Ex-ante Evaluation
1. Name of the ProjectCountry: The People’s Republic of China
Project: Yunnan Kunming Water Environmental Improvement Project (II)(Loan Agreement: March 30, 2007; Loan Amount: 10,400 million yen; Borrower: The Governmentof the People’s Republic of China)
2. Necessity and Relevance of JBIC’s Assistance
In China, the sewage treatment rate in urban areas has leveled off at 48% (2005), while in rural areas
sewerage facilities themselves have not spread very much. Consequently, the water pollution of riversand contamination of seawater as typified by the frequent outbreak of red tide, have become a seriousproblem. In the 11th Five-Year Plan (2006–2010), to tackle the problem of water pollution, theGovernment of China has set the goal of raising the sewage treatment rate to 70% in all principal
cities across the country. To achieve this goal, it is important to develop sewage treatment facilities.
The rate of water supply in urban areas reached 89% in 2004. However, since the clean water sources
are concentrated in the southwestern part of China, other areas are frequently hit by water shortages.
Also, there are many cities beset with the problem of having their water supplied from deteriorating
sources. In its 11th Five-Year Plan for Environmental Protection (2006–2010), the Government ofChina designates river basins as prioritized conservation targets with the view to raising the water
quality of the designated river basins to the required level through, among other things, prevention ofcontamination of the said rivers, which are also important sources of drinking water, and conversionof sources of clean water. Furthermore, the Government of China promotes the creation ofwater-saving cities by implementing administrative measures such as regulating the amount ofgroundwater that can be pumped up and introducing technologies for recycling treated sewage.
In the south of Kunming City(population: approx. 5 million, or 3.6 times the population of Shigaprefecture), the capital city of Yunnan Province, lies Dianchi Lake (area: 309 km2, or about half thesize of Lake Biwa), a freshwater lake in the Yangtze River basin. Since the 1980s, the amount ofuntreated wastewater that flows into Dianchi Lake has increased year after year in tandem with theeconomic development in the heart of the city’s urban area. In the 1990s, the water quality of Dianchi
Lake deteriorated to the level unsuitable for agricultural use. Thus, in 1996, the lake was designatedas a prioritized environmental protection area (3 rivers and 3 lakes).
Given the aforesaid situation, the State Environmental Protection Administration (SEPA) adopted the10th Five-Year Plan for Environmental Protection (2001–2005) and, in addition to regarding
improvement of the quality of water in Dianchi Lake as a national prioritized project, in the 10thFive-Year Plan for National Economic and Social Development (2001–2005), Yunnan Province andthe Kunming Municipal People’s Government plan to improve the sewage treatment capacity in theheart of the urban area (with a population of 2.81 million), which is the biggest source of waterpollution for Dianchi Lake. The Kunming government has endeavored to improve the city’s sewage
treatment capacity by constructing a sewage treatment plant in the center of the city and by providing
a network of sewage pipes. But despite these efforts, the area’s sewage treatment capacity (464,000m3/day) has not increased enough to keep up with the increase in the total volume of sewage(688,000 m3/day), with the result that untreated wastewater continues to flow into the lake. By 2015,-1-the projection is that the volume of sewage in the center of the urban area will increase to 900,000
m3/day. Thus, the pressing issue for the Government of China, Yunnan Province and Kunming City isto stem the flow of water contaminants into the lake by raising the area’s sewage treatment capacity.
The project addresses environmental conservation, one of the priority areas designated in theEconomic Cooperation Program for China prepared by the Government of Japan and theMedium-Term Strategy for Overseas Economic Cooperation Operations of JBIC (FY2005–FY2007).
Thus, JBIC’s support for this project is highly necessary and relevant.
3. Project Objectives
The project aims to improve the sewage treatment capacity in the urban area of Kunming City,
Yunnan Province, by developing sewage treatment facilities. It will thereby help improve the living
conditions of its population by reducing the amount of polluted water discharged into Dianchi Lake.
4. Project Description(1) Target Area
Kunming City, Yunan Province(2) Project Outline
The project involves the procurement of materials and equipment, and civil works necessary fordeveloping sewerage facilities in the aforesaid target area.
