FOR OFFICIAL USE ONLY Report No: PAD2729 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF EUR 89.1 MILLION (US$ 100 MILLION EQUIVALENT) TO THE PEOPLE'S REPUBLIC OF CHINA FOR A SHAANXI SUSTAINABLE TOWNS DEVELOPMENT PROJECT May 6, 2019 Social, Urban, Rural And Resilience Global Practice East Asia And Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective {Sep 26, 2018}) Currency Unit = Renminbi (RMB) US$1= RMB 6.8 US$1=EUR0.891 FISCAL YEAR January 1 - December 31 Regional Vice President: Victoria Kwakwa Country Director: Martin Raiser Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez Practice Manager: Francis Ghesquiere Task Team Leader(s): Guangming Yan ABBREVIATIONS AND ACRONYMS CBA Cost-Benefit Analysis CCUD China Center for Urban Development CPF Country Partnership Framework CPS Country Partnership Strategy CPMO County Project Management Office CQS Consultant’s Qualification Selection DA Designated Account DRC Development and Reform Commission ECOP Environmental Code of Practice EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EMP Environmental Management Plan ESMP Environmental and Social Management Plan GHG Greenhouse Gas GFDRR Global Facility for Disaster Risk Reduction GSURR Urban, Rural and Social Development Global Practice FB Finance Bureau FM Financial Management FMM Financial Management Manual FY Fiscal Year GDP Gross Domestic Product GOC Government of China GRS Grievance Redress Service IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding IFR Interim Financial Report INDC Intended Nationally Determined Contribution KfW Kreditanstalt für Wiederaufbau M&E Monitoring and Evaluation NDRC National Development Reform Commission NMT Non-Motorized Transportation O&M Operations and Maintenance PAD Project Appraisal Document PDO Project Development Objective PIU Project Implementing Unit PIF Project Investment Lending PPLG Provincial Project Leading Group PPSD Project Procurement Strategy Document PDRC Provincial Development and Reform Commission PDOF Provincial Department of Finance PDOC Provincial Department of Construction PSR Press Situation Response PPMO Shaanxi Provincial Project Management Office PMO Project Management Office RP Resettlement Plan RMB Renminbi (Yuan) RPF Resettlement Policy Framework SIA Social Impact Assessment SORT Systematic Operations Risk-Rating Tool SPG Shaanxi Provincial Government SSR Southern Shaanxi Region TOR Term of Reference US$ United States Dollar WA Withdrawal Application WBG World Bank Group The World Bank Shaanxi Sustainable Towns Development Project (P162623) TABLE OF CONTENTS DATASHEET ........................................................................................................................... 1 I. STRATEGIC CONTEXT ...................................................................................................... 7 A. Country Context................................................................................................................................ 7 B. Sectoral and Institutional Context .................................................................................................... 8 C. Relevance to Higher Level Objectives............................................................................................... 9 II. PROJECT DESCRIPTION.................................................................................................. 12 A. Project Development Objective ..................................................................................................... 12 B. Project Components ....................................................................................................................... 12 C. Project Cost and Financing ............................................................................................................. 14 D. Project Beneficiaries ....................................................................................................................... 14 E. Results Chain ................................................................................................................................... 15 F. Rationale for Bank Involvement and Role of Partners.................................................................... 15 G. Lessons Learned and Reflected in the Project Design.................................................................... 16 III. IMPLEMENTATION ARRANGEMENTS ............................................................................ 17 A. Institutional and Implementation Arrangements .......................................................................... 17 B. Results Monitoring and Evaluation Arrangements......................................................................... 18 C. Sustainability................................................................................................................................... 18 IV. PROJECT APPRAISAL SUMMARY ................................................................................... 19 A. Technical, Economic and Financial Analysis ................................................................................... 19 B. Fiduciary.......................................................................................................................................... 21 C. Safeguards ...................................................................................................................................... 23 V. KEY RISKS ..................................................................................................................... 26 VI. RESULTS FRAMEWORK AND MONITORING ................................................................... 28 ANNEX 1: Implementation Arrangements and Support Plan .......................................... 38 ANNEX 2 Implementation Support Strategy .................................................................. 48 ANNEX 3A: Detailed Project Description ........................................................................ 51 ANNEX 3B: Analytical Screening Methodology for Town and Intervention Selections..... 54 ANNEX 4: Economic and Financial Analysis .................................................................... 58 ANNEX 5: Environmental and Social Safeguards ............................................................ 72 ANNEX 6: Team List ...................................................................................................... 77 The World Bank Shaanxi Sustainable Towns Development Project (P162623) ANNEX 7: Project Map .................................................................................................. 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) DATASHEET BASIC INFORMATION BASIC_INFO_TABLE Country(ies) Project Name China Shaanxi Sustainable Towns Development Project Project ID Financing Instrument Environmental Assessment Category Investment Project P162623 B-Partial Assessment Financing Financing & Implementation Modalities [ ] Multiphase Programmatic Approach (MPA) [ ] Contingent Emergency Response Component (CERC) [ ] Series of Projects (SOP) [ ] Fragile State(s) [ ] Disbursement-linked Indicators (DLIs) [ ] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster [ ] Alternate Procurement Arrangements (APA) Expected Approval Date Expected Closing Date 28-May-2019 31-Dec-2025 Bank/IFC Collaboration No Proposed Development Objective(s) The proposed project development objective is to foster regional collaboration, reduce flood risk, and improve urban services in selected towns in the southern part of Shaanxi. Page 1 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Components Component Name Cost (US$, millions) SSR Collaboration Platform 59.13 Resilience Strengthening 96.77 Urban Regeneration 29.69 Project Management 2.70 Organizations Borrower: People's Republic of China Implementing Agency: Foreign Debt Management Office, Shaanxi Provincial Development and Reform Commission PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 238.60 Total Financing 238.60 of which IBRD/IDA 100.00 Financing Gap 0.00 DETAILS -NewFinEnh1 World Bank Group Financing International Bank for Reconstruction and Development (IBRD) 100.00 Non-World Bank Group Financing Counterpart Funding 88.60 Borrower/Recipient 88.60 Other Sources 50.00 GERMANY: KREDITANSTALT FUR WIEDERAUFBAU (KFW) 50.00 Page 2 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Expected Disbursements (in US$, Millions) WB Fiscal Year 2019 2020 2021 2022 2023 2024 2025 Annual 0.00 10.00 15.00 15.00 20.00 20.00 20.00 Cumulative 0.00 10.00 25.00 40.00 60.00 80.00 100.00 INSTITUTIONAL DATA Practice Area (Lead) Contributing Practice Areas Social, Urban, Rural and Resilience Global Practice Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks Gender Tag Does the project plan to undertake any of the following? a. Analysis to identify Project-relevant gaps between males and females, especially in light of No country gaps identified through SCD and CPF b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or No men's empowerment c. Include Indicators in results framework to monitor outcomes from actions identified in (b) No SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating 1. Political and Governance ⚫ Moderate 2. Macroeconomic ⚫ Moderate 3. Sector Strategies and Policies ⚫ Substantial 4. Technical Design of Project or Program ⚫ Substantial 5. Institutional Capacity for Implementation and Sustainability ⚫ Substantial 6. Fiduciary ⚫ Substantial Page 3 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 7. Environment and Social ⚫ Moderate 8. Stakeholders ⚫ Moderate 9. Other ⚫ Moderate 10. Overall ⚫ Substantial COMPLIANCE Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [✓] No Does the project require any waivers of Bank policies? [ ] Yes [✓] No Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 ✔ Performance Standards for Private Sector Activities OP/BP 4.03 ✔ Natural Habitats OP/BP 4.04 ✔ Forests OP/BP 4.36 ✔ Pest Management OP 4.09 ✔ Physical Cultural Resources OP/BP 4.11 ✔ Indigenous Peoples OP/BP 4.10 ✔ Involuntary Resettlement OP/BP 4.12 ✔ Safety of Dams OP/BP 4.37 ✔ Projects on International Waterways OP/BP 7.50 ✔ Projects in Disputed Areas OP/BP 7.60 ✔ Legal Covenants Sections and Description Institutional Arrangements (General) Page 4 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Project Agreement (PA), Schedule, Section I.A.1: For the purpose of carrying out the Project, the Project Implementing Entity shall maintain, and cause to be maintained, the following entities with composition, powers, functions, staffing, facilities and other resources acceptable to the Bank: (a) At the provincial level: (i) the Provincial Project Leading Group responsible for providing overall policy, financial, and institutional guidance on Project implementation and facilitating coordination among different implementing agencies within its jurisdiction; and (ii) the Provincial Project Management Office responsible for implementation, coordination, reporting, management, and monitoring and evaluation of the activities under the Project, including the preparation of the consolidated Annual Work Plan and Budget, and semi-annual Project Reports; and (b) At the county level: (i) a Project leading group in each Project County, responsible for providing overall policy, financial and institutional guidance on Project implementation and facilitating coordination among different implementing agencies within its respective jurisdiction; and (ii) a County Project Management Office responsible for implementation of the Project at the county level, and coordinating day-to-day activities with the Provincial Project Management Office, the respective Municipal Platform Secretariat and other agencies, monitoring Project implementation within the county concerned and preparing Project annual work plans and budgets and semi- annual progress and financial reports for submission to the Provincial Project Management Office for consolidation and onward submission to the Borrower and the Bank. Sections and Description Institutional Arrangements (SSR Platform) PA, Schedule, Section I.A.2: 2. For the purpose of carrying out Part 1 of the Project, the Project Implementing Entity shall establish by no later than October 1, 2019, and thereafter maintain, and cause to be maintained, the following entities with composition, powers, functions, staffing, facilities and other resources acceptable to the Bank: (a) at the provincial level, the SSR Collaboration Platform Office responsible for: (i) the daily operation of the platform, including the organization of the SSR annual roundtable dialogue; (ii) the coordination of cross-level and cross-sectoral issues; (iii) leading the development of the SSR vision, coordinating regional development strategies and policies, and implementation of action plans in line with the agreed regional strategies; (iv) the coordination for implementation of thematic regional joint-investments; (v) the dissemination of best practices and experiences demonstrated in the SSR; and (b) at the municipal level, a Municipal Platform Secretariat responsible for: (i) supporting the SSR Collaboration Platform Office on coordination with sub-municipal and county governments; (ii) lead the implementation of regional investments; and (iii) preparing and managing a three-year rolling scheme of capital investments on regional infrastructure. Sections and Description Annual Work Plans and Budgets PA, Schedule, Section I.B.1: The Project Implementing Entity shall, and shall cause the Project Counties to: (a) prepare and furnish to the Bank by November 30 in each year, beginning in 2019, a draft Annual Work Plan and Budget for review and comment, summarizing the implementation progress of the Project for the said year and the Project activities to be undertaken in the following calendar year, including the proposed annual budget for the Project; (b) taking into account the Bank’s comments, finalize and furnish to the Bank no later than December 15 in each year, beginning in 2019, the Annual Work Plan and Budget, acceptable to the Bank; and (c) thereafter ensure the implementation of the Project during the following calendar year in accordance with the Annual Work Plan and Page 5 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Budget agreed with the Bank and in a manner acceptable to the Bank. The Project Implementing Entity shall, and shall cause the Project Counties to, not amend, suspend, abrogate, or waive said Annual Work Plans and Budgets or any provision thereof without the prior written agreement of the Bank. Sections and Description Project Operations Manual PA, Schedule, Section I.B.2: Throughout the implementation of the Project, the Project Implementing Entity shall, and shall cause the Project Towns to, apply the Project Operations Manual in a timely and efficient manner acceptable to the Bank. The Project Implementing Entity shall, and shall cause the Project Towns to, not amend, suspend, or waive said Project Operations Manual or any provision or schedule thereof, without the prior written agreement of the Bank. In the event of any inconsistency between the provisions of the Project Operations Manual and those of this Agreement or the Loan Agreement, the provisions of this Agreement and the Loan Agreement shall prevail. Sections and Description Safeguards PA, Schedule, Section I.C: The Project Implementing Entity shall, and shall cause the Project Towns to: (a) implement, the Safeguards Instruments in a manner and substance acceptable to the Bank; (b) ensure that each contract for works financed under the Project includes the obligations of the work contractors and any sub- contractor to comply with the relevant provisions of the Safeguards Instruments, as the case may be; (c) ensure that all studies and technical assistance to be supported under the Project are carried out under terms of reference acceptable to the Bank, and that such terms of reference are consistent with, and pay due attention to, the Bank’s Safeguards Policies; (d) not amend, suspend, or waive the Safeguards Instruments, or any provision thereof, without the prior written concurrence of the Bank; (e) maintain, policies and procedures adequate to enable them to monitor and evaluate, in accordance with guidelines acceptable to the Bank, the implementation of the Safeguards Instruments; and (f) take all measures necessary on their part to regularly collect, compile, and submit to the Bank, as part of the Project Reports, and promptly in a separate report whenever the circumstances warrant, information on the status of compliance with the Safeguards Instruments. Sections and Description Mid-term Review PA, Schedule, Section II.2: The Project Implementing Entity, and shall cause the Project Counties to, shall prepare, under terms of reference acceptable to the Bank, and furnish to the Bank no later than June 30, 2022, a consolidated mid-term review report for the Project, summarizing the results of the monitoring and evaluation activities carried out from the inception of the Project, and setting out the measures recommended to ensure the efficient completion of the Project and to further the objectives thereof. Conditions Page 6 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Type Description Effectiveness Loan Agreement (LA). Article IV. 4.01. The Co-financing Agreement has been executed and delivered and all conditions precedent to its effectiveness or to the right of the Borrower to make withdrawals under it (other than the effectiveness of this Agreement) have been fulfilled. I. STRATEGIC CONTEXT A. Country Context 1. While China is on track to eliminate extreme poverty by 2020, the country still has a sizable poor and vulnerable population if measured against international benchmarks applicable to middle income countries. China is estimated to have 95.5 million people below a “lower middle income” international poverty line of US$3.20 a day (in 2011 purchasing power parity terms) and 373.1 million people below a “higher middle income” poverty line of US$5.50 a day.1 The Southern Shaanxi Region (SSR) in western China, where this project will be implemented, is one of China’s fourteen remaining Adjacent Destitute Mountain Areas prioritized by the country’s poverty reduction initiatives. Twenty -four out of the 28 counties in the SSR are deemed as “National Poverty Counties,” and they represent 49 percent of the total provincial population in poverty. 2. Recognizing that small cities and towns remain central to poverty alleviation, the Government of China (GOC) has prioritized their development through specific national policies and strategies. While small cities2 and towns are home to over 60 percent of the country’s total urban population, they receive only 9 percent of total fixed asset investment3, and, accordingly, public services and utilities in these cities are deficient. Issued by the State Council in 2014, the National New-Type Urbanization Plan (2014-2020) is considered a blueprint for China’s future urban development and was the first national plan of its kind in years solely dedicated to China’s urbanization. One of its priorities is on the agglomeration of small cities and towns; it mandates provinces and municipalities to develop policies and guidelines that encourage cities and towns in a cluster to highlight their specialization and support linkages to other major urban areas. In 2016, the State Council provided more detailed targets in the Urban Development and Management Guidelines and reiterated the importance of regional development. 3. Increasing frequency and intensity of flood events is threatening existing and future development gains across poor regions of China. Floods are the most frequent among all natural disasters in the world. Between 1990 and 2016, floods have caused more than US$ 670 billion in economic damage4, 1 World Bank. 2018. Poverty and Shared Prosperity 2018 : Piecing Together the Poverty Puzzle. Washington, DC: World Bank. © World Bank. https://openknowledge.worldbank.org/handle/10986/30418 License: CC BY 3.0 IGO. 2 “Small cities” are those with a total urban population below 200,000 residents, as defined by China’s urban statistical practice. 3 World Bank. 2012. China Small and Medium Towns Overview. 4 Kovacs, Y., Doussin N., Gaussens M. Flood risk and cities in developing countries. Paris: SEPIA Conseils; 2018. Guha-Sapir D, Hoyois Ph., Wallemacq P. Below. R. Annual Disaster Statistical Review 2016: The Numbers and Trends. Brussels: Page 7 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) with data suggesting that damage is more intense and costly in developing countries. 5 The SSR is not exempt: 42 percent of the SSR population, or 3.6 million people, live in cities and towns along the Han River (the largest tributary of the Yangtze River) that are increasingly affected by floods. These towns contributed to two-thirds of the SSR’s total GDP in 2015 and are the backbone of economic activity in the region. In the period 1997 to 20166, floods in the SSR affected 32.8 million people7 and caused damages estimated in the billions (US$). 8 Recent government post-disaster assessments suggest that better coordination amongst towns along the Han River basin could have lessened the impacts or the severity of weather-related disasters. Climate change is expected to cause parts of Shaanxi to become high-risk flood areas, further increasing the region’s vulnerability9 B. Sectoral and Institutional Context 4. As the world continues to urbanize, sustainable development increasingly depends on successful collaboration among adjacent small cities and towns. Effective collaboration is needed to ensure policy coherence and address local development needs among increasingly inter-connected urban areas. Secondary cities and towns are the linkages between rural and mega-urban areas.10 They are often left behind in the urbanization process because, unlike major cities, they lack institutional capacities and resources required to promote interventions across administrative boundaries. This project will demonstrate how collaboration can be fostered among adjacent secondary towns to address common resilience challenges in the face of rapid urbanization and climate change. A new institutional platform will be established as part of the project to coordinate decision-making on regional socio-economic development topics, such as flood control, climate change adaptation, and urban regeneration, among others, with a view to reduce losses in the poorest counties. The process of developing this platform can serve as an example for other fast-urbanizing regions facing similar climate-risk challenges, within China and globally. 5. The project will help establish the SSR Collaboration Platform to support institutional collaboration at a regional level. The first of its kind in China, this platform will enable collaboration among towns in the SSR to improve decision-making on the socio-economic development of the region. The platform will help accelerate the implementation of the Shaanxi Provincial Institutional Reform Plan, issued in October 2018: the Reform Plan calls for the reorganization and merging of several provincial CRED; 2016. 5 Wallemacq, Pascaline & Guha-Sapir, Debarati & McClean, Denis & , CRED & , UNISDR. (2015). The Human Cost of Natural Disasters - A global perspective. 6 The high incidence of sudden rainstorms, mountain torrents and river floods can be attributed to the fact that the SSR is a topographically fragile area. This results in complex weather changes, climatic discontinuity and extreme weather events that difficult to forecast. Sudden rainstorms, mountain torrents and river floods with associated landslides, rock falls and urban waterlogging are common. 7 SSR has a total population of 8.45 million. In average, each resident in SSR has been affected or experienced 4 flood events in the last twenty years from 1997-2017. 8 The disasters resulted in heavy casualties of 1,114 people deaths, 2.03 million hectares of farmland flooded, and 660,000 houses destroyed. 9 Xu, Y., Zhang, B., Zhou, B.-T., et al., 2014. Projected flood risks in China based on CMIP5. Adv. Clim. Change Res. 5(2), doi: 10.3724/SP.J.1248.2014.057. 10 In all developing regions except for Latin America and Caribbean, more people live in cities and towns of 500,000 inhabitants or fewer in or around big cities. Page 8 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) departments and their responsibilities, and the platform’s initial focal topics match the responsibilities of one of the forthcoming departments under the plan. These include climate change mitigation, flood and drainage management, and the monitoring and prevention of water pollution, among others. The Reform Plan came out of the GOC’s national institutional restructuring plan and is one of many similar plans across the country that require this same consolidation. As such, the platform can serve as a pilot for collaboration and similar reforms that will occur in other parts of China. 