Document of The World Bank FOR OFFICIAL USE ONLY Report No: 75471-CN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$100 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A ANHUI YELLOW MOUNTAIN NEW COUNTRYSIDE DEMONSTRATION PROJECT November 19, 2013 China and Mongolia Sustainable Development Unit Sustainable Development Department East Asia and Pacific Region This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board Consideration and updated document will be made publicly available in accordance with the Bank’s policy on Access to Information. CURRENCY EQUIVALENTS (Exchange Rate Effective November 1, 2013) Currency Unit = Yuan/Y RMB Y 6.12 = US$1 US$ 0.163 = RMB 1 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS APG Anhui Provincial Government AWP Annual Work Plan CEA Cost-Effectiveness Analysis CNAO Chinese National Audit Office CNY Chinese Yuan CPS Country Partnership Strategy CQ Consultant Qualifications DA Designated Account DRC Development & Reconstruction Council EA Environmental Assessment ECOP Environmental Code of Practice EIA Environmental Impact Assessment EM P Environmental Management Plan EMDP Ethnic Minority Development Plan ERR Economic Rate of Return FM Financial Management FMM Financial Management Manual FSR Feasibility Study Report FY P Five Year Plan GDP Gross Domestic Product GoC Government of China HH Households Ha Hectare HVTB Hundred Villages and Thousand Buildings MDRC Municipal Development and Reform Commission HMG Huangshan Municipal Government MTR Mid-Term Review HMFB Huangshan Municipal Finance Bureau HVTB A Hundred Villages, A thousand buildings” IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding IFR Interim Financial Report ISDS Integrated Safeguard Data Sheet M&E Monitoring and Evaluation MIS Management Information System MOF Ministry of Finance NBF Non-Bank Finance NCB National Competitive Bidding NDRC National Development and Reform Commission NSCS New Socialist Countryside Scheme O&M Operation and Maintenance ORAF Operational Risk Assessment Framework PAD Project Appraisal Document PAO Provincial Audit Office PCN Project Concept Note PCR Physical Cultural Resources PDO Project Development Objective PDRC Provincial Development and Reform Commission PFB Provincial Finance Bureaus PIU Project Implementation Unit PLG Project Leading Group PM Procurement Manual PMP Pest Management Plan PP Procurement Plan PMO Project Management Office PMU Project Management Unit POM Project Operations Manual PRC People’s Republic of China QBS Quality-Based Selection QCBS Quality-and-Cost-Based Selection RA P Resettlement Action Plan RF Results Framework RFP Request for Proposals RMB Renminbi SA Social Assessment SBD Standard Bidding Document TA Technical Assistance TEG Technical Expert Group UNESCO United Nations Educational and Scientific Organization VSL Variable Spread Loan Regional Vice President: Axel van Trotsenburg, EAPVP Country Director: Klaus Rohland, EACCF Sector Director: John Roome, EASSD Sector Managers: Mark Lundell, EASCS Task Team Leader: Rabih H. Karaky, EASER CHINA Anhui Yellow Mountain New Countryside Demonstration Project TABLE OF CONTENTS Page I. STRATEGIC CONTEXT ...............................................................................................10 A. Country Context .......................................................................................................... 10 B. Sectoral and Institutional Context............................................................................... 10 C. Rationale for Bank Involvement ................................................................................. 12 D. Higher Level Objectives to which the Project Contributes ........................................ 13 II. PROJECT DEVELOPMENT OBJECTIVES ..............................................................13 A. PDO............................................................................................................................. 13 B. Project Beneficiaries ................................................................................................... 13 C. PDO Level Results Indicators..................................................................................... 13 III. PROJECT DESCRIPTION ............................................................................................14 A. Project Components .................................................................................................... 14 B. Project Financing ........................................................................................................ 15 Lending Instrument ........................................................................................................... 15 Project Cost and Financing ............................................................................................... 16 C. Lessons Learned and Reflected in the Project Design ................................................ 16 IV. IMPLEMENTATION .....................................................................................................17 A. Institutional and Implementation Arrangements ........................................................ 17 B. Results Monitoring and Evaluation ............................................................................ 18 C. Sustainability............................................................................................................... 19 V. KEY RISKS AND MITIGATION MEASURES ..........................................................20 A. Risk Ratings Summary Table ..................................................................................... 20 B. Overall Risk Rating Explanation ................................................................................ 20 VI. APPRAISAL SUMMARY ..............................................................................................21 A. Economic and Financial Analyses .............................................................................. 21 B. Technical ..................................................................................................................... 22 C. Financial Management ................................................................................................ 23 D. Procurement ................................................................................................................ 24 E. Social (including Safeguards) ..................................................................................... 24 F. Environment (including Safeguards) .......................................................................... 26 Annex 1: Results Framework and Monitoring .........................................................................29 Annex 2: Detailed Project Description.......................................................................................32 Annex 3: Implementation Arrangements ..................................................................................37 Annex 4: Operational Risk Assessment Framework ................................................................52 Annex 5: Implementation Support Plan ....................................................................................56 Map……........................................................................................................................................60 . PAD DATA SHEET China Anhui Yellow Mountain New Countryside Demonstration Project (P129563) PROJECT APPRAISAL DOCUMENT . EAST ASIA AND PACIFIC EASCS Report No.: PAD399 . Basic Information Project ID EA Category Team Leader P129563 B - Partial Assessment Rabih H. Karaky Lending Instrument Fragile and/or Capacity Constraints [ ] Investment Project Financing Financial Intermediaries [ ] Series of Projects [ ] Project Implementation Start Date Project Implementation End Date 27-Dec-2013 31-Dec-2018 Expected Effectiveness Date Expected Closing Date 15-May-2014 30-Jun-2019 Joint IFC No Sector Manager Sector Director Country Director Regional Vice President Mark R. Lundell John A. Roome Klaus Rohland Axel van Trotsenburg . Borrower: People's Republic of China Responsible Agency: Huangshan Municipality development and Reform Commission Contact: Mr. Ding Shili Title: Deputy Director Telephone No.: 05599-2355872 Email: hsshxmb@126.com . Project Financing Data(in USD Million) [X] Loan [ ] Grant [ ] Guarantee [ ] Credit [ ] IDA Grant [ ] Other Total Project Cost: 145.19 Total Bank Financing: 100.00 Financing Gap: 0.00 . Financing Source Amount Borrower 0.00 International Bank for Reconstruction and 100.00 Development Local Govts. (Prov., District, City) of Borrowing 45.19 Country Sub-borrower(s) 0.00 Total 145.19 . Expected Disbursements (in USD Million) Fiscal 2014 2015 2016 2017 2018 2019 0000 0000 0000 Year Annual 5.00 10.00 30.00 25.00 25.00 5.00 0.00 0.00 0.00 Cumulati 5.00 15.00 45.00 70.00 95.00 100.00 0.00 0.00 0.00 ve . Proposed Development Objective(s) The project development objective (PDO) is to improve the quality of services and income generating opportunities available to rural households in selected villages of Huangshan municipality. . Components Component Name Cost (USD Millions) Infrastructure Improvement 66.46 Cultural Heritage Conservation 20.72 Enhanced Economic Opportunities 21.47 Institutional Support 5.29 . Institutional Data Sector Board Agriculture and Rural Development . Sectors / Climate Change Sector (Maximum 5 and total % must equal 100) Major Sector Sector % Adaptation Co- Mitigation Co- benefits % benefits % Transportation General transportation 25 sector Water, sanitation and flood protection General water, sanitation 25 and flood protection sector Industry and trade Other industry 25 Agriculture, fishing, and forestry General agriculture, fishing 15 and forestry sector Public Administration, Law, and Justice Sub-national government 10 administration Total 100 I certify that there is no Adaptation and Mitigation Climate Change Co-benefits information applicable to this project. . Themes Theme (Maximum 5 and total % must equal 100) Major theme Theme % Rural development Rural services and infrastructure 58 Urban development Cultural Heritage 18 Rural development Rural non-farm income generation 10 Rural development Other rural development 9 Urban development Municipal governance and institution 5 building Total 100 . Compliance Policy Does the project depart from the CAS in content or in other significant respects? Yes [ ] No [ X ] . Does the project require any waivers of Bank policies? Yes [ ] No [ X ] Have these been approved by Bank management? Yes [ ] No [ X ] Is approval for any policy waiver sought from the Board? Yes [ ] No [ X ] Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] . Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 X Natural Habitats OP/BP 4.04 X Forests OP/BP 4.36 X Pest Management OP 4.09 X Physical Cultural Resources OP/BP 4.11 X Indigenous Peoples OP/BP 4.10 X Involuntary Resettlement OP/BP 4.12 X Safety of Dams OP/BP 4.37 X Projects on International Waterways OP/BP 7.50 X Projects in Disputed Areas OP/BP 7.60 X . Legal Covenants Name Recurrent Due Date Frequency Technical Expert Group (TEG) X CONTINUOUS Description of Covenant The Borrower shall maintain a Technical Expert Group (TEG) at the municipal level, including experts with adequate qualifications and experience in transport, water supply and sanitation, cultural heritage, tourism, agriculture, and environment with terms of reference, compositions, and other resources acceptable to the World Bank, to be responsible for advising the PMO and the PMUs on technical and institutional matters relating to project implementation. . Team Composition Bank Staff Name Title Specialization Unit Minhnguyet Le Khorami Program Assistant Program Assistant EASER Minneh M. Kane Lead Counsel Lead Counsel LEGES Ji You Urban Specialist Urban Specialist EASCS Junxue Chu Senior Finance Officer Senior Finance Officer CTRLN Zhefu Liu Senior Social Development Senior Social Development EASCS Specialist Specialist Lourdes L. Anducta Program Assistant Program Assistant EASER Ximing Zhang Sr Water Resources Spec. Sr Water Resources Spec. EASCS Rabih H. Karaky Senior Economist Task Team Leader EASER Feng Ji Senior Environmental Environmental Specialist EASCS Specialist Yi Geng Sr Financial Management Sr Financial Management EASFM Specialist Specialist Xieli Bai Program Assistant Program Assistant EACCF Yunqing Tian Team Assistant Team Assistant EACCF Tuo Shi Urban Economist Young Professional UDRUR Salim Rouhana Urban Specialist Young Professional AFTU2 Zheng Liu Procurement Specialist Procurement Specialist EASR2 Non-Bank Staff Name Title Office Phone City Eddie Ke-Siong Hum Sanitary Engineer Singapore Kingsley Robotham Urban & Institutional Amman Specialist Wanlong Lin Economist Beijing Feng Ding Cultural Heritage Specialist Shanghai . Locations Country First Administrative Location Planned Actual Comments Division People’s Huangshan Huangshan District (12 X Republic of Municipality villages) China Huizhou District (8 villages) Qimen County (12 villages) She County (20 villages) Tunxi District (3 villages) Xiuning County (7 villages) Yi County (6 villages) I. STRATEGIC CONTEXT A. Country Context 1. Since it embarked on a series of economic reforms starting in 1978, China’s economy has grown at a remarkable annual rate of about 10% and more than 600 million people have been lifted out of poverty. But to sustain this rapid pace of development, China still has to address a number of challenges, amongst them the high inequalities in incomes, opportunities, and quality of life that exist between rural and urban areas. In 2010, the average per-capita disposable income among rural residents was less than one third that of urban residents. 2. The Government of China (GoC) is aware of this challenge and has laid out a set of programs and policies in the 12th Five Year Plan (FYP 2011-2015) to try and address it. One of these programs is the “New Socialist Countryside Scheme” (NSCS) which was launched under the 11th FYP, and is aimed at increasing farmers’ incomes, diversifying their employment opportunities, improving their livelihoods and productivity levels, enhancing their living conditions and the overall management of their rural environment, and strengthening their institutions for self-governance within harmonious communities. 3. The 12th FYP also outlines the guiding principles to establish the new socialist countryside through strengthening rural-urban linkages, integrating infrastructure construction, public services provision and social management, and capitalizing on local comparative resources advantages to promote local economic development. It further encourages the diversification of rural economies away from the primary sector towards industry and services sectors, including the protection and development of tourism resources, where applicable. It gives priority to the preservation of cultural and natural heritage sites, and to famous cities, towns and villages in Chinese history and culture with pilot projects for the protection and utilization of non-physical cultural heritage as well. B. Sectoral and Institutional Context 4. Located in the eastern region of China, Anhui province ranked 26 among all Chinese provinces in GDP per capita in 2010 1. Compared to its direct neighboring provinces, Anhui’s per-capita GDP is less than 40% that of Zhejiang and Jiangsu provinces. A closer look reveals that the share of the primary sector in Anhui’s GDP is 14% compared to 4.9% and 6.9% for Zhejiang and Jiangsu respectively, and 10% nationally. Meanwhile, the share of the tertiary sector is 33.9% compared to 43.5% and 41.5% for Zhejiang and Jiangsu respectively. More than 40% of Anhui’s labor force is still employed in agriculture, with relatively low productivity levels. In 2010, the average per capita rural income in Anhui ranked 22nd in China, considerably lower than the national average. 5. Against this background, some of the effective measures to help Anhui province catch up include improving agricultural productivity, engaging farmers in higher value-added commodities supply chains, capitalizing on comparative advantage resources to diversify the sources of income for rural residents, and promoting rural non-farm sector development to create new employment opportunities. For this purpose, the Anhui Provincial Government (APG) has 1 Per capita GDP level of CNY 2,0888 equivalent to (US$ 3,086) 10 been actively implementing the NSCS through a number of schemes such as the “Thousand Villages and Hundred Towns Demonstration Scheme” which aims at “forming new industrial structure, elevating rural households’ living standard, promoting new countryside customs, improving images of countryside, and consolidating governance of rural areas. 6. The NSCS has particular implications for Huangshan Municipality. Located at the far Southern end of Anhui province, Huangshan is endowed with beautiful natural environment and abundant Huizhou cultural architecture. It is home to two UNESCO World Heritage sites, including the Yellow Mountain after which the city is named, and is one of the leading tourism destinations in China. It is rich in old ancient buildings dating back to the Ming dynasty. Huangshan’s economy is highly dependent on the tourism sector. In 2010, Huangshan’s tourism revenue represented nearly 65% of its total GDP. 7. Huangshan municipality encompasses three districts and four counties, with more than one hundred towns and around 900 villages spread across a total area of 9,807 Km2. The total population is estimated at around 1.48 million in 2010, with nearly 60 % of which living in rural areas. More than 42% of the labor force is employed in the agricultural sector, which accounts for 13% of the municipality’s GDP. Meanwhile, the services sector contributes to over 43% of the local GDP but employs less than a third of the labor force. In 2010, the per capita annual disposable income of urban households (CNY 18,669) was nearly three times that of rural households (CNY 6,716). 8. The NSCS, implemented since 2006, has led to significant development of Huangshan’s economy and to the improvement of the living conditions in rural areas. The total revenue from the rural economy has almost doubled between 2005 and 2010, and the per capita annual net income of rural households has increased from CNY 3,185 to CNY 6,716. Around 165 villages have been included in the Thousand Villages and Hundred Towns Demonstration Scheme. Over 4,015 km of rural roads have been constructed or upgraded and about 73% of the rural population has been covered with piped water supply with safe and reliable water sources. The agribusiness sector has also grown at a fast rate with the tea industry generating more than CNY 4.6 billons in total revenue in 2010. 