Ex-ante Evaluation
1. Name of the ProjectCountry: People’s Republic of China
Project: Yunnan Province Kunming City Water Environment Improvement Project (I)(Loan Agreement: June 23, 2006; Loan Amount: 12,700 million yen; Borrower: The Government ofthe People’s Republic of China)
2. Necessity and Relevance of JBIC’s Assistance
Dianchi Lake (area 309 km2, about half of Lake Biwa (670 km2)) is situated to the south of Kunming
City, the capital of China’s Yunnan Province (population 5 million, about 3.6 times of Shiga Prefecture(1.38 million)). It is a freshwater lake in the Yangtze River basin. Since the 1980s, economic
development centering on urban areas in Kunming City brought increasing volumes of untreatedsewage flowing into Dianchi Lake. By the 1990s, the water quality of Dianchi Lake had deteriorated toa level unsuitable even for agricultural use, and Dianchi Lake was designated a vital environmental
protection area (Three Rivers and Three Lakes) in 1996.
In response to such situation, the State Environmental Protection Administration formulated the “10thState Environmental Protection Five-Year Plan,” which designated Dianchi Lake water quality
improvement as a national priority project. Sewage from the Kunming City urban center (population2.81 million) is the largest source of water pollution in Dianchi Lake. Yunnan Province and theKunming Municipal People’s Government planned increased sewage treatment capacity to treat thissewage in the 10th Five-Year Plan for National Economic and Social Development (2001-2005). TheKunming Municipal People’s Government carried out projects designed to increase sewage treatment
capacity, such as sewage treatment plant construction and development of the sewage pipe network inthe urban center. However, that area’s current sewage treatment capacity (464,000m3/day) does notcover sewage output volume (688,000m3/day), and untreated sewage continues to flow into Dianchi
Lake. By 2015, central urban area sewage output volume is forecast to increase to 900,000 tons/day
due to urban area expansion and increased population. Restraining the flow of water pollutant into
Dianchi Lake by increasing sewage treatment capacity in this area is an extremely important issue forthe Chinese government, Yunnan Province, and Kunming City.
The Japanese government announced the Economic Cooperation Program for China in October 2001,
and set out a policy placing more emphasis on areas such as conservation of environments andeco-systems, improvement of living standards and social development in the inland regions, humanresources development, institution building, and technology transfer. Moreover, the reduction of waterpollution/pollution control and the development of human resources are also established as priority
areas in JBIC’s Medium-Term Strategy for Overseas Economic Cooperation Operations. Thus, JBIC’sassistance for this project is highly necessary and relevant.
3. Project Objectives
This project is to enhance the sewage treatment capacity in the Central Area of Kunming City anddecrease the pollution load to Dianchi Lake, by constructing sewage treatment systems, and thereby
improve the living condition in the area.
4. Project Description(1) Target Area
Kunming City, Yunnan Province(2) Project Outline
Civil works, procurement of equipments, pertaining to sewage treatment facilities in the Kunming City
urban center, and training program(a) Development of the sewage pipe network(b) Rehabilitation and expansion of the sewage treatment plants(c) Construction of new sewage treatment plants(3) Total Project Cost/ Loan Amount:
52,981 million yen (Yen Loan Amount: 12,700 million yen)
(4) Schedule
July 2006-end of December 2012 (78 months)(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 April2002). This categorization is assigned because this project does not correspond to sectors or
regions described in said guidelines as being sensitive to negative impact, and because it is notdeemed to have a significant harmful impact on the environment.
(iii) Environmental Permits
The State Environmental Protection Administration approved the Environmental Impact
Assessment(EIA) report for the project in August 2005.
(iv) Anti-Pollution Measures
Water leaving sewerage facilities will be treated to meet Chinese domestic water emissions
standards before being discharged into the river, where it is not foreseen to have any particularimpacts. Also, sludge created at sewage treatment plants is planned to be appropriately disposed of
at existing landfill disposal sites.

(v) Natural Environment
The project target area and surrounding area does not correspond to an area sensitive to impact,
such as a national park. Undesirable impacts on the natural environment are assumed to beminimal.
(vi) Social Environment
Steps will be taken according to Chinese domestic procedures to acquire a 35ha site for the project.
There will be no relocation of residents.
(vii) Other/Monitoring
The Kunming City Environmental Protection Office will monitor water quality for the project.
(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
Baseline(2004)
Population served by sewage treatment(unit: 10,000 people)
Sewage treatment volume(unit: 10,000m3/day)
Percent of sewage treated (%)

197.0

Target(2015, 3 years after completion ofproject)
315.2

46.4

90.0

68

99.8

Quality of water discharged (BOD) (mg/L)

5-14< 10(2) Financial Internal Rate of Return: 5.5%(a) Costs: Project cost, operation and maintenance cost(b) Benefits: Revenue from fees(c) Project life: 30 years
6. External Risk Factors(1) Current city planning may change planned areas for roads or other developments and construction
site change, causing delays in civil works.
(2) Change in the policy of principle of fee burden could cause a shortage of fiscal funds or feescollected, affecting operation and maintenance.
7. Lessons Learned from Findings of Similar Projects Undertaken in the Past
From past ex-post evaluations of yen loan projects, the lesson has been learned that to ensuresustainability of project results, it is important to set an appropriate fee system, considering operationand maintenance costs, investment cost, ability of beneficiary residents to pay, and the capacity forfiscal burden. It is also important to formulate technical standards for operation and maintenancefrequency, and judgment for facility renewal. Thus, the project will confirm through interimsupervision and other means that an appropriate fee system and technical standards will be established.
8. Plans for Future Evaluation(1) Indicators for Future Evaluation(a) Population served (unit: 10,000 people)(b) Volume of sewage treated (unit: 10,000m3/day)(c) Percentage of sewage treated (%)(d) Quality of water discharged (BOD) (mg/L)(e) FIRR (%)(2) Timing of Next Evaluation
After completion of project