ICRR 13193 Report Number : ICRR13193 IEG ICR Review Independent Evaluation Group 1. Project Data: Date Posted : 05/21/2010 PROJ ID : P064730 Appraisal Actual Project Name : Cn-yangtze Dike US$M ): Project Costs (US$M): 519.64 519.06 Strengthening Country : China Loan/ Loan /Credit (US$M ): US$M): 210.00 204.50 Sector Board : ARD US$M ): Cofinancing (US$M): Sector (s): Flood protection (97%) Central government administration (2%) Sub-national government administration (1%) Theme (s): Water resource management (40% - P) Land administration and management (40% - P) Decentralization (20% - S) L/C Number : L4570 Board Approval Date : 06/27/2000 Partners involved : Closing Date : 12/31/2004 12/31/2008 Evaluator : Panel Reviewer : Group Manager : Group : Emily O'Sullivan Robert Mark Lacey IEGSE ICR Reviews IEGSE 2. Project Objectives and Components: a. Objectives: The project objective according to the LA was : " to protect property and life along the middle reaches of the Borrower's Yangtze River against floods by strengthening its dikes and associated structures and protecting its riverbanks against erosion, and by improving the operation and maintenance of such dikes ." The project development objective given in the PAD is to : "enhance the protection of the river bank against erosion and to improve critical sections of existing main dikes along the banks of the mid -Yangtze River in Hunan and Hubei Provinces, thus protecting the properties and lives behind the dikes against floods . The project would also support institutional reforms aimed at enhancing the existing dike operation and maintenance organizations, both organizationally and technically ." This ICRR uses the PAD description of objectives as it is more specific and detailed . b.Were the project objectives/key associated outcome targets revised during implementation? No c. Components (or Key Conditions in the case of DPLs, as appropriate): US$ 84. 84 .38 million; Actual : US$129 River Bank and Dike Foundation Protection (Appraisal : US$84 129 .33 million ). This US$ 129. included river bank protection works, over a length of 132.7 km (82.4 km in Hubei and 50.3 km in Hunan), to be undertaken by Changjiang Water Resources Commission (CWRC) US$ 187. Dike Strengthening – Hubei (Appraisal : US$187 US$ 193. 187 .44 million; Actual : US$193193 .52 million ). This included dike rehabilitation and seepage control of 558.8 km of Class I and RI dikes (442.8 km in Hubei and 116.0 km in Hunan) and cross-dike structures rehabilitation and replacement . US$ 42. Dike Strengthening – Hunan (Appraisal : US$42 US$ 43. 42 .94 million; Actual : US$43 43 .15 million ). This included computerized system to monitor the seepage through the dike and settlement /deformation of the dike and support to the CWRC for the development of a physical model of the middle Yangtze River reach covering the middle part of the lower reach. US$ 20. Dike Monitoring /River Modeling (Appraisal : US$20 US$ 25. 20 .42 million; Actual : US$25 25 .8 million ). This provided modern equipment – wheel loaders, bulldozers, excavators, dump trucks, light vehicles and boats – for dike maintenance to increase the organizational capacity to carry out regular maintenance . Equipment for Dike O&M (Appraisal : US$5 US$ 5.90 million ). This included office US$ 5.82 million; Actual : US$5 equipment, such as computers, fax machines and printers . US$ 85. Resettlement (Appraisal : US$85 US$ 95. 85 .76 million; Actual : US$9595 .32 million ). This covered involuntary resettlement of 47,992 (10,958 families) people in accordance with OD 4.30. Environmental Management (Appraisal : US$1 US$ 1.76 million ). This included US$ 1.72 million; Actual : US$1 implementation of an Environmental Management Plan (EMP) detailing protection measures. mitigation, offsetting and enhancement measures; establishment of an international Panel of Environmental Experts to provide guidance and monitor implementation of the EMP; and setting up of Environmental Management Offices (EMO) in each province to carry out environmental monitoring and training programs . Engineering and Project Management (Appraisal : US$18 18 .00 million; Actual : US$19 US$ 18. 19 .10 million ). This covered US$ 19. preparation of final designs and bidding documentation of the Project works and construction supervision . In addition, the component also provided for a design and construction standards review panel and consultants to assist the provinces with supervising the construction of works, with particular focus on quality control . Institutional Development & Flood Protection and Disaster Mitigation (Appraisal : US$5 US$ 5.16 million; Actual : US$ 5.18 million ). This covered Technical assistance, training programs and study tours in China and other US$5 countries for the Ministry of Water Resources (MWR)/Changjiang Water Resources Commission (CWRC), Hubei and Hunan Provinces, and Flood prevention and disaster mitigation technical assistance located in MWR's Technical Research Center. Component Revisions : 1. Dike strengthening activities were expanded to cover a length of 123.5 km dikes on two tributary rivers, the Jushui and Fuhuan to the mid-Yangtze River, in Wuhan Municipality, Hubei Province . The investment was supported by an Environmental Management Plan (EMP) and a Resettlement Action Plan (RAP). 