2007.9~12 Issue 4 China Urban Development Quarterly Stepping Up: Improving the Performance of China's Urban Water Utilities China has made remarkable progress in expanding its urban water supply and wastewater infrastructure since 1990. However, as the country is experiencing the greatest wave of urbanization in history, providing urban water services to new residents and dealing with new spatial patterns of urban development, particu- larly in booming metropolitan areas, will be a demand- ing task. The disparities between cities of high and low capacities have created segments in the urban water market. National policies, standards, and approaches for urban water services will need to be tailored to meet the local economic and environmental reality. Addressing future challenges will require not only Cover of the English version of the report. The Chinese version has been translated more investment, but new approaches to enhance and will be published in January 2008. governance and regulation, boost utility operational Photo: World Bank and financial performance, increase user fees, ensure adequate fiscal support, and explicitly recognize the following approaches: constraints facing lower capacity cities and towns. 1.ImproveNationalPolicyCoordination A recent World Bank study titled Stepping Up: Improv- There are four main sector agencies at the national level that ing the Performance of China's Urban Water Utilities guide the urban water sector: the Ministry of Construction reviews China's accomplishments in providing urban (MOC), the State Environmental Protection Agency (SEPA), water services, identifies the major challenges, and the Ministry of Water Resources (MWR), and the Ministry recommends directions for the future. It aims to of Public Health (MOPH). The various specialized sector provide an assessment of where the sector stands agencies each issue a multitude of opinions, notices, and today and to create a strategic framework for policy Urban Water Report continued on page 2 discussions, project design, and reform efforts. Five interrelated themes are the center of the strategic framework: Contents: Report on China's Urban Water Utilities..................................................................1 I. Adopting Goal-based Sector Gover- Urban Planning News................................................................................................5 nance Urban Events..............................................................................................................7 Public Water Utility Reform: Best Practice, Best Fit................................................8 In the past, performance of China's water sector was The World Bank's Water and Wastewater Lending Program in China.....................9 measured by achievement of physical targets. The World Bank Held a Series of Workshops on Public Transport................................13 focus for the future should be on utility performance, Update on "Urban Best Practice Area" of the World Expo Shanghai 2010............15 including improving the environment, protecting E-Development Resources at the World Bank.........................................................16 public health, and providing good quality service to all Understanding Your Local Economy: A Resource Guide for Cities......................17 at reasonable cost. This study recommends the Capacity Development at the Local Level through Radio........................................19 The World Bank China Urban Development Quarterly Issue 4 9~12 . 2007 circulars, which are not always consistent, provide The way China applies standards now does not fully ambiguous guidance to cities, and may even be con- meet these criteria, particularly for low-capacity cities. tested by other sector agencies. This study recommends that China use transitional wastewater standards for low capacity cities and manage This study recommends that the State Council establish water quality from a watershed perspective, and that the a National Water and Sanitation Committee under a timing for lower capacity cities to meet the full standard Deputy Prime Minister, with one ministry serving as the should be realistic and could be left to the discretion of Secretariat. The committee would not be a new agency, provincial governments. but rather be composed of representatives from the relevant national agencies, as well as other stakeholder II. Improving Municipal Utility Governance groups. It could coordinate national policy formulation, and Structure integrate decision-making among the different sector agencies, and monitor sector performance and There is still huge potential for improving the efficiency development. of urban water utilities by modifying utility governance and structure. The study's three recommendations are as 2. Strengthen Provincial Government Oversight follows: Provincial agencies in China already have many key mandates for utility oversight. However, their efforts are 1. Streamline and Coordinate Municipal Utility often hampered by a lack of funds and real authority Governance over municipal governments, as well as lack of coordina- Municipal governments will need to improve their tion among provincial agencies. This study recommends capacity to govern and regulate public utilities, and that provincial governments increase the budget and create more integrated, accountable, and transparent city capacity of their provincial agencies and more vigor- governance structures for the sector. This study ously exercise their oversight role for urban water recommends that high-capacity cities experiment with services. This study also recommends that provincial streamlined utility governance structures, such as a governments establish "Provincial Water and Sanitation Water Board or a multi-sector Public Utilities Committees" or create new "Provincial Water Offices" Commission. Lower capacity cities should make a that would consolidate urban water regulatory and concerted effort to coordinate the different government oversight functions into one office. agencies overseeing water utilities. 3. SetAppropriateWaterandWastewaterStandards 2.EmpowerMunicipalUtilitiesandHoldThem China should aim to have standards that are: Accountable Affordable to ensure the service is financially sustain- This study recommends that municipal governments able empower utilities to take more responsibility for key Enforceable to allow regulators to compel compliance corporate functions such as strategic master planning, Efficient to enable policy objectives to be met in a capital improvement plans, financing strategies, cost- least-cost manner recovery strategies, human resource development, regulatory compliance, etc. A culture of continuous utility improvement should be encouraged by national, provincial, and city governments. This can be realized through a commitment to transparency, customer orientation, monitoring and evaluating performance against other utilities and improvements over time, and the judicious use of the private sector. Professional organizations and research institutes have an important role to play in fostering a new culture of excellence. Jining Wastewater Treatment Plant in 3. Manage Wastewater as a Network Utility Business Shandong Province Many cities in China have the view that drainage is a Photo: Ji You, World Bank Beijing Office 2 China Urban Development Quarterly Issue 4 9~12 . 