6. Resilience interventions offer opportunities for urban regeneration to control sprawl and unplanned growth. In addition to improved coordination on flood-related issues, the platform will promote a novel concept to improve the livability of dilapidated urban core areas. Shaanxi has experienced urban sprawl at a rate higher than the national average, leading to highly inefficient land use and unsustainable town growth.11 The project’s resilience measures target flood-prone terrain, including a large proportion of old city-centers that have become derelict due to de-industrialization and lack of investment. The redevelopment of these areas to improve public space accessibility and mobility through pedestrian and bike infrastructure interventions will be integrated into resilient infrastructure investments. This offers an alternative to greenfield development in the outskirts of the participating towns and will stimulate regeneration of the urban core areas of the towns, countering further sprawl and its associated negative externalities. C. Relevance to Higher Level Objectives 7. The proposed project is aligned with the WBG’s twin goals of ending extreme poverty and promoting shared prosperity. The project is designed with a strong pro-poor dimension to supplement the on-going poverty reduction efforts in the SSR. The project area is one of the poorest regions in the country. The project aims to build resilience and support urban regeneration in old urban areas that have high populations of low-income households, rural migrants, and elderly communities. Pro-poor measures will include: (i) selecting project towns from poverty counties defined at the national or provincial level; and (ii) giving priority to investments in disaster-prone urban poor communities. 8. The proposed project is aligned with the World Bank Group’s Country Partnership Strategy (CPS) for China (Report 67566-CN) discussed by the World Bank’s Board of Executive Directors in November 2012. The project contributes to two CPS themes—supporting greener growth and promoting more inclusive growth. In addition, the project is consistent with the commitments in the WBG Capital Package Policy Proposal of April 2018 (see Box 1). A new Country Partnership Framework (CPF) is under preparation and will reflect a reorientation to a more strategic and selective WBG engagement, in line with China’s reform priorities and with the WBG capital increase policy commitments. As part of the preparation process for the new CPF, the WBG country team and Chinese authorities jointly reviewed the lending pipeline and removed projects that did not sufficiently align with the capital increase policy commitments, which emphasize “strengthening policies and institutions required for sustainable IBRD 11 Overthe last fifteen years, the rate of expansion of Shaanxi’s built up area is about 3.5 times greater than its urban population growth. This far exceeds China’s national average ratio of 1.9 times, and the international benchmark ratio of 1.12. Measured by per capita urban land area, each urban resident in Shaanxi occupies 110.1 m2 of urban land, comparing to a national average of 100 m2. Page 9 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) graduation.” The proposed project was maintained in the pipeline because it addresses a key institutional deficiency in small town development (lack of coordination/administrative fragmentation) in addition to prioritizing urgent and “no-regret” climate resilience investments. Box 1. How the Project addresses the capital package policy commitments 1. Supporting a new institutional solution for the problem of coordination among sub regional governments : As in many other parts of the world, limited coordination among towns in the SSR has hampered effective flood risk management. Administrative fragmentation results in sub-optimal solutions to problems that would be better addressed jointly. The project will address this issue through the establishment of an innovative and new institutional structure—the Southern Shaanxi Region (SSR) Collaboration Platform—to coordinate decision-making on regional socio-economic development issues such as flood control, climate change adaptation, and urban regeneration. The first of its kind in China, the platform was influenced by a number of government-associated regional organizations. 12 The platform will be established to support coordination initially among six towns along the Han River (a tributary of the Yangtze River). Other towns from the SSR are expected to join the platform as it gets developed. 2. Contributing to Global Public Goods: The project promotes actions to adapt to the consequences of climate change and to mitigate carbon emissions. The project will help the region shift from treating adaptation as an incremental cost and isolated investment to systematically managing and incorporating climate risks and opportunities throughout development planning. In doing so, the project will contribute to better flood management in an ecologically fragile part of China. Further, the project supports carbon mitigation through introducing an urban development model that controls urban sprawl and car-oriented development. The project will encourage the replication of this green urban development model across China, which could have an important impact on emissions abatement.13 3. Sharing global knowledge for urban development: The project will pilot collaboration among secondary cities and towns; it will integrate resilience, climate adaptation and urban regeneration into local development planning and financing. Knowledge documentation and sharing is an integral part of the project activities as lessons from the development of the platform will be relevant to other towns in Shaanxi and parts of China, and to Bank clients that face similar challenges around the world.14 At the national-level, the China Center for Urban Development (CCUD), the main think-tank providing urban policy support under the NDRC, will be our partner to share the project work. Internationally, our work will be disseminated through GSURR’s knowledge management program and through the Global Facility for Disaster Risk Reduction (GFDRR), which supports numerous countries to mitigate natural disaster and climate risk impacts. Finally, the German development bank co-financier of the project, KfW, has an active global portfolio to protect the climate and environment, which provides opportunities for lessons from this project to be applied in other contexts. 12 Annex 1 elaborates further on some government-associated organizations that have influenced the development of the SSR Collaboration Platform. 13 Jiang, Yang, Pericles Christopher Zegras, Dongquan He, and Qizhi Mao. “Does Energy Follow Form? The Case of Household Travel in Jinan, China. “Mitigation and Adaptation Strategies for Global Change” 20, no.5 (November 6, 2014): 701-718 14 The SSR has many key features shared by other developing countries, such as: (i) a similar stage of economic development characterized by relatively low urbanization but with an increasing rural-to-urban migration trend; (ii) pervasive and persistent poverty particularly in rural areas; and (iii) highly prone to increasing climate change risks and vulnerable to floods in particular due to their climate-sensitive and topographical fragile locations and underinvestment in infrastructure. Page 10 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 4. Maximizing Finance for Development: By their nature, the investments into increased resilience and urban regeneration are difficult to finance on commercial terms. The project’s main contribution to maximizing financing for development is to use the SSR collaboration platform to screen and prioritize investment needs and identify projects which have the potential to leverage and incentivize private sector participation. However, the project does not envisage directly using project funds to crowd in the private sector. The project does mobilize substantial co-financing from local governments and from KfW thereby minimizing IBRD exposure. 9. The project supports the Global Sustainable Development Goals15, the WBG’s 2025 Climate Change Targets and Actions (2018), and the Adaptation and Resilience Action Plan (2018) by promoting actions to both adapt to climate change consequences and to mitigate carbon emissions. First, the project’s SSR Collaboration Platform intends to help the region shift from treating adaptation as an incremental cost and isolated investment to systematically managing and incorporating climate risks and opportunities throughout development planning. In this way, the project’s attention on climate adaptation mirrors the recent WBG Adaptation and Resilience Action Plan. Furthermore, on adaptation, the project will contribute to better flood management through regional flood risk management and water pollution monitoring systems in an ecologically fragile part of China, as well as introduce best practices in resilient infrastructure to be more adaptive to flash floods and climate change. Second, this project will contribute to China’s transition to its new urbanization path and support the country in achieving its Nationally Determined Contribution goals. The project mitigates carbon emissions by illustrating a novel urban development model for the region, from one that is car-oriented and encourages sprawl to one that is compact16 and emphasizes walkable streets. Moreover, the project supports the adoption of similar approaches across China, and if replicated at a large-scale, could have a significant impact on emissions abatement.17 With the continued population growth of these small cities and towns, the future consumption patterns of these areas will determine the air, water, and solid waste management, among others, drastically influencing regional and global public goods. 10. The project also supports China in moving towards a new urban development model. As referenced in paragraph two, the National New-Type Urbanization Plan (2014-2020) describes what is envisioned for the “new-type” or future urban development.18 The project builds on this plan and on the joint policy report of the World Bank and the State Council Development Research Center entitled Urban China: Toward Efficient, Inclusive, and Sustainable Urbanization (2014).19 Key policy recommendations 15 Transforming our world: the 2030 Agenda for Sustainable Development (United Nations, 2015). United Nations Sustainable Development Summit. 16 A “compact city” is an urban planning and design concept which promotes high residential density with mixed land uses. It is characterized by a dense street network and has an urban layout that encourages walking and cycling, and is associated with reduced environmental impact and reduced consumption of fossil fuels and energy. 17 Jiang, Yang, Pericles Christopher Zegras, Dongquan He, and Qizhi Mao. “Does Energy Follow Form? The Case of Household Travel in Jinan, China. “Mitigation and Adaptation Strategies for Global Change” 20, no.5 (November 6, 2014): 701-718 18 The National New-Type Urbanization Plan (2014-2020) focuses on environmental sustainability from a people-centered perspective and outlines various key themes, including (i) convert more rural migrants to urban residents (at least 100 million by 2020); (ii) focus on agglomeration of small cities and towns, to have sufficient specialization and linkages to major urban areas; (iii) emphasize environmental protection and mixed-used, transit-oriented development; and (iv) preserve the natural and cultural features of cities. 19 Policy recommendations from the report include building mixed-use land development, optimizing urban and rural land use to contain urban sprawl, maximizing resource efficiency, curtailing the negative externalities of pollution and congestion by regenerating old urban areas, in order to create more livable, productive and efficient cities and towns. Page 11 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) from this were incorporated into the Urban Development and Management Guidelines issued by the State Council in 2016. The Guidelines used the principles of “innovative, coordinated, green, open, and shared” city development and included requirements to improve urban planning and development at various scales—the region, cities, streets, blocks, and buildings. II. PROJECT DESCRIPTION A. Project Development Objective PDO Statement 11. The proposed project development objective is to foster regional collaboration, reduce flood risk and improve urban services in selected towns in the southern part of Shaanxi. PDO Level Indicators 12. At the project level, PDO indicators for the proposed project include the following: (i) Formal regional collaboration platform by Shaanxi Provincial Government operationalized (milestones based on the number of output level indicators achieved, weighted and measured in percentage improvement); (ii) Population mitigated against flood risks, including women (number and percentage) (iii) Population provided with access to improved basic urban services and public amenities, including women (number and percentage); B. Project Components 13. The project comprises four components, as described in the following paragraphs. Annex 3A contains a detailed project description and investments by components and towns. 14. Component 1: SSR Collaboration Platform (US$ 59.1 million): This component aims to improve the collaboration between towns along the upstream of the Han River Corridor through the establishment of an institutional platform. The platform will not only guide investments for this project but will build long-term collaboration to support future regional development plans and projects envisioned by the towns. As a result, the proposed platform will be in operation beyond the duration of this project and influence the region’s long-term development. The structural and non-structural interventions and activities of the SSR Collaboration Platform include the following: 1.1 Establish and operate the SSR regional collaboration platform to foster collaboration among the towns in the project region of SSR and enhance dialogue to improve decision-making on regional and cross-border topics. Page 12 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 1.2 Conduct studies on the region’s long-term vision to coordinate urban development and impacts of climate change in the region. These studies will inform future decisions related to strengthening resilience. Develop a technical implementation handbook on guidelines for town regeneration and resilience strengthening based on the pilot work done from the project towns. 1.3 Establish a coordinated regional flood risk management system and a water pollution monitoring system to strengthen resilience. Annex 3A contains more details on these systems. 1.4 Establish a documentation and dissemination process to share knowledge nationally, as well as globally. CCUD, the central government think-tank under the NDRC, will distribute the project’s framework and lessons throughout the country. 15. Component 2: Resilience Strengthening (US$ 96.8 million): This component will enhance resilience against floods in project towns. With an increasing incidence of floods in recent years, managing this type of natural disaster will not only help the towns adapt, but will also support them to withstand future shocks and grow amidst the fast-changing climate conditions. Structural interventions involve building or upgrading critical infrastructure, including: (i) building new and upgrading existing storm and drainage pipelines, and constructing or rehabilitating pumping stations, control and sluice facilities to reduce waterlogging, and piloting low impact sustainable drainage application on suitable urban roads; and (ii) constructing emergency shelters and evacuation routes. Investments selected based on a specific methodology and focus on towns which have weak institutional arrangements. 16. Component 3: Urban Regeneration (US$ 29.7 million): This component will regenerate dilapidated urban areas in the towns using a people-oriented approach20 to cultivate a connected and inviting urban core. Investments will be prioritized towards lower-income areas. Structural interventions include: (i) rehabilitating old neighborhoods by upgrading urban utilities services and retrofitting existing underutilized spaces; and (ii) improving non-motorized transport by upgrading pedestrian and biking infrastructure along core streets. 17. Component 4: Project Management (US$ 2.7 million): This component will support the overall development of the Project Implementing Entity to coordinate and manage project implementation, including: (i) procurement and contract management, accounting and financial management, project reporting, (ii) design review, bid document review; (iii) independent monitoring of the implementation of the project’s safeguards instruments; (iv) developing a Monitoring and Evaluation (M&E) system; (v) training and workshops for strengthening the capacity of key stakeholders (e.g. PPMO, PMO and staff from related local government agencies of project counties); (vi) consulting services and professional staffing supports for the regional Collaboration Platform Office. 20As opposed to an approach that caters first to cars, which is how much of urban development has been done in recent decades. Page 13 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) C. Project Cost and Financing 18. Project Cost and Financing: Project costs are estimated at US$ 239 million (RMB 1,623 million), of which US$ 150 million will be financed by an IBRD loan of US$ 100 million equivalent and a KfW loan of US$ 50 million equivalent. The IBRD loan and the KfW loan will be provided as joint co-financing Table 1 below summarizes the project costs and IBRD and KfW financing by component. Table 1: Project Cost and Financing Estimated IBRD KfW Estimated Government Cost Loan Loan Project Component Cost contribution RMB US$ US$ US$ million US$ million million million million Component 1: SSR 402.06 59.13 10.58 32.37 16.18 Collaboration Platform Component 2: Resilience 658.05 96.77 21.18 50.39 25.20 Strengthening Component 3: Urban 201.89 29.69 6.53 15.44 7.72 Regeneration Component 4: Project 18.37 2.70 0 1.80 0.90 Management Sub-Total (Baseline Cost) 1280.37 188.29 38.29 100 50 Front-end fee 2.55 0.375 Contingency 170.09 25.01 Interest during construction, commitment fee, 138.90 20.43 investigation & design fee, and others Land acquisition and 30.79 4.53 resettlement Total 1,622.70 238.63 88.63 100 50 (RMB 6.8=US$1) D. Project Beneficiaries 19. The project will be implemented in six towns of Shaanxi Province, specifically Hanbin, Ziyang, Shiquan, Yang, Mian, and Shangnan. The primary beneficiaries include 576,300 residents, with 30,330 poor from the project towns. They will directly benefit from enhanced resilient infrastructure against reduced flood disasters and better access to urban infrastructure and services. Other direct beneficiaries include agencies involved in planning and implementing coordinated regional town development at the provincial, municipal and town levels. Page 14 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) E. Results Chain 20. The theory of change for this project is illustrated below: F. Rationale for Bank Involvement and Role of Partners 21. KfW and the World Bank bring the best international practices and standards on integrated flood risk management and urban regeneration. Given its limited capacity and resources, the SSR in the past has mainly adopted more traditional methods to address floods that have proven insufficient and would benefit from the depth of knowledge that both KfW and the Bank have accumulated on integrated flood risk management. The Bank’s increasing work on inclusive urban regeneration is also important and useful, particularly to areas with limited planning capacities. Two recent World Bank publications21 on cities and flooding and urban regeneration provide a wealth of experience and international best practices, with some existing lessons from these efforts elaborated in the following section. 22. KfW and the World Bank bring the convening power to be able to develop an institutional 21 The two publications include: Amirtahmasebi, Rana; Orloff, Mariana; Wahba Tadros, Sameh Naguib; Altman, Andrew M. 2016. Regenerating urban land: a practitioner’s guide to leveraging private investment (English). Urban Development. Washington, D.C. : World Bank Group and Jha, Abhas K.; Bloch, Robin; Lamond, Jessica. 2012. Cities and Flooding: A Guide to Integrated Urban Flood Risk Management for the 21st Century. World Bank. Page 15 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) platform for regional collaboration. Bringing different government departments of varying levels to collaborate is a challenging endeavor anywhere in the world. The Bank’s convening power, and the visibility it brings to the project, has already proven useful during the conception of the platform. The Bank’s convening power will also be useful when platform parties have to agree on new procedures and regulations. Finally, KfW and the Bank’s convening power will support the expected scale up of the platform to the other towns along the Han River. The Bank and KfW have agreed to harmonize their respective requirements in the project design and intend to continue cooperation to facilitate implementation. Overall, involvement from the two institutions is projected to reinforce the policy reform process initiated by the province and will increase the sustainability of the platform after project completion. 23. KfW and the World Bank bring opportunities for global knowledge sharing and partnerships. Aside from financial support, KfW’s technical assistance and initiative to disseminate the project approach and lessons are key to the project. KfW’s climate, environment, and urban development practice spans multiple regions and KfW plans to disseminate the project’s results with a wide range of clients interested in learning about integrated, climate-smart planning and urban development. CCUD, a major urban development think-tank under the NDRC, is a partner of the project and will disseminate the lessons learned from the project at a national level and to its international partners. They intend to use this project as one of their case examples on sustainable town development. The World Bank-managed GFDRR also intends to communicate the best practices from the project to its wide international audience of numerous countries where it supports natural disaster and climate risk mitigation. Finally, there is a good potential for the project approach to be shared internationally and be contextualized and replicated in other developing countries. Due to the high demand for improving regional resilience and the similar stage of economic development the SSR shares with developing countries22, the project’s successes are relevant and could be very viable for other counties to learn from. G. Lessons Learned and Reflected in the Project Design 24. Lessons from the Bank’s Urban Portfolio. The project incorporates lessons from the Bank’s experience in promoting territorial development, enhancing city resilience and urban flood risk management, and regenerating older urban areas. It has drawn lessons from both past and current projects, including the (i) Guangdong Pearl River Delta urban Environmental Project (China, P075728), (ii) Can Tho Urban Development and Resilience Project (Vietnam, P152851), (iii) Metro Manila Flood Risk Management Project (Philippines, P153814), (iv) Mekong Delta Integrated Climate Resilience and Sustainable Livelihoods Project (Vietnam, P153544), (v) Wenchuan Earthquake Recovery Project (China, P114107), (vi) Zhejiang Qiantang River Basin Small Town Environment Project (China, P116656), and (vii) Shaanxi Poor Rural Areas Community Development Project (China, p153541). Lessons have also been drawn from Bank publications, such as Cities and Flooding: A Guide to Integrated Urban Flood Risk Management for the 21st Century (2012) and Regenerating Urban Land: A Practitioners Guide to Leveraging Private Investment (2016). The handbook brings together cases of cities that have used their land assets and regulatory power to leverage and incentive private participation in urban regeneration. 