2. Additional expansion of dike strengthening coverage to four tributary rivers to the mid -Yangtze River, the Qishui, XiShui, Bahe and Jushui in vicinity of Huanggang City in Hubei Province . The investment was supported by an Environmental Management Plan (EMP) and a Resettlement Action Plan (RAP). d. Comments on Project Cost, Financing, Borrower Contribution, and Dates: Borrower Contribution: Appraisal, US$309.64 million; Actual, US$314.56 million Project Cost: Hubei province’s share of project costs and Bank ’s loan proceeds, accounting for over 80 percent of the total, was highest among project entities . By mid-2005 Hunan Province had completed all the project activities with full Bank disbursement and Hubei had completed all the planned physical works, but significant funds under the loan, totaling about US$ 51.3 million had either been saved or remained unallocated . This situation arose for two reasons . First, at appraisal project cost estimates were based on preliminary, not detailed designs. Once detailed designs were completed, savings of about US$ 34 million from the Bank loan were realized. Second, savings of about US$ 17.3 million were achieved because successful bids were approved for Civil Works through National Competitive Bidding (NCB) and the contracts were below the detailed estimates . To utilize these savings, component activities were revised to strengthen more dikes on key tributary rivers . Dates: The project's closing date of December 31 2004, was extended on four occasions, each time for 12 months. Implementation delays were caused initially by the SARS outbreak in 2003 which severely affected construction work due to restrictions imposed on the movement of people and goods . Despite this, the major dike strengthening work foreseen in the PAD had, as noted above, been completed by the end of 2005, one year behind schedule. However, the additional work to strengthen more dikes on tributary rivers did not start until 2006 and there were two further extensions to accommodate this . A final 12 month extension was granted due to the severe winter storms in the project area in 2008. 3. Relevance of Objectives & Design: Relevance of Objectives : Substantial . The project objectives are still consistent with the water sector development priorities as identified by the current government policy and Country Partnership Strategy (CPS) for China. The Bank project was part of a multi -billion dollar government dike strengthening program largely funded by the central government. The Bank’s current CPS for China (CPS 35435-CN, May 23 2006) and the Country Water Resources Assistance Strategy (CWRAS-2002) identify flood protection as one of the critical areas for the Bank to support with both structural (infrastructure construction ) and nonstructural measures (institutional capacity building, river basin management, participatory approaches, and strengthening O&M ). These are also priorities identified in China’s 11th Five Year Plan (2005-2010). Relevance of Design : Modest . Project design was appropriate for the achievement of the PDOs . Design included a combination of infrastructure and institutional development activities necessary for sustained outcomes. The technical specifications were designed to be undertaken by China ’s expert hydrological research and design institutes with extensive experience with past works . Distinct components for environment and resettlement helped to ensure adequate attention and financing of these important aspects and compliance with Bank Safeguard policies. Setting up Dike Management Offices (DMOs) at various levels as the implementation agencies with their division of labor and responsibilities localized ownership, responsibility and accountability . One significant drawback, however, was the considerable overestimation (amounting to about 25% of the loan amount) of the costs of the original dike strengthening components . Had these costs been more accurately estimated, some at least of the savings could have been foreseen and their reallocation planned at the appraisal stage, thereby reducing implementation delays . 4. Achievement of Objectives (Efficacy): To enhance the protection of the river bank against erosion and to improve critical sections of existing main dikes along the banks of the mid -Yangtze River in Hunan and Hubei Provinces, thus protecting the properties and lives behind the dikes against floods . Substantial . The objective was achieved and target indicators were nearly all met or exceeded . River bank protection works extended 187 km (147 percent of appraisal) and seepage control extended over 302 km (90 percent of appraisal). Though seepage control coverage did not reach the appraisal target, it was adequate to control leakages. Dike strengthening activities largely exceeded appraisal targets . In total, dike strengthening covered 495 km (103 percent), slope protection 740 km (157 percent) and action taken on 211 cross-dike structures (156 percent). Sections of the strengthened dikes were officially inspected by a panel of experts commissioned by the Ministry of Water Resources and determined to be structurally and technically adequate to command a 1: 20 year flood. The success of the objective was strengthened through the creation of a