Document ofThe World Bank

Report No:

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED GRANT FROM THEGLOBAL ENVIRONMENT FACILITY (GEF) TRUST FUND

IN THE AMOUNT OF US $5.0 MILLION

TO THE

NINGBO MUNICIPALITY

FOR A

GEF NINGBO WATER AND ENVIRONMENT PROJECT

May 2006

Urban Development Sector UnitEast Asia and Pacific Region

CURRENCY EQUIVALENTS

(Exchange Rate Effective: May 4, 2006)

Currency Unit = CNYCNY 8.0139 = US$1US$ 0.1248 = CNY 1

NINGBO FISCAL YEARJanuary 1 – December 31

ABBREVIATIONS AND ACRONYMSCMSC Cixi Municipal Sewerage CompanyCNAO National Auditing Office of People’s Republic of ChinaDRC Development and Reform CommissionEMP Environmental Management PlanEPB Environmental Protection BureauFB Finance BureauFMS Financial Management SpecialistGEF Global Environmental FacilityICB International Competitive BiddingLMEs Large Marine EcosystemsMBDs Model Bidding DocumentsMOF Ministry of FinanceNCB National Competitive BiddingNMFB Ningbo Municipal Finance BureauNGO Non-Governmental OrganizationNWEP Ningbo Water Environmental ProjectPEMSEA GEF/UNDP/IMO Partnership for Environmental Management of the Seas of East

AsiaPMO Project Management OfficeQBS Quality Based SelectionQCBS Quality and Cost Based SelectionSA Special AccountSBD Standard Bidding DocumentsSCIES South China Institute of Environmental Sciences SEPA State Environmental Protection Administration WWF World Wide Fund for NatureWWTP Wastewater Treatment PlantUNDP United Nations Development ProgrammeUNEP United Nations Environment Programme

Vice President: Jeffrey GutmanCountry Manager/Director: David Dollar

Sector Manager: Keshav VarmaTask Team Leader: Greg Browder

CHINAGEF NINGBO WATER AND ENVIRONMENT PROJECT

CONTENTS

Page

A. STRATEGIC CONTEXT AND RATIONALE......................................................................5

Country and sector issues............................................................................................................5

Rationale for Bank involvement..................................................................................................6

Country Eligibility.......................................................................................................................7

Higher level objectives to which the project contributes.............................................................7

B. PROJECT DESCRIPTION..................................................................................................7

Financing instrument...................................................................................................................7

Global Environmental Objective (GEO).....................................................................................7

Project development objective and key indicators......................................................................7

Lessons learned and reflected in the project design....................................................................8

Alternatives considered and reasons for rejection.......................................................................9

C. IMPLEMENTATION.........................................................................................................10

Partnership arrangements...........................................................................................................10

Institutional and implementation arrangements.........................................................................10

Monitoring and evaluation of outcomes/results........................................................................10

Sustainability and Replicability.................................................................................................11

Critical risks and possible controversial aspects.......................................................................11

Loan/credit conditions and covenants.......................................................................................12

D. APPRAISAL SUMMARY..................................................................................................13

Economic and financial analyses...............................................................................................13

Technical....................................................................................................................................13

Fiduciary....................................................................................................................................14

Social.........................................................................................................................................14

Environment..............................................................................................................................14

Safeguard policies......................................................................................................................15

Policy Exceptions and Readiness..............................................................................................16

Annex 1: Country and Sector or Program Background..........................................................17

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies..................20

Annex 3: Results Framework and Monitoring.........................................................................21

Annex 4: Detailed Project Description......................................................................................24

Annex 5: Project Costs................................................................................................................30

Annex 6: Implementation Arrangements..................................................................................32

Annex 7: Financial Management and Disbursement Arrangements......................................34

Annex 8: Procurement Arrangements.......................................................................................38

Annex 9: Economic and Financial Analysis..............................................................................42

Annex 10: Safeguard Policy Issues.............................................................................................45

Annex 11: Project Preparation and Supervision......................................................................51

Annex 12: Documents in the Project File..................................................................................52

Annex 13: Statement of Loans and Credits...............................................................................53

Annex 14: Country at a Glance..................................................................................................60

Annex 15: Incremental Cost Analysis........................................................................................62

Annex 16: STAP Roster Review.................................................................................................66

Annex 17: Strategic Partnership Investment Fund..................................................................73

Annex 18: Maps.............................................................................................................................77

CHINA

CHINA-GEF-NINGBO WATER AND ENVIRONMENT MANAGEMENT

PROJECT APPRAISAL DOCUMENT

EAST ASIA AND PACIFIC

EASUR

Date: May 5, 2006Country Director: David DollarSector Manager/Director: Keshav VarmaProject ID: P090336Focal Area: International WatersLending Instrument: GEF Grant

Team Leader: Greg J. BrowderSectors: General water, sanitation and flood protection sector (100%)Themes: Other environment and natural resources management (P)Environmental screening category: B

Project Financing Data[ ] Loan [ ] Credit [X] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others:Total Bank financing (US$m.): 5.00Proposed terms:

Financing Plan (US$m)Source Local Foreign Total

BORROWER/RECIPIENT 12.1 0.0 12.1GLOBAL ENVIRONMENT FACILITY 3.0 2.0 5.0Total: 15.1 2.0 17.1Associated Bank Financing (US$m) Source Local Foreign TotalNingbo Water and Environment Project (FY05)(Cixi Wastewater Component Only)BORROWER 63.8 7.0 70.8IBRD 17.2 40.0 57.2Total: 80.9 47.1 128.0

Borrower: People’s Republic of ChinaResponsible Agency: Ningbo Municipal GovernmentContact People:1. Ms. Xu Xu, Vice Director, World Bank Project Management Office

1509/R. 15th Floor, Tianning Tower, 138 West Zhongshan RoadPost Code: 315000, Ningbo ChinaTel: 86-574-8728-0409; Fax: 86-574-8728-0430; Email: xx@nbdpc.gov.cn

2. Mr. Li Zhibo, Deputy Division Chief, Division of Foreign Capital UtilizationNingbo Municipal Development and Reform CommissionPost Code: 315000, Ningbo ChinaTel: 86-574-8718-6862; Fax: 86-574-8736-7370; Email: zhibo@nbnet.com.cn

Estimated GEF Disbursements (Bank FY/US$m)FY 07 08 09 10Annual 0.5 2.0 2.0 0.5Cumulative 0.5 2.5 4.5 5.0Project implementation period: Start: September 1, 2006 End: June 30, 2010Expected effectiveness date: September 1, 2006Expected closing date: December 31, 2010

Does the project depart from the CAS in content or other significant respects? Ref. PAD A.3 [ ]Yes [X] No

Does the project require any exceptions from Bank policies?Ref. PAD D.7 [ ]Yes [X] NoDoes the project include any critical risks rated “substantial” or “high”?Ref. PAD C.5 [ ]Yes [X] No

Does the project meet the Regional criteria for readiness for implementation? Ref. PAD D.7 [X]Yes [ ] No

Project development objective Ref. PAD B.2, Technical Annex 3The Project objectives are to reduce land-based pollution along the Cixi coast and the East China Sea, promote the replication of innovative low cost wastewater treatment techniques, and encourage coastal zone conservation.

Global Environment objective Ref. PAD B.2, Technical Annex 3The Project aims to reduce land-based pollution discharges that have an impact on the seas of East Asia, and ultimately catalyze the sustainable development of large marine ecosystems of East Asia.

Project description [one-sentence summary of each component] Ref. PAD B.3.a, Technical Annex 4The Project has three components: 1. Constructed Wetland for Tertiary Treatment of the 100,000 m3/d Cixi Wastewater Treatment Plant (US$7.1 million);

2. Development of a Wetland Center, including: i) enhancement and restoration of degraded wetland and tidal mudflats; ii) Visitor Center Building and associated facilities. (US$8.0)

3. Design and Management (US$2.0) support, including: i) a Wetland Center Management Assistance

Contract with a NGO/University Consortium; ii) Engineering Design; and iii) Training and Dissemination of Project Experience Which safeguard policies are triggered, if any? Ref. PAD D.6, Technical Annex 10

Environmental Assessment: Category B assessment Natural Habitat: Conservation and Ecological Enhancement of Degraded Habitat Involuntary Resettlement: Minor Resettlement Impacts

Significant, non-standard conditions, if any, for:Ref. PAD C.7Board presentation: None

Loan/credit effectiveness:

a. A subsidiary grant agreement signed between the Ningbo Municipal Government and the Cixi City Government;

b. A subsidiary grant agreement signed between the Cixi City Government and the Cixi Municipal Drainage Company (CMSC) for Component 1: Constructed Wetland; and

c. A subsidiary grant agreement signed between the Cixi City Government and the Wetland Center Management Company.

Covenants applicable to project implementation:a. Wetland Center management assistance consultants and ecological engineering design

consultants shall be mobilized no later than June 1, 2007; andb. Wetland Center shall be opened to the public no later than December 31, 2008.

A. STRATEGIC CONTEXT AND RATIONALE

Country and sector issues

2. East Asia's rapid economic growth has been accompanied by significant environmental degradation. Land-based pollution of the region's coasts, estuaries and rivers is one of its most severe environmental problems and is degrading the region's large marine ecosystems (LMEs). To help littoral states address this problem, the GEF and World Bank have agreed to establish a Partnership Investment Fund for Pollution Reduction in the Large Marine Ecosystems of East Asia (the Fund). The objective of the Fund is to reduce land-based pollution discharges that have an impact on the seas of East Asia by leveraging investments in pollution reduction through the removal of technical, institutional, and financial barriers. In particular, the Fund will finance activities related to World Bank pollution reduction investment projects that are in innovative and can be replicated in other areas. Expected outcomes of the Fund would be increased investment in activities that reduce land-based pollution and the replication of cost-effective pollution reduction technologies and techniques demonstrated by the Fund. A Brief on the Fund (Tranche 1 of 3 Tranches) in the amount of US$25 million was approved by the GEF Council in November 2005.

3. The activities under this GEF-financed project were originally conceived as part of the IBRD-financed Ningbo Water and Environment Project (NWEP). The NWEP project was approved by the World Bank Board in FY05, and this associated GEF project will be the first project financed under the Fund. NWEP has three components: i) Ningbo Water Supply (US$157.9 million); ii) Cixi Wastewater (US$128.0 million); and iii) Institutional Development (US$4.5 million). This GEF project is an environmental enhancement to the Cixi component of NWEP. Cixi City covers an area of 1,100 km2, with a population of around 1 million, and is located on the northern coastline of Ningbo Municipality bordering Hangzhou Bay. The proposed GEF project is designed to demonstrate simple and effective wastewater treatment methods – constructed wetlands – and sustainable wetland management approaches.

4. The rapid economic and population growth in Ningbo, as well as many other coastal cities in China, is increasing pollution from cities into neighboring seas. In addition, non-point source pollution from urban and agricultural run-off is a large and growing problem, and a significant contributor to marine pollution in China. Consequently, the coastline of Ningbo and its neighboring East China Sea are severely polluted. As reported in the 2004 Environmental Quality Report on Near-Shore Ocean Areas of China, the East China Sea is the worst polluted sea in China, and its major pollutants are nitrogen compounds and phosphates.

5. Inappropriate wastewater treatment technology has further aggravated coastal pollution situation in Ningbo, as well as in China in general. Wastewater treatment facilities in China are in many cases designed with advanced technologies with insufficient consideration of financial or operational implications. The advanced treatment units may subsequently not be efficiently utilized due to budget constraints or lack of technical expertise. An Annual Audit Report released by the National Auditing Office of China (CANO) reported that in 2004, 60 out of 78 audited wastewater treatment facilities were under-utilized due to lack of operating funds or delay of the construction of auxiliary facilities, such as wastewater collection systems. Non-point water pollution control in China is still in its infancy, as the country is focusing first on the control of point sources, such as discharges from cities and large industries.

8

6. In addition to coastal pollution, loss of coastal wetlands is another challenge faced by Ningbo, as well as in China. China has the forth largest wetland area in the world with 650,000 km2, or 10 percent of the world total. However, land reclamation, aquaculture and environmental pollution as a result of rapid population growth and economic development have caused serious loss and degradation of China’s wetlands. It is estimated that over half of the country’s coastal wetlands have been lost. Bordering to the north to Hangzhou Bay, Ningbo Municipality has a coast line of 788 km and about 1000 km2 of inter-tidal mud flat and marshes. These inter-tidal mud flat and marshes and their neighboring estuary waters are important natural habitats for fishes, benthos, migratory and indigenous water birds, and wetland vegetation. Nevertheless, it is reported that large-scale land reclamation in Ningbo has led to the loss of 46% of its coastal wetland areas. In addition, aquaculture activities (including snails, crabs, and fish) in coastal wetlands have inevitably eliminated natural habitat for wetland flora and fauna.

7. China has implemented extensive national regulations regarding the preservation of marine environment and wetland. The Marine Environmental Protection Law of People’s Republic of China (1999) regulates the conservation of coastal areas and protection of marine ecosystems from land-based pollution. As a member of the GEF/UNDP/IMO Partnership in Environmental Management for the Seas of East Asia (PEMSEA), China is endeavored to promote integrated coastal management to reduce the degradation of coastal ecosystem. As a signatory party of the Ramsar Convention on Wetlands, China is implementing its National Engineering Plan for Wetland Conservation (2004-2030) to conserve 90% of its natural wetlands, to restore 140,000 km2 of wetland area, and to develop legal and policy measures to more effectively manage these areas. Coastal wetlands at Hangzhou Bay have been classified as one of the eight nationally significant wetland areas under the National Engineering Plan for Wetland Conservation (2004-2030). It is foreseeable that this GEF project will become an integral part of China’s efforts in reducing land-based pollution to East Asia’s LMEs and in restoring the country’s important wetland areas.

Rationale for Bank involvement

8. Land-based pollution reduction is a key priority of the Bank in its investment, policy and capacity building activities in the East Asia and Pacific Region. The objectives of the proposed GEF project reflect this priority, and are in consistent with the World Bank’s corporate and regional environment strategies.1 The Bank is already making a significant contribution to Cixi’s sustainable development by financing the wastewater infrastructure investments under the NWEP. Through this proposed GEF project, the Bank can further enhance these investments by supporting Cixi’s efforts to manage its coastal resources and adopt simple and ecologically friendly wastewater treatment methods. In particular, the Bank, via its access to the Fund can assist Cixi design and implement an innovative project which will serve as a demonstration model for other coastal cities in China and East Asia.

1 World Bank, 2001. Making Sustainable Commitments. An Environment Strategy for the World Bank. World Bank, Washington D.C.; World Bank, 2005, Environment Strategy for the World Bank in the East Asia and Pacific Region, World Bank: Washington D.C

9

Country Eligibility

9. China is eligible for GEF assistance under the International Waters Focal Area through the World Bank. The GEF project is eligible for financing under the Fund as it fulfills all seven necessary conditions:

a. it is located within the coastal watersheds of one of the six East Asian Large marine ecosystems;

b. it demonstrates an innovative technical mechanism to combat land-based water pollution;

c. it has high likelihood of replication in China and more widely in East Asia;

d. it is unlikely to proceed without grant financing from GEF;e. it has necessary co-financing available;f. it has been endorsed by China's GEF Focal Point; and g. it meets all relevant World Bank Appraisal criteria.

Higher level objectives to which the project contributes

10. This GEF project will, at both the national and international levels, showcase innovative wastewater treatment techniques and sustainable wetland management practices. The experience and lessons learned from the implementation of the GEF project will assist the replication of such innovative techniques throughout China and East Asia. In addition, sustainable wetland management practices demonstrated under the project will provide a model for wetland management in China and the rest of the world.

11. As the first project under the Fund, this GEF project will also be able to contribute to the success of the Fund by reducing land-based pollution discharges that have an impact on the seas of East Asia, and ultimately catalyze the sustainable development of large marine ecosystems of East Asia.

B. PROJECT DESCRIPTIONFinancing instrument

12. The financing instrument is a US$ 5 million GEF grant. The grant will be complemented by counterpart funding from the NWEP and Ningbo Municipal and Cixi City Governments.

Global Environmental Objective (GEO)

13. Under the Fund, the objective of this project is to mobilize international and domestic financial resources to demonstrate an innovative wastewater treatment technology – wetland treatment – to reduce land-based pollution to East Asia’s LMEs.

Project development objective and key indicators

14. The Project objectives are to reduce land-based pollution along the Cixi coast and the East China Sea, promote the replication of innovative, simple and effective wastewater treatment techniques, and encourage coastal zone conservation.

10

Project Description:

15. The project is a companion to the Ningbo Water and Environment Project (NWEP), an IBRD financed water supply and wastewater infrastructure project approved by the World Bank in 2005. Under NWEP, Cixi City Government will invest $128 million in the provision of wastewater collection and treatment services in the city, including for the construction of two wastewater treatment plants. The GEF-NWEP (Components 1 – 3 below) forms an integral part of Cixi’s wastewater project as it provides improved wastewater treatment through a constructed wetland and the preservation of enhanced wetlands for non-point source pollution treatment.

16. Component 1: Constructed Wetland (US$7.12 million). The GEF project will support the establishment of a wetland which will provide tertiary treatment for the new 100,000 m3/d North Cixi secondary wastewater treatment plant (WWTP) financed by NWEP. The Cixi City Government has allocated 86 ha of recently reclaimed land for the constructed wetland associated with North WWTP. The proposed constructed wetland will be a combination of vegetated submerged gravel bed and free surface water wetland.

17. Component 2: Establishment of a Wetland Center (US$8.0 million). The Cixi City Government has designated an existing area in the vicinity of the Ningbo-Shanghai Bridge as the Wetland Center. The Wetland Center covers an area of approximately 43.5 km2 and includes the following plots (see IBRD Map 34441): i) Plot A1-recently reclaimed, non-tidal land within the existing sea dike (4.3 km2); ii) Plot A3-tidal marshland to the west of Plot A1 (1.4 km2); iii) Plot A5- a low lying island to the north of Plot A3 (1.8 km2); and iv) the tidal mudflat/bay section adjacent to Plots A1, A3, and A5, and covering approximately 36 km2. Plots A2 and A4 would remain agricultural or low-density buffer areas. Development of the Wetland Center consists of two activities: i) the construction of a visitor center for wetland education and research, and ii) the enhancement and restoration of the Wetland Center’s natural wetland area. The Wetland Center has three objectives: i) enhance the ecological functions of the area; ii) serve as an educational and research center for wetland management; and iii) improve water quality in surrounding canals by natural wetland treatment.

18. Component 3: Design and Management Assistance (US$2.0 million). The GEF project will finance the following three activities: i) engineering design of the Constructed Wetland and the Wetland Center; ii) Management Assistance for the Wetland Center; and iii) Training and Dissemination of Project experience. Management assistance is expected to be provided by a consortium of NGOs/Universities.

Lessons learned and reflected in the project design

19. The project design draws upon the Bank’s considerable experience in working with China on environmental issues, including those related to wastewater treatment and wetland conservation. The Bank has been working closely with China on the implementation of other GEF projects and lessons learned in these projects have been taken into account in designing this project. Specific lessons include:

11

20. Simplify Wastewater Treatment: China has stringent effluent standards for treatment plants discharging into environmentally sensitive receiving water bodies, such as Hangzhou Bay. In an effort to meet these standards, wastewater companies often select technologically sophisticated treatment processes which are complex and expensive to operate. Consequently, many wastewater treatment plants in China do not perform as originally intended due to lack of operating funds and expertise. The GEF project will take advantage of the abundant reclaimed land in Cixi to develop a constructed wetland for tertiary treatment for the North Cixi plant. Although the constructed wetland has higher initial capital costs than conventional tertiary treatment (chemical coagulation followed by filtration) it has lower operational costs and is a simple and robust treatment method.

