Document of The World Bank Report No: ICR00003740 IMPLEMENTATION COMPLETION AND RESULTS REPORT (TF-12022) ON A GLOBAL ENVIRONMENT FINANCING TRUST FUND GRANT IN THE AMOUNT OF US$ 5 MILLION TO THE PEOPLE’S REPUBLIC OF CHINA FOR A CHINA HUAI RIVER BASIN MARINE POLLUTION REDUCTION PROJECT June 27, 2016 Environment and Natural Resources Global Practice China Country Office East Asia and Pacific Region 1 CURRENCY EQUIVALENTS (Exchange Rate Effective April 30, 2016) Currency Unit = Renminbi (RMB) Yuan RMB Yuan 1.0 = US$ 0.15 US$1 = RMB Yuan 6.47 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS AB Agricultural Bureau BOD Biological Oxygen Demand CAS Country Assistance Strategy CMB City Management Bureau COD Chemical Oxygen Demand CPS Country Partnership Strategy DPMO Dongying Project Management Office EA Environmental Assessment EIRR Economic Internal Rate of Return EMP Environmental Management Plan EPA Environmental Protection Agency FEPA Farmers Environmental Protection Association FM Financial Management FSW Free Surface Wetland FY Fiscal Year GEF Global Environment Facility GEO Global Environmental Objective ha hectare HRBFMDI Huai River Basin Flood Management & Drainage Improvement ICR Implementation Completion and Results Report IF Investment Fund ISR Implementation Status and Results Report MS Moderately Satisfactory mu 15 mu equals one hectare MU Moderately Unsatisfactory NPV Net Present Value O&M Operation & Maintenance PAD Project Appraisal Document PIU Project Implementation Unit PLG Project Leading Group PMO Project Management Office PMP Pest Management Plan 2 PPMO Provincial Project Management Office QAG Quality Assurance Group QEA Quality at Entry Assessment QSA Quality of Supervision RAP Resettlement Action Plan RMB Chinese currency SAAS Shandong Academy of Agricultural Science SIL Sector Investment Loan SPFB Shandong Provincial Finance Bureau SS Suspended Solids TA Technical Assistance TN Total Nitrogen TP Total Phosphorus U Unsatisfactory UNEP United Nations Environment Program USD US dollars WASP Water Quality Analysis Simulation Program WRB Water Resources Bureau Senior Global Practice Director: Paula Caballero Practice Manager: Iain Shuker Project Team Leader: Xiaokai Li ICR Team Leader: Anis Wan ICR Primary Author: Anis Wan 3 CHINA HUAI RIVER BASIN MARINE POLLUTION REDUCTION PROJECT CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Global Environment Objectives and Design ...............................................11 2. Key Factors Affecting Implementation and Outcomes ..........................................................16 3. Assessment of Outcomes .......................................................................................................24 4. Assessment of Risk to Development Outcome ......................................................................29 5. Assessment of Bank and Borrower Performance ..................................................................29 6. Lessons Learned.....................................................................................................................32 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ........................34 Annex 1. Project Costs and Financing .......................................................................................35 Annex 2. Outputs by Component...............................................................................................36 Annex 3. Lending and Implementation Support/Supervision Processes ..................................48 Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR ..................................50 Annex 5. List of Supporting Documents ...................................................................................60 MAP 4 A. Basic Information GEF Huai River Basin Country: China Project Name: Marine Pollution Reduction Project Project ID: P108592 L/C/TF Number(s): TF-12022 ICR Date: 06/13/2016 ICR Type: Core ICR THE PEOPLE'S Lending Instrument: SIL Borrower: REPUBLIC OF CHINA Original Total USD 5.00 M Disbursed Amount: USD 3.94 M Commitment: Revised Amount: USD 3.94 M Environmental Category: B Global Focal Area: I Implementing Agencies: Shandong Provincial Water Resources Department Cofinanciers and Other External Partners: NA B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 03/22/2010 Effectiveness: 07/05/2012 06/22/2012 Appraisal: 07/25/2011 Restructuring(s): Approval: 02/23/2012 Mid-term Review: 09/01/2014 09/26/2014 Closing: 12/31/2015 12/31/2015 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Unsatisfactory Risk to Global Environment Outcome High Bank Performance: Moderately Unsatisfactory Borrower Performance: Unsatisfactory C.2 Detailed Ratings of Bank and Borrower Performance Bank Ratings Borrower Ratings Moderately Quality at Entry: Government: Unsatisfactory Unsatisfactory Moderately Implementing Moderately Quality of Supervision: Unsatisfactory Agency/Agencies: Unsatisfactory Overall Bank Moderately Overall Borrower Unsatisfactory Performance: Unsatisfactory Performance: 5 C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments (if Indicators Rating Performance any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): GEO rating before Unsatisfactory Closing/Inactive status D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Agricultural extension and research 14 13 Irrigation and drainage 26 26 Public administration- Water, sanitation and flood 6 5 protection Solid waste management 9 6 Wastewater Treatment and Disposal 45 50 Theme Code (as % of total Bank financing) Environmental policies and institutions 28 15 Pollution management and environmental health 42 52 Rural services and infrastructure 10 13 Water resource management 20 20 E. Bank Staff Positions At ICR At Approval Vice President: Laura Tuck Pamela Cox Country Director: Bert Hofman Klaus Rohland Practice Iain G. Shuker Ede Jorge Ijjasz-Vasquez Manager/Manager: Project Team Leader: Xiaokai Li Xiaokai Li ICR Team Leader: Anis Wan ICR Primary Author: Anis Wan 6 F. Results Framework Analysis Global Environment Objectives (GEO) and Key Indicators(as approved) To demonstrate innovative and cost-effective water pollution control practices in Guangli river catchment area of the Dongying Municipality, contributing to pollution reduction in the Bohai Sea. Revised Global Environment Objectives (as approved by original approving authority) and Key Indicators and reasons/justifications NA. (a) GEO Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Project induced reduction in pollutant/nutrient loads entering Bohai Sea from Indicator 1 : Guangli River Watershed - COD, BOD,NH3-N, TP (tons/year) COD: 517.6 COD: 20.67 Value BOD: 215 BOD: 0 (quantitative or 0 NH3-N: 134 NH3-N: 0 qualitative) TP: 12.9 TP: 2.34 Date achieved 12/31/2011 12/31/2015 12/31/2015 Comments Not achieved. Wetland & rural wastewater treatment facilities largely completed (incl. % but yet to become operational. Simulated results are shown in Section 3. The achievement) results shown above come from agricultural and rural pollution reduction. Reduction in pollutants/nutrients through constructed wetlands at Dongbalu - Indicator 2 : COD, BOD, NH3-N, TP (tons/year) COD: 430 COD: 0 Value BOD: 215 BOD: 0 (quantitative or NH3-N: 129 NH3-N: 0 Qualitative) TP:12 TP: 0 Date achieved 12/31/2011 12/31/2015 12/31/2015 Comments Not achieved. Wetland construction completed but expected to become (incl. % operational only by August 2016. Thus the actual achievements are zero. achievement) Simulated results are shown in Section 3. (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Annual volume of treated wastewater at wetlands (million m3/year) Value (quantitative or 0 9.25 0 Qualitative) Date achieved 12/31/2011 12/31/2015 12/31/2015 Comments Not achieved. Wetland expected to be operational by August 2016. Actual results (incl. % are zero. Simulated result is the same as the target, which is questionable (should 7 achievement) be 1/3 of the estimated values as the water covered area of wetland is 1/3 of the original plan). Rural wastewater pollution load reduction in participating villages - COD, SS Indicator 2 : (tons/year) Value COD: 9.3 (quantitative or 0 0 SS: 4.6 Qualitative) Date achieved 12/31/2011 12/31/2015 12/31/2015 Comments Not achieved. Only one rural wastewater treatment facility in intermittent (incl. % operational, four completed construction by closing date, two completed in June achievement) 2016, one dropped out. Low water volume and O&M remain concerns. Livestock waste pollution reduction in participating villages - COD, TN, TP Indicator 3 : (tons/year) Value COD: 78.3 COD: 20.67 (quantitative or 0 TN: 0.743 TN: 0.196 qualitative) TP: 5.883 TP: 1.55 Date achieved 12/31/2011 12/31/2015 12/31/2015 Comments (incl. % Not achieved. Target not achieved mainly due to lower demand from farmers. achievement) Agricultural pollution/nutrient load reduction in participating villages - NH3-N, Indicator 4 : TP (tons/year) Value NH3-N: 5 NH3-N: 7.40 (quantitative or 0 TP: 0.123 TP: 0.79 qualitative) Date achieved 12/31/2011 12/31/2015 12/31/2015 Comments Targets over-achieved despite reduced area because they were set too low. One (incl. % target should be TN instead of NH3-N. It was a mistake in the PAD. In northern achievement) China NH3-N content in the soil is very low with limited value for monitoring. Proportion of farmers adopting integrated and balanced fertilizer application Indicator 5 : technology in participating villages (%) Value (quantitative or 0 80 44 Qualitative) Date achieved 12/31/2011 12/31/2015 12/31/2015 Comments Partially achieved. 55% farmer participation achieved. Applied on 1,851 ha versus (incl. % the original plan of 2,278 ha of land. Fewer farmers participated due to decreasing achievement) land area and migration as a result of urbanization. Indicator 6 : Number of Farmers Environmental Protection Associations Operational Value (quantitative or 0 22 10 Qualitative) Date achieved 12/31/2011 12/31/2015 12/31/2015 Comments Partially achieved. A total number of 10 FEPAs established (registered, rules (incl. % stipulated, office provided, training provided and villagers are members). But most achievement) are not fully operational and their practicality and sustainability remain unclear. Indicator 7 : Number of people trained Value (quantitative or 0 4,500 4,464 Qualitative) Date achieved 12/31/2011 12/31/2015 12/31/2015 8 Comments 99% achieved. 4,420 farmers trained (including 2,081 in Kenli county, 300 in (incl. % Dongying city, 439 trained externally and joined study tours, 1,600 field training), achievement) 44 PMO staff trained and joined study tours. Study of the impact on pollution reduction through constructed wetlands in Indicator 8 : Guangli River Value (quantitative or No Completed Completed Qualitative) Date achieved 12/31/2011 12/31/2015 12/31/2015 Comments Partially achieved. Report completed but based on simulated data rather than (incl. % actual monitoring data since the wetland is yet to become operational. achievement) Evaluation study and management planning for Agricultural and Rural Pollution Indicator 9 : Reduction in Guangli River catchment Value (quantitative or No Completed Completed Qualitative) Date achieved 12/31/2011 12/31/2015 12/31/2015 Comments Partially achieved. Report completed but rural pollution reduction study is largely (incl. % based on simulated data because most rural wastewater treatment facilities are yet achievement) to be put into operation. Indicator 10 : Development and dissemination of Huai River basin-wide replication strategy Value (quantitative or No Completed Completed Qualitative) Date achieved 12/31/2011 12/31/2015 12/31/2015 Comments Partially achieved. Report completed but largely based on simulated data because (incl. % wetland and most rural wastewater treatment facilities are yet to be put into achievement) operation. Two dissemination workshops conducted. G. Ratings of Project Performance in ISRs Actual Date ISR No. GEO IP Disbursements Archived (USD millions) 1 06/20/2012 Satisfactory Satisfactory 0.00 2 12/29/2012 Satisfactory Satisfactory 0.00 3 06/25/2013 Satisfactory Moderately Satisfactory 0.00 4 03/07/2014 Moderately Satisfactory Moderately Satisfactory 0.50 5 06/28/2014 Moderately Unsatisfactory Unsatisfactory 0.50 6 12/30/2014 Moderately Unsatisfactory Moderately Unsatisfactory 0.56 7 06/16/2015 Moderately Unsatisfactory Moderately Unsatisfactory 1.05 8 12/17/2015 Unsatisfactory Unsatisfactory 3.01 H. Restructuring (if any) Not Applicable 9 I. Disbursement Profile 10 1. Project Context, Global Environment Objectives and Design 1.1 Context at Appraisal Country and Sector Context China’s rapid economic growth has come at a high environmental cost. In particular, a seriously deteriorating water environment caused mostly by land-based pollution from industries, farming and domestic sources was of major concern to authorities at the time of appraisal. The majority of the rivers and lakes in the country were - and continue to be - polluted to different degrees. This had alerted Chinese policy makers and the general public to give much higher priority to pollution reduction and control and was clearly articulated in the 12th Five-Year Plan (2011-2015), which aimed to follow a green growth path. Improved water management was one of the pillars of green growth. The Huai River Basin 1 is one of the most important water systems in China. The key development challenge in the Huai River Basin was to maintain the balance between socioeconomic development and environmental protection. With rapid economic growth in the region, the Huai River Basin had become one of the most polluted basins in China, discharging increasing quantities of nutrients and pollutants into the Bohai Sea and Yellow Sea, contaminating these international waters. Shandong Province, which has the longest coastline within the Huai River Basin, contributed more pollutant loads to these seas than any of the other three provinces. Water pollution in Dongying originated from both point and non-point sources in urban and rural areas. The municipal sewage accounted for 60%, industrial sewage for 8%, and rural wastes and agricultural runoff for about 30% as the main sources of pollution of the Guangli River, which contributes to water pollution and eutrophication in the Bohai Sea. The main issues with existing water pollution control practices were two-fold: (a) Lack of a balanced and integrated approach to water pollution management. (b) Lack of effective institutional mechanism for managing non-point source (NPS) pollution in rural and agricultural areas. The Project is in line with the Master Plan for Dongying Water City Development (2009) setting the goal to transform the Guangli River into an eco-corridor during the “12th Five-Year Plan” period, through improving water quality and the environment. Rationale for Bank Involvement and Higher Level Objectives to Which the Project Contributed The project contributed to China’s objective of improved water resources management and pollution control. As part of the Bank‘s program to assist China in water resources and environmental management, the proposed project was well aligned with the Government‘s Long Term Strategic Plan for Water Pollution Management and Control in Key Basins and 1 The vast majority of Shandong province is located in Huai River Basin while a small part is located in Yellow River Basin. But the Shandong Water Resources Bureau belongs solely to the jurisdiction of Huai River Commission. Therefore the GEF project is named Huai River and placed under Huai River Commission even though the Guangli River flows into the Yellow River. 11 Seas, as well as one of the main pillars of the Country Partnership Strategy (CPS) for China for the period 2006 – 2010: “managing resource scarcity and environmental challenges”, and for the period 2011 – 2015. Global Objectives for GEF The proposed project was part of the World Bank and GEF Strategic Partnership Investment Fund for Pollution Control in Large Marine Ecosystems of East Asia (the IF), a program approved by GEF in 2005 to finance innovative demonstration projects for pollution control. The IF is managed in cooperation with the Partnerships in Environmental Management for the Seas of East Asia (PEMSEA) that has developed a Regional Sustainable Development Strategy of the Seas of East Asia. PEMSEA is also part of the regional implementation plan of the UNEP‘s Global Program of Action (GPA) for the Protection of the Marine Environment from Land-based Activities. The project was expected to provide incremental benefits to the baseline of the Bank-financed China Huai River Basin Flood Management and Drainage Improvement Project2 (HRBFMDI Project) which became effective in January 2011. 1.2 Original Global Environment Objectives (GEO) and Key Indicators (as approved) GEO The GEO as described in the Grant Agreement was: to demonstrate innovative and cost- effective water pollution control practices in the Guangli river catchment area of the Dongying Municipality, contributing to pollution reduction in the Bohai Sea. Indicators The main GEO outcome indicators of the proposed project were: (a) project-induced reduction in pollutant and nutrient loads entering the Bohai Sea from the Guangli River Watershed; and (b) reduction in pollutants and nutrients through a constructed wetland at Dongbalu. 1.3 Revised GEO (as approved by original approving authority) and Key Indicators, and reasons/justification The GEO and key indicators were not formally revised. 1.4 Main Beneficiaries The project envisaged to benefit about 1.8 million people in Dongying city (of whom approximately half are women). More specifically, beneficiaries would include: (a) farmers benefiting from improved production practices and production cost savings; (b) rural and urban residents benefiting from improved living environment and reduced water pollution 2 It was originally planned to blend the GEF Huai River Project with the Bank loan Project (HRBFMDI). But the preparation of the GEF grant project was delayed and the HRBFMDI could not wait for it. So it became a standalone project. Also the loan project was regarding flood management while the GEF project was mostly regarding wetland construction. 