was reorganized into regional operating companies. The three operating companies under the SMSC, were established to carry out sewerage operations. SMSC retains wastewater assets and remains under SWA for - 15 - overall management of the sewerage sector. SWEC had project management responsibilities for SSP2 and some other Bank-supported projects in Shanghai. (SWEC reports to SWA). Counterpart funding for the project was made available in a timely manner throughout project implementation. 7.6 Implementing Agency: The performance of the implementing agency is rated satisfactory. SMSC managed the project initially. When SWEC was established in 2000, the Project Office was transferred from SMSC to SWEC. Continuity of management and staff was maintained with emphasis on construction activities. SMSC maintained satisfactory compliance with its financial covenants through 2002, and again in 2004. The financial strength of SMSC was temporarily reduced in 2003 due to heavy capital expenditures and the fact that tariffs had remained unchanged since 2002. This was rectified by a 28 percent tariff increase from August 1, 2004. Monitoring data was provided by the Borrower as part of the ICR information (see Annex 7). The original project scope was completed and put into operation in 1999, ahead of schedule. Construction quality was very good and several awards were received for construction excellence. Timely engagement of consultant teams to assist in implementation also enabled the work to proceed satisfactorily. The completed facilities are highly satisfactory and meet the project objectives. All added investment components are in operation. The technical assistance and staff training loan amount was reduced from $19 to $6.0 million in 2002. However, this component was still largely completed (supported in part by bilateral assistance from several countries, see details in Annex 2c). Procurement was carried out efficiently in accordance with Bank guidelines. Resettlement and environmental monitoring activities were implemented satisfactorily. Periodic reporting was timely in accordance with the legal requirements, early in the project focusing mostly on construction progress and concerns. More recently the report scope was broadened, after Bank mission interventions, to include more reference to institutional and training activities. While, even at the end of the project, the reports did not include reference to monitoring indicators (see Aide-memories on file), in March 2004, SWEC initiated the preparation of the "Review Statement on Environmental Impact for Shanghai Sewerage Project Phase II". This comprehensive document (attached as Annex 7) provides substantive information on the environmental impact of SSP2 in response to the project objectives. The predominant construction management skills in the Project Office seemed to preclude appreciation of the broader project objectives to some extent. Strong utility/ environmental management skills in the project office team should be considered in future similar projects. 7.7 Overall Borrower performance: The project has been completed successfully, due to the continued high level of commitment by SMG to halt the environmental degradation across the city, and to improve the social conditions for its people. This commitment is confirmed through the on-going SHUEP project. SMSC has successfully operated and managed the wastewater facilities across the city for the past ten years, outperforming its financial targets. Recent institutional changes and the introduction of private - 16 - sector initiatives by SMG have also improved the operational efficiency. 