2007 public good, whereas wastewater treatment is a commer- cial activity. The typical institutional arrangement for High-capacity cities. Water supply and integrated wastewater in China is fragmented, often leaving the city wastewater utilities (i.e., drainage and treatment utilities) without an entity with overall responsibility for the should finance all capital investments through capital planning, financing, and operating of the wastewater markets, private investment, and internally generated system. Moreover, it hides the true overall cost of cash with full cost recovery tariffs. The one exception is wastewater service, which can be significantly more that municipal governments may wish to continue expensive than water supply. financing drainage investments to control the growth in tariffs. This study recommends that municipal governments explore options for integrating wastewater service and Low-capacity cities. Water supply utilities, and recovering collection system costs from users. Some especially integrated wastewater utilities, will continue options for integrating the service include: to need equity contributions, grants, and concessionary One utility company owns and manages all drainage finance to keep tariffs at socially acceptable levels. network and treatment plant assets. Moreover, low-capacity cities should be subject to less The treatment company enters into a lease contract for stringent transitional water and wastewater quality the drainage network. standards to reduce costs. The treatment company enters into management contracts with the government drainage bureaus. Raising tariffs is one method of increasing revenues. Of A "Wastewater Group" is formed that puts all organi- equal importance is improving fee collection and utilizing zations under a single management team. efficient rate structures. Although Chinese cities are rapidly installing water meters at the household level, 4. Pursue Opportunities forAggregating Urban Water smaller cities are lagging in this respect. Services Water utilities are typically organized along administra- 2. Make More Use of Debt Financing tive boundaries in China. Aggregating services across China's strong economy has created a high level of administrative jurisdictions or functions can potentially liquidity in the domestic banking system, which has generate benefits from economies of scale, more profes- created a golden opportunity for water utilities to tap sional management, and improved access to finance. The into. At present Chinese utilities have very low debt-to- study recommends that provincial and municipal asset ratios, and rely more heavily on municipal govern- governments explore options for extending urban water ments for finance. This study, therefore, recommends infrastructure to suburban towns, as well creating that Chinese cities should transform their financially regional water utilities which service multiple towns and stressed utilities into creditworthy enterprises that can cities. fund an appropriate share of their capital program through commercial debt. III. Moving Up the Financial Sustainability Ladder 3. Create Incentive-Based Concessionary Finance Programs Moving toward cost-recovery tariffs and greater reliance China's national government provides significant levels on capital markets for investment generates strong of finance to the urban water sector. The two main incentives for utility efficiency. It also enhances ac- instruments are the China Development Bank (CDB), countability to users who must pay for the service and which offers long-term loans, and the National Develop- to lenders who require repayment. Cost-recovery tariffs ment and Reform Commission (NDRC)-administered also allow the utility to operate in a more commercial state bond program, which offers long-term, low interest manner and reduce its dependence on government loans and grants. These financing mechanisms could be transfers. further refined through structured programs. 1. Ensure Utility Cost Recovery from User Fees This study recommends that the national government This study recommends that all cities have user fees that restructure existing concessionary finance programs (or cover the utility's costs and adopt financing strategies develop new ones) for the urban water sector. There are along the following lines: many different options that need to be studied and 3 THE WORLD BANK China Urban Development Quarterly Issue 4 9~12 . 2007 affermage, lease, and design-build-operate arrangements. These non-investment private arrange- ments are particularly attractive for cities that (a) do not have financing constraints, but want to improve the performance of their utility, or (b) cities where the investment risks are large, particularly in low-capacity cities. V. Improve Utility Capital Planning to Lower Costs Waibaidu Bridge at the influence of The urban water business is capital intensive, so good Yangtze River and the Suzhou Creek Photo: Ji You, World Bank Beijing Office decisions on infrastructure investment can lower costs and improve service. This study identifies two important pursued, but the following principles should guide the areas for capital planning. reforms: National government funding for the urban water Water supply planning. Most cities still do not employ sector should be significantly increased. sophisticated water planning methodologies that More funding should be channeled to low-capacity explicitly consider multiple objectives, uncertainty, and cities and towns. risk in order to determine the optimal resource mix for Provincial governments should take the lead in meeting their urban water demand. In particular, designing and administering concessionary finance economic, financial, and environmental objectives are program(s). often not fully factored into water supply planning The program(s) should be structured to provide the exercises, which tend to be driven by physical planning right incentives, with carefully designed eligibility approaches or are policy-driven. criteria, appraisal procedures, and monitoring and evaluation activities. Investments in water supply and drainage networks. The A range of financing instruments should be proper planning of investments in upgrading and considered, including loans, grants, revolving loan expanding water supply and wastewater pipes and programs, credit enhancements, output-based aid, etc. pumping stations holds huge potential for savings. Developing asset management programs (AMP) IV. Use the Private Sector to Help Improve ¡ªwhich collect information on existing assets Municipal Utilities (particularly buried pipes), use sophisticated methodolo- gies for analyzing the data, and link investments to Cities throughout China have turned to the private overall service goals¡ªshould be used in China too. sector to finance, construct and operate water supply Utilities should also carefully consider the costs and and wastewater treatment plants. This study has two benefits of two different types of drainage systems: (1) general recommendations on private participation. First, combined systems, which convey both wastewater and municipal governments and their utilities should engage stormwater; and (2) separate drainage systems, which with the private companies as part of an overall reform are increasingly popular in China, can cost up to double process to ensure a sustainable utility balance. Most combined systems, and may not be justified by the importantly, if user fees and fiscal transfers are environmental benefits. Low-capacity cities should inadequate, then regardless of whether ownership avoid separate collection systems. and/or operation is public or private, the service will not be sustainable. (This summary is prepared by the Quarterly editor based on the executive summary of the report. To read Second, the general approach in China is that private the full report in English, please visit companies must "pay to play," meaning they must http://go.worldbank.org/PRR44UVHT0 For more invest their own funds if they are to participate in the information, please contact Greg Browder at sector. Many non-investment models, however, could be gbrowder@worldbank.org or Mingyuan Fan at employed beneficially in China, including management, mfan@worldbank.org) 4 China Urban Development Quarterly Issue 4 9~12 . 