12 in the Guangli river; and (c) fishermen benefiting from a reduced threat of eutrophication in the Bohai Sea. 1.5 Original Components As originally approved the Project was designed to support four components (see Annex 1 for details): Component A. Wetland Construction and Sluice Gate Operation Optimization (original base Cost: US$27.19 million): (a) Construction of a wetland at Dongbalu consisting of a free surface flow wetland, an ecological retention pool, an entrance gate, a gated overflow weir and a pumping station, and provision of related equipment; (b) Upgrading of the automatic gate control system covering three sluice gates on the Guangli River, and the gates at the entrance and exit of the Dongbalu wetland; and (c) Provision of cash transfers to people affected by the wetland construction. Component B. Agricultural Pollution Control and Rural Waste Management (original base Cost: US$4.59 million): (a) Wastewater, human and livestock waste collection and treatment in participating villages; (b) (i) Introduction of agricultural pollution reduction technologies and management practices in Participating Villages through comprehensive and balanced fertilizer applications, provision and use of insect luring lamps, and construction of eco- trenches and buffer strips in crop fields; and (ii) monitoring of the results of implementation of these technologies and practices; and (c) establishment, equipping and operation of Farmer Environmental Protection Associations (FEPAs) in participating villages. Component C. Capacity Building and Policy Studies (original base Cost: US$1.85 million): (a) Establishment and operation of an environmental protection education and training center to be located in Dongying Municipality for training and dissemination of technologies and good practices in environmental protection, nutrient management and pollution reduction; (b) Capacity building activities to provide technical and project management training for staff involved in Project implementation and monitoring; and (c) (i) Evaluation study of the effectiveness of constructed wetlands in the treatment of polluted water based on the analysis of the Project monitoring results; (ii) development of an agricultural pollution reduction and rural waste management strategy and plan for the Guangli River Watershed in the Dongying Municipality, including an evaluation study of the related Project interventions for the purpose; and (iii) development of a Huai River Basin-wide replication strategy for cost-effective water pollution control, including dissemination and training and workshops as required for the purpose. Component D. Project Management and Implementation Support (original base Cost: US$2.29 million): (a) Provision of technical assistance for the review of technical designs and tendering 13 documents, construction quality of Project facilities, and for Project reporting; (b) Project monitoring and evaluation; and (c) Support for project management by the PMOs and PIUs. 1.6 Revised Components The original components were not formally revised during implementation. 1.7 Other significant changes The scope of several key activities was reduced as shown below. These changes occurred primarily due to an early change in the wetland design and the subsequent implementation delays, also resulting in cost overruns of the wetland. There was no restructuring during the implementation though to reflect the reduced scope. A detailed analysis of the individual changes and their impact on outcomes is provided in section 2.2 and 3.2. Table 1: Completed project costs against budgeted costs Component Project Costs GEF Financing Original Actual Percentage Original Actual Percentage (US$’000) (%) (US$’000) (%) Wetland Construction and 27,188 41,572.5 152.91 1,843 1,845 100.1 Sluice Gate Operation Optimization Agricultural Pollution and 4,591 2088.2 45.48 1,839 1,626.9 88.47 Rural Waste Management Capacity Building and Policy 1,851 355.2 19.18 1,011 348.3 34.45 Studies Project Management and 2,290 826.7 36.1 307 124.5 40.55 Implementation Support Total Costs 37,828 44,842.6 118.54 5,000 3,944.7 78.89 Changes in design for the Constructed Wetland at Dongbalu led to a significantly reduced water covered area and caused major delays. The feasibility study report included a constructed wetland of a total land area of 2,698 mu with water covered area of 2,485 mu mainly for the purpose of water treatment. In the end, the completed water covered area, i.e. the wetland area that possesses treatment capacity, was only about one- third of the original plan (874 mu versus 2,485 mu). The significant delay in completion of the wetland left no time for its operation and monitoring. The wastewater part of sub-component B.1 was reduced. It was envisaged to support eight villages with 9,325 people and a treatment capacity of 233 tons /day. In the end five villages completed the construction of their wastewater treatment facilities covering 5,118 people, one village dropped out because it became connected to the public sewer system, while the remaining two were completed in June 2016. Due to the low water volume and implementation delays only one facility has been put into intermittent operation since September 2015. Ecological buffer strips and eco-trenches were only partially adopted. 1,109 hectares of farmland in the six participating villages were planned to be used as buffer strips without using any fertilizers in order to reduce the TN and TP load. In reality only 10% of the designed area has been completed (4 buffer strips built instead of the planned 6) because most farmers were not willing to adopt the zero fertilizer application approach. Meanwhile, a total length of 1,709 meters of eco-trenches has been built in the four pilot 14 villages instead of the originally planned six villages, accounting for only 40% of the originally planned length. The effect of eco-trenches is expected to be lower than the original design because some of the side slopes of the trenches were not stabilized as designed, and the vegetation was just naturally grown plants instead of the planned plant species that had stronger capacity to absorb TN and TP. The proportion of farmers adopting integrated and balanced fertilizer application technology in participating villages was 44% versus 80% planned. Balanced fertilizer application covered 1,862 ha versus the planned 2,278 ha of land. Fewer FEPAs were established than planned. Annex 2 in the PAD envisaged the establishment of 22 FEPAs, with a minimum of 8 for activities under component B and the remaining 14 to be financed by non-project funds as a part of project replication. However, the results framework only showed 10 FEPAs to be established, which was a typo. The 22 EFPAs in Annex 2 was the original intention and in reality only 10 FEPAs were established because the other villages were not covered by the project investment and had less incentives to participate. Livestock waste storage and treatment significantly reduced: During appraisal it was planned to build 1,650 livestock waste storage tanks of 3 different sizes with a total volume of 2,500 m3. In addition, a centralized composting facility was supposed to be built. At completion, 83 tanks had been built with a total volume of 660 m3, and the centralized composting facility was not built due to lower demand and concerns over O&M. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Soundness of the background analysis supporting the project, lessons learned incorporated, and the rationale for the Bank’s intervention: The project design took into account Bank’s experiences with water pollution reduction and management interventions (e.g., the GEF Baltic region agricultural pollution control program). These included: (a) effective water pollution management in a basin or catchment requires an integration of pollution reduction at source and treatment of polluted water; (b) pollution reduction measures need to be prioritized in line with the government strategy and priority programs, as well as the interests of other key stakeholders, particularly for local communities; (c) design of wetlands should be adapted to local conditions, both in terms of water quality and the operating environment (e.g. temperature), and avoid excessive landscaping; and (d) a community-based approach is essential for sustainable agricultural non-point pollution control and rural waste management; Rationale for Bank Involvement. The project supported the government‘s priorities in systematically controlling pollution in heavily polluted river basins including the Huai River by reducing land-based pollutants to international waters such as the Bohai Sea and Yellow Sea. The design was consistent with the Bank Group‘s Country Partnership Strategy for China (CPS dated May 23, 2006), which required that the Bank Group helps China mainstream environmental concerns into the development process. "Taking steps to minimize water pollution" and piloting and scaling up "policies and mechanisms to address 15 agriculture non-point pollution" were among priority Bank engagement areas. The project also fit with the regional PEMSEA strategy (of which the IF is a partner), which promotes sustainable development in the region. Assessment of project design. Overall, the project objectives were clearly stated and responsive to China's priorities, while meeting the Bank’s goals as set out in the CAS. The components were broadly designed to match the project objectives. Environmental and social factors were adequately incorporated into the design. Environmental impacts were expected to be largely beneficial, with any potential minor negative impacts readily mitigated by project interventions. However there were several design shortcomings which in hindsight affected project performance during implementation: Institutional arrangements caused difficulties in cross sectoral coordination: Since this Project was originally associated with a Bank supported loan Project - Huai River Basin Flood Management and Drainage Improvement Project (HRBFMDI) - its institutional arrangement was inherited from the HRBFMDI Project. The Shandong Provincial Project Management Office (PPMO) for the HRBFMDI Project was set up in the Water Resources Bureau (WRB) and also served as the PPMO for this project. Therefore the Dongying Municipality Project Management Office (DPMO) was also located in the Water Resources Bureau, with Project Implementation Units (PIUs) established in the three implementing agencies (Water Resources Bureau, City Management Bureau, and Agricultural Bureau). This arrangement made cross sectoral implementation difficult because WRB is only a sectoral bureau that is at the same administrative level as the other two IUs and thus has little authority to lead and coordinate. Originally it was planned to blend the GEF operation with the IBRD loan. In the end it became a standalone GEF project because the preparation of the associated HRBFMDI loan Project was much faster and could not wait for the GEF. The implementation period of three and half years seemed too short. It typically takes at least two years for a wetland to be designed and physically constructed. Establishing the plants in the wetland, growing them to maturity and reaching full biological effectiveness and capacity will typically take another two years. It is only at that time that the pollution reduction effect of the wetland can be measured, monitored and evaluated, which may take another year. Therefore, a five year implementation time frame would have been more appropriate. GEO and key indicators were not fully aligned: The GEO was to demonstrate innovative and cost-effective water pollution control practices in the Guangli River catchment of Dongying Municipality, contributing to pollution reduction in the Bohai Sea. It combined objectives at two different levels, with the demonstration effect pitched at the project level while the contribution to pollution reduction in the Bohai Sea being a higher level objective, with, however, very limited overall contribution compared to the size of Bohai Sea. Moreover, the two GEO level indicators both focus on measuring pollution reduction effects, without measuring the demonstration effect, innovation and cost effectiveness of the water pollution control practices. The design of project components and activities was too complex: The project aimed at an integrated approach to pollution reduction by including non-point agricultural and rural 16 pollution. While conceptually sound, given the limited funding and tight implementation period, tackling these two sets of issues cutting across three sectors, in addition to an already challenging task of wetland construction, seemed over-ambitious. The Farmer Environmental Protection Association (FEPA) lacked community ownership. While being an important innovation at the time of appraisal, FEPA seemed to lack a more thorough analysis of prior experience elsewhere and more in-depth consultations with the communities. In reality, farmers were not enthusiastic due to a lack of ownership within the community and a lack of financial sustainability. In their eyes, environmental protection is of a public goods nature and thus should be the government’s responsibility. The original idea was to replicate the successful experience from Water User Associations. But the latter was feasible because it is directly linked to farmers’ agricultural production and household benefits, which is not the case with FEPA. Therefore farmers had few incentives to actively participate. The design of the rural wastewater treatment facilities appeared inefficient due to low water volume. The domestic wastewater systems were only designed for laundry, kitchen and shower wastewater and did not include toilet water. Also, a large number of farmers have become migrant workers leaving behind only the elderly and children in the villages. The relatively big investment in rural wastewater systems appears inefficient compared to its low usage, without connecting to toilet water as the biggest source of domestic wastewater. Government commitment and stakeholder involvement During project preparation the local (Dongying municipal) government was committed to the project objectives and innovative approach. It provided institutional and human resources support, set up the PLGs and PMOs at various levels and made commitments to providing counterpart funding. However, after project approval there were frequent changes of leadership during implementation. As a result, the municipal government priorities and policies changed. This led to substantial changes to the original wetland design very early in the project resulting in significant implementation delays. During project preparation efforts were made to consult stakeholders to give a demand driven character to investments. Meetings and consultations were held at all levels, including with communities, government agencies and the private sector. The results of consultation were incorporated into the project design where appropriate. Yet, there seemed to be a lack of deeper understanding of some of the project objectives, which contributed to the fact that some project activities were not fully implemented as planned. For example, the villagers were not very active joining the FEPAs because their purpose and benefits were not totally clear. Some farmers were not willing to use their land as buffer area without using fertilizer at all due to concerns of reduced agricultural productivity, leading to significantly reduced total buffer area. Assessment of risks. At project concept stage, the Project team identified the risks to achieving the PDO in the various risk categories and listed the proposed mitigation measures: (a) setting up a multi-sectoral project leading group, and agreeing upfront on the division of responsibility amongst the different agencies and the coordination mechanism; (b) hiring competent technical and implementation support consultants, and providing targeted training for project staff; (c) enhancing ownership of beneficiary communities 17 through continued public awareness raising activities, financial subsidy and affordable contributions, and establishing FEPAs to institutionalize communities‘ self-management; and (d) provision of implementation support on technical aspects and on project management by qualified staff during Bank missions. The overall risk rating for the project, implementing agencies’ capacity and project complexity were all rated Medium, which proved to be too optimistic. The risk assessment underestimated the difficulties with multi sector coordination and project complexity which caused substantial challenges during implementation. It also underestimated the risk of getting communities’ incentives in place for successful participation in the FEPAs. Similarly, the risks of successfully implementing rural and agricultural non-point pollution activities were also higher than expected. One of the mitigation measures - hiring competent technical and implementation support consultants, and providing targeted training for project staff did not materialize as planned. The originally planned international consultancy was not hired. Instead the PMU used counterpart funding and hired local consultants. The risks of changed government priorities, rapid urbanization which affected several activities, and insufficient technical support service for non-point pollution reduction activities were not identified at appraisal. The Bank’s Quality Assurance Group (QAG) did not conduct a Quality at Entry Assessment (QEA) for the project. 2.2 Implementation The following factors have affected project performance during implementation: Changes in design for the constructed wetland at Dongbalu caused major delays. The original design in the feasibility study report included a constructed free-surface flow wetland with a total land area of 1.8 km2 mainly for the purpose of water treatment. This originally constituted approximately 75 percent of the total project investment (90% at completion). However, before the preliminary design in line with the approved project feasibility study was developed, a decision to instead build a wetland leisure park had been made by the Dongying municipal government under new leadership. The earthworks for the new leisure park design were completed within a short period of time without obtaining agreement from the Bank. Wetland bed preparation was based on a water park design and later had to be adjusted to meet water treatment wetland design standards at significant additional cost. As remedial measures the World Bank missions in 2013 proposed a number of improvements to the wetland design to ensure that it would be able to serve the intended water treatment functions to the extent possible. It took one and half years of extensive discussions between the Donging government and the Bank to finally agree upon a compromise design at the end of 2014 that was financially and technically realistic to salvage the situation. Some of the earth was backfilled and eventually it took nine months to complete the construction and planting works by September 2015 based on the revised wetland design, at a much smaller scale. In the end the completed water covered area, i.e. the wetland area that possesses treatment capacity, was only about one-third of the original plan in the feasibility study report (874 mu versus 2,485 mu). And the pollution reduction 18 effect of the treated water estimated to be much lower than expected. The significant delay of the wetland construction left no time for its operation and monitoring and evaluation. It also had an impact on other components because the implementing agencies of other components were concerned that the Project had a risk of being cancelled if agreement could not be reached on the design of the biggest component – wetland, and therefore were hesitant to proceed. Provision of counterpart funding was delayed. The Dongying municipal government made a commitment to allocate counterparts funds for the wetland component, but the planned budget was not used for the first year due to the project design change and delay and could not be carried over to the second year. During the second year a change of leadership at the municipal government led to misunderstandings and thus the project missed the annual budgeting process. As a result during almost 2 out of the 4 years of implementation counterpart funds were not provided on time. Only after the Provincial Financial Bureau and the Bank intervened counterpart funding was eventually provided for the relevant project activities. This was one of the main reasons for the implementation delay. Pumping station remains to be completed. Another reason for the wetland not being operational was that the pumping station located at the north end of the wetland has