The World Bank Jiangxi Wuxikou Integrated Flood Management Project (P128867) REPORT NO.: RES32297 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF JIANGXI WUXIKOU INTEGRATED FLOOD MANAGEMENT PROJECT APPROVED ON MARCH 20, 2013 TO PEOPLE'S REPUBLIC OF CHINA WATER EAST ASIA AND PACIFIC Regional Vice President: Victoria Kwakwa Country Director: Martin Raiser Senior Global Practice Director: Jennifer J. Sara Practice Manager/Manager: Sudipto Sarkar Task Team Leader: Liping Jiang The World Bank Jiangxi Wuxikou Integrated Flood Management Project (P128867) I. BASIC DATA Product Information Project ID Financing Instrument P128867 Investment Project Financing Original EA Category Current EA Category Full Assessment (A) Full Assessment (A) Approval Date Current Closing Date 20-Mar-2013 30-Jun-2019 Organizations Borrower Responsible Agency People's Republic of China Jiangxi Jingdezhen Municipal Water Affairs Bureau Project Development Objective (PDO) Original PDO To reduce the flood risk in the central urban area of Jingdezhen City through implementation of priority structural and non-structural measures, and contribute to establishment of an integrated flood risk management system for the City. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-82370 20-Mar-2013 06-May-2013 19-Jul-2013 30-Jun-2019 100.00 82.80 17.20 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES The World Bank Jiangxi Wuxikou Integrated Flood Management Project (P128867) Background 1. This IBRD US$100 million loan project supports reduction of flood risks through implementation of structural and non-structural measures in the central urban area of Jingdezhen City, as well as the establishment of an integrated flood risk management system. The project was approved by the Board on March 20, 2013, the legal documents were signed on May 6, 2013 and the project became effective on July 19, 2013. The original closing date is June 30, 2019. No extension of closing date has been processed to date. The total cost of this project is US$513.70 million, of which US$413.70 million in counterpart funding is shared between central, provincial, and municipal governments. The project has four components: (1) Construction of Wuxikou Flood Control Scheme (total cost US$114.86 million, of which Bank financing is US$87.96 million); (2) Capacity Building for Integrated Flood Risk Management System (total cost US$9.40 million, which is fully financed by the Bank); (3) Implementation of Resettlement Action Plan (total cost US$384.61 million, to be fully financed by government counterpart funds); and (4) Project Management and Implementation Support (US$2.39million, which is fully financed by the Bank). Implementation Status of Project Components 2. Project implementation has been broadly satisfactory since the effective start date. As of April 11, 2019, the project has disbursed US$82.80 million of the IBRD loan proceeds, leaving an undisbursed balance of US$17.20 million (if considering the US$7.61 million to be retroactively disbursed to the project (as described later in this restructuring paper), and quality assurance funds of to be paid to contractors (US$7.13 million) after meeting quality standards), then the total disbursed amount will be US$97.54 million). As described below, the progress and expenditure rates for the project components have varied, but the recommended revisions reflected in this restructuring paper, will allow the components to be completed on time by the original closing date and with full achievement of the project objectives. The status of each project component is as follows: Component 1: Construction of Wuxikou Flood Control Scheme: Overall, this component is on track to be fully completed, disbursed and meet project objectives on time by the close of the project. In terms of physical progress for this component, construction of the dam includes two parts (civil works and installation of electrical and mechanical equipment) both of which have been fully completed. Reservoir impounding will take place in two stages after the flood season. The first stage will fill the reservoir to an elevation of 45 meters above sea level (i.e. the design “dead storage” level), starting from the end of October 2018. The second stage of reservoir impounding started in March 2019 and will fill the reservoir to an elevation of 50 meters above sea level by the end of the project on June 30, 2019 to play a role for flood control, as planned during the project appraisal. Component 2: Capacity Building for Integrated Flood Risk Management System: This component is currently on track, where the system established has been test-operated and will be fully operational to facilitate the flood decision making and will meet project objectives on time by the close of the project. In terms of physical progress, this component includes five sub-components making up the ‘non-structural’ flood risk reduction measures of the project. The status of each sub-component is given below: (1) Preparation of an integrated flood risk management master plan - preparation of the master plan has been completed, which is now under final review by the government. (2) Development of an integrated flood risk management decision support system - the integrated flood risk management decision support system has been completed and is currently undergoing trail operations led by the Jingdezhen Municipal Water Affairs Bureau. The World Bank Jiangxi Wuxikou Integrated Flood Management Project (P128867) (3) Construction of a municipal flood control and dispatching center - the construction of the flood control and dispatching center has been completed by the end of 2018. (4) Provision of equipment for municipal flood control center – all equipment (screens, computers, servers, cables, etc.) have been procured, and was installed in December 2018. (5) Carrying out integrated flood management awareness raising and community engagement – the implementation plan was prepared and completed, the mid-term report for the study has been revised and completed based on the Bank comments, and one rehearsal drill involving community volunteers was conducted as planned in Jingdezhen City in April 2018. The final study report will be completed by the original closing date of the project. (6) Provision of integrated flood risk management technical training - operational staff for the flood control management center in the water affairs bureau have received a number of overseas, domestic, and on-the-job training. Component 3: Implementation of Resettlement Action Plan: This component is fully funded by counterpart financing, as originally planned, except for an access road added as a result of mid-term review. The counterpart funding issue wasresolved in September 2018. Overall, this component is now on track and will be fully completed with big efforts by the projectclosing date (the construction of the new houses for all resettlers has been delayed for a few months because of the rainy season). This component also includes two special infrastructure works: (1) high speed railway relocation, and (2) construction of an access road for resettlement population. The high speed railway relocation has been fully completed by the end of 2018. The access road has mostly completed and the remainder will be completed by the end of the project. Component 4: Project Management and Implementation Support: The status of loan disbursement for this component is relatively low, mostly because of the reduced costs for capacity building activities (see sub-component b) below) and the new costs proposed to be added during the MTR (i.e. reservoir water-quality monitoring boats, etc. see para. 4). This component is on track to be fully disbursed and meet project objectives by the close of the project. Sub-component progress is as follows: (1) The provision of consulting and engineering services have been mostly completed as planned. (2) The carrying out of capacity building activities is ongoing in line with the project objectives but has been at significantly less cost than was estimated in the PAD. New government travel policies restrict overseas travel for government staff. In response, under this project in lieu of overseas training, domestic trainings were organized, and foreign experts were invited to provide training in Jingdezhen City directly. These revised capacity building measures substantially reduced the costs for this component but allowed the training and capacity building objectives to still be met. (3) The establishment and operation of the monitoring and evaluation (M&E) system has been setup and is in use by the project consultant. (4) The procurement of office equipment has been completed; and procurement of vehicles is currently underway and will be completed by the end of the project. Rationale for Project Restructuring and Proposed Changes 3. Project Cost Review and Adjustment: In 2018, during the project mid-term review process, project component and activity costs were reviewed and revised from the original values in the PAD and feasibility study. Each component had some adjustments, with cost increases for some activities/contracts, and cost savings for others. The net change, with respect to Bank financing, was an overall cost savings, which presents an opportunity to add new activities to the project in line with the project description in the project legal agreements and re-allocate funds among project The World Bank Jiangxi Wuxikou Integrated Flood Management Project (P128867) disbursement categories. Component 1 had an overall cost reduction of US$17.97 million, because of adjustments and cost savings in procurement and contracts (i.e. original FSR estimates vs. lower actual implementation costs). Component 2 had an overall cost reduction of US$1.86 million, as a result of cost savings in procurement of contracts. Component 3 is entirely financed by counterpart funding and had no cost changes related to the IBRD loan. Component 4 had a net cost reduction of US$0.33 million, because of the lower costs for capacity building and study tours as discussed above. The net impact on Bank-financed project activities is an overall savings in costs of US$20.16 million. To fully utilize the Bank loan, these savings are proposed to be reallocated for new, additional project activities, and also by adjusting the IBRD disbursement ratios to reimburse existing expenditures (including retroactively, see below). 