22 See footnote 11. Page 16 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Both technical assistance and infrastructure investments from these publications have informed project design. Lessons Include: 25. A clear, collective vision and roadmap is fundamental for territorial development. Because of strong intra-regional externalities, a shared vision is critical to encourage collaborative planning. However, capacity limitations and administrative fragmentation often undermine such a collective approach in practice. The project supports both: (i) preparation of needs assessments and long-term visioning of the town development in the SSR; and (ii) establishment of a town collaboration platform to implement the regional systems, guide town development plans and streamline town resilience investments. Collaboration among cities and towns is a complex, multi-stakeholder, and long-term process that requires a sustained, institutional mechanism. The institutional arrangements need to be resilient to changing administrative and socioeconomic contexts. 26. Resilience is essential to sustain poverty reduction gains in the context of climate change . Sustaining the poverty reduction gains that the SSR has made over the last decade requires a concerted effort to boost the resilience of towns amidst increasing frequency and intensity of flood events. Infrastructure gaps, particularly weak flood prevention facilities, poor drainage and inadequate sewerage networks, have increased flood vulnerability in the SSR. Flood risk at town levels is further exacerbated because prevention solutions are not coordinated with regional flood management measures, resulting in inefficiencies. 27. Land use planning is a critical component of an integrated approach to flood management. Land use planning offers many opportunities to manage floods at all stages of the flood risk management cycle. Urban planning regulations can discourage development in flood-prone zones, reduce water runoff through development controls for flood risk mitigation, designate routes and public spaces for better response and recovery efforts, alleviate damages from unavoidable floods, and accommodate urban growth and expansion in flood-safe areas. 28. Investments in non-structural measures, such as data monitoring and modeling, emergency preparedness and disaster response, must supplement structural investments for an effective approach to flood risk management. Physical investments in resilience infrastructure will not eliminate risk entirely. Reducing vulnerability to disasters in project towns need to go beyond disaster-prevention engineering investments and focus on integrated, risk-informed urban planning with a comprehensive approach to urban upgrading of infrastructure. In this way, cities are not only protected from floods but manage floods. This approach takes a long-term, sustainable view. III. IMPLEMENTATION ARRANGEMENTS A. Institutional and Implementation Arrangements 29. Institutional Arrangements: The Provincial Project Leading Group (PPLG) has been established. Page 17 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) The Group is chaired by the Deputy General Director of Shaanxi Provincial Development and Reform Commission (PDRC) and includes representatives from the PDRC, Provincial Department of Finance (PDOF), Provincial Department of Ecology and Environment, the Provincial Department of Emergency Management, and the Provincial Department of Water Resources. The PPLG will provide overall policy and strategic guidance to project preparation and implementation. It will also be responsible for facilitating inter-agency coordination and resolving any major issues identified during project preparation and implementation. The PPMO is physically located in the PDRC and is implementing the Shaanxi Small Towns Infrastructure Project (P133069). At the local level, a leading group and county-level PMOs will be established to coordinate and implement town-level project activities. A SSR Collaboration Platform will be established to guide the implementation of Component 1. The platform will be supported by three secretariat offices with full-time staff stationed in Hanzhong Development Reform Commission (DRC), Shangluo DRC, and Ankang DRC. It will have the full involvement of the project towns. Detailed design for this in terms of implementation arrangements for the platform is provided in Annex 1. 30. County Level PLGs, CPMOs, and Project Implementing Units (PIU). Each of the six project towns have established similar leading groups (PLG) chaired by respective mayors to provide local level policy direction to the subsequent implementation of the project in their respective jurisdiction. They have also made necessary arrangements regarding their own County Project Management Office (CPMO) and Project Implementation Unit (PIU). B. Results Monitoring and Evaluation Arrangements 31. A Monitoring and Evaluation (M&E) framework has been established to monitor implementation progress and progress towards achievement of the PDO. The PPMO, with inputs from the CPMOs and PIUs, will be responsible for data collection and reporting on progress and results. A project implementation support consulting team will be hired by the PPMO and will assist with overall project supervision as well as the M&E. Independent specialized monitoring institutes will monitor and report on the implementation of, and compliance with, environment management plans (EMPs) and resettlement plans (RPs). Annual M&E reports will also be submitted to the World Bank. Semi-annual reporting will be prepared on implementation progress as determined by the project team. A Mid-term Review will be carried out within 36 months of project effectiveness to assess the performance of project implementation and recommend needed adjustments to achieve the PDO. C. Sustainability 32. Project sustainability depends to a large extent on the client’s commitment and success in strengthening the client’s institutional capacity for carrying out subprojects. The Shaanxi Provincial Government and local governments of participating towns have shown a strong commitment to regional development through their dedication to the design of the proposed platform and project details. They are open to integrating international best practices in building climate-resilient cities and mainstreaming resilience into local urban planning, regeneration and financing. The project has been prepared with broader engagement of related sectoral administration agencies at the provincial level with intensive involvement of the implementation agencies at city and town levels. Page 18 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 33. This project and the platform is one of the earliest pilots influenced by the recent national institutional restructuring process. 23 This, plus the fact that the platform’s is housed in an existing department in the provincial government, supports its sustainability. The proposed regional collaboration platform is established at the provincial level and chaired by the PDRC. The towns are participating as the key players, first collaborating on flood risk issues and then on other issues that support their shared vision for the SSR’s future. Through this process of working on regional flood risk, the towns will collaborate and will be required to examine their region holistically and understand other interdependencies and risks they may face, and eventually work in other topics that can improve the region’s development trajectory and overall social well-being. Furthermore, the on-going, rolling scheme of capital investments on SSR regional infrastructure will allow it to continue beyond the project period. 34. Technical, economic, and financial analyses have been conducted to ensure that the required resources and capacities will be in place to construct, operate, and maintain the created assets. The concerned line agencies in project towns will take responsibility for implementing their respective project activities as well as the Operations and Maintenance (O&M) of related project facilities after their construction. Technical studies under Component 1 will help towns to mainstream institutional structures which will enable O&M as well as plan for future development. Continued involvement of the beneficiary communities and stakeholders throughout the project cycle will also contribute to project sustainability. IV. PROJECT APPRAISAL SUMMARY A. Technical, Economic and Financial Analysis (i) Technical Analysis 35. SSR Collaboration Platform: The project introduces international best practice of integrating urban resilience into land use planning. It seeks to support regional development through establishing and operationalizing the SSR Town Collaboration Platform. It will have broader technical engagement from lower-level governments, private sector, leading industries, and local think tanks. The platform’s goal is to enable collaboration among towns to improve decision-making on regional socio-economic development and will initially focus on reducing flood risks and costs with an approach that combines investments in no-regret climate resilient infrastructure with improvements in data monitoring, modelling, disaster preparedness and other “non-structural” measures. It will also support developing the region’s long-term vision for growth amidst increasing climate risks. 36. Resilience Strengthening: This component demonstrates the systematic integration of resilience into local public investment planning, design, construction and service delivery. It supports flood prevention and improves drainage services and emergency evacuation facilities in selected towns. It also improves the capacity of local governments to facilitate disaster response. Designs of flood prevention 23As stated in paragraph five, the platform will help accelerate the implementation of the Shaanxi Provincial Institutional Reform Plan, published in October 2018, which was a result of the GOC’s national institutional restructuring plan also introduced in 2018. Page 19 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) and drainage infrastructure have considered both structural (pumping stations, drainage pipes, etc.) and non-structural measures (flood monitoring and modeling, risk assessment and management, contingency planning and drills). Evaluation of the options have taken account of cost benefits based on full life-cycle cost, capacity of project owners to manage and sustain the infrastructure and services delivery, and their comparative reliability. Design of the resilience investments are based on internationally recognized hydraulic models adapted for the SSR’s conditions. 37. Town Regeneration: This component demonstrates a new urban development pattern that curbs sprawl and helps mitigate flood and climate risks in the long-term. Resilience investments are combined with urban regeneration interventions in densely populated, old city-center areas in selected towns that are prone to floods. This component upgrades urban utilities services. Technical designs of regeneration investments have been reviewed to promote resilience aspects, such as the green flood risk reduction measures, which can be further be leveraged to create multi-function public spaces. The Bank’s global best practice and key principles for successful urban regeneration were adopted in preparing and designing this component. 38. Technical Soundness: Technical feasibility of the proposed investments have been appraised and will be reconfirmed by project-financed consultants during the review of detailed designs and bidding documents in the project implementation stage. After a thorough analysis of alternatives, proposed physical investments under the project represent cost-effective and affordable solutions. Standard design criteria and design principles have been appropriately modified to suit local conditions and requirements. (ii) Economic Analysis 39. The economic benefits and costs of each investment component have been identified and a cost-benefit analysis has been conducted. The main economic benefits include: (i) avoided or reduced future flood damages owing to disaster prevention and reduction measures; (ii) savings from potential environmental pollution management costs; (iii) improved living conditions and amenities; (iv) recreational value of emergency shelters serving as public space; (v) global environmental benefits (reduced CO2 emission due to increased walkability and decreased use of motor vehicles); and (vi) public health enhancement due to increased walkability via non-motorized transport (NMT). It is also expected that the project will improve natural disaster management and institutional capacity of project towns. The economic costs of the project are capital investments and O&M costs, including associated environmental mitigation, land acquisition, and resettlement costs of the investments. 40. For the economic analysis, the types of investment activities were grouped into four categories: (i) Flood control in Hanbin, Shiquan, Yang, Mian, Shangnan; (ii) Emergency Shelter and Evacuation Routes in Shiquan, Ziyang, Yang, Mian, Shangnan; (iii) Neighborhood Rehabilitation in Hanbin, Shiquan, Yang, Shangnan; and (iv) NMT/Walkability Improvement in Hanbin, Shiquan, Yang, Mian, Shangnan. The cost-benefit analysis (CBA) was employed in the economic analysis for all investment subcomponents in the project towns. 41. EIRRs by town and by investment category are summarized in the table below. Investments in each town differ and have been selected based on a detailed screening methodology, described in Annex Page 20 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 3B.24 The results represent the low-end value due to not only the exclusion of some benefits in valuation, but also because of conservative assumptions to avoid overestimation. The results of the CBA show that the proposed investments are economically viable. Detailed methodologies and results of CBA for each subcomponent is provided in Annex 4. Table 2: EIRRs by town and subcomponent Subcomponents Hanbin Shiquan Ziyang Yang Mian Shangnan Flood Control 12.11% 12.82% 12.01% 12.04% 12.75% Emergency Facilities 12.94% 12.02% 12.59% 12.10% Neighborhood 14.77% 13.93% 12.54% Rehabilitation 12.23% NMT/Walkability 12.40% 12.30% 13.37% 11.41% Improvement 42. Local residents, including vulnerable groups in the project areas, are supportive of improving local infrastructure and environmental protection facilities and would benefit from the project. As local governments will shoulder most of the project investment costs, the project anticipates no negative impact on the poor. (iii) Financial Analysis 43. Financial analysis has been carried out to assess the adequacy of financial resources of project towns to finance the proposed investments, operate and maintain the assets created under the project, and meet the debt service requirements. Financial data from the past five years was analyzed and reasonable assumptions were applied in the financial analysis. The assumptions applied were made by the counterparts and represent their best estimate and forecast on the exchange rate, financial charges from the Bank and KfW loans, as well as project implementation progress, related loans disbursement and counterpart funding contribution plan on an annual basis. 44. All project towns have committed to provide counterpart funds for the implementation of the project and allocate budget for the O&M of the assets created under the project. The fiscal revenues of project towns over the past five years have been reviewed and those for the future years have been projected based on reasonable assumptions. The results of these projections and analyses show that the government contribution to the project made by the project towns is less than 1 percent of their available fiscal revenues each year. The debt service requirements of project towns are less than 1 percent of their available fiscal revenues projected from 2026 to 2045. The project towns have the capacity to provide counterpart funds to the project and debt service requirement will not have any negative impact to them. B. Fiduciary (i) Financial Management and Disbursement Arrangements 24 Blank spaces represent a lack of that type of investment in the specific town. Page 21 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 45. A financial management (FM) assessment has been carried out to assess capacity of the PPMO, and six CPMOs. The FM capacity assessment identified the following common risks: (i) The Bank operations are new to town-level PIUs and they have limited financial management capacity with either domestic invested infrastructure projects or internationally-financed projects. To mitigate the risk, the FM work will be carried out by designated qualified and experienced financial staff. However, the PPMO, has good experience of working on Bank financed operations and will provide guidance, supervision, and training to the PIUs for their FM work. In addition, the Bank will provide guidance and training to the project financial staff as needed. (ii) The late contribution of counterpart funding may pose financial pressure to project implementation. To mitigate the risk, a counterpart fund contribution plan needs to be committed and provided by the borrower to the Bank by source, amount and contribution time. The project counterpart funds in the first implementation year are required to be included into the annual government budget preparation cycle by the PIUs. After taking mitigation measures into account, the overall residual financial management risk is rated as Moderate. 46. The World Bank loan agreement will be signed between the World Bank and MOF. The on- lending agreement for the Bank loan will be signed between MOF and SPFB on behalf of Shaanxi Provincial Government, then, in turn, between SPFB and each town finance bureaus for project town. (ii) Procurement 47. Regulations. Procurement for the project will be carried out in accordance with the World Bank’s Procurement Regulations for IPF Borrowers, dated July 2016 and revised on November 2017 and August 2018, as required by the provisions of the Loan Agreement. Also, applicable to the project will be the World Bank‘s Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, dated October 2006, and thereafter revised in January 2011 and July 1, 2016. 48. Institutional Arrangements. PPMO will be responsible for overall procurement management, supervision, contract signing and implementation of contracts under the management of PPMO. CPMOs will play the role for coordination with PPMO, providing technical input at bidding stage, signing and implementation of contracts in their respective jurisdiction. Two PIUs in Hanzhong Municipality will be responsible for the contract signing and implementation responsibilities designed by SSR collaboration platform. 49. Capacity Assessment. The PPMO has rich experience with Bank-financed projects and is implementing the Shaanxi Small Towns Infrastructure Project (P133069). Reference is made to PAD Paragraph 19 of Annex 3 of P133069, where the PPMO will continue to give sufficient attention to identifying and addressing red flags of unethical practices in procurement and contract execution. Although no substantial issue with fraud and corruption was identified during first three years of implementation of P133069, the PPMO’s continuous attention is required. CPMOs are all new to Bank’s procurement. The following main risks have been identified during the assessment: (1) non-compliance with Bank Regulations due to unfamiliarity with Bank procurement rules and procedures, and/ or preference in complying with local procurement procedures when local regulations conflict with Bank procurement requirements; (2) weak contract management capacity due to possible resettlement and land acquisition delay, substantial variations or insufficient counterpart funding; and (3) staff shortfall at the PPMO in the first year of implementation when both the proposed project and the ongoing project Page 22 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) P133069 are under implementation at the same time. 50. Mitigation measures. To mitigate the above mentioned risks, the PPMO and CPMOs will take the following actions: (1) engaging a procurement agent with experience in the Bank procurement’s procedures and project management consultant to support project implementation; (2) developing a Procurement Manual and provision of regular trainings to CPMOs and PIUs on Bank procurement policies, methods, and procedures and, most important, lessons learned from implementation of previous projects; (3) using a provincial public transaction center to ensure transparency, confidentiality, and appropriate dissemination of the procurement processes; (4) providing implementation support by the Bank’s procurement specialist during project implementation; (5) carrying out post review by the Bank team or auditors appointed by the Bank; and (6) hiring by the PPMO of additional staff in the first year of implementation. 51. The overall procurement risk was assessed as Substantial. C. Safeguards (i) Environmental Safeguards 52. The project is classified as a Category B project and triggers Environmental Assessment (EA) (OP4.01), Natural Habitat (OP4.04) and Physical Cultural Resources (OP4.11). An EA and Environmental Management Plan (EMP) have been prepared in accordance with Chinese EA regulations and the Bank safeguards policies. It is expected that the major environmental impacts are site-specific, and few would be irreversible. 53. Environmental Assessment (OP4.01). The EA shows that the project would have overall environmental and social benefits, such as (i) improvement of basic infrastructure facilities (ii) reduction of pollution discharging into Han River etc., and (iii) improvement of living conditions for local people and promotion of NMT in the towns. Principal negative environmental impacts of the project will be mainly associated with rehabilitation and improvement of basic infrastructure in project towns. Adverse impacts would include disturbance to local communities and traffic, nuisance of dust, noise, vibration and wastewater, and disposal of spoil, etc. The construction related impacts will be short-term, limited and site-specific due to the small scale of construction activities and can be readily managed with good construction management. Adverse impacts during operations are limited, which mainly include noise nuisance from traffic and new/improved pumping houses. The project will finance technical assistance activities under Component 1 to support the study of sustainability and resilience in town regeneration and development. The TA activities will include requirements (which are to be specified in the TORs for TAs) to identify the environmental and social considerations that should be taken into account during town cluster regeneration and development. This requirement has been specified in the ESMP and will be followed during project implementation after the details of these TA activities are determined. 54. Natural Habitats (OP4.04). The project triggers OP4.04 Policy because some activities (e.g. public evacuation roads, and emergency shelters) are close to the Han River. These activities will not cause any significant adverse impacts to the Han River because they are mainly limited to the renovation or Page 23 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) improvement of existing infrastructure. The EA confirms that these activities are in line with Chinese EA regulations and the relevant master plans for natural habitats, and in compliance with the Bank policies on OP4.01 and OP4.04 and have been or will be approved by relevant government agencies. Mitigation measures include continuous consultation with relevant governmental authorities, good construction management, and specific measures for Han River protection. 55. Physical Cultural Resources (OP4.11). The project triggers OP4.11 Policy because some activities in old communities are close to some PCRs. To avoid any adverse impact on PCRs, mitigation measures will be implemented in line with the national regulatory and legal framework concerning cultural heritage. These include: (a) engaging qualified and experienced contractors; (b) training of workers on PCRs and environmental protection before commencement of construction; and (c) chance find procedures included in mitigation measures and contracts. Consultation with concerned and affected parties on the proposed measures has been conducted, and concerns about the management of spoil, noise and dust during construction have been incorporated into the PCR Management Plan. 56. Based on the EA, a stand-alone Environmental and Social Management Plan (ESMP) has been developed to avoid, minimize, mitigate and compensate for the potential adverse impacts. The ESMP specify mitigation and enhance measures for the project activities, including that (i) Environmental Code of Practices (ECOPs) for civil work contactors to be included into the bidding documents and civil work contracts; (ii) mitigation measures for Han River Protection; (iii) PCRs management plan; (iv) mitigation measures for storm water pipeline, sewer, water supply pipeline and associated roads; (v) mitigation measures for pumping houses; public toilets, public emergency shelters; and (vi) mitigation measures for technical assistance activities. 