yet to be completed. The civil works of the pumping station had been finished and the pump had been purchased. Yet as part of the master plan the Dongying government later decided to increase the capacity of the pumping station and planned to purchase another pump with larger capacity to pump water from the Dongbalu and the other two wetlands to be constructed by the government funding. The pumping station is expected to be completed around August 2016. Survival rates were low due to high salt content of the soil and delayed planting: The implementation delay caused the project to miss the optimal planting season of April/May 2015. Soil leaching to address the high salinity issue took quite some time and planting only started in June but was slower in July and August due to the flooding season and was completed in September 2015, which was not a good season for the macrophytes to germinate and grow. This was exacerbated by the higher than expected salt contents in the soil of the wetland despite the leaching process. So the survival rate was only about 50%. As remedial measures the implementing agency and contractor have signed a contract to ensure that they would carefully manage the water/salt conditions, replant as needed in the spring of 2016 to increase the plant survival rate to a satisfactory level (designed survival rate was 80- 85% or above). Water volume collected for the wastewater treatment facilities was low: The wastewater part of sub-component B.1 was supposed to support the construction of rural domestic wastewater treatment works in eight selected villages located in the upper reaches of the Guangli River Basin. Among which one village dropped out because its sewers were already connected to the urban domestic wastewater treatment plant. Four villages have completed the construction of their wastewater treatment facilities. One village changed the design from a waste water stabilization pond to artificial wetland treatment with reduced effectiveness, as this community lives closer to the sewage facility and expressed concerns about odor and potential safety risks. Two villages (financed by counterpart funding) experienced delays and were completed in June, 2016. The treatment facilities in the above mentioned five villages cover 5,118 people (127 ton/day) compared to 9,325 19 people (233 ton /day) as originally planned. Furthermore, the wastewater volume collected from the project households is low because 1) the domestic wastewater design only included laundry, kitchen and shower wastewater but did not include the biggest source - toilet water; 2) more and more farmers have become migrant workers and left only the elderly and children behind in the villages. During implementation the Bank team recommended that the wastewater system should include toilet water but the investment to renovate toilets should be borne by farmers. However, farmers showed little interest and thus this did not materialize in the end. Due to the low water volume and implementation delay only one facility has been put into intermittent operation (since September 2015) by project close. The main issue remains to be whether sufficient sewage can be collected and the facilities could be sustainably utilized with sound O&M measures. Livestock waste storage and treatment facilities were reduced due to lower demand: It was planned to build 1,650 livestock waste storage tanks of 3 different sizes with a total volume of 2,500 m3. In addition, a centralized composting facility was supposed to be built, which would include (i) a manure collecting system to collect livestock wastes from all animals in two villages, (ii) an aerobic composting workshop to treat collected manure and produce organic fertilizer, and (iii) a liquid distribution system to convey livestock liquid wastes for irrigation and land application. In reality 83 tanks have been built with a total volume of 660 m3, and the centralized composting facility was not built due to concerns over O&M, particularly during low temperatures in winter. The number of storage tanks is significantly lower than the original plan due to lower demand as a result of the reduced number of livestock households in the villages. With more people working outside the villages as migrant workers livestock production is shifting from scattered smallholdings towards larger scale farms. Also, the originally designed storage tanks were mostly 1 m3, which were too small for practical use.   Balanced fertilizer application 3 was partially implemented due to decreasing farm land area. Ten villages participated in the program and received subsidies for purchase of balanced fertilizer. The original design was to cover 2,278 hectares of land while the actual result was 1,862 hectares, partly due to the overall decreasing cropping area as a result of urbanization, and also the implementation delays. Training was provided to farmers to enable them to better understand its benefit, introduce the concept of eco- farming, and increase utilization effectiveness of the fertilizers while reducing water pollution. Farmer interviews confirmed that there was a high level of community participation. At the same time technical assistance and services need to be improved to help farmers increase awareness of its linkage with pollution reduction and achieve better results. Construction of buffer strips and eco-trenches was partially completed due to low commitment from the communities. 1,109 hectares of farmland in the six participating villages were planned to be used as buffer strips without using any fertilizers in order to reduce the TN and TP inflow into the Guangli River. In reality only 10% of the designed area has been completed (4 buffer strips built instead of the planned 6) because most farmers were not willing to adopt the zero fertilizer application approach due to concerns 3 The target for agricultural non-point pollution should be “Total Nitrogen” instead of “NH3-N”, as shown in the feasibility report. It was a mistake in the PAD. In northern China NH3-N content in the soil is very low with limited value for monitoring. 20 over lower productivity. Meanwhile, a total length of 1,709 meters of eco-trenches were built in the four pilot villages instead of six planned villages. The effect of eco-trenches turned out to be lower than the original design because some of the side slopes of the trenches were not stabilized as designed, and the vegetation was consisted mainly of naturally grown plants instead of the planned plant species that would have had stronger capacity to absorb TN and TP. FEPAs were established but not fully functioning. It was planned to establish a total of 22 FEPAs in 22 villages, including a minimum of eight FEPAs to be established linked to project activities under sub-components B rural waste treatment and agricultural pollution reduction, and another 14 FEPAs to be also funded by the Project but linked to pollution reduction activities financed by non-project funds as a part of project replication. The purpose was to enable farmer communities to participate collectively in environmental protection project activities, to take responsibility for O&M, and to replicate best practices in their respective villages. In reality, only 10 FEPAs were established in 10 villages (registered and with rules and regulations stipulated and offices provided), out of which about 2 – 3 were functioning better with a higher level of participation and better awareness of the pollution reduction objectives. The FEPAs were mainly led by village chiefs and management teams. Among most villagers interviewed the understanding of the roles and responsibilities of the FEPAs was limited. While recognizing the innovative nature of the FEPAs, the practicality and sustainability of these FEPAs, which were mainly of a public goods nature and seemed lacking community ownership and funding, is of concern. Capacity building and policy studies were affected by change in domestic policy and implementation delay. These were designed to be closely linked with the Components A & B. This component used only about 20% of the project resources allocated. Due to changes of domestic policies towards domestic training and overseas study tour some planned training and study tours did not happen, which to some extent affected the capacity building of FEPAs and PMO staff. Most farmer training was conducted at a late stage so the impact was limited during implementation. The policy studies were originally designed to be comprehensive studies to assess project innovations in rural environmental management, and create a replication strategy for dissemination of best practice examples in an expanded area within the Huai River Basin. However, the policy studies and planning exercise started quite late due to delays of other components. At project closure these reports were completed but mostly using simulated analysis instead of actual monitoring data. So their effectiveness remain to be verified after the facilities will be put into full operation. Project Management and Implementation Support requires further strengthening. The project management component only used 36% of the total budgeted resources, and only 41.69% of GEF grant was used. As mentioned above in Section 2.1, the institutional set up made the cross agency coordination difficult. Furthermore, the PMO (DWRB) was implementing only one small sub-component, while most other activities were implemented by CMB (wetland), and to a lesser extent by AB (non-point pollution). This arrangement provided fewer incentives and little leverage for the PMO to lead implementation overall. In hindsight, it would have been more appropriate, and likely more effective, to put the DPMO in a higher level comprehensive bureau such as the Finance Bureau or Planning and Reform Commission. 21 Mid-term-review (MTR): At appraisal a MTR was planned to be conducted on September 1, 2014. In September 2014 a supervision mission was carried out but no formal MTR was undertaken. When the counterpart and the Bank team reached agreement on the remedial measures to the revised wetland design an MTR should have been carried out to respond to the changed circumstances to help improve project performance and increase the likelihood of achieving the GEO. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization Design. Overall, the M&E arrangements for the project were well designed and included implementation performance and results monitoring, specialized monitoring, and safeguards compliance monitoring. However, the GEO and key indicators were not fully aligned. Both GEO indicators were designed to measure pollution reduction effects. No indicators were included to measure the demonstration effect, innovation and cost effectiveness of the pollution control measures. Project implementation performance monitoring was undertaken by the Dongying PMO, with inputs from the PIUs and Dongying Environmental Protection Bureau, and with the assistance of implementation support consultants. Technical monitoring, including water quality of wetlands inflow and outflow, water quality of treated rural wastewater, effect of changes in fertilizer use on surrounding water quality was carried out by the Dongying Environmental Protection Bureau, the Dongying Agricultural Bureau PIU, and Shandong University. Safeguards compliance monitoring, based on the EMP, PMP and RAP, was conducted through an external environmental and resettlement supervision consultancy. Implementation. M&E activities started late due to the overall implementation delay. Dongying Environmental Monitoring Station was contracted to monitor and assess the impact of the Dongbalu Wetland and Wastewater Treatment. The relevant monitoring data were provided for the period from September to December 2015, and monitoring will last until June 2017. The wetland related results indicators for effluent could not be monitored because the wetland has yet to become operational. Most rural wastewater treatment indicators are also unavailable due to the fact that the facilities are not yet fully operational. Estimations and simulated assessments based on other similar operations have been carried out as a part of the Study of the Effect of Wetlands on Pollution Reduction. But some simulated results are questionable as pointed out in Section 3.2. Besides, Shandong Agricultural Academy of Science (SAAS) has carried out monitoring and assessment of the impact of the agricultural pollution reduction activities, which included some actual monitoring data and evidence based analysis. The key results are explained in Section 3.2 and the Results Framework in the Data Sheet. Utilization. As a result of the implementation delays few monitoring and evaluation data were available to guide resource allocation and decision making. Due to the lack of actual monitoring data and the limited time left for the studies mentioned above, the accuracy and applicability of the analyses are affected. 2.4 Safeguard and Fiduciary Compliance Safeguards Environment: The project was appropriately categorized as “B”. It complied with the requirements of the Bank’s environmental assessment (OP 4.01), and Pest management 22 (OP 4.09) safeguards. It was expected to have a significant positive environmental impact in terms of pollution reduction. Negative impacts were associated mainly with construction activities. These impacts were minimal, site specific, reversible, and easily mitigatable. An EMP had been developed, laying out necessary mitigation measures, institutional arrangements, and a monitoring plan to avoid or minimize adverse impacts. A Pest Management Plan (PMP) had been developed to help farmers reduce the use of chemical pesticides in the pilot villages. In accordance with Bank Safeguard policies and applicable national regulations, public consultations were conducted during the environmental assessment process, including a questionnaire survey and meetings with the project affected people and other stakeholders. Feedback received and concerns expressed were taken into account in the EA process and project design. Social: The project complied with the relevant national laws and regulations, as well as the Bank OP4.12 requirements. A RAP was prepared setting forth appropriate compensation and restoration measures for the relocation cases and other impacts. The project had positive social impacts in terms of reduced pollution levels, benefitting farmers and fishermen, as well as the rural and urban population in the Guangli river watershed. The project had a potential negative social impact from the construction of wetlands at Dongbalu, as it required a change in land use for land owned by the state-owned Shandong Shengli Petroleum Company. This land use change entailed relocation of seven small-sized enterprises that leased the land for their businesses, and also affected some power lines and fish ponds. Provision of cash transfers for the planned activities under this sub-component was completed in 2012. The total actual cost was US$ 7.41 million compared to the estimated US$ 6.79 million in the PAD, fully financed by counterpart funding. The Shandong Construction Development Research Institute was contracted to carry out an external monitoring and assessment of the resettlement and submitted a completion report in April 2013, which was reviewed by the Bank and found acceptable. Fiduciary Expenditure and post procurement reviews were regularly carried out by the Bank’s procurement and financial management (FM) specialists. Issues raised by these reviews were clarified and efficiently resolved. Based on training provided by the Bank team’s procurement, disbursement and FM specialists, the Project’s PMUs were in a position to maintain clear and detailed accounts, as well as progress reports. Financial Management. The GEF Grant and the Designated Account was managed by Shandong Provincial Finance Bureau (SPFB). The project financial management capacity had been strengthened through training and implementation support. During implementation the withdrawal application and reimbursement processes were slow due to the PMU’s lack for experience with Bank financed projects and lack of communication between the PMU and the Dongying Municipal Finance Bureau. Later this issue was resolved through improved communication, concerted efforts by all the relevant parties, and increasing the threshold of the special account deposit. Financial reports were submitted on time and financial statements had unqualified audit opinions. Procurement was carried out by the DPMO. The principal risk of procurement staff‘s lack of experience under Bank-financed projects was mitigated through targeted training, appropriate setting of prior review thresholds, close coordination with and guidance from the PPMO, and implementation support from the Bank. A procurement manual has been 23 prepared to guide staff responsible for processing and approving procurement. Procurement of works, goods and consulting services were carried out in compliance with the relevant procurement guidelines. Procurement processes were delayed due to the overall implementation delay and lack of counterpart funding at times but resolved at a later stage of implementation. 2.5 Post-completion Operation/Next Phase The Government remains committed to providing the necessary support for a successful project transition, including maintaining the project organizations at each level for a transitional period and provision of the required operating cost beyond completion of the Project The wetland will be integrated into the broader wetlands construction program which includes two other wetlands funded by the government. The city planning bureau has stipulated O&M regulations including influent management, plant cleaning and replanting, harvesting and weeding. The agriculture bureau has also developed O&M measures for wastewater treatment facilities, and livestock waste storage. As an interim measure to support FEPA’s development the municipal finance bureau has made a commitment to establish a budget line starting from 2016 to support the ten FEPAs with about US$ 5,000 per year each. M&E for the wetland and other components will be continued by the Municipal Environmental Protection Monitoring Station until June 2017. Despite these commitments the post completion operation remains a concern for most components (See section 4). 