design and construction standards review panel, as well as consultants to assist the provinces with supervising the construction of works, with particular focus on quality control . As a result of the component revisions to utilize project savings, the achievement of the primary PDO was enhanced through the following outcomes : Hubei province undertook further works along major tributary rivers close to Wuhan and Huanggang . This involved embankment strengthening and slope protection over 175 km, seepage control for 107 km and rehabilitation or replacement of 41 cross-dike structures. The project supports institutional reforms aimed at enhancing the existing dike operation and maintenance organizations, both organizationally and technically . Substantial . The capabilities of the institutions responsible for flood control along the Yangtze River have been improved, particularly with respect to: flood control standards, regulations, policies and emergency response systems; research and development in the technology and methodology for riverbank protection, foundation seepage control and flood risk analysis; and, organization and funding for dike O&M . Specifically, Hubei Province has set up a computerized Dike Monitoring and River Modeling system to monitor seepage and settlement /deformation of the dikes.This modeling has also allowed advanced warning for possible weaknesses in the dikes during high water levels so that measures can be taken to prevent dike breaches . The physical model of Yangtze River helps to predict sediment and water flows, as well as the movement of the river channel in real time . Efficiency of maintenance operations was improved through the provision of equipment to allow for mechanization of maintenance. Operations were also improved with computers, fax machines and other needed office equipment . The project addressed institutional constraints in such critical areas as : (i) dike maintenance; (ii) review of standards for flood control and design of dikes; (iii) resolving complex design and construction issues; (iv) adoption of modern construction technologies; and (v) ensuring financial and physical sustainability of the infrastructure facilities. A Flood Disaster Prevention Center was established in the Ministry of Water Resources and technical assistance was provided for : (i) review and recommendation of changes of flood control standards, regulations and emergency response and disaster relief procedures; (ii) training and design in geo-technical investigation of dikes for Provincial Design Institutes; (iii) training of flood-fighting staff; and (iv) the setting up of a technical help desk for solving specific problems in flood control in the provinces and river basin . 5. Efficiency (not applicable to DPLs): Economic efficiency was calculated following the same methodology as in the PAD . A cost-benefit analysis assumed the benefits to be the reduction of expected future losses resulting from project investments . This expected reduction was based on surveys of losses from past floods and estimates areas covered by flood events of varying return periods. The flood frequency and loss data were used to calculate costs due to flooding, in the “Without Project� and “With Project� situations. The difference between the two scenarios was used to derive the expected economic benefit (saved costs). A further stream of benefits included in the analysis is the potential reduction in flood fighting costs resulting from repair and strengthening of dikes and improved monitoring and modeling systems . The key assumptions for the analysis were : (1) project life is estimated to be 50 years; (2) in conformity with disaster loss analysis in China it has been assumed that the unit value of flood losses increase by 3 percent annually, as per national code (SL206-98); (3) phase-in of project benefits only starts from after the completion of strengthened dikes . The ex-post EER is estimated at 44 percent (Hubei 49 percent, Hunan 21 percent) which indicates the project is economically viable and robust . Valuing losses at constant annual values, rather than assuming a 3 percent per year increase in value reduced the overall ERR to 41 percent (Hubei 44 percent, Hunan 17 percent), still very good. This is just slightly less than the ex -ante EIRR calculated for the PAD of 49 percent. Efficiency is rated as substantial . ERR )/Financial Rate of Return (FRR) a. If available, enter the Economic Rate of Return (ERR) FRR ) at appraisal and the re- re -estimated value at evaluation : Rate Available? Point Value Coverage/Scope* Appraisal Yes 49% 100% ICR estimate Yes 44% 100% * Refers to percent of total project cost for which ERR/FRR was calculated. 