2007 Urban Planning News Urban and Rural Planning Law of China to will establish over 6,000 national standards, in addition be enforced beginning January 1, 2008 to those revisions. ¡¡ The Urban and Rural Planning Law of China was adopted in the 30th session of the standing committee 11 national eco-garden city pilots identified for the10th National People's Congress, and released in by the Ministry of Construction the form of a Presidential Order signed by Chinese President Hu Jintao. The Law will be enacted on January Recently, 11 cities (Qingdao, Nanjing, Hangzhou, 1, 2008, when the existing City Planning Law will be Weihai, Yangzhou, Suzhou, Shaoxing, Guilin, Changshu, rescinded. The Urban and Rural Planning Law consists Kunshan and Zhangjiagang) were identified as pilot of 7 chapters with 70 articles, including general rules, cities for China's "National Eco-Garden City" program. development of urban and rural planning, revision of The Ministry of Construction will conduct surveys and urban and rural planning, supervision & inspection, summarize experiences in these cities, with an aim to legal responsibilities, and appendix. promote eco-garden city development in China. The 3rd batch of famous historic and cul- tural towns/villages unveiled Forty-one towns, such as Guangfu Town in Hebei Province, and 36 villages, including Liuliqu Village in Longquan Town, Mentougou District of Beijing, were evaluated by the Ministry of Construction and the State Administration of Cultural Heritage and accredited as the 3rd batch of famous Chinese historic and cultural towns/villages. The accreditation awarding ceremony was held in Beijing on June 9. Vice Minister of Construc- tion Qiu Baoxing and Director of the State Administra- tion of Cultural Heritage Shan Qixiang awarded the Photo: Curt Carnemark, World Bank certificates. Subway and light rail in service in China Over 6000 national standards to be issued amounting to 602.3 km in this year and next year Ten cities in mainland China, such as Beijing, Shanghai According to Liu Pingjun, Director of China's National and Guangzhou, have built and started to operate Standard Administration Committee, recently the issue subways and light rails, according to the latest statistics of outdated standards has been acutely felt in China. by China's Ministry of Construction. Twenty-two lines Among the over 21,000 national standards at present, are now in service or the pilot phase, covering a total more than 9,500 outdated ones will need to be revised in length of 602.3 km. the "eleventh five-year period". In 2007 and 2008, China 5 THE WORLD BANK China Urban Development Quarterly Issue 4 9~12 . 2007 Urban railway transport construction plans have been also stated that policy measures shall be further im- approved for 15 cities (Beijing, Shanghai, Tianjin, proved and implemented to provide more policy support Chongqing, Guangzhou, Shenzhen, Nanjing, Hangzhou, and fiscal transfer and to create a favorable policy Wuhan, Chengdu, Harbin, Changchun, Shenyang, Xi'an environment for revitalizing old industrial bases in the and Suzhou). These cities will invest a total of RMB 620 northeast. Meanwhile, the revitalization program shall be billion in the next 10 years to build 1,700 km of urban driven forward by reform, greater transparency, and railways. independent innovation, to speed up economic restruc- turing and transformation of growth patterns. China's urban population reaches 577 million 2008 World Planners Congress to be held China's urban population had reached 577 million in 662 in Dalian, China cities, including 287 at or above the prefecture level, according to the Comprehensive Urban Social and The 44th World Planners Congress, sponsored by the Economic Development Report, released by the China's International Society of City and Regional Planners National Bureau of Statistics on September 26, 2007. (ISOCARP), is to be held in Dalian, China from Septem- ber 19-23, 2008, with the main theme as "Urban Growth The 2007 China Development Report: Reducing Poverty without Sprawl -- A Way towards Sustainable in Development, publicized in Beijing lately by the China Urbanization". The Congress will consist of 3 pillars of Development Research Foundation, revealed that forums, exhibitions and city tours. A young planners' China's rural population in poverty has declined from seminar will be conducted before the Congress. The 250 million in 1978 to around 20 million at present, and 2008 Annual Conference of Urban Planning in China, the incidence of poverty declined from 31% to 2.5%. sponsored by the Urban Planning Society of China, will be held at the same time. Revitalization Plan of Northeastern China approved by the State Council (Urban Planning News is a regular feature co-spon- sored by the World Bank and the Urban Planning China's State Council formally approved the Northeast- Society of China) ern Region Revitalization Plan, proposing to build the northeast into an important region of economic growth, and setting a target of positioning around "4 bases and 1 district". In its approval comments, the State Council Photo/ Curt Carnemark, World Bank 6 China Urban Development Quarterly Issue 4 9~12 . 2007 Urban Events Annual Conference of Urban Planning Qiu Baoxing delivered an academic speech on "Chal- lenges and Strategies in Fostering Orderly Urbanization The China Annual Conference of Urban Planning was in China". Other speeches were: "Development of City held September 1-3, 2007 in Harbin, a famous city in Culture and Cultural Heritage Protection", by Shan northern China. Renowned officials from the central Jixiang, Director of the State Administration of Cultural government, local officials from Heilongjiang Province Heritage; "National Urban System Planning under and Harbin Municipality, experts, and over 1,300 urban Guidelines on Healthy Urbanization" by Wang Kai, planners attended this annual conference. Deputy Chief Urban Planning from China Academy of Urban Planning and Design, and "Coordinated Regional Zhou Ganzhi, President of Urban Planning Society of Development and Planning of Functioning Zones" by China, delivered opening remarks titled "Bring out the Fan Jie, Director of the Sustained Development Research Blossom of Urban Planning through Reviewing Experi- Center under the China Academy of Sciences. To ences and Creating New Momentum". He gave a general broaden the horizon of professional urban planners and picture of planning, revealed existing problems, reiter- promote inter-disciplinary connection, the conference ated extreme importance of local experiences, and also invited academicians and renowned experts (e.g., proposed 2 roles for the planning sector, namely playing Qian Yi, Ding Yihui, Wang Yi, Huang Ping, Chu Dajia) a leading role at micro level and a supporting role at from fields related to urban planning, such as macro level, and making due