57. ESMP implementation will be managed by the PPMO and County PMOs with designated environmental safeguards staff. Civil work contractors and supervision companies will be required to assign qualified environmental staff to their team to ensure effective implementation of the ESMP. PPMO, under assistance of on-site environmental supervisors, local EPB and external monitoring institution, will supervise the implementation of ESMP. To improve local capacity, the ESMP proposes capacity training activities for civil work contractors, County PMOs, environmental supervisors, and monitoring institutions, etc. The ESMP also specifies monitoring plan, environmental supervision, and the budget for the ESMP implementation. 58. Two rounds of public consultations were carried out during the EA process. The technique used for the public consultations include surveys using public opinion questionnaires, focused group discussions, public meetings with key stakeholders, and interviews with some project-affected persons. The issues raised during consultations have been incorporated in the EA and ESMP. Furthermore, feedbacks on the concerns and issues collected during public consultations have been provided to the concerned groups and documented in the EA. The environmental safeguards documents and other project related documents have been disclosed locally through various means (e.g., websites, newspapers, etc.), as required by national and Bank policies. Prior to project appraisal, the environmental safeguards documents were disclosed on December 4, 2018, through the Bank’s Internal website. (ii) Social Safeguards Page 24 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 59. OP 4.12 Involuntary Resettlement. Component 1, 2 and 3 will pose land acquisition and resettlement, triggering the OP 4.12, Involuntary Resettlement, and an RP was prepared. The RP was based on resettlement planning and social assessment for each town. Further, the project may partially finance activities in multi-sectors, including but not limited to flood management, wastewater collection, etc., for which due diligence review was conducted in the resettlement planning process. All the civil work has been identified before project appraisal, therefore there is no RPF needed. 60. The minority screening and the social assessment concluded that there are no ethnic minority groups in the project areas. Therefore, this policy is not triggered. The project is located on the upstream the Han river, where the majority is of Han nationality. Hui Nationality is scattered throughout the region, entrenched in the community, thus it does not fall under the definition of IP within the OP 4.10 Policy. 61. Social Assessment (SA). A social assessment was implemented through questionnaire surveys, public consultation meetings, focus-group discussions, and in-depth interviews, etc., in order to understand local context, identify and analyze stakeholders, recognize project demands from various stakeholders. These include government agencies, citizen beneficiaries and community representatives. The social assessment process directly involved 40 meetings, about 400 citizen interviews, 1396 questionnaires, and improved project designs on flood management facilities and urban regeneration in Shangnan, Hanbin and Ziyang. The SA was also able to avoid or minimize adverse impacts or social risks potentially resulting from the project. 62. Gender. A gender analysis was conducted to identify gaps and further to emphasize two measures to benefit female citizens. More than 44 percent of the people consulted were women, which enabled mainstreaming gender in the project design and implementation. The gender analysis illustrates that women in project areas have lower participation than men in public consultations due to their lower educational background and socio-cultural norms. The project will closely monitor two gender-related indicators: (I) ratio of access to emergency shelters by female, and (ii) ratio of monitoring cameras installed in public buses to improve safety for females. 63. Citizen Engagement. Extensive consultation and participation was conducted to consult with potentially affected persons and project beneficiaries to seek opinions for better project design and the resettlement plan. Hotlines for information disclosure have been setup, and appointed staff in the project offices will answer any questions related to the project and resettlement policies. Relevant project information has been provided to the affected communities through newspaper reports, posters and public meetings. The final SA and the RP were also locally disclosed to the public, via Provincial DRC websites, provincial/county libraries. They were also disclosed through Bank’s Internal website on December 4, 2018. (iii) Grievance Redress Mechanisms 64. Grievance Redress Mechanism. The project has several grievance redress mechanisms: World Bank mechanism, project and government mechanism, and court system. The project-level mechanism includes PMO system and the external monitoring to deal with daily grievance. In parallel, any grievance Page 25 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) could go to the court system. The WB system includes project management level and the GMR. 65. World Bank Grievance Redress. Communities and individuals who believe that they are adversely affected by a WB supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel, which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate GRS, information is available at http://www.worldbank.org/en/Projects-operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, information is available at www.inspectionpanel.org. V. KEY RISKS 66. The overall risk rating of the project is substantial. The main risks are associated with sector strategies and policies, technical design, institutional capacity for implementation and sustainability, and fiduciary. These risks include: whether the platform will be functional under the planned arrangement, if the platform will be sustainable after the close of the project, whether from a technical standpoint the government will sustain the new urban development model or go back to the previous development model of demolish-resettle-rebuild, and the additional sophistication required from Shaanxi to manage both the World Bank and the KfW financing. The final risk is the relatively weak procurement capacity of the PMOs. 67. The following measures will be taken to mitigate these risks: 1) As referenced above, the proposed SSR collaboration platform will be formally established with mandate approved by the SPG and is housed in the Shaanxi PDRC. The platform will be supported by three secretariat offices with full time staff stationed in Hanzhong DRC, Shangluo DRC, and Ankang DRC. All of this, including embedding within existing and functioning government institutions, is intended to help with both the platform implementation and sustainability. 2) The project’s analytical screening approach to prioritize project interventions has been documented for the platform’s future use. The baseline scenarios and data are intended for future scale-up. Armed with this approach, the platform can screen future projects and prioritize, plan and implement a rolling-scheme of regional capital investments in disaster resilience with domestic funding. The approach also supports the platform on how to tackle a regional development plan and integrate the project into their short term and long-term development goals. This approach will aid in the platform’s sustainability. Page 26 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 3) During preparation, KfW and the World Bank have agreed to harmonize their requirements in terms of safeguards, financial management, and will continue aligning on procurement and disbursement procedures before effectiveness and cooperate during implementation. .. Page 27 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) VI. RESULTS FRAMEWORK AND MONITORING Results Framework COUNTRY: China Shaanxi Sustainable Towns Development Project Project Development Objectives(s) The proposed project development objective is to foster regional collaboration, reduce flood risk, and improve urban services in selected towns in the southern part of Shaanxi. Project Development Objective Indicators RESULT_FRAME_T BL_ PD O Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 Foster regional collaboration Formal regional collaboration platform by Shaanxi Provincial Government operationalized 0.00 50.00 50.00 50.00 75.00 100.00 100.00 100.00 (Percentage, milestones based on the number of output level indicators achieved) (Percentage) Reduce flood risk Population mitigated against flood risk 0.00 19,000.00 52,000.00 118,000.00 214,000.00 305,000.00 423,000.00 423,000.00 (Number) of which are women 0.00 49.00 49.00 49.00 49.00 49.00 49.00 49.00 Page 28 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) RESULT_FRAME_T BL_ PD O Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 (Percentage) improve urban services People provided with access to improved basic urban services and public 0.00 8,000.00 24,000.00 66,000.00 121,000.00 174,000.00 214,000.00 214,000.00 amenities within ~500m* radius (Number) of which are women 0.00 49.00 49.00 49.00 49.00 49.00 49.00 49.00 (Percentage) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 SSR Collaboration Platform Formal decision announcement signed No Yes Yes Yes Yes Yes Yes Yes (Yes/No) Regional Flood Risk Management System in No No No No No Yes Yes Yes operation (Yes/No) Regional Water Pollution Monitoring System in No No No No Yes Yes Yes Yes operation (Yes/No) Resilience Strengthening Area of emergency 0.00 0.00 2.10 7.70 11.90 24.70 27.30 27.30 facilities built Page 29 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 5 6 (Hectare(Ha)) Length of new evacuation routes constructed 0.00 0.00 0.80 3.20 7.50 10.80 10.80 10.80 (Kilometers) Length of newly built and upgraded storm and drainage pipelines 0.00 3.60 12.60 32.50 55.80 75.20 89.70 89.70 improved (Kilometers) Town Regeneration Area of old neighborhoods 0.00 12.00 36.00 84.00 182.00 275.00 356.00 356.00 rehabilitated (Hectare(Ha)) Length of pedestrian and bike lanes newly built or 0.00 0.00 3.50 24.70 44.40 72.60 91.10 91.10 rehabilitated (Kilometers) IO Table SPACE UL Table SPACE Monitoring & Evaluation Plan: PDO Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection The indicator measures Monitor the three Formal regional collaboration platform by whether the regional PMO output indicators. The PMO / Project Shaanxi Provincial Government collaboration platform by Annually Progress first output indicator is Management operationalized (Percentage, milestones the Shaanxi Provincial Report weighted at 50%, while Consultants based on the number of output level Government has been the other two output indicators achieved) operationalized. If all three indicators are weighted Page 30 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) of the output indicators are at 25% each. If all three met, the regional are met then the collaboration platform is outcome indicator considered to be established value is at 100%. and operationalized. This type of indicator is more Formal decision robots than a yes/no announcement signed indicator based on one (50%) criterion, particularly for the 1. Official establishment of an entity document involving multiple Regional Flood stakeholders and their Risk institutions. Management Scheme in Note that: a) Unit for operation indicator is a percentage. b) (25%) The first output indicator 2. Regional represents 50%, while the integrated other two represent 25%. c) system of flood Percentage is determined by risk the fulfillment of output assessment, indicators as described in flood mapping the methodology. and modeling, early warning and monitoring, and emergency response completed and structural measures installed. Page 31 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Regional Water Pollution Monitoring Scheme in operation (25%) 3. GIS-based regional system of water quality monitoring and real-time emergency reporting for water pollution events completed and structural measures installed. Determine current This outcome indicator number of people who measures the change in are mitigated against number of people mitigated flood risk hazards in the against flood risk before and PMO defined project area PMO / Project after project interventions. Annually Progress before project Management Population mitigated against flood risk Those who are exposed to Report interventions as a Consultants flood risk are determined by baseline. Determine their proximity to vulnerable number people who areas, as defined by are mitigated against previous flood incidences. flood risk hazards after project interventions. Page 32 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) For the women calculate the percentages. Note that: a) the defined project area must be clearly demarcated. of which are women This outcome indicator measures the number of people that have been provided with access to Determine people improved basic urban provided with access to services. “Improved basic improved basic urban urban services and public services and public amenities” are the project amenities by interventions, and include demarcating a 500- any upgrading of urban PMO meter* radius around PMO / Project People provided with access to improved utilities services or changes Annually Progress each street improved Management basic urban services and public amenities made to underutilized Report and counting within Consultants within ~500m* radius spaces. (These encompass, those limits. (The actual but are not limited to, distance should follow adding new or rehabilitating the masterplan of each water supply, sanitation town and be clearly pipes, storm drainage noted). Determine infrastructure, lighting percentage of women. facilities, street furniture, and greenery. Underutilized spaces is defined by the project as spaces as those in Page 33 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) the lower-income part of city core areas that have had a lack of investment; these were carefully filtered through the initial project area selection screening process). “Access” is defined as about 500 meters radius from the periphery of the streets that are being improved. *The actual distance should follow the masterplan from each town. They are usually 400 or 500 meters. Clearly demarcate the distance for each project town. Note that a) The around 500 meters distance is commonly used in various urban planning projects and is considered to be a walkable or bikable distance. b) Improved basic urban services and public amenities includes regeneration activities such as upgrading urban utilities such as adding or improving water supply, storm drainage, sanitation Page 34 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) pipelines, lighting, street furniture, greenery, among others. c) The 500 meters should be measured from the street edge or periphery of the street. of which are women ME PDO Table SPACE Monitoring & Evaluation Plan: Intermediate Results Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection The decision announcement should be an official PIU Progress Obtain copy of the PIU / Project Once Formal decision announcement signed document signed by the Report signed document. Management Consultants Shaanxi Provincial Government. Determine if the regional integrated system of flood risk assessment, flood Check that structural mapping and modeling, PIU Progress and non-structural PIU / Project Regional Flood Risk Management System early warning and Report measures are Management Consultants in operation monitoring, and emergency completed response system are completed and structural measures are installed and in use. Check that the GIS-based PIU Progress Check that structural PIU / Project Regional Water Pollution Monitoring regional system of water Report and non-structural Management Consultants System in operation quality monitoring and real- measures are Page 35 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) time emergency reporting completed for water pollution events are completed and structural measures are installed and in use. Measure area of PIU Progress Measure area of emergency Annually emergency facilities PIU Area of emergency facilities built Report facilities built. built. Measure the length of Measure the length of new PIU Progress Length of new evacuation routes Annually new evacuation routes PIU evacuation routes Report constructed constructed. constructed. Measure length of newly built and Measure length of newly upgraded storm and built and upgraded storm drainage pipelines and drainage pipelines improved. They can be improved. They can be PIU Progress Length of newly built and upgraded storm Annually counted together in the PIU counted together in the Report and drainage pipelines improved tables, but in the notes tables, but in the notes the the total new and total new and upgraded upgraded pipelines pipelines can be shown should be shown separately. separately. Measure of old Measure area of old PIU Progress Annually neighborhoods PIU Area of old neighborhoods rehabilitated neighborhoods Report rehabilitated. rehabilitated. Measure length of PIU Progress Measure length of Length of pedestrian and bike lanes newly Annually PIU pedestrian and bike lanes Report pedestrian and bike built or rehabilitated newly built and lanes newly built and Page 36 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) rehabilitated. They can be rehabilitated lanes counted together in the should be shown tables, but in the notes the separately. total new and rehabilitated lanes should be shown separately. ME IO Table SPACE Page 37 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) ANNEX 1: Implementation Arrangements and Support Plan Implementation Arrangements 1. Project Leading Group. The Provincial Project Leading Group (PPLG) has been established. The PPLG is chaired by the Deputy General Director of Shaanxi Provincial DRC, and include representatives from the Provincial Development and Reform Commission (PDRC), Provincial Department of Finance, the Provincial Department of Construction (PDOC), the Provincial Department of Water Resources, and the Provincial Department of Environmental Protection. The PPLG will provide overall policy and strategic guidance to project preparation and implementation. It will also be responsible for facilitating inter-agency coordination and resolving any major issues identified during project preparation and implementation. The PPMO is physically located in the PDRC and is implementing the Shaanxi Small Towns Infrastructure Project (P133069). 2. Provincial Project Management Office (PPMO). The PLG has designated the exiting Provincial Project Management Office (PPMO) under the Provincial Development Reform Commission (DRC) to coordinate the preparation activities of the proposed town investments. PPMO has had previous experience in coordinating the implementation of World Bank and Asian Development Bank financed projects. The PPMO is staffed with competent and committed staff in the field of procurement, financial management, and safeguards. Its major responsibilities are: (a) overall project coordination, management and monitoring; (b) annual budget preparation; (c) project-wide quality assurance; (d) progress reporting to the Bank and PLG; (e) interagency coordination and procurement management; and (f) training facilitation. 3. County Level PLGs, CPMOs, and Project Implementing Units (PIU). Each of the six project towns have established similar leading groups (PLG) chaired by respective town governors or vice governors to provide local level policy direction to the subsequent implementation of the project in their respective jurisdiction. They have also established CPMOs and designated PIUs. 4. Design and Project Management. The project towns are responsible for preparation of detailed designs and bidding documents, obtainment of clearance by the respective bureaus. The PPMO will manage the procurement process by inviting bids, and evaluating bids jointly with project towns, following which project towns execute the contracts. A firm of consultants would support PPMO in overall project management, advisory services and reporting, including: (a) reviews of detailed engineering designs and bidding documents; (b) construction supervision and contract management; and (c) monitoring and evaluation, etc. 5. SSR Collaboration Platform. The platform is a regional institution established for the SSR. Its goal is to enable collaboration to ensure effective and efficient urban resilience in the region. It is a government-led body with wide stakeholder engagement from lower level governments, private sector, leading industries, and local think tanks. Page 38 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) The SSR Collaboration Platform Summary The Platform is a regional institution established for the Southern Shaanxi Region. Its goal is to enable collaboration among towns in the region to improve decision-making on regional socio-economic development topics such as resilience, climate change, competitiveness, etc. It is a government-led body with wide stakeholder engagement from lower level governments, private sector, leading industries, and local think tanks. Unlike other previous regional initiatives, this platform requires the active engagement from the towns to initiate dialogue, lead the preparation of the sub-projects, and develop future joint-plans. Under the lens of urban resilience, the platform will initially work together on projects that reduce flood risk and costs. Through this process, the towns will be required to examine their region holistically and understand other interdependencies and risks they may face, and eventually work in other topic areas that can improve its development trajectory and overall social well- being. A Provincial Platform Office will be established in the Shaanxi Provincial DRC. The Platform Secretariats will be established in the Municipal DRC of the three participating project municipalities, Ankang, Shangluo and Hanzhong Municipalities. The local government of the project towns, represented by local DRCs, will participate as platform members. The first of its kind in China, the platform was influenced by a number of government-associated regional organizations. Some of these organizations include Metro, a regional government body of the Portland metropolitan area of the U.S., which coordinates the successful growth of cities and counties in the region. It manages the region’s spatial growth, solid waste system, and economic initiatives. It is cited as being responsible for the success of the region’s transit-oriented development, or mixed-use, high-density development around light rail and transit centers, and the proper channeling of funds to multiple modes of transpo rtation, several “city centers,” for distributed regional development. The Tennessee Valley Authority is another, which is a federally-owned corporation also in the U.S. that supports flood control, electricity generation, fertilizer manufacturing, and economic development to the Tennessee Valley. The organization acts as a regional economic development agency, in addition to being a provider, to rapidly modernize the region's economy and society. Initial Platform undertakings: - Develop policy strategies and studies on (a) SSR’s long-term development vision, (b) a regional climate strategy, examining future impacts of climate change, among others - Implement a flood risk management system - Implement a water pollution management system - Establish a documentation and dissemination process to share knowledge to other towns, provinces in China and globally - Manage a three-year rolling scheme of capital investments on SSR regional infrastructure - Organize the SSR Annual Roundtable - At the provincial and municipal-levels, a permanent institutional entity, the Provincial Platform Office, will be newly established in the PDRC. Commissioned by SPG, this Provincial Platform Office is responsible for: (i) the daily operation of the platform; (ii) leading the development of the SSR visioning, coordinated regional development strategies and policies, and implementation of action plans in line with the agreed regional strategies; (iii) the coordination for implementation of thematic regional investments led by Page 39 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) provincial sectoral departments (the SSR flood risk management system, SSR water pollution risk management system); (v) the dissemination of best practices and experiences demonstrated in the SSR to other regions and towns in Shaanxi Province. The project will finance consulting services needed to support the work and operation of provincial Platform Office during the six-year period of the Project implementation. Platform Secretariats will be established in the municipal DRC in the following three municipalities: Ankang, Shangluo and Hanzhong. Their main mandate is to lead the implementation of regional investments under the project and to support the Provincial Platform Office by coordinating with sub-municipal governments. - At the town-level, local government of project towns, represented by local DRCs, will participate in the platform as members. Project towns are the key players and are not expected to merely act as an “observer” as in some top-down, regional initiatives. A roundtable meeting with participation of all members will be held on an annual basis, entitled the SSR Annual Roundtable Dialogue. Managed through the Municipal Platform Secretariats, a three-year rolling scheme of the SSR regional infrastructure investment will be reviewed, updated and agreed upon at the roundtable. The participating towns are responsible for (i) full engagement in the SSR Roundtable Dialogue, reviewing regional development strategies and implementation frameworks prepared by the Provincial Platform Office, and evaluating the regional infrastructure investments; (iii) financing and implementing the agreed investments from the towns from the three-year rolling domestic-funding investment scheme; (iv) bilateral dialogue and cooperation between neighboring towns facilitated by the platform; (v) leading the preparation and implementation of the towns’ sub-project under the Project. Page 40 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Figure 1-1: Diagram of SSR Town Collaboration Platform Page 41 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Financial Management and Disbursement Arrangements 6. A financial management (FM) assessment has been carried out to assess capacity of the projected PPMO and CPMO. The goal was to determine if the project FM arrangements, associated with risk mitigating measures, satisfy the World Bank’s minimum requirements under the Bank Policy and Bank Directive on Investment Project Financing. 