6. Outcome: Given substantial relevance of objectives, efficacy and efficiency, overall project outcome is rated as satisfactory despite modest design relevance . a. Outcome Rating : Satisfactory 7. Rationale for Risk to Development Outcome Rating: Technica l: The design, construction and quality control strictly followed the Decree for Quality Control of Engineering Construction promulgated by the State Council . The panel of experts commissioned by the MWR to inspect the construction of the dikes determined the finished product to be of sound quality . They are also required to pass another inspection one following project completion, further reducing the likelihood of project outcomes being compromised. Environment : The completion of the Three Gorges Dam, while primarily anticipated to further reduce flood risk, could alter the river regime through sediment movement . bearing this n mind the project has planned careful monitoring and increased investments to reduce risks . Government : The government is committed to maintaining project outcomes through continued provision of finances and institutional support to the Dike Management Offices . a. Risk to Development Outcome Rating : Negligible to Low 8. Assessment of Bank Performance: Quality at Entry : Bank staff designed a project clearly aligned with the Country Partnership Strategy . Lessons that were drawn from previous experience with similar projects implemented in China . Expertise in O&M and institutional development provided by the Bank was well utilized . The project design also adequately addressed the safeguard policies, M&E requirement and included an excellent risk analysis and appropriate mitigation measures. As noted in Section 3 above, however, the failure to recognize the potential for cost-savings in civil works, and hence plan earlier for their reallocation, was a contributory factor to implementation delays. Quality of Supervision : The Bank completed semi-annual missions comprising multi-disciplinary professionals and project management staff with core members involved throughout implementation . The Aide Memoire and Management letters were completed and provided actions to be taken by the implementing agencies. While the project had completed all physical targets by the end of 2005, the missions recognized the need for further work in order to achieve the PDOs . It was decided that tributary dikes were also in need of strengthening in order for the flood control system to be most successful . Two sub-components were added to the project to be completed during the extension period, funded with project savings. This decision greatly improved project outcomes . The supervision missions were also able to handle problems such as resettlement compensation and environmental concerns (e.g. snail sinking tanks to reduce the incidence of schistosomiasis ) during implementation. at -Entry :Moderately Satisfactory a. Ensuring Quality -at- b. Quality of Supervision :Satisfactory c. Overall Bank Performance :Moderately Satisfactory 9. Assessment of Borrower Performance: Government Performance : Government commitment to the project was high . As previously noted, the project was part of a large government -funded program given top priority by both the central and local governments. A Central Project Steering Committee (CPSC) was set up, comprising of representatives from the Ministry of Finance, National Development & Restructuring Committee and the MWR . A Project Coordinating Office was also established by MWR to coordinate the implementation of the project by Hunan and Hubei Provinces. Each province established a Project Leading Group (PLG) and Provincial Project Management Office (PPMO). Human and financial resources for project implementation were adequate from both levels of government. Implementing Agencies : The implementing agencies at the central government level were the Changjiang Water Resources Commission (CWRC) and the Central Project Coordination Office (CPCO). The Provincial Project Management Offices (PPMOs) in Hunan and Hubei consisted of staff from the Provincial Departments of Finance and of Water Resources as well as from the Provincial Development and Restructuring Committee. The provincial offices oversaw infrastructure construction and fiduciary and safeguard compliance. They provided support to the local -level PMOs through provision of O&M manuals and training in procurement and financial management . The PPMOs responded efficiently and effectively to issues raised by the Bank supervision missions . At the local level, PMOs were staffed by well qualified administrators and professionals . The offices were responsible for the carrying out of project planning, preparation of annual work plans, semi -annual progress reports, financial management and securing local government funding. a. Government Performance :Satisfactory b. Implementing Agency Performance :Satisfactory c. Overall Borrower Performance :Satisfactory 10. M&E Design, Implementation, & Utilization: Design : The project design included specific measures to ensure adequate supervision including the design and construction standards panel, assistance from consultants, a long -term monitoring system for the dikes, and a river model. The PDO indicators outlined in Annex 1 of the PAD provided appropriate measures of objective achievement. There was, however, some inconsistency in the main body of the PAD regarding the indicators, but the project used those from the Project Design Summary only . For resettlement, the M&E covered: (i) construction of houses and infrastructure; (ii) payment of private and public compensation; (iii) establishment of development programs for resettlement, which incorporated the results of the independent monitoring program of the RAP and the findings of the international /local panel of resettlement/environmental experts. M&E on environmental