8. Lessons Learned · Continuity and quality of key personnel from both Bank and Borrower sides are important to ensure success. · Project Office should include personnel with utility and environmental management skills, and emphasize construction management expertise. · With bold implementation approaches, new technologies can be applied for improved project effectiveness and efficiency. To avoid undue risks, knowledgeable staff is a pre-requisite. Various technical innovations important to China were successfully introduced by SMG. These included: the use of large diameter pre-stressed concrete pipes; spiral grit removal equipment; fiber reinforced plastic pipes; inverted siphon discharge systems; flexible pump/motor connections; odor control at pump stations; and extensive use of stainless steel. The experience gained from these technologies should be disseminated widely by SMG for national benefit. · The usefulness of public/private partnerships for wastewater operations, possibly through BOT or concession arrangements, is acknowledged for system improvements and operational efficiency; a strategy further supported in SMG's development program, supported by the SHUEP project. · More emphasis on very large ICB turn-key contracts in future similar projects may encourage foreign/local joint venture firms to participate, with potentially stronger construction management skills. · Civil works contracts in infrastructure projects in Shanghai do not attract any interest internationally, even when contracts are packaged in amounts exceeding $10.0 million. Local firms are well skilled to undertake the work at very competitive prices. Appraisal cost estimates should reflect this reality. In addition, appraisal cost estimates based on Government unit-rate pricing tend not to reflect the real market cost of infrastructure in Shanghai (or elsewhere in urban areas of China). In future similar projects, the appraisal costs should be determined based on real market values. · Local area sewer networks and related connections should be included in project scope, or otherwise legislated by government, to ensure appropriate and timely utilization of trunk sewer systems. · Monitoring indicators are an important means of assessing project achievements. These were provided in the SAR, but the base line data was not defined at appraisal. As a result the Borrower experienced difficulty in effectively using the monitoring parameters during implementation. Monitoring indicators and baseline parameters to assess project outcome should be established at appraisal and not left to be determined during project execution. · Monitoring of project impact should be closely coordinated among involved agencies, and data shared to avoid duplicated efforts. Operational managers should have timely access to the environmental impact data. 9. Partner Comments (a) Borrower/implementing agency: See Project Implementation Assessment Report, and Review Statement on Environmental Impact for Shanghai Sewerage Project Phase II, both provided by the Borrower and attached as Annex 7. (b) Cofinanciers: - 17 - Not applicable. (c) Other partners (NGOs/private sector): Not applicable. 10. Additional Information Not applicable. - 18 - Annex 1. Key Performance Indicators/Log Frame Matrix Annex 1a: Key Implementation Performance Indicators/Log Frame Matrix Outcome/Impact Indicators: Objective Indicator Unit Year Base CY96 CY97 CY98 CY99 CY00 CY01 CY02 CY03 CY05 Wastewater Management System Utilization Increase in SSC customers billed Projected in SAR. % 3 2 2 2 2 Actual. 2.6 2.03 2.14 2.16 Increase in number of SSC system connections. Projected in SAR. 1000 30 30 50 50 100 Actual. 404 59 107 21 Increase in wastewater flow & Mm3/d pollution load in SSP2 outfall. Projected in SAR. 1.0 1.1 Actual. 0.75 0.83 1.04 1.04 Service area of collection. Km2 Projected in SAR. Actual. 240 Population served. 