7. After taking mitigation measures into account, the overall residual financial management risk is rated as Moderate. The FM capacity assessment identified the following common risks: (i) The Bank operations are new to five town level PIUs and they have limited financial management capacity with either domestic invested infrastructure projects or internationally-financed projects. To mitigate the risk, the FM work will be carried out by designated qualified and experienced financial staff. The PPMO, who is experienced with Bank financial operations, will provide guidance, supervision and training to the PIUs for their FM work. In addition, the Bank will also provide guidance and training to the project financial staff as needed. (ii) The late contribution of counterpart funding may pose financial pressure to project implementation. To mitigate the risk, a counterpart fund contribution plan needs to be committed and provided by the borrower to the Bank by source, amount and contribution time. The project counterpart funds in the first implementation year are required to be included into the annual government budget preparation cycle by the PIUs. 8. The World Bank loan agreement will be signed between the World Bank and MOF. The on-lending agreement for the Bank loan will be signed between MOF and SPFB on behalf of SPG, then in turn between SPFB and each town finance bureaus for project town. 9. The total project cost is estimated around RMB1,623 million. The proposed Bank loan is US$100 million, equivalent to around Rmb680 million, KfW will also provide a separate loan to the Government of China in the amount of US$50 million equivalent in Euro, and the counterpart funding is around Rmb603 million. The KfW and the Bank financing will be provided as joint co-financing, whereby the PPMO uses both financings for the purposes of financing agreed percentage of the same eligible expenditures. The budget cycle of the project would run from January 1 to December 31. A project budget covering the life of the project and an Annual Work Plan and Budget (AWPB) would be prepared by the PPMO and PIUs, approved by the PLG and submitted to the Bank for review. The local government would contribute in the form of cash and in-kind such as office space, staff time spent on the project, and utilities. 10. Internal Control. All of the CPMOs are part of existing government agencies and has basic internal control procedures in place such as appropriate FM duty segregation, payment and authorization controls, accounting and reporting procedures etc. Besides the existing internal controls in CPMOs, the following arrangements could work as an supplementary to the project overall internal control system: (a) primary FM responsibilities of the PPMOs will include, but not be limited to, providing guidance and conduct supervision to the CPMOs’ FM work, reviewing Bank financed project expenditures and financial reports submitted by the PIUs, consolidating and submitting project financial reports to the World Bank in compliance with legal documents, and overseeing the implementation of project activities; (b) SPFB will maintain and manage the project designated account (DA) and oversight the use of the Bank loan for its intended purposes; (c) project financial management manual (FMM) prepared by the PPMO with consultation of SPFB to unify the FM work of the PIUs; (d) a FMIS system will be applied to the project and the PIUs can monitor contract implementation, disbursement and financial management progress through it; (e) Bank team’s regular supervision based on the risk approach; and (f) annual Page 42 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) external audit to evaluate the fairness of project financial statements and performance of the overall internal control system. 11. Accounting and Reporting. The PPMO and each CPMO will manage, monitor, and maintain project accounting records by establishing a separate cost center for the project activities they execute using a computerized accounting system in accordance with Circular #13: “Accounting Regulations for the Bank- financed Projects” issued in January 2000 by MOF. The requirement set out in circular #13 (2000) will be followed to maintain project accounting records to generate the overall project financial statement as follows: (a) Balance sheet of the project (b) Statement of sources and uses of fund by project components (c) Statement of implementation of loan agreement (d) Statement of designated account (e) Notes to the financial statements (required only for annual financial statements) 12. The PPMO and each CPMO will regularly produce their standalone project financial statements, which comply with MOF requirements and acceptable to the Bank. The PPMO will be responsible for preparing consolidated project financial statements on regular basis. The PPMO will prepare and submit the consolidated project Interim Financial Reports (IFRs) to the World Bank within 60 days after the end of the calendar semester period. 13. Auditing. Shaanxi Provincial Audit Office (SPAO) will be assigned by CNAO (China National Audit Office) as auditor for the project. The annual audit report will be issued by SPAO. The PPMO will submit audited project financial statements satisfactory to the World Bank within six months after the closure of each fiscal year during the entire project life. According to the agreement reached with MOF and CNAO, the project audit reports will be made publicly available in both World Bank and SPAO’s official websites. 14. Flow of Funds. One segregated Designated Account (DA) will be set up and managed by the SPFB in Euro to receive the loans from both the Bank and KfW and pay eligible project expenditure incurred by PIUs. The ceiling of the DA will be 7 million Euro. It will be opened at a commercial Bank acceptable to the Bank. SPFB will establish and maintain sub-ledger accounts for WB loan and KfW loan individually under the DA. According to the joint co-financing arrangements between the Bank and KfW, the financing percentage between the Bank and KfW for CW is 54% and 27%, and for Goods, consulting services, training and workshops is 67% and 33%, respectively. To ensure proper usage of project funds, payment requests will be prepared by the PIUs, reviewed and approved by related county/municipal finance bureaus first, then passed to the PPMO for review and finally approved by SPFB. The loan proceeds will be disbursed from the DA by SPFB directly to contractors or to PIUs through county or municipal finance bureaus if the PIUs make pre-financing. 15. The proposed funds flow arrangement and related processing period should ensure contractors receive payment within required dates stipulated in the signed contracts. The Bank’s task team will closely monitor the disbursement efficiency during implementation. If material payment delays resulted by slow disbursement are noted, the task team will guide the project in exploring more streamlined funds flow arrangement. Page 43 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 16. Disbursements under the project will be carried out in accordance with the provisions of the Disbursement Guidelines (“World Bank Disbursement Guidelines for Investment Project Financing” dated February 2017), the Disbursement and Financial Information Letter (DFIL), and the Loan Agreement. Details on the disbursement arrangements are provided in the project’s DFIL and Loan Agreement. 17. All the Bank disbursement methods will be available to be used in this project: (a) advances into and replenishment of Designated Accounts (DA), (b) direct payment, (c) reimbursement, and (d) special commitment. It is expected that direct payment and special commitment will only be used for payment on large international contracts requiring payment in foreign currency if any. The DA will be operated on an advance basis and the initial advance will be made through the completion of a Withdrawal Application. The DA will be in Euro dollar. Subsequent replenishments will be made through submission of withdrawal applications providing details on the use of funds previously advanced, based on Statements of Expenditures. The disbursement of the Bank loan and KfW loan will be managed separately by the respective institutions. The proposed Bank loan allocation and financing percentage are listed in below table: Table 1-1: Bank Loan and Financing Percentages Category Amount of WB Percentage of Amount of Percentage of Expenditures to Loan Allocated Expenditures to KfW Loan be (Euro) be financed by Allocated financed by KfW (inclusive of Bank (Euro) Taxes) (inclusive of Taxes) (1) Civil works 72,171,000 54% 35,640,000 27% (2) Goods, non- 16,929,000 67% 8,910,000 33% consulting services, consulting services, training and workshops Total 89,100,000 44,550,000 A provision for retroactive financing will be made in the Loan Agreement, with withdrawals up to an aggregate amount not to exceed US$10 million equivalent allowed for payments made prior to the date of the Loan Agreement, on or January 25, 2019, for eligible expenditures. Procurement 18. Regulations. Procurement for the project will be carried out in accordance with the World Bank’s Procurement Regulations for IPF Borrowers, dated July 2016 and revised on November 2017 and August 2018, as required by the provisions of the Loan Agreement. Also, applicable to the project will be the World Bank‘s Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, dated October 2006, and thereafter revised in January 2011 and July 1, 2016. Page 44 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 19. Institutional Arrangements. PPMO will be responsible for overall procurement management, supervision, contract signing. CPMOs will play the role for coordination with PPMO, providing technical input at bidding stage, signing and implementation of contracts in their respective jurisdiction. 20. Capacity Assessment. The PPMO has rich experience with Bank financed projects and is implementing Shaanxi Small Towns Infrastructure Project (P133069). Reference is made to PAD Paragraph 19 of Annex 3 of P133069, where the PPMO will continue to give sufficient attention to identifying and addressing red flags of unethical practices in procurement and contract execution. Although no substantial issue with fraud and corruption was identified during first three years of implementation of P133069, the PPMO’s continuously attention is required. CPMOs are all new to Bank’s procurement. The following main risks have been identified during the assessment: (1) non-compliance with Bank Regulations due to unfamiliarity with Bank procurement rules and procedures, and/ or preference in complying with local procurement procedures when local regulations conflict with Bank procurement requirements; (2) weak contract management capacity due to possible resettlement and land acquisition delay, substantial variations or insufficient counterpart funding; and (3) staff shortfall at PPMO in the first year of implementation as both the proposed project and the ongoing project P133069 are under implementation during the same period. 21. Mitigation measures. To mitigate the above mentioned risks, the PPMO and CPMOs will take the following actions: (1) engaging procurement agent with experience in Bank procurement’s procedures and project management consultant to support the project implementation; (2) developing a Procurement Manual and provision of regular trainings to CPMOs and PIUs on Bank procurement policies, methods, and procedures and more important, lessons learned from implementation of previous projects; (3) using a provincial public transaction center to ensure transparency, confidentiality and appropriate dissemination of the procurement processes; (4) providing implementation support by the Bank’s procurement specialist during project implementation; (5) carrying post review by Bank team or auditors appointed by the Bank; and (6) hiring additional staff in the first year of implementation by PPMO. 22. The overall procurement risk was assessed as Substantial. 23. Major Procurement Envisaged under the Project According to the current procurement plan, all except one contract for works, goods, non-consulting services will be procured through national competitive procurement. Consulting services contracts may be procured through Quality- and Cost-Based Selection (QCBS)/Least-Cost Selection (LCS)/Selection under a Fixed Budget (FBS), or Selection Based on the Consultants’ Qualifications. 24. Project Procurement Strategy for Development (PPSD) and Procurement Plan (PP) A PPSD has been developed with the main recommendations including :(i) All procurement of the Project shall be carried out at the Shaanxi Provincial Public Resources Trading Platform, which shall be operated and supervised uniformly by the provincial trading platform; (2) In case of any conflict or discrepancy between the 2018 edition of the World Bank Procurement Regulations and the national procurement laws and regulations, the requirements of Article 84 of the Government Procurement Law and Article 67 of the Tendering and Bidding Law shall be followed; (3) PPMO is responsible for bidding processes of all contracts under the project, overall project procurement management and contract signing. CPMOs are responsible daily procurement management; (4) C-band dual- polarization weather radar needs to be purchased through a Direct Selection (DS). All other items will be procured through open bidding. DS was selected based on market engagement and sector practice. It was found that C-band dual-polarization weather radar adopts CB model product of one company and the radar data of the Page 45 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) company has been used in Shaanxi for a long time. To meet the system compatibility requirements, DS was assessed as the most efficient and economy method to achieve VfM for the project procurement objective. 25. Procurement methods and World Bank oversight. The thresholds of individual procurement methods and the requirements for the Bank’s prior review are shown in table below. These will need to be followed for the project procurement activities, which have been agreed upon based on the specific Bank procurement requirements, as well as the justifications provided in the PPSD. Specific procurement requirements will be included in the PP; however, any changes to procurement thresholds needed during project implementation will need to be justified in the updated PPSD and reflected in the updated PP. In addition to prior review carried out by the Bank, the Bank project implementation support mission will visit the field at least once a year to carry out procurement supervision and/or post-review of procurement activities by the Bank or its consultants/auditors. The post-review sampling ratio of contracts will be one-in-ten. Table 1-2: Post-review Sampling Ratio of Contracts Contract Value Prior-Review Threshold Expenditure Category Procurement Method Threshold (US$) (US$) Goods and Non- ≥10,000,000 ICB All Consulting Services <10,000,000 NCB ≥2,000,000 <500,000 Request for Quotation Not applicable None Direct Contracting ≥2,000,000 Works and Supply and ≥40,000,000 ICB All Installation of Plant and Equipment <40,000,000 NCB ≥10,000,000 <500,000 Request for Quotation Not applicable Consulting Services ≥300,000 QCBS/QBS ≥1,000,000 <300,000 CQS N/A Fixed-budget Selection ≥1,000,000 Least Cost Selection ≥1,000,000 Individual consultant ≥300,000 Direct Selection (firm) ≥1,000,000 Direct Selection (individual) ≥300,000 Page 46 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 26. Advance Contracting and Retroactive Financing. Retroactive financing of up to 10 million would be available for eligible expenditures incurred prior to the date of the Loan Agreement (LA). The procurement plan sets forth the contracts that are expected to be signed in advance of loan signing, together with the relevant Bank review procedures. Advance contracting for contracts with high risk as highlighted in the procurement plan will be subject to procurement prior review though its value may below the above thresholds. 27. Use of Systematic Tracking of Exchanges in Procurement (STEP). It is mandatory for all procurement transactions for post and prior contract review under the project to be respectively recorded in, or processed through the Bank’s planning and tracking system, STEP. This ensures that comprehensive information on procurement and implementation of all contracts for goods, works, non-consulting services, and consulting services awarded under the whole project are automatically available. This tool will be used to manage the exchange of information (such as bidding documents, bid evaluation reports, no objections, and so on) between the implementing agencies and the Bank. The Bank team has provided training to the borrower on how to establish its account and use the STEP. Page 47 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) ANNEX 2 Implementation Support Strategy 1. The strategy for implementation support has been developed based on the risk assessment through the SORT process. It focuses on those risk categories rated as Substantial, i.e., Implementing Agency (IA) risks and project risks (technic design, fiduciary, and delivery monitoring & sustainability). The implementation support plan will be reviewed and updated based on the periodic assessments of the risks and appropriateness of the mitigation measures implemented. 2. Capacity. Lack of capacity in the project towns to implement a project of this size and complexity has been identified as the key risk to project implementation. The project includes comprehensive capacity building technical assistance for (i) consultant services to PPMO/CPMO for project implementation and management, monitoring and evaluation, etc.; (ii) targeted training programs including domestic and overseas study tours to PMOs staff to strength their capacity in managing their respective components. Bank implementation support missions will monitor the effectiveness of these arrangements (especially fiduciary aspects) and provide appropriate guidance to resolve any issues. 3. Technical Guidance. To mitigate the risk of compromising sustainability of the investments caused by overdesign of infrastructure without solid demand analysis and realistic projection, specific expertise on urban planning, flood management, and traffic management, will be assembled during semi-annual supervision mission to review and provide advice on technical designs and implementation. In addition, PPMO, local PMOs and PIUs will receive technical assistance in reviewing project designs and bidding documents. 4. Delivery Monitoring and Sustainability. To mitigate the risk of unsustainable investments and low quality of service delivery caused by missing or insufficient funds available after project completion for O&M, implementation support missions will pay special attention to the preparation of enhanced O&M budgeting and maintenance schedules by project towns. 5. Procurement Management. Procurement implementation support will include: (a) provide trainings to all procurement staff in a timely manner; (b) guide PPMO on preparation and implementation of Procurement Management Manual to govern and manage the project procurement; (c) review procurement documents and providing timely feedback on the results of prior reviews and regular post reviews; and (d) monitoring procurement progress against the agreed Procurement Plan. 6. Financial Management. The FM specialist will provide support during supervision missions on the implementation of the agreed FM arrangements for the project, and resolve any issues which may occur. She/he will also review FM reports, including IFRs, annual financial statements, and audit reports, and will follow-up on issues identified. She/he will pay special attention to the timely provision of counterpart funds by each of the project agencies and highlight any shortfalls to the TTL and to appropriate levels in Government. 7. Social and Environmental. Social and environmental risks will be mitigated through the development of EIA/EMP/RP with support from experienced consultants. Bank social and environmental safeguard specialists will ensure that the required safeguard documents are specific, comprehensive yet practical, and are achievable. The Bank will ensure that sufficient training is provided on safeguards, and that adequate resources are allocated for monitoring the implementation of the EMPs/ECOPs/RPs. The Bank will review internal and external monitoring reports on safeguards implementation and also carry out intensive site visits during implementation support Page 48 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) missions for a first-hand assessment of compliance with Bank safeguards requirements. It will follow up with meetings at the appropriate level to resolve issues identified. 8. Use of Country-Based Staff. The Bank has adequate staff on the ground in China to timely respond to the client’s needs. 