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Relevance of objectives: Substantial. The GEO of “to demonstrate innovative and cost-effective water pollution control practices in the Guangli River catchment of Dongying Municipality, contributing to pollution reduction in the Bohai Sea” was relevant at appraisal and remained broadly relevant and consistent with the Country Partnership Strategy (CPS) through to completion. It continues to be relevant to the new CPS FY13-16, highlighting “supporting greener growth”, “demonstrating innovative ways to manage wetlands and lakes, including through the increased use of wetlands to filter urban and industrial run-off before excess nutrients cause eutrophication in lakes, rivers, and bays (including the Bohai and South China Seas)”. In addition, the project objectives were consistent with the following outcomes under the CPS: (i) enhancing urban environmental services; (ii) demonstrating sustainable approaches to natural resources management approaches, and (iii) demonstrating pollution management. However, during implementation the relevance of some project activities changed due to evolving circumstances and the project should have made adjustments accordingly to remain relevant to the prevailing situation. For example, as explained in section 2.2, fast paced urbanization led to fewer villages participating in rural waste water treatment activities, reduced demand for livestock waste storage, decreased farming area for balanced fertilizer application, etc. A restructuring should have been carried out to respond to these changes and to increase the likelihood of achieving the GEO. 24 Relevance of design: Modest. Overall, the project objectives were clearly stated, responsive to China's priorities and consistent with the CPS. The components were broadly designed to match the project objectives. However, as mentioned in section 2.2 several design shortcomings affected project performance during implementation, including: inappropriate institutional arrangements inherited from the HRBFMDI Project caused difficulties in cross sectoral coordination; The implementation period of three and half years seemed too short; GEO definition and key indicators were not fully aligned; Combination of wetland construction with non-point agricultural and rural pollution management seemed over-ambitious; FEPA lacked community ownership; The design of the rural wastewater treatment facilities appeared inefficient due to low water volumes; The risks of changed government priorities and rapid urbanization affected several activities, and insufficient technical support service for non-point pollution reduction activities should have been identified and mitigation measures proposed at appraisal. 3.2 Achievement of Global Environmental Objectives 1). Achievement of the first objective of demonstrating innovative and cost effective water pollution control practices in the Guangli river catchment of Dongying Municipality: Modest Innovation: The Project has demonstrated that a constructed wastewater treatment wetland can be built locally on beachland with high salt and alkaline content. This was the first time that such a wetland was constructed in Dongying, and the concept, technology and design are considered very innovative in Dongying. The successful physical construction of the wetland has also helped to convince the Dongying municipal government to invest in two similar wetlands (Dongqilu and Yihonghe) that are expected to be completed by end of 2016 with a total daily treatment capacity of 300,000 cubic meters (with an estimated cost of RMB 411 million Yuan), forming an integrated system together with the GEF financed Dongbalu wetland. Another innovation was the integrated approach to water pollution management adopted by the Project, combining wetland treatment with non-point agricultural pollution management, rural wastewater treatment and institutional arrangements. Due to the limited scale of funding and the complexities of coordinating several line agencies this somewhat over ambitious design was difficult to implement and the expected synergies could not be fully achieved. The third innovative feature was the establishment of Farmers Environmental Protection Associations (FEPAs). While recognizing the innovative nature of the FEPAs, their practicality and sustainability remains uncertain. They were mainly of a public goods nature and seemed lacking community ownership and funding. Their purpose was to enable farmer communities to participate collectively in environmental protection project activities, to take responsibility for O&M, and to replicate best practices in their respective villages. In reality, only 10 FEPAs were established in 10 villages (compared to the originally planned 22 FEPAs), out of which about 2 – 3 were functioning well with a higher level of participation and better awareness of the pollution reduction objectives. 25 Among most villagers the understanding of the roles and responsibilities of the FEPAs remained limited. Cost effectiveness: Despite the explicit mention of cost effectiveness in the GEO no cost effectiveness analysis was carried out at appraisal. Also, there were no indicators to measure cost effectiveness at any level. Instead the project conducted a cost benefit analysis with a series of assumptions that in hindsight appear both conceptually questionable and difficult to quantify and attribute (see section 3.3). Given the public goods nature of the project components a cost effectiveness analysis would have been the appropriate approach. At this point it is difficult to assess whether the assertions in the main text in the PAD that the components were cost effective are indeed valid. As for the constructed wetland there is evidence from similar projects, such as the Ningbo wetland project, that the cost per unit water treated can be significantly lower than conventional treatment (RMB 0.1 Yuan versus RMB 0.4-0.5 Yuan). However, in this project the cost of wetland construction was 75% higher than the original estimate and the treatment area was significantly smaller than designed. Since the wetland is not operational yet it is also unclear how high the O&M costs will be, making a cost effectiveness estimate for its operation difficult. Similarly, the PAD claims that the rural waste water treatment component is cost effective because of low capital investment, scattered nature of houses and availability of waste land to dispose tail water. In reality, the volume of wastewater treated is very low due to the fact that the design excluded toilet water (hoping it would be financed by other sources) and fewer farmers remain in the villages due to urbanization. The agriculture pollution component, while designed to reflect best international practices, was applied on a smaller land area due to urbanization and insufficient commitment from the communities to fully implement the improved practices. Also, there are insufficient data available to support the assumption that farmers actually increased productivity and reduced input cost as a result of this component. 2). Achievement of the second objective of contributing to pollution reduction in the Bohai Sea: Negligible. The project had three components that would potentially contribute to pollution control in the Bohai sea: the constructed wetland, the rural waste treatment facilities and the agriculture nonpoint pollution control activities. By the closing date none of these components had a significant impact on pollution reduction. Constructed wetland: Due to the significant changes to the design, its implementation was delayed and the water covered area and effectiveness was much lower than expected. The occupied land area of the wetland was the same as the originally planned 2,625 mu. But the water cover area of the constructed wetland, i.e. the wetland area that possesses wastewater treatment capacity, was only about one-third of the original plan in the feasibility study report (874 mu versus 2,485 mu). The actual effectiveness of the wetland was even lower because the completed vegetation coverage was only 64% of the water covered area (561 mu of area covered by emerged aquatic plants), versus the original plan of 79% for emerge plants (1,700 mu) and 95% for three types of plants4 (2,355 mu). The 4 Including 1,700 mu of emerged plants, 262 mu of floating plants, 393 mu of sub-merged plants. 26 overall delay, the unfinished pumping station and the low survival rate of the plants in the wetland rendered the project unable to become operational on time and prove its effectiveness. Monitoring and Evaluation could not be carried out to support an evidence based assessment of the component’s actual results and impact. The wetland is expected to be put into operation by August 2016. At least one year of monitoring data (once per month) are required to assess the actual treatment performance. So the earliest time to obtain the required data would be August 2017. In reality it may take longer as it takes time for the plants to grow and the wetland environment to become mature and fully functional. In the absence of actual data on effluent for the wetland component simulations were made to indicate potential effectiveness. The simulated data, based on other similar constructed wetlands using the actual monitored influent data through Water Quality Analysis Simulation Program (WASP) models, indicate that the potential contribution of the wetland to the reduction of pollutants/nutrients loads entering the Bohai Sea will be: 403.25 t/a (against the target 430.25 t/a; 93.78%); BOD 92.03 t/a (against target 215 t/a; 42.34%); NH3-N 12.37 t/a (against target 129 t/a; 9.59%); and TP 0.46 t/a (against target 12 t/a; 3.83%). However, the simulated COD reduction is questionable due to the reduced scale of the wetland and an estimate closer to one third of the target would appear more reasonable. The concern over the accuracy of the COD simulation also puts the entire simulation results into question. One factor that was underestimated during the wetland design was the improvement of the water quality in the Guangli River during the past few years due to comprehensive treatment conducted by various domestic programs. The original influent quality was COD 60mg/l, NH3-N 2.5 mg/l while the current quality is COD 40mg/l, NH3- N 2mg/l, which has already met the project end target (surface water standard class V). Some project activities (agricultural and rural pollution reduction) may have contributed to this improvement, but given the relative size of the project interventions (about 12%) its contribution is considered insignificant 5 . This raises a relevance issue because this improvement had been part of the Dongying municipal government master plan and should have been anticipated and taken into consideration when designing the project activities and setting appropriate target values for the pollution reduction measures. Actually the target values of effluent only meeting surface water standard Class V appears too conservative. Rural waste management: Out of the original plan of serving 9,325 people in eight villages and a treatment capacity of 233 tons per day only 5,118 people in five villages were actually covered (127 tons per day). By project closing only one facility had been put into operation due to the delay and lower than expected wastewater volumes. The actual monitored reduction in COD and SS is zero versus a target of 9.3 tons and 4.6 tons per year. Eighty three livestock waste storage tanks have been built with a total volume of 660 m3 as compared to 1,650 tanks originally planned with a volume of 2,500 m3. The 5 The total cropping area in Guangli River catchment is 20,030 hectare while the project treated area is only about 2,420 hectare (1,850 ha using balanced fertilizer and 570 ha buffer zone). 27 centralized composting facility was not built due to lower demand for such a facility and concerns over O&M. The projected pollution reduction is COD 20.67 t/a, TN 0.196 t/a, and TP 1.55 t/a. Agriculture pollution control:    Balanced fertilizer was applied on 1,862 hectares, versus the original 2,278 ha planned. Farmers participation rate was 44% (1,661 households out of 3,723 households) versus the target of 80 %. Four Buffer strips were completed on only 10% of the designed 1,109 hectare of land and a total length of 1,709 meters of eco- trenches were built in four pilot villages instead of the planned 6 villages. The side slopes of the trenches were not stabilized as designed, and the vegetation consisted mainly of naturally grown plants instead of the planned plant species that would have had stronger capacity to absorb TN and TP. The pollution reduction for this component is TN 7.4 tons/year (the PAD had mistakenly set the target for agricultural non-point pollution reduction as NH3-N instead of TN) versus the target of 5 tons/year, and TP 0.79 tons/year versus the target of 0.123 tons/year. These two targets are over-achieved despite the reduced scope because the target values for balanced fertilizer were believed to be set too low. The monitoring data for balanced fertilizer is 5.92 tons/year and 0.74 tons/year for reduction in TN and TP respectively. The achieved total reduction of pollutants/nutrients loads for all the above components was COD 20.67 t/a (against target of 517.6 t/a; 3.99%); BOD none (against target 215 t/a); NH3-N – none (against target 134 t/a); TN 7.596 t/a (against target of 5.743 t/a set at intermediate outcome level, 132%), and TP 2.34 t/a (against target 12.9 t/a; 18%). Therefore the project failed to achieve the second objective. 3.3 Efficiency The Project’s efficiency is rated negligible. At appraisal the project conducted a cost benefit analysis with a series of assumptions that in hindsight appear both conceptually questionable and difficult to quantify and attribute. The main benefits included cost savings associated with reduced application of chemical fertilizer and pesticides, increased productivity in agriculture, and increase in the value of the land surrounding the constructed wetland. Indirect benefits included improvement in water quality, biodiversity protection in the Bohai and the Yellow Seas, and carbon emission reduction. The economic costs of the project included capital costs and O&M costs. The economic internal rate of return (EIRR) of the project at appraisal was estimated at 13.8%, while the EIRR of wetland construction component and the treatment of pollution from rural areas and agricultural production was 14.5% and 12.3% respectively. The net present value (NPV) of the project at a discount rate of 8% was estimated at RMB153.6 million. Sensitivity analysis conducted by increasing capital costs by 10% and decreasing benefits by 10%, as well as a combination of the two, yielded EIRRs in excess of the discount rate of 8%. However, this approach is problematic as it is practically impossible to attribute the land value increase (accounting for 80% of the quantifiable benefits as an assumption at appraisal) to the construction of the wetland, i.e. the land values might have increased in a similar way without the wetland construction. 28 Given the public goods nature of the project components, a cost effectiveness analysis would have been the appropriate approach. As already discussed in Section 3.2, at this point it is difficult to assess whether the assertions in the PAD that the components were cost effective are indeed valid. As for the constructed wetland there is evidence from similar projects, such as the GEF financed China Ningbo Wetland Project, that the cost per unit water treated can be significantly lower than conventional treatment (about 0.1 yuan/ton versus 0.40-0.50 yuan/ton). However, in this project the cost of wetland construction was 54% higher than the original estimate and the treatment area was significantly smaller than designed. Since the wetland is not operational yet it is also unclear how high the O&M costs will be, making a cost effectiveness estimate for its operation difficult. Similarly, the PAD claims that the rural waste water treatment component is cost effective because of low capital investment, scattered nature of houses and availability of waste land to dispose tail water. In reality, the volume of wastewater treated is very low due to the fact that the design excluded toilet water and fewer farmers remain in the villages due to urbanization. The agricultural pollution reduction component, while designed to reflect best international practices, was applied on a smaller land area due to urbanization and insufficient commitment from the communities to fully implement the improved practices. Also, there are insufficient data available to support the assumption that farmers actually increased productivity and reduced input cost as a result of this component. 3.4 Justification of Overall Outcome Rating Rating: Unsatisfactory Based on substantial relevance of the Project's objectives, modest relevance of design and implementation, modest and negligible efficacy of the project’s development objectives, and modest efficiency, the overall outcome is rated unsatisfactory. The Project has failed to meet the GEO of demonstrating innovative and cost-effective water pollution control practices in the Guangli River catchment of Dongying Municipality, contributing to pollution reduction in the Bohai Sea. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development The project’s social benefits include raising awareness among villagers about the importance of environmental protection, water pollution control and the benefits of eco farming methods. It also improved the sanitary conditions in villages through rural wastewater treatment and livestock waste storage. This will benefit women and children more, as the majority of men are migrant workers. The project neither had a specific poverty nor a gender focus. (b) Institutional Change/Strengthening The project had a positive impact on the participating institutions as they were exposed to innovative technologies and domestic and international experience in project management, wetland design and construction and sustainable farming practices. The planned training and capacity building activities both domestically and internationally were reduced as a 29 result of a change in national policy. This has to some extent affected their ability to learn and exchange experiences with other provinces and countries. (c) Other Unintended Outcomes and Impacts NA. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not applicable. 4. Assessment of Risk to Development Outcome The risk to development outcomes is rated as high. The wetland is currently not operational so it remains uncertain how well the system will function and provide the intended benefits, especially given the high salinity content and the cold weather conditions in winter. The wetland area is also quite large and its O&M, harvesting of the plants and management may prove challenging. The rural wastewater treatment facilities have a substantial risk of not remaining functional in the long term because the communities seem to lack sufficient incentives to pay for O&M and the water flows are lower than expected. The FEPAs are also at risk as they are designed to be self-financing and fully participatory but in reality farmers’ incentives to participate and contribute financially are low. The risk to the sustainability of some non-point agriculture pollution components including application of balanced fertilizer, eco trenches and buffer strips are substantial without the financial and technical support of the project, and a lack of commitment by the farmers. Livestock waste storage will be relatively sustainable because the O&M cost is low and there is significant uptake by the farmers. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Unsatisfactory Overall, the Bank team made substantial efforts and played an important role in facilitating the project’s preparation and design to ensure that the project objective was of strategic relevance and was responsive to the priority issues that were of major concerns to the government. Preparation and appraisal of technical aspects was conducted with the Bank’s assistance, engaging the counterparts in dialogue, studies and fieldwork to develop an innovative approach and implementation modality. The essential component to achieving the GEO was the wetland and the bank team helped introduce an innovative wastewater treatment concept which was applied in Dongying for the first time. The original wetland design supported by the Bank team was sound. The Bank also ensured that fiduciary and safeguards arrangements were adequate and could meet the Bank’s and country’s respective policies and requirements. However, there were significant shortcomings related to the design features that affected project performance and results. As explained in Section 2.1 these included the inefficient 30 institutional arrangements, short implementation period, GEO and key indicators not fully aligned, design of project components and activities too complex, high expectation of the FEPAs, design of the rural wastewater treatment facilities with insufficient water volume, design of the 1 m3 livestock waste storage not being very practical. (b) Quality of Supervision Rating: Moderately Unsatisfactory The Bank provided frequent and timely implementation support and supervision during the whole process of implementation. At the beginning of implementation, the Bank team identified the issue of a changed design of the Dongbalu wetland and immediately requested the counterparts to discontinue implementation and take remedial actions. The Bank team engaged in a proactive and persistent process of negotiations to reverse the wetland design to the extent possible to bring the project back on track towards achieving its GEO. It sought support from higher level leadership, including the Provincial and Dongying municipal government and Bank management, to help coordinate with the relevant parties and solve the problem, and provide counterpart funding. The Bank team also provided strong technical support to identify suitable solutions to re-design the wetland in a technically and financially viable way. After the third revised wetland design was agreed and acted upon the Bank team provided intensive support to accelerate implementation through the regular supervision missions that were undertaken bi-annually, as well as through site-specific technical visits, as evidenced in the aide memoires. During the last year of implementation the Bank team worked effectively with the PMUs to overcome the implementation hurdles to finally complete the construction of the wetland. The Bank team also ensured that financial management, procurement, environmental and social safeguard issues were effectively addressed and training provided as needed. Mission aide memoires and ISRs were regularly completed, and of good quality. On the other hand, some shortcomings remain: (i) The institutional arrangements remained as a key weakness, and the problem was identified at the beginning of the project. While it might have been challenging to totally rectify the situation, stronger institutional support, including seeking more support from the project leading group, and/or a possible restructuring, should have been provided to help the client improve its project management efficiency; (ii) Due to the serious Dongbalu wetland construction problems, supervision of the Bank predominantly focused on solutions to this component. Therefore comparatively less attention was paid to the other parts of the project; (iii) ISR ratings should have been downgraded to MU or below much earlier because the change of the wetland design and other delays posed a significant risk to both implementation performance and achievement of the GEO. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Unsatisfactory Given the quality of Bank’s performance at entry and during supervision, the Bank’s overall performance is rated moderately unsatisfactory. Throughout the life of the project, the Bank team provided strong technical and operational support to the client. It identified the critical issues in a timely manner and made significant efforts to help solve the ensuing problems. However the apparent shortcomings described above, including flaws in project 31 design and supervision, risk assessment, candor of ISR ratings, and lack of restructuring warrant a MU rating for Bank performance. 5.2 Borrower (a) Government Performance Rating: Unsatisfactory The agencies involved including MOF, the Huai River Commission, the Shandong provincial government and the Dongying municipal government, as well as other members of the project leading group, all played important an important role, to varying degrees, in guiding and supporting the development and implementation of the project and its Global Environmental Objectives. They provided leadership, coordination and services, financial and human resources, and made institutional arrangements. In the beginning, the local (Dongying municipal) government was committed to the project objectives and innovative approaches. It provided institutional and financial support, set up the PLGs and PIUs at various levels and made commitments to provide further counterpart funding. However, there were frequent changes of leadership during project preparation and implementation. Fairly early on, the municipal government priorities and policies changed compared to the original project design, which led to the substantial changes to the wetland design. This in turn caused significant implementation delays and a reduced scope and pollution reduction function of the wetland. After the revised design was eventually agreed upon, the government continued to provide support, especially during the last year of implementation, to accelerate implementation and complete the project activities to the extent possible. However, since the changed design of the wetland is considered to be the main reason for the inability of the project to achieve the expected pollution reduction objective, government performance is rated unsatisfactory. (b) Implementing Agency or Agencies Performance Rating: Moderately Unsatisfactory (MU) Provincial PMO: MU. The provincial PMO was in charge of overall coordination and project management. It made strong efforts to coordinate cross sectoral activities, which proved to be difficult due to the inefficient institutional set up. Being located in a different city it made extra efforts to travel to the project site multiple times to provide implementation support and supervision, especially in the later stages of project implementation. However it would have been helpful if the vigor of supervision were there in the beginning, and the critical issue of the wetland design change identified earlier and the Bank’s agreement obtained before the earthworks were carried out to avoid a series of substantial issues later. More proactivity in seeking support from the PLGs to solve the problems would have also been helpful. Dongying Municipal PMO: MU. Overall, the Dongying PMO (Water Resources Bureau) was efficient in completing the tasks it was assigned and delivered the sluice gates component on time and within budget. However, it was less efficient in cross sectoral coordination for the reasons described in section 2.2 as a result of the inefficient institutional set up, especially during the early stage of the implementation. Its performance improved later with more experience gained and has made significant efforts 32 to support and urge the other agencies to accelerate implementation and improve project performance. Dongying Municipal Urban Construction Bureau: MU. The Urban Construction Bureau was in charge of implementation of the Dongbalu constructed wetland. Overall it demonstrated strong technical capacity and completed the construction within a short period of time. However, when the design change was decided at the municipal level the bureau did not obtain agreement from the Bank until after it had gone far into construction per the revised wetland design. This led to the serious delays already discussed. And it took a long time for them to agree on and finalize the wetland design after the Bank interfered. Dongying Municipal Agricultural Bureau: MU. The Dongying Municipal Agricultural Bureau was in charge of the rural waste management and agricultural pollution control components, as well as the establishment of the Farmers’ Environmental Protection Associations, and training components. While the physical implementation of the components was managed reasonably well, there were substantial delays and reduced scope in several activities. The training of farmers was less effective in explaining the linkage between the investments and the project objectives and there was no systematic assessment of the impact of farmers training conducted. (c) Justification of Rating for Overall Borrower Performance Rating: Unsatisfactory Frequent changes in leadership and a unilateral decision by the municipal government to change the design of the key component of the project led to substantial implementation delays, reduced scope and ultimately a failure to achieve the GEO on time. Line agencies tried their best to implement their respective activities but coordination was difficult throughout implementation leading to underperforming and mostly delayed results. 6. Lessons Learned Government commitment is critical. This project showed once again that sustained government commitment is key to effective and successful implementation. While even frequent changes in government leadership are a regular challenge in development work, it is critical to maintain close communication between the client and the Bank throughout the preparation and implementation process. The fact that the client not only changed the design of the most critical component of the project without consulting the Bank, but also implemented the civil works unilaterally, led to a very significant delay in overall implementation, reduced scope, and eventually to a failure to reach the agreed objectives on time. Restructuring should have been carried out. When very early in the process the government decided to change the wetland design it took over one year of complex and protracted negotiations to agree on a revised treatment wetland design. During most of that period the outcome was uncertain because most of the wetland earthworks had already been completed in a way that was not well suited for a pollution treatment wetland. It was evident that even if agreement could be reached on the final design it would also be unlikely to reach the design capacity and therefore the full anticipated pollution control 33 impact. Given the serious nature of the component change and obvious significant cost implications, and also changes in other components, an early and thorough restructuring should have been carried out and may have led to a better outcome. Appropriate institutional arrangements are critical for successful coordination and implementation. Integrated and complex projects that require support from several line agencies are prone to coordination challenges and often suffer from difficulties in coordinating several equal line agencies, and a lack of ownership among the departments that are not in charge of most of the project activities. To ensure effective coordination it is critically important to locate the lead unit in a department that has the authority to coordinate other departments, such as in the finance bureau or the planning agency. In cases where this is not practical, at least the lead unit should be in charge of the biggest component and a project leading group needs to play a more active role in ensuring effective coordination. Complexity of design needs to match the funding size and implementation period. Finding the right balance between an innovative integrated design and practical implementation capacity proved to be a challenge. While it was conceptually desirable to integrate both infrastructure focused interventions such as the wetland with demand-side management interventions (awareness raising, policy incentives, behavior change) and management practices (introducing new technologies and environmentally friendly agriculture production practices), this complexity proved to be too difficult to coordinate and implement in this project. As a relatively small intervention with a short implementation period of only three and half years the project was only partly able to overcome the coordination and implementation challenges. One of the lessons learned is that balanced and integrated projects of this nature must have a certain size and funding volume (or blended with loan projects) to get full leadership attention, and they need a longer and more realistic implementation period to succeed. Farmer Environmental Protection Associations need to be based on community ownership. The FEPAs were a novel and innovative design feature in this project. Building on successful experiences from water user associations and producer associations in other parts of the country, the idea was to connect farmers and communities around environmental issues and jointly implement project interventions, take responsibility for O&M and replicate best practices in their respective villages. While this idea had appeal to some, the majority of farmers did not see sufficient incentives to engage in a meaningful way. The lesson here is that the introduction of a new and unproven innovation is risky and that in the future a much more thorough analysis and preparation is needed before such a component is integrated into an already complex operation. The team should be commended for taking risks but introducing innovation needs more evidence of the key factors that are critical for success upfront. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies Implementing agencies’ comments have been incorporated into the ICR and reflected in the summary of Borrower’s ICR attached in Annex 4. (b) Cofinanciers NA 34 (c) Other partners and stakeholders NA 35 Annex 1. Project Costs and Financing (a) Project Cost Financing by Component Appraisal Actual/Latest Estimate Estimate Component (%) (USD (USD millions) millions) A. Wetland Construction and Sluice Gate Operation Optimization 27,188 41,572 153 A1 Constructed Wetland at Dongbalu 19,473 33,994 175 A2 Sluice Gate Operation Optimization 923 166 18 A3 Resettlement Compensation 6,792 7,413 109 B. Agricultural Pollution Control and Rural Waste Management 4,591 2,088 45 B1 Rural Waste Management 2,255 1,626 72 B2 Agricultural Pollution Control 2,003 374 19 B3 Establishment and Operation of FEPAs 333 88 26 C. Capacity Building and Policy Studies 1,851 355 19 C1 Education and Training Center 193 37 19 C2 Capacity Building 778 35 4 C3 Policy Studies 880 283 32 D. Project Management and Implementation Support 2,290 826 36 D1 Implementation Support 1,849 313 17 D2 Monitoring and Evaluation 91 16 18 D3 Project Management 350 497 142 Total Baseline Costs 35,920 44,842 125 Physical Contingencies 1,908 0 0 Price Contingencies 0 0 0 Total Project Costs 37,828 44,842 119 Project Preparation Facility (PPF) 0 0 0 Front-end fee IBRD 0 0 0 Total Financing Required 37,828 44,842 119 (b) Financing Source of Funds Type of Appraisal Actual/Latest Percentage of Cofinancing Estimate Estimate Appraisal (USD) (USD) Borrower Counterpart 32,828,000 40,897,900 124.58% funding GEF Grant 5,000,000 3,944,700 78.89% Total 37,828,000 44,842,600 119% 36 Annex 2. Outputs by Components Project Outputs Plan at Appraisal Actual Completed Component A Wetland Construction and Sluice Gate Operation Optimization (a). Construction of wetlands The feasibility study report Due to the revised design of the at Dongbalu consisting of free- included a constructed free- free flow surface wetland, the surface flow wetlands, an flow surface wetland with a occupied land area of the ecological retention pool, an total land area of 2,625 mu completed wetland is same as entrance gate, a gated overflow (1.8 km2) mainly for the the original plan: 2,625 mu (1.8 weir and a pumping station, purpose of water treatment, of km2). But the completed water and provision of related which the water covered area, covered area, i.e. the wetland equipment; i.e. the wetland area that area that possesses pollution possesses treatment capacity treatment capacity, was only was 2,485 mu. The area about one-third of the original covered by aquatic plants was plan (874 mu versus 2485 mu). 2,355 mu (emerging plants The significant delay in 1,700 mu, floating plants 262 completion of the wetland left mu, and sub-merged plants no time for its operation and 393 mu), with 95% of monitoring. The area covered vegetation coverage in the by aquatic plants in the wetland surface area . It will treat is 561 mu and vegetation about 70,000m3/day (2,900 coverage in the water surface m3/hour) between March and area is 64.2%. The current November, and 25,000 influent water quality is m3/day (1040 m3/hr) between significantly improved (COD December and February, i.e. 40mg/l, NH3-N 2mg/L) due to about 43% and 15% of total the comprehensive treatment river flow (50 - 60 million conducted by various domestic m3/year). The designed programs. Some project influent quality: COD Cr ≤ 60 activities (agricultural and rural mg/L, BOD5≤20 mg/L, NH3 pollution reduction) may have -N≤8 mg/L, TP ≤1.0 mg/L; contributed to this while the effluent quality is: improvement, but given the COD – 40 mg/L; BOD – 10 relative size of the project mg/L; ammonia – 2.0 mg/L; interventions (about 12%) its TP -0.4 mg/L. contribution is considered insignificant. In 2008 the total In addition, an ecological cropping area in Guangli River retention pool, an entrance catchment was 20,030 hectare gate, a gated overflow weir while the project treated area and a pumping station were to was only 2,400 hectare (1,850 be built. fertilizer and 571 buffer zone). Moreover, according to a survey carried out in 2010, 60% of the pollution was from domestic sewage, 30% 37 agricultural non-point pollution, and 10% industrial pollution. So apparently the sewage pipelines connecting more households to the urban sewers and the wastewater treatment plants built in the past few years have been very effective. But this improvement should be part of the Dongying municipal government master plan and should have been anticipated and taken into consideration when designing the project activities and setting appropriate target values for the pollution reduction measures. Actually the target values of effluent meeting surface water standard V appear too low. Another reason for the wetland not being operational was that the pumping station located at the north end of the wetland has yet to be completed. The civil works of the pumping station has been finished and the pump purchased. Yet as part of the master plan the Dongying government later decided to increase the capacity of the pumping station and planned to purchase another pump with larger capacity to pump water from the Dongbalu wetland and the other two wetlands to be constructed by the government funding. The pumping station is expected to be completed around August 2016. (b). Upgrading the automatic Upgrading the automatic gate The automatic gate control gate control system covering control system covering threesystem covering three sluice three sluice gates on the sluice gates on the Guangli gates on the Guangli River, and Guangli River, and the gates at River, and the gates at the the gates at the entrance and the entrance and exit of the entrance and exit of the exit of the Dongbalu wetlands Dongbalu wetlands Dongbalu wetlands have been completed and operating well. (c) Provision of cash transfers c) Provision of cash transfers Provision of cash transfers for 38 to Affected Persons of the to affected persons of the the planned activities under this wetlands construction. wetlands construction. sub-component was completed in 2012. The total actual cost was US$ 7.41 million compared to the estimated US$ 6.79 million in the PAD, fully financed by counterpart funding. Component B Agricultural Pollution Control and Rural