9. However, there are still remaining challenges that the Huangshan Municipal government (HMG) is facing to further develop the rural economy, enhance the living conditions of rural households, and preserve the region’s cultural and natural assets. Investments in infrastructure are insufficient to meet the needed demand, especially for roads, water, and sanitation. Only about 30% of the villages have good sewerage systems and wastewater treatment works. Many of the cultural heritage assets and ancient buildings are neither well preserved nor put to adaptive use, due to shortage of funding. Agriculture productivity remains low and the integration of farmers in high value commodities supply chains has not yet been fully achieved. Employment opportunities in the non-farm sector are limited. Tourism infrastructure and services in the villages are not well developed. Finally, the capacity and skill-sets of the institutions and stakeholders involved is in need of improvement. These constraints have undermined the potential of villages to draw on their endowments to develop tourism and create new employment opportunities and income sources. In fact, out of the 23 million tourists (measured in person-time) that visited Huangshan in 2010, the average stay was only 1.57 days. The current rural income is still heavily dependent on agriculture and remittances from migrant workers. 11 10. Recognizing these constraints, the HMG has put greater emphasis on the NSCS in its 12th FYP in parallel with the national and provincial programs. It has proposed to increase infrastructure investments in “water, electricity, road, gas and housing”, implement safe drinking water projects that cover a 341,400 rural population, upgrade the village power grid system, improve the safety facilities for rural roads, and accelerate the development of modern high value-added agriculture and agribusiness. 11. In parallel, HMG has initiated a five year cultural heritage conservation program (2009- 2013) - “A Hundred Villages, A thousand buildings” (HVTB) - aimed at protecting 1,065 ancient Hui Style buildings across 101 villages with an estimated investment of CNY 6 billion. The HVTB includes both preservation and utilization components. The preservation component consists of preparing protection and utilization master plans, preserving original village layout, remains of ancient buildings, family temples and gardens, protecting ancient trees and countryside sceneries, and protecting intangible cultural heritage assets. The utilization component develops ancient villages into attraction sites with various features such as Hui-style culture experience, fishing holiday resort, photo-shooting and drawing spots, and agro-tourism. Meanwhile, some ancient buildings are to be transformed into art studio, folk-style hostels, restaurants, museums, bookstores, etc. 12. Finally, HMG has formulated a comprehensive tourism development strategy with the objective of reaching 50 million person-times of tourists and 50 billion Yuan in tourism revenue by 2015. Under this agenda, 500 villages are expected to be directly involved in the tourism industry and 3000 rural households are expected to operate family-run hostels/restaurants by 2015. To achieve this goal, HMG plans to improve the overall village environment and invest in basic infrastructure and facilities including roads, water and power supply, sanitation and signage. It also plans to build up tourism management capacity and strengthen relevant institutions such as establishing countryside tourism cooperatives, regulating business activities at tourism sites, and standardizing tourism-related services. C. Rationale for Bank Involvement 13. The Bank is well positioned to play a key role in helping HMG in its efforts to promote rural countryside development. Building on lessons learned from similar projects that were successfully implemented in China and elsewhere, the project provides an opportunity to demonstrate new approaches to regional development which integrate infrastructure upgrading with cultural heritage conservation, and enhancing economic opportunities in rural tourism and modern agriculture. 14. The Bank has directly been involved in supporting the new countryside development agenda promoted by the GoC through a number of projects such as the Ningbo new countryside development project (2009) and Chongqing Urban and Rural Integration Project (2010). Furthermore, quite a rich experience has been gained from a number of cultural heritage protection and conservation projects such as the Gansu cultural and natural heritage protection and development project (2008), the Guizhou cultural and natural heritage protection and development project (2009) and the Shandong Confucius and Mencius cultural heritage protection and development project (2011). The Bank has also recently published a report on “Conserving the past as a foundation for the future: The China-Bank partnership on cultural 12 heritage conservation” (2011). D. Higher Level Objectives to which the Project Contributes 15. The project speaks directly to both strategic themes of the Country Partnership Strategy (CPS) for China (2013-2016), namely supporting greener growth and promoting more inclusive development. It contributes to achieving a number of outcomes set in the CPS such as: Piloting new ways to boost rural incomes and reduce poverty, enhancing secondary town development, promoting sustainable agriculture practices, demonstrating sustainable natural resource management approaches, and enhancing urban environmental services. The project also contributes to improving the quality of life, raising farmers’ incomes, and constructing the “New Socialist Countryside” in line with the objectives of the 12th FYP. II. PROJECT DEVELOPMENT OBJECTIVES A. PDO 16. The project development objective (PDO) is to improve the quality of services and income generating opportunities available to rural households in selected villages of Huangshan municipality. This would be achieved by investing in: (i) upgrading infrastructure services, (ii) restoring and preserving the existing cultural heritage assets, and (iii) promoting high value- added agriculture and countryside tourism. B. Project Beneficiaries 17. Direct beneficiaries of the project will be around 145,000 rural residents living in 68 villages across 7 counties/districts that will benefit directly from improved public services and enhanced economic opportunities and capacity building activities. It is estimated that around 44% of the project total beneficiaries are women. The impact area of the project will cover a population of 510,000 residents who will benefit indirectly from project investments. 18. Government departments staff at municipal, county, and district levels including cultural heritage, tourism, agriculture, water resources, environment, finance, and planning will also benefit from project activities. The project will have direct benefits to private sector agencies involved in tourism and high-value agriculture, and to villager organizations, including farmers and tourism associations that are active in the project area. C. PDO Level Results Indicators 19. Achievement of the PDO will be measured by a number of key indicators including:  Number of beneficiaries with improved infrastructure services in project villages.  Number of tourists visiting project villages  Value of agriculture production in project villages 20. The project is expected to generate public benefits that would consist of (a) improved infrastructure and services; (b) preserved and conserved cultural heritage assets; (c) strengthened 13 capacity of village level organizations and government agencies. Private benefits would mainly consist of increased income from agriculture and tourism activities. III. PROJECT DESCRIPTION A. Project Components 21. The project will finance investments in 68 villages across four counties and three districts of Huangshan municipality. An asset based local development approach is contemplated, which combines the conservation of cultural and natural heritage sites in the project villages with infrastructure upgrading and promotion of income generating opportunities from high value agriculture and countryside tourism. Interventions are tailored to local circumstances and determined in consultation with line bureau staff, village groups, private sector representatives, local government, and villagers. 22. Project areas and activities are selected based on specified criteria that aim at reducing the existing development and income gaps among different villages on one hand, and at maximizing the potential benefits from the existing cultural and natural heritage assets on the other hand. The buy-in from local villagers is critical to ensure ownership of project activities and the sustainability of their impacts. The total cost is estimated at about $145.19 million comprising an IBRD loan of $ US100 million and counterpart funding of $45.19 million. The project would have four components. Component 1: Infrastructure Improvement (US$66.46 million- IBRD: US$57.28 million) 23. This component aims at improving infrastructure services in project villages by financing sustainable priority investments in rehabilitating and expanding infrastructure facilities while preserving and enhancing the traditional and historic character of these villages. Investments would include: i) village roads upgrading/construction, bridges, sidewalks, domestic and tourism pathways, street lightings, and associated sub-surface infrastructure services (such as power and telecommunication cables); ii) safe and reliable piped water supply either from mountain springs or town water supply plants with appropriate treatment technologies; iii) storm water and waste water management through construction of drainage systems, sewer networks and low cost and environmentally appropriate treatment and disposal facilities; iv) river enhancements for flood prevention, environmental and recreational uses through clean up, and embankment upgrading, and v) rehabilitation of small dams, ponds, and canals for irrigation and drainage. Component 2: Cultural Heritage Conservation (US$20.72 million- IBRD: US$18.25 million) 24. This component aims at restoring, preserving, protecting and, where practicable, adaptively reusing historic Huizhou style buildings for social, cultural, village environment, and tourism development purposes. Investments would include interventions to: i) arrest physical deterioration; improve structural integrity, physical safety and functionality; ii) improve presentation and signage for restored buildings; iii) promote and facilitate, where practicable, the adaptive reuse of local cultural heritage assets for social, cultural, and tourism development purposes; iv) support the preparation of cultural heritage conservation plans for the selected project villages; v) provision of sub-grants to owners of private historic buildings in project 14 villages to enable them to restore their properties; vi) document, research, promote, and disseminate materials and information on selected important intangible cultural heritage assets (rituals and festive events, performing arts and traditional craftsmanship). Component 3: Enhanced Economic Opportunities (US$ 21.47 million- IBRD: US$18.92 million) 25. This component aims at generating direct employment opportunities, increasing local household incomes, and stimulating village economies by building on the above improvements of the infrastructural services and cultural heritage assets, to promote the development of high- value agriculture and rural tourism. Investments would include (i) support to intensified production and improved quality of characteristic high-value agriculture products such as tea, mulberry, flowers, herb and grapes, and in high-value aquaculture - including initiatives to obtain green and organic certification and to assist cooperatives and producer associations, with direct benefit in income and indirect benefits in introduction and demonstration of improved technology; (ii) improved marketing facilities and exhibition centers for agriculture products and handicrafts ; (iii) development of income-generating tourism services including adaptation of existing buildings, promotion of tourism at the village level, supporting rural tourism associations, and training of villagers in tourism industry skills; (iv) enhance the core surrounding environment by retrofitting existing non-Hui houses/buildings into Huizhou architecture to promote the visibility and positive image of the villages; and (v) provision of ancillary facilities to support tourism including tourism service centers, exhibition and performance spaces, parking lots, public toilets and improvements to public spaces such as squares and exercise facilities. Component 4: Institutional Support (US$5.29 million- IBRD: US$5.29 million) 26. Component 4 supports and develops the capacity of institutions to implement the project and to sustainably manage, operate and maintain the outputs of Components 1, 2 and 3. Investments will include (i) support to strategic research and planning including new countryside development and market-led village-based tourism; (ii) capacity development for management, operation and maintenance of project outputs; (iii) establishment of an information dissemination, communication, and promotion platform; iv) establishment of effective financial and project management information systems and project monitoring and evaluation system; v) the purchase of necessary systems hardware and software for the PMO and PMUs; vi) training of PMO and PMU staff to effectively utilize the systems; and vii) other project related studies and consultancies including project construction management. B. Project Financing Lending Instrument 27. The project will be financed by an IBRD Investment Project Financing (IPF) to the People’s Republic of China (PRC) in the amount of US$100 million, to be on-lent by PRC to Anhui Province. The Bank Loan will be on standard IBRD terms for six-month LIBOR plus variable spread, US Dollar denominated IBRD flexible loan (IFL), commitment-linked, level repayment 15 of principals with 30 years maturity including 5-year grace period. The front end fee is of 25 basis points. Project Cost and Financing 28. The total project financing requirement are estimated at US$145.19 million inclusive of price and physical contingencies, taxes, interest during construction and front-end fee. Table 1 shows the breakdown of project costs and sources of funding by component. Total counterpart funding of US$ 45.19 million is comprised of allocations from the seven project counties/districts, the municipality, and other sources. Table 1: Project Cost and Financing Description Estimated Costs IBRD Financing US$ RMB US$ % (million) (million) (million) 1. Infrastructure Improvement 66.46 412.06 57.28 86 2. Cultural Heritage Conservation 20.72 128.47 18.25 88 3. Enhanced Economic Opportunities 21.47 133.12 18.92 88 4. Institutional Support 5.29 32.82 5.29 100 5. Underground Power and Telecommunication Lines 0.90 5.58 - - 6. Land Acquisition and Resettlement 0.49 3.06 - - 7. O&M Funds for Built Assets 1.04 6.47 - - 8. Project Overheads 14.71 91.22 - - 9. Contingencies 10.90 67.58 - - Total Project Costs 142.00 880.39 99.75 70 10. Interest During Implementation 2.94 18.26 - - 11. Front End Fee 0.25 1.55 0.25 100 Total Financing Required 145.19 900.20 100.00 69 C. Lessons Learned and Reflected in the Project Design 29. The project design has benefited from a number of lessons learned from past and on-going interventions in China and elsewhere in rural infrastructure development, cultural heritage conservation, and enhancing income-generating opportunities within the context of countryside development. Key lessons include: 30. Sub-projects selection. With a large number of diverse sub-projects and a high proportion of intangible benefits, the selection of sub-projects activities was participatory, demand-led, and based on a clear defined set of criteria. 31. Infrastructure Design. Unreliable baseline information, inadequate sector planning and optimistic projections often lead to overdesign of planned infrastructure investments. During 16 project preparation, designs of the proposed facilities were developed based on a combination of site surveys, community consultations, accurate demand-based planning, cost effective technical specifications, and appropriate design standards. In addition, cost estimates were reviewed to ensure that they reflect market conditions. 32. Operations & management arrangements. Adequate operation and maintenance arrangements, with responsibilities and funding sources ought to be clearly defined from the start. Clarification of asset ownership is essential to ensure effective O&M and oversight of the invested infrastructures. While flexibility is required in the options considered for effective O&M of the invested infrastructures at village level, where appropriate, the existing village committees or local rural associations would also be organized and trained to help operate and manage the built assets for their sustainability. 33. Cultural Heritage Conservation Practices. Over the past few years, the Bank has gained significant experience supporting cultural heritage conservation projects and sector analysis, including the recently completed report entitled: “Conserving the past as a foundation for the future: China-WB partnership on Cultural heritage conservation”. Lessons learned from this work which have been directly incorporated in the project include: (a) integrating cultural heritage and infrastructure rehabilitation, (b) increasing community participation and appreciation, (c) supporting best practices for conservation, (d) building the capacity of conservation’ institutions and specialists, (e) adapting cultural heritage assets for new uses, (f) and promoting economic development through heritage conservation and tourism. IV. IMPLEMENTATION A. Institutional and Implementation Arrangements 34. The project will be implemented over a period of 5 years in 68 villages of Huangshan municipality across three districts and four counties. Huangshan Municipal Development and Reform Commission (MDRC) is the lead implementing and coordinating agency for the project. It is a resourceful department that enjoys strong municipal government support, and assistance from provincial and central agencies. It also has the ability to draw on all line bureaus and technical agencies to get them involved in project preparation and implementation. Huangshan Municipality MDRC has established a Project Management Office (PMO) to coordinate the preparation of the Project and to supervise and monitor its implementation. 35. Each County and District has established a Project Management Unit (PMU) within its respective DRC office to coordinate the preparation of the Project and supervise and monitor its implementation. At the township and village levels, local Project Implementation Units (PIUs) will be responsible for project implementation. 