9. Resources and skills required. Formal supervision and site visits covering all aspects of project implementation will be carried out semi-annually and will be supplemented by need-based visits by small groups. A Mid-Term Review will be carried out no later than June, 2022 to evaluate progress and make necessary adjustments. Estimated inputs from different specialists in different stages of project implementation are outlined below. Table 2-1: Supervision Input Resource Time Focus Skills Needed Estimate Procurement review, supervision Procurement specialist(s) 4 SWs and training FM and disbursement training and FM specialist 4 SWs FM supervision Social and Resettlement First twelve Social development specialist 4 SWs Management months Environmental training and 4 SWs Environmental specialist supervision Transportation Management Transport Specialist 4 SWs Urban Planning Urban specialist 4 SWs Team Leadership TTL 8 SWs Procurement review, supervision Procurement specialist(s) 12 SWs and training FM and disbursement training and FM specialist 9 SWs FM supervision Social and Resettlement Social development specialist 9 SWs Management 12-48 months Other Environmental Management Environmental specialist 9 SWs Transportation Management Transportation Specialist 12SWs Urban Planning Urban specialist 9SWs Legal Management Senior Counsel 3SWs Monitoring and Evaluation M&E Specialist 6SWs Team Leadership TTL 24SWs Page 49 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) SW: Staff Weeks 10. The skills mix required is summarized below. Table 2-2: Staff Time and Trips Number of Staff Weeks Skills Needed (SWs) Number of Trips Comments Each Year TTL/Urban Specialist 10 SWs 3 Country Office Based Transport technical Country Office Based and 8 SWs 3 specialist Local Consultant. Urban Planner Country Office Based 8 SWs 2 Procurement Specialist 3 SWs 2 Country Office Based Social Development Country Office Based 3 SWs 2 Specialist Environmental Specialist 3 SWs 2 Country Office Based Page 50 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) ANNEX 3A: Detailed Project Description 1. Project area overview: The SSR is comprised of 3 municipalities (Hanzhong, Ankong, and Shangluo), which are made up of 28 administrative areas (25 counties and 3 urban districts), with a total population of 8.45 million people. Forty-two percent of its population, or 3.6 million people, live in urban areas. The region is one of China’s fourteen remaining Adjacent Destitute Mountain Areas prioritized by the country’s poverty reduction initiatives. Twenty four out of the 28 administrative areas are deemed as “National Poverty Counties,” and they represent 49% of the total provincial population in poverty. The region’s development has been mainly constrained by its mountainous topography, protected natural habitat and environment, and limited size of arable land compared to its population. Cities and towns in the SSR have concentrated along the upstream of the Han River corridor, the largest tributary of Yangtze River. This area is the backbone of economic and urban growth in SSR as it accommodated 62 percent of SSR’s total population in 2015 and contributed 67% of SSR’s total GDP. As cities and towns in the SSR continue to develop in this topographically fragile area, natural hazards, such as floods, landslides, and earthquakes, are increasing in numbers. Most of proposed project towns are not prepared for natural disasters despite having experienced many over the years. Mainstreaming resilience into town development planning and financing is critical to ensure that town assets and services develop in a safe, resilient, and sustainable manner so that they can bring desired benefits to existing residents and those who are moving in from surrounding rural areas. 2. Project Design Methodology at the Town Level: Project activities and investments in the towns will focus on two identified priorities (i) resilience against flooding, and (ii) regeneration of old urban areas to cultivate compact, efficient land use patterns. These two themes were prioritized based on analysis of the existing situation of the region. These components will also adopt a holistic, preventative approach through technical assistance in addition to physical interventions. Table 3A-1: Project Cost and Financing Estimated KfW Estimated Government IBRD Loan Cost Loan Project Component Cost contribution US$ RMB US$ US$ million US$ million million million million Component 1: SSR Collaboration Platform 402.06 59.13 10.58 32.37 16.18 Component 2: Resilience Strengthening 658.05 96.77 21.18 50.39 25.20 Component 3: Urban Regeneration 201.89 29.69 6.53 15.44 7.72 Component 4: Project Management 18.37 2.70 0 1.80 0.90 Sub-Total (Baseline Cost) 1280.37 188.29 38.29 100 50 Front-end fee 2.55 0.375 Contingency 170.09 25.01 Interest during construction, commitment 138.90 20.43 fee, investigation & design fee, and others Page 51 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Land acquisition and resettlement 30.79 4.53 Total 1,622.70 238.63 88.63 100 50 (RMB 6.8=US$1) 3. The project comprises four components, as described in the following paragraphs. 4. Component 1: SSR Collaboration Platform (US$ 59.1 million): This component aims to improve the collaboration of towns along the upstream of the Han River Corridor through the establishment of an institutional platform. Facing similar urban resilience and regeneration challenges, coordinated resilience and regeneration planning and data-sharing can improve the region’s sustainable growth. The platform will not only guide investments for this project but will build long-term collaboration to support future regional development plans and projects envisioned by the towns. As a result, the proposed platform will be in operation beyond the duration of this project and influence the region’s long-term development. The structural and non-structural interventions and activities of the SSR Collaboration Platform include the following: (i) Establish and operate the SSR regional collaboration platform, a government-led, cross-level permanent institution newly established at provincial level, supported by the project. As an institutional innovation piloted under the project, the proposed platform serves to foster collaboration among the towns in the project region of SSR and enhance dialogue to improve decision-making on regional and cross-border topics. It will initially begin collaboration on the area’s two pressing themes of regional flood risk management and regional water pollution monitoring. (ii) Support the development of policies, including: (i) a study on the region’s long-term vision to coordinate urban expansion and sustainable development; (ii) a study on the likely impacts of climate change; (iii) the development of technical implementation handbook on best practices for town regeneration and resilience enlengthening based on the pilot work done from the project towns. These studies are to be shared and disseminated. (iii) Establish a regional flood risk management system. Activities include the development of (i) a region-wide integrated system for flood risk assessment; (ii) a monitoring and early warning system; (iii) emergency response and contingency plans; (iv) a region-wide coordinated flood risk reduction plan; as well as (v) guidance on flood risk reduction planning and investments at the local level for strengthening existing natural riverside embankments. This will require: (i) the installation of rain gauge stations and hydrometric stations, including 915 high resolution monitoring cameras; (ii) the construction of a regional emergency management center stocked with proper equipment, and 25 sub-centers at the town level; (iii) construct regional warehouse and distributed warehouse of flood control materials; and (iv) upgrading regional meteorological monitoring center, including the installation of two doppler weather radars, 40 automatic meteorological stations, and two mobile meteorological observatories. Establish a regional water pollution monitoring system. Activities include (i) develop a GIS-based region-wide system of water quality monitoring and real- time emergency reporting for water pollution events; (ii) install eight wastewater discharge monitoring stations at key points along the upstream of the Han River in various towns, and setup equipment for pollution events and surveillance and response, including 26 unmanned aerial vehicles and two water vehicles. Page 52 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) (iv) Establish a documentation and dissemination process to share knowledge nationally, as well as globally. CCUD, a central government think-tank under NDRC, will be the main government partner to distribute the project’s lessons throughout the country. 5. Component 2: Resilience Strengthening (US$96.8 million): This component aims to enhance resilience against floods in project towns. With an increasing incidence of floods in recent years, managing this type of natural disaster will not only help the towns adapt, but will also help them withstand future shocks and grow amidst the fast-changing climate conditions. Structural interventions involve building or upgrading critical infrastructure, including (i) build new and upgrade old storm water pipelines, construct or rehabilitate pumping stations, control and sluice facilities to reduce waterlogging, and pilot low impact sustainable drainage application in suitable urban roads. A total of 90.25 km of floodways and drainage pipes, 5 storm water pumping stations will be supported by the project. (iii) construct 18 emergency shelters (total land area of 28.4 hectare) and evacuation routes of 11.63 km. 6. Component 3: Urban Regeneration (US$29.7 million): This component aims to regenerate dilapidated urban areas in the towns using a people-oriented approach to cultivate a connected and inviting urban core. Investments will be prioritized towards lower-income areas. Structural interventions include (i) rehabilitate old neighborhoods by upgrading urban utilities service and retrofit existing underutilized and hazardous spaces. Nine old neighborhoods with a total land area of 356 hectares in 4 project towns (Hanbin, Shiquan, Yang and Shangnan) will be rehabilitated under the project; (ii) improve NMT by upgrading pedestrian and biking infrastructure along core streets. Specific improvements include adding porous pavement with associated civil works of utility pipelines, adding pedestrian safety measures, street furniture, signage, and greenery. A total length of 90.31 km pedestrian and biking paths in 5 project towns (Hanbin, Shiquan, Yang, Mian and Shangnan) will be upgraded under the project. 7. Component 4: Project Management (US$ 2.7 million): Project Management Consultant, including (i) procurement and contract management, accounting and financial management, project reporting, (ii) design review, bid document review; (iii) independent monitoring of the implementation of the project’s safeguards instruments; (iv) developing a Monitoring and Evaluation (M&E) system; (v) training and workshops for strengthening the capacity of key stakeholders (e.g. PPMO, PMO and staff from related local government agencies of project counties); (vi) consulting services and professional staffing supports for the regional Collaboration Platform Office at provincial DRC level and two Platform Secretariats at municipal level. Page 53 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) ANNEX 3B: Analytical Screening Methodology for Town and Intervention Selections 1. A systematic, analytical screening approach was applied during project preparation to identify project towns and to prioritize interventions. The analytical and screening approach has been documented in the Feasibility Study Report together with baseline scenarios and data. It is available for future use, refinement, and scale-up. The approach will also serve as a screening tool for the SSR Regional Collaboration Platform for prioritizing, planning, and implementing regional capital investments in disaster resilience with domestic funding. 2. The analytical and screening approach is a four-step exercise that draws on the Press-Situation-Response (PSR) method for cities and their vulnerability towards climate change, UN’s City Disaster Resilience Scorecard method for cities’ disaster resilience analysis and other qualitative and quantitative methods, adapted to the town context. The approach consists of 4 steps: STEP 1 Pre-screening project Screened using quantitative selecting criterion developed jointly by the towns Shaanxi Provincial government and the Bank Task Team. An initial list of 12 candidate towns were screened. STEP 2 Assessing climate change Assessed for each of the towns on the longlist using the PSR method. vulnerability Among the 12 candidate towns on the longlist, 6 towns were shortlisted as having relatively higher vulnerability, and therefore be prioritized for project support. STEP 3 of assessing disaster Assessed each of the 6 shortlisted towns using the UN’s City Disaster resilience Resilience Scorecard method to identify pressing issues to be addressed and prioritize the areas of interventions for project support. Of the “Ten Essentials” of disaster risk reduction themes defined by the UN and analyzed in the project towns, (i) weak institutional arrangement and capacity in organizing disaster resilience, (ii) weak in pursuing resilient urban development and design, (iii) needs for increasing infrastructure resilience are the top three “essential” interventions prioritized. Responding to these top three essentials, interventions of fostering regional coordination in resilience building, streamlining resilience in planning, and enhancing town resilience against flooding risks were prioritized as the focus in project design; STEP 4 of selecting specific Selected each town using clearly defined criteria, focusing on flood disaster resilience infrastructure infrastructures, disaster emergency shelters and evacuation routes. investments STEP 1 Pre-screening project towns: 3. Quantitative criteria were developed jointly by the SPG and Bank, and were used for initial pre-screening of towns in the targeted project region of SSR who had the potentials to participate the project. Among the total 28 towns in SSR, a longlist of 12 candidate towns were screened out, including, Ningqiang, Lueyang, Mian, Hantai, Yang, Xixiang, Shiquan, Ziyang, Hanbin, Shangnan and Zhen’an. - Towns located in the project target region of SSR. Page 54 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) - Towns that have the fiscal capacity to borrow the proposed loans and are in a position to finance the counterpart funding requirement; - Towns have demonstrated their commitment in participating in the Project proposed regional coordination mechanism, and strong engagement in pursuing sustainable town development through investing in urban resilience and urban regeneration; - Towns of larger size (as defined by a population larger than 50,000) in terms of population and economic activities, play important role in the local settlement systems, have more potential to accommodate rural- urban migration, and to accommodate sizable project activities and investments; - Towns that are specifically prone to flooding and that lack or have underinvested in emergency response systems; - Towns have sizable deteriorating old neighborhoods that are densely populated with low-income groups and have the willingness and vision to undertake urban regeneration instead of the traditional demolish- resettle-rebuild model; STEP 2 Assessing climate change vulnerability 4. Pressure-Situation-Response (PSR) is a globally-applied method for vulnerability assessment in various fields, including for analyzing a city’s vulnerability to climate change. Refined in the context of project region and data availability, a customized PSR approach was used to assess climate change vulnerability in project towns from three dimensions of: (i) RISK: Climate change risks to towns, (ii) SENSITIVITY: town’s sensitivity to climate change, and (iii) RESPONSE: towns capability responding to the climate change. Twenty-one indicators with time-serial data (2000 to 2015) were collected and used to assess the town’s vulnerability. Table 3B-1 Indicators used for assessing climate change vulnerability in project towns DIMENSION THEME INDICATORS - annual temperature change rate (%) Climate Change - annual precipitation change rate (%) - Incidence of extreme climatic events (%) RISK - Population density (residents/km2) Urbanization - Total area of farm land (km2) - Industrial GDP as % of total GDP (%) - relative humidity (%) Natural Environment - vegetation coverage rate (%) SENSITIVITY - water resource quality - total amount of pollution discharged (t/yr) Social Environment - primary sector GDP as % of total GDP (%) - Per capita GDP (RMB/person) - Local gov fiscal revenue (RMB/yr) Financial capacity - Fiscal expenditure on R&D - Tertiary sector GDP as % of total GDP (%) RESPONSE - Level of medical care HR & Social Capital - Total length of road and highway (km) Flood control - % of flood control dykes built to design capability standards (%) Page 55 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) - % of urban area serviced by drainage/pumping infrastructure of design standards (%) - % of urban space and road pavement built of green drainage technology (LID, %) - Number of emergency shelters and length of evacuation routes (number, km) STEP 3 Assessing disaster resilience 5. As observed from the Scorecard result radar charts, among the “Ten Essentials” of disaster risk reduction themes defined by the UN and analyzed in the project towns, (i) weak institutional arrangement and capacity in organizing disaster resilience, (ii) weak in pursuing resilient urban development and design, (iii) needs for increasing infrastructure resilience are the top three “essential” interventions prioritized, and are the pressing themes to be addressed in project towns. Responding to these top three essentials, project interventions and investments therefore are focused on fostering regional coordination and collaboration in resilience building, streamlining resilience in urban planning, and enhancing town resilience infrastructure against flooding risks and emergency evacuation facilities in project towns. STEP 4 Selecting disaster resilience infrastructure investments 6. In line with the findings from previous steps of the disaster resilience assessment, a set of clearly defined selection criteria was developed and agreed between the Bank and Shaanxi Province. They were developed as a way of identifying specific investments and activities for project support, focusing on the prioritized key themes of fostering regional collaboration, streamlining resilience in planning, enhancing resilient flood infrastructure, disaster emergency shelters and evacuation routes. Investments eligible for project support should be: - Responding to Project Concept and Priorities: Project interventions should contribute to project priority of fostering regional collaboration, and should directly respond to the identified pressing needs of flood risk reduction and improvement of access to basic urban services in project towns. - Conformity with Official Plans: Investments screening should be justified by local master plans. Scope, scale and implementation timing of investment should be consistent with what is proposed in related sectoral plans (flood control plans, disaster risk management plans, drainage and wastewater management plans and etc.). - Not Overlapping: Investment identified should have reasonable integrity. Overlapping and cross-linking in terms of physical contents and financing between the project funded investments and those funded by other sources should be avoided. - Appropriate Timing: Timing scheduled for identified investments should potentially fit with the expected timing of the project preparation. Investments of pressing needs and scheduled with an immediate or tight timetable for implementation should not be considered for project support regardless of their nature. Page 56 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) - Investment Sustainability: Institutional and financial arrangements, funding and revenue sources for O&M of assets newly built under the proposed investment have to be clearly defined and secured. - Social Risks: Investments featured with substantial social risks of resettlement or land acquisition should not be considered, - Structural and Non-structural Balanced: Both engineering and non-engineering measures for proposed interventions should be are explored, assessed and well-integrated. - Technical Soundness: Cost-Benefit Analyst (CBA) should be fully applied to all the proposed investments. Alternative options available to the proposed investment should be fully explored and analyzed. - Investments of flood control embankment, waterways currently of substandard (capacity lower than 10- year flood event) that need to be upgraded to designed flood resilient standard of 20-year event or higher. - Investments of drainage pipelines and pumping stations needed for urban area that are suffering waterlogging, existing facility capacity of substandard (storm return period of 0.5 year), need to be upgraded to design standard (return period over 2 years or more) - Investments for gaps of emergency shelters and evacuation routes to ensure that all the residents have access to evacuation shelters built of resilient standards within a 400-meter walking distance. - Regeneration interventions supplementary to resilience investments for neighborhoods that have the features of: (i) neighborhoods built before 1998; (ii) percentage of low-income > 20%; (iii) not planned to be resettled; and (iv) established self-management organization. Page 57 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) ANNEX 4: Economic and Financial Analysis 1. Economic Analysis. The project will finance urban resilience infrastructure (flood management) and town regeneration in six towns of SSR. The investments within resilience include (i) flood risks reduction in riverside embankments interventions, flood-control measures, storm water pipelines, separation of combined drainage and sewage networks, pumping stations, controlling and sluicing facilities to reduce waterlogging, rehabilitating the water supply distribution pipelines in project areas, etc.; and (ii) major emergency shelters and evacuation routes. The town regeneration will invest on upgrading urban utilities services in old urban neighborhoods, including the promotion of NMT. It is estimated that at least 576,300 local residents living in the project towns will directly benefit from the project investment. 2. For the economic analysis, the types of investment activities were grouped into four categories for economic analysis: (i) Resilience Strengthening on Flood Control infrastructure in the following counties - Hanbin, Ziyang, Shiquan, Yang, Mian, Shangnan; (ii) Emergency Shelter and Evacuation Routes in Ziyang, Shiquan, Yang, Mian, Shangnan; (iii) Old Neighborhood Rehabilitation in Hanbin, Shiquan, Yang, Shangnan; and (iv) NMT/Walkability Improvement in Shiquan, Yang, Mian, Shangnan. 3. Economic justification, together with financial, technical, and other evaluation criteria, has been taken into account in the project identification to ensure the selection of economically-attractive investment for preparation. This type of selection has contributed to project design. For instance, during project identification the team applied economic evaluation principles to screen and select economically-attractive investment activities for preparation. Economic Benefits and Costs Identified 4. Economic benefits of each investment component have been identified. The main benefits include: (i) avoided or reduced future flood damages due to disaster prevention and reduction measures; (ii) savings from potential environmental pollution management costs; (iii) improved living conditions, amenities; (iv) recreational value of emergency shelters serving as public space; (v) global environmental benefits (e.g., reduced CO2 emission owing to increased walkability and less use of motor vehicles); and (vi) public health enhancement owing to increased walkability via NMT. It is also expected that the project will improve natural disaster management and institutional capacity of project towns. The table below lists the types of economic benefits by type of investments. After the following section describing valuation methods, the details of the economic benefits and costs and economic evaluation are discussed in each investment category. Table 4-1: Economic Benefits by Type of Investments Benefits Town Emergency Shelter Old NMT/Walkability Resilience and Evacuation Neighborhood Improvement on Flood Routes Rehabilitation Control Avoided / reduced future ++ ++ flood damages Page 58 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Savings from wastewater ++ ++ treatment costs Improved environmental ++ ++ and living conditions (amenities and accessibility) Recreational value ++ Reduced CO2 emission ++ Enhanced Public Health ++ 5. The economic costs of the project are capital investment costs (including associated environmental mitigation, land acquisition, and resettlement costs) and O&M costs. General Assumptions and Valuation Methods Used 6. The economic analysis assumes that market prices for the main elements of costs and benefits do not vary much from their economic values, i.e., shadow prices. The economic benefits and costs are valued at base year 2018 price levels. All of them are net of inflation, duties, and taxes. The discount rate used in the analysis is 6 percent as recently recommended by a World Bank study. The project duration includes 20 years of operation, plus up to 5 years of construction, depending on the construction schedule of each investment activity. Most of the assets such as drainage and pipelines can last beyond 25 years. Asset residual was reflected in the end year of the benefit stream. 