Ex-ante Evaluation
1. Name of the ProjectCountry: The People’s Republic of China
Project: Sichuan Water Environmental Improvement Project(Loan Agreement: March 30, 2007; Loan Amount: 6,300 million yen; Borrower: The Government ofthe 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 serious
problem. 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.
Sichuan Province (population: 85 million; land area: 480,000 km2) in southwest China is located in
the upper stream of the Yangtze River, one of the country’s seven largest rivers. In its cities, theconstruction of sewage treatment facilities is lagging in the face of increasing volumes of sewage
generated as a result of economic development. Thus, household sewage and industrial wastewater
have been discharged untreated into the upper stream of the Yangtze River, causing a deterioration ofwater quality. In some branch rivers, water quality during dry season falls under category V (highlypolluted). Thus, improving the water environment in the Yangtze basin is a pressing issue. Although
the Yangtze River today serves as a major source of drinking water in the province, because of the
impact of the water pollution discussed above, there are cities whose existing water sources cannot be
used for their water supply systems. Therefore, these cities have to develop new sources of water. To
cope with these issues involving the water environment, the Sichuan Provincial Government has
formulated the 11th Five-Year Plan for National Economic and Social Development in Sichuan
Province (2006–2010) and regards the problem of environmental contamination and ecologicalvandalism in the upper stream of the Yangtze River as a priority issue that should be solved throughthe construction of sewage treatment plants and conversion of water resources and the like.
The project addresses environmental conservation, one of the priority areas designated in the
Economic Cooperation Program for China prepared by the Government of Japan and theMedium-Term Strategy for Overseas Economic Cooperation Operations of JBIC (FY2005–FY2007).
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Thus, JBIC’s support for this project is highly necessary and relevant.
3. Project Objectives
The project aims to reduce the volume of water pollutants discharged into the upper stream of theYangtze River that runs through five cities (Yibin, Suining, Mianyang, Panzhihua, and Ziyang) and toensure stable supplies of safe drinking water by expanding and improving their water supply andsewerage systems. It will thereby help improve the living conditions of the populations.
4. Project Description(1) Target Area
Five cities of Sichuan Province: Yibin, Suining, Mianyang, Panzhihua, and Ziyang(2) Project Outline
The project involves the construction of sewerage and water supply facilities, procurement ofmaterials and equipment, and implementation of a training program in the aforesaid target area.
(a) Yibin: Sewerage facilities (sewage pipes and drains: 62 km, pumping stations: 6 locations)(b) Suining: Sewerage facilities (sewage pipes and drains: 27 km, sewage treatment plant: 60,000t/day)(c) Mianyang: Sewerage facilities (sewage pipes and drains: 140 km, pumping stations: 14locations)(d) Panzhihua: Sewerage facilities (sewage pipes and drains: 21 km, sewage treatment plant:
3,9000 t/day); water supply facilities (water supply pipes and drains: 9 km)(e) Ziyang: Sewerage facilities (sewage pipes and drains: 47 km)(f) Training: Manager training, training concerning sewage technology(3) Total Project Cost/Loan Amount
10,709 million yen (Yen Loan Amount: 6,300 million yen)
(4) ScheduleMay 2007–December 2012 (68 months). The definition of project completion is “when the project isfinally completed and accepted.”(5) Implementation Structure(a) Borrower: The Government of the People’s Republic of China(b) Executing Agency: Sichuan Provincial People’s Government(c) Operation and Maintenance SystemYibin: Yibin Qinyuan Water Affairs Co., Ltd.
Suining: Suining Luyuan Drainage Co., Ltd.
Mianyang: Mianyang Kenong Investment Co., Ltd.
Panzhihua: Panzhihua Urban Construction Investment Co., Ltd.
Ziyang: Ziyang Urgan Construction Investment Co., Ltd.
(6) Environmental and Social Consideration(a) Environmental Effects/Land Acquisition and Resident Relocation-2-(i) Category: B(ii) Reason for Categorization
This project is not likely to have significant adverse impact on the environment due to the factthat the project sector and project characteristics are not likely to exert impact and the project
is not located in a sensitive area under the “Japan Bank for International Cooperation
Guidelines for Confirmation of Environmental and Social Considerations” (established inApril, 2002). Thus, this project is classified as Category B.
(iii) Environmental Permit
The Environmental Impact Assessment (EIA) report related to the project will be approved bythe Sichuan Environmental Protection Bureau in April, 2007.
(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 acquisition of about 13 ha and the acquisition will be implemented
in accordance with the domestic procedures of China. The project does not involve resident
relocation.
(vii) Other/ Monitoring
In the project, the environmental protection bureau of each city where the project is
implemented will monitor water quality and the like.
(b) Promotion of Poverty Reduction
To help the poor, each of five cities introduce lower fee for water supply and sewerage, and it will
be applied to this project as well.
(c) Promotion of Social Development (e.g. Gender Perspective, Measures against Infectious
Diseases Including AIDS, and Consideration of the Disabled)None(7) Other Important Issues: None
5. Outcome Targets(1) Evaluation Indicators (Operation and Effect Indicator)
ProjectIndicator

Seweragefacilities

Population treated (10,000 persons)Amount of wastewater treated (10,000m3/day)
Percentage of wastewater treatment (%)-3-Baseline(2005 actualperformance)
67

Target (2012, atprojectcompletion)
163

7.8

37

2070

Effluent quality (BOD concentration:mg/L)
Effluent quality (COD concentration:mg/L)
Water
Percentage of population served (%)
supplyPopulation served (10,000 persons)facilities
Amount of water supply (10,000 m3/day)(2) Number of Beneficiaries
There are approx. 1.16 million beneficiaries in the project.

130–180≦10–20

250–470≦50–609556
14985915(3) Internal Rate of Return (Financial Internal Rate of Return)
Based on the conditions given below, the financial internal rate of return (FIRR) is 4.1%.
(a) Cost: Project cost, operation and maintenance expenses(b) Benefit: Income from fees(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 collection 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 important(1) to set an appropriate fee schedule that takes into consideration operation and maintenance costs,
investment costs, beneficial residents’ ability to pay, and ability to assume financial burden, and (2) toestablish technical standards for judging the maintenance frequency and the need for the replacementof facilities. Based on this lesson, efforts will be made in the project, through interim monitoring andsupervision, etc., to ensure the establishment of an appropriate fee schedule and technical standards.
8. Plans for Future Evaluation(1) Indicators for Future Evaluation- Population treated (10,000 persons)- Amount of wastewater treated (10,000 m3/day)- Percentage of wastewater treatment (%)- Effluent quality (BOD concentration: mg/L)- Effluent quality (COD concentration: mg/L)- Percentage of population served (%)- Population served (10,000 persons)- Amount of water supply (10,000m3/day)- FIRR (%)(2) Timing of Next Evaluation
After project completion-4-