21. Consider Ecological Dimensions of Urban Development: Chinese cities are growing rapidly and transforming agricultural or undeveloped land into industrial, residential, and commercial areas. In the course of this transformation, it is also important to consider environmental and ecological amenities to enhance the quality of life and support the eco-system. The Cixi City Government has taken the bold move under the GEF project of reserving significant amounts of land for both the constructed wetland (86 ha) and the Wetland Center (43.5 km2) to help preserve coastal resources and provide environmental amenities to its citizens and visitors.

22. Take Into Account Non-Point Source Water Pollution: Run-off from urban areas and agricultural land can contain large quantities of pollution, particularly nutrients which are contributing to massive red tides in the East Asia Sea. In addition to controlling municipal and industrial dischargers, it is important for Chinese cities to begin to tackle non-point sources of pollution in order to achieve ambient water quality objectives. The GEF project will demonstrate an innovate and ecologically friendly approach to non-point source control by filtering water from nearby canals through an enhanced wetland system in the Wetland Center to improve water quality.

23. Full involvement of local stakeholders. The development of this project has involved a wide group of local stakeholders in government as well as NGOs, and key research institutes and universities which have been working on pollution and conservation issues in Hangzhou Bay. Two stakeholder workshops were organized in June and November 2005. Representatives from over twenty Ningbo and Cixi agencies and over 10 NGO representatives and wetland researchers were invited first to develop a sustainable vision for the project and then to review the conceptual design of the project prepared by consultants. By fully engaging all stakeholders in the project development process, the GEF project has helped stakeholders reach consensus on key activities of the project. It is foreseeable that such consensus will facilitate the successful implementation of the GEF project.

Alternatives considered and reasons for rejection

24. Meeting Discharge Standards: Two alternatives were considered for the GEF/NWEP project to achieve effluent discharge standards. The first alternative is to discharge treated wastewater from the two secondary wastewater treatment plants directly into Hangzhou Bay through an outfall. However, this option was rejected given the large tidal variation and shallow water along the Cixi coastline, and also does not reduce nutrient loads into the sea. Two options were considered for tertiary treatment: i) conventional chemical/filtration process; and ii)

12

constructed wetland. The constructed wetland option was selected for the North WWTP due to the availability of land, and lower operational cost and complexity. There is limited land available for the East WWTP which makes the constructed wetland option more challenging. It was agreed that GEF funds would not be used for the East WWTP, and treatment will be provided through a conventional tertiary treatment system, or some combination of the two options. The selection and implementation of the preferred approach for the East WWTP will be supervised by the NWEP task team.

25. Wetland Center Size: Various plots of land were considered for incorporation into the Wetland Center. The selected combination was based on obtaining land for different types of eco-systems including: non-tidal wetland (inside sea dikes), tidal wetlands, tidal mudflats, and an off-shore island. The option of including Plots A2 and A4 (see IBRD Map 344441) into the Wetland Center were considered and then rejected as they have already been partly converted into agricultural land. Instead these plots will be zoned as agricultural and low-density buffer areas adjacent to the Wetland Center.

C. IMPLEMENTATION

Partnership arrangements

26. The GEF project is an integral part of the Bank loan project (i.e. NWEP) and the first project to be financed under the Partnership Investment Fund for Pollution Reduction in the Large Marine Ecosystems of East Asia.

Institutional and implementation arrangements

27. Cixi Municipal Government Level: A Ningbo Water and Environment Leading Group has been established to provide policy direction and planning support for integrated water and environmental management throughout Ningbo Municipality. The Leading Group is headed by a Vice Mayor, includes high-level representatives from all relevant agencies, and provides oversight for both the GEF project and NWEP. The NWEP PMO is located in the Municipal Development and Reform Office and will also be the PMO for the GEF project. The Ningbo Municipal Finance Bureau is responsible for management of the Special Account.

28. Cixi City Government Level: Cixi City Government has established a Leading Group specifically for the GEF project, and in particular for the Wetland Center. The Cixi Leading Group is headed by a Mayor and Vice Mayor and includes relevant government agencies. The Leading Group is supported by a GEF Project Expert Group which consists of nationally renowned wetland experts from universities and technical representatives from specialized government agencies at the Cixi City and Ningbo Municipal levels. The Cixi Construction Bureau is the primary government agency responsible for oversight of the GEF project and providing any necessary counterpart funding.

29. Implementing Agencies: The implementing agency for Component 1: Constructed Wetland will be the Cixi Municipal Sewerage Company (CMSC) which is also responsible for implementation of the NWEP Cixi wastewater component. The Cixi Construction Bureau has established a “Wetland Center Management Company” for the implementation of Components 2: Wetland Center, and Component 3: Design and Management. The Management Company,

13

under the oversight of the Construction Bureau, will be responsible for planning, construction, and operation of the Wetland Center.

30. NGO/University Consortium. The GEF project will fund a management assistance contract to help the Wetland Center Management Company during the detailed design, construction and start-up operations of the Wetland Center. The Consortium will be selected at the start of GEF project implementation, and will have expertise in ecology, environmental education, and fund-raising.

Monitoring and evaluation of outcomes/results

31. Annex 3 presents the results framework and monitoring program for the GEF project. The primary outcome indicators relate to pollution reduction, establishment of a viable Wetland Center with high quality habitat and a strong environmental education program, and dissemination of the GEF project experience domestically and internationally. Data collection and analysis will be undertaken primarily by the NGO/University Consortium, with support from the CMSC for the constructed wetland. The terms of reference for the Consortium include a detailed monitoring program developed in collaboration with the Bank task team to meet GEF monitoring requirements. The Consortium is also expected to develop an active ecological research program on Cixi coastal zone management. The PMO will ensure that the necessary monitoring and reporting is undertaken, and the Bank supervision missions will review and comment on the monitoring reports.

Sustainability and Replicability

32. Both Ningbo Municipality and Cixi City are committed to the success of the GEF project and the associated NWEP. The degree of importance attached to both projects is reflected in the active participation of high-level government officials in the Leading Groups. Under the NWEP, the Ningbo PMO has been established as a permanent government agency, and thus is able to attract qualified individuals who are offered job security and promotion potential. Under the GEF Project, the Cixi Wetland Center Management Company is established with full funding support from the Cixi City Government. Ningbo and Cixi have invested significant amounts of their own funds in the NWEP implementation and preparation of the GEF project. The Cixi City Government has also committed a total of 86 ha of reclaimed lands to be used for constructed wetland and set aside another 43.5 km2 of area for the conservation of the Wetland Center. Operational funds for the constructed wetland will be provided by CMSC which generates revenues through wastewater tariffs. Operational funds for the Wetland Center will be generated through a variety of sources including user fees, grants and donations, and funding from the Cixi City government.

33. This project has also included outreach activities to disseminate experience and knowledge learned from the operation of the Wetland Center and constructed wetland and to promote the replication of innovative use of wetland in wastewater treatment in China and East Asia. The potential for replication of GEF project activities is considered high. Constructed wetlands are an attractive treatment option for both secondary and tertiary treatment, as well as non-point source pollution treatment, in areas where land is readily available. Wetland conservation is now a national policy in China, and

14

many other cities and provinces in China will be eager to learned from the experience of the Cixi Wetland Center.

Critical risks and possible controversial aspects

34. The overall risk rating of the GEF project is modest. Potential risks and proposed mitigation measures are described in the following table.

Potential Risks Proposed Mitigation Measures RatingWetland Center is not financially sustainable

(1) Strong financial commitment and capability of the Ningbo Municipal and Cixi City Governments.

(2) NGO/University Consortium is expected to help develop a world-class Center which will generate user fees and attract donations.

(3) Consortium is expected to develop a business plan and undertake an active fund raising program.

Modest

Wetland Center may not be ecologically viable.

(4) A significant amount of land has been dedicated to the Center (43.5 km2) and includes all important wetland ecosystems: non-tidal, tidal marsh, tidal mudflats, and island. The non-tidal wetland (Plot A1) will be enhanced using advanced ecological engineering methods.

Low

Constructed wetland fails to achieve specified treatment targets

(5) Technical assistance will be provided during concept development, design, construction, and operations period. The constructed wetland area (86 ha) meets international design criteria requirements.

Modest

Overall risk rating Modest

Loan/credit conditions and covenants

35. Condition for Effectiveness .

a. A subsidiary grant agreement signed between the Ningbo Municipal Government and the Cixi City Government;

15

b. A subsidiary grant agreement signed between the Cixi City Government and the Cixi Municipal Sewerage Company (CMSC) for Component 1: Constructed Wetland; and

c. A subsidiary grant agreement signed between the Cixi City Government and the Wetland Center Management Company for Component 2: Wetland Center.

36. Dated Covenants. The following two dated covenants will be included in the GEF grant agreement:

c. Wetland Center management assistance consultants and ecological engineering design consultants shall be mobilized no later than June 1, 2007; and

d. Wetland Center shall be opened to the public no later than December 31, 2008.

D. APPRAISAL SUMMARYEconomic and financial analyses

37. A formal cost-benefit analysis was not undertaken, but the GEF project will provide significant economic benefits associated with wetland conservation including: i) helping to maintain the ecological health and aquaculture productivity along the coastline by restricting harvesting within the Wetland Center and thereby creating a “seed bed” for the adjacent areas; ii) providing habitat for local and migratory birds, and facilitating bird watching within the Wetland Center, and thereby generating benefits for people who place amenity and/or existence value on healthy bird populations; and iii) improving the quality of life in Cixi City by preserving wetland habitat which has been the defining geographical feature in Cixi’s historical and cultural development. In addition, a project specific analysis on GEF incremental cost analysis has been prepared and included in Annex 15.

38. The constructed wetland will be part of the CMSC’s wastewater treatment plant and thus the appropriate level of financial analysis is CMSC. Under NWEP, a comprehensive financial analysis was undertake for CMSC, and legal covenants were included in the NWEP loan agreement which requires Cixi City to raise tariffs to a level sufficient to covering operating costs and debt service. The Bank task team is monitoring the tariff increases and financial status of CMSC during NWEP supervision.

39. Counterpart funding of the Wetland Center will be provided by the Cixi City government through the Construction Bureau to the Wetland Center Management Company. Revenue requirements for the operations of the Wetland Center are estimated to be around US$350,000. The financial analysis in Annex 9 shows that most, if not all, of the revenue requirements can be met from visitor and user fees (assuming 100,000- 200,000 visitors per year and an entrance fee of 15-30 RMB per person), with any necessary gaps to be filled with donations and funding from the Cixi City Government. One of the first tasks of the NGO/University Consortium is to develop a Business Plan for the Wetland Center.

Technical

40. The technical viability of the GEF project has been confirmed by the Bank task team. Independent international experts have also reviewed the studies carried out during project

16

preparation and further confirmed technical viability of the GEF project. Technical assistance will be provided throughout project implementation of to ensure the success of the GEF project

41. The constructed wetland for the North Cixi wastewater treatment plant will utilize an area of 86 ha, which will provide approximately 7 days of hydraulic residence time and is consistent with good international practice. The constructed wetland will utilize a combination of vegetated subsurface and surface flow designs which are standard practice for wetland design.

42. The Wetland Center contains sufficient area and diversity to be transformed into an ecologically viable unit. The total area of 43.5 km2 includes all major wetland types: non-tidal wetlands, tidal marshes, tidal mudflat, and an off-shore island. The non-tidal wetlands in Plot A will be restored and enhanced using advanced ecological engineering methods. Harvesting and other aquaculture activities within the Wetland Center area will be prohibited and habitat created for flora and fauna. One of the first tasks for the NGO/University Consortium is to develop a comprehensive wetland management plan for the Center. The Center will include an environmental education and research building(s) which will be designed utilizing green building technology. The total number of visitors to the Center will be controlled and access to prime wetland habitat will be restricted so as not to unduly disturb the wildlife.

Fiduciary

43. The GEF project will use the adequate financial management system developed under the NWEP to provide, with reasonable assurance, accurate and timely information on the status of the GEF project in the reporting format agreed with the Bank. The GEF project will also rely on procurement capacity of the CMSC developed under the NWEP. The Wetland Management Company is a new implementing agency, and thus will receive procurement and financial management training from the PMO to ensure consistency with Bank requirements. The overall risk for procurement is considered average.

Social

44. The constructed wetlands under Component 1 will be built on 86 ha of recently reclaimed land which is undeveloped and unutilized, and will thus will not entail any resettlement activities or affect livelihood activities. The major social impact of the GEF project will be the restriction on aquaculture activities in the Wetland Center under Component 2. There are four overlapping groups of people currently utilizing the Wetland Center Area: (1) crab or fish farming on Plots A3 and A5 (54 households, 168 people); (2) fishing with preset nets on mudflats (40 households, 120 people); and (3) fishing with boats within the Wetland Center (50 households, 150 people). In addition, almost all households in the two neighboring towns are informally picking sea products (mainly clam and snail) on mudflats. A resettlement action plan (RAP) meeting the World Bank's OP/BP 4.12 has been prepared and provides for adequate compensation and livelihood restoration. The Cixi Construction Bureau will be responsible for resettlement activities in coordination with local government officials. The resettlement office of the Ningbo NWEP PMO will supervise RAP implementation. The capacity of the Cixi Construction Bureau and the NWEP PMO is considered adequate.

17

Environment

45. The GEF project is a Category B project for environmental assessment as it is an environmental enhancement to the NWEP. Environmental design studies for the constructed wetland (Component 1) and the Wetland Center (Component 2) were conducted during project. The studies provided comprehensive environmental analysis and carried out extensive stakeholder consultation. These studies show that the GEF project as a whole will have a significant net positive impact, as it will improve ambient water quality in Cixi City and the Hangzhou Bay, and promote sustainable development of Cixi City of Ningbo Municipality. The negative impacts associated with the project are expected to be non-existent or minimal, and the impacts are expected to be site specific, reversible, and easily mitigated. Key environmental issues are discussed in Annex 10. An Environmental Management Plan has been prepared to address potential adverse impact associated with the construction and operation of the constructed wetland and the Wetland Center.

Safeguard policies

Safeguard Policies Triggered by the Project Yes NoEnvironmental Assessment (OP/BP/GP 4.01) [X] [ ]Natural Habitats (OP/BP 4.04) [X] [ ]Pest Management (OP 4.09) [ ] [X]Cultural Property (OPN 11.03, being revised as OP 4.11) [ ] [X]Involuntary Resettlement (OP/BP 4.12) [X] [ ]Indigenous Peoples (OD 4.20, being revised as OP 4.10) [ ] [X]Forests (OP/BP 4.36) [ ] [X]Safety of Dams (OP/BP 4.37) [ ] [X]Projects in Disputed Areas (OP/BP/GP 7.60) [ ] [X]Projects on International Waterways (OP/BP/GP 7.50) [ ] [X]

46. In addition to the Environmental Assessment and Involuntary Resettlement policies discussed in the proceeding section, this project also triggers another safeguards policy – natural habitats.

47. Natural Habitats. This GEF project will help conserve, rehabilitate and create new natural habitats along the Cixi coastline. In particular, the constructed wetland and Wetland Center will preserve, enhance or restore existing natural habitats for benthos, vegetation, and migratory and indigenous waterfowls. Annex 4 lists detailed habitat enhancement, conservation and creation activities to be carried out under the GEF project.

48. Ningbo Municipality is a repeat borrower for the Bank with a high capacity to implement safeguards policies. The ongoing Zhejiang Urban Environmental Project and NWEP have proven that Ningbo has developed a good understanding and experience in implementing World Bank safeguards policies.

49. Study Disclosure and Consultation: With the Bank’s assistance, the Cixi City Government organized two stakeholder workshops in June and November 2005. The first workshop was designed to develop a “sustainable vision” for the GEF project. The second workshop was carried out by having key stakeholders comment on preliminary results of the two

18

aforementioned studies. Both the Component 1 and Component 2 environmental design studies were disclosed locally and in the Bank’s Infoshop in February and April 2006.

50. RAP Disclosure and Consultation: During project preparation consultation has taken place through field surveys and meetings with government officials and project-affected people. These consultations influenced the design of the RAP. The full RAP was disclosed in Ningbo and Cixi libraries and government websites in February and April 2006. The draft RAP was disclosed in the World Bank Infoshop in January 2006 and the updated RAP was disclosed in April 2006.

Policy Exceptions and Readiness

51. The GEF project does not require any policy exceptions and is ready for implementation.

19

Annex 1: Country and Sector or Program Background

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

Ningbo and Its Coastal Environment

1. Ningbo Municipality is located 175 km south of Shanghai, borders Hangzhou Bay and the East China Sea (See MAP IBRD 34441), and is China’s second-largest port. The high suspended solids concentration in Hangzhou Bay, combined with hydrological and tidal currents, results in overall sediment accretion along the northern Ningbo coastline in Cixi City, Ningbo Municipality, with accretion rates on the order of 50-100 meters per year.2 Consequently, in contrast to most situations, wetland areas are actually being created in Cixi due to the sediment accretion along the coastline. Cixi thus has the unique opportunity to develop new tracts of land while at the same time preserving its wetland area.

2. According to Cixi City’s Plan for Integrated Beach Development (1997-2010), approximately 130 km2 of land will be enclosed by sea-dikes between 2000 and 2010. The reclaimed land will be carefully planned and developed with a combination of agricultural and aquaculture areas, industrial estates, coastal tourism, and wetland conservation zones. The area outside of the sea dike is called the “beach-area” and the width of the beach area varies depending on the tide but can extend hundreds of meters at low tide. Both the area inside and outside of the sea dike has rich benthos resources and vegetation, and provide an excellent habitat for migratory and indigenous water birds. In addition, there is considerable aquaculture in the near shore area (i.e. just outside the sea dikes) including snails, crabs, and fish.

3. The rapid population growth in Ningbo, as well as many other coastal cities in China, is making planning and financing for utility services such as water and wastewater very challenging. Investments in water supply and pollution control in the municipality have lagged far behind its rapid economic development. In addition, non-point source pollution from urban and agricultural run-off is a large and growing problem, and a significant contributor to marine pollution in China. Inevitably, the coastline of Ningbo and its neighboring East China Sea are severely polluted. As reported in the 2004 Environmental Quality Report on Near-Shore Ocean Areas of China, the East China Sea is the worst polluted sea in China and its major pollutants are nitrogen compounds and phosphates. As of 2005, Ningbo Municipality and China in general has yet to identify effective means to address land-based pollution problems.

4. Inappropriate wastewater treatment technology has further aggravated coastal pollution situation in Ningbo, as well as in China in general. Wastewater treatment facilities in China often designed with advanced technologies and without considering the financial or operational implications. The advanced treatment units subsequently not utilized due to budget constraints or lack of technical expertise. An Annual Audit Report released by the National Auditing Office of China (CANO) reported that in 2004, 60 out of 78 audited wastewater treatment facilities were under-utilized due to lack of operating funds or delay of the construction of auxiliary facilities, such as wastewater collection systems.

2 The tides in Hangzhou Bay are the driving force for such coastline changes, with average tidal range varying from 1.7 to 5.3 meters, and water velocities on the order of 3 m3/s along the Cixi coast.

20

5. In addition to coastal pollution, loss of coastal wetlands is another challenge faced by Ningbo and China in general. China has the forth largest wetland area in the world in wetlands with 650,000 km2, or 10 percent of the world total. However, land reclamation, aquaculture and environmental pollution as a result of rapid population growth and economic development have caused serious loss and degradation of China’s wetlands, and it is estimated that over half of the country’s coastal wetlands have been lost. It is estimated that Ningbo Municipality has a coast line of 788 km and about 1000 km2 of inter-tidal mud flat and marshes. These inter-tidal mud flat and marshes and their neighboring estuary waters are important natural habitats for fishes, benthos, migratory and indigenous water birds, and wetland vegetation. Nevertheless, it is reported that large-scale land reclamation in Ningbo has led to the loss of 46% of its coastal wetland areas. In addition, aquaculture activities (including snails, crabs, and fish) in coastal wetlands has inevitably eliminated natural habitat for wetland flora and fauna.