36. The PMO will report to the Project Leading Group (PLG), established at the municipal level and consisting of representatives from the various line departments and technical experts. The PLG is set-up and headed by the Executive vice mayor of HMG, and includes officials from municipal DRC, Finance bureau, Environmental Protection bureau, Agriculture bureau, Tourism commission, and Planning bureau. 17 37. Technical agencies including the Cultural Commission, Tourism, Environment Protection, Transportation, Agriculture, Water Resources, Land and Resources, Planning, and Finance will be involved in project planning and implementation. These departments will help provide material and technical guidance at the municipal and county level to facilitate project implementation. For example, the Cultural Commission will help communicate with state/provincial Cultural Relics Bureaus and gain their support for historical building protection, obtain the necessary plans approvals, participate in the conservation works for ancient houses, and provide technical support. The Water Resources Bureau will assume the responsibility for planning and design of river works, and irrigation and drainage infrastructure works. The Tourism Commission will be responsible to guide project stakeholders to help develop market based village level tourism. Finally the Transportation Bureau will be responsible for providing necessary guidance, approvals, and technical support for rural roads construction. 38. Village committees and associations will be trained to operate and maintain village assets created under the project. They will further be involved in facilitating the implementation and the monitoring of project activities, particularly those related to cultural heritage, agriculture, and tourism development. Linkages will be forged between village committees and associations on the one hand, and PIUs and private sector operators to help implement and monitor project activities. Women are expected to play a key role within the different organizations, by contributing and benefiting from project investments. 39. Given that the PMO, the PMUs and all project counties and districts are new to Bank projects, project management consulting services will be engaged to support the PMO, PMUs and PIUs, in project management, contract management, detailed design review, bid documents review, and project monitoring and reporting. In addition, a Technical Experts Groups (TEG) will be recruited to provide technical advice relating to the different project sub-sectors namely infrastructure, cultural heritage, tourism, and agriculture. Project implementation support will be provided at two levels: general project management support for the project as a whole and specific project management and technical support to individual projects. 40. A Project Operations Manual (POM) has been prepared to guide project implementation. The POM describes detailed implementation arrangements for project components, including project management institutions, and the roles and responsibilities of different stakeholders involved. It provides details of project inspection and supervision, procurement, disbursement, financial management, accounting and audit requirements, as well as monitoring and evaluation, and other relevant information. B. Results Monitoring and Evaluation 41. Project results will comprise progress, physical outputs, costs, direct benefits and count of beneficiaries, intermediate results per component and the PDO indicators which will be measured by indicators of improved services and income generating opportunities. The results framework (Annex 1) identifies the project outcome indicators that the project PMO and PMUs in collaboration with the line bureaus and the organizations involved will be collecting data on. 42. Monitoring and Evaluation instruments will include a Management Information System (MIS) to track physical and financial progress, M&E reports of for the results indicators, and an 18 impact survey for sample project activities and households in the target villages and any additional primary and secondary data as needed. 43. County/district PMUs will prepare regular M&E reports which will be sent to the municipal PMO for compiling, verification, and reporting. Using the M&E collected information, the PMO and the PMUs will produce semi-annual reports to monitor project progress that will be shared with the Bank. In addition a mid-term review (MTR) will be conducted half way through project implementation for a comprehensive assessment of project progress and results. Reports of physical and financial progress of activities implementation will be prepared semi-annually and would constitute a key document for review by regular Bank supervision missions. The municipal PMO will also prepare an MTR progress report ahead of the MTR mission. 44. The Impact survey (s) will quantify the economic benefits of project investments including access to roads, water supply, agriculture production and tourism development and will allow the benefits of the majority of project investments to be measured. The survey would also supply additional information on income generating opportunities as well as measuring the uptake and satisfaction of project beneficiaries with services directly supported by the project. The impact survey will be conducted at three stages of project implementation: a baseline at the onset of the project, a follow-up prior to mid-term and a final round at project completion. C. Sustainability 45. Sustainability is a key objective of the project. It will depend on a number of factors including the sound and cost effective technical designs of the planned interventions, the effectiveness of project management and implementation, adequate operation and maintenance arrangements put in place, well-functioning project institutions including village level organizations, and continued government commitment. 46. To address issues of institutional, operational, and financial sustainability, special attention was given during project preparation to ensure accurate demand assessment, appropriate technical design, and selecting cost effective solutions. Furthermore, proper operations and maintenance arrangements comprising clear assignments of responsibilities, systems of maintenance planning and implementation, capacity to operate these systems, sufficient financial resources through budget allocations and cost recovery, have been emphasized and incorporated during project preparation. 47. The HMG has shown high commitment to the New Countryside development program. The Mayor, Vice Mayor, and the Directors of various bureaus and commissions have actively participated and engaged with Bank missions over the course of project preparation. APG has also been actively involved through the PFB and PDRC visiting the municipality and interacting with the Bank team. The municipal DRC, the lead project implementing agency, has shown remarkable capacity to mobilize resources and ensure line bureaus participation in the design and preparation of the diverse project activities. Finally village committees and associations will play a key role in sustaining project interventions by effectively participating in their supervision, operation, and maintenance. 19 48. Project components have been designed to directly contribute to the overall objective of new countryside development in Huangshan. An approach that minimizes market uncertainties and builds on existing assets and opportunities is adopted with emphasis on providing a balance between infrastructure upgrading, cultural heritage protection, agricultural and tourism income generating investments. 49. Huangshan is a major tourism destination in China. The municipality is home to two UNESCO world heritage sites, and is endowed with beautiful natural scenery and historic cultural heritage sites. More than 60% of the city revenue originates from the tourism sector, with the predominant share coming from the domestic tourism market. The latter is perceived to be more sustainable than the international market, and is expected to continue to expand driven by the rise in domestic households’ incomes. Large investments are currently undertaken by the government to capitalize on Huangshan’s many comparative advantages. For example, Huangshan is currently being linked to the high speed railway system in the country, which would minimize the travel time from major urban cities in the country and other surrounding provinces. Upgrading project village infrastructure, restoring ancient houses and temples, and supporting the capacity development of village households to engage in tourism and higher value added agriculture investments will create new opportunities for the local economy and improve its capacity to maintain and sustain its investments. V. KEY RISKS AND MITIGATION MEASURES A. Risk Ratings Summary Table Rating Stakeholder Risk L Implementing Agency Risk - Capacity S - Governance M Project Risk - Design M - Social and Environmental M - Program and Donor L - Delivery Monitoring and Sustainability M - Exchange Rate M Overall Implementation Risk M B. Overall Risk Rating Explanation 50. The overall risk rating is considered Moderate. The main risks arise from the lack of prior experience for the project implementing agencies in preparing and implementing World Bank projects and the large number and diverse nature of the sub-projects to be implemented with particular attention to the unique ecological and cultural environment of Huangshan villages. 20 Necessary mitigation measures, including compliance with Bank policies and procedures, securing the buy-in of the local villagers, engaging technical staff from line departments and expert teams, and designing cost effective and technically sound interventions with minimum adverse impact to the natural environment were built in the project design and will be applied over the course of project implementation. An experienced Design Institute, that is familiar with World Bank projects, has been engaged to prepare the Feasibility Study Report. 51. The overall risk level is also moderated by factors including that (a) the project is part of the government program on the NSCS; (b) its geographical area is limited to 68 villages covering less than 10% of the municipality total area, and (c) the largest proportion of project costs is allocated to infrastructure improvement and civil works, two areas with which the client has quite a lot of experience. VI. APPRAISAL SUMMARY A. Economic and Financial Analyses 52. Tangible benefits from the project investments will arise from (a) reduced journey times and vehicle operating costs on access roads; (b) increased agricultural production due to flood mitigation, irrigation, and improved production technology; (c) increased value of agriculture production including through improved access to agricultural land; (d) increase value of agriculture products due to improved production technology and certification; (e) reduced losses in agriculture product processing and marketing, (f) increase in the number of tourists and in the output of sale of goods and services in the tourism sector. 53. Intangible benefits will arise from (a) improvement to village infrastructure and environment including streets, lighting, public and community facilities, flood mitigation, etc.; (b) improve access to safe, adequate and reliable water supply and safe sanitation; and (c) preservation of tangible and intangible cultural heritage. 54. Because of the large number, small size, diverse types of activities, intangible nature of many of the benefits, and many sub-projects producing a mixture of tangible and intangible benefits, different approaches to economic and financial analysis have been employed. These include cost effectiveness analysis for infrastructural investments, and benefit-cost analysis for irrigation, agricultural and tourism activities. Furthermore, project design and monitoring will seek to ensure (a) demand-led, participatory selection of sub-projects; and (b) that sub-projects activities and technical solutions adopted represent least-cost alternatives for delivery of the identified benefits. 55. The analysis shows that investments in infrastructure and water supply are cost effective. The unit cost per kilometer of rural roads is comparable to that under the “Every Village Access Project 2”. The unit cost per beneficiary is lower. Similarly, the unit cost per ton for water supply 2 Every Village Access Project is a program launched by GOC in 2006, aimed at building cement or asphalt roads in villages across the country. 21 is lower compared to the cost under the “Rural safety Drinking Water project 3”, while the number of beneficiaries per unit cost is higher. 56. The Economic Rate of Return (ERR) of investment in flood control, irrigation, special agricultural industry and cultural heritage are estimated at about 27%, 18%, 24%, and 33% respectively, which indicates that the investment in these activities is economically viable. 57. Finally, the project is expected to generate significant spillovers that would accelerate and promote new countryside development, tourism promotion, rural modern infrastructure services provision, and rural employment generation. Broad estimates by the PIUs suggest that the project will generate an addition RMB 1 billion in tourism receipts, and create an additional 20,000 jobs in project villages. 58. Fiscal Analysis. Fiscal analysis was undertaken to determine the impact of the project on the counties/district financial situation. It was found that for most project counties, counterpart funding over the project implementation period represents less than 0.5% of on-budget revenues. Similarly annual loan repayment represents less than 0.1% of the annual on-budget revenues in many years. Counterpart funding and loan repayment are expected to be within the fiscal capacities of project counties and districts. Project Districts/Counties Finances (RMB 1,000 million) 2008 2009 2010 2011 2012 REV EXP REV EXP REV EXP REV EXP REV EXP Huangshan City 11.43 11.03 15.05 14.74 20.94 20.66 24.83 24.36 52.95 51.97 Tunxi District 3.57 3.48 4.41 4.34 5.78 5.71 8.41 8.33 11.41 11.34 Huangshan District 5.41 5.40 6.96 6.93 8.53 8.55 11.83 11.83 14.68 14.70 Huizhou District 3.00 2.95 3.62 3.57 4.86 4.82 7.26 7.19 9.43 9.42 Qimen District 5.36 5.34 6.50 6.47 7.78 7.75 9.75 9.73 11.39 11.37 Yixian County 3.46 3.43 3.89 3.87 4.69 4.67 6.23 6.21 8.03 8.00 Xiuning County 6.20 6.17 7.41 7.38 9.14 9.14 12.66 12.62 14.41 14.41 Shexian County 8.83 8.75 11.26 11.18 13.69 13.63 17.66 17.59 21.78 21.72 Source: Huangshan Finance Bureau B. Technical 59. Significant technical experience has been accumulated by both the borrower and the bank working on similar projects in the sector. Design risks are mostly related to overdesign and high costs, which have been mitigated during project preparation through a combination of field visits to project villages, designs strictly following national regulations and codes, technical advice given to the project PMO and PMUs and to the Design Institute. 60. Infrastructure (access roads and bridges, village infrastructure, water and sanitation and productive infrastructure including irrigation, drainage and production roads) will in the main be 3 Rural Safety Drinking Water Project is a program launched by GOC in 2006, aimed to resolve rural safety drinking issue within 2 Five-year plan periods (2006-2015) 22 designed in accordance with prevailing national and regional standards, established good practice, and complete buy-in of project stakeholders. The overall risk of technical failure is judged to be low, although care will be needed in the design of some aspects, such as slope stabilization and protection works on mountain roads, bridge footings and aspects of hydraulic designs. All sub-project designs would include an operation and maintenance plan with assigned responsibilities and approximate annual costs. Local village organizations are expected to play a key role in operation and maintenance activities. Least cost design (selecting between alternative technical options) should be based on whole-life costs including discounted operation and maintenance costs. 61. Operation and maintenance of project works will be ensured through a combination of cost recovery, contract management, budget allocations and community involvement measures. • Village roads and bridges: 600 Yuan/Km is provided in the budget for each county/district • Districts/Counties have a budget of 10 Yuan/mu for irrigation repairs. Routine O&M costs are collected from beneficiary farmers. • Part of the Land transfer proceeds will be used for O&M • Village collective revenue from forestry resources and mineral resources • Water charges paid by the beneficiaries • Village funds: Each village has a fund with 15 Yuan/head allocated for urgent O&M requests • Large civil works contracts will have the option of a built-in clause for O&M of the asset for a year or two following works completion. • Transfers from provincial and central government schemes (Hundred Villages and thousand buildings; Xinan River Ecological Compensation Scheme, Top Hundred Photo shooting spots, Ecological villages, A hundred Shining sites). • Village organizations will be trained and engaged in O&M of project civil works. • The PMUs will manage an O&M fund of 1% of total project infrastructure costs financed by counterpart funds. 