Waste Management (a) 1. Wastewater treatment in The wastewater part of sub- One village dropped out Participating Villages; component B.1 was supposed because its sewers were already to support the construction of connected to the urban domestic rural domestic wastewater wastewater treatment plant. treatment works in eight Four villages have completed selected villages located in the the construction of their upper reaches of the Guangli wastewater treatment facilities River Basin. before the closing date. One village changed the design from a waste water stabilization pond to artificial wetland treatment with reduced effectiveness, as this community lives closer to the sewage facility and expressed concerns about odor and potential safety risks. Two villages (financed by counterpart funding) experienced delays and are completed in June, 2016. The treatment facilities in the above mentioned five villages cover 5,118 people (127 ton/day) compared to 9,325 people (233 ton /day) as originally planned. Furthermore, the wastewater volume collected from the project households is low because 1) the domestic wastewater design only included laundry, kitchen and shower wastewater but did not include the biggest source - toilet water; 2) more and more farmers have become migrant workers and left only the elderly and children behind in 39 the villages. During implementation the Bank team recommended that the wastewater system should include toilet water but the investment to renovate toilets should be borne by farmers. However, farmers showed little interest and thus this did not materialize in the end. Due to the low water volume and implementation delay only one facility has been put into intermittent operation by project close. The main issue remains to be whether sufficient sewage can be collected and the facilities could be sustainably utilized with sound O&M measures. (a) 2. Livestock waste It was planned to build 1,650 In reality 83 tanks have been collection and livestock waste storage tanks built with a total volume of 660 treatment in of 3 different sizes with a total m3, and the centralized Participating Villages; volume of 2,500 m3. In composting facility was not addition, a centralized built due to lower demand for composting facility was such facility and concerns over supposed to be built, which O&M. The number of storage would include (i) a manure tanks is significantly lower than collecting system to collect the original plan due to smaller livestock wastes from all demand as a result of the animals in two villages, (ii) an reduced number of livestock aerobic composting workshop households in the villages. With to treat collected manure and more people working outside produce organic fertilizer, and the villages as migrant workers (iii) a liquid distribution livestock production is shifting system to convey livestock from scattered smallholdings liquid wastes for irrigation towards larger scale farms. and land application. Also, the originally designed storage tanks were mostly 1 m3, which were too small for practical use.   (b) Introduction of agricultural The original design was to Ten villages participated in the pollution reduction apply balanced fertilizer to program and received subsidies technologies and management cover 2,278 hectares of land. for purchase of balanced practices in Participating fertilizer. The actual result was 40 villages through 1,862 hectares, partly due to the comprehensive and balanced overall decreasing cropping fertilizer applications, area as a result of urbanization, provision and use of insect and also the implementation luring lamps, and construction delays. Training was provided of eco-trenches and buffer to farmers to enable them to strips in crop fields; and better understand its benefit, monitoring of the results of introduce the concept of eco- implementation of these farming, and increase utilization technologies and practices effectiveness of the fertilizers while reducing water pollution. Farmer interviews confirmed that there was a high level of community participation. At the same time technical assistance and services need to be improved to help farmers increase awareness of its linkage with pollution reduction and achieve better results. 100 solar insect luring lamps All 100 solar frequency insect installed luring lamps were installed, out of which 30 each were in Huangdian and Shangzhuang, 20 each in Shaotou and Wangying. Each lamp could cover 2 – 3 hectares. The previous mission observed that some lamps were stolen. The ICR mission observed that the lamps were collected from the field for storing and will be reused next year. Interviews with farmers confirmed that they were very positive about the function of these lamps witnessing lots of insects being killed. However farmers indicated that there wasn’t significant reduction of pesticide use as a result of the use of the lamps. This was because the area covered by the lamps wase relatively small and they were not convinced that the lamps can substitute a significant amount of pesticides. 41 About 1,109 hectares of In reality only 10% of the farmland in the six designed area has been participating villages were completed (4 buffer strips built planned to be used as buffer instead of the planned 6) strips without using any because most farmers were not fertilizers in order to reduce willing to adopt the zero the TN and TP inflow into the fertilizer application approach Guangli River. due to concerns over lower productivity. Meanwhile, a total length of 1,709 meters of eco- trenches was built in the four pilot villages instead of the 6 planned villages. The effect of eco-trenches turned out to be lower than the original design because some of the side slopes of the trenches were not stabilized as designed, and the vegetation was consisted mainly of naturally grown plants instead of the planned plant species that would have had stronger capacity to absorb TN and TP. (c)Establishment, equipping It was planned to establish a In reality, only 10 FEPAs were and operation of FEPAs in total of 22 FEPAs in 22 established in 10 villages Participating Villages. villages (a minimum of eight (registered and with rules and FEPAs would be established regulations stipulated and for project activities under offices provided), out of which sub-components B (a) rural about 2 – 3 were functioning waste treatment, and B (b) better with a higher level of agricultural pollution participation and better reduction, and other FEPAs awareness of the pollution would be established for reduction objectives. The pollution reduction activities FEPAs were mainly led by financed by non-project funds village chiefs and management as a part of project replication. teams. Among most villagers The purpose was to enable interviewed the understanding farmer communities to of the roles and responsibilities participate collectively in of the FEPAs was limited. environmental protection While recognizing the project activities, to take innovative nature of the FEPAs, responsibility for O&M, and the practicality and to replicate best practices in sustainability of these FEPAs, their respective villages. which were mainly of a public goods nature and seemed lacking community ownership 42 and funding, is of concern. Component C Capacity Building and Policy Studies: (a) Establishment and An Education and Training operation of an environmental Center was established in 2014 protection education and within the Dongying Vocational training centre to be located in College. Technical training was Dongying Municipality for provided by the center to training and dissemination of government officials, project technologies and good staff and FEPA members on practices in environmental subjects related to the project protection, nutrient activities implementation and management and pollution management. The total number reduction; of trainees is 4,420 farmers, including 2,081 trained in Kenli county, 300 in Dongying city, 439 farmers trained externally and participated in study tours, 1,600 farmers trained in the field, 44 PMO staff trained and participated in study tours. Most farmer training was conducted at a late stage and thus had limited impact for implementation. The original cost allocation for this subcomponent was USD 193,000 (100% counterpart funding) while the actual cost was USD 37,000 (100% GEF grant). Only 19% of the original budget was spent because the civil works for building the training center did not happen. The training center is located in the existing Dongying Vocational College instead. (b) Capacity building activities Capacity building activities to A substantial number of FEPA to provide technical and provide technical and Project members were trained on a Project management training management training for staff variety of subjects concerning for staff involved in Project involved in Project rural and agricultural pollution implementation and implementation and reduction by the Kenli monitoring monitoring. Capacity building agricultural extension service and policy studies were center and Dongying designed to be closely linked Vocational Colleague with the Components A & B. (Education and Training A capacity building program Center) and so on. A total 43 was developed by the number of 4,420 farmers have Provincial and Dongying been trained, including 2,081 in PMOs, which included Kenli county, 300 in Dongying training, and domestic and city, 439 farmers trained international study tours externally and participated in related to project study tours, and farmers field management, implementation training was 1,600, 44 PMO and future O&M. staff have been trained and participated in study tours. The PPMO organized an overseas study tour in September 2015 regarding project management, and Dongying PMO organized domestic study tours regarding agricultural and rural waste management. However, most farmer training was conducted at a late stage and thus had limited impact on project implementation. And much of the external training and study tours could not be implemented due to changes in national government policy in this regard. The original cost allocation was US$ 778,000, among which GEF grant was US$ 240,000 while the actual cost was only US$ 36,000, among which GEF grant was US$ 29,000. (c) Evaluation study of the The policy studies were The policy studies and planning effectiveness of constructed originally designed to be exercise started quite late due to wetlands in the treatment of comprehensive studies to delays of other components. At polluted water based on the assess project innovations in project closure, some reports analysis of the Project rural environmental were completed while others monitoring results; management, and create a were in the process of development of an agricultural replication strategy for finalization, mostly using pollution reduction and rural dissemination of best practice simulated analysis instead of waste management strategy examples in an expanded area actual monitoring data. So their and plan for the Guangli River within the Huai River Basin. effectiveness remain to be Watershed in the Dongying verified after the facilities will Municipality, including an be put into full operation. evaluation study of the related Shandong University has Project interventions for the delivered the report on the purpose; and development of a contracted policy studies. On Huai River Basin-wide October 20 – 21, 2015 a replication strategy for cost- seminar was held in Dongying 44 effective water pollution with 85 participants, including control, including representatives from Hua River dissemination and training and Commission, Shandong workshops as required for the Provincial EPA, and other purpose. domestic experts to discuss and disseminate the relevant lessons and experiences. Another workshop was held in Dongying in December 2015 to further disseminate the lessons learned. Due to the implementation delay this sub- component was also significantly scaled back with the original cost estimate being US$ 880,000 (among which GEF is US$ 770,000) while the actual being US$ 286,000 (100% GEF grant). Component D Project Management and Implementation Support: (a) Provision of technical The Dongying Municipal City assistance for the review of Management Bureau and technical designs and tendering Agricultural Bureau hired the documents, construction relevant experts to provide quality of Project facilities, and technical assistance for project for Project reporting; technical designs, tendering documents, construction supervision, including wetland specialists, procurement specialists, FEPA specialists etc. Dongying PMO hired a third party consultancy to provide technical support for the preparation of the Feasibility Study Report. (b) Project monitoring and Project progress and technical M&E activities started late due evaluation; monitoring and evaluation, to the overall implementation including water quality of delay. Dongying Environmental wetlands inflow and outflow, Monitoring Station was water quality of treated rural contracted to monitor and wastewater, effect of changes assess the impact of the in fertilizer use on Dongbalu Wetland and surrounding water quality. Wastewater Treatment. The relevant monitoring data were provided for the period from September to December 2015, 45 and monitoring will last until June 2017. The wetland related results indicators for effluent could not be monitored because the wetland has yet to become operational. Most rural wastewater treatment indicators are also unavailable due to the fact that the facilities are not yet fully operational. Estimations and simulated assessments based on other similar operations have been carried out as a part of the Study of the Effect of Wetlands on Pollution Reduction. Besides, Shandong Agricultural Academy of Science (SAAS) has carried out monitoring and assessment of the impact of the agricultural pollution reduction activities, which included some actual monitoring data and evidence based analysis. SAAS has been contracted to provide monitoring and evaluation services for a duration of 5 years. They were supposed to provide semi-annual reports to the Dongying PMO from the beginning of 2014 to the end of 2018. Due to the implementation delay their monitoring work only started in 2015, so it will last for 4 years instead of 5 years until 2017. The SAAS has delivered the agricultural pollution reduction monitoring/study report (including estimate of pollution reduction) on December 25th, 2015. However the report is mostly based on estimated results instead of actual monitoring data. Therefore its effectiveness remains to be verified once the wetland and other facilities become fully operational. 46 (c) Support for Project The project management management by the PMOs and component (D) only used 36% PIUs. of the total budgeted resources, and only 41.69% of planned GEF grant was used. The institutional set up made the cross agency coordination difficult. Furthermore, the PMO (DWRB) was implementing only one small sub-component, while most other activities were implemented by CMB (wetland), and to a lesser extent by AB (non-point pollution). This arrangement provided fewer incentives and little leverage for the PMO to lead implementation overall. In hindsight, it would have been more appropriate and likely more effective, to put the DPMO in a higher level comprehensive bureau such as the Finance Bureau or Planning and Reform Commission. 47 Annex 3. Institution Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Xiaokai Li Senior Water Resources Management EASIN Task Team Leader Specialist (TTL) Ximing Zhang Senior Water Resources Specialist EASCS Co- TTL Joe Zhao Wastewater Management/Constructed Consultant Technical Specialist Wetlands Weiguo Zhou Rural Wastewater &Agricultural Pollution Consultant Operations Control Specialist Peter Haase Constructed Wetland/Wastewater Consultant Technical Specialist Management Zongcheng Lin Senior Anthropologist EASCS Social Safeguards Feng Ji Environmental Specialist EASCS Environmental Safeguards Jian Xie Senior Environmental Economist EASER Economic analysis Yi Dong Senior Financial Management Specialist EAPFM Financial Management (FM) Yuan Wang Procurement Specialist EAPPR Procurement Marta Molares-Halberg Lead Counsel LEGES Lawyer Robert O’Leary Senior Finance Officer CTRFC Disbursement Tomoko Kato Operations Officer EASIN Operations Vellet E. Fernandes Program Assistant EASIN Administrative and Client Support (ACS) Hongwei Zhao Program Assistant/Team Assistant EACCF ACS Dan Xie Program Assistant/Team Assistant EACCF ACS Supervision/ICR Dong, Yi Senior Financial Management Specialist EAPFM FM Environmental Specialist EASCS Environmental Ji, Feng Safeguards Lin, Zongcheng Senior Anthropologist Consultant Social Safeguards Yao, Songling Senior Social Development Specialist GSU02 Social Safeguards Zhang, Ximing Senior Water Resources Specialist GWA02 Co-TTL Lead Water Resources Management GWA01 TTL Li, Xiaokai Specialist Wang, Yuan Senior Procurement Specialist GGO08 Procurement Yu, Zhuo Finance Specialist WFALN Disbursement Anis Wan Operations Officer GEN02 ICR team leader Cai, Mantang Water Environment & institution specialist Consultant Environment Li, Ou Social Development Specialist Consultant Environment Wu, Deyi Constructed Wetland Specialist Consultant Procurement Jieli Bai Program Assistant EACCF ACS Hongwei Zhao Program Assistant EACCF ACS 48 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY08 3.74 13,932 FY09 13.86 37,589 FY10 18.94 78,567 FY11 16.49 77,726 FY12 9.78 87,357 Total 62.81 295,171 Supervision/ICR FY13 9.56 52,220 FY14 6.17 37,578 FY15 4.73 40,924 FY16 4.59 46,749 Total 25.05 177,470 49 Annex 4. Summary of Borrower's ICR and/or Comments on Draft ICR I. Project Background, Objectives and Content 1.1 Project Background and Objectives In recent years, the ecological problems of Bohai Sea have become increasingly prominent and terrigenous excessive discharge phenomenon is still serious; the marine development scale of region surrounded by Bohai Sea has extended and the contradiction between the development and protection is becoming more and more obvious. The pollution of sea area in Dongying is relatively serious while it is the direct victim of pollution. As the main drainage channel running through the Dongying downtown and the only river connecting Yellow River with Bohai Sea, due to the fast development of industry and agriculture in Guangli River basin in recent years, the pollution aggravates. The water body of this river basin is polluted seriously, so the treatment to the pollution in Guangli River basin has no time to delay. Based on this, Dongying City plans to reduce the emission of terrigenous nutrients and pollutants through conducting comprehensive prevention and control of river basin pollution in Guangli River in Dongying City to reduce the negative impact on Bohai Sea so as to establish a model project with innovative concept and high benefits. Dongying City uses grants from Global Environment Facility (GEF) and local supporting funds to start to implement “Huai River Basin Marine Pollution Reduction Project” in 2012 and the project construction period is 4 years (January 2012 to December 2015). This project uses Guangli River in the Huai River Basin of Shandong Province as a demonstration. Through sustainable measures, reduce the total pollutant discharge into the river of land point sources and non-point sources, improve the self- purification capacity of river water body, reduce the total