Page 1 PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB2628 Project Name Western Provinces Rural Water Supply, Sanitation and Hygiene Promotion Project Region EAST ASIA AND PACIFIC Sector Water supply (63%); Sanitation (26%); Hygiene Promotion (6%); Sub-national government administration (4%) Project ID P095315 Borrower(s) PEOPLE'S REPUBLIC OF CHINA Implementing Agency Foreign Loan Support Project Management Office of Shaanxi Province, Tel: +86-29-87294627; WB/DFID Rural Water Supply and Sanitation Project Management Office of Sichuan Province, Tel: +86-28-86647004. Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared December 1, 2006 Date of Appraisal Authorization November 28, 2006 Date of Board Approval June 7, 2007 1. Country and Sector Background China has made significant progress in increasing water supply and sanitation coverage over the years and appears to be generally on track for achieving the Millennium Development Goal (MDG) targets. However, the broad national water supply and sanitation coverage statistics mask significant regional and rural/urban disparities, with the situation being most acute in the poorer provinces in western China. Vulnerable groups, including women, the disabled and ethnic minorities, are disproportionately affected by the lack of access. Improving equitable and sustainable access to safe water and adequate sanitation and hygiene promotion for the poor in rural parts of western China is therefore an important national development objective. By the end of 2005, there were about 312 million rural people reported to be without access to safe water supply and 790 million rural residents without improved sanitation, many of whom live in western provinces. Although the central government has given high priority to the development of western China, given the region's relative under-development, dispersed and remote poverty distribution and limited experience in adopting community participation approaches, it is a challenge to develop equitable and sustainable rural water supply and sanitation programs which can address the scale of the problem. Poor integration of water, sanitation and hygiene promotion activities and limited cooperation between the relevant sector agencies is a key barrier to achieving sustainable investments but also to maximizing their impact on health and productivity. Many parts of western China are also plagued by water source contamination as a result of agricultural and industrial pollution and/or high natural arsenic, fluoride or salinity levels. Water resources are scarce and are worsened by increased demand from industry and urban centers, combined with inefficient irrigation systems. This makes the identification and collection of Page 2 adequate water supply a difficult and time consuming task for rural households. The government has begun to address water quality problems and to support moves towards more efficient and sustainable water use. However, the lack of access to safe water supply and improved sanitation, together with poor hygiene practices, continues to limit the productivity of rural households and presents the risk of incidents of poor health which can force those just above the poverty line back below it. The Government's Eleventh Five Year Plan (FYP) for Rural Safe Drinking Water Supply and Sanitation (2006-2010) sets a target of providing safe drinking water to 160 million people. The plan emphasizes that poorer western regions, areas with serious water scarcity and quality problems, ethnic minority areas and rural schools will be a focus for funding and other assistance. It also intends to introduce a new approach to the whole life cycle of safe drinking water programs, including integration of sanitation and hygiene promotion activities together with water supply and innovative approaches for scheme selection, institutional arrangements and monitoring and evaluation (M&E) systems. In addition, the plan sets out favorable conditions for private sector participation in rural water supply schemes and for labor contributions from beneficiaries. Even with the successes to date, it should be recognized that there are a number of serious constraints and challenges facing the rural water supply, sanitation and hygiene promotion (RWSSH) sectors and thus the attainment of national targets. Firstly, while there are a range of national policies and targets for the sector, there is no comprehensive national policy framework to set uniform policies and practices as well as to coordinate the many agencies involved in the sector. Secondly, financing still remains a problem, especially in rural areas with limited fiscal transfers from the center to provinces for rural water supply, sanitation and hygiene promotion. Thirdly, even once the facilities are built, the long term sustainability of water supply plants and latrines is adversely impacted by in-appropriate designs, poor construction and insufficient maintenance. Despite significant user financing of both water supply and sanitation, the sustainability of facilities is often negatively affected by a lack of community participation in the planning, design and management of facilities. The Bank, in partnership with the UK Department for International Development (DFID) and the Unit ed Nation Children’s Fund (UNICEF), were asked by the central government to assist in the design of a project to demonstrate many of innovations which have been set out in the Eleventh FYP. All three international agencies have had extensive experience in the sector in