Cixi City and The Hangzhou Bay Bridge

6. Cixi City, located north of Ningbo Municipality on the shore of Hangzhou Bay, covers an ara of 1,100 km2 and has a population of around one million people and one of the most dynamic county level economies in the country in terms of capacity and competitiveness. The newly started construction of Cixi-Shanghai Bridge across the Hangzhou Bay (the Hangzhou Bay Bridge) is seen by Cixi as a new opportunity to integrate Cixi into Shanghai and Yangtze Delta Region and therefore will further strengthen Cixi’s economy. Millions of visitors are expected to visit or stop by at Cixi and Ningbo through the new Bridge to southeast coastal area of China. Cixi City Government has taken opportunity for further improving the city’s environment, livability and competitiveness. In the meantime, Cixi new city area on both sides of the Bridge along the Bay is being planned, nature conservation for wetlands in Hangzhou Bay area is being initiated, and control of water pollution is expected through the implementation of the newly approved NWEP. The city has set its objective to become an “environmentally and ecologically friendly” city, and sees this as the approach to its sustainable development.

Wetland Conservation in China

7. Recognizing the important ecological and economic values of wetlands, the Chinese government has promoted sound management and rational utilization of wetlands after it ratified the Ramsar Convention on Wetlands in 1992 and issued a China Wetland Conservation Action Plan in 2000. The Chinese government has also begun implementation of the National Engineering Plan for Wetland Conservation (2004-2030) which aims to conserve 90% of its natural wetlands, restore 140,000 km2 of wetland area, and develop legal and policy measures to more effectively manage these areas. As of 2005, China has established more than 260 wetland nature reserves with a total area of 160,000 km2, including 21 wetland areas listed in the Ramsar List of Wetlands of International Importance. Under the National Plan for Wetland Conservation (2004-2030), coastal wetlands at Hangzhou Bay have been classified as one of the eight nationally significant wetland areas. In addition, for all coastal wetland areas in China, the National Plan proposes to evaluate impacts of developmental activities to these wetlands, to strengthen conservation of wildlife species and their habitats, to set up migratory bird research and conservation stations, and to demonstrate sustainable wetland uses.

8. As of 2005, wetland conservation in China is heavily relied on governmental investment, with a focus on the establishment of nature reserves. With assistance of international organizations, China has also implemented few wetland conservation projects since 2000 (see

21

Annex 2 for details). It is noted that, however, investment in wetland conservation in China is limited, uncoordinated and unsystematic, and consequently is of low efficiency.3 Identified key barriers to effective conservation of wetland include: i) a lack of integration of wetland management and biodiversity conservation into development planning; ii) no institutional mechanisms for multi-sectoral wetland management; iii) limited awareness of wetland values and functions at all levels; iv) lack of examples of sustainable development of wetland resources and involvement of local communities; and v) lack of technical capacity at national and local levels to manage and conserve wetlands and their biodiversity.4

Constructed Wetland for Wastewater Treatment

9. During the past 20 years, constructed wetlands have been used to help purify water in a controlled manner in the North American and European countries. In the US, the potential for achieving improved water quality while creating valuable wildlife habitat has lead to a wide use of constructed wetlands for treating and recycling wastewater. While land intensive, these systems offer an effective means of integrating wastewater treatment and resource enhancement, often at a cost that is competitive with conventional wastewater treatment alternatives.

10. The concept of using constructed wetland for wastewater treatment was introduced into China in the mid-1990s. In particular, a European Union financed project – Biotechnological Approach to Water Quality Improvement in Tropic and Sub-tropic Areas for Reuse and Rehabilitation of Aquatic Ecosystems (Contract # ERBIC18CT960059) – from 1996 to 1999 assisted Chinese research institutes to experiment constructed wetland in wastewater treatment. As of 2005, China has built up a number of pilot constructed wetlands in small scale for wastewater treatment. For example, the largest size of built constructed wetland by one leading Chinese institute is about 2,300 m2 (or about 0.2 ha).5 In addition to their pilot and experimental nature, these reported cases have yet to address ecological, aesthetic and education values of constructed wetlands.

Cixi’s Response

52. Cixi is implementing the Ningbo Water and Environment Project (NWEP), an IBRD financed water supply and wastewater infrastructure project approved by the World Bank in 2005. Under NWEP, Cixi City Government will invest $128 million in the provision of wastewater collection and treatment services in the city, including for the construction of two wastewater treatment plants. In addition, the GEF-NWEP forms an integral part of Cixi’s wastewater project as it provides improved wastewater treatment through a constructed wetland and the preservation of enhanced wetlands for non-point source pollution treatment. Annex 4 provides more details on the project.

3 Wen, Yali, 2005. “Investing and Financing Wetland Conservation in China.” Beijing: Asia Regional Meeting in Preparation for Ramsar COP9 (May 13-16, 2005). Available at http://indaba.iucn.org/ramsarfilms/mtg_reg_asia2005_ppt08.ppt.4 GEF Project Brief: China Wetland Biodiversity Conservation and Sustainable Use (1999).5 Xu, Lijing, Jinsong Wei, 2005. “Constructed Wetland – A Blossoming Flower of Environmental Protection Industry.” Economic Daily August 16, 2005 (in Chinese).

22

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

Bank Financed Project Targeted Sector Issues Performance RatingChina: Ningbo Water and Environment Project (FY05)

Water Supply in Ningbo City andWastewater in Cixi City

Implementation Progress: SDevelopment Objective: S

China: Zhejiang Urban Environment Project (FYo4)

Wastewater, Solid Waste, and Cultural Heritage in selected cities in Zhejiang Province including a wastewater component in Ningbo City.

Implementation Progress: SDevelopment Objective: S

China(GEF) Lake Dianchi Freshwater Biodiversity Restoration Project (FY02, ongoing)

Restore and manage habitats around the lake to secure the conservation of the remaining endemic species of the lake and its immediate tributaries

Implementation Progress: SDevelopment Objective: S

ChinaHai Basin: Second Tianjin Urban Development and Environment Project (FY03, ongoing)

Construct WWTPs to reduce land-based wastewater discharge to the Yellow Sea

Implementation Progress: SDevelopment Objective: S

ChinaHai Basin Integrated Water and Environment Management Project (FY04, ongoing)

Improve the performance of small city WWTPs to reduce land-based wastewater discharge to the Yellow Sea

Implementation Progress: SDevelopment Objective: S

China:Guangdong Pearl River Delta Urban Environment Project (FY04, ongoing)

Improve environmental condition of the South China Sea by addressing one of the recognized major trans-boundary threats to it - land-based pollution

Implementation Progress: SDevelopment Objective: S

Other International Organizations Targeted Sector IssuesUNDP (GEF/Regional):Prevention and Management of Marine Pollution in the East Asian Seas (1993- )

Control marine pollution from land and sea- based sources

UNDP (GEF/China):Wetland Biodiversity Conservation and Sustainable Use (1999-2007)

Conserve biodiversity in wetland reserves, including the establishment of five wetland environmental education and interpretation centers

UNDP (GEF/Regional): Reducing Environmental Stress in the Yellow Sea Large Marine Ecosystem (2000-2005)

Reduce stresses to the Yellow Sea due to land-based pollution

UNEP:(GEF/Regional): Reversing Environmental Degradation Trends in the South China Sea and Gulf of Thailand (2002-2007)

Improve regional co-operation in the management of the South China Sea and demonstrate alternative remedial actions to address priority trans-boundary pollutants

WWF (WWF/HSBC/China):Yangtze River Wetland Conservation Project (2002-2025)

Restoration of freshwater wetlands and their natural connections to the Yangtze River

ADB: (GEF/ADB/China):Sanjiang Plain Wetland Conservation Project (2005-2010)

Restore and protect wetland reserves

23

Annex 3: Results Framework and Monitoring

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

Results Framework

Global Environmental Objectives

Project Outcome Indicators Use of Project Outcome Information

(1) Reduce land-based pollution along the Cixi coast and the East China Sea

(2) Promote the replication of simple, innovative low wastewater treatment techniques

(3) Encourage coastal zone conservation.

(1) Reduction in BOD and nutrient discharges for two WWTPs; and nitrogen removal in Plot A1 of the Wetland Center.

(2) Number of domestic and international workshops in which Ningbo participates or organizes

(3a) Number of visitors to the Wetland Center

(3b) Increased productivity of tidal mudflats.

(3c) Increase in bird abundance and species variety.

(1) Track the performance of the wastewater treatment systems and make modifications in O&M as necessary.

(2) Ensure that experience in Ningbo is shared broadly domestically and internationally.

(3) Monitor the quality and attractiveness of the Wetland Center and associated facilities.

Intermediate Outcomes Intermediate Outcome Indicators

Use of Intermediate Outcome Monitoring

Constructed wetland(1) Provide tertiary

treatment for the North WWTP.

(2) Provide wetland ecological services

(1) Class 1A discharge standards met

(2) Constructed wetland with habitat value completed

Track the progress of physical works, operational performance, and ecological value of the constructed wetland.

Wetland Center (1) Establish an

internationally recognized wetland education and research center

(2) Create a wetland which is internationally renowned for its migratory birds

(3) Operate the Wetland Center in a sustainable manner

(1) Visitor Center completed

(2) Restoration and Enhancement of existing wetland and tidal areas.

(3) Financial sustainability achieved through user fees or contributions.

(1 & 2 ) Track the progress of physical works of both the visitor center and enhancement of Wetland Center.

(3) Make adjustments to business plan to ensure financial sustainability.

24

Arrangements for Project Outcome MonitoringProject Outcome

Indicators Baseline 2008 2010 Frequency and

ReportsData Collection

InstrumentsResponsibility for Data Collection

(1) BOD, N, and P reduction in wastewater discharge(tonnes/year)

0 Both WWTPs:BOD: 10,000T-Nitrogen: 2,000T-Phosphorus: 200

Of Which North Constructed Wetland:BOD: 300T-Nitrogen: 400T-Phosphorus: 25

Enhanced Wetland Plot A1:T-Nitrogen: 175

Annual Reports EMP Monitoring Program

Wetland Center Consultants for Wetlands

Cixi Municipal Sewerage Company for WWTP

(2) Number of workshops

N/A Participation: 2 International and 2 Domestic Workshops

Participated: 2 International and 2 Domestic Workshops.Organized: 1 Domestic Workshop

Annual Reports and Bank Missions

EMP Monitoring Program

Wetland Center Consultants

(3a) Number of visitors to Wetland Center

N/A 150,000 Annual Reports and Bank Missions

EMP Monitoring Program

Wetland Center Consultants

(3b) Increased abundance of benthic fauna in tidal wetlands and mudflats

Severely degraded habitat

Scientific 2007 baseline ecological productivity studies completede.g. (kgs benthic organisms per m2)

25% increase in benthic fauna productivity over 2007 baseline

Annual Reports and Bank Missions

EMP Monitoring Program

Wetland Center Consultants

(3c) Increased bird abundance and species diversity.

Severely degraded habitat

Scientific 2007 baseline ecological surveys completed.

25% increase in bird sightings and number of species.

Annual Reports and Bank Missions

EMP Monitoring Program

Wetland Center Consultants

Note: The TOR for the Wetland Management Consultants contains a detailed monitoring program and will be included in the contract costs.

25

Arrangements for Intermediate Outcome MonitoringIntermediate

Outcome Indicators

Baseline 2007 2008 2009 2010 Frequency and Reports

Data Collection

Instruments

Responsibility for Data

CollectionConstructed WetlandConstructed wetland completed and wastewater treatment meet Class 1A discharge standards

Detailed ecological engineering design completed

Constructed wetland with habitat value completed

Constructed wetland in production

Compliance with effluent standards

Annual Project Monitoring Reports and Bank Missions

Construction Reports

Monitoring Reports

Cixi Municipal Sewerage Company

Wetland CenterVisitor center completed, wetland areas restored and enhanced, and financially sustainable.

Intensive aquaculture activities, no environmental education activities

Design Completed

Wetland Center Buildings and Ecological Enhancements Completed

Wetland Center Operational

Revenues from user fees and contributions sufficient to meet operational costs.

Annual Project Monitoring Reports and Bank Missions

Construction Reports

Wetland Center Financial Statements

Wetland Center Management Company

26

Annex 4: Detailed Project Description

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

Component 1: Construction of the Constructed Wetland (US$7.1 million):

1. The GEF project will finance a “constructed wetland” to provide tertiary treatment for the effluent from the 100,000 m3/day North Cixi secondary wastewater treatment plants (WWTP) financed by the NWEP in Cixi City. As treated wastewater will discharge into the inland canal network and then into the East China Sea, a high level of treatment is required to avoid eutrophication and other water quality problems as the canals have a relatively low assimilative capacity. The WWTP is designed to meet Class 1A discharge standards, which are essentially 10 mg/l BOD and SS, with removal of nutrients to 15 mg/l total-nitrogen and 0.5 mg/l of phosphorus. The proposed treatment process is a modified A2O process, with tertiary treatment. As discharge into Hangzhou Bay through an outfall is not an economically viable option given the large tidal variation and shallow water along the Cixi coastline, the Cixi City Government has selected the use of constructed wetland as the preferred tertiary treatment option.

2. Constructed wetlands are artificial wastewater treatment systems, which consist of shallow ponds or channels that have been planted with aquatic plants, and which rely on microbial, biological, physical, and chemical processes to treat wastewater. They typically have impervious clay or synthetic liners, and constructed structures to control the flow direction, liquid detention time, and water level. Depending on the type of system, they may contain an inert porous media such as rock, gravel or sand. Constructed wetlands provide advanced treatment to effluent from conventional wastewater treatment plants. In particular, the functions of the constructed wetland will include but not limited to: i) meeting effluent discharge standards and minimizing impact on LMEs; ii) providing ecological functions such wildlife habitat, particularly for migratory birds; iii) aesthetic values; iv) opportunities for environmental education; v) low operational costs and ease of operation and maintenance; and vi) potential to serve as a GEF model for constructed wetlands. Correctly designed wetlands can treat and remove some toxicants to lower levels than standard methods such as activated sludge. The effect is primarily due to the longer hydraulic residence time of the wetland (~ 7 days vs. 4-6 hours) that allows slow bacterially-mediated reactions to reach completion. In turn, the longer hydraulic residence time is due to a large area over which to spread water to be only about 60 cm deep.

3. The Cixi City Government has decided to allocate 86 ha of recently reclaimed land for the constructed wetland associated with North WWTP. Based on the feasibility study on the constructed wetland completed by the South China Institute of Environmental Science (SCIES) and suggestions provided by international experts, the proposed constructed wetland will be a combination of vegetated submerged gravel bed and free surface water wetland. The vegetated submerged gravel bed portion of the constructed wetland will be used to accept treated wastewater from the WWTP and improve water quality by absorption and degradation of biological membrane, microorganism and wetland plants growing on the gravels. Free surface water portion of the constructed wetland then will be used to further remove nitrogen from the wastewater after the submerged gravel bed through denitrification process (conversion of nitrates in wastewater to nitrogen gas). Wastewater will be further purified through a biological filtration

27

gravel bed section and a UV disinfection section before being discharged into local inland canal network, and ultimately into the Hangzhou Bay. The biological filtration gravel bed section of the constructed wetland will be similar to the submerged gravel bed section but with a main function of removing phosphorous.

4. The engineering of constructed wetland will be completely open to result in a net ecological, environmental and landscape benefit to the wetland system’s natural functions and values. A simple set of 3-5 mostly flat-bottomed cells of constant depth (~ 60 cm) in each of the two wetlands with plantings of emergent plants is proposed. A small (~ 1-2 ha) deeper area (> 2 m) in each wetland would provide the growth of large emergent plants and give open water for birds to land and take off.6 Species of emergent plants that are easy to grow and effective in pollutant removal will be selected. Candidate species include cattails, which are much more efficient for providing carbon for denitrification and heavy metals removal, and bulrush, which are better at absorbing pesticides and organics. For the removal of TSS almost any close stand of plants will do while BOD is also best treated with specific plants.

5. Detailed ecological engineering design of the constructed wetland will be financed under Component 3 of the GEF project. The Ningbo NWEP PMO will collaborate with the Cixi Construction Bureau and CMSC to supervise the design and construction of the constructed wetland. The CMSC will operate and maintain the constructed wetland as an integral part of the WWTP financed under the NWEP.

6. The proposed design recognizes that toxic ammonia in surface water wetland might create public health concerns as high ammonia concentration will deter small fish from eating mosquito larvae, which as adults are vectors for malaria, dengue fever and others. As free surface water wetland is most efficient in nitrate removal but minimal in ammonia removal, the gravel bed filters in the vegetated submerged gravel bed section of the constructed is designed to nitrify ammonia from 5-8mg/L (inflow from the North WWTP to the constructed wetland) to about 2mg/L in the gravels prior to allowing it to reach the free surface water section of the constructed wetland. In case that the gravel bed filters are less effective in nitrification, minor modification of the WWTP’s operation can be easily made to nitrify ammonia to the desired level. (One of such modifications is increase in retention time.) The transformation of ammonia to nitrate also helps the constructed wetland to remove effectively nitrogen, which is the limiting nutrient for algae growth in the sea and needs to be removed to protect environmental quality of East Asia’s LMEs.

Component 2: Establishment of the Wetland Center (US$8.0 million)

7. The Wetland Center will be established on a designated natural wetland area close to the new Shanghai-Ningbo Bridge (see Map IBRD 344441). Component 2 includes two activities to be financed by the GEF project: i) the construction of a visitor center and its auxiliary facilities and ii) the restoration and enhancement of natural wetland areas of the Wetland Center. When the 36-km long bridge is completed it will be the longest bridge in the world, and will convey millions of vehicles per year across the Hangzhou Bay. The objectives of these two activities are:

6 A realistic estimate of open water at the Cixi constructed wetlands is about 10%.

28

i) To establish a world-class Wetland Center integrated with an internationally recognized bird wetland conservation area with the potential for tourism, public education, wetland research, and economic self-support;

ii) To demonstrate a means of removing point and non-point source pollutants into Hangzhou Bay and an internationally-recognized example for other parts of the region; and

iii) To create a reserve of marine wetlands that would be a continuing source of re-population for the over exploited fish and shellfish along the Cixi coastline.

8. The Wetland Center covers an area of approximately 43.5 km2 and includes the following plots (see IBRD Map 34441): i) Plot A1-recently reclaimed, non-tidal land within the existing sea dike (4.3 km2); ii) Plot A3-tidal marshland to the west of Plot A1 (1.4 km2); iii) Plot A5- a low lying island to the north of Plot A3 (1.8 km2); and iv) the tidal mudflat/bay section adjacent to Plots A1, A3, and A5, and covering approximately 36 km2. Plots A2 and A4 would remain agricultural or low-density buffer areas.

9. The Environmental Baseline Study carried out by the Wetlands International and EDAW, Inc. revealed that the Wetland Center, as part of Cixi coastal wetland area, has been used as a secondary stopover site to the Chongming Island wetland area in Shanghai for feeding for migratory birds moving to and from northern breeding areas in Siberia and wintering ground to as far as Australia. It is noted that most migratory birds, dominated by small and large wading birds such as sandpipers, use the Chongming Island wetland because of minimal human presence at the Chongming Island wetland but ubiquitous human presence in Cixi coastal area.

10. As of 2005, all the proposed Wetland Center is owned and managed by the Cixi City Government. In particular, Plot A1 was used as a wetland conservation area, Plots A3 and A5 were contracted to local farmers for crab farming, and the beach and bay areas were contracted to local farmers for shellfish harvest and for fishing. Information about these farmers and impacts of this GEF project on these farmers’ livelihood is discussed in details in the Resettlement Action Plan of the project.

11. Based on conceptual design of the Wetland Center completed by the Wetlands International and EDAW Inc., the area will be developed mainly as a large enhanced natural wetland for migratory birds. The now-farmed tidal marsh areas of Plot A3 and the island of Plot A5 will be re-graded to natural slopes for free tidal access, and the few crab and fish farms there will be closed. A physical barrier will be established along the Wetland Center perimeter to prevent unauthorized access of humans to the marshes and mudflats to fish or collect clams and crabs. A series of floating buoys will be placed in the shallow offshore area to restrict boat access to only those visiting the site for ecological purposes.