pollutant discharge into the sea and reduce the degree of pollution of sea water; through the comprehensive management of river basin, control the pollution in Guangli River Basin in Dongying City and set a model for the river basin management of other provinces in Huai River Basin. The development goal of this project is to demonstrate innovative and cost-effective water pollution control measures in Guangli River Basin in Dongying City to contribute to the reduction of pollution in Bohai Sea. 1.2 Project Construction Content and Completion Grants to Marine Pollution Prevention and Control Project of Huai River Basin from Global Environment Facility is located in Dongying District and Guangli River Basin in Kenli County in Dongying City of Shandong Province, mainly including wetland construction and gate optimization, agricultural pollution control and waste management in rural area, capacity building and policy research, project management and implementation support; (1) Wetland construction and gate optimization Constructed wetland , including two parts, funded by GEF grants and counterpart funded respectively, which were constructed respectively on January 10, 2015 and December 5, 2014. By the end of September 2015, all works were completed according to the plan. Among them, some works with GEF grants mainly include earthwork arrangement, plant cultivation and construction of ecological floating bed; some local supporting works mainly include earthwork arrangement, diversion sluice, canal distribution, guide wall, culvert pipe and other construction. The design flow is 7.0×104m3/d (March –November) and 2.5×104m3/d (December-February of next year); designed influent quality: CODCr≤60mg/L, BOD5≤20 mg/L, NH3-N≤8 mg/L, TP 50 ≤1.0 mg/L; Effluent quality: carry out requirements of Class V standard of Environmental Quality Standard for Surface Water (GB3838-2002). The area covered by aquatic plants in wetlands is 374166m2 and vegetation coverage in the water surface area is 64.2%. Gate optimization. The content has been completed according to the plan and the current state of operation is good. Existing automatic gate control system includes three sluices in Guangli River and sluices newly built in the water inlet and outlet of Dongbalu wetland, which have run automatically. These facilities will play an important role in regulating the flow rate of river water, increasing the carrying capacity of the water body and adjusting the water balance of wetland. Resettlement compensation. Only those relating to wetlands in this project involve land acquisition and resettlement, which have been finished in 2012. Usage right of 2667 mu land was transferred to Dongying Municipal Government from SINPEC Shengli Oilfield Group. The relocation and full compensation of all enterprises have been completed successfully. (2) Agricultural pollution control and waste management in rural area ○1 Rural sewage treatment. In order to reduce the disorderly discharge of domestic sewage, choose Zhaojia Village, Shantou Village, Wangying Village, Xuejia Village, Jiangjia Village, Huangdian Village and Qinjia Village along the Guangli River to be the pilots. Among them, Huangdian Village, Xuejia Village, Qinjia Village, Jiangjia Village and Wangying Village use wastewater treatment process of “anaerobic acidification+ constructed wetlands (subsurface flow) to dispose domestic sewage. The total treatment capacity is up to 225m3/day and the designed influent quality is CODCr≤300mg/L, BOD5≤200 mg/L, SS≤150 mg/L, NH3-N≤40 mg/L and TP ≤6.0 mg/L; the effluent quality reaches Standard B of the first class in Discharge standard of pollutants for municipal wastewater treatment plant; the sewage treatment facility of Shaotou Village has no processing terminal and the sewage enter into the urban sewage treatment facility through the laid sewage pipe network and the effluent quality reaches Standard A of the first class in Discharge standard of pollutants for municipal wastewater treatment plant; Zhaojia Village disposes the domestic sewage by constructing constructed wetlands. The rural sewage treatment engineering in Huangdian, Xuejia, Qinjia, Jiangjia and Zhaojia supported by GEF grants has been completed fully and checked and accepted. The domestic sewage treatment engineering of domestic supported Wangying Village and Shaotou Village is under construction and the project construction is expected to be finished in the mid-May 2016. ○2 Excrement storage tank for cultivation dejection in rural area. In order to reduce the pollution of rural farms to the environment, the project has set up manure pit with different volume in Shaotou Village, Wangying Village, Xuejia Village, Jiangjia Village, Huangdian Village, Qinjia Village and other pilots for collecting cultivation dejection. There are 42 manure pits with 5m3, 40 manure pits with 10m3 and one manure pit with 50m3 in total (83 in total) and the manure pits are surrounded by protective fence. At present, manure pits are put into use. ○3 Agricultural pollution control. For the agricultural non-point source pollution, the project selected Shaotou Village closer to Guangli River and seriously polluting Guangli River as a pilot. By taking different measures of formulated fertilization, buffer zone and ecological intercepting ditch, the loss load of nitrogen and phosphorus in Guangli River Basin can reduce. a. Formulated fertilization. 2014 soil testing formulated fertilization was mainly carried out in Shaotou Village, Wangying Village, Shangzhuang Village, Huangdian Village, Tang Village, Zhaojia and Xi Ying and 2015 soil testing formulated fertilization was in Shaotou 51 Village, Wangying Village, Shangzhuang Village, Huangdian Village, Jiangjia, Qinjia and Xuejia. b. Ecological intercepting ditch and buffer zone. Huangdian Village, Shangzhuang Village, Wangying Village and Shaotou Village constructed the ecological intercepting ditch and buffer zone to dispose the tail water of the farmlands so that nitrogen and phosphorus in the farmland drainage can be removed and degraded. The ecological intercepting ditches in Huangdian Village, Shangzhuang Village, Wangying Village and Shaotou Village are respectively 400 meters, 642 meters, 365 meters and 302 meters. c. Trapping light. The solar-energy frequency-vibrancy trapping lights are installed in the farmland of the pilot villages in order to effectively deal with the insects and pests in the farmland and reduce the pesticide use, of which Huangdian Village and Shangzhuang Village install 30 lights respectively and Shaotou Village and Wangying Village install 20 respectively, totaling 100 lights. The effective radius of prevention and control is 60 meters according to the actual use of the lights so the prevention and control area of each light is about 1.13 hectares. d. Farmers’ environmental protection association. This protect establishes 10 farmers’ environmental protection associations which are equipped with offices and equipment and posted with rules and running procedures in 10 rural communities having important influence in Guangli River basin and totally trains members of the farmers’ environmental protection association for 66 times with 4420 person-times. (3) Capacity building and policy research ① Education and training center. The education and training center was established in Dongying Technician College in 2014 and then Dongying Agricultural Bureau hired Kenli County Agricultural Training Center as the technical supporting institution for relevant training of this project. The training institution is equipped with computers, projectors and other training equipment and prepares relevant training courseware. ② Action about capacity building. Kenli County Agricultural Training Center and Dongying Technician College have trained a large number of association members and the training theme is related with the rural and agricultural pollution control. The total number of the trained people has reached 4460 so far (including 40 people trained by the project office (purchasing and financial training)). ③ Policy research. At present, the subject research report—“Assessment and demonstration research on pollution prevention and control in Guangli River basin of Dongying City” undertaken by Shandong University has been completed and submitted in December, 2015. The grants project seminars were carried out in Dongying Blue Horizon Hotel respectively from October 20, 2015 to October 21, 2015 and on December 18, 2015, which discussed the project experience and the next-step work and shared the working experiences. The promotion of strategically plan formulation as well as website construction has been completed. (4) Project management and implementation support ① The project sets up the three-level management organization in order to promote the successful implementation of the project: provincial, municipal and community level, including Shandong Province Project Leading Group (PPLG), Huai River Commission, Shandong Province Management Office (PPMO), Dongying City Project Leading Group (DPLG) and Dongying City Project Management Office (DPMO). ② Project monitoring and evaluation. The monitoring and evaluation for this project are implemented by Dongying Environmental Monitoring Station and Shandong Province Academy of Agricultural Sciences. The monitoring and evaluation of the constructed wetland and rural sewage treatment facilities are entrusted to Dongying Environmental Monitoring 52 Station which is responsible for it until June, 2017. The agreement is signed with Shandong Province Academy of Agricultural Sciences to provide monitoring and evaluation of sub- content of the agricultural pollution control and the preparation of Monitoring and Evaluation Report about Agricultural Pollution of the Pilot Villages in Guangli River Basin has been completed. ③ Project management and support. Dongying Urban Management Bureau and Agricultural Bureau hire the relevant experts in the implementation process of the project to provide technical assistance for the review of the project technical design, bidding documents and construction quality supervision, including purchasing experts, wetland and rural sewage processing experts and commissioner consultation of the environmental protection association. Dongying Project Office entrusts the third-party advisory agency to provide the technical assistance for the project feasibility study, project progress tracking and monitoring, process report and completion report. 1.3 Project Investment Situation After completion of the project, the actual total investment is 44.8426 million dollars, of which actual grants of GEF is 3.9447 million dollars, accounting for 8.8% and the domestic supporting facilities are 40.8979 million dollars, accounting for 91.2%. The detailed project investment is shown in Table 1. Table 1 GEF Project Investment List S.N. Project name GEF grants Supporting funds Total US$ 000 US$ 000 US$ 000 1 Wetland construction and gate optimization 184.50 3972.75 4157.25 2 Agricultural pollution control and wa 162.69 46.13 208.82 management in rural area 3 Project management and implementat 34.83 0.69 35.52 support 4 Capacity building and policy research 12.45 70.21 82.67 Amount to 394.47 4089.79 4484.26 II. Main Factors influencing Project Execution 2.1 Positive Factors (1) Project management organization. From preliminary preparation to completion of the project, personnel in provincial and municipal project offices are kept stable, which guarantees successful development of project management work. (2) Working mechanism. Since May of 2014, project leading group convened a project meeting every two to three months to follow up project progress; from October of 2014 till now, provincial project office organized to go to Dongying every month to supervise progress of the project and solve problems met in the project in time, and reported progress and problems to World Bank every two months, which effectively propelled progress of project execution. (3) Project participants. All participants of the project played due role in project construction. Project management departments at all levels fully exercised function of decision- making and management. Beneficiaries of the project also basically participated in project design and management work by respective Farmers’ Environmental Protection Associations. 2.2 Negative Factors (1) Concept deviation. Earth excavation was conducted in wet land without consent of World Bank thus backfill was conducted again in excavation segments under requirement of World Bank, which delayed project progress to some extent. The reason is that: during initial 53 phase of the project, there was inconformity between concepts of Dongying Municipal Government and World Bank in function of wet land that Dongying Municipal Government hoped to build the wet land into wet land landscape park for relaxation and entertainment of citizens in Dongying while the concept of World Bank was that main function of wet land shall be removing contaminant in water body and environmental benefits shall be valued more. (2) Supporting funds. Although supporting funds of wet land construction had been listed into 2014 Dongying City Financial Investment Plan, execution period of the project was delayed to 2015. Municipal Government did not distribute funds of this item again when preparing annual budget of 2015, thus construction contract of the project was unable to be signed, which affected progress of project execution. Slow domestic supporting funds execution of sewage treatment facility construction in Shaotou and Wangying also affected execution progress of the whole project. (3) Lack of experience. It was the first time that execution units of the project conducted project of World Bank, thus it lacked management experience of the project and did not know well about World Bank procedure, especially withdrawal and account submission, which generated certain negative influences to project execution. To overcome difficulties, staff of every project execution unit studied legal documents and financial management guides in order to better understand project policies and activities; provincial Financial Department and municipal Finance Bureau actively directed payment activities of execution units. Besides, in order to help every party better understand grand payment work, inspection mission of World Bank conducted training on aspects of payment and financial management to financial staff and project management staff of Dongying City Financial Bureau, provincial project office, Dongying project office and three project execution units. (4) Department coordination. As there were multiple project management departments, they may work from different angles and had different understandings so that insufficient coordination between works of different departments was caused, which generated certain influence to project execution. (5) Slow withdrawal and account submission. One of the main reasons was slow project progress, and the other is that execution units were not familiar with withdrawal and account submission procedure of World Bank. Provincial project office and Financial Department took following measures to accelerate payment progress of the project: ① they signed to agree service standard, clarifying clear time requirements for project execution units, local project office and finance bureaus at all levels in submitting, approving and handling payment application materials; ② communication between provincial project office and provincial Financial Department was enhanced, efficiently enhancing progress of withdrawal application and directing project execution units to submit unpaid applications of completed engineering in time. In addition, to accelerate payment progress and complete larger capital demand, provincial project office, provincial Financial Department and World Bank experts consulted to increase down payment of assigned account to maximum limit 1 million dollars. (6) Policy factor. Due to new rural construction, major roads in the village were hardened. During pipeline excavation process of rural sewage treatment facility construction, villagers did not agree to destroy existing roads in the village. After active consultation of Dongying City Agricultural Bureau and construction party with cadres of village committee and villagers, project execution was assured by avoiding roads in the village while consultation process did delay progress of project construction. Moreover, as policies related to international investigation and overseas training changed, content in such aspect was restricted. Project management organization and execution units failed to fully learn and know about advanced domestic and foreign experience and methods. Thus, deviation existed in recognition and understanding of the project to some extent, which caused that the project cannot be better executed. 54 III. Project Development Target Completion Situation and Benefits 3.1 Project Development Target Completion Situation Main achievement indexes of development target of the project are mainly expressed in two aspects. The first one is reduction of contaminant and nutrient content flowing from Guangli River basin to the Bohai Sea triggered by the project. The second one is reduction of contaminant and nutrient by constructing wet land in Dongba Road. Specific completion situation of monitoring index is as follows. Index 1: Reduction of contaminant and nutrient content flowing from Guangli River basin to the Bohai Sea triggered by the project Reduction of contaminant and nutrient content flowing from Guangli River basin to the Bohai Sea triggered by the project is equivalent to the sum of reduction of contaminant and nutrient in Dongba Road wet land, reduction of contaminant in rural sewage, reduction of contaminant in excrement of village animals and reduction of agricultural contaminant/nutrient load. Estimates of reduction of contaminant and nutrient content flowing from Guangli River basin to the Bohai Sea are COD: 449.52t/a, BOD: 92.03 t/a, NH3-N: 12.37t/a, TN: 7.51t/a and TP: 1.317t/a. Index 2: Reduction of contaminant and nutrient by constructing wet land in Dongba Road Analog computation is conducted to show purifying effect of Dongba Road constructed wetland in Effect Research of Guangli River basin Water Pollution Regulation by Constructed Wetland of Shandong University, with the result showing that: contaminant emission reduction of Dongba Road wet land is COD: 403.25t/a t/a, BOD: 92.03t/a t/a, NH3-N: 12.37t/a and TP: 0.46 t/a. Index 1.1: Annual amount of sewage treatment by wetland According to design flow of Dongba Road constructed wetland, which is 7.0×104m3/d (March to November) and 2.5×104m3/d (December to February of next year), it can be estimated that annual amount of sewage treatment by wet land is 21,500,000m3(design capability). Index 2.1: Sewage control in participated villages According to evaluation results of Research Report on Demonstration Evaluation, Mode Study and Regulation Planning of Guangli River basin Agricultural Village Pollution Prevention of Shandong University, China University of Petroleum (East China) and Qingdao Agricultural University, after construction of village sewage treatment facility project, about 7.85×104~1.35×105m3 domestic sewage will be reduced from being discharged into Guangli River basin. According to designed water quality of flowing-in and flowing-out water, it can be estimated that emission reduction of COD and SS will be about 25.6t/a and 13.9 t/a, and target value will be met after normal operation of the project. Index 2.2: Animals excrement control over in participated villages (1) Emission reduction of COD. Designed excrement storage tank of the project is 2500m3 in volume. According to designed excrement storage amount and actual volume, it can be estimated that emission reduction of COD is about 20.67t/a. (2) Emission reduction of TN and TP. Results in Research Report on Demonstration Evaluation, Mode Study and Regulation Planning of Guangli River basin Agricultural Village Pollution Prevention (December of 2015) of Shandong University, China University of Petroleum (East China) and Qingdao Agricultural University is adopted for emission reduction of TN and TP. In 2015, reduction of TN and TP in excrement was 0.11t and 0.067t respectively, both lower than target value. The reason is that number of farmers households raising livestock in pilot villages reduced greatly. 