289 Projected in SAR. Mill. Actual. N/A 4.14 Urban Pollution Impact Reduction & Control Effectiveness of Increasing number of No. control. discharges licensed. Projected in SAR. 100 100 Actual. The number has increased, but no detail information available. Decreasing number of violations of licence No. conditions. Projected in SAR. 500 500 400 400 300 300 Actual. The number has decreased, but no detail information available. Water quality Water quality improvement in Class. Huangpu and tributaries. General. Projected in SAR. Actual. V V V IV IV IV Huangpu River. See below for Huangpu. Projected in SAR. Actual. IV IV IV III III III Songpu. DO. Permanganate III III III III III IV III Ammonia III III III III III III III TP. V III III IV III III IV Oil III III III III V III IV III III III III III I I - 19 - Objective Indicator Unit Year Base CY96 CY97 CY98 CY99 CY00 CY01 CY02 CY03 CY05 Linjiang. Class DO. IV IV IV III IV IV III Permanganate III III II II III III III Ammonia V V IV IV >V IV IV TP. III IV V IV III IV IV Oil. IV IV IV IV IV I I Nanchi Water Plant. DO. IV IV IV III IV IV III Permanganate. IV IV III III IV III III Ammonia. >V >V V IV >V >V V TP. III III III III III III III Oil. IV IV IV IV IV IV IV Yangpu Bridge. DO. >V >V V IV IV >V IV Permanganate IV III III III III IV III Ammonia. >V >V >V >V >V V >V TP. III IV IV IV IV IV IV Oil. V IV IV IV IV IV IV Wusong Kou. DO. IV III IV IV IV IV IV Permanganate III III III III III III III Ammonia. >V >V >V >V >V V >V TP. IV III III IV III IV IV Oil. IV IV IV IV IV IV IV Bailonggang Outfall Water quality within design Performance. mixing zone. Projected in SAR DO. Level. mg/l 8 8 7 7 6 6 Actual. DO. mg/l 8.19 7.48 6.78 7.25 8.2 0 7.14 6.45 Permanganate Class II II II III II II II Ammonia. Class IV III IV III III III III BOD. Class I I I I I I I Organic pollution indicator crustations. Polln. Projected in SAR. Assmt. N/A Actual. /1 H H H H H L L Inlet/Outlet sewage concentration. mg/l Projected in SAR. N/A Actual. Inlet BOD. 104/168 Inlet SS. 133/220 Outlet BOD. 108/208 Outlet SS. 155/265 Visibility of wastewater plume from satellite image. Km2. Projected in SAR. 2 2 2 Actual. Information not available. /1. H=heavy. L=light. - 20 - Objective Indicator Unit Year Base CY96 CY97 CY98 CY99 CY00 CY01 CY02 CY03 CY05 Improved Wastewater Tariff. Yuan/ Operational and Projected in SAR m3 0.35 0.35 0.38 0.44 0.46 0.69 0.69 0.76 Financial (average) Performance. Actual. Domestic. 0.02 0.12 0.12 0.24 0.45 0.70 0.70 Non-domestic. 0.14 0.34 0.34 0.37 0.45 0.70 0.70 Revenue generation. Operation expenses + debt service (or depreciation) + percentage of capital expenditure. Projected in SAR. % 5 5 5 5 10 thereafter. Actual. 4.4 13.3 44.1 13.9 -5.2 Debt Service Ratio. Revenue/Debt Projected in SAR. Not less than 1.3 Actual. 0.81 1.06 1.28 1.33 0.71 Operational efficiency Staff / gains over time. 100,000 Actual. consum. 8.7 8.1 7.9 2.4 1.9 1.8 1.7 1.0 Institutional Physical delivery per Work Development, Plan. done. Project Projected in SAR. Management and Actual. All programs completed as planned except planning & regulation Training. Achievement of Action studies. Plans. % of Projected in SAR. Plan. 0 100 Actual. All programs completed satisfactorily by 2003 apart from planning & regulation studies. Bilateral support from governments of Australia, Canada and Japan. Assessment of job skills. Projected in SAR. -- Actual. Very positive outcome. Job skills enhanced at all levels through training by DRA team and contractors. Attitude and work performance. Projected in SAR. -- Actual. Work attitude and performance of SMSC staff substantially enhanced through institutional reform by SMG and various skills training programs including: on-job technical training by contractors; formal training by SMSC training department; and local/overseas study tours/training. - 21 - Output Indicators: Indicator/Matrix Projected in SAR Actual/Latest Estimate Sewerage & Sanitation Improvements. Puxi Interceptors. 1200-2800 mm dia. 6.0 km. long 1600-2700 mm dia. 13 km. long. Puxi Link Sewers. Not defined. As required. Puxi Property connections. As required. As required. Pump Station rehabilitation. 920,000 m3/d. As projected Huangpu Crossing. Twin 2200 mm dia. Pipes by 540 m. long Twin 2200 mm dia. by 610 m. long. Pump Station SA. 1,600,000 m3/d. 1,600,000 m3/d Pudong Interceptors. Multiple culverts totalling 41.1 km. As projected. Pump Station SB. 2,700,000 m3/d. 2,700,000 m3/d. Pump Station M2. 1,700,000 m3/d. 1,700,000 m3/d. Pudong Link Sewers. 