7. The cost-benefit analysis (CBA) was employed in the economic analysis for all investment subcomponents in the project towns. Within the CBA, a number of valuation methods are used to quantify and monetize economic benefits, including contingent valuation method (CVM) (a non-market method) and hedonic method (a surrogate market method). For the emergency shelter investment, the concept of contingent valuation method (CVM) was adopted in the CBA to estimate the willingness-to-pay (WTP) value of the local population for improved and new emergency shelters, and quantify economic values of the recreational aspect and the avoided/reduced future flood damages. For the construction of resilient and rehabilitation civil works of drainage, sewers, water supply, sanitation, neighborhood public space, backstreets and walkways, street lights, etc., which improves the living standards of local residents and enhances economic development opportunities of local communities, surrogate market method was employed. In particular, the economic benefits of improving accessibility, amenity, environmental quality, and development opportunity to local residents were estimated based on the increase in the value of lands due to the project interventions. Sensitivity analysis was conducted to test the robustness of the results of the cost-benefit analysis of each sub-component. Economic Analysis of Representative Case Study by Category A. Resilience Strengthening – Flood Management 8. A detailed description on the economic cost-benefit analysis (CBA) of the Town Resilience on Flood Control sub-component in Hanbin is presented below as an example to illustrate the analysis. The results of the cost-benefit analysis of the other Resilience Strengthening on Flood management sub-components are presented in the summary table at the end of this Annex. Page 59 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 9. Resilience Strengthening on Flood Management in Hanbin: The proposed project will upgrade the floodway and drainage system for mitigating mountain flood risks to the town’s core urban area. Investments include (i) new construction of one floodway channel of 1.1 km, improving three existing floodway totaled to 1.1 km; (ii) upgrading the drainage system to higher resilience standards for the town’s core area (7 km 2); and (iii) expanding one existing storm water pumping station and new construction of another storm water pumping station, and the rehabilitation and new construction of drainage mains and sewer mains (total length of 6.78 km). The total capital investment of this sub-component is RMB 371.54 million. The project operation duration in the analysis is twenty years. 10. Economic benefits. Three main types of economic benefits have been monetized in the analysis, including (i) avoided/reduced future flood damages; (ii) savings from wastewater treatment costs; and (iii) improved environmental and living conditions. The estimates of avoided flood damages are based on historic flood damages and projected trends of economic development and flood losses avoided by the project. While the public is supportive of the Project, no willingness-to-pay survey was conducted for this study. The economic benefits of savings from wastewater treatment costs were estimated though a replacement cost approach, without the proposed subcomponent on rehabilitation and new construction of drainage mains and sewer mains, wastewater treatment facility will need to increase the treatment capacity, thus bear additional costs. Improved living conditions through amenities and environmental quality to local residents were measured indirectly and approximated by the increased value of the land along the river section protected by the project and availability for future development. 11. Avoided flood damages. Han River frequently floods the project town located area. The Project, together with ongoing efforts of the town in flood protection, will increase the town’s flood protection standards along Han River from 1:20 year floods to 1:50 years. Based on the statistical data of Hanbin and the assumption that floods would take place every year, the economic loss avoided by the project was estimated annually at RMB 38.32 million. 12. Savings from wastewater treatment costs. Based on the replacement cost approach, the proposed investment on rehabilitation and new construction of drainage mains and sewer mains will reduce wastewater volume entering into the wastewater treatment facility. The treatment cost per unit of wastewater (at RMB 3.54 per ton) is derived from the composition of sample pollutant. It is estimated that by project completion, the reduced wastewater volume going into treatment facility will be 2.99 million cubic meters annually, which leads to annual savings of RMB 10.60 million. 13. Environmental and amenity improvement benefits. The flood management investments in Hanbin will also improve the aesthetic values and sanitation conditions of the areas along the river segment in the city and improve amenities and living standards of the people who live there. These benefits, however, are not directly available in monetary terms. The hedonic approach was used in the analysis, which estimated the change in the value of lands affected by the Project and then used it to approximate the economic benefit of the amenities and quality of life improvements. According to the land pricing data provided by the Land Resources Bureau, the current average transaction price of representative land parcels for future development in the project area is RMB 2,040 per sqm, which is approximately 20% lower compared to that of similar area with sufficient infrastructure in place. Accordingly, a conservative estimate of a 20 percent increase of land value is expected by 2033 at selected sites, attributable to environmental improvement, without double counting of avoided flood damages. In accordance with the data provided by the Land Resources Bureau and Urban Planning Bureau, the area of the Page 60 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) land affected by the project and planned for future residential development is 500,000 sqm. Following the implementation of the project (2025-2033) the annual land value increase in the project area would be RMB 32.9 million. 14. Economic costs. Economic costs of the Project consist of capital investment costs and O&M costs. It is estimated that the total capital cost of this sub-component amounts to RMB 305.10 million at present value. 15. Results of the cost-benefit analysis. The economic analysis results are shown in the table below. The economic internal rate of return (EIRR) of the Project is 12.11%, the net present value (NPV) is RMB 211.24million and the benefit-cost ratio is 1.64. The EIRR is above the acceptable level. Table 4-2: Summary of the Economic Analysis Outcomes on Hanbin NPV (at Benefit/Cost (RMB million) 2019 2024 2026 2030 2034 2038 2042 2044 6%) Benefit Avoided/reduced future flood 309.86 0 0 38.32 38.32 38.32 38.32 38.32 38.32 damages Savings from wastewater 85.71 0 0 10.60 10.60 10.60 10.60 10.60 10.60 treatment costs Improved environmental and 143.81 0 0 32.85 32.85 0 0 0 0 living conditions Total Benefit 539.38 0 0 81.77 81.77 48.92 48.92 48.92 48.92 Cost Capital investment 305.10 62.05 62.05 0.00 0.00 0.00 0 0 0 O&M 23.05 0 0 2.29 2.29 6.73 0 0 0 Total Cost 328.15 62.05 62.05 2.29 2.29 6.73 0 0 0 ENPV 211.24 -62.05 -62.05 79.49 79.49 42.19 46.63 46.63 42.19 EIRR 12.11% B/C ratio 1.64 16. Results of sensitivity analysis. To further test the robustness of the analysis, a sensitivity analysis was conducted with the assumption of a 5 percent increase in capital costs (EIRR at 11.47 percent), a 5 percent decrease in claimed economic benefits (EIRR at 11.44 percent), and a combined scenario, in which case the EIRR is 10.81 percent. B. Resilience Strengthening - Emergency Shelter and Evacuation Routes 17. A description on the economic cost-benefit analysis (CBA) of the Emergency Shelter and Evacuation Routes sub-component in Mian is presented below as an example to illustrate the analysis. The results of the cost- benefit analysis in this investment category are presented in the summary table at the end of this Annex. Page 61 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 18. Emergency Shelter and Evacuation Routes in Mian: Mian’s current emergency response system is not adequately equipped for its population thus urgently requires upgrading. An alternative was considered when designed the proposed investment: construction of a new emergency shelter on a large land parcel up to 54,519 sqm, with the capacity of 36,346 people. However, the available land parcel is located far from the densely- populated area and will not be as effective in evacuating and sheltering neighboring residents. In addition, the construction cost of a shelter of this size would be considerably high. Hence, a more cost-effective investment that combines upgrading existing shelters and construction of new ones was proposed. 19. The proposed project will upgrade existing and construct major emergency shelters and evacuation routes in Mian’s core urban area. Investments include: (i) new construction of two emergency evacuation shelters totaled to 13,886 sqm of land area that could serve 9,256 people; (ii) upgrading 2 emergency shelters totaled to 107,450 sqm of land area, which will be capacitated to serve approximately 27,090 people. Overall the proposed project activities will serve 100 percent of the town’s population for emergency evacuation facility; and (iii) new construction of two emergency evacuation routes, total length of 800m. The total capital investment of this sub- component is RMB 10.88 million. The project operation duration in the analysis is twenty years. 20. Economic benefits. Three main types of economic benefits have been measured in the analysis, including (i) recreational value of the emergency shelter, which serves as public space for the local residents in the absence of disasters; (ii) avoided/reduced future flood damages; and (iii) Improved environmental and living condition. Separate WTP surveys were conducted to assess the first two aspects of benefits, respectively, for both upgrading and new construction of emergency shelters. 21. Recreational value as public space. The WTP of the recreational aspect was derived from the WTP value for the Dayan Pagoda Square according to the Research document of ‘Value of Urban Public Space and Its Valuation,’ adjusted to Mian’s disposable income per capita level, and arrived at the WTP of RMB 114.19 per capita per year for the Mian public squares. It was estimated that the WTP for the recreational use of the public space will increase year to year as the disposable income per capita increases annually. And the population was estimated at 10,000—defined as the residents living within 1km radius of the public square. Hence, the recreational benefit of the emergency shelters in Mian is estimated to be RMB 1.14 million in 2025. 22. Avoided/reduced future disaster damages. The WTP survey was conducted to assess the value of the emergency shelters in preventing and reducing future disaster damages. The WTP was estimated at RMB 10 yuan per capita per year, and the beneficiary population was approximately 36,346, as the carrying capacity of the emergency shelters designed. Hence, the benefit of the emergency shelters in Mian for preventing/reducing future flood damages is estimated to be RMB 0.36 million in 2025. 23. Improved environmental and living condition. The investments on the emergency response facilities in Mian will also improve the amenities and living standards of the people who live there. These benefits, however, are not directly available in monetary terms. The hedonic approach was used in the analysis, which estimated the change in the value of lands affected by the Project and then used it to approximate the economic benefit of the amenities and quality of life improvements. According to the land pricing data provided by the Land Resources Bureau, the current average transaction price of representative land parcels for future development in the project area is RMB 3,000 per sqm, which is approximately RMB 150 per sqm (5%) lower compared to that of similar area with sufficient infrastructure in place. Accordingly, a conservative estimate of a 5 percent increase of land value is expected by 2033 at selected sites, attributable to environmental improvement, without double counting of Page 62 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) avoided flood damages and recreational value. In accordance with the data provided by the Land Resources Bureau and Urban Planning Bureau, the area of the land affected by the project and planned for future residential development is 69,420 sqm. Following the implementation of the project (2025-2033) the annual land value increase in the project area would be RMB 1.68 million. 24. Economic costs. Economic costs of the Project consist of capital investment costs and O&M costs. It is estimated that the total capital cost of this sub-component amounts to RMB 10.88 million at present value. Total O&M costs are estimated at RMB 3.92 million. 25. Results of the cost-benefit analysis. The economic analysis results are shown in the table below. The economic internal rate of return (EIRR) of the Project is 12.59 percent, the net present value (NPV) is RMB 8.45 million and the benefit-cost ratio is 1.57. The EIRR is above the acceptable level (with discount rate at 6 percent). Table 4-3: Summary of the Economic Analysis Outcomes on Mian Emergency Shelter and Evacuation Routes NPV (at Benefit/Cost (RMB million) 2019 2024 2026 2030 2034 2038 2042 2044 6%) Benefit Recreational value 12.97 0 0 1.19 1.40 1.65 1.95 2.30 2.50 Avoided / reduced future flood 0 0 2.94 0.36 0.36 0.36 0.36 0.36 0.36 damages Improved environmental and living condition (land value 7.34 0 0 1.68 1.68 0 0 0 0 appreciation) Total Benefit 23.25 0 0 3.23 3.44 2.02 2.31 2.66 2.86 Cost Capital investment 10.88 2.21 2.21 0 0 0 0 0 0 O&M 3.92 0 0 0.30 0.30 1.76 0.30 0.30 1.76 Total Cost 14.80 2.21 2.21 0.30 0.30 1.76 0.30 0.30 1.76 ENPV 8.45 -2.21 -2.21 2.93 3.14 0.26 2.01 2.36 1.10 EIRR 12.59% B/C ratio 1.57 26. Results of the sensitivity analysis. To further test the robustness of the analysis, a sensitivity analysis was conducted with the assumption of a 5 percent increase in capital costs (EIRR at 11.87 percent), a 5 percent decrease in claimed economic benefits (EIRR at 11.83 percent), and a combined scenario, in which case the EIRR is 11.11 percent. C. Resilience Strengthening - Old Neighborhood Rehabilitation 27. A description in the economic cost-benefit analysis (CBA) of the old neighborhood rehabilitation sub component in Shangnan is presented below as an example to illustrate the analysis. The results of the cost-benefit analysis in this investment category are presented in the summary table at the end of this Annex. Page 63 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 28. The proposed project aims to regenerate the town’s old communities, totaling 0.94 sq km of land area, benefiting 30,900 residents, most of whom are low-income families. Activities include rehabilitation of backstreets and narrow lanes with associated civil works of utility pipelines, construction of sanitation facilities (public toilets, waste bin), improvement of pavement and street lights, small public space, and emergency evacuation walkways. About 60 percent of the towns total population will benefit from the proposed regeneration interventions. The project operation duration in the analysis is twenty years. 29. Economic benefits. Two main types of economic benefits have been monetized in the analysis, including (i) savings from wastewater treatment costs; and (ii) Improved environmental and living condition. The economic benefits of savings from wastewater treatment costs were estimated though replacement cost approach, without the proposed subcomponent on rehabilitation and new construction of drainage mains and sewer mains, wastewater treatment facility will need to increase the treatment capacity, thus bear additional costs. Improved living condition through amenity and environmental quality to local residents were measured indirectly and approximated by the increased value of the land invested under the project and available for future development. 30. Savings from wastewater treatment costs. Based on the replacement cost approach, the proposed investment on rehabilitation and new construction of drainage mains and sewer mains will reduce wastewater volume entering into the wastewater treatment facility. The treatment cost per unit of wastewater (at RMB 3.54 per cubic meter) is derived from the composition of sample pollutants. It is estimated that by project completion the reduced wastewater will be 1.06 million cubic meter. annually, which leads to annual savings of RMB 3.76 million. 31. Environmental and amenity improvement benefits. The rehabilitation investments in Shangnan City will Also improve the aesthetic values and sanitation conditions of the areas along the river segment in the city and improve amenities and living standards of the people who live there. These benefits, however, are not directly available in monetary terms. The hedonic approach was used in the analysis, which estimated the change in the value of lands affected by the Project and then used it to approximate the economic benefit of the amenities and quality of life improvements. According to the land pricing data provided by the Land Resources Bureau, the current average transaction price of representative land parcels for future development in the project area is RMB 3,000 per sqm. A conservative estimate of 4 percent increase of land value is expected by 2033 at selected sites, attributable to environmental improvement, without double counting of avoided flood damages. In accordance with the data provided by the Land Resources Bureau and Urban Planning Bureau, the area of the land affected by the project and planned for future residential development is 30,000 sqm. After implementation of the project (2025-2033) the annual land value increase in the project area would be RMB 0.58 million. 32. Economic costs. Economic costs of the Project consist of capital investment costs and O&M costs. It is estimated that the total capital cost of this sub-component amounts to RMB 13.53 million at present value. Total O&M costs are estimated at RMB 8.71 million. 33. Results of the cost-benefit analysis. The economic analysis results are shown in the table below. The economic internal rate of return (EIRR) of the Project is 12.54 percent, the net present value (NPV) is RMB 11.46 million and the benefit-cost ratio is 2.43. The EIRR is above the acceptable level (with discount rate at 6 percent). Page 64 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Therefore, the proposed Neighborhood Rehabilitation investment in Shangnan is considered economically viable. Table 4-4: Summary of the Economic Analysis Outcomes on Shangnan Urban Regeneration Benefit/Cost (RMB NPV (at 2019 2024 2026 2030 2034 2038 2042 2044 million) 6%) Benefit Savings from wastewater 30.38 0 0 3.76 3.76 3.76 3.76 3.76 3.76 treatment costs Improved environmental and 2.54 0 0 0.58 0.58 0 0 0 0 living condition (land value appreciation) Total Benefit 32.92 0 0 4.34 4.34 3.76 3.76 3.76 3.76 Cost Capital investment 13.53 2.75 2.75 0 0 0 0 0 0 O&M 8.71 0 0 0.70 0.70 3.65 0.70 0.70 3.65 Total Cost 22.24 2.75 2.75 3.63 3.63 3.65 0.70 0.70 3.65 ENPV 10.68 -2.75 -2.75 0.70 0.70 0.11 3.05 3.05 0.11 EIRR 12.54% B/C ratio 1.48 34. Results of sensitivity analysis. To further test the robustness of the analysis, a sensitivity analysis was conducted with the assumption of a 5% increase in capital costs (EIRR at 11.73%), a 10% decrease in claimed economic benefits (EIRR at 11.69%), and a combined scenario, in which case the EIRR is 10.89%. D. NMT/Walkability Improvement 35. NMT/Walkability sub-component in Mian: An alternative was considered when designed the proposed investment: construction of new bike lanes with the standard specification, which would require land acquisition for the new biking lane. This option requires higher compensation cost for the land needed. The proposed project, however, will upgrade the current pedestrian with the aim to establish a safe and well-connected non-motorized transport network, or walking and biking, in the town’s central area with new construction and impro vements of sidewalks, walkways and bike routes, and biking lanes between the town center to its famous tourist destinations. The total length of sidewalks and bike lanes is 46km. The project operation duration in the analysis is twenty years. 36. A detailed description on the economic cost-benefit analysis (CBA) of the NMT/Walkability sub component in Mian is presented below as an example to illustrate the analysis. The results of the cost-benefit analysis in this investment category are presented in the summary table at the end of this Annex. 37. Impact of improved walkability on urban transportation mode. Walking substitutes for relatively short vehicle trips, which tend to have high costs per vehicle-mile. In particular, energy consumption and pollution emissions are several times higher than average for short trips when engines are cold, and parking costs are high Page 65 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) when measured per vehicle-mile, since these costs are divided into few miles. A short walking trip often substitutes for a longer motor vehicle trip. As a result, each percentage shift of vehicle trips to walking can reduce transport external costs by several percentage points, particularly under urban-peak conditions when emission and parking costs are high. 38. Methodology—estimate of motor vehicle-mileage substituted by walking mileage. It is conservatively estimated that 10 percent of Mian’s residential population and tourists will benefit from the walkability system in 2023 when all project investments are expected to be completed and in operation. It is further assumed that every resident beneficiary will walk an extra 4.0 km daily (round-trip) or approximately an extra 40 minutes of walking to replace 16 km of motor vehicle travel. Table 4-5: Estimate of motor vehicle-mileage replaced by walking-mileage Mian Beneficiary Vehicle-km Days Vehicle-km Population population avoided per day affected avoided/year (km/day/person) (days/yr) (million km/yr) Resident 30,000 3,000 4 260 3.12 Tourist 1,250,660 125,066 14.4 1 1.8 261 4.92 39. Economic benefits. The Project investments will bring positive benefits in the following areas: (i) reduce GHG emissions, the proposed investments in walkability, greening and public space upgrades will generate global environmental benefit in reduced GHG emissions through avoided motor vehicle mileage substituted by walking; and (ii) enhanced public health, the proposed urban regeneration investments in walkability, greening and public space upgrades will help improve the fitness level of the participating local residents. 40. Reduce GHG emissions. Motor vehicle transportation emits considerable amount of CO2, ranging from 17.7 gCO2/km from high-occupancy buses to 243.8 gCO2/km from single-occupancy cars. Based on a survey of the transportation modes in Mian, the weighted average emission factor of motor vehicle transportation in Mian is estimated at 92.13 gCO2/km (see table below). At a weighted average emission factor of 92.13 gCO2/km, a total of 1051.32 tons of CO2 emissions from motor vehicle travel per year will be avoided due to project-enabled walkability improvements. 41. The global social cost of CO2 is assumed to follow the curve proposed by The Guidance Note on Social Value of Carbon (2014) growing from US$33.0 in 2018 to US$75.0 in 2047. Based on the Global social cost of carbon, the amount of emission abatement would translate into an annual benefit of RMB 1.10 million, and a total of RMB 8.90 million through the course of the project. Table 4-6. Estimate of the average emission factor of motor-vehicle transportation in Mian Bus Cars Taxi Weighted Average Incidence of motor vehicle use in Mian 28.57% 42.86% 28.57% Emission factor (gCO2/passenger km) 17.7 121.9 121.9 92.13 Page 66 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Note: Occupancy of cars assumed at 1.5 persons, and of taxi at 1.5 passengers. Assuming equal trip distance for all modes of motor vehicle transportation 42. Enhanced health from walking. New Zealand Transport Agency’s Economic Evaluation Manual has estimated the monetary values of the health benefits of active transportation such as walking and cycling, to range between NZD 0.48 and NZD 0.96 (in 2007 NZD) for every extra mile of walking, assuming that half of the benefit is internal to the individual, and half are external to the society at large, in areas such as hospital cost savings. 