62. Cultural heritage activities were based on detailed surveys for all structures to be restored in the project. National, provincial, and municipal level cultural heritage sites will be given priority for preservation following the approval of the corresponding conservation and management plans by the respective authorities. The design of this component emphasized the following aspects: (a) application of best international and national conservation practices to maintain the authenticity of the monuments (ICOMOS China 2002, ICOMOS International 1987); (b) adaptive reuse of the cultural assets where applicable with clear identification of the future users and involving them in the restoration activity; (c) clear mechanisms for maintaining the restored buildings; (d) drawing on technical and costing benchmarks and parameters from the government programs such as the HVTB program; (d) improving presentation and signage of the historic buildings; (e) selecting the least cost and technically sound repair options; (f) including the local communities in conservation decisions; and (g) strengthening the links between conservation and local economic development. C. Financial Management 63. The project PMO and PMUs will conduct project financial management work. The Bank loan proceeds, including overseeing the Designated Account, will be managed by Anhui 23 Provincial Finance Bureau (APFB). A financial management capacity assessment of the implementing agencies and finance bureaus indicated that the principal FM risks are (a) the designated project financial management staff lack knowledge and experience in managing Bank financed projects; and (b) decentralized implementation structure and comprehensive project components increase the complexity and financial management risk. Mitigation measures to address the above risks include (a) a designated FM manual (FMM) issued as part of the overall POM, so that project FM procedures for coordination and reporting are standardized; (b) in addition to FM training to be provided by the Bank, more extensive workshops (including technical training and experience sharing) will be arranged by APFB and the PMO; (c) a unified MIS system integrating project management, procurement, financial management and disbursement will be implemented by the project to standardize FM work and strengthen internal controls and; (d) all project staff should be well trained before project start-up to properly use the MIS system. With the implementation of these proposed actions, the FM arrangements satisfy the Bank’s minimum requirements under OP/BP 10.00. Annex 3 of the PAD provides additional information on financial management. D. Procurement 64. Procurement will be managed by the municipal PMO with oversight by the municipal PLG. Procurement will be undertaken by the county/District PMUs with some packages carried out at the municipal level by the PMO. In addition, the PMO will provide oversight, quality control for procurement, and supervision. The roles and responsibilities of the PMO and the various PMUs and PIUs are described in the procurement management manual. The first 18 month procurement plan has been developed and is available in the project files. It will be used to monitor procurement under the project. (Additional information is provided in Annex 3). 65. The key procurement risks identified by the procurement capacity and risk assessment are: (i) the PMO, the PMUs and the PIUs have no prior experience implementing Bank financed operations; (ii) there is a possible influence of domestic procurement practice which may lead to possible delays and non-compliance with Bank Procurement and Consultant Guidelines during implementation; (iii) the works are diversified and scattered in 68 villages across four counties and three districts, the consequential fragmented packaging creates a large number of transactions. 66. In order to mitigate these risks, the following actions have been agreed to: (i) the PMO will hire a Procurement Agent with qualifications and experience in procurement in projects financed by the Bank or other multilateral financial institutions and under Terms of reference acceptable to the Bank; (ii) the Bank will provide continuous procurement training during project preparation and implementation; and; (iii) A Procurement Management Manual has been prepared to guide the procurement activity. E. Social (including Safeguards) 67. The project has significant social benefits. It supports the improvement of villages infrastructure, enhances farmers’ livelihoods by developing village based tourism, maintains and protects traditional ‘Hui’ cultural heritage structures in the villages, and promotes harmonious development in project villages. It puts into effect the city-support-village and industry-support- 24 agriculture strategies of the central government. Rural residents of project villages are the primary intended beneficiaries. 68. A Resettlement Action Plan (RAP) has been prepared. The RAP provides details on resettlement policy procedures and requirements that will have to be followed during project implementation, including compensation rates, mitigation measures to restore livelihoods, and institutional and monitoring arrangements. The RAP was first disclosed in the municipal library and PMO on December 12, 2012. Updated versions of the RAP were subsequently advertised on February 5, 2013, May 22, 2013, and June 25, 2013 on the municipality’s website. The RAP was disclosed by the Bank Infoshop on July 11. 69. A Resettlement Policy Framework (RPF) has been prepared in the event that some sub- projects might be dropped or replaced following project appraisal. The RPF was disclosed on the municipal website on June 25, 2013, and disclosed by the Bank Infoshop on July 11, 2013. 70. Gender Analysis and development. The Social Assessment included a gender analysis. Zhongshan University with support from local agencies, conducted a disaggregated gender analysis in affected villages/communities, listened to women’s expectations, and collected ideas and recommendations that have been incorporated in the designs of subprojects. Gender disaggregated information was also collected and used in the RAP to ensure that women’s interests will be safeguarded during any resettlement implementation. Social and gender equality will continue to be promoted through wide and equal participation of, and consultation with, the local people in project areas throughout project implementation. Equal participation and gender responsiveness will be reflected in project activities such as training, intangible cultural heritage, village associations, agriculture and tourism, as well as other capacity building activities. 71. Land acquisition impacts are minimal. The project requires the permanent acquisition of 2.7 ha of village land and the temporary acquisition of 2.5 ha of village land during civil work activities. The selection and design of village based subprojects attempted to avoid and minimize any involuntary resettlement activity which may be caused by permanent land acquisition or temporary land occupation and structure demolition due to the sensitive environment in the national park of Huangshan city area. For example, in the selection of road works, only roads with a pavement width of no more than 4.5 m were included. Furthermore, road works will be conducted in conjunction with line burial and drainage works, and priority is given to existing water resources facilities. As a result, land acquisition was minimized and housing structural demolitions were avoided. 72. Resettlement financing. The ownership of the land will not be converted. Based on the Chinese land law and administrative management of village infrastructure, all of the subprojects will be owned by the engaged villages. In order to fully support the project, the project municipal districts and counties will pay any resettlement cost to the affected farmers so as to reduce the village financial difficulties. 73. Participation strategy. Focus group discussions and key informant interviews have been used to consult with potentially affected persons, beneficiary groups in villages and obtain views and preferences regarding resettlement impacts and mitigation measures, including land 25 compensation and the resettlement budget to be supported by the municipal districts and counties since the all of the village based subprojects will be owned by the villages and the land to be used by village roads will still be village owned land. The affected villages will play a key role in determining and implementing their livelihood restoration programs. For example, after land compensation amounts are calculated, each community will determine how land compensation can best be used to improve, or at least restore, local income-earning potential. The project entity will set up procedures to supervise land compensation use. Both internal and independent monitoring of the resettlement program would be conducted regularly during project implementation. 74. Consultation. The project contracted Zhongshan University to conduct the census and social survey, the social impact analysis and public consultation. This has contributed significantly to the preparation of the RAP and avoidance of any housing structural demolition. Villages and farmer groups have also been consulted and participated in the resettlement planning process and the preparation of the project. They provided feedback on project timeline, mitigation mechanisms, and income generating activities in agriculture and tourism. Their feedback has been incorporated into the RAP and the consultation session concluded that the resettlement and rehabilitation measures planned under the RAPs are adequate to address and mitigate any project impacts on land acquisition. 75. Institutional arrangements. Levels of resettlement offices from municipality, district/county, to township/village will be established under the PMO and PMUs to supervise the resettlement implementation. The project city land and resources bureaus will be responsible for the land acquisition approval. An experienced national consulting team will be contracted to serve as the independent monitoring agency of the resettlement program. The project will be monitored and the living standards of the project affected people will be evaluated throughout implementation. The monitoring results will be regularly reported twice a year and, if needed, remedial actions will be devised. 76. Linked projects. No new proposals of civil works, which are linked to the Bank loan supported project, are anticipated. F. Environment (including Safeguards) 77. The project is classified as a “Category B” operation under Bank OP 4.01. The project triggers the following EA safeguards policies: Environmental Assessment (OP4.01), Natural Habitats (OP4.04), Physical Cultural Resources (OP4.11), Pest Management (OP4.09) and Dam Safety (OP4.37). 78. Environmental Assessment (OP4.01). Environmental Assessments (EAs) for the project were conducted by an accredited EA consulting institute. The impacts of the project on the environment are expected to be overall positive. The project brings many environmental and social benefits to local communities, such as the improved village infrastructure, public amenities and environment, conservation of the existing Hui-style cultural heritage resources, and the increased revenue by promoting value-added agriculture and countryside tourism. The EA shows that the project will not have any significant adverse environmental impacts due to its small scale investments mainly for the renovation or improvement of the existing facilities which 26 are distributed across seven districts and counties in Huangshan Municipality. The principal potential adverse impacts are construction related. These impacts will be site-specific and are reversible in nature, for which mitigation measures can be readily designed. Environmental Codes of Practices (ECOPs) have been prepared to address these general impacts. During operation, the project may cause some induced impacts from the increased tourists in the rural villages. Adequate mitigation measures including provision of sanitation facilities have been taken into account in the project design and the EMP. 79. Natural Habitats (OP4.04). The project triggers OP4.04 Policy because some activities are designed for four villages (i.e. Fuxi, Shuxi, Xiong, and Yanjiao) which are located in natural habitats areas. These activities are mainly limited to the renovation of existing infrastructure which will not cause any significant adverse impacts to the protected areas. The EA confirms that these activities are in compliance with the Bank policies on OP4.01 and OP 4.04. They are also in line with Chinese EA regulations and the relevant master plans for the natural habitats, and have been approved by relevant governmental authorities. Mitigation measures include continuous consultation with the natural habitats management authorities, good construction management, specific measures for natural habitats protection, and provision of sanitation facilities for tourists in the project design. 80. Physical Cultural Resources (OP4.11). The project will finance conservation of 137 old buildings, some old trees, and two old bridges in two villages. The PCR inventories have been developed and mapped through information obtained from literature sources, site surveys, consultation with PCRs authorities, and communities etc. A PCRs Management Plan, as part of the EMP, specifies conservation measures for the PCRs, monitoring plan; capacity building activities (e.g. trainings, studies); institutional arrangements; and the budget for the implementation of the PCRs Management Plan. 81. Pest Management (OP4.09). The project finances the diversification of crop system (e.g. tea, roses, and Chinese herbs) which potentially involves pest management. A Pest Management Plan has been prepared for agricultural components under this project. 82. Dam Safety (OP4.37). The project triggers the Safeguards Policy on Safety of Dams (OP4.37) since the project financed water supply facilities will draw water from reservoirs formed by two existing dams, Qiyunshan Dam in Xiuning County and Qiaokengwu Dam in Shexian County. The project will also finance the rehabilitation of 54 existing weirs for retaining water (weir height from 1-5m and capacities are up to 20,000 cubic meters). Dam safety plans and emergency preparedness plans have been prepared for the two existing dams. In addition, the PMO would assign special staff to assist the Bank team to ensure the project is implemented in line with the OP4.37. A Dam Safety Action Plan has been prepared as part of the POM. 83. During the implementation, the Borrower will prepare and update an Annual Dam Safety Action Plan and provide relevant dam safety information to the Bank and arrange field trips to review the safety status the relevant dams, and take dam safety measures recommended by the Bank to improve the safety status when necessary to ensure the safety of dams. The dam safety expert in the task team will (a) inspect and evaluate the safety status of existing dams, their appurtenance, and performance history; (b) review and evaluate the owner’s operation and 27 maintenance procedures; and (c) provide written reports of findings and recommendations for any remedial work or safety-related measures necessary to upgrade the existing dams to an acceptable standard of safety. 84. Environment Management Plan (EMP). An EMP has been developed for the project as a stand-alone document. The EMP includes specific mitigation measures, ECOPs, a Pest Management Plan, a PCRs Management Plan, monitoring and supervision arrangements, institutional arrangements for the implementation of the EMP, capacity building, and estimated budget of the EMP implementation. Mitigation measures and ECOPs for the construction phase will be entered into bidding documents and supervised by relevant institutions. 85. Public Consultations and Information Disclosure. In accordance with Bank Safeguard policies and Chinese regulations, public consultations were conducted from September to December 2012, including public consultation meetings and questionnaire survey with project affected persons and other stakeholders (e.g. village associations, PCR authority, EBP, forestry bureau). Their opinions and concerns have been taken into account in the EA process and project design. The EA and the EMP were locally disclosed on December 21, 2012 and re- disclosed on February 6, 2013, May 22, 2013, and June 25, 2013 through announcements on the local website and the local newspapers. The EMP and the EA safeguards documents were disclosed by the World Bank InfoShop on June 27 and July 11, 2013 respectively. 28 Annex 1: Results Framework and Monitoring CHINA: Anhui Yellow Mountain New Countryside Demonstration Project Project Development Objective (PDO): The proposed project development objective (PDO) is to improve the quality of services and income generating opportunities available to rural households in selected villages of Huangshan municipality. Cumulative Target Values** Responsib Description Core Unit of Data Source/ ility for (indicator PDO Level Results Indicators* Baseline Frequency Measure YR 1 YR 2 YR3 YR 4 YR5 Methodology Data definition etc.) Collection Indicator one: No. of PMU beneficiaries with improved Semi- Field Survey, PMO infrastructure services in project No. 0 37793 69771 95936 122100 145357 Annual Project MIS M&E villages consultant Indicator two: Number of PMU tourists visiting project villages person- Semi- PMO 3806 4128 4805 6606 8408 10013 Field Survey (000) time Annual M&E consultant Indicator three : Value of PMU Agriculture production in project 10,000 Semi- PMO 72167 74332 76934 80010 84012 88633 Field Survey villages RMB Annual M&E consultant INTERMEDIATE RESULTS Intermediate Result (Component One): Intermediate result indicator one: PMU increased length of roads Semi- Field Survey, PMO Km 0 60.4 173 240 267 308.6 constructed/repaired in project Annual Project MIS M&E villages consultant Intermediate result indicator two: PMU # of beneficiaries with access to Semi- Field Survey, PMO No 94670 97260 103750 110230 116720 123200 improved water sources in project Annual Project MIS M&E villages consultant Intermediate result indicator PMU three : # of beneficiaries with Semi- Field Survey, PMO No 9700 9700 12950 19450 24300 29150 access to improved sanitation in Annual Project MIS M&E project villages consultant Intermediate result indicator PMU four: Land area with improved Semi- Field Survey, PMO access to irrigation and flood ha 0 224 717 2165 3516 4065 Annual Project MIS M&E control with improved irrigation consultant and drainage services 29 Intermediate result indicator PMU five: Improved flood protection Semi- Field Survey, PMO M2 0 109356 419956 602966 774196 843506 Construction Annual Project MIS M&E consultant Intermediate Result (Component Two): Intermediate result indicator one: PMU Area of historic buildings Field Survey, PMO M2 0 950 2951 16051 35677 46788 Semi-Annual restored Project MIS M&E consultant Intermediate result indicator two: PMU Number of idle historic buildings Field Survey, PMO No. 0 3 9 42 85 96 Semi-Annual adaptively reused Project MIS M&E consultant Intermediate result indicator PMU three: Increase in number of Field Survey, PMO No. 0 1000 3600 14200 20200 24600 Semi-Annual audience attending Exhibitions Project MIS M&E and Performances consultant Intermediate result indicator four: PMU number of successors trained for Person- Field Survey, PMO 0 144 342 576 792 900 Semi-Annual traditional arts and techniques time Project MIS M&E consultant Intermediate Result (Component Three): Intermediate result indicator one: Semi- Field Survey, PMU Area of production bases Mu 0 1400 2304 5279 7101 12377 Annual Project MIS PMO developed in project villages. Intermediate result indicator two: Farmers trained in new 460 1380 2760 4140 4600 Semi- Field Survey, PMU p.m. 0 agriculture technologies. 