China. Two western provinces with water quality and scarcity problems, one from the north (Shaanxi Province) and one from the south (Sichuan Province) of the country were selected, through a competitive process. The aim is to develop replicable models which would address the lack of access in the different socio-economic and geographical conditions in the north-west and south- west of the country. The project would support both provinces in developing an integrated approach to the design and delivery of RWSSH services, while incorporating innovations and past lessons learned. The project would support the implementation of the Eleventh FYP, by developing lessons on the three in one approach in order to scale this up in other provinces. The project would support poverty alleviation by targeting poor counties and villages which lack safe drinking water and sanitation facilities and ensure equity by setting the necessary conditions for equitable access. Page 3 2. Objectives The project development objective (PDO) is to increase access of poor participating communities to sustainable and equitable water supply, sanitation and hygiene promotion services by adopting an integrated and participatory approach, which can be replicated in other provinces. Key outcome indicators include: (a) Increase in number of people and schools with access to safe water supply; (b) Increase in number of people and schools with access to improved sanitation services; (c) Increase in percentage of people in participating communities and schools who have adopted safe hygiene and sanitation behaviors; (d) Percentage of water supply services operating in an equitable and sustainable way; and (e) Evidence of the adoption and sustainability of the integrated approach and replication in domestic programs. Safe water supply, improved sanitation and effective hygiene promotion positively influence health, education, social and environment outcomes and are therefore also recognized as being key to achieving broader poverty reduction goals. The Bank, DFID and UNICEF are committed to assisting China reach the Millenium Development Goals (MDGs) and the GOC has already incorporated the MDGs within their Eleventh FYP. MDG Seven, ‘to ensure environmental sustainability’, in which water and sanitation access are two of the targets, is identified as one that will be particularly difficult for China to achieve. Through this project, the Bank, DFID and UNICEF aim to support China’s efforts in reaching the MDGs, while helping to develop efficient, equitable and sustainable RWSSH services and to improve the impact of these investments. Furthermore, the lessons learned by the project will help the GOC in scaling-up the integrated approach in line with the Eleventh FYP. The Bank’s Country Partnership Strategy (CPS) 1 and the DFID Country Assistance Strategy (CAP) run in parallel to the GOCs own Eleventh FYP for 2006 to 2010. The proposed project fits squarely within the Bank’s CPS and directly supports the theme of ‘Reducing Poverty, Inequality and Social Exclusion’ . DFID’s CAP, which is focused on supporting China in meeting the MDGs, includes a wider program for supporting the RWSSH sector. UNICEF’s work in China is embodied by five main priorities, the first of which is early childhood care - a key aspect of which is safe water, a healthy environment and good hygiene practices. In addition, the Government of China’s vision of development referred to as an all-round or ‘Xiao Kang’ and harmonious society by 2020 includes achieving a balance between regions, urban and rural areas, economic and social development. 3. Rationale for Bank Involvement The Government’s existing policies and programs for rural water supply, sanitation and hygiene promotion (RWSSH) are clearly resulting in an increase in access to safe water supply and sanitation. However, these programs are often implemented separately by different line departments or agencies and experience of implementing an integrated water supply, sanitation and hygiene promotion ( three-in-one approach) has been minimal. International evidence illustrates that water supply and sanitation programs, implemented together with hygiene 1 Country Partnership Strategy of the World Bank Group for the People’s Republic of China, May, 2006. Page 4 promotion activities, have a greater impact on health and productivity than single sector interventions. Consequently, the effectiveness of the existing single sector interventions in China is limited and the potential positive impacts on health and productivity are not fully realized. In the proposed Western Province Rural Water Supply, Sanitation and Hygiene Promotion (WPRWSSH) project, the Bank will work together with DFID and UNICEF to assist in the transfer of global and national experiences in implementing an integrated and sustainable approach, supporting the recent direction of Government of China (GOC) policy in the sector. The Bank has the experience of supporting four prior RWSSH projects, spanning two decades, and this new project provides an opportunity to consolidate lessons learned while bringing in additional support from two key international partners. DFID has supported a number of integrated community-managed programs and has particular strengths in developing participatory approaches and community management models. UNICEF has been a strong advocate for raising the profile of sanitation, hygiene promotion and water quality monitoring and brings extensive experience of sanitation and hygiene promotion approaches. The three international agencies working together can provide substantial added value to the design and delivery of new approaches for RWSSH in China. 