700-1500 mm dia. by 2.9 km long. As projected. Pudong Pump Stations constructed by 1,400,000 m3/d. As projected at eight stations. Pudong Dev. Auth. (not funded by SSP2) As required. As required. Pudong Property connections. 240 km2 area. 289 km2 area. Puxi/Pudong Sewer Rehabilitation. System as required. System as required. System telemetry for Puxi & Pudong. Bucket cleaning & ancillary equipment. Provided. Sewer Cleaning Equipment. Not appraised. Catchment of 10.8 km2 to serve 615,000 Puxi Mid-line sewers. people. Not appraised. Link sewers & pump stations in ten areas Pudong Link Sewers. Covering 24 km2. Wastewater Treatment & Disposal Systems. Screens & grit removal Bailonggang Wastewater Treatment Plant. 1,700,000 m3/d. capacity. Screens & grit removal of 1,700,000 m3/d capacity. Outfall pump Station. 1,700,000 m3/d. capacity. 1,700,000 m3/d capacity. Outfall. 1.6 km. long by 4.2 m dia. 4.2 m dia. 870 m long, stand-by 120 m. Capacity 1,700,000 m3/d. Wastewater systems & treatment plant 255,000 m3/d capacity. 200,000 m3/d. Carried out in Shanghai Rehabilitation. Environment Project. Power Supplies. Systems as required. Systems as required. Monitoring equipment. As required. Provided. Bailonggang Chemically Enhanced Not appraised in SAR (Additional investment.) 1,200,000 m3/d provided. Primary Treatment Plant. Institutional Development and Training. Pump Station Model Tests. Completed satisfactorily. Priority Outlet Shaft Model Test. Completed satisfactorily. Pilot WWTP Model study. Completed satisfactorily (partly funded by Govt. of France) Institutional & Financial. Accounting, organizational & MIS systems support for SMSC. Completed satisfactorily. Technical & Planning. Construction Management Services. Completed satisfactorily. Review Panel Completed satisfactorily (funded by Govt. of Australia). Sewer Condition & Mapping Survey. Completed satisfactorily (funded by Govt. of Canada). Future Project Preparation. Completed satisfactorily (preparation of SHUEP funded by Govt. of Japan). Planning Studies. Not done. Regulations Study/Drafting. Not done. Training. Senior managers. All completed satisfactorily, 60 person months Training Center & Equipment. of overseas training provided. Technical Training. Environmental Monitoring Training. Other Training. - 22 - Annex 2. Project Costs and Financing Project Cost by Component (in US$ million equivalent) Appraisal Actual/Latest Percentage of Estimate Estimate Appraisal Component US$ million US$ million Sewerage and sanitation improvements 459.30 384.20 72.3 Wastewater treatment and disposal 69.10 146.50 176.1 Institutional development and training 15.80 5.30 28.3 Total Baseline Cost 544.20 536.00 Physical Contingencies 58.80 Price Contingencies 30.20 Total Project Costs 633.20 536.00 Interest during construction 34.60 58.80 169.90 Total Financing Required 667.80 594.80 Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) 1 Procurement Method Expenditure Category ICB NCB 2 N.B.F. Total Cost Other 1. Works 71.52 132.96 0.00 54.40 258.88 (48.50) (89.53) (0.00) (0.00) (138.03) 2. Goods 94.40 2.57 0.00 12.30 109.27 (92.40) (2.20) (0.00) (0.00) (94.60) 3. Services 0.00 0.00 5.34 0.00 5.34 (0.00) (0.00) (5.34) (0.00) (5.34) 4. Miscellaneous 0.00 0.00 0.00 97.14 97.14 Land Acquisition (0.00) (0.00) (0.00) (0.00) (0.00) 5. Miscellaneous 0.00 0.00 2.93 0.00 2.93 (0.00) (0.00) (2.93) (0.00) (2.93) 6. Miscellaneous 0.00 0.00 0.00 62.44 62.44 (0.00) (0.00) (0.00) (0.00) (0.00) Total 165.92 135.53 8.27 226.28 536.00 (140.90) (91.73) (8.27) (0.00) (240.90) "3. Services" refers to Institutional Development & Training. "5. Miscellaneous" refers to Construction Management Services. "6. Miscellaneous" refers to Supervision & Project Management. 1/Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. 