220 650 1250 1950 2180 Annual Project MIS PMO of which women Intermediate result indicator three: Rural residents trained in 370 850 1400 1900 2400 Semi- Field Survey, PMU p.m. 0 provision of tourism services 160 410 710 960 1350 Annual Project MIS PMO of which women Intermediate result indicator four: Increase in number of Semi- Field Survey, PMU No. 0 30 63 118 164 175 Tourism facilities Annual Project MIS PMO Intermediate result indicator five: PMU Number of Village houses Field Survey, PMO No. 0 50 100 170 256 292 Semi-Annual Changed with Hui-Style façade. Project MIS M&E consultant Intermediate Result (Component Four): 30 Intermediate result indicator one: Staff from various line 0 432 1026 1728 2376 2600 Semi- Field Survey, PMU departments trained – Men and p.m 0 173 410 691 950 1080 Annual Project MIS PMO women Intermediate result indicator two: Semi- Field Survey, PMU PMO and PMU staff trained p.m 0 240 570 960 1320 1500 Annual Project MIS PMO Intermediate result indicator Semi- Field Survey, PMU three: Number of units trained in No 0 18 28 48 58 68 Annual Project MIS PMO O&M. 31 Annex 2: Detailed Project Description CHINA: Anhui Yellow Mountain New Countryside Demonstration Project I. Introduction and Summary 1. The proposed PDO is to improve the quality of services and income generating opportunities available to rural households in selected villages of Huangshan municipality. This would be achieved by investing in: (i) upgrading infrastructure services, (ii) restoring and preserving the existing cultural heritage assets, and (iii) promoting high value-added agriculture and countryside tourism. 2. Achievement of the PDO will be assessed through key indicators measuring improved access to rural households to upgraded infrastructure services; Increase in the number of tourists visiting project villages where cultural heritage assets have been preserved; and increase in revenues from high value agriculture and countryside tourism in project villages. 3. The Anhui Yellow Mountain Countryside Demonstration Project would finance investments in 68 villages across four counties and three districts of Huangshan municipality. An asset based local development approach that combines the preservation of cultural heritage sites in the project villages with infrastructure upgrading and promotion of income generating opportunities from high value agriculture and countryside tourism is contemplated. Interventions will be tailored to local circumstances and will be determined in consultation with line bureau staff, villagers groups, private sector representatives and local government. Project areas and activities are selected based on specified criteria that aim at reducing the existing development and income gaps among different villages on one hand, and at maximizing the potential benefits from the existing cultural and natural heritage assets on the other hand. The buy-in from local villagers is critical to ensure ownership of project activities and the sustainability of their impacts. 4. The total cost is estimated at about $145.19 million comprising an IBRD loan of $100 million and counterpart funding of $45.19 million. Counterpart funds comprise allocations from the seven project counties/districts, the municipality, and other sources. The Bank loan will be passed on as grants to the participating villages. Table 1: List of Participating Districts/Counties and Villages District/County Project villages Tunxi District Xinjiang, Liucun, and Waibianxi Xixinan, Qiankou, Kunsha, Shuyuan, Lingshan, Qiashe, Huizhou District Fuxi, and Yangcun Raocun, Xingcun, Guocun, Longyuan, Baiguoshu, Huangshan District Chaoyang, Zhongdun, Shuxi, Longshan, Xinfeng, Sanhe and Yongfeng. Xucun, Shitan, Yuliang, Wenzhengshan, Baojiazhuang, Shexian County Maihuayu, Xiongcun, Tangyue, Shendu, Changxi, Fuhui, Beian, Zhanqi, Jiekou, Zhengcun, Hongqin, 32 Hongfei, Zhangtan, Miantan, and Sucun. Langsi, Tianli, Huaqiao, Yanjiao, Yanpu, Huangcun, Xiuning County and Wanxin. Bishan, Guhuang, Pingshan, Miaolin, Shengchong, and Yixian County Tuanjie. Huanglong, Huansha, Kengkou, Lixi, Liudu, Luxi, Qimen County Lunkeng, Mashan, Penglong, Taoyuan, Xiangtan, and Zhukou. II. Project Components Component 1: Infrastructure Improvement (Base Cost, US$66.46 million- IBRD: US$57.28 million). 5. This component aims at improving the infrastructure services in project villages by financing sustainable priority investments in rehabilitating and expanding infrastructure facilities while preserving and enhancing the traditional and historic character of these villages. Activities financed under this component include: 6. Sub-Component 1.1: Roads, Bridges and associated infrastructure. This sub- component will support roads, bridges and tracks (meaning roads of less than 2.5m width and so not suitable for use by a four-wheeled vehicle) that provide access from natural villages to the road network. It will also support improvement of street, alleys and pavements, street lighting, buried services ducts, and environmental improvement works within the residential areas of natural villages. The beneficiaries will be the population of the villages who will experience an improvement in service quality with time saving for travel to and from the villages, and potentially improved income generating opportunities due to easier transport of agriculture inputs and products and increased tourist arrivals. Specific measures include 308.6 km of village roads, 52 bridges (less than 5.5 m wide), and 2,973 street lights. 7. Sub-Component 1.2: Water supply and Sanitation. This sub-component will support safe, adequate and reliable water supplies and safe sewerage. The beneficiaries will be the households with new water supply and sewerage connections who will experience improved water and sanitation services. Improved water and sanitation will also facilitate tourism development in project villages and contribute to investment in income generating opportunities. Specific measures include: additional 6,195 m3/d of water supply, additional in total 3,015 m3 high level water reservoirs, and 276.68 km of water distribution networks, 22.18 km of storm water drainage, additional 25 units of waste water treatment facilities of total treatment capacity of 1,695 m3/d, 827 three compartment septic tanks, 4 biogas digesters, 1 wetland, and 136.46 km of sewers. 8. Sub-Component 1.3: Hydraulic Infrastructure. This sub-component will support hydraulic works for river training, flood mitigation, drainage and irrigation of agricultural land including revetments, small dams, ponds and irrigation and drainage canals. Specific measures include: construction/improvement of 51.1 km of river embankments with associated river cleaning (275,095 cubic meters), 84.15 km of irrigation canals, 54 ponds and/or small dams 33 repaired for irrigation and general uses. There are also 9 small quays 1 conduit pipe and 1 irrigation pump station. Component 2: Cultural Heritage Conservation (Base Cost 20.72 million, IBRD US$ 18.25 million) 9. This component aims at restoring, preserving, protecting and, where practicable, adaptively reusing historic Huizhou style buildings for social, cultural, village environment, and tourism development purposes. Specific activities include: 10. Sub-Component 2.1: Restoring Historic Buildings. This sub-component will support the restoration, preservation, protection, and utilization of a number of historic Huizhou style buildings for social, cultural, village environment and tourism development purposes. There are around 137 historic buildings to be restored spread across 40 project villages (34 of which already have conservation plans completed). They include 53 family temples, 65 ancient houses, and 19 other buildings. Around 96 of the historic buildings are publicly (national, provincial, city) or collectively (village level) owned. The remaining ones are private properties. Shexian county accounts for the largest number of historic buildings to be restored with 68 buildings spread across 17 villages within the county. A set of eligibility criteria and costing parameters have been established for the selection and financing of the restoration activity, drawing on field surveys, best practices, and terms and conditions of similar existing government programs, such as HVTB scheme. In addition to the 137 buildings, sub-grants will be provided to finance the restoration of privately owned historic buildings based on clearly defined guidelines. 11. Sub-Component 2.2: Protect Intangible Heritage. This sub-component will support the protection and utilization of intangible cultural heritage. This includes items already included on the national, provincial, municipal, and county levels intangible cultural heritage protection lists, such as Huizhou local traditional crafts, Huizhou folk arts, and Huizhou authentic food etc. Intangible cultural heritage activities will cover 16 villages and would include: setting up landing stages, show centers, supporting local communities and master trainers to train and pass on the skills to younger generations, providing necessary equipment (tools, instruments, clothes, etc…), organizing festivals and showcasing of traditional plays and songs, and promoting these activities to villagers and tourists. Component 3: Enhanced Economic Opportunities (Base Cost US$ 21.47 million, US$ 18.92 million) 12. This component aims at generating direct employment opportunities, increasing local households’ incomes, and stimulating village economies by building on the above improvements in basic infrastructural services and cultural heritage assets, to promote the development of high-value agriculture and rural tourism. Specific investments include: 13. Sub-component 3.1: Agriculture industry support. This sub-component will support the intensified production and improved quality of characteristic high value agriculture products such as tea, mulberry, flowers, medicinal herbs, vegetables, and grapes. In total, an area of 12,613 mus across 28 villages will be supported. Demonstrations for enhanced agricultural practices including IPM, soil fertility management, green and organic certification will be 34 undertaken. Agricultural trading centers will be established, and producers groups (associations and cooperatives) will be supported to improve their production base, establish market links with input suppliers and output buyers, and build their management capacity. Sub-grants will be provided to producer associations and cooperatives to help cover expenditures related to registration, office furniture and equipment, capacity building, and other operational expenses. Training will be organized to build the capacity of local farmers and rural households in the application of modern agriculture practices. Women are expected to constitute a significant proportion of the targeted beneficiaries. 14. Sub-component 3.2: Village-based Tourism development. Investments under this sub- component are aimed at providing the necessary skills and ancillary facilities and services to develop village based tourism. Specific investments include: development of income-generating tourism services including adaptation of existing buildings, promotion of tourism at the village level and training of villagers in tourism industry skills; support to rural tourism associations by providing them with sub-grants to help cover their establishment and operating costs (office furniture and equipment), website construction and other printed material, and management training; improving/constructing of trading centers for agriculture and tourism products; converting/extending rural houses/village structures to small inns (3), rehabilitating/constructing tourism reception centers (5), building parking lots (39) and public toilets (73), improving village environment and public spaces such as village squares (6), piers (6), cultural centers (6), greening areas (13), and exercise areas (25). In addition around 292 buildings in 15 villages, located along tourism and cultural heritage routes, will have their facades changed to Hui-style architecture to promote the visibility and villages’ image and ensure that the new architecture is adapted to the historic environment. Component 4: Institutional Support (Base Cost US$ 5.29 million IBRD: US$ 5.29 million) 15. This component seeks to improve the capacity of the various institutions involved in the project, including the entities in charge of project management and implementation. 16. Sub-component 4.1: Institutional Capacity building. This sub-component would strengthen and develop the capacity of various project institutions to implement the project and to sustainably manage, operate and maintain its outputs. Investments will include (i) support to strategic research and planning including market based development for village-based tourism; (ii) Technical assistance to provide project institutions with specialist and multidisciplinary expertise on various aspects of the project. Such expertise may include, but not restricted to, municipal engineering, cultural heritage, tourism, high-value agriculture, environment, social and economic aspects; (iii) Information dissemination and communication to raise awareness, introduce new concepts, and build the skills of project stakeholders and beneficiaries in new countryside development opportunities; and (iv) strengthening the capacity for managing, operating and maintaining project outputs. 17. Sub-component 4.2: Project Management, Monitoring & Evaluation. This sub- component would finance the costs of (i) surveys, design and construction supervision, (ii) establishment of an effective financial and project management information systems and an effective project monitoring and evaluation system including progress, outcomes and impact 35 evaluation; iii) and training for PMO and PMU staff on various aspects of project management and supervision. 36 Annex 3: Implementation Arrangements CHINA: Anhui Yellow Mountain New Countryside Demonstration Project Project Institutional and Implementation Arrangements 1. General Arrangements and Project Leading Group. The project will be implemented over a period of 5 years in 68 villages of Huangshan municipality across 3 districts and four counties. The project will be managed at two levels of the government: (i) the municipal government, and (ii) the county or district level government. The Project Leading Group (PLG) is set-up and headed by the Executive vice-Mayor of Huangshan Municipality, and includes senior officials from the Municipal DRC, the Finance Bureau, the EPB, the State Land Resource Bureau, the Agriculture Bureau, Tourism Commission, and the Rural Planning Bureau. The main functions of the PLG are to: (a) guide the project formulation, (b) give policy direction for project preparation and implementation, (c) coordinate and make decisions on key inter-jurisdiction issues related to the project, and (d) coordinate the provision of counterpart funds, and monitor overall project progress. 2. Project Management and Implementation. Huangshan Municipality has established a Project Management Office (PMO) to coordinate the preparation of the Project and supervise and monitor its implementation. The PMO is housed at the Municipal DRC which is the lead agency for overall project management and implementation. Each Project County and District has established a Project Management Unit (PMU) within its respective DRC to coordinate the preparation of the Project and supervise and monitor its implementation at the county or district level. At the township and village levels, local Project Implementation Units (PIUs) will be responsible for project implementation. Where appropriate, local village committees and organizations will be organized and trained to operate and maintain the assets created under the project. 3. Technical Expert Group. Given that the PMO and all project counties and district PMUs are new to the Bank projects, a technical expert group (TEG) will be recruited at the Municipal level to provide periodic assistance to the project PMO and PMUs and PIUs. The TEG will include professionals with adequate qualifications and experience in infrastructure, transport, water supply and sanitation, cultural heritage, tourism, agriculture, and environment. 4. Specific responsibilities of the project PMO and PMUs include: • Preparing the Feasibility Study for the entire project (PMO). • Prepare the Project Operations Manual (PMO/PMU). • Prepare and update annual implementation plans, procurement plans, and financing plans (PMO/PMU). • PMO will approve and issue annual investment plans and follow up closely with the county/districts on their implementation (PMO). • Monitor and track project progress, disbursement of World Bank loan and counterpart funds (PMO/PMU). 37 • Ensures timely allocation of counterpart funds (PMO/PMU). • Ensure proper use of loan (PMO/PMU). • Ensure financial management arrangements are put in place (PMO/PMU) • Establish and operate the management information system, and submit progress reports, financial statements and audit statements to the PMO/Bank (PMU/PMO). • Prepare funds withdrawal applications for World Bank loans and submit them to provincial levels (PMO). • Ensure timely mobilization, allocation and disbursement of project funds (PMO/PMU). • Supervise, monitor and report on project physical, financial, output and outcomes progress (PMO/PMU). • Collaborate with corresponding municipal bureaus and commissions including Environmental Protection Bureaus, Cultural Heritage, Tourism, Water resources, and Agriculture commission, and with TEG to support the various technical and operational aspects of project activities (PMO). • Mobilize TEG as needed to develop technical specifications, training activities, cost estimates (PMO). • Work closely with village organizations to provide them with management support, resources, and involve them in project preparation implementation, and supervision (PMU). • Carry out check and acceptance of completed works and disburse funds accordingly (PMU/PMO). • Collect data and report periodically on the monitoring and evaluation indicators (PMO/PMU). 