contribution in different environment, meteorology, law, sociology and manage- roles. ment to make diversified presentations, such as "Situa- tion of National Resources and Environment and Sustainable Urban Development in China", "Global Climate Changes and its Impact on China", "Public Interest in the Property Law", "Issues in Urbanization from the Perspective of Coordinated Urban and Rural Development", "Human-oriented Urban Research and Urban Planning". These presentations were well received by the audience. On top of the plenary session, there were 10 parallel meetings surrounding the main theme of "Urban Plan- ning Towards Harmonious Society", shedding light on Opening Ceremony of the 2007 Annual Conference of city master planning, urban infrastructure, urban resi- Urban Planning dence and urban public utilities, industry planning and Photo: Urban Planning Society of China planning of industrial parks, planning administration and land development, planning and construction of small towns and villages, detailed planning and urban design, The opening ceremony was followed by the awards heritage conservation and city revitalization, regional ceremony for the 4th China Academy of Urban Planning planning and urban eco-planning.Out of 718 theses, 123 and Design Cup young planner thesis competition and were presented in the parallel meetings, followed by the excellent organizers of the Annual Conference. heated discussions. Active participation was also witnessed in the 6 free forums (Planning Innovation In In the plenary session, Vice Minister of Construction 7 THE WORLD BANK China Urban Development Quarterly Issue 4 9~12 . 2007 The Context Of Resource Constraints, Cultural Revital- deteriorating urban water ecology have become main ization In The Process Of Rapid Urbanization, Planning obstacles for sustainable development in China. In that Reform In The Context Of Rule Of Law, Urban Planning context, securing the urban water supply, improving Services In The Liberal Market, Urban Planning In The urban drinking water quality, and purifying the water Context Of Institutional Innovation, Urban Planning In environment constitute an important basis for sustain- The Context Of Social Equity) and 2 special forums able social and economic development, as well as better (Urban Planning Career Development Forum: Opportuni- livelihood and health. Based on past experiences in ties And Challenges, And Planning And Construction Of urban water supply, water conservation and water Urban Centers). These forums produced sharp views, pollution control, and the strategy of developing water- insightful ideas and inspiring debates. saving cities and establishing a water market, building a sound urban water environment presents a necessary In parallel with the conference, a number of other choice to ease growing tension between population, activities were ongoing including the 4th Executive resources and environment. Council Meeting, the 4th Council Meeting of the Urban Planning Society of China, and the exhibition for the The 2nd International Conference for China's Water 2007 China Urban Planning Conference. The sponsor Sector, sponsored by China's Ministry of Construction, handed out the registration cards awarding credit hours National Development and Reform Commission, Ministry for continuing education to accredited planners, and of Science and Technology, and State Environmental published a number of books such as Harmonious Urban Protection Administration, was convened to learn about Planning and 50 Years of Urban Planning Society of cutting-edge international technologies and successful China. experiences, review domestic explorative practices, and discuss appropriate development strategies and coun- The conference was sponsored by the Urban Planning termeasures for China to further promote market reform Society of China, supported by the Harbin People's and the industrialization process in the urban water Government and Heilongjiang Provincial Construction sector, provide guidance on urban water supply, water Department, and hosted by the Harbin Urban Planning conservation, and wastewater treatment and reuse, and Bureau. It was announced in the conference that 2008 to speed up technology advancement and mechanism annual conference for urban planning will be held in innovation in the water sector in China. Dalian. Wang Shihua and Song Zengbin, Deputy Mayors of Harbin and Dalian respectively, held the Over 1,000 scholars, officials and entrepreneurs from handover ceremony. dozens of countries and regions shared their views on water shortage challenges in China and the Asia Pacific (The text is prepared by the Urban Planning Society of China. For more information, please visit www.Planning.cn) 2nd International Conference for China's Water Sector With rapid economic growth and accelerating urbanization, China is witnessing increasingly acute conflicts between shortages of water resources and increasing water demand. Over 400 of China's 600 cities suffer from water shortages. Even worse, the already limited water resources are challenged by water Jiguanshi Wastewater Treatment Plant pollution, thus strengthening the case for enhancing the in Chongqing Municipality safety of the urban water supply and water environment. Photo: Ji You, World Bank Beijing Office Scarce water resources, intensifying water pollution, and 8 China Urban Development Quarterly Issue 4 9~12 . 2007 Region. A number of activities were launched around the theme of "infrastructure development and sustained use of water". Country statements, ministerial round tables, a ministerial declaration discussion, and themed forums were held. All delegates exchanged ideas on experiences Public Water Utility Reform: and challenges in those two fields in various Asian and Pacific countries and regions, and deliberated policy Best Practice, Best Fit initiatives and technical measures to facilitate infrastruc- ture and water development in future. The international conference touched on all aspects related to infrastructure and water sector development, including theories and practices on infrastructure investment and financing, government supervision, water safety, water conservation, and utilization of non- Editor's note: Jamal Saghir, Director, Energy, Trans- traditional water sources, as well as intensive exchanges port and Water Department of the World Bank attended on research and application related to water treatment, the 2nd International Conference for China's Water water ecology protection and rehabilitation, water Sector. Below is the synopsis of his speech at the conservation, wastewater treatment and recycling. The Conference's closing ceremony. conference built a platform for policy information exchange among governments, for communication and dialogue between government agencies, water enterprises, research institutes, consulting and design institutes, financial institutions, and water equipment manufacturers, and for the exhibition for cutting-edge outcomes and proven practices. (The text is selected from China City Water Webpage. For more information, please visit www.chinacitywater.org) Jamal Saghir giving speech at the closing ceremony of the 2nd International Conference for China's Water Sector Photo: Ji You, World Bank Beijing Office Achievements and challenges Since 1990, China has had remarkable success in increas- ing the stock of water infrastructure, expanding water supply coverage, and increasing the percentage of wastewater that is treated. The World Bank is proud to have contributed to these past accomplishments by providing around $5 billion in financing to support 34 urban water projects throughout China. 