management included the implementation of the environmental management plan, including the periodic monitoring results of the construction inspectors and the international /local panel of resettlement/environmental experts. Implementation : Infrastructure works were supervised and monitored by independent qualified institutions during project implementation. The project M&E was carried out and recorded in semi -annual reports. A dike monitoring system including a system of piezometers was completed under the project, as well as the river model. Utilization : Project M&E provided crucial material on the following : (i) physical and financial statements; (ii) recommendations and findings of the international /national panel of experts; and (iii) recommendations for improvement of implementation performance . This information was used to make well -informed decisions during implementation, including the decision to utilize cost savings to strengthen tributary dikes . a. M&E Quality Rating : Substantial 11. Other Issues (Safeguards, Fiduciary, Unintended Positive and Negative Impacts): Safeguards : The project was classified as Category A for environmental purposes . As well as OP 4.01, safeguards policies for Natural Habitats and Involuntary Resettlement were also triggered . Environment . Significant environmental issues were identified at appraisal, and corresponding mitigation measures developed in the Environmental Impact Assessment (EIA). According to the ICR, implementation was in compliance with the Bank's safeguards policies : environmental management offices were established, staffed where necessary by internationally recruited experts; qualified environmental construction inspectors were employed and the ICR describes the mitigating measures to combat potentially adverse environmental impacts, as well as those arising during construction as "highly satisfactory;" Environmental Management Plans were prepared and implemented in a satisfactory manner, and an adequate ongoing system for monitoring environmental impact has been put in place . Resettlemen t. The ICR reports that compliance with Bank safeguards policies was satisfactory . Resettlement Action Plans (RAP) were prepared and fully implemented; all affected people were consulted and participated in resettlement decisions and related actions; village livelihood development plans were also fully implemented, productive infrastructure recovered and agricultural productivity enhanced; the livelihood of the affected communities and persons has been restored, and adequate compensation paid to affected enterprises . Natural Habitat . Although the ICR acknowledges that this safeguard policy was triggered, there is no discussion of compliance with it. Fiduciary : Discussion in the ICR is sketchy . Financial Management (FM) requirements were reportedly followed during implementation, and training was provided to staff of project management offices in FM and procurement . However, there is no discussion of compliance with project auditing requirements . 12. 12. Ratings : ICR IEG Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Risk to Development Negligible to Low Negligible to Low Outcome : Bank Performance : Satisfactory Moderately Substantial potential cost savings were Satisfactory not identified during preparation . Therefore, there was no prior planning for their reallocation. This contributed to the considerable implementation delays. Borrower Performance : Satisfactory Satisfactory Quality of ICR : Satisfactory NOTES: NOTES - When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006. - The "Reason for Disagreement/Comments" column could cross-reference other sections of the ICR Review, as appropriate . 13. Lessons: The following are the main lessons from the project derived from the ICR lessons : Where applicable, Bank projects should be fully integrated into a country's larger program for a given sector . This way, unexpected changes (for example, cost savings) can be quickly and efficiently taken advantage of to improve overall sector performance. A programmatic approach allows improvements in areas that, even if originally outside the project design, nevertheless contribute to the achievement of the project objective (s). In situations where a project is likely to trigger potentially significant safeguard policies, incorporating them as full components can help ensure they are satisfactorily completed . In this instance, environmental and resettlement safeguards were included as distinct components, fully costed and financed, providing them a similar status as the other components. Robust cost estimates at appraisal can save time during implementation by recognizing early on where cost savings are possible, thus allowing the funds to be incorporated into project design prior to implementation . Significant cost savings were only recognized after appraisal and the components had to be revised . 14. Assessment Recommended? Yes No 15. Comments on Quality of ICR: The ICR is of satisfactory quality . It is candid and concise. Nonetheless, discussion of fiduciary issues should have been much fuller, and there is no analysis of compliance with the Bank's safeguards policy for Natural Habitat, although this was triggered by the project . a.Quality of ICR Rating : Satisfactory