12. It is proposed that about 300 ha, or 90% of the land area, of Plot A1 be ecologically enhanced to establish fluctuating level freshwater wildlife bird ponds and surroundings, or high and low tide habitat for migratory birds. All together, Plots A1, A3 A5, and the tidal mudflats will form an integrated ecological system with birds flying to and from the sites at high and low tides, and the removal of human competition from the enhanced natural wetland will provide a better feeding ground and support more birds. In particular, a goal is to establish a new wintering population center with excellent viewing facilities for endangered birds, such as the black-faced spoonbill, which is one of the 50 rarest birds in the world and would attract many international bird watchers. This endangered spoonbill migrates up and down the China coast on its way back

29

and forth from Vietnam to N. Korea and Japan. By enhancing fish and shrimp populations in shallow water habitat in the Wetland Center, and especially areas near Plots A3 an A5, it is expected that this endangered spoonbill will eventually migrate to the enhanced natural wetland. The remaining 10% of the land area of Plot A1 (about 33 ha at the east edge of Plot A1, will be used for the Visitor Center buildings and auxiliary facilities, including but not limited to a parking area, a visitor automobile road, board walks, and bird viewing blinds.

13. The Wetland Center will focus on ecological management and research of the enhanced natural wetland, bird watching and general education of the public, including introduction of GEF, PEMSEA and the Fund, exhibits of sustainable wetland and marine ecosystems, and other activities to benefit its sustainable operation. The needs of the casual visitor are primarily educational and outdoor experience. For the bird watchers the focus will be on the migratory birds especially rare ones such as the black faced spoonbill. The Wetland Center will have good access from the bridge. However, access to the prime birding habitat will be limited to bird watchers. Group tours will be organized on seawalls and canals surrounding Plot A1 using mini-buses and tour boats, respectively.

14. Another function of the Wetland Center is that its Plots A3 and A5 will act as a nucleus for repopulating the mudflats and marshes outside the new seawalls. The entire coastal region is heavily exploited for shallow water animals. There is a danger that some economically valuable species, their young stages or those of their prey will be eliminated by over-harvesting. The setting aside of the mud flats and marshes around Plots A3 and A5 will assist in providing a safety valve to repopulate the over-harvested areas to the east of the new bridge.

15. The 300 ha of wetlands to be enhanced in Plot A1 and enhanced will have a function of piloting ecological engineering measures for removing non-point source pollutants from the water in the inland canal system that will be pumped through Plot A1. Water residence times will be around 14 days as a minimum. The water from Plot A1 will reach the inshore Hangzhou Bay via the sea gates. In addition, once re-graded and with the farmers removed, the tidal marshes in Plots A3 and A5 will resume their natural pollution control functions with no further need of maintenance. The ability of wetlands to remove nitrate will decrease the threat of eutrophication and red tides in the area. In addition, the ability of the large area of free surface wetlands to remove heavy metals and petroleum products in Plot A1 will be of benefit to both the birds feeding in the shallow marine waters but also to the people who gather and eat the shellfish east of the new bridge.

16. The dual use of the Wetland Center as a bird habitat and pollution removing system is fairly unique and will provide international recognition for the Cixi and Ningbo regions. It is estimated that annually upwards of 200,000 persons will visit the Wetland Center.

Component 3: Ecological Engineering Consultancy and Management Contract (US$ 2.0 million)

17. The GEF project will finance the following three activities under Component 3:

18. Engineering Consultancy for the Constructed Wetland, the Environmental Center and Enhanced Natural Wetland (US$ 500,000): As the ecological engineering design of the constructed wetland and Wetland Center components are closely related and complementary

30

activities, the GEF project will finance an engineering consultancy contract for both components. The consultant team would be responsible for: i) detailed ecological engineering design of the constructed wetland; ii) detailed engineering design of the environmental center building and its auxiliary facilities; and iii) ecological enhancement design for Plots A1, A3 and A5. The engineering contract will be competitively procured by a selection committee composed of Cixi and Ningbo municipal officials.

19. Based on the feasibility study and international experts’ comments, the ecological engineering design of the constructed wetland will develop detailed engineering design for the constructed wetland. The design will focus on three main functions of the constructed wetland: removing pollutants from the effluent of a secondary treatment plant and two secondary purposes: wildlife habitat and human enjoyment.

20. For the engineering design for the Visitor Center buildings, three functions of the Visitor Center will be emphasized: environmental education, wetland research, and bird watching. Green building design principles and standards are required to be adopted in the design. In general, the design should consider the use of recycled or recyclable materials and renewable energy for the construction and operation of the Center. Concepts such as renewable insulation such as sod or reed roofing combined with solar panels on the south side and bird-friendly windmills can be used in interactive displays such as sediment removal by wetlands in cut-away exhibits. The use of a forested car park with permeable surfaces will be considered and located at small distance from the site enticing the visitors to walk from a wood to the center through a wetlands-lake complex.

21. The ecological engineering design for A1 plot will highlight two functions of the area: an undisturbed roosting site for migratory birds at high tide when their feeding areas are inundated, and a wetland area removing pollutants from the water in the canals that will feed these wetlands. Two kinds of pond-wetland systems will be required; the fluctuating large and small seasonal ponds. Each will attract its own fauna. Water levels in these ponds will be managed to ensure open mud flats and shallow water for the roosting migratory birds. Measures to protect migratory birds from their predators will also be considered in the ecological engineering design of Plot A1. For Plots A3 and A5, the ecological engineering design will mainly concern how to re-grade the land to approximate the natural condition of a tidal marsh.

22. Management Assistance Contract for the Wetland Center (US$ 1,300,000): As the Ningbo and Cixi implementation agencies have good expertise in project management and construction, but understandably do not have the ecological expertise necessary to manage the Wetland Center, this GEF project will fund a four-year management assistance contract for a consortium of NGOs, research institutes and universities (the NGO Consortium) to participate in the detailed design and management of the Wetland Center. The NGO consortium could bring the energy and expertise of the academic and NGO communities, and perhaps bring additional funding and lower overall costs. The NGO Consortium is expected to provide technical assistance for the effective and adaptive management and monitoring of the Wetland Center. In particular, the consortium will carry out research to identify appropriate management practices that help the natural wetland evolve to a high quality habitat for international migratory birds and for continuous repopulation of over-exploited coastal resources. The consortium will also monitor how pollution reduction of inland and coastal waters has been achieved at the enhanced natural wetland. By organizing bird watching, environmental education, and other activities that

31

are beneficial to the sustainable operation of the Wetland Center, the consortium is expected to develop a financing mechanism for the sustainable operations of the Center after four years.

23. Replication and Dissemination Activities (US$200,000): It is expected that training and workshops may be needed during project implementation as local implementation agencies are relatively new to concepts and practices related to constructed wetland, wetland conservation, bird watching and wetland education. As part of the Partnership Investment Fund for Pollution Reduction in the Large Marine Ecosystems of East Asia, this GEF project will fund necessary activities to promote the dissemination of knowledge and experience learned from the project and the replication of innovative wastewater treatment techniques in China and in East Asia. These activities will include but not limited to organizing international and domestic workshops in Ningbo and participating in workshops organized by other international organizations such as the GEF, the Fund, and the PEMSEA.

32

Annex 5: Project Costs

CHINA: GEF NINGBO WATER AND ENIVORNMENT PROJECT

Project Costs by ComponentUS$ Million RMB Million

Component 1: North WWTP Constructed Wetland 7.12 58.00

Component 2: Cixi Wetland Center 8.00 65.20 Ecological Restoration Works 3.77 30.70 Environmental Education and Research Center 3.64 29.70 Resettlement 0.59 4.80

Component 3: Design and Management 2.00 16.30 Wetland Center Management Assistance 1.30 10.60 Ecological Engineering and Visitor Center Design 0.50 4.08 Training and Experience Sharing 0.20 1.63

Total Project Cost 17.12 139.50

Project Financing Plan US$ Million RMB MillionGlobal Environment Facility 5.00 40.8Cixi City Government 5.39 43.9Cixi Municipal Sewerage Company 6.12 49.9Ningbo Municipal Government 0.61 5.0

Total 17.12 139.50

Project Financing By Expenditure Category US$ Million RMB MillionWorks 14.92 121.57Consulting Services 1.8 14.67Goods 0.2 1.63Training and Outreach 0.2 1.63

Total 17.12 139.5

GEF Fund Allocation By Expenditure Category US$ Million RMB Million1. Works 2.8 22.82

Constructed Wetland 1 8.15Wetland Center Ecological Restoration 0.9 7.335

Environmental Education Building and Facilities 0.9 7.3352. Goods 0.2 1.633. Consulting Services 1.8 14.674. Training and Outreach 0.2 1.63

Total 5.00 63.57

33

Cost Estimates for the Associated Cixi Component ofthe Ningbo Water and Environment Loan Project

Description

Tota

l Cos

t with

Co

ntin

enci

es

(Mill

ion

RMB)

Tota

l with

Co

ntin

genc

ies

(mill

ions

US$

)

IBRD

Loa

n Am

ount

(mill

lion

RMB)

IBRD

Loa

n Am

ount

(mill

lion

US$)

Component 2: Cixi WastewaterNorthern Wastewater Treatment Works 128.7 15.5 80.5 9.7Mid Trunk Sewer System 148.2 17.9 77.0 9.3Western Trunk Sewer System 153.1 18.4 79.5 9.6Eastern Wastewater Treatment Works 91.3 11.0 56.3 6.8Eastern Trunk Sewer System 126.2 15.2 66.0 8.0City and Town Link Sewer System 239.3 28.8 121.3 14.6Overhead 81.6 9.8 0.0 0.0Resettlement 46.6 5.6 0.0 0.0IDC and Commitment Fee 50.9 6.1 0.0 0.0

Sub-totals 1065.9 128.4 480.6 57.9

34

Annex 6: Implementation Arrangements

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

1. A number of government agencies in the Ningbo Municipal Government and the Cixi City Government are involved in the implementation of the GEF Project. Key institutional arrangements are outlined in the following figure.

Ningbo Municipal Government

2. Water and Environment Leading Group: The Leading Group is in charge of the complex regional water supply and water quality issues confronting the Municipality. The Leading Group is headed by an Executive Vice Mayor and is composed of Directors from the Ningbo Development and Reform Commission (the Ningbo DRC), Environmental Protection Bureau (EPB), Water Resources Bureau, Construction Bureau, and Finance Bureau. The Leading Group's mandate is to provide policy direction and planning support for integrated water and environmental management throughout the Municipality. The Leading Group is supported by an active Office. Both the Leading Group and its Office were actively involved in NWEP preparation and will play a guiding role in implementation. In a manner similar to the NWEP arrangements, the Leading Group and its Office were actively involved in the preparation of the Ningbo GEF Project and will play a guiding role in implementation.

3. NWEP Project Management Office (PMO): The PMO is located under the Ningbo DRC, and is composed of a qualified project manager, an experienced chief engineer, and a procurement specialist, a project accountant, an environmental specialist, a resettlement unit, and a translator. The PMO has been established as a permanent government agency, and thus is able to attract qualified individuals who are offered job security and promotion potential. The PMO is

Ningbo Water and Environment Leading Group

Ningbo Finance Bureau

Ningbo Development and Reform Commission

NWEP PMO

Cixi City Ningbo GEF Project Leading Group

Cixi Construction Bureau

Other municipal agencies

Other Cixi city agencies

Cixi Municipal Sewerage Company

Cixi City Ningbo GEF Project Expert Group

Cixi Wetland Company

35

responsible for overall project coordination and implementation of NWEP and the Ningbo GEF Project and the primary liaison with the Bank (project monitoring and reporting).

4. The Ningbo DRC Foreign Capital Utilization Division: The Division serves as a liaison with international development agencies. It will be an important bridge between the PMO and Finance Bureau, and the Bank during project implementation.

5. The Ningbo Municipal Finance Bureau: The Bureau will manage the GEF special account.

Cixi City Government

6. Cixi City Ningbo GEF Project Leading Group: In August 2005, the Cixi City Government established a Leading Group for the GEF project under the direction of the Mayor and Vice Mayor. The Leading Group's mandate is to provide policy direction and planning support for the GEF Project. The leading group includes 12 directors of the Cixi DRC, EPB, and Construction, Urban Planning, Water Resources, Agriculture, Land Resources, Tourism, and Finance Bureaus. The Cixi Construction Bureau has served as the Office of the Leading Group. The director and one deputy director of the Construction Bureau serve as director and deputy director of the Office of the Leading Group.

7. Cixi City Ningbo GEF Project Expert Group: In addition to the Leading Group, the Cixi City Government has also established an Expert Group led by a nationally renown wetland expert from Fudan University. Two professors from the Nanjing Normal University and the Zhejiang Forestry Survey and Design Institute and seven engineers and senior engineers from the Cixi Environmental Protection, Water Resources, Planning, Agriculture and Construction Bureaus and CMSC are members of the Expert Group. The Expert Group is expected to provide technical support to the Leading Group on the design and implementation of the GEF project.

8. Cixi Construction Bureau: The Cixi Construction Bureau is the lead Cixi government agency for project implementation and has oversight responsibility for the Cixi Municipal Sewerage Company (CMSC) and the Cixi Wetland Center Management Company. The Cixi Construction Bureau will also provide counterpart funding for the Wetland Center.

Implementing Agencies

9. Cixi Municipal Sewerage Company (CMSC): The CMSC will be the implementing agency for Component 1: Constructed Wetland. The CMSC is responsible for wastewater collection and treatment in Cixi City and is the implementing agency for the Cixi component of NWEP. CMSC was legally established in 2004, and is experienced in World Bank procedures.

10. Wetland Center Management Company. The Cixi Construction Bureau has established a small company in 2006 to be responsible for the Wetland Center component. The Management Company staff is experienced people drawn from the Construction Bureau. The Management Company will be assisted by the PMO and the Construction Bureau in complying with World Bank procedures. Because Cixi and Ningbo agencies have limited ecological expertise essential to the management of the Wetland Center, a consortium of NGOs and universities (the NGO consortium) will be selected through a competitive process to provide assistance in the detailed design and management of the Wetland Center. This NGO consortium will bring the energy and expertise of the academic and NGO communities, and perhaps bring additional funding and lower overall costs.

36

Annex 7: Financial Management and Disbursement Arrangements

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

1. A Financial Management Specialist (FMS) from the Bank has conducted an assessment of the adequacy of the project financial management system of the GEF Ningbo Water Management Project. The assessment, based on guidelines issued by the Financial Sector Board on November 3, 2005, has concluded that the project meets minimum Bank financial management requirements, as stipulated in BP/OP 10.02. In the FMS’s opinion, the project will have in place an adequate project financial management system that can provide, with reasonable assurance, accurate and timely information on the status of the project in the reporting format agreed with the project and as required by the Bank.

2. Funding sources for the project include the GEF grant and counterpart funds. The GEF grants will flow from the Bank into the designated account, to be set up at and managed by the Ningbo Municipal Finance Bureau (NMFB), and finally to the project implementing entities through Cixi county finance bureau.

3. The GEF grant will be signed with the People's Republic of China, through the Ministry of Finance (MOF), which will then enter into a grant agreement with Ningbo Municipality. The NMFB will have a subsidiary grant agreement with the Cixi City Government. The Cixi Finance Bureau will then have grant agreements with the project implementing entities. Counterpart funds will come from the Ningbo Municipal and Cixi City Governments.

Audit Arrangement

4. The project’s financial statements will be audited in accordance with standards acceptable to the Bank, In line with other Bank financed projects in China, the project will be audited in accordance with International Auditing Standards and the Government Auditing Standards of the People's Republic of China (1997 edition). The Ningbo Municipal Audit Office has been identified as auditors for the project. Annual audit reports will be issued in the name of the Ningbo Municipal Audit Office.

5. The annual audit report of project consolidated financial statements will be due to the Bank within six months of the end of each calendar year. The consolidated project financial statements will be submitted through the municipal PMO.

Disbursement Arrangement

6. In line with the agreement between the Bank and MOF, the project will use traditional disbursement techniques and will not use report-based disbursement.

Allocation of Grant Proceeds

7. Proceeds of the GEF grant will be disbursed against expenditure categories as shown in the table below.

37

CategoryAmount of the GEF Trust Fund Grant Allocated (Expressed in

US$ Equivalent)% Of Expenditures

(1) Works under Component 1: Constructed Wetland (Contract W1)

1,000,000 30%

(2) Works under Component 2 for ecological restoration of wetlands

900,000 50%

(3) Works under Component 2 for construction of buildings and facilities.

900,000 50%

(4) Goods 200,000 100%

(5) Consultants’ services 1,800,000 100%

(6) Training and workshops 200,000 100%

Total 5,000,000

Use of Statement of Expenditures (SOEs)

8. The proceeds of the grant may be disbursed on the basis of SOEs as indicated in the table below.

Expenditure Category Contracts Less than US$ Equivalent Works NoneGoods US$100,000Consulting Firms US$100,000Individual Consultants US$50,000

9. Expenditures exceeding the above limits will be made in accordance with respective procurement guidelines and signed contracts.

Designated Account (SA)

10. One designated account (DA) will be established in the NMFB. The authorized allocation will be US$ 500,000. GEF funds would be disbursed from the DA set up at the Finance Bureau to the project implementing entities and/or supplier and contractors.

38

11. NMFB will be directly responsible for the management, monitoring, maintenance, and reconciliation of the DA activities of the project. Supporting documents required for Bank disbursements will be prepared and submitted by respective project implementing entities to NMFB for final verification and consolidation before submission to the Bank. The flow of the withdrawal application is as follows:

Financial Management and Reporting Arrangements

12. Implementing Entity . The PMO has been set up under the Ningbo Municipal Planning Commission. The Cixi Municipal Sewerage Company will be the implementing entity for the constructed wetland component, the Cixi Wetland Management Center will be the implementing entity for the Wetland Center and Component 3: Design and Management Assistance.

13. Funds Flow . Funds flow for Bank loan will follow the Bank and MOF requirements, as follows:

14. Accounting Organization and Staffing . Adequate project accounting staff with educational background and work experience commensurate with the work they are expected to perform is one of the factors critical to successful implementation of project financial management. Based on discussions, observation and review of educational background and work experience of the staff identified for financial and accounting positions in the implementing entities, the task team noted that the financial staff recruited should be able to meet the Bank’s minimum requirements.

15. To strengthen financial management capacity and achieve consistent quality of accounting work, the task team has suggested that a project financial management manual (the Manual) be prepared based upon the existing NWEP Manual. The Manual will provide detailed guidelines on financial management, internal controls, accounting procedures, fund and asset management and withdrawal application procedures. The NMFB agreed to preapre the Manual for the GEF project. The Manual will be finalized and distributed to all the financial staff before project effectiveness.

16. Accounting Procedures . The administration, accounting, and reporting of the project will be set up in accordance with Circular #13: "Accounting Regulations for World Bank Financed Projects" issued in January 2000 by MOF. The circular provides in-depth instructions of

World Bank DA managed

by NMFB

Cixi City FB

Implementing entities

Implementing Entities

Approved by Cixi county FB

Approved by Ningbo PMO

Approved by NMFB

World Bank

39

accounting treatment of project activities and covers the following: chart o f account, detailed accounting instructions for each project account, standard set of project financial statements, and instructions on the preparation of project financial statements.

17. The standard set of project financial statements mentioned above has been agreed between the Bank and MOF and applies to all Bank projects appraised after July 1, 1998 and includes the following: Balance Sheet, Statement of Source and Use of Fund, Statement of Implementation of Grant Agreement, and Statement of Designated Account.

18. Each of the implementing entities will be managing, monitoring, and maintaining the respective project accounting records. Original supporting documents for project activities will be retained by originating implementing entities. In addition, each implementing entity will prepare financial statements, which will be submitted to the Ningbo PMO for review and approval. The Ningbo PMO will furnish the consolidated project financial statements to the Bank on a regular basis.