2/Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units. - 23 - Project Financing by Financier (in US$ million equivalent) Percentage of Appraisal Financier Appraisal Estimate Actual/Latest Estimate Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF. Shanghai Municipality 417.80 353.90 84.7 World Bank 250.00 240.90 96.4 Co. financing /b 0.00 0.00 0.0 TOTAL /a 250.00 417.80 0.00 240.90 353.90 0.00 96.4 84.7 0.0 /a Includes interest during construction (IDC); $34.6 million at apprasial; $58.8 million actual. /b Bilateral assistance was provided by the following countries: Country Amount Purpose ($ mill. equiv.) Australia 0.05 Engineering review panel Canada 0.6 Sewer connection studies Denmark 0.7 Water quality model studies France 1.2 SSP2 preparation and treatment model studies Norway 3.2 Preparation of SSP2 TOTAL 5.75 - 24 - Annex 3. Economic Costs and Benefits Least-cost analysis methods were used to justify investment choices at apprasial. I.e. Economic Rate of Return (ERR) was not calculated. The reasons for this approach are properly justified in the Staff Appraisal Report (see Annex 15). - 25 - Annex 4. Bank Inputs (a) Missions: Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists, 1 FMS, etc.) Implementation Development Month/Year Count Specialty Progress Objective Identification/Preparation 02/01/1995 7 MUNICIPAL ENGINEER/TTL (1); ENVIRONMENTAL ECONOMIST (1); SANITARY ENGINEER (1); FINANCIAL ANALYST (1); ENVIRONMENTAL CONSULTANT (1); INSTITUTIONAL CONSULTANT (1); RESETTLEMENT SPECIALIST (1) Appraisal/Negotiation June/July 1995 8 MUNICIPAL ENGINEER/TTL (1); ENVIRONMENTAL ECONOMIST (1); SANITARY ENGINEER (1); FINANCIAL ANALYST (1); ENVIRONMENTAL CONSULTANT (1); INSTITUTIONAL CONSULTANT (1); RESETTLEMENT SPECIALIST (1); PROGRAM ASSISTANT (1) Supervision 07/10/1996 6 MUNICIPAL ENGINEER/TTL S S (1); FINANCE (CONS.) (1); DISBURSEMENTS (RMC) (1); ENGINEER (CONS.) (1); PROCUREMENT (RMC) (1); INSTITUTIONS (CONS.) (1) 11/29/1998 5 MUNICIPAL ENGINEER/TTL S S (1); FINANCE (1); INSTITUTIONAL SPECIAL. (1); RESETTLEMENT SPEC. (1); ENGINEER (1) 04/05/2000 4 MUNICIPAL ENGINEER/TTL HS S (1); CULTURAL HERITAGE - 26 - SPECIALIST (1); URBAN CONSULTANT (1); FINANCIAL SPECIALIST (1) 11/14/2000 7 MUNICIPAL ENGINEER/TTL HS HS (1); ECONOMIST (2); FINANCIAL SPECIALIST (1); ENVIRONMENTAL ENGINEER (1); INTERPRETER (1); CULTURAL HERITAGE (1) 12/07/2001 5 FINANCIAL ANALYST/TTL HS HS (1); PROCUREMENT (1); FINANCE, INSTITUTIONAL (1); ENGINEERING (1); RESETTLEMENT (1) 03/14/2002 4 FINANCIAL ANALYST/TTL S S (1); ENGINEERING (1); MUNICIPAL ENGINEER (1); FINANCIAL/INSTITUTIONA (1) 09/04/2002 7 FINANCIAL ANALYST/TTL S S (1); SOCIAL DEVELOPMENT (1); URBAN CONSULTANT (1); MUNICIPAL ENGINEER (1); PROCUREMENT SPECIALIST (1); DISBURSEMENT OFFICER (1); INSTITUTIONAL SPECIALIST (1) 01/24/2003 4 FINANCIAL ANALYST/TTL HS S (1); URBAN CONSULTANT (1); MUNICIPAL ENGINEER (1); INSTITUTIONAL SPEC. (1) 11/09/2003 5 FINANCIAL ANALYST/TTL HS S (1); MUNICIPAL ENGINEER (1); ENVIRONMENTAL SPECIALIST (1); INSTITUTIONAL SPECIALIST(1) ICR September 2004 3 FINANCIAL ANALYST/ HS S TTL (1); SANITARY ENGINEER (1); INSTITUTIONAL SPECIALIST(1) - 27 - (b) Staff: Stage of Project Cycle Actual/Latest Estimate No. Staff weeks US$ ('000) Identification/Preparation 59.3 282.9 Appraisal/Negotiation 33.0 151.1 Supervision 84.9 486.0 ICR 8.0 40.0 Total 185.2 960.0 Regional direct to full cost mark-up is 25% for fiscal years prior to FY00. - 28 - Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies H SU M N NA Sector Policies H SU M N NA Physical H SU M N NA Financial H SU M N NA Institutional Development H SU M N NA Environmental H SU M N NA Social Poverty Reduction H SU M N NA Gender H SU M N NA Other (Please specify) H SU M N NA Private sector development H SU M N NA Public sector management H SU M N NA Other (Please specify) H SU M N NA - 29 - Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating Lending HS S U HU Supervision HS S U HU Overall HS S U HU 6.2 Borrower performance Rating Preparation HS S U HU Government implementation performance HS S U HU Implementation agency performance HS S U HU Overall HS S U HU - 30 - Annex 7. List of Supporting Documents Staff Appraisal Report No. 14973-CHA Borrower's Implementation Assessment report dated January 2004. Borrower's Review Statement on Environmental Impact for Shanghai Sewerage Project Phase II dated Arpil 2004. ICR Aide Memoire dated September, 2004. - 31 - - 32 -