9 THE WORLD BANK China Urban Development Quarterly Issue 4 9~12 . 2007 In addition to financing, the Bank aims to provide value lessons around the world of tools that can be useful. Let by improving planning, promoting financial me briefly discuss four of those tools: corporatization, sustainability, supporting institutional reforms, and the use of public-public performance agreements, and undertaking analytical studies to support development enhancement of consumer accountability and increased of the sector. In this context, I am very happy to present private sector participation. some good practices of public water utility reform today. Corporatization is the process of transforming a utility In the past decades, many governments have tried to that is embedded within a municipality or ministry into make state-owned water utilities more efficient but few an organization with its own corporate identity. Perfor- have succeeded in turning them around into effective mance of corporatized utilities varies. Well functioning and viable organizations. The major transition in the corporatized utilities have one thing in common: their 1990s has been from central public provision to local transparently appointed boards leave the utility manage- public provision. Another important 1990s trend was the ment the discretion to act in key areas. drop in public, private, and donor sources of investment funding. This significantly reduced opportunities for Performance agreements can clarify the objectives for network expansion or performance improvement. a public utility--and their relative weight. They can make it easier to hold managers and boards accountable for In the new millennium, many utilities still face the same performance. Most inherent limitations of contracts problems as in the past. They are locked in a vicious plans cited in the 1990s are still valid. However, in the spiral of weak performance incentives, low willingness to past decades new forms of performance agreements pay by consumers, and insufficient funding for mainte- have emerged. For instance, more staff and managers of nance leading to deterioration of assets. The vicious public utilities receive financial bonuses for good spiral is largely a consequence of ineffective institutions performance. And a central government can allocate coupled in many cases and countries with the monopo- central government funds on a competitive basis to listic nature of the sector, lack of proper benchmarking decentralized utilities. These forms of incentives have and competition in the market and for the market. moved utilities into action to better serve their Consumers, especially the poor, have in many cases lost consumers. I know that China is moving in this out. direction. New approaches Consumer accountability can help balance the ac- countability framework of utilities and can help prevent I would like to summarize some new approaches to political capture. Traditionally, utilities lack of consumer public water utility reform that can help utilities to accountability reflects the fact that they are dependent escape the vicious cycle. on governments, financially and in other ways. The belief that citizens were effectively represented by There is no perfect model for public utilities that guaran- politicians, who in turn connected with utilities, was tees good performance. However, well functioning water challenged in the 1990s. This led to an increased interest utilities have certain attributes in common. These in direct accountability from utilities to consumers. attributes are: Consumer accountability can be achieved through Customer orientation: Reporting and "listening" to information channels, surveys, complaint mechanisms, clients, and working to better meet their needs. advisory groups, board membership and other measures. Autonomy: being independent to manage profession- ally without arbitrary interference by others. Increased Private Sector Participation to enhance Accountability: being answerable to other parties for efficiency, increased accountability and attract policy decisions, for the use of resources, and for investments. performance. Market orientation: making greater use of markets and The above tools are important but reforms have to be the introduction of market-style incentives. embedded in measures for financial turnaround and capacity building. Successful reforms combine measures How can we achieve those attributes? There is no one to improve the institutional environment with utility- solution that fits all. However, we have learned some focused steps. 10 China Urban Development Quarterly Issue 4 9~12 . 2007 Financial sustainability Reform processes require patience -- they are long Utility governance processes that combine various measures. Improve- Private Sector participation ments in the environment in which the utility operates, Capital planning are likely to have only a limited impact if the utility does not have the systems or internal capacity in place to take These policy themes provide a starting point for achiev- advantage of it. ing the 2020 sector vision. China is a vast and diverse country, with some very rich large cities such as Beijing Applications to China and Shanghai, and hundreds of smaller and poorer cities. Standards and approaches will have to be tailored to the The operational and financial performance of Chinese city's capacity. It is not possible to use the same water and wastewater utilities is about average for standards and service delivery models for all cities in middle-income countries, but still well below utilities in China. Super cities should strive to meet the highest OECD countries. Given China's severe water resource international standards. Smaller and poorer cities will constraints and environmental degradation, coupled need to take a more transitional approach with signifi- with rapid urbanization, China's utilities will need to cant financial assistance from the government. China's perform better than average utilities in OECD countries if national policies do not always recognize this diversity, its broader public health and environmental objectives yet the reality can not be ignored in practice. We are to be achieved by 2020. encourage policy makers to explicitly recognize eco- nomic differences and explicitly tailor sector policies, Drawing upon the World Bank's experience in China, as financing, and standards to actual capacity of the cities. well as the Bank's global knowledge, we have recently published a report called Stepping Up: Improving the But the overall direction is clear. Progress will require Performance of China's Urban Water Utilities. The report coordinated action from all actors. paints a vision for the urban water sector in the year 2020. This vision entails the provision of safe and In conclusion, public sector reform is difficult and reliable drinking water for all, comprehensive stormwater intrinsically political. It is not a quick fix or an easy drainage, and the collection and treatment of all munici- alternative to private sector participation. There is a pal wastewater. This requires efficient and financially substantial difference between reforms that are desirable sustainable water utilities. and reforms that are feasible. Reform -- in reality -- is often an incremental process, and reformers will (temporarily) have to put up with less-than-ideal solutions. The selection of reform measures will have to be based on the best-fit rather than the best-practice. Thank you for your attention. Photo: Curt Carenemark There are five key policy themes that we suggest to the Government of China in the Stepping Up report: Goal based sector governance 11 THE WORLD BANK China Urban Development Quarterly Issue 4 9~12 . 