19. Internal Audit . There is no formal independent Internal Audit department for the project. However, this will not impact the project's financial management as PMO management and monitoring, and yearly external audits, will ensure that financial management controls are functioning appropriately.

20. Financial Management Action Plan . The following proposed time-bound actions were agreed with the PMO:

Action Responsible Entity Completion Date1. Financial management training to all relevant project staff

Ningbo PMO and NMFB Before effectiveness

2. Financial management manual issued to related financial staff

Ningbo PMO and NMFB Before effectiveness

40

Annex 8: Procurement Arrangements

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

A. General

1. Procurement for the proposed project would be carried out in accordance with the World Bank’s "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Grant, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

2. Procurement of Works: Works procured under this project would include: northern WWTP constructed wetland, environment educational center and ecological restoration of natural wetland. The procurement will be done using the Chinese Model Bidding Documents (MBDs). ICB is not expected. But if there is ICB, the Bank’s Standard Bidding Documents (SBDs) would be used. Prior review will be required will be required on all civil works contracts to ensure GEF grant funds are utilized in an optional manner.

3. Procurement of Goods: The Wetland Center will require items such as vehicles, computers, projectors, boats, etc. These will be procured using World Bank Goods procurement procedures. For contracts less than US$100,000 national shopping can be used. For contracts greater than US$100,000 NCB goods procurement will be used. Since the GEF grant allocation for goods is only US$200,000, no ICB procurement of goods is expected.

4. Selection of Consultants: There will be two major consultant contracts. The first consultant contract will be for the engineering design of the constructed wetland, ecological restoration of the Wetland Center, and design of the Wetland Center buildings and facilities. This will be procured under the QCBS method. The second contract will be for assistance in the design and management of the Wetland Center. This will most likely be provided by consortia of NGOs, universities and/or research institutes. Therefore these contracts could be procured using QBS procedure. Short lists of consultants for services estimated to cost less than US $300,000 equivalent per contract may be composed entirely of national consultants, in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

B. Assessment of the agency’s capacity to implement procurement

5. Procurement activities for Component 1: Constructed wetlands will be carried out by the Cixi Municipal Sewerage Company (CMSC) in collaboration with the Ningbo PMO and Cixi Construction Bureau. Procurement activities for Components 2 and 3: ecological restoration, environment education center and the consulting services will be carried out primarily by the Cixi Construction Bureau with Cixi Wetland Management Office as the actual implementation agency, with direct assistance from Ningbo PMO. China Minmetal International Tendering Company will be the procurement agent for the three civil works contracts, constructed wetland,

41

ecological restoration of the natural wetland, and the environment education center. This tendering company is also the procurement agent for the on-going Ningbo Water and environment Project. The Ningbo PMO will provide overall coordination and instruction for all procurement activities.

6. For this GEF-financed project, the Cixi Construction Bureau has established an office, Cixi Wetland Office, with four staff to be responsible for the preparation of the project, This office will be transferred to an entity with legal capacity to sign contracts. The assessment found that the four staff have experience with local procurement procedures, and capacity to coordinate the procurement activities. With the assistance from the tendering company and guidance from Ninbo PMO, this office has the capacity to conduct the procurement. CMSC is implementing a component of the Ningbo Water and Environment Project and the general performance is satisfactory. Inside the Ningbo PMO, the chief engineer will be responsible for the overall coordination and overseeing of the procurement activities, who is also managing the on-going Ningbo Water and Environment Project.

7. An assessment of the capacity of the Implementing Agency to implement procurement actions for the project has been carried out by Zhentu Liu, senior procurement specialist of the World Bank Office, Beijing, on March 29, 2006. The assessment found that the organizational structure for implementing the project and the staffing of the related entities are adequate for implementing the project.

8. The major risk concerning the procurement component for implementation of the project was identified which is the lack of experience with the World Bank projects by Cixi Wetland Office. The corrective measures which have been agreed are (1) The Ningbo PMO will provide direct guidance; and (2) China Minmetal International Tendering Company will be employed as the procurement agent.

9. The overall risk for procurement under the GEF project is average.

C. Procurement Plan

10. The Ningbo PMO, at appraisal, developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between the Borrower and the Project Team on March 29, 2006 and is available at the Ningbo PMO and through the World Bank Internet Site. The Procurement Plan will be updated annually, in agreement with the Bank to reflect actual project implementation needs, and improvements in institutional capacity. The Procurement Plan is provided in Table B below.

D. Frequency of Procurement Supervision

11. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agencies has recommended procurement supervision missions every six month to visit the field (includes special procurement supervision for post-review/audits).

42

Table A: Thresholds for Procurement Methods and Prior ReviewExpenditure

CategoryContract Value

Thresholds (US$)Procurement

MethodContract Subject to Prior

Review (US$)1. Works Less than $15 million NCB All2. Goods Less than US$500,000

Less than US$100,000

NCB

National Shopping

None

None

2. Consulting service

Above $100,000 (Firms)

Individual

QBS and QCBS

Other

All

Above $50,000

Table B-1: Proposed Procurement Plan: Works and GodsRef.No.

Package Description

Content Estimated Value

Procure. Method

P-Q

Review by Bank

Dom. Pref.

Expected Bid-Opening Date

Contract Duration

W1 1. Northern WWTP Constructed Wetland

86 ha constructed wetland and associated facilities

$7,120,000 NCB works

N Prior N May 2007 8 months

W2 2. Wetland Center Ecological Restoration

Earthworks, ponds, vegetation, boardwalks, etc.

$4,770,000 NCB works

N Prior N December 2007

12 months

W3 3. Wetland Center Buildings and Facilities

Building and associated infrastructure

$3,640,000 NCB works

N Prior N May 2007 12 months

Goods Wetland Center Equipment

Too Be Defined

< $200,000 NS or NCB Goods

N None Y TBD TBD

43

Table B-2: Proposed Procurement Plan: Consulting Services1 2 3 4 5 6 7

Ref. No.

Description of Assignment

EstimatedCost

SelectionMethod

Reviewby Bank(Prior / Post)

ExpectedProposals

SubmissionDate

Comments

C1 Constructed Wetland and Wetland Center Engineering Design

500,000 QCBS Prior August 2006 Start: December 2006, Duration 18 months

C2 Wetland Center Management Assistance Contract

1,300,000 QBS Prior August 2006 Start: December 2006, Duration: 4 years

C3 Training, Workshops, Misc.

200,000 SOE

2,000,000

44

Annex 9: Economic and Financial Analysis

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

1. Economic Analysis: The GEF project will generate considerable economic benefits associated with wetland conservation including: i) helping to maintain the ecological health and aquaculture productivity along the coastline by restricting harvesting within the Wetland Center and thereby creating a “seed bed” for the adjacent areas; ii) providing habitat for local and migratory birds, and facilitating bird watching within the Wetland Center, and thereby generating benefits for people who place amenity and/or existence value on healthy bird populations; and iii) improving the quality of life in Cixi City by preserving wetland habitat which has been the defining geographical feature in Cixi’s historical and cultural development. These benefits are difficult to quantify and thus a formal cost-benefit analysis was not undertaken for the project.

2. Financial Analysis for Component 1: Constructed Wetland: The constructed wetland will be part of the CMSC’s wastewater treatment plant and thus the appropriate level of financial analysis is CMSC. Under NWEP, a comprehensive financial analysis was undertake for CMSC, and legal covenants were included in the NWEP loan agreement which requires Cixi City to raise tariffs to a level sufficient to covering operating costs and debt service. The Bank task team is monitoring the tariff increases and financial status of CMSC during NWEP supervision. The following paragraphs highlight the key CMSC financial issues.

3. Until April 2004, the city government applied wastewater charges only to commercial and special use groups. However, as of May 2004, new wastewater tariffs were introduced that apply to all customer groups. The average wastewater tariff in Cixi is now RMB 0.37/m3 compared to RMB 0.49/m3 in the Ningbo urban core. CMSC, in contrast to NWSC, will depend heavily on equity contributions to fund its capital investment program. Cixi City will contribute approximately 350 million RMB to CMSC, about one-third of the total project cost. An analysis of the fiscal impact indicates that the project counterpart contributions to be allocated by the Cixi Government are well within its financial capacity.

Projected Tariff Requirements in Cixi (RMB/m3 water consumed, current terms)Weighted Average Tariff Existing Projected

2004 June. 2006 Jan. 2008 Jan. 2010Water Supply 2.06 2.37 2.72 2.72Wastewater Tariff 0.37 0.86 1.43 1.69Total 2.43 3.23 4.15 3.41Increase in Wastewater Tariff 132% 66% 18%

4. The financial projections prepared for CMSC indicate that very significant tariff increases will be required to enable it to operate on a financially viable basis. The average tariff will need to be increased by about 130% as of 2006, and then by a further 66%, to RMB 1.43/m3, by the beginning of 2008. The increase in 2008 is designed to fully recover NWEP operating and maintenance costs and to meet debt service on the NWEP project loans. Additional, but smaller increases are projected to be required in 2010 and 2012, of 18% and 15% respectively, which would bring the average tariff to just under RMB 2/m3. Even with these very large tariff

45

increases, debt service will place a considerable strain on CMSC, particularly over the 2010 – 2014 period. Assuming that the required tariff increases are successfully implemented beginning in 2006, the company should be able to comply with the cost recovery covenant in all years. However, the projections indicate that CMSC might experience some difficulty in meeting the debt service covenant in those years in which debt service is greatest.

5. Changes in key variables have been assessed in terms of their potential impact on the financial position of CMSC. A one year delay in implementing the required tariff increases would have the greatest adverse impact on the company. A delay in the implementation of the first two increases now planned for the beginning of 2006 and 2008 could constrain CMSC’s capacity to provide its share of project counterpart funding. The estimated shortfall is about RMB 20 million, which could be addressed through an increase in the city government’s contribution. The city government has agreed to meet all counterpart requirements not met by CMSC.

6. Financial Analysis for Component 2: Wetland Center: All of the counterpart funding for the Wetland Center, which is estimated at around US$6.9 million, will be provided by the Cixi City Government through the Construction Bureau. The estimated annual cost of running the Center is around RMB 2.8 million per year (US$350,000 year) as shown in the table below:

No. Items Numbers Unit price Total1 Staff salary 12 4,000 576,000/year2 Public awareness activities 300,000/year3 Communication cost 30,000/year4 Public facilities maintenance 500,000/year5 Equipment maintenance 50,000/year6 Other overheads (training,

travel, workshops, study tours)

400,000/year

7 Office stationary and supplies 30,000/year

8 Water and power 300,000/year9 Part-time staff 15 1,800 324,000/year10 Centre logistic management 300,000/year

Total RMB 2,810,000x4years=11,240,000 USD1,405,000

7. There will be at least three potential sources of revenue for the Center: i) user fees, ii) donations; and iii) budget transfers from the Cixi City Government. The table below identified various scenarios for meeting revenue requirements:

Scenario Low Base HighNumber of Vistors 100,000 150,000 200,000Visitor Fee (RMB/per person) 20 20 15User Revenue (RMB/Year) 2,000,000 3,000,000 3,000,000Cixi Government Transfers (RMB/Year) 1,000,000 0 0

46

8. The analysis shows that in the base scenario, the Wetland Management Company can meet is operational cost with a reasonable fee of 20 RMB/person (US$2.5). In the high scenario, the user fee could be dropped to 15 RMB. Under the low scenario, the Cixi City government may be required to subsidize the operation of the Center. Fortunately, the Cixi City government has a strong fiscal position and has made a commitment to support the Wetland Center as necessary.

9. One of the first tasks of the NGO/University Consortium is to develop a Business Plan for the Wetland Center to more accurately estimate costs and revenue requirements. In addition, the Consortium will include a professional fund raiser who will solicit donations and grants from companies and individuals to support the Wetland Center operations.

47

Annex 10: Safeguard Policy Issues

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

1. The project is classified as a Category B project and the following safeguard policies are triggered: i) environmental assessment; ii) natural habitats; and iii) resettlement. Ningbo Municipality is a repeat borrower, with experience of a completed project (Zhejiang Multi-Cities Project), the ongoing Zhejiang Urban Environmental Project which includes four components in Ningbo City, and the ongoing NWEP. The Ningbo Municipal and Cixi City authorities have developed a good understanding and experience in implementing World Bank safeguard policies.

Environmental Assessment (OP/BP 4.01)

2. The GEF Ningbo Project is an environmental enhancement to the NWEP. Two studies were undertaken during preparation to provide comprehensive environmental analysis and project design: i) Constructed Wetland Feasibility Study; and ii) Wetland Center Design Study. These studies show that the GEF project as a whole will have a significant net positive impact, as it will improve ambient water quality in Cixi City and the Hangzhou Bay, and promote sustainable development of Cixi City of Ningbo Municipality. The negative impacts associated with the project are expected to be non-existent or minimal, and the impacts are expected to be site specific, reversible, and easily mitigated. An Environmental Management Plan has been prepared and outlines necessary mitigation measures, institutional arrangements, and monitoring plan to avoid, minimize or otherwise compensate for the adverse impact associated with the construction and operation of the constructed wetland treatment system and the wetland center.

Component 1: Constructed Wetland Treatment System

3. The overall wastewater management approach in Cixi City, including the constructed wetland, was reviewed in the approved NWEP EIA. The Northern WWTPs is designed to meet discharge standard Class lA, with limits of 10mg/l BOD and SS, and removal of nutrients to 15 mg/l total-nitrogen and 0.5 mg/l of phosphorus. The proposed treatment process is a modified A/O (anaerobic followed by aerobic) with tertiary treatment. Since the land in the vicinity of the plants is recently reclaimed coastal land with no development and is owned by the Cixi City government, there are no land acquisition requirements or resettlement issues. The constructed wetland was therefore chosen as the preferred alternative because it provides robust treatment with considerable buffering capacity. Another objective of the constructed wetland is to help maintain and enhance a wetland ecological habitat as the surrounding area develops.

4. The use of constructed wetlands for tertiary treatment was reviewed in the approved NWEP EIA at a conceptual level. In 2006, the exact location and size of the constructed wetlands were decided after two rounds of broad stakeholder consultations and multiple rounds of internal discussion within the Cixi City Government (see Map IBRD 34441). A total of 86 ha of land have been assigned as the constructed wetland site to the Northern WWTP.

5. Overall environmental impacts of the constructed wetland are expected to be positive. The study on the Constructed Wetland was carried out by the South China Institute of Environmental Sciences (SCIES) of the State Environmental Protection Administration (SEPA). The study has clearly defined the objective of the constructed wetland program and prepared

48

alternative constructed wetland designs without considering land requirements. Based on Cixi’s decision on land-related issues, the study has proposed, and the Cixi City Government has accepted, a preferred configuration of wetland design and land use, i.e. a gravel bed plus free surface wetland. International wetland experts have reviewed the study and the preferred design and agreed that the proposed design can serve the function of tertiary wastewater treatment and achieve the targeted discharge standards. Technical assistance will be continuously provided under the GEF project to ensure international best practice is followed in the detailed design, construction, start-up and operations and monitoring of the constructed wetlands.

Component 2: Establishment of the Wetland Center

6. The Cixi City Government has designated an existing area in the general vicinity of the Ningbo-Shanghai Bridge as the Wetland Center (see Map IBRD 34441 for exact location and boundary of the area). The Wetland Center would cover an area of approximately 43.5 km2 and include the following plots: i) Plot A1-recently reclaimed and within the sea dike on the border of the 10th Sea Dike and to the west of the Ningbo-Shanghai Bridge (4.3 km2); ii) Plot A3-tidal marshland to the west of Plot A1(1.4 km2); iii) Plot A5-island to the north of Plot A3 (1.8 km2); and iv) the tidal mudflat/bay section adjacent to Plots A1, A3, and A5 and covering approximately 36 km2. Plots A2 and A4 would remain agricultural or low-density buffer areas.

7. During the project preparation, a study on the Wetland Center has been completed by Wetlands International and the EDAW Inc., a United States-based urban planning firm. This study is comprised of three parts: i) investigating environmental baseline of the Cixi coastal area; ii) designing the Wetland Center conceptually; and iii) developing a land use plan for the Wetland Center. This study concludes that the Wetland Center will help promote environmental awareness, and protect wetland and coastal resources. In addition, the environmental impacts of the Wetland Center will be expected to be positive by preserving habitat for plants, aquatic species, and birds, and by educating general public on environmental protection, wetland conservation and bird watching. Negative environmental impacts associated with the construction of the visitor center and the restoration and enhancement of the natural wetland areas are believed minor, site specific and none are irreversible.

8. The proposed visitor center will be a medium-sized building with a parking lot and access road. The parking lot will be built in southeast forest corner of Plot A1 of the natural wetland area. The access road will be built on an existing road. The conceptual design of the visitor center has suggested that international green building principles be followed to minimize the consumption of energy, water and non-recyclable materials, minimize waste generation and discharge, and maximum the use of recycled materials and renewable energy. The conceptual design of the Wetland Center is benefited from an international study tour organized during project preparation.

9. The study has suggested that eco-tourism, namely, bird watching activities, be carried out at the Wetland Center. The study estimates that annual visitors could potentially be around 200,000 person visits and the maximum allowed number of visitors should be no more 3,000 per day. A visitor automobile road is suggested to be constructed on an existing road along the east boundary of Plot A1 of the natural wetland area. According to the land-use plan of the natural wetland, a number of bird watching board walk and bird viewing blind next to the visitor automobile road will be constructed to facilitate environmental education and bird watching

49

activities. By limiting these construction activities to the east boundary of Plot A1, future impacts related to these constructions will be minimized.

Natural Habitats (OP/BP 4.04)

10. Currently, none of the coastal area along Cixi is designated by national authorities as legally defined protected areas. The objective of the GEF Ningbo project is to help conserve, rehabilitate, enhance and create new natural habitats along the Cixi coastline. By doing so, the constructed wetland and the Wetland Center will preserve or enhance existing natural habitats for benthos, vegetation, and migratory and indigenous waterfowls.

11. The Environmental Baseline Study of the Cixi Coastal Area (as a part of the Study on Environmental Center and Associated Natural Wetlands), carried out by the Wetland International and the EDAW Inc., identified that the ecological function of the Cixi coastal area was secondary habitats for migratory birds before these areas were either enclosed by the sea-dikes or used for crab farming, fishing or shellfish collection. This study suggests that wetland should be restored or enhanced to improve habitat quality.

12. Based on the findings of the Environmental Baseline Study and technical comments of international experts, the study on natural wetland has proposed to establish an enhanced natural wetland for international migratory birds around the Wetland Center. Within this area, only guided bird watching activities will be allowed. Fishing, crab farming, shellfish collection activities will be prohibited.

13. The study also proposes minor land-use modifications in the Wetland Center to enhance its ecological function. In particular, Plot A1 of the Wetland Center will have diverse resting habitats (such as hills, deep and shallow ponds) for different types of migratory waterfowl. Existing crab farms in areas outside of the seawalls, namely Plots A3 and A5, will be leveled to restore to natural condition, and thus to provide undisturbed feeding areas for waterfowls. Consequently, these project activities are expected to greatly improve quality of natural habitat for international migrating birds and other species.

14. Based on technical suggestions of international experts, the study on the constructed wetland, carried out by SCIES, has incorporated ecological and aesthetical values into the design of the constructed wetland. Various islands and slopes have been proposed for the constructed wetland to attract different types of migratory and indigenous waterfowl.

Involuntary Resettlement (OP/BP 4.12)

15. The project does not involve any residents or permanent structures in the constructed wetland or the Wetland Center. All of the land is owned and regulated by the Cixi City government. No land acquisition is required. Field trips by the Bank team have confirmed that the constructed wetland site was recently reclaimed land and no agricultural or industrial activities exist on the sites. Therefore, no resettlement action is needed for the constructed wetland component of the project. Instead, resettlement action will focus only on aquaculture activities existing in the Wetland Center.