- Sewerage facilities (sewage pipes and drains, enhancement of sewage treatment plants: 5
locations, sewage pumping stations)(3) Total Project Cost/Loan Amount55,172 million yen (Yen Loan Amount: 10,400 million yen)
(4) Schedule
March 2007–end of December 2012 (70 months). The definition of project completion is “when theterm of warranty expires.”(5) Implementation Structure(a) Borrower: The Government of the People’s Republic of China(b) Executing Agency: Kunming Municipal People’s Government(c) Operation and Maintenance System: Kunming Dianchi Lake Investment Company, Limited(6) Environmental and Social Consideration(a) Environmental Effects/Land Acquisition and Resident Relocation(i) Category: B(ii) Reason for Categorization:
This project is classified as Category B according to the “Japan Bank for International
Cooperation Guidelines for Confirmation of Environmental and Social Considerations”(established in April, 2002). This categorization is assigned because this project does notcorrespond to sectors or regions described in said guidelines as being sensitive to negative-2-impact, because it is not deemed to have a significant harmful impact on the environment..
(iii) Environmental Permit
The Environmental Impact Assessment (EIA) report related to the project was approved by
the State Environmental Protection Administration in August, 2005.
(iv) Anti-Pollution Measures
Wastewater from sewerage facilities will be treated and released into the river in a state andmanner that meets the wastewater standards established in China. Thus, no significant
adverse impact is forseen. Additionally, sludge generated in sewage treatment plants will beappropriately disposed of in reclaimed repository sites.
(v) Natural Environment
The project site is not located in or around sensitive areas, such as national parks, and soadverse impact on the natural enivronment is assumed to be minimal.
(vi) Social Environment
The project involves land acquision of about 35 ha and the acquisition was implemented inaccordance with the domestic procedures of China. The project does not involve resident
relocation.
(vii) Other/Monitoring
In the project, the Kunming Environmental Protection Bureau will monitor water quality andthe like.
(b) Promotion of Poverty Reduction
None(c) Promotion of Social Development (e.g. Gender Perspective)
None(7) Other Important Issues
None
5. Outcome Targets(1) Evaluation Indicators (Operation and Effect Indicator)
Indicator
Population treated (10,000 persons)Amount of wastewater treated (10,000 m3/day)
Percentage of wastewater treatment (%)
Effluent quality (BOD concentration: mg/L)

Baseline(2004)
197.0
46.4
68
5–14

Target (2015, 3 years
after project completion)
315.2
90.0
99.8
<10(2) Number of Beneficiaries
There are approx. 1 million beneficiaries in the project.
(3) Internal Rate of Return (Economic and Financial Internal Rate of Return)
Based on the conditions given below, the financial internal rate of return (FIRR) is 5.5%.
[FIRR](a) Cost: Project cost, operation and maintenance expenses-3-(b) Benefit: Income from sewage charge(c) Project life: 30 years
6. External Risk Factors
1. Delays in construction due to site changes caused by changes in road maintenance areas,development areas, etc. in urban planning
2. Impact on operation and maintenance due to shortages in financial funds or collected fees due tochanges in the policies relating to the fee sharing principle
7. Lessons Learned from Findings of Similar Projects Undertaken in the Past
From the ex-post evaluation of ODA loans granted in the past, it has been learned that it is importantto set an appropriate fee schedule that takes into consideration operation and maintenance costs,
investment costs, payment ability of beneficial residents, and ability for financial burden.
In the project, an appropriate fee schedule will be set proportionate to the household finance ofresidents by raising in stages the sewage system fee, which is currently at a low rate. When it
becomes time to revise the fee schedule it will be done by establishing a system that reflects thevoices of the users by holding public hearings and the like.
8. Plans for Future Evaluation(1) Indicators for Future Evaluation
Population treated (10,000 persons), amount of wastewater treated (10,000 m3/day), percentage ofwastewater treatment (%), effluent quality (BOD concentration: mg/L), financial internal rate ofreturn (FIRR)(%)(2) Timing of Next Evaluation
After project completion-4-