2007 The World Bank's Water and Wastewater Lending Program in China (in US$ Millions) World Bank Financing W&S Components2 Total Waste- Water Other Start Closing ProjectName Cost1 IBRD IDA Total water3 Supply Water4 Date Date Beijing Environmental Project Changchun Water Supply and Environment Project Tianjin Urban Development and Environment Project Southern Jiangsu Environment Protection Project Zhejiang Multicities Development Project Liaoning Environment Project Hubei Urban Environment Project Yunnan Environment Project Second Shanghai Sewerage Project Third National Rural Water Supply Project Shandong Environment Project Guangxi Urban Environment Project Fourth Rural Water Supply and Sanitation Project Sichuan Urban Environment Project Hebei Urban Environment Project Second Beijing Urban Environment Project Chongqing Urban Environment Project Liao River Basin Project Huai River Pollution Control Project Second Tianjin Urban Environment Project Shanghai Urban Environment Project Zhejiang Urban Environment Project Guangdong Pearl River Delta Urban Environment Project Hunan Urban Development Project Tai Basin Urban Environment Project Ningbo Urban Environment Project Liuzhou Urban Environment Project Chongqing Small Cities Infrastructure Improvement Second Phase Shanghai Urban Environment Project Sichuan Urban Development Project Henan Towns Water Supply Sanitation Project Second Guangdong Pearl River Delta Urban Project Second Shangdong Environment Project Second Liaoning Medium Cities Project Total (in millions) Notes: 1. Includes price & physical contingencies, but excludes interest during construction and front-end fee. 2. Includes proportional share of contingencies. 3. Usually excludes industrial pollution control but includes most sanitation. 4. Includes investments in canal extensions, river embankments, canal sediment dredging, flood protection etc. (Source: Greg Browder et al, Stepping Up: Improving the Performance of China's Urban Water Utilities, P155.) 12 China Urban Development Quarterly Issue 4 9~12 . 2007 World Bank Held a Series of Seminars on Public Transport The World Bank has been supporting the development influencing urban transport outcomes, and the potential of urban transport in China for almost 20 years with for the Clean Development Mechanism and carbon financing support for infrastructure investments as well financing in China's urban transport sector. The as supporting policy development and implementation. seminar provided many ideas to strengthen the institu- The development of public transport, an identified tional arrangements related to urban transport in China. priority of the Government of China, is a central element Inputs received at the seminar were also used to finalize of this effort. A series of recent seminars was held, in a working paper titled Developing the Public Transport Beijing, Fuzhou in Fujian Province, and Jinzhou in Sector in China-Issues to consider in the organization, Liaoning Province to inform discussions related to supply, and regulation of public transport bus services. development of public transport and institutional arrangements for the provision of public transport bus services. Reform and Development of Public Trans- portation Seminar, Fuzhou Urban Transport Seminar, Beijing On November 7, 2007, the Municipal Government of Fuzhou and the World Bank jointly hosted a seminar in On October 31t, 2007, the World Bank hosted a seminar Fuzhou focused on the "Reform and Development of on urban transport issues at the Bank office in Beijing. Public Transport in Fuzhou." More than 100 people Representatives from the National Government, various attended the meeting, including officials from the State research institutes, universities, consulting firms and the Ministry of Construction, Fujian Province, and munici- Beijing municipality attended. Three speakers gave pal governments of several cities including Shanghai, presentations on issues related to public transport Chongqing, Shenyang, Nanjing, Hangzhou, Nanning, regulation and organization, the role of institutions in Nanchang, Hefei, Xiamen, and Quanzhou as well as various experts. The urban construction division chief of the Ministry of Construction outlined the main developments related to public transport development across China. The Bank outlined the rationale and international experience underlying global trends towards the introduction of private capital in bus operations, the value of competitive tendering mecha- nisms as a determining factor in selecting suppliers, and the role of regulation. Speakers from Fuzhou, Chongqing, and Shanghai described recent developments, the current status and plans for the development of public transport in their cities. Speakers from Hong Kong described how public transport services were organized in Hong Kong SAR. Speakers from two international public transport companies active in China -- Veolia and New World -- provided an operator's perspective on the management, regulation Reform and Development for Public and provision of public transport. The seminar also Transportation Seminar, Fuzhou provided input to Fuzhou as it implements the national Photo: World Bank Beijing Office 13 THE WORLD BANK China Urban Development Quarterly Issue 4 9~12 . 2007 guidance on prioritizing public transport. ment where transparent, competitive methods were being used to procure public transport service, and there was confidence that service was being produced cost- Integrated Corridor Management: Traffic efficiently, subsidies had effectively been used to Management and Public Transportation increase quality of service. Finally, the talk found that it Improvements, Jinzhou was critical to design the details of a subsidy scheme carefully; in the absence of careful design there was risk On December 7, 2007, the Municipal Government of of the subsidy funds not being used to support Jinzhou hosted a workshop focusing on public transport Government's stated goals. and safety issues in Jinzhou as part of the Bank-fi- nanced Liaoning Medium Cities Infrastructure Project. Participants included officials and representatives from Urban Mass Rail Concessions: The Expe- public transport companies from the Project cities of rience of Bangkok, Kuala Lumpur and Benxi, Fushun, Liaoyang, Panjin and Jinzhou. The head Manila 2007 Sustainable Urban Develop- of public transport for the Jinzhou Municipal Govern- ment Forum, Beijing ment talked about current trends in public transport in Jinzhou and provided an indication of the Municipal The 2007 Sustainable Urban Development Forum was Government's current plans for improving public held in Beijing on December 8-9, 2007. It was co- transport consistent with State Council Directive #46 on sponsored by the Ministry of Construction and the providing priority for public transport. The Bank's China Development Bank. The topics included urban Urban Transport Advisor, Sam Zimmerman, presented an infrastructure financing, private concessions, municipal operational strategy to provide priority to public trans- financing, urban environment economic policy, green port that focused on (i) selecting a key public transport lending, and Clean Development