5. Municipal line agencies. A number of municipal agencies will be involved in the project as follows: • Municipal DRC will be in charge of coordinating with PDRC and NDRC on the processing and approval of the FSR and the energy-saving appraisal • Municipal Finance bureau will be in charge of communication with PFB, and MOF and securing the counterpart fund resource • Municipal tourism commission help guide the village based plans to develop rural tourism • Municipal Environmental Protection Bureau- Review the Environmental Assessment and communicate with Provincial Department of Environmental Protection to gain approval of the EA • Municipal Transportation Bureau – Provide technical support for rural construction • Municipal Agriculture Commission – Guide the high-value agricultural activities and provide technical support • Municipal Cultural Commission – Guide and support the overall work of cultural relics protection and restoration, and communicate with state and provincial cultural relics bureaus to secure approval of conservation plans for the different relics. • Municipal Water Bureau: Guide and review technical aspects related to hydraulic investments • Municipal housing Construction Commission- Guide water supply investments • Municipal Land and resources bureau to monitor land use 38 • Municipal Planning bureau- guide overall countryside construction planning 6. A Project Operations Manual (POM) has been prepared to guide project implementation. The POM describes the project rationale and objectives, components, safeguards issues addressed, investments, benefits, financial and economic analysis, risk and sensitivity analysis, cost recovery and loan repayment. It also describes the detailed implementation arrangements for project components, including project management institutions, and the roles and responsibilities of different stakeholders such as government departments, line agencies, advisory expert groups, villagers, and the World Bank. The POM also provides details of the project inspection and supervision plan, procurement procedures, loan disbursement, financial management (including a FM manual), accounting and audit requirements, as well as monitoring and evaluation functions, indicators and reporting. 7. The POM also describes the procedures and guidelines for managing the sub-grants under sub-components 2.1, 3.1, and 3.2. It specifies the eligibility and selection criteria, the application and screening process, the implementation agreement to be signed between the beneficiaries and the county/district PMUs and the monitoring, verification, reporting and payment. Financial Management, Disbursements and Procurement Financial Management 8. The FM capacity assessment identified the following principal risks: (a) the designated project financial management staff lack knowledge and experience in managing Bank financed projects; and (b) decentralized implementation structure and comprehensive project components increase complexity and financial management risk. Mitigation measures to address the above risk are as follows: (a) a designated FM manual (FMM) issued as part of the POM, so that project FM procedures for coordination and reporting are standardized; (b) in addition to FM training to be provided by the Bank, more extensive workshops (including technical training and experience sharing) will be arranged by APFB and the Huangshan Municipality PMO; (c) a unified MIS system integrating project management, procurement, financial management and disbursement will be adopted by the project to standardize FM work and improve internal control and; (d) all project staff should be well trained before project start-up to properly use the MIS system. Overall, the residual financial management risk after taking into account mitigation measures is assessed as Substantial. 9. Funding sources for the project include the Bank loan and counterpart funds. The Bank loan agreement will be signed between the Bank and the People’s Republic of China (through MOF); For Bank loan to finance project activities of three districts, Anhui Provincial Finance Bureau (APFB) will on-lend to Huangshan Municipal Government through Huangshan Municipal Finance Bureau (HMFB), HMFB will further on lend to the three project districts through district finance bureaus who will be the final debtors; for Bank loan to finance project activities of four counties, APFB will directly on-lend to four project counties through related county finance bureaus who will be the final debtors. The Bank loan proceeds will flow from the Bank into the project DA to be set up and managed by APFB and then be disbursed to HMFB and related district/county finance bureaus based on their funding requests (also referred to as withdrawal 39 applications). The funding requests will be supported by contractor and supplier invoices and other necessary documents processed and ready for payment. Sources of Funds (US$ million) WB Loan County/District Total Tunxi District 5.77 2.68 8.45 Huizhou District 8.25 3.90 12.15 Huangshan District 28.77 12.55 41.32 Shexian County 24.19 10.76 34.95 Xiuning County 10.67 5.03 15.70 Yixian County 7.79 3.51 11.30 Qimen County 14.56 6.76 21.32 Total 100.00 45.19 145.19 Source: PMO Audit Arrangements 10. Anhui Provincial Audit Office (APAO) has extensive experience with previous Bank projects and has been identified as the project auditor. The annual audit report will be issued by APAO. The annual audit report on the project financial statements will be due to the Bank within 6 months after the end of each calendar year. This requirement is stipulated in the loan agreement. Following the World Bank’s formal receipt of the audited financial statements from the borrower, the World Bank and the China National Audit Office will make them available to the public in accordance with the World Bank Policy on Access to Information. The responsible agency and timing is summarized as follows. Audit Report Submitted by Due date Consolidated Project financial statements PMO June 30 of each calendar year Disbursement Arrangements 11. Four disbursement methods are available for the project: advance, reimbursement, direct payment and special commitment. Advance will be the primary disbursement method. Supporting documents required for Bank disbursement under different disbursement methods are documented in the Disbursement Letter issued by the Bank. The Bank loan would disburse against eligible expenditures (taxes inclusive) as in the following table: IBRD Loan Category Allocated Percentage of Expenditures Amount US$ to be financed (million) 1. Works 88.52 86% 2. Goods, Consultant Services, 10.15 100% Training 40 3. Sub-grants 1.08 100% of amounts disbursed 4. Front end fee 0.25 100% 5. Total 100.00 12. Sub grants for Private Houses Rehabilitation - Bank loan proceeds of approximately USD 1 million are designed as a subsidy for the rehabilitation work on some privately owned old houses. The detail operational procedures, including selection criteria, subsidy determination, monitoring and checking, and payment procedures, have been prepared by Huangshan Municipality PMO and agreed by the Bank. For each house rehabilitated, an implementation agreement as well as a maintenance agreement will be signed among the beneficiary house owner, township government and District/County PMU. The budget, technical specification and subsidy payment term are all stipulated in the implementation agreement. The subsidy will be 30% of the repair budget but no more than RMB 50,000 for each house. The subsidy will be paid to the beneficiary against the signed implementation agreement and a verification report. 13. Sub grants for Community Associations – Bank loan proceeds may finance the establishment and strengthening of some community associations upon agreed procedures, including expenditures related to registration fee, training for farmers, office furniture (table and chairs, file cabinet) supplies, and equipment and other small expense incurred for operation of community associations. The predetermined sub grant for each community association will be agreed with the Bank and documented in the project implementation plan. The sub grant will be made against the Implementation Agreement signed between District/County PMUs and communities and a verification report. 14. Budgeting. The annual project implementation plan, including the funding budget and resources, will be prepared by each district/county PMUs and consolidated by the Huangshan Municipality PMO. The budget for counterpart funds committed by local governments will be reviewed and approved by its People’s Congress and be included in their sectoral budget. Based on the approved budget and implementation progress, the local finance bureau will provide government appropriations to the project. Budget variance analysis will be conducted regularly by PMO and the PMUs, thus providing timely information to local government and the Bank on project execution and enabling timely corrective actions. 15. Funds flow. APFB will be directly responsible for the management, maintenance and reconciliation of DA activities. For components implemented by Huangshan Municipality PMO, Bank loan proceeds will be disbursed from APFB to HMFB, then to Huangshan Municipality PMO and finally to the service providers. For components implemented by District PMUs, Bank loan proceeds will be disbursed from APFB to HMFB, then to District/ Finance Bureaus, and finally to contractors. For components implemented by County PMUs, Bank loan proceeds will be disbursed from APFB to County Finance Bureaus, then to the contractors. All the disbursement applications will be initiated by related PMUs, reviewed by District/County Finance Bureaus, consolidated by PMO before submitting to HMFB and APFB. The flow of funds and funding requests are as follows: 41 World Bank Funding Request Flow DA at APFB Funds Flow Huangshan Municipal Finance Bureau (HMFB) County Finance Bureaus Huangshan City PMO County PMUs District Finance Bureaus District PMUs Contractors 16. Accounting and Financial Reporting. 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 project will adopt a customized MIS system integrating project management, procurement, financial management, disbursement and monitoring. The MIS is planned to be installed and tested before implementation of the Project. The Terms of reference of the system will be reviewed by the Bank to ensure adequate and appropriate system features and functionality. Additionally, the task team will closely monitor the initial stage to ensure timely installation, testing and usage of the system. If delays in the installation and testing of the system occur, manual accounting records will be maintained. This is deemed an acceptable back-up solution as transaction volumes are low in the initial start- up phase of the project. 17. All PMUs will manage, monitor and maintain project accounting records for their responsible project activities. Huangshan Municipality PMO will work with APFB to prepare the consolidated project financial statements. The unaudited semi-annual project financial statements will be prepared and furnished to the Bank by the PMO as part of the Progress Report no later than 45 days following each semester (the due dates will be August 15 and February 15). 42 18. Internal Control. The related accounting policy, procedures and regulations were issued by MOF and the FMM aligns the financial management and disbursement requirements among various implementing units. Procurement 19. Capacity Assessment: The procurement capacity assessment identified the lack of experience with World Bank financed projects of the procurement staff in the PMO, the PMUs and PIUs and possible influence of domestic procurement practice on project implementation as the principal risks. The mitigation measures agreed to include: (i) A procurement agent recruited based on TOR prepared by the PMO and agreed to by the Bank.; (ii) the Bank will provide continuous procurement training during project preparation and implementation; (iii) PMO to finalize by negotiations a Procurement Management Manual acceptable to the Bank. Overall procurement risk is considered as Substantial. 20. Applicable Guidelines: Procurement will be carried out in accordance with the “Guidelines: Procurement of Goods, Works and Non-Consulting Services under IBRD Loans and IDA Credits & Grants by World Bank Borrowers” dated January 2011; and “Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits & Grants by World Bank Borrowers” dated January 2011; and the provisions stipulated in the Loan Agreement. NCB shall be carried out in accordance with the Law on Tendering and Bidding of the People’s Republic of China promulgated by Order of the President of the People’s Republic of China on August 30, 1999 subject to the modifications stipulated in the Legal Agreement in order to ensure consistency with Bank Procurement Guidelines. 21. Procurement of Works: Works procured under this project will include: i) village/farm roads upgrading/construction, bridges, sidewalks, domestic and tourism pathways, street lightings; ii) safe and reliable piped water supply either from mountain springs or town water supply plants with appropriate treatment technologies; iii) storm water and waste water management through construction of drainage systems, sewer networks and low cost and environmentally appropriate treatment and disposal facilities; iv) river enhancements for flood prevention, environmental and recreational uses through dredging, clean up, and embankment upgrading, and v) rehabilitation of small dams, ponds, and canals for irrigation and drainage; vi) restoring, preserving, protecting and, where practicable, adaptively reusing historic Huixhou style buildings for social, cultural, village environment, and tourism development purposes; vii) improved marketing facilities and exhibition centers for agriculture products and handicrafts ; (viii) development of income-generating tourism services including adaptation of existing buildings, promotion of tourism at the village level and training of villagers in tourism industry skills; and (ix) provision of ancillary facilities to support tourism including, parking lots, public toilets and improvements to public spaces such as squares and exercise facilities. Procurement will be conducted using the Bank’s Standard Bidding Documents for all International Competitive Bidding (ICB) and National Model Bidding Documents agreed with or satisfactory to the Bank for all National Competitive Bidding (NCB). 22. Procurement of Goods. Goods procured under this project will include office equipments, vehicles and materials for project promotion. Procurement will be done using the Bank’s 43 Standard Bidding Documents for all ICB and National Model Bidding Documents agreed with or satisfactory to the Bank for all NCB. 23. Selection of Consultants. Consulting services will include consulting services for: (a) strategic research and planning including new countryside development and market-led village- based tourism; (b) capacity development for management, operation and maintenance of project outputs; (c) establishment of an information dissemination and communication platform; (d) establishment of effective financial and project management information systems and project monitoring and evaluation system; and (e) other related consultancies and studies. 24. Training and Workshops. Plans for training and workshops will be developed by the PMO and included in project annual work plan for Bank review. Expenditures incurred in accordance with the approved plans for training and workshops will be the basis for reimbursement. 25. Procurement Plan. The first 18 month Procurement Plan has been prepared by the PMO. It will be made available in the project’s records and on the Bank’s external website. The Procurement Plan will be updated annually or as required to reflect implementation needs and improvements in institutional capacity. 26. Frequency of Procurement Supervision. Prior review supervision will be carried out through the World Bank. Procurement post reviews will be carried out by the Bank every 12 months. The procurement post review sampling ratio will be one out of five contracts. 27. Thresholds for Prior-Review and Procurement Method. The thresholds for prior review and procurement method are indicated in the table below Description Thresholds (--) ICB < US$25,000,000 NCB Works = US$10,000,000 ICB All First 2 NCB works contracts by each PIU irrespective of Goods NCB value and all contracts >=US$1,000,000 Consulting firm selection >=$300,000 First 2 IC contracts Individual consultant selection irrespective of value. Consulting SSS (either firm or individual) All Services First 2 CQS contracts CQS irrespective of Value. NCB=National Competitive Bidding; CQS= Selection Based on the Consultants’ Qualifications; SSS=Single Source Selection; ( – ) = Not Applicable 28. Retroactive financing. Retroactive financing of up to $10 million would be available for eligible expenditures incurred on and after November 1, 2013. The following contracts will be procured under retroactive financing and they will all be subject to prior review by the Bank as indicated in the procurement plan. Estimated Procurement Ref. No. Description Cost Method (’0000$) HSS/C1 Project MIS 16.13 CQS Project Management & Supervision- Construction Quality- HSS/C2 83.87 QCBS Technical Assistance HSS/C3 Impact Evaluation 8.06 CQS Xinfeng Village、Yongfeng Village、Chaoyang Village、 HSQ/C1 93.36 NCB Shuxi Village、Guocun Village (Infrastructure construction) Xingcun Village、Raocun Village、Sanhe Village, HSQ/C2 171.21 NCB Longyuan Village (Infrastructure construction) Longshan Village、Baiguoshu Village、Zhongdun HSQ/C3 47.74 NCB Village (Infrastructure construction) 45 Estimated Procurement Ref. No. Description Cost Method (’0000$) Taoyuan Village, Huanglong Village, Lixi Village, Zhukou QM/C1 Village, Xiangtan Village ( Infrastructure construction and 72.27 NCB tourism facilities) Bishan Village, Guhuang Village, Pingshan Village, Miaolin YX/C1 Village, Shenchong Village, Tuanjie Village (Infrastructure 74.32 NCB construction) Yuliang Village, Tangyue Village and Baochuan Village SX/C1 24.66 NCB (Infrastructure construction) Shendu Village, Jiekou Village, Zhangtan Village; Miantan SX/C2 53.85 NCB Village (Infrastructure Construction) Xucun Village -Xiongcun Village: Maihuayu Village SX/C3 36.67 NCB (Infrastructure construction) TX/C1 Liucun Village.- (Infrastructure construction) 46.14 NCB Xixinan Village: (Infrastructure construction) HZQ/C1 15.07 NCB Fuxi Village, Yangcun Village, Qiashe Village – HZQ/C2 85.00 NCB (Infrastructure Construction) Kunsha Village, Shuyuan Village: (Infrastructure HZQ/C3 17.23 NCB Construction and Tourism facilities) XN/C1 Yanjiao Village- Infrastructure Construction 115.30 NCB Environmental and Social (including safeguards) Environmental 29. The project is classified as a “Category B” operation under Bank OP 4.01. The project triggers the following World Bank EA safeguards policies: Environmental Assessment(OP4.01), Natural Habitats(OP4.04), Physical Cultural Resources(OP4.11), Pest Management(OP4.09) and Dam Safety(OP4.37). 