Ex-ante Evaluation
1. Name of the ProjectCountry: The People’s Republic of China
Project: Xingjiang Environmental Improvement Project (I)(Loan Agreement: March 30, 2007; Loan Amount: 12,998 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 remained at 48% (2005), while in rural areas
sewerage facilities themselves have not spread very much. Consequently, the water pollution of rivers
and freshwater lakes has become a serious problem. Additionally, since clean water sources areconcentrated in the southwestern part of China, there are regional factors that cause water shortages.
Also, there are many cities beset with the problem of having their water supplied from deteriorating
sources. Furthermore, since China relies on coal for around 69% of its domestic energy consumption(2005), air pollution caused by sulfur oxide, soot, dust and other particles has become a serious
problem. Given this situation, in the 11th Five-Year Plan (2006–2010), the Government of China ispromoting a strengthening of environmental conservation and protection and renovation of naturalecosystems.
The Xingjiang Uygur Autonomous Region, located in China’s western border region, is regarded as apivotal region for the development of the western part of China. The four regional cities in Xingjiang
where the project is implemented once prospered as bustling trading posts along the Silk Road.
Today, these regional cities, relatively developed compared to other cities, have a respective
population ranging from 200,000 to 400,000 and hold a special position for the development of theAutonomous Region. In these urban areas, however, rapid industrialization and urbanization, as wellas sizable population growth, have boosted demand for water and heating. At the same time,environmental problems such as water and air pollution are getting increasingly serious. Thus, there
is an urgent need to address these issues.
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).
Thus, JBIC’s support for this project is highly necessary and relevant.
3. Project Objectives
The project aims to increase sewage treatment and water supply capacities and reduce the amount ofwater and air pollutants by developing sewerage and water supply systems and installing centralizedheat supply facilities in the four regional cities in the Xingjiang Uygur Autonomous Region. It will
thereby help improve the environment of the cities as well as the living conditions of the populations.
4. Project Description(1) Target Area
Hami, Turpan, Wusu and Kuitun in the Xingjiang Uygur Autonomous Region(2) Project Outline(a) The project involves the construction and renovation of sewerage and water supply facilities-1-as well as the procurement of materials and equipment in the aforesaid four cities. It also
involves the construction of centralized heat supply facilities and the procurement ofmaterials and equipment in three of the four cities, namely, Hami, Turpan and Kuitun. Inaddition, as part of the project a training program will be conducted in Japan.
(a) Hami: Development of sewerage facilities (new construction and renovation of sewage pipes
and drains), development of water supply facilities (construction of water supply aqueducts,
new construction of purification plants, and new construction and renovation of distribution
pipes and drains), and development of centralized heat supply facilities (construction of heat
supply facilities, installation of heat supply pipes, and construction of heat-exchange stations)(b) Turpan: Development of sewerage facilities (new construction and renovation of sewage
pipes and drains, new construction of sewage treatment plants, and renovation of existing
sewage treatment plants), development of water supply facilities (construction of watersupply aqueducts as well as new construction and renovation of distribution pipes anddrains), and development of centralized heat supply facilities (construction of heat supply
facilities, installation of heat supply pipes, and construction of heat exchange stations)(c) Wusu: Development of sewerage facilities (new construction and renovation of sewage pipesand drains) and development of water supply facilities (new construction and renovation of
distribution pipes and drains)(d) Kuitun: Development of sewerage facilities (new construction and renovation of sewage
pipes and drains, new construction of sewage treatment plants, and expansion of existing
sewage treatment plants), development of water supply facilities (new construction andrenovation of distribution pipes and drains), and development of centralized heat supplyfacilities (construction of heat supply facilities, installation of heat supply pipes, andconstruction of heat-exchange stations)(3) Total Project Cost/Loan Amount
18,712 million yen (Yen Loan Amount: 12,998 million yen)
(4) ScheduleMay 2007–December 2012 (68 months). The definition of project completion is “when the term ofwarranty expires.”(5) Implementation Structure(a) Borrower: The Government of the People’s Republic of China(b) Executing Agency: Xinjiang Uygur Autonomous Region People’s Government(c) Operation and Maintenance System:CitySub-Project
Operation and Maintenance SystemHami
Development of sewerage facilities
Sewage Treatment Plant in Hami
CityDevelopment of water supply facilities
Water Works in Hami City
Development of centralized heat supply Mingzhu Heating Power Company infacilities
Hami City-2-

Turpan

Wusu

KuitunDevelopment of sewerage facilities andwater supply facilities
Development of centralized heat supplyfacilities
Development of sewerage facilities