Mechanism. On behalf corridor in the city; and (ii) implementing a combination of the World Bank, Mr. Zhi Liu presented the of infrastructure upgrades, traffic management improve- experiences of urban rail concessions in Bangkok, Kuala ments and public transport service upgrades on the Lumpur, and Manila. The presentation was based on a corridor to concentrate the impacts and benefits of the background study on the same subject for the Asian Government's efforts. The seminar provided input to the Development Bank-Japan Bank for International cities participating in the Bank Project on ways to Cooperation-World Bank flagship study Connecting prioritize public transport during Project implementation. East Asia: A New Framework for Infrastructure. The experiences of the three Southeast Asian cities are highly relevant as China has recently seen a wave of Operating Subsidies In Public Transport: mass rail transit project development, financing, and Academic Forum 2007 On The Theory And implementation in many major cities. As the Southeast Policy Of Transport Economics And Re- Asian experiences demonstrate, the private sector is able lated Development In Industrial to bring finance and expertise to the sector, which would Economics, School Of Economics And in turn provide fiscal space for the government to handle Management, Beijing Jiaotong University, other urgent priorities. The Southeast Asian experiences China have also generated a number of lessons learned on the success factors to ensure the best social and economic On December 8, 2007, the Bank's Senior Transport results from private concessions. Specialist, Mr. Shomik Mehndiratta, participated in a forum on Transport Economics at Beijing Jiaotong University. He spoke on operating subsidies for public (To download presentations of the seminars, please transport, drawing on the lessons of international visit http://www.worldbank.org.cn/Chinese/content/ experience to make suggestions for Chinese cities 240u63931951.shtml . To strengthen the support to grappling with the possibility of public transport China, the World Bank has deployed in its Beijing subsidies in the future. The talk concluded that there Office a new Senior Transport Specialist, Shomik were several effective alternatives to traditional operator Mehndiratta. For more information, please contact him subsidies; schemes targeted at providing subsidies at:smehndiratta@worldbank.org) directly to particular vulnerable users had often been found to be particularly effective. Further, in an environ- 14 China Urban Development Quarterly Issue 4 9~12 . 2007 Urban Best Practices Area Of World Exposition Shanghai 2010 Received The First Group Of Proposals; Deadline Extended To January 31, 2008 The international community has reacted actively to the September 20, 2007, where the ISC reviewed the initial call for proposals for the Urban Best Practices Area proposals. (UBPA) by the organizer of World Exposition Shanghai 2010. UBPA will exhibit urban best practices in the areas To provide opportunities for more cities to participate, of "livable cities", "sustainable urbanization", "protec- and to respond to suggestions by many cities, the ISC tion and utilization of the historical heritage", and has decided to extend the deadline for submission to "technological innovation in a built environment". So January 31, 2008. By this date, candidate cities should far the organizer has received 111 cases from 89 cities submit a written statement on the specific topic, relevant around the world, including 40 self-proposed cases by exhibition dimensions, exhibition format of the case, and cities (among which Liverpool, Sao Paolo, Zurich, a concept note of the case master plan to the Organizer. Madrid and other 9 cities have formally submitted their The ISC will encourage more applications from the cities proposals), 25 cases submitted by World Bank, and 46 in developing countries. cases by the United Nations Educational, Scientific and Cultural Organization (UNESCO). The second meeting of The ISC will meet again in February 2008 and decide the International Selection Committee (ISC) was held on final list of selections. Invitations to selected cities will be sent out subsequently. From April to December 2008, the Organizer of World Exposition 2010 will hold techni- cal negotiations with confirmed participants, and sign exhibition agreements. It is expected that cities and regions with physical cases will start building their projects in the northern part of the Urban Best Practices Area of the Exposition from October 2008 to September 2009, and participants with non-physical Cases can arrange their exhibitions areas in the Serial Pavilions from May 2009 to April 2010. Finally a trial run of the Urban Best Practices Area will be held from January to April2010. (For more information, please visit the official website of the World Exposition Shanghai 2010 at www.expo2010china.com) Site map of the Exposition. the "Urban Best Practices Area" is shown as the red highlighted part in the master plan, on the north bank of the river Huangpu. Picture: Shanghai World Exposition Bureau 15 THE WORLD BANK China Urban Development Quarterly Issue 4 9~12 . 2007 future is a single-window government centered around a citizen's need. This Global Dialogue enabled the policy- E-Development Resources at makers to get a snapshot of international experience in order to develop their own single-window and channel the World Bank management strategies and consider launching pilot projects replicating the models that proved successful elsewhere in the world. It focused specifically on citizen service centers as a most promising one-stop service delivery channel in countries with low Internet penetration. The e-Development Thematic Group is a World Bank initiative which supports a global community of practice E-Government Strategies: While a significant amount of bringing together World Bank staff and external clients attention has been given in the past to identifying the and partners for mutual dialogue, knowledge sharing, key components of e-Government strategies and learning and collaboration. Since 2003 it has organized or identifying best practices, little attention has been given co-sponsored over 100 learning and knowledge sharing to the processes involved in the design of such events, including three major training workshops and strategies. This event featured different country about 50 Global Dialogue seminars connecting audi- perspectives from India, the United States, and ences in some 40 countries via videoconference and live Singapore, and discussed what constitutes successful e- webcast. Government strategies and their key ingredients. Open system for e-Government: This was a Global Dialogue on open standards, open source and open formats. This approach has achieved growing accep- tance in the marketplace and is increasingly seen as key enabler of the transfer and use of information across organizations, systems, and devices. The seminar focused on the embrace of "open" information and communications technology systems by governments and businesses alike in the face of growing demands for the effective, customer-centric delivery of services. A panel of experts from the World Bank, Newport News, Virginia, Sun, Microsoft, Open Source Institute, ODF Alliance, et al discussed this pertinent and interesting topic. Citizens of Cote d'Ivoire learning ICT technology Photo: Ami Vitale, World Bank (To download videos, presentations and reports of past events or to participate in future events, please visit e- As a fast growing country, China has made impressive Development Thematic Group's website at progress in utilizing e-Development technology to http://go.worldbank.org/AB6DKLW3Z0 ) enhance government services. Mr. Zhu Yan, Director- General of Beijing Informatization Office shared Beijing's practice in one of the Global Dialogue seminars. The e-Development Thematic Group has accumulated rich resources over the years, and hopes that practitioners in China will find those international practices and discus- sions helpful. Examples of the e-Development Thematic Group's events include: Citizen-Centric Government: The government of the 16 China Urban Development Quarterly Issue 4 9~12 . 