4. Description The total investment of the project is US$75 million, with an IBRD loan (US$25 million), DFID grant (US$25 million) and counterpart funds from the two provinces of Shaanxi and Sichuan, including beneficiaries (US$25 million). The project will cover ten counties in Sichuan province and fifteen counties in Shaanxi province. The counties were selected based the following criteria: poverty levels; current access to safe drinking water and sanitation; levels of water- related disease; water resource scarcity; water quality problems; demand from counties; and geographical and socio-economic representativeness. Counties were carefully selected in such a way to ensure that they demonstrated the diverse problems faced by each province. Within counties, emphasis has been placed on selecting project areas in the more remote areas. The project will be implemented over five years in three batches: batch one (20 percent of schemes) in year one, batch two (40 percent of schemes) in years two and three, and batch three (40% of schemes) in years three and four. The project has been appraised based on the first batch of schemes. An implementation framework has been developed to guide the remaining eighty percent and is set out in Annex 6, Appendix 1. A project operation manual (POM) has been developed in order to guide the implementation of the project. The four main components of the project are described below. Component 1: Safe Drinking Water Supply US$ 44.45 million (63%) The water supply improvements component will comprise multi-village, single village, cluster of households and individual household schemes and will aim to cover one hundred per cent of the participating community. Multi-village schemes will involve construction of piped water supply schemes (both gravity and pumping) serving rural towns, centralized villages and clusters of villages or hamlets. Single village schemes will involve construction of small individual piped waters supply schemes (both gravity and pumping) or point water sources (protected springs, Page 5 bore wells, improved dug wells with pumps or rainwater collectors) serving a single village or hamlet. Households schemes will involve point water sources (protected springs, bore wells, improved dug wells with pumps or rainwater collectors) serving individual or small groups of households, typically in more remote or scattered locations. All schools within the project areas of Shaanxi province and selected schools within the project areas in Sichuan province will be provided with a safe water supply. The component will include a step by step approach to water source development, including selection, monitoring, protection and remediation. The Bank/DFID will finance 50 percent of the investment cost of a piped water supply scheme, with approximately 25 percent coming from the provinces/counties and approximately 25 percent from the beneficiaries, mainly through labor and household connection fees. The users will finance about 37.5 percent of the investment cost of water supply, 25 percent directly through household connection fees and 12.5 percent later through debt-servicing, which will be built into the water tariff rate). The debt- servicing of the Bank’s loan will be the responsibility of the participating counties. Operation and maintenance of the complete water supply schemes will be fully financed by the users, through the levying of water charges. Users will similarly expect to finance 25 percent of the investment cost of non-piped water supply schemes. Component 2: Environmental Sanitation - US$18.28 million (26%) The sanitation component will comprise household, public and school latrines, solid waste drop off points and final disposal sites in all project areas. Domestic wastewater drainage and other environmental improvements will be developed on a demonstration basis in both provinces. The sanitation component will include the five standard sanitary latrines promoted by the government. Guidance will be provided to households for making an informed choice about the sanitation options and technical support for households will be provided by relevant local agencies. Emphasis will be on maximizing coverage of household sanitation to optimize health benefits to the community. The Bank loan / DFID grant will subsidize up to 600 RMB (75 US$) which is sufficient to provide for a basic government standard sanitary latrine. Shaanxi province is aiming for 100 hundred per cent coverage of latrines in project areas while Sichuan province is aiming for 55 per cent. In the latter case, a process for targeting subsidies to the poorer households in the communities and steps for supporting demand for latrines from other households will be established. Physical investments will be complemented with activities for generating demand for sanitation. All schools situated in the project schemes in Shaanxi province and select schools in Sichuan province that do not have sanitary latrines or where latrines are deemed unsanitary, will be provided with low-cost latrine facilities, including handwashing facilities and guidance for managing these. Component 3: Hygiene Promotion – US$ 4.38 million (6.3%) The hygiene promotion component will comprise formative research and technical assistance, mass media programs, print and electronic media, households, community and school campaigns. A comprehensive hygiene promotion