16. After the Cixi City Government designated the specific areas for the Wetland Center, field surveys were carried out by the resettlement consultant – Hehai University – in November and December 2005 and March and April 2006. The Weltland Center would affect households in

50

two townships: Zhouxian Town and Andong Town. It is confirmed that all rural households affected by the establishment of the Wetland Center have agricultural (with an average 2.4 mu in Zhouxian and or 3.9 mu in Andong) in addition to their aquaculture activities in the Wetland Center. The establishment of the Wetland Center will not affect their use of these agricultural lands.

17. Cixi City has had extensive experience in coastal zone reclamation and compensation issues associated with the termination of temporary use rights. Users of land under the reclamation process understand that their land use rights are temporary and there are long-established local procedures for dealing with this issue. Cixi has an impressive record in providing adequate compensation for local farmers affected by reclamation activities. For this GEF project, Cixi has adapted their compensation policies to meet the Bank’s resettlement requirements.

18. The project identified that the households affected by the Wetland Center can be classified into four types based on aquaculture activities: (1) households engaging in crab or fish farming in tidal marsh, i.e., aquaculture farmers; (2) households engaging in fishing with preset nets on tidal mudflats, i.e., aquaculture netters; (3) households using boats to fish in the Wetland Center, i.e., fishermen; and (4) households occasionally picking sea products (mainly clam and snail) on tidal mudflats, i.e., pickers. The following table summarizes the number of households engaged in each activity.

Aquaculture Farmers: Tidal

Wetlands

Fishermen Aquaculture Netters: Tidal

Mudflats

Occasional and Informal Pickers

Households 54 40 50 --

Population 168 120 150 13 villages

Area (Mu) 2508 -- Tidal Mudflats

Note: All fishermen were also aquaculture farmers, and there is an overlap of 30 households between aquaculture farmers and netters.

19. Resettlement Entitlement: Due to the common practice of land reclamation along the Cixi Coast the use rights of households for aquaculture activities are universally understood to be temporary and subject to government regulation. In order to comply with Bank policy, Cixi City government agreed to compensate aquaculture farmers, fishermen, and netters with replacement costs for ponds, huts, gates, bamboo, nets, boats, etc. at the replacement cost. Aquaculture farmers and fishermen are required to obtain a license to utilize the coastal area, and approximately 80% of the households have paid their license fees. Households which do not have a license can purchase one and receive full replacement cost, or receive a reduced payment for their assets.

20. Many rural households in the two towns near the wetland center have been involved in occasionally picking or digging of sea products on the entire mudflats outside of the sea dyke (inside and outside of the Wetland Center). The Bank team and Cixi officials recognize that the pickers have access to other parts of the mudflats and the establishment of the Wetland Center should actually improve overall productivity along the coastline. Although the pickers in these

51

towns would probably be inconvenienced, it is not clear if they would not suffer an economic loss (and could in fact reap economic benefits due to increased yield). It is agreed that the Cixi government would provide an infrastructure development fund assistance to the affected villages of the two towns as compensation for the inconvenience from the Wetland Center. Such infrastructure development assistance should be provided based on broad consultation with farmers in these villages. Participatory consultation plan and methodology and the budget for village infrastructure development projects are detailed in the RAP.

21. Income Restoration: All aquaculture farmers, fishermen and netters would be offered the following income restoration opportunities: i) additional agriculture land will offered for lease to the displaced households based on their requests, including a 10,000 RMB cash bonus from Cixi City (Cixi City has an abundance of available agricultural land due the reclamation activities); ii) free vocational training to take advantage of the booming economic development and strong local job market; and iii) eligibility for the local social insurance program which is usually not available to rural households.

22. Information Disclosure: The RAP has been disclosed locally and at the World Bank Infoshop, and all potentially affected households have been surveyed and consulted. The draft RAP was disclosed in the World Bank Infoshop in February 2006 and the updated RAP was submitted in April 2006. The affected households would be informed would be informed again before the project starts at the appropriate time, and the PMO and Township government would support the affected farmers in receiving their entitlements.

23. Implementation and Monitoring: The Cixi Construction Bureau will be responsible for funding resettlement activities in coordination with local government officials. The resettlement office of the Ningbo NWEP PMO will supervise resettlement. Resettlement funds will be channeled through the Cixi Construction Bureau directly to households and villages, thus reducing opportunities for delay or unauthorized commissions. Village committees will play an important role in monitoring resettlement activities. An independent monitoring institute will supervise resettlement activities twice a year as required by the Bank. An appropriate grievance system has been formulated and will be set up to deal with any complaints. An independent resettlement monitor will be contracted to report on resettlement activities for Bank supervision missions.

Consultation and Disclosure

24. Wide local consultation and dissemination of the project preparation documents and descriptions of the issues have been carried out since these are the primary means of informing stakeholders. Key stakeholders include the Ningbo and Cixi City government agencies, the Andong and Hangzhou Bay Economic Development Zones, the Bridge Company, local research institutes investigating Hangzhou Bay issues, citizens and fishermen along the Cixi coastline, and local and international NGOs. With the Bank’s assistance, the Cixi City Government organized two stakeholder workshops in June and November 2005. Mayor and vice mayors of the Cixi City, key officials from Ningbo and Cixi government agencies, representatives from international and domestic NGOs, and professors from research institutes and universities working on Hangzhou Bay wetland issues participated the two stakeholder workshops, and heatedly debated how to pursue the GEF project in Cixi.

52

25. The first workshop was designed to develop a “sustainable vision” for the GEF project. This workshop was successful in terms of informing all stakeholders about proposed project activities and motivating all stakeholders to present their personal or agencies’ views on the project. This workshop also decided that two studies on the constructed wetland and on the Wetland Center to be carried out to help stakeholders make scientifically sound decision. The second workshop was carried out by having key stakeholders comment on preliminary results of the two studies. Results of the two studies and suggestions of an internationally renown wetland scholar and practitioner provided scientific inputs for all stakeholders to reach an agreement on the proposed designs and the size of both the constructed wetland and Wetland Center. Both stakeholder workshops were recorded and broadcasted on local television channels. In addition, local newspapers have reported major milestones in project preparation.

26. In addition to these two stakeholder workshops, an international study tour in August 2005 provided an precious opportunity for key government officials from both the Ningbo Municipal and Cixi City Governments, representatives from the Wetlands International and SCIES to learn international practices in wetland construction and conservation and to develop a shared vision on the design of the wetlands of their interests.

27. The final reports of the Studies on the Constructed Wetland and the Wetland Center were disclosed in the World Bank Infoshop in February and April 2006, and in Ningbo and Cixi libraries and government websites in February and April 2006.

53

Annex 11: Project Preparation and Supervision

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

Planned ActualPCN review August 18, 2005 August 18, 2005Initial PID to Infoshop August 18, 2005 August 18, 2005Initial ISDS to Infoshop September 29, 2005 September 29, 2005Appraisal April 10, 2006 April 4, 2006Negotiations May 2006 May 10-12, 2006Board/RVP approval June 15, 2006 June 29, 2006Planned date of effectiveness September 1, 2006Planned date of mid-term review December 2008Planned closing date December 2010

Key institutions responsible for preparation of the project:1. Ningbo Municipal Development and Reform Commission2. Ningbo Municipal Finance Bureau3. Cixi City Government4. Cixi Construction Bureau5. Cixi Municipal Sewerage Company

Bank staff and consultants who worked on the project included:Name Title UnitGreg Browder Sr. Environmental Engineer EASURLixin Gu Sr. Urban Environmental Specialist EASURJiang Ru Environmental Specialist/Consultant EASENZhefu Liu Sr. Social Development Specialist EAPCOAlex Horen Environmental Engineer ConsultantZhentu Liu Sr. Procurement Specialist EAPCOPeishen Wang Sr. Environmental Specialist EAPCOYi Dong Finance Analyst EAPCO

Bank funds expended to date on project preparation:1. Bank resources: US$150,0002. Trust funds: US$100,0003. Total: US$250,000

Estimated Approval and Supervision costs:1. Remaining costs to approval: US$25,0002. Estimated annual supervision cost: US$60,000

54

Annex 12: Documents in the Project File

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

World Bank

PCNPID at PCN StageISDS at PCN StageMinutes of PCN Review at PCN StageMinutes of PCN Review Meeting

PADPID at PAD StageISDS at PAD StageMinutes of ISDS Review at PCN StageMinutes of PAD Review MeetingMinutes of Decision MeetingMinutes of Negotiation

GEF

GEF PDF-B Proposal (final)GEF Review Sheet for Pipeline EntryPDF-B Output Reports:

1) Environmental Baseline Study of the Cixi Coastal Area2) Feasibility Study of Constructed Wetland3) Conceptual Design of the Environmental Education and Research Center4) Conceptual Design of the Enhanced Natural Wetland Associated with the

Environmental Education and Research Center5) Management Contract for the Environmental Education and Research Center

GEF Project Brief

55

Annex 13: Statement of Loans and Credits

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

Original Amount in US$ Millions

Difference between expected and actual

disbursements

Project ID

FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d

P057933 2005 CN-TAI BASIN URBAN ENVMT

61.30 0.00 0.00 0.00 0.00 61.00 1.85 0.00

P075730 2005 CN-HUNAN URBAN DEV

172.00 0.00 0.00 0.00 0.00 172.00 0.00 0.00

P073002 2004 CN-Basic Education in Western Areas

100.00 0.00 0.00 0.00 0.00 96.04 -3.96 0.00

P084003 2004 CN-GEF GUANGDONG PRD URB ENV

0.00 0.00 0.00 10.00 0.00 10.00 0.00 0.00

P065035 2004 CN-Gansu & Xinjiang Pastoral Development

66.27 0.00 0.00 0.00 0.00 61.37 7.50 0.00

P069852 2004 CN-Wuhan Urban Transport

200.00 0.00 0.00 0.00 1.00 198.00 125.12 0.00

P066955 2004 CN-ZHEJIANG URBAN ENVMT

133.00 0.00 0.00 0.00 0.00 131.67 0.92 0.00

P065463 2004 CN - Jiangxi Integrated Agric. Modern.

100.00 0.00 0.00 0.00 0.00 99.00 8.46 0.00

P075035 2004 CN - GEF-Hai Basin Integr. Wat. Env.Man.

0.00 0.00 0.00 17.00 0.00 16.55 0.96 0.00

P077137 2004 CN-4th Inland Waterways

91.00 0.00 0.00 0.00 0.46 90.55 2.33 0.00

P077615 2004 CN-GEF-Gansu & Xinjiang Pastoral Develop

0.00 0.00 0.00 10.50 0.00 10.50 1.90 0.00

P081749 2004 CN-Hubei Shiman Highway

200.00 0.00 0.00 0.00 1.00 199.00 0.00 0.00

P075728 2004 CN-GUANGDONG/PRD UR ENVMT

128.00 0.00 0.00 0.00 0.00 128.00 0.00 0.00

P075602 2004 CN-2nd National Railways (Zhe-Gan Line)

200.00 0.00 0.00 0.00 0.00 200.00 10.00 0.00

P067337 2003 CN-2nd GEF Energy Conservation

0.00 0.00 0.00 26.00 0.00 14.60 20.97 0.00

P040599 2003 CN-TIANJIN URB DEV II

150.00 0.00 0.00 0.00 0.00 143.82 8.67 0.00

P068058 2003 CN-Yixing Pumped Storage Project

145.00 0.00 0.00 0.00 0.00 132.38 -0.44 0.00

P076714 2003 CN-2nd Anhui Hwy 250.00 0.00 0.00 0.00 0.00 238.50 29.83 0.00P070191 2003 CN-SHANGHAI URB 200.00 0.00 0.00 0.00 0.00 184.92 15.25 0.00

56

ENVMT APL1P070441 2003 CN-Hubei Xiaogan

Xiangfan Hwy250.00 0.00 0.00 0.00 0.00 116.33 -23.67 0.00

P058847 2003 CN-3rd Xinjiang Hwy Project

150.00 0.00 0.00 0.00 0.00 92.81 19.47 0.00

P064729 2002 CN-SUSTAINABLE FORESTRY DEV. PROJECT

93.90 0.00 0.00 0.00 0.00 71.77 15.94 0.00

P060029 2002 CN-Sustain. Forestry Dev(Natural Forest)

0.00 0.00 0.00 16.00 0.00 12.08 6.20 0.00

P058846 2002 CN-Natl Railway Project

160.00 0.00 0.00 0.00 0.00 29.76 11.43 0.00

P068049 2002 CN-Hubei Hydropower Dev in Poor Areas

105.00 0.00 0.00 0.00 0.00 79.75 25.42 0.00

P070459 2002 CN-Inner Mongolia Hwy Project

100.00 0.00 0.00 0.00 0.00 72.71 6.38 0.00

P071147 2002 CN-Tuberculosis Control Project

104.00 0.00 0.00 0.00 0.00 71.97 -32.03 0.00

P056199 2001 CN-3rd Inland Waterways

100.00 0.00 0.00 0.00 0.00 68.67 10.84 0.00

P056516 2001 CN - WATER CONSERVATION

74.00 0.00 0.00 0.00 0.00 29.04 9.34 0.00

P058845 2001 Jiangxi II Hwy 200.00 0.00 0.00 0.00 54.77 52.40 15.50 0.00P047345 2001 CN-HUAI RIVER

POLLUTION CONTROL

105.50 0.00 0.00 0.00 0.00 74.60 -30.90 0.00

P051859 2001 CN-LIAO RIVER BASIN

100.00 0.00 0.00 0.00 0.00 52.64 26.11 0.00

P056596 2001 CN-Shijiazhuang Urban Transport

100.00 0.00 0.00 0.00 0.00 81.58 60.91 0.00

P045915 2001 CN-Urumqi Urban Transport

100.00 0.00 0.00 0.00 0.00 46.16 46.16 0.00

P058843 2000 CN-Guangxi Highway 200.00 0.00 0.00 0.00 0.00 71.94 37.94 0.00P064730 2000 CN - Yangtze Dike

Strengthening Project210.00 0.00 0.00 0.00 0.00 99.91 99.91 0.00

P042109 2000 CN-BEIJING ENVIRONMENT II

349.00 0.00 0.00 25.00 0.00 272.26 201.29 0.00

P064924 2000 CN-GEF-BEIJING ENVMT II

0.00 0.00 0.00 25.00 0.00 23.11 21.51 8.15

P058844 2000 3rd Henan Prov Hwy 150.00 0.00 0.00 0.00 0.00 38.31 22.64 0.00P045910 2000 CN-HEBEI URBAN

ENVIRONMENT150.00 0.00 0.00 0.00 0.00 107.53 54.53 0.00

P056424 2000 CN-TONGBAI PUMPED STORA

320.00 0.00 0.00 0.00 100.00 107.47 103.34 0.00

P045264 2000 CN-SMALLHLDR CATTLE DEV

93.50 0.00 0.00 0.00 0.00 5.08 1.65 0.00

57

P049436 2000 CN-CHONGQING URBAN ENVMT

200.00 0.00 0.00 0.00 3.70 140.43 83.13 0.00

P041268 1999 CN-Nat Hwy4/Hubei-Hunan

350.00 0.00 0.00 0.00 0.00 37.87 31.21 0.00

P057352 1999 CN-RURAL WATER IV

16.00 30.00 0.00 0.00 0.00 17.69 15.68 13.66

P038121 1999 CN-GEF-RENEWABLE ENERGY DEVELOPMENT

0.00 0.00 0.00 35.00 0.00 21.87 31.40 13.08

P058308 1999 CN-PENSION REFORM PJT

0.00 5.00 0.00 0.00 0.00 1.09 1.06 0.00

P060270 1999 CN-ENTERPRISE REFORM LN

0.00 5.00 0.00 0.00 0.00 1.80 3.30 3.08

P046829 1999 CN-RENEWABLE ENERGY DEVELOPMENT

100.00 0.00 0.00 0.00 0.00 9.03 96.03 6.16

P046564 1999 CN - Gansu & Inner Mongolia Poverty Red.

60.00 100.00 0.00 0.00 13.30 22.26 22.51 -13.24

P046051 1999 CN-HIGHER EDUC. REFORM

20.00 50.00 0.00 0.00 0.00 5.69 7.31 0.00

P003653 1999 CN-Container Transport

71.00 0.00 0.00 0.00 18.61 2.71 21.32 1.27

P043933 1999 CN-SICHUAN URBAN ENVMT

150.00 2.00 0.00 0.00 0.00 80.95 90.04 33.22

P042299 1999 TEC COOP CREDIT IV

10.00 35.00 0.00 0.00 0.00 33.18 -14.18 0.00

P041890 1999 CN-Liaoning Urban Transport

150.00 0.00 0.00 0.00 0.00 16.87 16.87 0.00

P036953 1999 CN-HEALTH IX (Shiyong Wang, Back-up)

10.00 50.00 0.00 0.00 0.40 29.39 22.17 0.27

P056216 1999 CN - LOESS PLATEAU II

100.00 50.00 0.00 0.00 0.00 10.77 12.91 -3.59

P051888 1999 CN - GUANZHONG IRRIGATION

80.00 20.00 0.00 0.00 0.00 21.30 20.40 0.00

P051856 1999 ACCOUNTING REFORM & DEVELOPMENT

27.40 5.60 0.00 0.00 0.00 16.21 16.11 0.00

P051705 1999 CN-Fujian II Highway 200.00 0.00 0.00 0.00 0.00 43.45 43.45 0.00P050036 1999 Anhui Provincial Hwy 200.00 0.00 0.00 0.00 9.60 20.23 29.83 0.00P049665 1999 CN-ANNING

VALLEY AG.DEV90.00 30.00 0.00 0.00 0.00 12.93 12.10 0.00

P003606 1998 ENERGY CONSERVATION

63.00 0.00 0.00 22.00 0.00 30.14 20.02 0.00

P003566 1998 CN-BASIC HEALTH (HLTH8)

0.00 85.00 0.00 0.00 0.00 33.63 25.76 0.00

P003539 1998 CN - SUSTAINABLE 100.00 0.00 0.00 0.00 2.06 42.18 44.24 0.37

58

COASTAL RESOURCES DEV.

P036414 1998 CN-GUANGXI URBAN ENVMT

72.00 20.00 0.00 0.00 10.19 58.34 67.53 36.27

P035698 1998 HUNAN POWER DEVELOP.

300.00 0.00 0.00 0.00 145.00 21.52 166.52 0.01

P003619 1998 CN-2nd Inland Waterways

123.00 0.00 0.00 0.00 37.00 14.13 51.13 4.94

P003614 1998 CN-Guangzhou City Transport

200.00 0.00 0.00 0.00 20.00 98.98 118.98 98.98

P036949 1998 CN-Nat Hwy3-Hubei 250.00 0.00 0.00 0.00 0.00 21.15 21.15 0.00P037859 1998 CN-GEF Energy

Conservation0.00 0.00 0.00 22.00 0.00 0.71 22.06 0.00

P045788 1998 CN-Tri-Provincial Hwy

230.00 0.00 0.00 0.00 0.00 15.14 15.14 0.00

P046952 1998 CN - FOREST. DEV. POOR AR

100.00 100.00 0.00 0.00 0.00 21.97 -76.59 14.60

P049700 1998 CN - IAIL-2 300.00 0.00 0.00 0.00 0.00 1.21 1.21 1.21P051736 1998 E. CHINA/JIANGSU

PWR250.00 0.00 0.00 0.00 86.00 33.39 119.39 16.97

P040185 1998 CN-SHANDONG ENVIRONMENT

95.00 0.00 0.00 0.00 1.40 20.07 21.47 15.60

P003590 1997 CN - QINBA MOUNTAINS POVERTY REDUCTION

30.00 150.00 0.00 0.00 0.00 3.16 6.55 3.91

P003654 1997 CN-Nat Hwy2/Hunan-Guangdong

400.00 0.00 0.00 0.00 0.00 21.04 21.04 21.04

P036405 1997 CN - WANJIAZHAI WATER TRA

400.00 0.00 0.00 0.00 75.00 11.91 86.91 3.20

P044485 1997 SHANGHAI WAIGAOQIAO

400.00 0.00 0.00 0.00 0.00 68.18 50.18 54.39

P003650 1997 TUOKETUO POWER/INNER

400.00 0.00 0.00 0.00 102.50 28.32 130.82 28.32

P003637 1997 CN-NAT'L RURAL WATER 3

0.00 70.00 0.00 0.00 0.00 0.56 3.77 3.35

P003594 1996 CN - GANSU HEXI CORRIDOR

60.00 90.00 0.00 0.00 0.00 71.13 62.81 0.00

P003599 1996 CN-YUNNAN ENVMT

125.00 25.00 0.00 0.00 19.48 30.16 51.40 15.45

P003602 1996 CN-HUBEI URBAN ENVIRONMENT

125.00 25.00 0.00 0.00 47.32 10.77 60.13 3.14

P034618 1996 CN-LABOR MARKET DEV.