4. Adding Project Activities from Cost Savings: During project implementation, a number of new project activities in line with the project description of the Loan Agreement were identified and added using the overall project cost savings of the Bank loan discussed above. The items include: i) reservoir site ecological restoration and relocation/protection of ‘ancient’ trees (US$4.28 million, Component 1); ii) patrol boats and video cameras for reservoir water-quality and city area flood monitoring, as well as flood contingency plan (US$1.01 million for both Component 2 and 4); and iii) reservoir resettlement access road ($US7.26 million, Compon ent 3, which is the only item added under Component 3 to be financed by the Bank financing). These added items are fully aligned with the project’s PDO. The total added cost for these items is US$12.55 million. 5. Reimbursement Ratio and Full Utilization of World Bank Loan: Given the significant cost savings noted above, the World Bank loan would not be fully utilized if the original Bank reimbursement ratios are followed (components 1 to 4 were: 100%, 77%, 0%, and 100%, respectively), resulting in a total reimbursable project cost of US$92.39 million (including the front-end fee) and leaving US$7.61 million of the Bank loan un-utilized. The project restructuring proposes to adjust the Bank financing ratios so as to fully utilize the loan. Given that most of the major project expenditures have already been made, the revised financing ratios are proposed to be applied retroactivity to project expenditures made on or after the date of June 1, 2016. 6. Request from the Government for the Proposed Changes. The Ministry of Finance sent a letter dated December 29, 2018 to the Bank (the letter is attached in Annex 1) after the internal review and clearance, requesting to amend the Loan Agreement as follows: (1) To adjust the disbursement rate from the original 77% to 100%, and make retroactive disbursement on the expenditures with original disbursement rate (77%) starting from June 1, 2016; (2) To relocate loan proceeds among project components and disbursement categories; (3) To use the saved loan proceeds to finance new eligible activities. After receiving the request, the team carried out project restructuring work based on the result of mid-term review, which identified two unresolved and difficult issues (institutional issues for real application of the flood risk management system and counterpart funding issue for resettlement), and successfully resolved them by September 2018 under the strong support from MOF, Jiangxi Provincial Government and the Bank senior management. Now, the project is going on a right track to achieve its development objectives by the closing date of June 30, 2019 as originally planned. 7. Based on the cost adjustments, cost savings, and added items discussed above, it is proposed that under this restructuring, the loan proceeds be re-allocated and disbursement rate be increased as shown in the table below. Annexes 1 and 2 show the original and revised costs by project component and by disbursement category with the MTR, and Annex 3 on the updated results framework. The total Bank Loan remains unchanged at US$100 million. It is The World Bank Jiangxi Wuxikou Integrated Flood Management Project (P128867) assessed that this reallocation will not affect the overall funding and completion of the on-going contracts. Moreover, counterpart funds for present contracts are sufficiently secured. 8. The project development objective remains relevant and achievable. The implementation of Bank’s safeguards policies has been satisfactory, and no major environment and social safeguards issues have arisen. Implementation of financial management and procurement procedures have also been rated as satisfactory. 9. Progress on Project Indicators: The amendment of the Project Agreement (PA) removes the results framework from the PA as usual practice, however, all indicators and their targets are not changed. The updated results framework shows that both the PDO indicators and the intermediate indicators are on track to meet their final targets by the current closing date of the project (See Annex 3 for the updated indicators data). II. DETAILED CHANGES REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Current Current Actuals + Proposed Disbursement % Ln/Cr/TF Expenditure Allocation Committed Allocation (Type Total) Category Current Proposed IBRD- Civil Works 91,240,000.00 69,536,346.01 92,290,000.00 77.00 100 82370-001 Currency: USD Goods 3,030,000.00 638,725.57 3,320,000.00 100.00 100.00 CS, Training, workshops 5,480,000.00 2,369,956.47 4,140,000.00 100.00 100.00 &study tour Total 99,750,000.00 72,545,028.05 99,750,000.00