program has been developed based on a behavior-communications survey carried out in both provinces during preparation. The program relies on existing hygiene promotion activities combined with innovative methods, including Page 6 mass media, social marketing approaches and rotating hygiene promotion teams. The component aims to help the participating communities to develop good hygiene practices in order to prevent disease and to ensure that the maximum health benefits from improved sanitation and safe drinking water supply can be achieved and sustained. The activities will be appropriately sequenced with the water supply and sanitation investments and are set out in the POM. Component 4: Institutional Strengthening and Development - US$ 3.23 million (4.7%) The institutional strengthening and development component will provide support to increase project office capacity to provide services to participating communities. It will include a comprehensive training program to ensure there is capacity for project implementation amongst provincial, county and township staff (PMO and implementing line agency staff), contractors, masons, rural water scheme operators, accounting staff, WASH committees, community leaders, teachers, doctors, women’s federation representatives and households. It will also include the costs of activities required to mobilize communities to participate in all stages of the project. The development of a result-based Monitoring and Evaluation (M&E) System, Community- based M&E System (CBMES), baseline and follow up survey as well as dissemination activities for scaling up the approaches on provincial and national level will also be supported. A Management Information System (MIS) will be developed to facilitate the management and reporting on inputs, outputs, procurement, and financial flows. 5. Financing Source: ($m.) BORROWER 25 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 25 UK: BRITISH DEPARTMENT FOR INTERNATIONAL DEVELOPMENT (DFID) 25 Total 75 6. Implementation Project organisational structures and the roles of key organisations are based on proposals made by provincial and county PMOs. These have been developed based on an understanding of what would be required to ensure a comprehensive, integrated and participatory approach to the provision of RWSSH services. The Development and Reform Commissions (DRCs) will take a leading role at province and county level, in order to achieve the required level of integration between the many departments and agencies involved. Project Leading Groups (PLGs) have been established at the provincial, municipal and county levels by the corresponding governments. The Provincial PLG is the highest project authority while the County PLG is the highest project authority at the county level. Implementation of the project will be the responsibility of the provincial DRC who would provide both leadership and coordination of all levels. Page 7 The PMOs at province and county Levels have a key role to play in project management, co- ordination, planning, implementation, monitoring and reporting and are led by the DRC. The proposed members of the PMOs, at both levels, include senior staff from the key line agencies involved including the Water Resources Bureau, Health Bureau, including Centres for Communicable Disease Control (CDC), Patriotic Health Campaign Committee Offices (PHCCOs) and Health Education Institutes (HEIs), and other relevant departments. Township PMOs are also proposed where it is considered that these will add value. The day-to-day implementation of the project has been decentralized to the county level and will be managed by the County DRCs. Within each county the institutional arrangements have been established based on the key agencies involved in the sector and include: water resources, health, rural energy, women’s federation etc. Working groups for aspects such as rural water supply and sanitation have been proposed by County PMOs in both provinces. These groups would report to the county PMOs and would include key county and township staff. The work groups would be responsible for the detailed planning, organizing and undertaking of fieldwork and capacity building in the participating villages. Rotating Hygiene Promotion teams are envisaged in both provinces. They will work across a number of counties, as a means of providing specialist hygiene promotion to compliment mass media campaigns and government programs. These teams will liaise with the County PMOs and the working groups to plan the sequencing of hygiene promotion activities and the timing of key messages. Water, Sanitation and Hygiene (WASH) Committees have been proposed in both provinces to enable better participation in the water, sanitation and hygiene components by each household in the project villages. The key principles and criteria for establishing the WASH Committees, their functions and the operating procedures are set out in the POM. Water supply scheme management will be undertaken under the control of the county PMO. Management arrangements will vary depending on the size and complexity of the technology adopted. For example, medium to large piped water supply schemes will be professionally managed by rural water utilities or local operators, while small piped water supply schemes and non-piped water supply schemes will be community-managed. Rural water utilities will have adequate arrangements to represent consumer voice and the details of this are set out in the POM. Flow of IBRD funds, combined with DFID grant funds, would follow the traditional route. IBRD and Grant Funds would transfer from the World Bank to a designated account (DA) in each province. The DAs would be under the management of the Finance Departments. Provinces would bear the foreign exchange risk and pass on the funds to the municipal and then county finance bureaus. The provincial PMOs are responsible for submitting the quarterly financial monitoring reports. 