10.00 20.00 0.00 0.00 0.00 5.48 7.61 0.00

P040513 1996 2nd Henan Prov Hwy 210.00 0.00 0.00 0.00 19.00 12.88 31.88 27.88P003596 1995 CN-Yangtze Basin

Water Resources 100.00 110.00 0.00 0.00 1.92 0.08 4.47 4.47

59

ProjectP003603 1995 CN-ENT HOUSING &

SSR275.00 75.00 0.00 0.00 57.46 37.63 92.94 14.60

P003639 1995 CN-SOUTHWEST POVERTY REDUCTION PROJECT

47.50 200.00 0.00 0.00 0.01 0.80 24.87 24.87

P003540 1994 CN-LOESS PLATEAU

0.00 150.00 0.00 0.00 0.00 0.01 -0.67 0.00

P003632 1993 CN-ENVIRONMENT TECH ASS

0.00 50.00 0.00 0.00 0.00 0.76 1.31 0.99

Total: 11,911.37

1,552.60

0.00 208.50

827.18 5,126.93

2,755.95

456.62

CHINASTATEMENT OF IFC’s

Held and Disbursed PortfolioIn Millions of US Dollars

Committed Disbursed

IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

2002 ASIMCO 0.00 10.00 0.00 0.00 0.00 10.00 0.00 0.00

2003 Anjia 0.00 2.00 0.00 0.00 0.00 2.00 0.00 0.00

2004 Antai 40.00 0.00 0.00 30.00 0.00 0.00 0.00 0.00

2003 BCIB 0.00 0.00 11.60 0.00 0.00 0.00 0.00 0.00

1999/00/02 Bank of Shanghai 0.00 24.67 0.00 0.00 0.00 24.67 0.00 0.00

2002 CDH China Fund 0.00 10.92 0.00 0.00 0.00 0.00 0.00 0.00

2003 CSMC 0.00 9.45 0.00 0.00 0.00 8.92 0.00 0.00

2004 CUNA Mutual 0.00 12.00 0.00 0.00 0.00 1.47 0.00 0.00

1998 Chengdu Huarong 5.61 3.20 0.00 6.25 5.61 3.20 0.00 6.25

1992 China Bicycles 4.50 0.00 0.00 0.00 4.50 0.00 0.00 0.00

2004 China Green Ener 20.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2004 China II 28.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2004 China Re Life 0.00 15.41 0.00 0.00 0.00 15.41 0.00 0.00

1994 China Walden Mgt 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00

2004 Colony China 0.00 17.31 0.00 0.00 0.00 0.33 0.00 0.00

2005 DMK 0.00 4.00 0.00 0.00 0.00 3.00 0.00 0.00

2002 Darong 10.00 1.50 0.00 8.00 0.00 1.50 0.00 0.00

1995 Dupont Suzhou 6.23 0.00 0.00 0.00 6.23 0.00 0.00 0.00

1994 Dynamic Fund 0.00 7.79 0.00 0.00 0.00 6.13 0.00 0.00

2004 Fenglin 19.00 6.00 0.00 18.00 0.00 0.00 0.00 0.00

2003 Great Infotech 0.00 3.50 0.00 0.00 0.00 2.80 0.00 0.00

2002 Huarong AMC 9.00 2.51 0.00 0.00 9.00 0.01 0.00 0.00

2004 IB 0.00 52.18 0.00 0.00 0.00 52.18 0.00 0.00

2002 IEC 20.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2004 Jiangxi Chenming 0.00 12.90 0.00 0.00 0.00 0.00 0.00 0.00

60

1998 Leshan Scana 3.46 1.35 0.00 0.00 3.46 1.35 0.00 0.00

2001 Maanshan Carbon 8.25 2.00 0.00 0.00 8.25 2.00 0.00 0.00

2001 Minsheng Bank 0.00 23.50 0.00 0.00 0.00 23.50 0.00 0.00

2001 NCCB 0.00 26.58 0.00 0.00 0.00 26.46 0.00 0.00

1996/04 Nanjing Kumho 34.00 2.23 0.00 0.00 0.00 0.00 0.00 0.00

2001 New China Life 0.00 13.21 0.00 0.00 0.00 5.83 0.00 0.00

1995 Newbridge Inv. 0.00 1.95 0.00 0.00 0.00 1.95 0.00 0.00

1997 Orient Finance 5.71 0.00 0.00 7.14 5.71 0.00 0.00 7.14

2003 PSAM 0.00 1.93 0.00 0.00 0.00 0.00 0.00 0.00

2003 SAIC 12.00 0.00 0.00 0.00 5.00 0.00 0.00 0.00

2000 SEAF SSIF 0.00 4.50 0.00 0.00 0.00 1.02 0.00 0.00

2004 SIBFI 0.00 0.08 0.00 0.00 0.00 0.08 0.00 0.00

1998 Shanghai Krupp 26.25 0.00 0.00 57.74 26.25 0.00 0.00 57.74

Shanghai Midway 0.00 16.02 0.00 0.00 0.00 16.02 0.00 0.00

1999 Shanxi 12.61 0.00 0.00 0.00 12.61 0.00 0.00 0.00

1993 Shenzhen PCCP 3.76 0.00 0.00 0.00 3.76 0.00 0.00 0.00

2002 Sino Gold 0.00 4.00 0.00 0.00 0.00 4.00 0.00 0.00

2001 Sino-Forest 5.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

1995 Suzhou PVC 0.00 2.48 0.00 0.00 0.00 2.48 0.00 0.00

Wanjie High-Tech 12.27 0.00 0.00 0.00 12.27 0.00 0.00 0.00

1996 Weihai Weidongri 0.36 0.00 0.00 0.00 0.36 0.00 0.00 0.00

2004 Wumart 0.00 4.32 0.00 0.00 0.00 4.32 0.00 0.00

2004 X Colony China 0.00 0.96 0.00 0.00 0.00 0.01 0.00 0.00

2003 XACB 0.00 19.94 0.00 0.00 0.00 3.25 0.00 0.00

2004 Xinao Gas 25.00 10.00 0.00 0.00 25.00 10.00 0.00 0.00

1993 Yantai Cement 3.13 0.00 0.00 0.00 3.13 0.00 0.00 0.00

2003 Zhengye-ADC 15.00 0.00 0.00 7.00 6.14 0.00 0.00 2.86

2002 Zhong Chen 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00

Total portfolio: 329.14 335.40 11.60 134.13 137.28 238.90 0.00 73.99

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

2004 CCB-MS NPL 0.00 0.00 0.00 0.00

2003 Cellon 0.00 0.01 0.00 0.00

2004 Chenming LWC 0.06 0.00 0.00 0.16

2004 China Green 0.00 0.00 0.01 0.00

2002 Huarong AMC 0.02 0.00 0.00 0.00

2002 IEC 0.00 0.00 0.01 0.00

2005 MS Shipping 0.02 0.01 0.00 0.00

2004 NCFL 0.00 0.02 0.00 0.00

2005 NHC 0.00 0.00 0.05 0.00

2003 Peak Pacific 2 0.00 0.01 0.00 0.00

2004 SIBFI 0.00 0.00 0.00 0.00

2002 SML 0.00 0.00 0.00 0.00

2002 Sino Mining 0.01 0.00 0.00 0.01

2005 Vetroarredo 0.01 0.00 0.00 0.00

2002 Zhong Chen 0.00 0.00 0.00 0.03

61

Total pending commitment: 0.12 0.05 0.07 0.20

62

Annex 14: Country at a Glance

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

63

64

Annex 15: Incremental Cost Analysis

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

Problem Statement

1. Unprecedented economic growth in East Asia has resulted in rapid urbanization, especially in coastal cities. The urban population concentration in coastal regions has caused the seas of East Asia to largely bear the brunt of the environmental impact of this development. The result is that municipal pollution of East Asia’s seas, estuaries and rivers is a severe problem that is well-recognized by the countries in the region, particularly China. In addition, the rapid population growth in coastal cities such as Ningbo is making planning, financing, and operation of utility services such as water and wastewater very challenging.

2. Non-point source pollution from urban and agricultural run-off is also a large and growing problem, and a significant contributor to marine pollution. Coastal wetlands provide natural purification for the run-off before it flows into the sea, as well as an important habitat for migratory birds and marine life. Knowledge of the important eco-system functions provided by wetlands is lacking throughout East Asia. There is a clear need to increase awareness and mobilize public opinion to preserve coastal habitats and reduce land-based sources of pollution.

Baseline Scenario

3. Many of the trends identified above – increased urbanization particularly in coastal cities, wetland degradation, and pollution of the sea - are unavoidable in the short term but the extent and pace can be managed. In the baseline scenario, i.e. no World Bank project in the Ningbo coastal area, these trends will continue, as will Ningbo’s challenges with long-term wastewater treatment. Moreover, important opportunities to conserve wetland habitat, promote environmental education, and disseminate knowledge will be foregone.

GEF Alternative Scenario

7. Under the GEF alternative scenario, IBRD financing would support Cixi City waste water collection and treatment investments. However, lack of local experience with innovative solutions and concerns about cost would limit the scale of Bank investments to conventional treatment facilities. GEF co-financing would support a further enhancement of the Cixi wastewater component of the NWEP. With GEF support, Cixi would utilize the constructed wetland to provide tertiary treatment for the North wastewater treatment plant. It would also establish a Wetland Center with a total area of 43.5 km2 to protect and conserve the coastal wetland areas. Finally, GEF funds will be used to support the operation of the Wetland Center.

8. The IBRD-financed NWEP includes the following wastewater component: Cixi Wastewater (US$128.4 million): The component includes: i) two wastewater treatment plants, one located in the north of Cixi (the North WWTP, 100,000 m3/day) and one in the east (50,000 m3/d); and ii) associated collection system mains and link sewers. The proposed treatment process for both WWTPs is a modified A2O process, with conventional chemical coagulation/ filtration method for tertiary treatment.

65

9. The GEF enhanced NWEP further adds the following components:

10. GEF Component 1 - Constructed Wetland For Tertiary Treatment (US$7.12 million). This component will finance a constructed wetland for tertiary treatment for the North WWTP. The constructed wetland area is approximately 86 ha and includes a combination of subsurface and surface flows and will be design to maximize ecological habitat while meeting the required discharge standards. Cixi Municipal Sewerage Company (CMSC) will be the implementing agency and financing will be provided through a combination of sources including IBRD loan under NWEP, CMSC counterpart funding, and a GEF contribution of US$1.0 million.

11. GEF Component 2: Establishment of a Wetland Center (US$8.0 million)This component will finance the creation a 43.5 km2 Wetland Center including an environmental education and research building and facilities, which will help Cixi reduce non-point water pollution into Hangzhou Bay. The Wetland Center will also promote environmental education related to wetland conservation and the importance of protecting the marine environment, as well enhance existing degraded coastal habitat. The component will be implemented by the Cixi Wetland Center Management Company, and will be financed through counterpart funding provided by the Cixi City government, Ningbo Municipal Government, and a GEF contribution of US$2.0 million.

12. GEF Component 3: Design and Management Assistance (US$2.0 million)The Ningbo and Cixi implementation agencies have good expertise in project management and construction, but understandably do not have the ecological expertise necessary to independently design of the constructed wetland and Wetland Center, and to manage the Wetland Center. The GEF project will therefore finance the following three activities: i) engineering design of the Constructed Wetland and the Wetland Center; ii) Management Assistance for the Wetland Center for four years; and iii) Training and Dissemination of Project experience. Management assistance is expected to be provided by a consortium of NGOs/Universities. The estimated cost of this component is about US$ 2 million and will be fully supported by the GEF grant.

Incremental Costs

13. As discussed in the Baseline Scenario section above, without IBRD and GEF support, the no-project scenario would prevail. In the GEF Alternative scenario, the additional costs would be $128.4 million investment under the Cixi Component of NWEP plus the $17.1 million under the GEF-NWEP project. 15. There is some overlap between the cost estimates under NWEP and GEF-NWEP for tertiary treatment at the North Cixi Wastewater Treatment Plant. Cost estimates under NWEP for the North Cixi Wastewater Treatment Plant assumed a conventional tertiary treatment with a capital cost of $1.1 million. The capital costs for the constructed wetland under GEF-NWEP are around US$7.1 million. The higher capital costs for the constructed wetlands are due to two factors: i) the extensive earthworks involved in creating a 86 ha constructed wetland; and ii) the wastewater needs to be pumped about 2.1 kms to the site. The constructed wetland, in contrast,

66

has lower operational costs and simple robust operational requirements, as well as providing ecological habitat, reducing nitrogen levels below the effluent standards, and potentially removing non-conventional pollutants such as heavy metals. The constructed wetland is thus more likely to meet the discharge standard and contribute to the reduction of pollution into international waters, as well as demonstrating low-operational cost treatment technology.

16. The incremental cost for this component is therefore conservatively estimated at US$134.4 million7, of which GEF will provide US$1.0 million.

17. Components 2 and 3 of the GEF project were not included in the NWEP project, nor previously contemplated by the Cixi City Government. Component 2 cost estimates do not include the cost of land contributed by the Cixi City government, which is significant. The successful management and operation of the Wetland Center will serve as an international show case for sustainable use and wetland conservation for China and the East Asia Region. The incremental costs are conservatively estimated at US$10.0 million, of which GEF will provide US$4.0 million.

18. The total incremental cost for the project is $144.4 million ($134.4 million for Component 1 plus $10 million for Components 2 and 3) of which GEF will provide $5.0 million. The following table summarizes the incremental costs and benefits for the project:

Table: Incremental Cost MatrixScenario Component US$

Million*Domestic Environmental Benefits

Global Environmental Benefits

1. No project

0.0 None None

2. GEF Alternative: NWEP and GEF-NWEP

1. Cixi wastewater with constructed wetland

$134.4 (1) Effluent discharge meets Class 1A standards;

(1) Pollution reduction to LMEs; (2) Demonstration of innovative low operational-cost treatment;(3) Additional ecological services;

2. Wetland Center

$10.0 (1) Protection of Cixi’s coastal ecology

(1) Pollution reduction to LMEs(2) Increased public awareness of LMEs

7 The total cost of the Cixi Wastewater project is $134.4 calculated as $128.4 million (total cost of component under NWEP) minus $1.1 million (estimate of conventional tertiary treatment in NWEP) plus $7.12 million (cost of constructed wetland at North Wastewater Treatment Plant in GEF-NWEP).

67

(3) Biodiversity conservation (migratory birds)(4) Showcase for sustainable coastal and marine conservation/

Total Baseline US$ 0 million GEF Alternative US$ 144.4 million Increment US$ 144.4 million

68

Annex 16: STAP Roster Review

CHINA: GEF NINGBO WATER AND ENVIORNMENT PROJECT

Reviewed By:Dr. Eric Wolanski, PhD, DSc (Hon. Causa), FTSE, FIE AustAustralian Institute of Marine Science, PMB No 3, Townsville MC, Queensland 4810, AustraliaTelephone: (07) 47534243, Facsimile (07) 47725852 E-mail: e.wolanski@aims.gov.au

Reviewed on: March 10, 2006

Note: Review has been undertake prior to the appraisal mission. The Project Document has been modified to taken into account both the Reviewer’s comments and the changes made during appraisal.

1. STAP Expert’s Comments

A. Technical comments

The document details a proposal for tertiary treating wastewater using a constructed a freshwater wetlands out of reclaimed land in tidal wetlands in Hangzhou Bay, and for restoring an adjoining, degraded, brackish-water, saltmarsh, wetlands. This proposal is praiseworthy because the scheme would be beneficial to water quality in Hangzhou Bay, to wildlife (especially migratory birds and marine organisms), and will be used as an educational centre as well as for eco-tourism. The scheme is expected to be economically self-sustainable after a few years. There are no obvious or significant environmental negatives.

The document is well written. The proposal is to be encouraged.

I have the following comments and suggestions.

a. The proposal is for leveling the restored tidal wetlands (A3 and A5) and for creating a freshwater wetland at site A1. There is considerable literature (e.g. see the review by Wolanski and Richmond Encyclopedia of Ecology: Ecological Engineering: Estuary restoration. ms # 55 in the forthcoming Elsevier Encyclopedia of Ecology) that shows that leveling is not enough to restore the natural ecology beside the plants. There is also a need for recreating a drainage pattern approximating that of a natural tidal creek draining a saltmarsh. Experience further suggests that this creek should be meandering in order to attract crustaceans. That is a simple engineering task; it does make a huge difference to the ecology.

b. The proposal will only succeed in the long-term in reducing the P nutrient load in Hangzhou Bay if the dead plants from the freshwater wetland (site A1) are annually removed and disposed on land (they could be used for fertilizers). Thus if P is the nutrient causing eutrophication in coastal waters the proposal should be modified such as the plants from site A1 are annually removed (maybe on a rotation basis so that birdlife can still remain). (If N is the nutrient causing eutrophication then there is problem no

69

problem as the plants should convert the N into N gas). Otherwise, after a few years necessary for the plants to establish their below ground biomass, this wetland will simply start to export nutrients to Hangzhou Bay. While some nutrients (N) are lost by respiration, others are not. This is a basic principle of ecohydrology, a program supported by UNESCO. See http://www.unep.or.jp/ietc/publications/freshwater/watershed_manual/index.asp

c. Since the wetland area is still very small, can the visitor center be built outside site A1, for instance in site A4. This is necessary because 250,000 people yearly visiting the site will frighten the birdlife away and thus negate the ecotourism benefits that are needed for the scheme to be economically self-sustained.

d. Some of the information in the proposal is contradictory. In page 17 for instance the outcome indicator is removing about 640 MT of N and 640 MT of phosphorus. On page 36 these amounts become, respectively, 550 and 600 tons. The discrepancy is not huge but puzzling.

e. On page 36, the US$14 user fee per visitor is incorrect; that should be US$1.40f. There is considerable discrepancy within the text as to the area of the freshwater wetland

A1. In the map, based on the scale shown on the map, the area is 4.4 km2. In the text however this area is listed as having an area of 300 ha (see page 4; this is 3 km2), 60 ha (page 3; this is 0.6 km2) and 42 km2 (page 39). Since 33 ha (0.33 km2) are lost for the visitor centre and parking, the true size of the wetlands is unknown in this report. This is not just of academic interest – it is fundamental to calculate the residence time of wastewater in the wetland. A residence time T of 1 week is proposed (page 19). This figure is acceptable although experience elsewhere suggests that 2 weeks is better for more thorough water treatment. Hence the surface area A of the actual wetland (minus the visitor centre and parking lot area) should be

A> T Q/hwhere h is the mean water depth (reported in this proposal to be 0.6 m) and Q is the wastewater flow rate (50,000 m3 d-1). In view of the discrepancy in the value of A, this needs checking before final approval. It is imperative that this World Bank-sponsored project adopts best science-based engineering practice, and the minimum residence time should be one week, though two weeks is preferable. A residence time less than one week is not acceptable to treat wastewater by wetland filtering – in that case the wetland area has then to be increased or the wastewater discharge reduced.