30. Environmental Assessment (OP4.01). Environmental Assessments (EAs) for the project were conducted by an accredited EA consulting institute (Shanghai Ship and Shipping Research Institute-SSSRI wich is accredited First class in EA). The impacts of the project on the environment are expected to be overall positive. The project brings many environmental and social benefits to the local communities, such as the improved village infrastructure, public amenities and environment, conservation of the existing Hui-style cultural heritage resources, and increased income by the promotion of value-added agriculture and countryside tourism. The EA shows that the project will not have any significant adverse environmental impacts due to its 46 small scale investments mainly for the renovation or improvement of the existing facilities which are distributed across seven districts and counties in Huangshan Municipality. 31. The principal potential adverse impacts are construction related impacts including dust, noise, wastewater, spoil disposal and short disturbance to local communities. These impacts will be site-specific and reversible in nature, for which mitigation measures can be designed readily. Environmental Codes of Practices (ECOPs) have been prepared to address these general impacts. Specific site mitigation measures have been developed to minimize potential impacts caused by each type of construction activities. During operation, the project may cause some induced impacts from the increased tourists in the rural villages. Adequate mitigation measures including provision of sanitation facilities have been taken into account in the project design and the EMP. 32. Natural Habitats (OP4.04). The project triggers OP4.04 Policy because some activities are designed for four villages (i.e. Fuxi, Shuxi, Xiong, Yanjiao) which are located in natural habitats: a provincial nature reserve (i.e. Tianhu), a national wetland park (Taipinghu), and two tourism scenic areas (i.e. Qiyunshan, Huashan). These activities are mainly limited to the renovation or improvement of existing infrastructure, e.g. road pavement, construction of a bridge to improve villagers’ accessibility during flood season, provision of road safety facilities, small scale water supply pipelines and sewers, and provision of recreation amenities (e.g. playground, and exercise areas) at villages. These activities will not cause any significant adverse impacts to the protected areas. The EA confirms that these activities are in compliance with the Bank policies on OP 4.01 and OP 4.04. They are also in line with Chinese EA regulations and the relevant master plans for natural habitats, and have been approved by relevant government agencies. Mitigation measures include continuous consultation with natural habitat management authorities, good construction management, specific measures for natural habitats protection, and provision of sanitation facilities for tourists in the project design. 33. Physical Cultural Resources (OP4.11). The project will finance conservation of 137 old buildings, some old trees, and two bridges in two villages. The PCRs survey has been conducted by a nationally recognized institution including experienced PCR consultants. The PCR inventories have been developed and mapped through information obtained from literature sources, site survey, consultation with PCRs authorities, and communities etc.. A PCRs Management Plan, as part of the EMP, specifies conservation measures for the PCRs, monitoring plan, the capacity building activities (e.g. trainings, studies), institutional arrangements, and the budget for the implementation of the PCRs Management Plan. 34. Pest Management (OP4.09). The project finances the diversification of crop systems (e.g. tea, flowers, and Chinese medicinal herbs) which potentially involve pest management. A Pest Management Plan has been prepared for agricultural components under this project, so as to minimize the environmental and health hazards related to the pest management. The PMP includes promotion of IPM, training, supervision, and a budget for PMP implementation. 35. Dam Safety (OP4.37). The project triggers the Safeguards Policy on Safety of Dams (OP4.37) since the project financed water supply facilities will draw water from reservoirs formed by two existing dams, Qiyunshan Dam in Xiuning County and Qiaokengwu Dam in Shexian County. The project will also finance 54 existing weirs rehabilitation for retaining water. 47 36. Dam safety plans and emergency preparedness plans have been prepared for the two existing dams. In addition, the Huangshan Municipality PMO will assign special staff for dam safety management to assist the Bank team in ensuring that the project is implemented in line with OP4.37. A Dam Safety Action Plan has been prepared as part of the POM to guide project staff. 37. During implementation, the Borrower will prepare and update an Annual Dam Safety Action Plan and provide relevant dam safety information to the Bank and arrange field trips to review the safety status the relevant dams, and take dam safety measures recommended by the Bank to improve the safety status when necessary to ensure the safety of dams. The dam safety expert in the task team will (a) inspect and evaluate the safety status of existing dams, their appurtenance, and performance history; (b) review and evaluate the owner’s operation and maintenance procedures; and (c) provide written reports of findings and recommendations for any remedial work or safety-related measures necessary to upgrade the existing dams to an acceptable standard of safety. 38. Alternative Analysis. Technical alternatives were considered for the investment components during the feasibility study and the EA to minimize environmental impacts. The EA and the feasibility study analyzed alternatives for wastewater treatment technology, options of road pavements and river embankment, etc. The EA also evaluates the “without project” situation. 39. Environment Management Plan (EMP). An EMP has been developed for the project as a stand-alone document. The EMP includes specific mitigation measures, ECOPs, a Pest Management Plan, a PCRs Management Plan, monitoring and supervision arrangements, institutional arrangements for the implementation of the EMP, capacity building, and estimated budget of the EMP implementation. The EMP also proposes (i) site-specific mitigation measures both for construction and engineering design, and management measures to address broader social impacts such as traffic management during construction; (ii) remedial measures in case of non-compliance by the contractors. Specific mitigation measures and ECOPs for the construction phase will be entered into bidding documents and supervised by relevant institutions. Given that all sub-projects have been identified and prepared prior to project implementation, an Environmental Management Framework was not prepared at this stage. 40. During the construction, the PMO and PMUs will appoint staff to take responsibility for coordinating EMP implementation. Environmental supervisors will be responsible for daily environmental management. During operation, the villages will be in charge of environmental management under the guidance and supervision of EPBs. The Bank team and the EA consultants have provided the clients with necessary safeguards trainings to improve their capacity during project preparation. The training will continue during project implementation. Personnel of the PMO, PMUs, PIUs, environmental supervisors and civil work contractors etc. will receive safeguards training specified in the EMP. The PCRs Management Plan includes the PCRs conservation training activities for local villagers and PCRs institutions. The Pest Management Plan includes training activities for farmers and IPM awareness promotion activities. 41. Public Consultations and Information Disclosure. In accordance with Bank Safeguard policies and Chinese regulations, public consultations were conducted from September to 48 December 2012, including public consultation meetings and questionnaire survey with project affected persons and other stakeholders (e.g. village associations, PCR authority, EBP, forestry bureau, water resources bureau). Local villagers supported the project and gave recommendations such as (i) improvement of access roads, drainage systems and reliable piped water supply, (ii) development of income generating agricultural and tourism services, and (iii) mitigation measures for construction activities. Their opinions and concerns have been taken into account in the EA process and project design. The EA and the EMP were locally disclosed on December 21, 2012, and re-disclosed again on February 6, 2013, May 22, 2013, and June 25, 2013 through announcements on the local website (Huangshan Government Website) and the local newspapers (Huangshan Daily). The EMP and EA safeguard documents were disclosed by Bank Infoshop on June 27 and July 11, 2013 respectively. Social 42. The Bank Policy OP 4.12 Involuntary Resettlement is triggered. A Resettlement Action Plan (RAP) has been prepared for serving for the entire project. The RAP provides details on resettlement policy procedures and requirements that will have to be followed during project implementation, including compensation rates, mitigation measures to restore livelihoods, and institutional and monitoring arrangements. The RAP was locally disclosed on December 12, 2012, and re-disclosed on February 5, 2013, May 22, 2013, and June 25, 2013. The RAP was disclosed by the Bank Infoshop on July 11, 2013. 43. The project will require the permanent acquisition of 2.7 hectares of village land (about 110 rural families) and 2.5 hectares of village land temporarily (about 155 rural families) during civil work of the project. About 137 rural residential buildings would be improved and made available for tourism purposes. Among those buildings, some of them might be rented by tourism firms or village committees and those villagers would be supervised to ensure they participate into the village tourism development program at will and receive proper benefits. 44. The RAP prepared by the project entity provides detail regarding resettlement policy principles and regulations to be followed, compensation rates and budget, mitigation measures to restore incomes where necessary and institutional and monitoring arrangements. 45. The selection and design of village based subprojects considered the avoidance or minimization of involuntary resettlement caused by any permanent land acquisition and temporary land occupation and structure demolition due to the sensitive environment and environmental requirement in the national park in Huangshan city area. For example, in the selection of road works, only roads with a pavement width of no more than 4.5 m were included. Furthermore, road works will be conducted in conjunction with line burial and drainage works, and priority is given to existing water resources facilities. As the result, the land acquisitions were minimized and the housing structural demolitions were avoided. 46. The ownerships of the lands will not be converted. Based on the Chinese land law and administrative management of village infrastructures, all of the subprojects will be owned by the engaged villages. In order to fully support the project, the engaged municipal districts and 49 counties will pay the resettlement cost to the affected farmers so as to reduce potential village financial difficulties. The engaged villages are the beneficiaries. 47. Following the institutional arrangements under the project, levels of resettlement offices from municipality, district/county, to township/village will be established under the PMO and the PMUs to coordinate and implement the resettlement activity together with the PIUs at the village level. The project city Land and Resources Bureaus will be responsible for the land acquisition approval. An experienced national consulting team will be contracted to serve as an independent monitoring entity of the resettlement program. The project will be monitored and the living standards of the project-affected people will be evaluated over the course of project implementation. The monitoring results will be regularly reported twice a year and, if needed, remedial actions will be devised. 48. Due diligence review was conducted to determine whether there are any links between the Bank-financed sub-projects and other construction activities in the villages. It was found that no new proposals for civil works, which are linked to the Bank loan supported project, are anticipated. 49. Gender Aspects. Social and gender equality will continue to be promoted through wide and equal participation of, and consultation with, the local people in project areas throughout project implementation. Special attention will be given to the participation of vulnerable people, men and women, with a good degree of gender sensitivity. Equal participation and gender responsiveness will be reflected in project activities such as training, intangible cultural heritage, village associations, agriculture and tourism, as well as other capacity building activities. In particular, women’s participation would account for at least 30% of the total participants and beneficiaries of the project. Monitoring & Evaluation 50. Systematic M&E will be carried to monitor progress, outputs, and outcomes of project activities. The results framework (Annex I) identifies the project outcome indicators that the project PMO and PMUs in collaboration with the line bureaus and the village organizations involved in project implementation will collect data on through regular monitoring and field surveys. PMO will prepare regular consolidated M&E reports based on reports from the PMUs, following review and verification. Physical and financial progress will be tracked through the Management Information System set up under the project. Reports of physical and financial progress of activities implementation will be prepared semi-annually and would constitute a key document for review by regular Bank supervision missions. 51. Using the M&E collected information, the PMO and the PMUs will produce semi-annual reports to monitor project progress. Consolidated reports produced by the PMO for the entire project will be shared with the Bank on a semi-annual basis. In addition, a mid-term review will be conducted half way through project implementation for a comprehensive assessment of project progress and results. PMO will prepare a MTR report which will be shared with the Bank ahead of the MTR mission. 50 52. In addition, an external agency/institute will be commissioned to design and undertake an impact evaluation assessment of project interventions on project beneficiaries based on representative surveys to be conducted at three stages of project implementation: a baseline, a follow-up prior to mid-term, and a final round at project completion. The impact evaluation will include specific surveys for a sample of sub-projects (Roads, tourism) and a socio-economic survey of a sample of households within the target villages, and a control group. This will focus on access to services, use of and satisfaction with services supported by the project, and changes in income from project supported income-generating opportunities. 53. Information collected from the M&E reports will be used to assess implementation progress of project activities and the likelihood of the project achieving its development objective. It will also be used to identify any implementation bottlenecks that would necessitate additional efforts and resources, or adjustments through changes or restructuring. The information gathered would also highlight successful examples that may be disseminated and replicated countrywide. 51 Annex 4: Operational Risk Assessment Framework CHINA: Anhui Yellow Mountain New Countryside Demonstration Project Project Stakeholder Risks Rating: Low Description : There is a little anticipated stakeholder risk Risk Management: An integrated, comprehensive and consultative approach has been adopted Client- Bank relationships are quite strong and expected to and is expected to continue. The process involves village groups, local government, line bureaus, remain so in the foreseeable future. Development objectives and private sector representatives and local institutions. Huangshan Municipality DRC has the leverage targets are well aligned between the two as reflected in the 12th to engage various stakeholders and involve them in project preparation and implementation. There FYP and in the China CPS. is strong commitment and ownership from all project stakeholders. The project’s concept and Level of enthusiasm and participation from all stakeholders is objectives speak directly to the overall development targets outlined in key government strategy quite high (Municipal government, county government, documents such as the 12th FYP and the municipality development plans. The Bank team will villagers groups, private sector representatives) and from continue to recommend wider consultations with various stakeholders to ensure their buy-in in implementing agencies in all counties/districts. Central project investments. government agencies (NDRC, MOF) are also paying particular attention to the project. Resp: Client Stage: Prep/Imp Due Date : Dec. 31, 2018 Status: In- progress Implementing Agency Risks (including fiduciary) Capacity Rating: Substantial Description: Project PMO and PMUs have no prior experience Risk Management: The Bank team has worked closely with the PMO and PMUs and provided preparing and implementing Bank-financed projects, especially continuous assistance on various aspects, particularly fiduciary policies and Bank guidelines. A in financial management and procurement aspects. This may number of training workshops have been held during project preparation to familiarize the PMO affect the implementation capacity and generate risks of delay and PMUs with Bank policies, and preparation/implementation requirements. Huangshan PMO has and slow disbursement, hence negatively impacting also been put in touch with PMOs from other World Bank projects to learn from their experience. implementation progress. Based on the Bank Team recommendation, Huangshan Municipal Government has provided adequate financial and human resources to the PMO to ensure that it conducts its work effectively. The capacity of the project counties needs to be improved. PIUs While Huangshan Municipality hasn’t had prior experience working on World Bank projects, and local consultants may not have adequate experience Anhui province has implemented a large number of World Bank projects. Anhui PFB and PDRC preparing and implementing Bank financed projects and would are providing guidance to the Municipality PMO on continuous basis as well. Moreover, need assistance. municipal level agencies such as Water, Construction, Agriculture, Tourism, and Cultural Heritage Commission, are directly involved in project preparation and will remain during implementation. The local procurement practices may not be aligned with Bank’s They provide technical guidance, necessary reviews and approvals. Finally, the project has a built- policy and procedure in some areas which may cause delays in in technical assistance activity that will provide expertise knowledge and guidance to the PMO and project implementation. PMUs on operational, fiduciary and technical aspects. 