7. Sustainability The central and provincial governments have strong ownership of the project and have been actively leading project preparation. The provinces have incorporated the project into their provincial five-year planning process and recognize that the interventions will support them in meeting targets set under the FYP period, as well as the longer term vision for a harmonious and Page 8 well-off society and the governments aim of water for all by 2020. Moreover, the provincial governments regard the project as a pilot for the three-in-one approach, from which key lessons will be learned in order to scale-up across the province. Local government funding and significant beneficiary financing, through connection fees, combined with targeted subsidies for poor and vulnerable groups provide the basis for inclusive access to safe water supply. The financial sustainability of the water supply schemes is guaranteed by an average water tariff which covers at least operation and maintenance (O&M) costs. Affordability of water tariffs by poor and vulnerable groups is addressed through cross- subsidy mechanisms on scheme level, details of which can be found in the POM. In addition, appropriate demand assessment is encouraged and inflexible technical standards for “right- sizing” water supply schemes will need to be adhered to. An Implementation Framework, sets out some of the key principles, which the project should follow, including selection criteria, design standards as well as the process for reviewing the subsequent batches of schemes prior to approval. Participation of a range of key stakeholders will be crucial to the sustainability of the water supply schemes and environment improvements, particularly those that are community managed. Flat rate subsidies for sanitation (and an appropriate targeting mechanism for Sichuan province) ensure inclusive access to sanitation. The project will take steps to provide households with information about technology options and costs which will help the households in making an informed choice and encourage ownership. Steps for ensuring community involvement in all aspects of the project are set out in the POM. Training and capacity building will be provided for implementation, management, O&M of schemes, environmental sanitation and for general project management tasks. Training at the community level will be provided to ensure that households are better able to maintain the systems, identify and address minor problems before they become major, exercise consumer voice in professionally managed schemes, and understand what expectations they should have of the technology and services in relation to their costs. Replicability . There is great interest from both the central government and the provincial governments on the models that will be developed under the project and the innovations that are being tested. The new project represents a significant departure from old and existing programs but is well in-line with new thinking as set out in the Eleventh FYP. Therefore, the project has great potential to serve as a model both within the project provinces and in wider provinces for scaling up access to RWSSH. The project progress will be regularly reviewed and evaluated and activities have been identified for dissemination and the sharing of project lessons. In parallel to the project, the DFID/UNICEF-funded KASH project will provide technical assistance to central government in implementing the Eleventh FYP and will be closely linked to this project. This would aim to independently review the new approaches developed under the project and develop recommendations for scaling-up. 8. Lessons Learned from Past Operations in the Country/Sector The project concept and design draws on China’s own experience in RWSSH. In addition the project builds on lessons learned over 20 years of Bank support to RWSSH projects. Page 9 Incorporation of international best practices and experience from DFID and UNICEF programs internationally and in China has further enhanced project design. In general, it is clear that the coordination between the line departments delivering RWSSH needs to be improved to deliver an effective three-in-one approach as foreseen in recent GOC policies. Decentralization of decision-making in terms of technical appraisals, procurement and financial management is another key lesson which should also increase the efficiency of investments in the sector. Other lessons learned that have been incorporated into the project design are given below. Rural Water Supply . The design of water supply plants need to be developed based on a combination of cost-effective technical specifications, appropriate design standards and realistic forecasting of future demand for water. These all need to be addressed in the engineering designs at the feasibility stage itself. In designing, planning and managing water supply schemes, post-construction sustainability could also be enhanced by greater user consultation, community participation and capacity building of rural water supply scheme operators. In relation to the financing of water