83 excrement storage tanks were actually constructed, far 55 lower than expected amount (1500) in assessment phase of the project, which resulted that actual emission reduction of contaminant in excrement storage tank reduced. Index 2.3: Reduction of agricultural contaminant/nutrient load in participated villages Index of reduction of agricultural contaminant/nutrient load in participated villages is mainly expressed by effect of several measures, such as soil testing for formulated fertilization, buffer zone and ecological intercepting ditch. Such index value shall refer to results in Research Report on Demonstration Evaluation, Mode Study and Regulation Planning of Guangli River basin Agricultural Village Pollution Prevention (December of 2015) of Shandong University, China University of Petroleum (East China) and Qingdao Agricultural University. In 2015, reduction of TN and TP in farmland tail water was 7.40t and 0.79t respectively, meeting default target value. Index 2.4: Proportion of farmers applying comprehensive balanced fertilization technology in participated villages According to data provided by Dongying City Agricultural Bureau and after referring to relevant table of subsidy expenses, 10 villages got subsidy of soil testing for formulated fertilization(3723 planting households), and 1661 households got subsidy in 2014 and 2015. Thus, the proportion of planting households participating in applying comprehensive balanced fertilization technology is 44.6%. Index 2.5: Number of operating FEPA At present, 10 farmer environmental protection associations have all been established, with office and equipments equipped and regulations and operating procedures posted. Such index has met target value. Index 3.1 Number of people received training Up to now, total number of people receiving training has met 4460, slightly less than target value of 4500 people in assessment document of the project. Index 3.2: WetLand Pollution Prevention Effect study of Guangli River At present, subject “Effect Study of Guangli River basin Wet Land Pollution Prevention” undertaken by Shandong University has been finished and the report has been submitted in December of 2015. Index 3.3: Evaluation Research and Management Plan of Agriculture and Village Pollution Prevention in Guangli River Basin At present, “Evaluation Research and Management Plan of Guangli River basin Agriculture and Village Pollution Prevention” undertaken by Shandong University, China University of Petroleum (East China) and Qingdao Agricultural University has been finished and the report has been submitted in December of 2015. Index 3.4: Development and propaganda of Huai River basin promotion strategy On October 20th and 21th and on December 18th, 2015, grant project seminars were held in Dongying Blue Horizon Hotel respectively to exchange project work and share experience. Formulation of promotion strategy plan and website construction have been finished. 3.2 Project Benefits (1) Economic benefits. Project construction is demonstrated by Shandong Province Huai River Basin Guangli River basin. By reducing total pollution discharge in the river from land point source and non-point source, the project reduces pollution degree in Bohai Sea and Huanghai Sea water body, and greatly promotes development of marine economy of Dongying City as well as “efficient ecological economy in Yellow River Delta”. The project can generate enormous economic benefits. Economic benefits of RMB44,498,100 Yuan is expected to be generated every year after project execution. 56 (2) Social benefits. Social benefits are mainly expressed in enhancement of environmental protection awareness of villagers in project area, enhancement of satisfaction to community environment, recognition of people to the project, training and practicing to a group of provincial and municipal project management personnel who are familiar with World Bank business, laying good foundation for working on relevant business in the future. Besides, construction of the project will improve costal ecological environment of Guangli River and living environment of villages, and enhance city image of Dongying City to some extent. (3) Environmental benefits. ① After normal operation of the project, reduction of contaminant and nutrient flowing from Guangli River basin to Bohai Sea is COD: 449.52t/a, BOD: 92.03t/a, NH3-N: 12.37t/a, TN: 7.51 t/a and TP:1.317t/a respectively. ② According to Research Report on Demonstration Evaluation, Mode Study and Regulation Planning of Guangli River Basin Agricultural Village Pollution Prevention, 100 frequency-vibration trapping lights are installed in 4 pilot villages after project execution, effective prevention and control area meets 113 hectares, occupying 14.3% of total area of 4 pilot areas, reducing 0.34t of pesticide input. ③ After special personnel of farmers’ environmental protection association communicate with the villagers, they found out that with vigorous social propaganda, professional training, conferences and material issuance as well as farmers’ self-conclusion, more and more farmers have learned that there is no direct relationship between continuous increase of chemical fertilizer dosage and yield growth; with propaganda of the project and input of soil testing for formulated fertilization, more and more farmers turn to use compound fertilizer and specific fertilizer, which will generate positive influence to ecological environment in project area. (4) Project promotion and demonstration effect. The project provides a brand new mode for basin pollution regulation, covering methods combining agricultural non-point source pollution, rural domestic sewage treatment and terminal constructed wetland treatment. Execution effect shows that such mode conforms to treatment status of basin regulation and is good in effect (refer to subject research report of Effect Evaluation and Demonstration Research of Dongying City Guangli River Basin Pollution Prevention of Shandong University for specific content of project promotion and demonstration effect). 3.3 Evaluation Level Integrating constructed wetland construction, agricultural pollution control and rural waste management, famer environmental protection association construction and operation, capability construction, policy formulation, as well as project monitoring and evaluation, evaluation level of the project achievement is satisfactory. IV. Performance Evaluation of World Bank and Borrower 4.1 Performance of World Bank (1) Sufficient project identification and preparation. Before World Bank determined the project, it made a lot of deep investigations, including Huai River basin and sea area pollution, Guangli River costal agricultural village pollution status, economic development status of Dongying City etc., recognizing importance of regulating international basin and sea area pollution. (2) Careful and thorough consideration. Project design is reasonable. Detailed consideration and arrangement are made to content of project construction, progress, environmental influence, subsequent operation and management. (3) Precise and scientific project evaluation. Selection of project unit, investment orientation and scale, project design and project effect prediction all conform to international practice. Scientific method is adopted for analysis and calculation, assuring operability of project target. 57 (4) Serious and responsible project inspection. During project execution, inspection mission of World Bank inspected and directed deeply in project units and sites for several times, fully exchanged and communicated with project offices at all levels and every execution unit, and put forward many suggestions to promote project execution, which accelerated progress of project execution and improved project quality. In a word, managers and experts of World Bank are precise in work style, serious in work attitude, strong in policy and are rather flexible, leaving deep impression on project offices at all levels and every execution unit. World Bank has done satisfactory work for the project. 4.2 Performance of Borrower (1) Performance of Government Governments at all levels highly valued application, approval, evaluation and execution of the project. Except for policy guarantee and department coordination, large amount of manpower, material resources and financial resources were provided as well. Especially in project execution, governments at all levels fully supported project construction, established project leading team and project offices, allocated capable project managers, and safeguarded due allocation of full amount of domestic supporting funds to guarantee successful development of project construction. Governments have done satisfactory work for the project. (2) Performance of execution organization Under leadership of Dongying Municipal Government and with support and help of provincial project office and municipal project office, every project execution unit carefully studied project documents, correctly understood target and concept of project construction, meticulously designed engineering of the project, carefully constructed, and solved problems met during project construction in time. Although overall progress of project execution is slow, most of the construction content are completed as scheduled, basically meeting expected target. Overall performance of execution organizations during project construction is satisfactory. V. Main Experience and Lessons of Project Execution (I) Attention of government is important guarantee of project completion To successfully promote project execution, governments established project management organizations at all levels. At provincial level, Vice-Governor holds the post of leader of provincial project leading team, taking charge of full leadership and coordination, as well as reviewing decision and policy. Deputy director-general of provincial Financial Department holds the post of deputy director of provincial project office to assist provincial project leading team in inspecting the project and formulating decision on aspects of strategy and policy, acting as main coordination entity of the project as well as main center of communication between World Bank, GEF and governmental central departments. At municipal level, project leading team of Dongying City is composed of staff in Finance Bureau, Development and Reform Commission, Water Conservancy Bureau, Agricultural Bureau, Urban Management Bureau, Environmental Protection Agency, Marine Fisheries Bureau, Forestry Bureau, Planning Bureau, Territorial Resources Bureau, Bureau of Housing and Construction and Weather Bureau, while daily work is hosted by Dongying City Water Conservancy Bureau. (II) Adequate domestic supporting funds is the basis of project completion It’s not enough for project construction to depend on GEF grant funds, it also requires support of local supporting funds, especially large amount of funds required for Dongba Road wet land construction. However, as municipal financial supporting project package of such project was not listed into 2015 Dongying City Project Construction Plan so that local supporting funds was unable to be implemented, preliminary work of the project was unable to be conducted, construction contract cannot be signed, and progress of project withdrawal and 58 submission was also affected. Afterwards, wet land project was successfully executed only after supporting funds was allocated duly. (III) Good project supervision and management is important support for project execution Shandong Province project office and Dongying City project leading team closely supervised every procedure of project preparation to guarantee that domestic departments may review in time and relevant documents may be replied to avoid delay. During project construction, Shandong Province project office went to Dongying regularly to supervise and inspect progress of project execution, put forward solution to existing problems and submitted supervision report to World Bank every time. Dongying City project office actively took charge of organization, direction and supervision of project execution, which effectively promoted progress of project execution. Under leadership of Dongying City project leading team and provincial project office, Dongying City project office established good working mechanism with different execution organizations, namely Dongying City Urban Management Bureau and Agricultural Bureau, to cooperate closely in daily work and solve problems of project execution together. (IV) Function of environmental protection association and village committee shall be exercised Construction content, such as sewage treatment and excrement storage tank, involves improvement of village appearance and influence during construction period. In some project villages, except for normal construction supervision, village environmental protection association and village committee actively participated in supervision of construction process by finding problems in time, putting forward requirements and actively coordinating with construction party, which guaranteed quality of construction. (V) Construction content should be adjusted timely according to practical situation Take construction of excrement storage tank as an example, facilities after construction greatly improved environmental health in communities, and changed the farmers’ habit of piling animal excrement outside the yard or along the roads at will. However, through observation and acquaintance of environmental protection association, insufficiency of former design scheme was found, which was mainly that excrement storage tank was relatively short in height and there was no protective device so that unattended animals or even kids may fall into it while they were playing. Such risk information was reported to World Bank experts and Dongying City Agricultural Bureau by environmental protection association. And Dongying City Agricultural Bureau verified immediately and conducted funds calculation and design of installation scheme of excrement storage tank protective guard rapidly. With approval of World Bank, purchase, execution, installation, acceptance and other works were conducted quickly. (VII) It’s not favorable to set up project office in peer unit Execution organizations of the project are Dongying City Urban Management Bureau, Agricultural Bureau and Water Conservancy Bureau while project management office is set up in Dongying City Water Conservancy Bureau, taking charge of supervision, management and coordination of the project. However, in administration, Water Conservancy Bureau, Agricultural Bureau and Urban Management Bureau are at the same level so that it is not that easy for the project office set up in Water Conservancy Bureau to coordinate with other two units. It generated negative influence to project execution to a certain degree. For better service to project execution, it is suggested that project office shall not be set up in peer management organization. 59 Annex 5. List of Supporting Documents 1. GEF Grant Agreement 2. GEF Project Appraisal Document 3. Mission Aide Memoires and Back-to-Office Reports 4. Implementation Status Reports 5. Borrower’s ICR 6. Feasibility Study Report 7. Project Implementation Manual 8. Country Partnership Strategy of the World Bank Group for People’s Republic of China for the Period FY12-FY16 9. Study of the Impact on Pollution Reduction through Constructed Wetland in Guangli River Catchment 10. Evaluation Study and Management Planning for Agricultural and Rural Pollution Reduction in Guangli River Catchment 60 I I I I EXPRESSWAYS I I e I nh I EXPRESSWAYS UNDER CONSTRUCTION I Yu Da I I I I Bo Hai I I NATIONAL HIGHWAYS I I I Sea I RAILROADS 0 40 80 Kilometers I n he Zhangwei Xi I I I PREFECTURE CAPITALS I I I I I PROVINCE CAPITAL I DONGYING I I jia Yantai I PREFECTURE BOUNDARIES I Ma BINZHOU For detail, see Weihai I I I Dezhou map below. PROVINCE BOUNDARIES I He I Binzhou Dongying Lai Zhou Bay I I I I I I I I ) Y A N T A I (Yellow I I H E B E I I D E Z H O U ang WEIHAI Hu Wei He I I I I Zibo I I LIAOCHENG JINAN QINGDAO I Weifang I Jiol I JINAN ai I He I ZIBO I I Liaocheng WEIFANG I I LAIWU Huang Sea I I I I I I I Tai'an I I I I I Laiwu Yi He TAI’AN Qingdao HENAN I I I I I I R U S S I A N F E D E R AT I O N I I I I DI aI e ) H YuI I I RIZHAO HEILONGJIANG nh I I ow l Yel g ( e an L I N Y I MONGOLIA I Hu I Jining J I N I N G JILIN I I Heze Rizhao OL I ONG I M Sea of NEI D.P.R. OF I XINJIANG LIAONING Japan BEIJING I KOREA I Wanfu H BEIJING I TIANJIN e I REP. OF I HEBEI H E Z E I Nanyang SHANXI KOREA I I I NINGXIA SHANDONG Yellow I Hu ZAOZHUANG JAPAN I QINGHAI Sea Linyi I GANSU I HENAN ANHUI JIANGSU Zaozhuang I I I SHAANXI I SHANGHAI I R. I ING an XIZANG HUBEI East I H SICHUAN GQ I ZHEJIANG China ON I Sea CH I JIANGXI I HUNAN I FUJIAN I I I I I I I I I National GUIZHOU I I I I Capital I TAIWAN I YUNNAN I Province GUANGDONG PACIFIC H E N A N I GUANGXI I Boundaries I I I I I I I HONG KONG OCEAN I I I MYANMAR J I A N G S U I I I I I I International MACAO I I VIETNAM I I I I I I I II I I I I Boundaries LAO I I P.D.R. HAINAN PHILIPPINES I ellow) He ng (Y Hua Shengtou WWTP KENLI COUNT Y Wangying Huangdian Jiangia Lai Zhou Bay Sunjiazhuang Dongying Airport Qinjia Zhaoja The Training Center Agricultural and Rural Shaotou Pollution Reduction Pilot Area Water Outlet WQ Monitoring Shengtou WWTP DO NGY ING HUANGHE ROAD WATER SYSTEM DONGBA ROAD WATER SYSTEM DENGEI ROAD Constructed Wetland Sluice Gate Operation Optimization Guangli River Shaying WWTP Water Inlet DONGYING DISTRICT Water Quality WQ Monitoring Monitoring Stations 0 5 10 Kilometers CHINA GEF HUAI RIVER BASIN MARINE POLLUTION PROJECT SHANDONG PROVINCE PROJECT ACTIVITIES: EXISTING INFRASTRUCTURE: PROJECT COMPONENT A1: CONSTRUCTED WETLAND HUANGHE ROAD WATER SYSTEM PROJECT COMPONENT A2: SLUICE GATE OPERATION OPTIMIZATION—EXISTING WASTEWATER TREATMENT PLANTS—EXISTING PROJECT COMPONENT A2: SLUICE GATE OPERATION OPTIMIZATION—TO BE CONSTRUCTED WASTEWATER TREATMENT PLANT—PLANNED PROJECT COMPONENT B1 AND B2: PILOT VILLAGES EXPRESSWAY COMPONENT C1: EXISTING TRAINING CENTER MAIN ROADS PROJECT COMPONENT D: WATER QUALITY MONITORING AND EVALUATION STATIONS URBAN AREA AGRICULTURAL AND RURAL POLLUTION REDUCTION PILOT AREA IBRD 38790R | JUNE 2016 This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information Budget, Performance Review shown on this map do not imply, on the part of The World Bank & Strategic Planning General Services Group, any judgment on the legal status of any territory, or any Printing & Multimedia endorsement or acceptance of such boundaries.