52 Status: In- Resp: Client Stage: Prep/Imp Due Date : Dec. 31, 2018 progress Governance Rating: Moderate Description: The project PMO and all project PMUs are part of Risk Management: Project leading groups have been established at municipal level. Municipal the DRC which is the highest planning authority government level PMO will oversee the operations of the county PMUs and of the PIUs and provide necessary agency. Furthermore, the municipal and local county/district governance and technical support. governments have adequate governance structure to facilitate Resp: Client Stage: Prep/Imp Due Date: Dec. 31, 2018 Status: In- effective decision making throughout project preparation and progress implementation. However, given the lack of familiarity of the Risk Management: With adequate management and supervision systems in place, the risk of fraud PMO and PMUs with World Bank projects, the risk has been and corruption is reduced. assessed as moderate. Project Risks Design Rating: Moderate Description : The project covers a number of sectors Risk Management: The selection criteria agreed to during project preparation have indicated that (infrastructure, cultural heritage, agriculture, tourism) and it is all project investments should be in compliance with the existing counties master plans for the possible that there will be imbalance in the investments and various sectors. This would ensure that the activities are designed in an integrated and progress among the different activities, with heavier emphasis comprehensive fashion under an overall master plan. However, it is important to keep in mind that on infrastructure and civil works and a seemingly lack of a the investments would be need-based. Resources are limited, and some activities have already been comprehensive project plan. invested using other funding sources. For instance, some villages might have already undertaken the infrastructure activities. In these villages, the project will focus on the other sectors to For infrastructure, there might be a tendency to overdesign complement the infrastructure investments. The Bank team worked closely with the PMO during some of the activities with relatively costlier investments, and the preparation and review stage, to ensure that infrastructure works are not overdesigned and that not to have effective mechanisms in place for proper Operation cost effectiveness has been factored in. The preparation work also ensured that project design takes and maintenance. into account the O&M arrangements and adaptable reuse of cultural heritage sites. During project implementation, the PMO would ensure that these aspects are being implemented. For cultural heritage investments, there may be a risk of little consideration for the adaptable reuse of some of cultural heritage sites, in addition to proper O&M mechanisms put in Status: In Resp: Client Stage: Implementation Due Date : Dec. 31, 2018 place. There is also a need to have proper surveys for cultural progress heritage conservation works. Social & Environmental Rating: Moderate Description: Environmental and Social Risks have been Risk Management: The Bank team has provided the client with training on social and carefully evaluated during the process of EA and RAP and environmental safeguards policies. The client has engaged qualified consultants to prepare the addressed through the appropriate safeguards instruments required safeguards documents. The task team will continue to have close interaction with PMO (EMP, PMP, PCRs Management Plan, and RAP) and public and the PMUs to improve the capacity on Safeguards, ensure that not only the documents have consultations. The capacities of Huangshan PMO and been well prepared but that they also will be implemented to mitigate any social or environmental county/district level PMUs to prepare, manage, and implement impact. the World Bank’s safeguards policy instruments have been Status: In strengthened by safeguards trainings provided by the Bank team Resp: Client Stage: Prep/Imp Due Date : Dec. 31, 2018 progress and the EA consultants. Further capacity building activities have 53 been included in the safeguards instruments. Program & Donor Rating: Low Description: There is no risk associated with program Risk Management : dependency or donor coordination Resp: N/A Stage: N/A Due Date :N/A Status: N/A Delivery Monitoring & Sustainability Rating: Moderate Description: Limited capacity of project PMO and PMUs with Risk Management: Close collaboration with Bank team and continuous training to PMO and implementing World Bank projects. Low capacity and limited PMU staff will be ensured throughout project preparation and implementation. Counties and technical and operational knowledge at the project villages level districts have committed to providing timely counterpart funds. Collaboration with Technical line departments and Technical assistance will be provided through hiring of expert teams and project management consulting services. Some project villages/sub-components may drop because of This risk has been addressed through selection criteria of project villages to ensure that the risk is preference to access other sources of funds minimized Monitoring: Data collection and processing systems need to be A strong M&E system would be put in place to monitor and evaluate project outcomes and in place and monitoring should start as early as possible to impacts. This will be supported by an MIS system that measures physical and financial progress ensure the baseline and future impacts are monitored. and targets. A robust baseline survey would also be undertaken to establish the benchmark parameters against which progress will be measured. Sustainability: The O&M of basic infrastructure and adaptable This has been addressed through a number of measures including budget allocations for O&M, use of preserved historical buildings may not be adequately financial mechanisms, contract management, and community involvement. addressed at village level. The slow provision of counterpart funding may also lead to inadequate O&M arrangements, which The project is part of the government program on the National Rural Countryside Development; Its are critical for sustaining the project benefits. geographical area is limited to 68 villages covering less than 10% of the municipality total area. It is expected that by the time the project becomes effective, the project PMO and PMUs would have acquired adequate level of capacity and some familiarity with Bank policies and procedures through training and continued interaction with Bank teams. Status: In Resp: Client Stage: Implementation Due Date : Dec. 31, 2018 progress Other: Exchange Rate Appreciation Risk Rating: Moderate Description: Appreciation of Chinese currency may affect the Risk Management: Huangshan manages a large portfolio of programs and schemes each year, and availability of funds between the time of project appraisal and may consider allocating more to this project. District and county governments could find the implementation possibility to mobilize other domestic investment managed by other line bureaus if the objective is the same as the Bank project. Project can also use any savings resulting from efficient bidding process Status: In Resp: Client Stage: Implementation Due Date : Dec. 31, 2018 progress Overall Risk 54 Overall Implementation Risk: Rating Moderate Risk Description: The overall Implementing risk rating is assessed as Moderate. The main risks arise from the lack of prior experience for the project implementing agencies in preparing and implementing World Bank projects and the large number and diverse nature of the sub-projects to be implemented with particular attention to the unique ecological and cultural environment of Huangshan villages. Necessary mitigation measures, including compliance with Bank policies and procedures, securing the buy-in of the local villagers, engaging technical staff from line departments and expert teams, and designing cost effective and technically sound interventions with minimum adverse impact to the natural environment were built in the project design and will be applied over the course of project implementation. The overall risk level is also moderated by factors including that (a) the project is part of the government program on the NSCS; (b) its geographical area is limited to 68 villages covering less than 10% of the municipality total area, and (c) the largest proportion of project costs is allocated to infrastructure improvement and civil works, two areas with which the client has quite a lot of experience. It is also expected that by the time the project becomes effective, the project PMO and PMUs would have acquired some level of capacity and familiarity with Bank policies and procedures through training and continued interaction with Bank teams. 55 Annex 5: Implementation Support Plan CHINA: Anhui Yellow Mountain New Countryside Demonstration Project Strategy and Approach for Implementation Support 1. The strategy for implementation support revolves around the objectives of (a) achieving the project development objectives and project outcomes as measured by the results indicators; (b) providing timely and quality support to ensure satisfactory implementation progress covering the various facets of project activities including technical, managerial, institutional, environmental, social, procurement, financial management, risks, monitoring and evaluation; and (c) mitigating the key risks identified in the ORAF. 2. The approach for implementation support focuses on the following: a. Management Support i. Implementation support for readiness, effectiveness, progress ii. PMO and PMU staff capacity iii. Review of annual plans iv. Monitoring Implementation progress (physical and financial targets) v. Project changes, restructuring b. Technical support i. Technical advice on designs for infrastructure and cultural heritage works. ii. Technical guidance for intangible cultural heritage, high-value agriculture and tourism activities. iii. Institutional strengthening and technical assistance (role of technical institutions - and Expert Teams) iv. Role and activities for Village organizations v. Review of training plans and activities vi. Advice on communication and dissemination strategy for new countryside development. c. Procurement i. Compliance with Bank procurement guidelines ii. Prior and post review iii. Contract management d. Financial management i. Compliance with financial management procedures ii. Disbursement e. Environmental, social, and other safeguards i. Implementation of the relevant safeguards manuals f. Delivery, monitoring and sustainability i. Track PDO and Outcomes Results indicators ii. Monitoring and evaluation 56 iii. Responsibility, quality and availability of data for monitoring and evaluation g. Help Mitigate other implementation risks h. Alignment of Bank resources, staffing and skills (supervision missions, team composition, budget). Implementation Support Plan 3. The implementation support plan (ISP) will cover the key areas of project implementation mainly technical, fiduciary, safeguards, monitoring and evaluation, and risks. The ISP will be developed to cover the entire project implementation period, from effectiveness to completion, and support activities will be designed to provide support at the right time to ensure tailored- support. The ISP will be reviewed and updated based on periodic assessment of risks and appropriateness of the mitigation measures implemented. 4. Implementing Agency Capacity. The project PMO and PMUs have little to no experience in implementation of Bank projects. This has been identified as a substantial risk to project implementation. Bank implementation support in project management will initially focus on assisting the client in strengthening implementation capacity at all levels, particularly in financial management and procurement. Frequent supervision early on during the first half of the implementation period is expected to assist with compliance with Bank financial management and procurement policies and procedures. The Bank team will also support the client in implementation progress and annual plan reviews, project adjustments and any restructuring required. 5. Technical. Specific technical expertise in infrastructure design, cultural heritage preservation, tourism development, high value agriculture practices, and villager organizations will be mobilized. These will be complemented by international expertise, particularly in the areas of cultural heritage preservation and rural tourism development. The challenges for sustainable operational and maintenance mechanisms will be monitored by the Bank’s technical specialists during routine supervision. These specialists would also provide technical support to project implementing agencies and help resolve any potential technical issues that may arise. 6. Procurement. Implementation support will focus on ensuring that (a) the procurement agents are performing effectively; (b) PMO and PMU staff are fully familiar with, and adhere to the Procurement Management Manual; and (c) planned procurement training is provided to all procurement staff in a timely manner. The Bank procurement specialist will also carry out prior and post reviews of procurement transactions and monitor the implementation and updates of the procurement plan. 7. Fiduciary Requirements. The fiduciary supervision strategy is based on its financial management risk rating, which will be evaluated on a regular basis by the financial management specialist in line with the FMSB’s Financial Management Manual, and in consultation with the task team leader. The Financial management specialist will join the Bank supervision missions to review the implementation of the Financial Management Manual. The specialist would also provide technical support to project implementing agencies and help provide timely resolution to 57 potential financial management issues. Training will be also provided by the Bank before the commencement of project implementation. 8. Safeguards. The team’s environmental specialist will monitor compliance with environmental safeguards and adherence to the environmental monitoring programs, PCR, and pest management plans. The social specialist will monitor adherence to the Resettlement Action Plan should any involuntary taking of land be required that was not foreseen at preparation. The Bank’s dam safety specialist will monitor any dam safety reviews required to be undertaken. All members of the Bank’s safeguards team are based in Beijing and will provide timely and on- demand implementation support to the client when needed. 9. Delivery Monitoring and Sustainability. The Bank team will support PMO and PMUs in analysis and review of project monitoring information from the project MES and MIS to address issues arising during implementation. In terms of sustaining the project approach, the Bank team will support PMO in identifying successful mechanisms for integrating infrastructure, cultural heritage, and income generating activities, and operation and maintenance measures from the project for mainstreaming into China’s wider New Countryside Development program. 10. Other. Exchange rate appreciation is identified as a moderate risk in the ORAF. The Bank supervision team will closely monitor exchange rate changes, impact on project implementation, and work closely with PMO to mitigate such impacts through agreed project measures. 11. Implementation Support Missions. An overview of the focus, timing, skills, and resource estimates is given in Table A5.1 and the required skill mix in Table A5.2. 58 Table A5. 1 Supervision Inputs Time Focus Skills Needed Resource Partner Role Estimate First twelve • Task and team • TTL 8 months leadership • Technical support • Technical skills 15 Technical support • FM and procurement • Bank policies 6 • Safeguards • Bank policies 4 12-60 months • Task and team • TTL 20 leadership • Technical support • Technical skills 60 • FM and procurement • Bank policies 16 • Safeguards • Bank policies 8 Table A5.2. Skills Mix Required Skills Needed Number of Staff Number of Trips Comments Weeks TTL/Economist 28 10 Bank staff Roads and Infrastructure 15 10 International and Engineer national consultants Water and Sanitation Specialist 15 10 International and national consultants Cultural Heritage Specialist 15 10 International and national consultants Agriculture Economist 15 10 International and national consultants Tourism Specialist 15 10 International and national consultants Bank Safeguard Policy 12 11 Country-office based Bank staff Bank FM Policy 11 10 Country-office based Bank staff Bank Procurement Policy 11 10 Country-office based Bank staff 59 118°E CHINA SHANDONG WUHU ANHUI YELLOW MOUNTAIN JIANGSU NEW COUNTRYSIDE DEMONSTRATION PROJECT HENAN Bozhou Huaibei Suzhou PROJECT VILLAGES COUNTY OR DISTRICT COUNTY OR DISTRICT PROJECT COUNTIES OR CAPITALS BOUNDARIES ANHUI Fuyang Bengbu DISTRICTS PREFECTURE CAPITALS PREFECTURE BOUNDARIES Huainan PROVINCE CAPITAL PROVINCE BOUNDARIES Chuzhou (inset) 21 NANJING Luan HEFEI Chaohu Ma'anshan Tunxi District Shexian County 23 1 Xinjiang (cont'd) Wuhu 2 Liucun 36 Zhanqi HUBEI Tongling Xuanzhou 37 Jiekou 22 3 Waibianxi 15 Anqing Chizhou 38 Zhengcun 17 16 Huizhou District 39 Hongqin Huangshan 4 Xixinan 20 ZHEJIANG 5 Qiankou 40 Hongfei CHIZHOU 13 12 Tunxi AREA 41 Zhangtan 19 6 Kunsha OF 42 Miantan MAP 7 Shuyuan Huangshan District JIANGXI 43 Sucun 8 Lingshan 9 Qiashe Xiuning County 18 10 Fuxi 44 Langsi 45 Tianli 14 XUANCHENG 11 Yangcun 46 Huaqiao 54 Huangshan District 47 Yanjiao 12 Raocun 48 Yanpu 13 Xingcun Yixian County 49 Huangcun 10 14 Guocun 30°N 60 24 30°N 50 Wanxin 11 43 15 Longyuan 64 55 40 Yixian County 65 51 53 16 Baiguoshu 63 39 25 17 Chaoyang 51 Bishan 58 57 Yixian 52 Huizhou 8 9 Shexian 33 61 34 18 Zhongdun 52 Guhuang 66 H U A N G S H A N District 6 7 31 27 36 35 19 Shuxi 53 Pingshan 59 Qimen 56 5 38 26 32 68 28 20 Longshan 54 Miaolin 4 29 21 Xinfeng 55 Shenchong 47 41 42 56 Tuanjie Qimen County 48 Huizhou 30 22 Sanhe 50 67 Xiuning Tunxi Shexian County37 23 Yongfeng Qimen County Shexian County 57 Huanglong Xiuning County District 58 Huansha 1 2 3 Tunxi 24 Xucun 62 44 25 Shitan 59 Kengkou 49 26 Yuliang 60 Lixi 46 27 Wenzhengshan 61 Liudu 28 Baojiazhuang 62 Luxi 45 29 Maihuayu 63 Lunkeng 30 Xiongcun 64 Mashan 0 10 20 ZHEIJIANG 31 Tangyue 65 Penglong KILOMETERS 66 Taoyuan 32 Shendu JIANGXI NOVEMBER 2013 IBRD 40338 33 Changxi 67 Xiangtan This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information 34 Fuhui 68 Zhukou shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any 35 Beian endorsement or acceptance of such boundaries. 118°E