schemes, while significant user financing has worked effectively, explicit subsidies for the very poor need to be considered to ensure access. Once the schemes are built, clarification of asset ownership is important to ensure effective management, consumer voice, oversight of the schemes and, ultimately, sustainability. For the management of schemes, flexibility is required in the options considered to suit the given context, including options for management by local operators or community management where appropriate. Sanitation and Hygiene Promotion . In order to substantially increase the coverage of sanitary latrines, households need to be offered a choice of affordable sanitation options as well as be provided with adequate information in order to make an informed decision. In order to reap health benefits, whole villages, rather than a few households, need to be mobilized to improve their sanitary conditions and communities need to be provided with the knowledge, assistance and some financial support, where required, to improve sanitation. Positive hygiene behavior change is a long term process that requires targeted, emotive and sustained hygiene promotion messages which are delivered through a range of effective communication channels. Traditional government approaches need to be supplemented by mass media and more face-to-face communication. These approaches need to be based on formative social market research which helps develop a good understanding of what the key hygiene behaviors to target are, what communication channels are most effective and what the motivators to change behavior are. Institutional Strengthening and Development . Better coordination amongst the concerned line agencies helps to improve the efficiency of RWSSH projects. Moreover, it also makes more skills available for implementation than there would otherwise be in a single sector project. However, efforts, so far, to encourage coordination of agencies, where a single line agency has been leading, have had limited success. While community participation is seen as key to developing demand-driven and sustainable projects this has been hard to achieve without sufficient budget and capacity building to support this. The development of a comprehensive training program covering all stakeholders is essential if capacity is to be built and maintained. Project management, monitoring and evaluation and reporting can be greatly assisted by the use of management information systems together with training for using these, and can facilitate integrated working if well designed. Page 10 9. Safeguard Policies (including public consultation) The proposed project has been reviewed and designated for Category B consistent with the provisions of OP/BP/GP 4 .01. The project will have a positive impact on people’s health, environment and quality of life. No major negative social or environmental issues have been identified or are suspected in the project. Impacts and mitigation measures will be site specific. A description of the planning and review process for the 20% first batch of schemes, and listings of site specific potential negative impacts and related mitigation measures typical of water supply and sanitation interventions are given in Annex 10. Details of the review and approval process for safeguards policies for the subsequent batches of schemes (80 percent) are set out in the implementation framework appended to Annex 6. The process adopted for the remaining batches of schemes will reflect that which was carried out for the first batch of schemes. The safeguard screening category of the project is S2 as one or more safeguard policies are triggered, but effects are limited in impact and are technically and institutionally manageable. The draft safeguards documents will be made accessible to the local public as part of the preparation process and will be published through InfoShop prior to Appraisal. Safeguard Policies Triggered by the Project Yes No Environmental Assessment ( OP / BP / GP 4.01) [x] [ ] Natural Habitats ( OP / BP 4.04) [ ] [x] Pest Management ( OP 4.09 ) [ ] [x] Cultural Property ( OPN 11.03 , being revised as OP 4.11) [ ] [x] Involuntary Resettlement ( OP / BP 4.12) [x] [ ] Indigenous Peoples ( OD 4.20 , being revised as OP 4.10) [ ] [x] Forests ( OP / BP 4.36) [ ] [x] Safety of Dams ( OP / BP 4.37) [x] [ ] Projects in Disputed Areas ( OP / BP / GP 7.60) * [ ] [x] Projects on International Waterways ( OP / BP / GP 7.50) [ ] [x] 10. List of Factual Technical Documents a. Project Concept Note b. ISDS and Safeguards Review Meeting Minutes c. Draft PAD and PPR/QER Stage d. Environmental Impact Assessment, including EMP and monitoring e. Social Assessment Report f. Community-based approaches Report, Project Technical Assistance. g. Survey of Dam Safety h. Resettlement and Land Acquisition Framework i. Draft Project Operation Manual j. Detailed Cost Tables k. Economic Analysis and Financial Assessment Report l. Hygiene Promotion Report * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas Page 11 m. Water Resources Report n. Institutional Working Paper o. Training Needs Assessment Working Paper p. Monitoring and Evaluation Working Paper q. Note on Sanitation Subsidy r. Mission Aide Memoires s. IBTF for DFID Grant 11. Contact point Contact: Thomas L. Zearley Title: Sector Coordinator Tel: 5788+7600 Fax: 86-10-58617800 Email: Tzearley@worldbank.org Location: Beijing, China (IBRD) 12. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: pic@worldbank.org Web: http://www.worldbank.org/infoshop