B. General comments

a.    Global environmental benefits and/or drawbacks of the project. This project has great environmental benefits in essentially using ecohydrology, which is advocated by UNESCO (see http://www.unesco.org/water/ihp/ihp_six.shtml) to gain social, economic, and environmental benefits from wastewater. Drawbacks are likely if the residence time is too small (less than 1 week minimum). b.    How the project fits within the context of the goals of GEF, as well as its operational strategies, program priorities, GEF Council guidance and the provisions of the relevant conventions.

70

I do not know the relevant conventions well enough. I commented on the technology, the engineering, and the science. c.    Regional context. As discussed in my new book (E. Wolanski (2006). The environment in Asia Pacific harbours. Springer, Dordrecht, 497 pp), nearby coastal waters in China have practically collapsed ecologically. This project is excellent regionally as starting to apply remediation measures.

d.    Replicability of the project (added value for the global environment beyond the project itself). The successful demonstration of the ideas and concepts behind this project find wide replicability all over the Asia Pacific. e.    Sustainability of the project. The system will require training of staff and maintenance of the wetlands.

f.    Linkages to other focal areas.

g.    Linkages to other programs and action plans at regional or sub-regional levels. I am aware of the PEMSEA project – this new project will add enormously to the value of PEMSEA which is too much reliance on engineering and not enough life sciences and no use of the ability of using natural processes(e.g. filtering by wetlands) to enhance the robustness of the aquatic ecosystem. As my new book (E. Wolanski (2006). The environment in Asia Pacific harbours. Springer, Dordrecht, 497 pp) shows, such engineering approaches (the ‘Dutch’ approach) have failed to deliver a healthy water environment to 100 million people in the Asia Pacific. This new project is excellent in adding the major new idea of using natural processes to reduce eutrophication risks in coastal waters while providing significant social, economic, and environmental benefits.

h.    Other beneficial or damaging environmental effects. No damaging environmental effects.

i.    Degree of involvement of stakeholders in the project.Looks very good from what I read.

j.    Capacity-building aspects. Not clear who does the training and who gets trained

k.    Innovativeness of the project. Sound.

2. Responses to STAP Expert’s Comments

71

The following table summarizes the responses to the seven technical and three general comments raised by the STAP expert.

72

STAP Reviewer Comments ResponsesTechnical CommentsLiterature shows that leveling and planting is not enough to restore the natural ecology beside the plants. There is also a need for recreating a drainage pattern approximating that of a natural tidal creek draining a salt marsh. Experience further suggests that this creek should be meandering in order to attract crustaceans.

We agree that the restoration of main natural tidal creeks is necessary to restore the ecology of Plots A3 and A5. The project has confirmed that main tidal creeks are present and are functional. However, the project will rely on tides to recreate secondary and tertiary drainage channels.

The proposal will only succeed in the long-term in reducing the P nutrient load in Hangzhou Bay if the dead plants from the freshwater wetland (site A1) are annually removed and disposed on land (they could be used for fertilizers). Thus if P is the nutrient causing eutrophication in coastal waters the proposal should be modified such as the plants from site A1 are annually removed (maybe on a rotation basis so that birdlife can still remain). (If N is the nutrient causing eutrophication then there is no problem as the plants should convert the N into N gas).

The large A1 wetland has wildlife (migratory birds) as its main function with nutrient and other contaminant removal as a secondary goal. (1) For this project, removal of phosphorus

is not a major need at Cixi since the flows from A1 will almost directly enter the ocean where nitrogen is the primarily nutrient simulating new nuisance algae production and eutrophication in general. Denitrification can permanently remove about 200 g/m2/y (Horne, 1995) of the nitrate pollutant without the need to harvest.

(2) The proposed design is based on one used in California for about 15 years for mixed wildlife-nutrient removal wetlands with comparable size (100-220 ha) to that proposed for Plot A1. Recent research shows that these wetlands have been able to overcome the need for biomass removal and disturbance of the wildlife (Reilly et al., 2000; Bachand & Horne, 2000 a-b; Mitch et al., 2000). Instead of removing the dead vegetation, the peat accumulated by the dead plants is designed to become the main repository for the sequestration and/or destruction of contaminants (Horne, 2000; Horne & Fleming-Singer 2006).

(3) Vegetation removal is not economically feasible primary because the P content of plants is about 0.3% as dry weight and about 0.03% of fresh weight. Thus massive amounts of plant matter would have to be harvested in the 300 ha of A1. Even without vegetation removal, some permanent P-removal will occur ~ 1 g/m2/y (the one gram rule of Richardson, Duke University, 2000) and this will be a benefit.

Since the wetland area is still very small, can the visitor center be built outside site A1, for instance in site A4? This is necessary because 250,000 people yearly visiting the site will

Under ideal circumstances this would be desirable. However, there is no land available in the adjacent plots such as A4. The project views these areas as a buffer zone between full development and the freshwater A1

73

frighten the birdlife away and thus negate the ecotourism benefits that are needed for the scheme to be economically self-sustained.

and its tidal component. Development in these areas will be kept to a minimum with the encouragement of open areas between buildings.

Some of the information in the proposal is contradictory. In page 17 for instance the outcome indicator is removing about 640 MT of N and 640 MT of phosphorus. On page 36 these amounts become, respectively, 550 and 600 tons. The discrepancy is not huge but puzzling.

The data is in consistency. The 640 MT of N and 640 MT of phosphorus are referring nutrient removal to be achieved by both the constructed and enhanced natural wetlands. However, the 550 MT of N and 600 MT of phosphorus are referring nutrient removal to be achieved by the constructed wetland only.

Post Appraisal Note: Annex 3 contains the updated pollution reduction targets.

On page 36, the US$14 user fee per visitor should be US$1.40

Updated.

There is considerable discrepancy within the text as to the area of the freshwater wetland A1. In the map, based on the scale shown on the map, the area is 4.4 km2. In the text however this area is listed as having an area of 300 ha (see page 4; this is 3 km2), 60 ha (page 3; this is 0.6 km2) and 42 km2 (page 39). Since 33 ha (0.33 km2) are lost for the visitor centre and parking, the true size of the wetlands is unknown in this report.

The estimated 4.4 km2 based on the scale of the map is correct but it includes about 1.07 km2 water surfaces of canals surrounding Plot A1. So the actual size of Plot A1 is about 3.33 km2, i.e. 333 ha. The 300 ha on Page 4 refers to the wetland area to be enhanced, which excludes the area of the Environmental Center, which is about 33ha. The 60 ha on Page 3 refers to the size of the constructed wetland for the north WWTP. The 42.5 km2 refers to the total area of the enhanced natural wetland areas, including Plots A1, A3, A5, and mudflat and open water areas marked in the map.

Post Appraisal Note: The size of the North WWTP constructed wetland has been increased to 86 ha, and the East WWTP constructed wetland has been dropped from the GEF project.

A residence time T of 1 week is proposed (page 19). This figure is acceptable although experience elsewhere suggests that 2 weeks is better for more thorough water treatment. Hence the surface area A of the actual wetland (minus the visitor centre and parking lot area) should be A> T Q/hwhere h is the mean water depth (reported in this proposal to be 0.6 m) and Q is the wastewater flow rate (50,000 m3 d-1). In view of the discrepancy in the value of A, this needs checking before final approval.

We agree that one week hydraulic residence time is not ideal. As noted, the removal of contaminants is secondary to migratory bird habitat in Plot A1 and the near future contaminant loading (and thus flow) for Plot A1 is yet to be determined (the flow rate of 50,000 m3 d-1

is the flow rate for the east constructed wetland). The project will consider the reviewer’s suggestion when determining the flow rate of water to be pumped into Plot A1 from neighboring canal.

General CommentsGlobal environmental benefits and/or drawbacks of the project. Drawbacks are likely if the residence time is

See the above response.

74

too small (less than 1 week minimum).

Sustainability of the project. The system will require training of staff and maintenance of the wetlands.

Sufficient training of staff and maintenance of the wetlands are well considered in the project.

Capacity-building aspects. Not clear who does the training and who gets trained

Qualified consultants will be hired competitively to train the management and operating staff of the constructed wetland. The NGO Consortium is expected to train local staff in the management of the Wetland Center.

Reference1. Bachand, P. A. M. & A. J. Horne. 2000a. Denitrification in constructed free-surface

wetlands I. Very high nitrate removal rates in a macrocosm study. Ecological Engineering 14: 9-15.

2. Bachand, P. A. M. & A. J. Horne. 2000b. Denitrification in constructed free-surface wetlands II. Vegetation community effects. Ecological Engineering 14:17-32.

3. Horne, A. J. 1995. Nitrogen removal from waste treatment pond or activated sludge plant effluents with free-surface wetlands. Wat. Sci. Tech. 31: 341-351.

4. Horne, A. J. 2000. Phytoremediation by Constructed Wetlands. Pp. 13-60 in N. Terry (Ed.) Phytoremediation of Contaminated soil and Groundwater. CRC Press. Boca Raton, Florida.

5. Horne, A. J. & M. Fleming-Singer. 2006. Phytoremediation using constructed wetlands: An overview.pp 329-376 in M. Fingerman & R. Nagabhushanam (eds.) Bioremediation of Aquatic and Terrestrial Ecosystems. Science Publishers Enfield (NH) USA.

6. Mitsch, W. J., A. J. Horne & R. W. Nairn. 2000. Nitrogen and phosphorus retention in wetlands – ecological approaches to solving excess nutrient problems. Ecological Engineering 14: 1-7.

7. Reilly, J. F., A. J. Horne & C. D. Miller. 2000 Nitrogen removal in large-scale free-surface constructed wetlands used for pre-treatment to artificial recharge of groundwater. Ecological Engineering 14:33-47.

8. Richardson, C.J., P.Vaithiyanathan, R.J. Stevenson, R.S. King, C.A. Stow, R.G. Qualls, and S.S. Qian. 2000. The ecological basis for a phosphorus (P) threshold in the Everglades: Directions for sustaining ecosystem structure and function. Duke University Wetland Center, Duke University, Durham, North Carolina.

75

Annex 17: Strategic Partnership Investment Fund

CHINA: GEF-Ningbo Water and Environment

1. In 1995, twelve East Asian countries came together with a common vision to ensure the sustainable development of their shared waters.8 This partnership of governments, with the support of the Global Environment Facility (GEF), United Nations Development Program (UNDP), and the International Maritime Organization (IMO), created the Partnerships in Environmental Management for the Seas of East Asia (PEMSEA). One of the main achievements of the countries through their contribution to PEMSEA has been the development and adoption of the Sustainable Development Strategy for the Seas of East Asia (SDS-SEA), which was endorsed by each of the twelve countries in December 2003. The SDS-SEA is significant as it is the first, and the broadest, partnership agreement in the region to address the management of the regional seas. One of the highest priorities for action in the SDS-SEA is the reduction of land-based pollution that has an impact on the marine environment.

2. The countries of East Asia have recognized that a coordinated and innovative approach with a strong focus on scaling up investment is urgently needed to implement the SDS-SEA. GEF’s new operational modality – the Strategic Partnership – has provided East Asia with an opportunity to undertake the necessary actions with coordinated support from GEF and the World Bank. The WB/GEF Partnership Investment Fund for Pollution Reduction in the Large Marine Ecosystems of East Asia (the Fund), an US$80 million grant financing facility managed by the World Bank, was approved by GEF in November 2005. The Fund forms the key financing arm of the East Asia Seas Strategic Partnership.

3. The objective of the Fund is to scale-up investments in coastal land-based pollution reduction in East Asia through co-financing of projects that remove technical, institutional, and financial barriers which currently limit efficient investment in pollution reduction. The US$80 million grant financing provided by GEF is expected to leverage between US$800 million and US$1.5 billion in counterpart financing from the World Bank and other sources, including the public and private sectors. The Fund has adopted a coordinated approach to monitoring such that the contribution of all projects to the overall objectives of the Fund can be measured. Tables 1 and 2 below show the overall Fund indicators and the expected contribution of the project.

4. The GEF - Ningbo Water and Environment Project is the first project to be financed by the Fund. This project provides a significant environmental enhancement to the IBRD-financed Ningbo Water and Environment Project (NWEP), which was approved by the World Bank in March 2005. Under NWEP, Cixi City, which is located on the coast of Hangzhou Bay and the East China Sea, will construct two wastewater treatment plants with a total treatment capacity of 150,000 m3/d. This project will enhance Cixi’s wastewater treatment strategy and coastal management through the provision of a constructed wetland to provide tertiary treatment at the largest of the two wastewater treatment plants. This pilot is expected to prove the technical and economic viability and increased environmental benefits of wetland treatment compared with the chemical tertiary treatment process more conventionally used in China. In addition, the project

8 The original twelve countries included Brunei Darassalam, Cambodia, China, Indonesia, Japan, DPR Korea, R.O. Korea, Malaysia, Philippines, Singapore, Thailand and Vietnam. Three additional countries joined in 2005 (Lao PDR, Myanmar and Timor-Leste) making a current total of 15.

76

will support innovations in coastal management in China through the conservation of a natural coastal wetland for non-point source pollution control, establishment of a wetland education center, and policy reform to support coastal wetland conservation and management.

5. Replication Potential : Finding simple and effective methods for wastewater treatment and building public support for pollution control and environmental conservation in China, and throughout the region, is critical. The overwhelming majority of Chinese -- 94 percent -- live in the eastern third of the country. Of China's 1.2 billion people, over 677 million (56 percent) reside in 13 southeast and coastal provinces and two coastal municipalities -- Shanghai and Tianjin. Along much of China's 18,000 kilometers of continental coastline, population densities average over 600 per square kilometer. Much of the wastewater generated along the coast is untreated and flows into the sea, resulting in massive and frequent red tides, adverse impacts on marine fisheries and aquaculture, and consequent public health problems.

6. Examples of innovate wastewater treatment and pollution reduction methods, if properly disseminated and replicated, will have a significant impact on reducing pollution in the LMEs of East Asia. The GEF-supported constructed wetland will provide tertiary treatment for the new North Cixi wastewater treatment plant. It will reduce BOD and suspended solids, as well as nutrients such as phosphorous and nitrogen, which are the key culprits in the red tide phenomena. Constructed wetlands can also be used as the primary treatment process in certain situations. Constructed wetlands offer the advantages of generally low capital costs (assuming land costs are not prohibitive), robust treatment performance, low operating costs and simplicity of operations, and environmental amenities. Plot A1 of the Wetland Center will also be designed to reduce non-point source pollution. Non-point source pollution from agricultural and urban run-off is a major contributor to pollutant loadings into East Seas. The Wetland Center will demonstrate that wetlands can be integrated into both the urban and rural landscapes to provide wildlife habitat, aesthetic amenities, as well as provide purification of non-point sources.

8. Replication Strategy: The project will fund a multi-pronged replication strategy, including: (i) a series of workshops in Ningbo to share experiences for both the constructed wetland and natural wetland conservation. Stakeholders from throughout China, including other coastal cities and national environmental authorities, will be invited. The workshop material will be in both in English and Chinese, and representatives from PEMSEA will be invited to attended and help disseminate the experience and workshop documents; (ii) Ningbo representatives will participate in conferences sponsored by GEF or PEMSEA, such as the biannual GEF International Waters Congress and the PEMSEA East Asia Seas Congress; (iii) the proposed Wetland Center will serve as a comprehensive source of information as people from throughout China and East Asia can visit the center and learn more about the GEF-supported activities in Ningbo. In collaboration with GEF and PEMSEA, the environmental education center can also present exhibits about other efforts throughout East Asia to reduce marine pollution and protect marine eco-systems. The Wetland Center will be a key replication mechanism for the project.

In addition to the project-funded replication activities described above, the overall Program will also include separately funded-activities to disseminate and promote the adoption of various technologies and pilot projects financed under the Program.

77

Table 1. Arrangements for results monitoring at the level of the Fund (extracted from Fund Brief approved by GEF Council in November 2005)Target indicators Project reporting to Fund Fund reporting to GEF

Outcome Indicators 2010 2015 Frequency and Reports

Data Collection Instruments

Responsibility for Data Collection

Frequency and

Reports

Responsibility for Data

Collection

Increased investment in pollution reduction ($ million)

350 to

500

800to

1,500

Annual project progress report (PPR) and Bank

disbursement reports

PMO project implementation records, Bank

disbursement data

Project Management

Office(PMO); Bank task

team

Report annually to GEFSEC; Report to

GEF Council at

time of request for subsequent

tranche

Fund Mgmt Team with

data derived

from World Bank

project task team

reporting

Reduction in discharge of BOD to seas of East Asia (tonnes) 150,000 300,000 Annual PPR

Measurements by project implementing

units, government statistics

PMO; Bank task team

Result Indicators Removal of barriers to pollution reduction:

Number of cost-effective technologies/ techniques demonstrated in specific country contexts

5 12 Annual PPRCommissioning

reports on investments

PMO; Bank task team

Number of institutional and/or regulatory reforms approved and implemented

4 10 Annual PPRRegister of government

regulations/decrees

Government agencies, PMO, Bank task team

Financing through revolving funds:Number of countries that have established a revolving fund 1 4

Annual PPRPMO project

implementation records

PMO; Bank task teamMinimum amount of capital invested in

revolving funds ($ million) 15 60

Dissemination and replication of demonstrated technologies, techniques and mechanisms:Products: Number of publications 6 12

Annual PPRPMO project

implementation records

PMO; Bank task team

Products: Number of project websites 6 12Events: Number of country workshops 6 12Events: Number of regional conferences/workshops participated in 2 5

Mainstreaming of SDS-SEA in World Bank EAP operations:Number of Strategic Partnership Council meetings participated in by World Bank staff (events/year)

2 2N/A N/A N/A

Number of World Bank CAS which include Fund 3 5

Table 2. GEF-Ningbo Water and Environment Project contribution to Fund targetsTarget Indicators Explanation

Outcome Indicators 2010

Increased investment in pollution reduction ($ million) US$128 Million

Total investment in coastal wastewater treatment by Cixi City Government through the project and NWEP.

Reduction in discharge of BOD to seas of East Asia (tonnes)

Cumulative BOD:2010: 20,0002015: 60,000

Cumulative T-N:2010: 4,0002015: 14,000

Cumulative T-P:2010: 5002015: 1,500

Pollution Reduction by two wastewater treatment plants constructed under the project and NWEP (including tertiary treatment provided by constructed wetland);And enhanced wetland in Plot A of Wetland Center for non-point pollution.

Result Indicators Removal of barriers to pollution reduction:

Number of cost-effective technologies/ techniques demonstrated in specific country contexts

2

1. Constructed wetland as a form of tertiary wastewater treatment.

2. Enhanced natural wetland for non-point source pollution control (removal of nitrogen)

Number of institutional and/or regulatory reforms approved and implemented 1

Establishment of Wetland Center with associated conservation area for pollution control and ecological habitat

Financing through revolving funds:Number of countries that have established a revolving fund - Not applicable to this project.

Minimum amount of capital invested in revolving funds ($ million) - Not applicable to this project.

Dissemination and replication of demonstrated technologies, techniques and mechanisms:

Products: Number of publications TBD Wetland Center Management Consultants Expected to Be Active in Research and Publication

Products: Number of project websites 1 Establish project website

Events: Number of country workshops 5 Participate in four domestic workshopsOrganize one domestic workshop

Events: Number of regional conferences/workshops participated in 4 Participate in four international workshops

Mainstreaming of SDS-SEA in World Bank EAP operations:Number of Strategic Partnership Council meetings participated in by World Bank staff (events/year)

- Fund level indicator, not applicable to individual projects.

Number of World Bank CAS which include Fund - Fund level indicator, not applicable to individual

projects.

Strategic Partnership Investment Fund for Pollution Reduction in the Large Marine Ecosystems of East AsiaAddendum to Annex 3

11/9/05

Annex 18: Maps

CHINA: GEF NINGBO WATER AND ENVIRONMENT PROJECT

Map IBRD 344441 (Wetland Center)

Strategic Partnership Investment Fund for Pollution Reduction in the Large Marine Ecosystems of East AsiaAddendum to Annex 3

11/9/05