Turpan Wanquan Water Supply andDrainage CompanyHeat Supply Company in Turpan
City
Sewage Treatment Plant in Wusu
City
Development of water supply facilities
Water Works in Wusu City
Development of sewerage facilities
Sewage Treatment Plant in Kuitun
CityDevelopment of water supply facilities
Water Works in Kuitun City
Development of centralized heat supply Heat Supply Company in Kuitun
facilities
City(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 April 2002). This categorization is assigned because this project does notcorrespond to sectors or regions described in said guidelines as being sensitive to negative
impact, and because it is not deemed to have a significant harmful impact on theenvironment.
(iii) Environmental Permit
Regarding Turpan, the Environmental Impact Assessment (EIA) report related to the project
was approved by the Xinjiang Uygur Autonomous Region Environmental Protection Bureau
in January, 2007. Regarding Hami, Wusu and Kuitun, the EIA report related to the project
was approved by the said bureau in February, 2007.
(iv) Anti-Pollution Measures
Wastewater from sewerage facilities and centralized heat source centers will be treated andreleased into rivers, deserts and the like (some sewage treated wastewater is used as irrigationin afforestation programs) in a state and manner that meets the wastewater standards
established in China. Thus, no significant adverse impact is forseen. Additionally, althoughsome of the sludge generated in sewage treatment plants will be used as fertilizer for
afforestation, highly contaminated sludge will be appropriately disposed of in existing
disposal area. Furthermore, regarding air pollution and other issues that may come up after
the project is started, domestic environmental standards are expected to be met by
implementing measures such as the installation of dust collectors and desulfurizers.
(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 52 ha and the acquisition will be implemented in-3-accordance with the domestic procedures of China. The project does not involve resident
relocation.
(vii) Other/Monitoring
In the project, the environmental observation stations set up in each of the four cities will
monitor the noise, water quality, air pollution, wastewater and so on.
(b) Promotion of Poverty Reduction
The poor make up 3.7% of the population in Hami, 6.3% in Turpan, 10.0% in Wusu, and 1.2% inKuitun. The poverty rate in three of the four cities exceeds the national average of 2.8%. To help
the poor, each of the four cities introduced lower fee for water supply and heat supply, and it
will be applied to this project as well.
(c) Promotion of Social Development (e.g. Gender Perspective, Measure for Infectious Diseases
including AIDS, Participatory Development, Consideration for the Handicapped, etc.)
None(7) Other Important Issues
None
5. Outcome Targets(1) Evaluation Indicators (Operation and Effect Indicator)(a) Development of Sewerage Facilities
Indicator
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)

Baseline(2005 actualperformance)
42.3
10.1
63.0
18–121
59–226

Target (2012, atproject completion)
78.8
23.5
92.9
≦20–36≦60–100(b) Development of Water Supply Facilities
Baseline(2005 actualperformance)
72.7
46.0
18.2

Indicator
Percentage of population served (%)
Population served (10,000 persons)Amount of water supply (10,000m3/day)Target (2012, atproject completion)
99.6
79.3
30.0

(c) Development of Centralized Heat Supply Facilities
Baseline(2005 actualperformance)–IndicatorSO2 emission reduction volume (t/year)-4-Target (2012, atproject completion)
1,029

NOx emission reduction volume (t/year)
TSP emission reduction volume (t/year)––707
29,834(2) Number of Beneficiaries(a) Development of sewerage facilities: Approx. 380,000(b) Development of water supply facilities: Approx. 350,000(c) Development of centralized heat supply facilities: Approx. 300,000(3) Internal Rate of Return (Financial Internal Rate of Return)
Based on the conditions given below, the financial internal rate of return (FIRR) is as follows:
Internal rate ofCity
Sub-project
returnDevelopment of sewerage facilities
Hami
4.4%
Development of water supply facilities
6.0%
Development of centralized heat supply facilities
6.0%
Development of sewerage facilities
Turpan10.3%
Development of water supply facilities
7.5%
Development of centralized heat supply facilities
9.6%
Development of sewerage facilities
Wusu
4.5%
Development of water supply facilities
6.2%
Development of sewerage facilities
Kuitun4.7%
Development of water supply facilities
6.3%
Development of centralized heat supply facilities
6.3%[FIRR](a) Cost: Project cost, operation and maintenance expenses(b) Benefit: Income from fees, subsidy(c) Project Life: 20 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
3. Risk of a fluctuation in the price of coal, the fuel for centralized heat supply facilities
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. Based on
this lesson, efforts will be made in the project to ensure the planning of an appropriate fee schedule.
8. Plans for Future Evaluation-5-(1) Indicators for Future Evaluation- Development of sewerage facilities: 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), financial internal rate ofreturn (%)- Development of water supply facilities: Percentage of population served (%), population served(10,000 persons), amount of water supply (10,000m3/day), financial internal rate of return (%)- Development of centralized heat supply facilities: SO2 emission reduction volume (t/year), NOxemission reduction volume (t/year), TSP emission reduction volume (t/year), financial internalrate of return (%)(2) Timing of Next Evaluation
After project completion-6-