25 After taking account income differences, the health benefit of walking is estimated at RMB 0.49 per extra kilometer of walking in Mian in 2018. It is further assumed that (i) the health benefit only applies to regular walking activities; (ii) to be conservative, the mileage accounted for health benefit is estimated on a 3 day/week walking schedule; and (iii) visitor occasional walking experience has negligible health impact. Thus, the Project is estimated to generate a total of RMB 5.23 million in annual health benefits. 43. Improved living condition. The investments on the NMT/Walkability component in Mian will also improve the amenities and living standards of the people who live there. These benefits, however, are not directly available in monetary terms. The hedonic approach was used in the analysis, which estimated the change in the value of lands affected by the Project and then used it to approximate the economic benefit of the amenities and quality of life improvements. According to the land pricing data provided by the Land Resources Bureau, the current average transaction price of land parcels 100m radius of the NMT routs to be constructed is RMB 67.5 per sqm, which is approximately RMB 45 per sqm lower compared to that of similar area with the proposed infrastructure in place. Accordingly, with the assumed increase of land value expected by 2033 at selected sites, without double counting of environmental and health benefit. In accordance with the data provided by the Land Resources Bureau and Urban Planning Bureau, the area of the land affected by the project and planned for future residential development is 600,000 sqm. Following the implementation of the project (2025-2033) the annual land value increase in the project area would be RMB 2.35 million. 44. Economic costs. Economic costs of the Project consist of capital investment costs and O&M costs. It is estimated that the total capital cost of this sub-component amounts to RMB 19.20 million at present value. Total O&M costs are estimated at RMB 22.80 million. 45. Results of the cost-benefit analysis. Based on the above, at an economic discount rate of 6.0 percent and a project live of 25 years, inclusive of the 5-year construction period, the Project investment is estimated to yield an ENPV of RMB 17.52 million, along with an EIRR of 12.40 percent, exceeding the economic opportunity cost of 6.0 percent. Thus, the Project is economic economically justified. Details are provided in the table below. Table 4-7: Summary of the Economic Analysis Outcome on Mian NMT / Walkability Improvement NPV (at Benefit/Cost (RMB million) 2019 2024 2026 2030 2034 2038 2042 2044 6%) Benefit Reduced CO2 emission 1.02 0.00 0.00 0.10 0.12 0.13 0.14 0.16 0.17 Improved public health 39.47 0.00 0.00 3.50 4.20 5.03 6.03 7.24 7.93 25 LTNZ (2010), Economic Evaluation Manual (EEM) – Volumes 1 & 2, Land Transport New Zealand (www.landtransport.govt.nz); at www.landtransport.govt.nz/funding/manuals.html (Active transportation health benefits data is found in Volume 2, section 3.8, p 3-22). Page 67 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Improved environmental and living condition (land value 19.03 0.00 0.00 2.35 2.35 2.35 2.35 2.35 2.35 appreciation) Total benefit 59.52 0.00 0.00 5.95 6.66 7.51 8.53 9.75 10.45 Cost Capital investment 19.20 3.90 3.90 0.00 0.00 0.00 0.00 0.00 0.00 O&M 22.80 0.00 0.00 1.35 1.35 12.97 1.35 1.35 12.97 Total Cost 42.00 3.90 3.90 1.35 1.35 12.97 1.35 1.35 12.97 ENPV 17.52 -3.90 -3.90 4.61 5.32 -5.45 7.18 8.40 -2.51 EIRR 12.40% B/C ratio 1.42 46. Results of the sensitivity analysis. To further test the robustness of the analysis, a sensitivity analysis was conducted with the assumption of a 5% increase in capital costs (EIRR at 11.55%), a 10% decrease in claimed economic benefits (EIRR at 11.51%), and a combined scenario, in which case the EIRR is 10.64% (above 6 percent accepted by the government). Therefore, the proposed NMT investment in Mian is considered economically viable. E. Summary table 47. The EIRRs by town and subcomponent are summarized in the table below. Table 4-8: EIRRs by town and subcomponent Subcomponents Hanbin Shiquan Ziyang Yang Mian Shangnan Resilience Strengthening on 12.11% 12.82% 12.01% 12.04% Flood Control 12.75% Emergency Shelter and Evacuation 12.94% 12.02% 12.59% 12.10% Routes Old Neighborhood 14.77% 13.93% 12.54% Rehabilitation 12.23% NMT/Walkability 12.40% 12.30% 13.37% 11.41% Improvement Impact on the poor 48. Given the objectives and the variety of economic benefits of the proposed investments, local residents including vulnerable groups in the project areas would benefit from the project and are supportive of improve local infrastructure and environmental protection facilities. As local governments will shoulder most of the project investment costs, the project anticipates no negative impacts on the poor. Page 68 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 49. Financial Analysis. Financial analysis has been carried out to assess the adequacy of financial resources of project counties/municipalities to finance the proposed investments, maintain and operate (O&M) the assets created under the project, and meet the debt service requirements. 50. Counterpart funds. According to the financing plan of the project, all counterpart funds will be provided by local county/municipal governments. To assess the financial capacity of local towns, the fiscal revenues of project towns over the past 5 years and next 28 years were analyzed and projected respectively. The analysis indicated that over the past 5 years, all project towns have been experiencing steady and fast increase of fiscal revenues. Table 4-9 below summarizes the average increase rate of fiscal revenues per annum by project towns. Table 4-9 Increase Rates of Fiscal Revenues (2013-2018) Towns Mian Yang Shiquan Shangnan Ziyang Hanbin Increase rate per annum 15% 17% 14% 8% 6% 6% 51. The projection of fiscal revenues for next 26 years were carried out assuming (i) the future increase rate of fiscal revenues every year will be capped by the above annual rates, and (ii) the project implementation period is from 2020 to 2025. The results indicated that project towns have the capacity to provide counterpart funds for the implementation of the project as local government’s contribution to the project is less than 1% of their projected available fiscal revenues for the period of project implementation. Table 4-10 summarizes the results by project town. Table 4-10 Comparison of Available Fiscal Revenues and Contribution to Project Page 69 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) 52. Debt Service Requirements. The project towns take the responsibility to pay the debt service ofBank and KfW loans. During the analysis, it is assumed that the Bank loan will be repaid from 2026 to 2048 equally and the KfW loan will be repaid from 2025 to 2034 equally. The interest rate for the Bank loan will be around 3.99%, which is the lending rate for flexible loans with a variable spread and average maturity greater than 18 to20 years in US$. The interest rate for the KfW loan will be around 1% which is the lending rate for flexible loans with a variable spread and average maturity greater than 10-15 years for Euro. The debt service requirements for project counties/districts are about less than 1% of their available fiscal revenues projected from 2026 to 2045 following the same methods above-mentioned. This debt service requirement would not have any significant negative impact to the project counties/districts. Table 4-11 summarizes the imposition of debt service requirements on the local governments. 53. Financial Analysis for O&M. The cash flow forecast for the future 20 years operation period of assets created under the project has been analyzed assuming (1) the O&M expenses are controlled in a very strict and stable way; (2) fiscal subsidies constitute the majority part of cash flow-in. The analysis indicates the cashflow in and out just break even in project towns and the O&M mainly rely on the government sustainable fiscal contribution. Table 4-11 Imposition of debt service requirements on the local governments (In RMB million) Page 70 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) Page 71 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) ANNEX 5: Environmental and Social Safeguards Environmental Safeguards 1. The project is classified as a Category B project, and triggers Environmental Assessment (OP4.01), Natural Habitat (OP4.04) and Physical Cultural Resources (OP4.11). An EA and EMP have been prepared in accordance with Chinese EA regulations and the Bank safeguards policies. It is expected that the major environmental impacts are site-specific, and few would be irreversible. 2. Environmental Assessment (OP4.01): The project would focus on the improvement and rehabilitation of the existing built-up area of towns. Physical investments mainly include improvement of wastewater, water supply, storm water pipelines, storm water discharge ditches, pumping houses, the rehabilitation of the associated roads and streets (e.g. street surface, lighting, provision of road safety facilities to promote walking and cycling etc.), and the construction or improvement of public emergency shelters and space. It is confirmed that OP 4.01 (Environmental Assessment) is triggered. The EA shows that the project would have overall environmental and social benefits, such as (i) improvement of basic infrastructure facilities, (ii) reduction of pollution discharging into Han river etc., and (iii) improvement of living conditions for local people and promotion of walking and cycling in the towns. Principal negative environmental impacts of the project will be mainly associated with rehabilitation and improvement of basic infrastructure in project towns. Adverse impacts would include disturbance to local communities and traffic, nuisance of dust, noise, vibration and wastewater, and disposal of spoil etc. The construction related impacts will be short-term, limited and site-specific due to the small scale of construction activities and can be readily managed with good construction management. Adverse impacts during operation are limited which mainly include noise nuisance from traffic and new/improved pumping houses. 3. The project will finance technical assistance activities under Component 1. The TA activities will include a requirement (which is to be specified in the TORs for TAs) to identify the environmental and social considerations that should be taken into account during town development. This requirement has been specified in the EMP and will be followed during project implementation after these TA activities are determined. 4. Natural Habitats (OP4.04): The project triggers the OP4.04 Policy because some activities (e.g. public evacuation roads, and emergency shelters) are close to Han river. These activities will not cause any significant adverse impacts to the Han river because these activities are mainly limited to the renovation or improvement of existing infrastructure, e.g. road pavement, provision of road safety facilities, water supply pipelines and sewers, and provision of emergency facilities at public shelters. The EA confirms that these activities are in line with Chinese EA regulations and the relevant master plans for natural habitats, and in compliance with the Bank policies on OP4.01 and OP4.04 and have been/will be approved by relevant government agencies. Mitigation measures include continuous consultation with relevant governmental authorities, good construction management, and specific measures for Han River protection. 5. Physical Cultural Resources (OP4.11): The project triggers the OP4.11 Policy because some activities in old communities are close to some PCRs, including three Mosques (one of which is provincial level cultural relic), one pagoda (a provincial level cultural relic), and Yuwang Palace and old streets in Shiquan (provincial level cultural relic). The project activities are limited to the improvement of existing infrastructure (e.g. mainly street pavement and installation of pipelines, lighting). To avoid any adverse impact on PCRs, mitigation measures will be implemented in line with the national regulatory and legal framework concerning cultural heritage. These include: (a) engaging qualified and experienced contractors, who will be required by contracts to mitigate vibration, dust, Page 72 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) noise, solid and water pollution, avoid night-time construction, minimize traffic in sensitive areas, and develop temporary traffic plans to detour traffic around construction sites; (b) training of workers on PCRs and environmental protection before commencement of construction; and (c) chance find procedures included in mitigation measures and contracts. Consultation with concerned and affected parties on the proposed measures has been conducted, and concerns about the management of spoil, noise and dust during construction have been incorporated into the PCR Management Plan. 6. Environmental and Social Management Plan (ESMP): Based on the EA, a stand-alone ESMP has been developed to avoid, minimize, mitigate and compensate the potential adverse impacts. The ESMP specifies mitigation and enhance measures for the project activities, including that (i) Environmental Code of Practices (ECOPs) for civil work contactors to be included into the bidding documents and civil work contracts; (ii) mitigation measures for Han river protection; (iii) PCRs management plan; (iv) mitigation measures for storm water pipelines, sewers, water supply pipelines and associated roads; (v) mitigation measures for pumping stations; public toilets, emergency evacuation shelters; and (vi) mitigation measures for technical assistance activities. 7. ESMP implementation will be managed by PPMO. An environmental and social management unit will be established in the PPMO with dedicated safeguards staff. Civil work contractors and supervision companies will be required to assign qualified environmental staff to ensure effective implementation of the ESMP. PPMO, under assistance of on-site environmental supervisors, local EPBs and an external monitoring institution, will supervise the implementation of the ESMP. To improve local implementation capacity, the ESMP proposes capacity training activities for civil work contractors, County PMOs, environmental supervisors, and monitoring institutions, etc. The ESMP also specifies a monitoring plan, environmental supervision, and the budget for the ESMP implementation. 8. Public Consultations and Information Disclosure: Two rounds of public consultations have been carried out during the EA process. The technique used for the public consultations include surveys using public opinion questionnaires, focused group discussions, public meetings with key stakeholders and interviews with some project-affected persons. The issues raised during consultations have been incorporated in the EA and ESMP. Furthermore, issues collected in public consultation have been provided to the concerned groups and documented in the EA. The environmental safeguards documents and other project related documents have been disclosed locally through various means (e.g., websites, newspapers, etc.), as required by national and Bank's policies. The environmental safeguards documents have been disclosed through the Bank’s Internal website on December 4, 2018. Social Safeguards 9. The minority screening and the social assessment concluded that there is no ethnic minority group in the project areas. Therefore, this policy is not triggered. The project is located on the upstream the Han river, where the majority is of Han nationality. Hui Nationality is scattered throughout the region, entrenched in the community, thus it does not fall under the definition of IP within the OP 4.10 Policy. 10. OP 4.12, Involuntary Resettlement. The RP has been prepared based on resettlement planning and social assessment for each town. Further, the project will, or may partially finance activities in multi-sectors, including but not limited to flood management, wastewater collection, etc., for which due diligence review was conducted Page 73 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) in the resettlement planning process. All the civil works have been identified before project appraisal, therefore there is no RPF needed. 11. The RP was prepared based on socio-economic surveys, impact inventories and rehabilitation schemes designing for resettlement compensation and livelihood development in consultation with the project affected population (PAP). This population was involved in the whole process of RP preparation, and will continue to participate in RP implementation and monitoring. In total, 81 mu collectively owned land will be required for project occupation, while 50 households, with 213 people in total, are in need of relocation. About 576 people in 174 households will be affected by the land requisition. In addition, 302 mu state-owned land will be used for the project, without any resettlement impact. The total affected population is 789 people from 224 households. 12. The households to be relocated will be provided with two restoration options: cash or a replacement apartment. The affected houses will be further investigated and evaluated by the commercial appraisal company, and then these households will choose one of the options and sign contracts with government based on negotiation. Except Hanbin, where the replacement house is under planning, the replacement houses in other towns are under construction and will be completed prior to the end of 2019. In the meantime, all the affected households will be provided with relocation allowance and transitional assistance to ensure their smooth restoration. 13. Due diligence reviews were undertaken. Six local-funded WWTPs were reviewed by the social consultants and concluded there is no pending issue related to land and resettlement. In Ziyang, four emergency evacuation shelters will use state-owned land, on which 117 households with 413 people were relocated for another project’s construction in 2016 and are still in transition. These 117 households will be supervised and monitored under this project. 14. Social Assessment (SA). A social assessment was implemented through questionnaire surveys, public consultation meetings, focus-group discussions, and in-depth interviews, etc., in order to understand local context, identify and analyze stakeholders, recognize project demands from various stakeholders. These include government agencies, citizen beneficiaries and community representatives. The social assessment process directly involved 40 meetings, about 400 citizen interviews, 1396 questionnaires, and improved project designs on flood management facilities and urban regeneration in Shangnan, Hanbin and Ziyang. The SA was also able to avoid or minimize adverse impacts or social risks potentially resulting from the project. 15. Gender Issues. Gender analysis was conducted to identify gaps and further to emphasize two measures to benefit female citizens. More than 44 percent of the people consulted were women, which enabled mainstreaming gender in the project design and implementation. 16. The gender analysis illustrates that women in project areas have lower participation than men in public consultations due to their lower educational background and socio-cultural norms. For instance, the analysis indicates that only 26 percent of women have right to make decision in their family, and only 18 women participated in meetings during project preparation. Most women were found to engage in non-skilled labor with lower wages, although the gender analysis suggests that they are interested in seeking economic opportunities through the project. The women are more likely to use urban space to practice exercises and are more concerned with public safety while using public transport. Based on the findings, ways of mainstreaming gender considerations into project design were discussed and it was concluded that gender concerns have been Page 74 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) adequately considered during project preparation. The necessary arrangements have been put in place in project design and in the implementation plan. The SA proposed the following measures in the project design to improve benefits for females, among which two indicators will be reflected in the project monitoring framework. - Female beneficiaries and impacted will be treated and compensated equally. - Women’s participation in the community consultation process should be more than 30 percent. - Female citizen’s participation in technical trainings should be more than 30 percent. - Encourage employment of women and vulnerable people for non-skilled or non-technical jobs during project construction. - Two gender-related indicators (1) ratio of access to emergency evacuation shelters by females, and (2) ratio of monitoring cameras installed in public buses to improve public security will be followed and closely monitored in the project implementation stage and will be reflected into the ICR. 17. Citizen Engagement. Extensive consultation and participation was conducted to consult with potentially affected persons and project beneficiaries to seek opinions for better project design and resettlement plan. Hotlines for information disclosure have been setup, and appointed staff in the project offices will answer any questions related to the project and resettlement policies. Relevant project information has been provided to the affected communities through newspaper reports, posters and public meetings. The final SA and the RP were also locally disclosed to the public, via Provincial DRC websites, provincial/county libraries. They were also disclosed through Bank’s Internal website on December 4, 2018. 18. Implementation Arrangements. PMOs at county level have been established and will be fully staffed in line with the RP to specifically implement the resettlement under the PPMO’s coordination and leadership. The County PMOs will take the full responsibility to finance the land acquisition and resettlement in the RP implementation, and disburse compensation and deliver assistance to the affected based on contractual agreements reached upon negotiation and consultation. The PMOs system will conduct internal implementation monitoring and reporting to understand the progress and quality on the ground. At the same time, an external resettlement consultant will be contractually engaged to periodically monitor and report on the RP implementation. 19. Capacity Building. The PPMO is experienced in managing projects financed by the Bank and other international agencies, and is familiar with the Bank social safeguards policies and requirements. As most county PMOs are new to the Bank policies, capacity building activities, including training and staff budgeting have been included in the RP and the SA. (iv) Grievance Redress Mechanisms 20. Grievance Redress Mechanism. The project has several grievance redress mechanisms: the World Bank mechanism, project and government mechanism, and court system. The project-level mechanism includes PMO system and the external monitoring to deal with daily grievances. In parallel, any grievance could go to the court system. The World Bank (WB) system, includes project management level and the GMR; see the following section. 21. World Bank Grievance Redress. Communities and individuals who believe that they are adversely affected by a WB supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in Page 75 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) order to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel, which determines whether harm occurred, or could occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), information is available at http://www.worldbank.org/en/Projects-operations/products- and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, information is available at www.inspectionpanel.org. Page 76 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) ANNEX 6: Team List Bank Staff Name Role Specialization Unit Guangming Yan Team Leader Urban GSU14 Barjor E. Mehta Lead Urban Specialist Urban GSU14 Songling Yao Senior Social Specialist Social GSU06 Feng Ji Senior Environmental Safeguards Environment GEN2A Jian Xie Senior Economist Economic GEN01 Jingrong He Senior Procurement Specialist Procurement GGOPP Senior Financial Management Haixia Li Financial Management GGOEA Specialist Aristeidis Panou Senior Counsel Legal LEGES Zhuo Yu Senior Finance Officer Disbursement WFACS Xiao Wu Team Member Programs EACCF Name Title Organization Location Rufei Zhang Senior Urban Specialist Consultant Shanghai Hong Kong Jasmine Tillu Urban Specialist Consultant SAR, China Andreas Honcamp Principal Project Manager KFW Germany Lucas Maes Procurement KFW Germany Xianlong Pan Coordinator KFW Beijing Page 77 of 78 The World Bank Shaanxi Sustainable Towns Development Project (P162623) ANNEX 7: Project Map Page 78 of 78