2007 Understanding Your Local Economy: A Resource Guide for Cities Poverty reduction is impossible unless cities are ing and delivering sound local economic development productive and able to offer economic opportunities to (LED) strategies, often as part of city development and the urban poor. The role of local authorities in develop- slum upgrading strategies, is crucial. Cities can perform better and provide an environment conducive to employ- ment and productivity through strategies that are attuned to local economic circumstances. The Cities Alliance has released a new publication, Understanding Your Local Economy: A Resource Guide for Cities, which addresses the challenges of analyzing local economic conditions and a city's comparative and competitive advantages. The Resource Guide, funded by the Netherlands Minis- try of Foreign Affairs, was produced by the London School of Economics and Kaiser Associates with the support of a number of Cities Alliance members, includ- ing the World Bank, UN-HABITAT, and USAID. This new publication presents practical approaches to conducting citywide and region-wide economic assessments, and includes advice on how to choose local economic development (LED) indicators and tools that can assess a local economy's competitiveness. Drawing on 15 case studies, one of which involved Lanzhou, China, and the methods and experiences of Cities Alliance members and partners, this publication offers practical guidance to the basic components of local economic assessments and how to undertake them. Officials of the City of Lanzhou knew that to design a Cover of the Resource Guide strategy effectively, it was essential to understand the Photo: Cities Alliance city's economic base and its constraints, as well as its competitive advantages. The assessment exercise in 2004-2005 aimed to provide the local government of Lanzhou with a strategic planning tool to support job creation and enable sustainable and inclusive growth. 17 THE WORLD BANK China Urban Development Quarterly Issue 4 9~12 . 2007 Lanzhou was one of the five Chinese cities that partici- The publication targets people and organizations pated in the city development strategy (CDS) program involved in local economy assessment and city strategy funded by the Cities Alliance, the World Bank, the development processes. To make the content accessible United Kingdom Department for International Develop- to different audience needs, the Resource Guide is split ment (DFID), and the United Nations Centre for Human into two sections. The first provides an overview of key Settlements -- Habitat (UNCHS). issues and tools. The second provides detailed guid- ance useful for conducting local economy assessments. Lanzhou went through the five steps of the local economy assessment process: The publication provides quick reference materials for decision makers, detailed guidance for practitioners, and i) Organizing the Effort links to in-depth information. It can also be used for ii) Identifying Data Requirements training activities, as it provides tips and case studies iii) Collecting the Data based on city experiences, and it highlights existing iv) Analyzing the Data resources from Cities Alliance members and partners. v) Assessing Competitiveness. Rich with web references, the Resource Guide should City officials identified the key LED indicators required, promote the development of better informed city conducted surveys to collect data, and defined the most strategies, as in Lanzhou, and help improve the eco- appropriate role for the city-region in economic nomic performance of cities as they seek to achieve development. Research was conducted using an assess- competitiveness and support the creation of opportuni- ment of Lanzhou city-region's strengths, weaknesses, ties for the urban poor. opportunities, and threats, with respect to market access, production capacities, innovation capacities, (To download this publication, please visit the Web site of Cities Alliance, http://www.citiesalliance.org. For more information, please contact the Resource Guide's project manager Pascale Chabrillat at pchabrillat@citiesalliance.org.) Spatial Patterns of Economic Growth, Lanzhou, China Photo: Chreod Corp. and the potential for agglomeration benefits. Based on the invaluable insights of the 15 cities like Lanzhou that engaged in this knowledge sharing effort, the CitiesAlliance Resource Guide summarizes LED assessment practices around the world and makes recommendations in the five key steps of the process. 18 China Urban Development Quarterly Issue 4 9~12 . 2007 Capacity Development at the Local Level Using Distance Educa- tion Via Radio: An Innovative Learning Program in Guatemala Since 1985, Guatemala has gone through a process of legal, administrative, and fiscal changes to promote decentralization. A critical factor for a successful reform process was to develop capacities of the municipal authorities and local populations to participate more actively and effectively in new models of participatory governance. The Guatemala Municipal Radio Training Program was designed and implemented within the decentralization framework. It has proved to be a path- breaking and innovative project, building local govern- ment capacity and bringing community involvement to participants in small towns and remote areas of the country, through the use of community radio stations. The triple methodology--a combination of book, radio, and face-to-face tutoring--has proved to be an effective way to develop local level capacity through distance Participants at a tutorial session of the Radio Program education. in Panabajal, Chimaltenango, Guatemala. Photo: Eirin Kallestad, World Bank Guatemala's local Community Development Councils (COCODEs) were established to provide a link between communities and municipal authorities. The law grants The second module on Participatory Planning took place this power to the councils, but little had been done to in the second half of 2006. The module emphasized the show communities how to officially establish the importance of participatory planning for community councils and voice their priorities. Based upon a recom- development, i.e., how to understand participatory mendation of the Secretary of Planning and Programming planning in municipalities and communities, and how to of the Presidency of Guatemala (SEGEPLAN), the World identify the advantages of being involved as citizens in Bank Institute assisted in developing training materials planning their communities' development. It had many to build COCODEs capacity for human, social, and registered participants on a similar high scale from very economic development. The Guatemalan Institute for diverse communities, and with a higher percentage of Radio Education (IGER) developed a radio training women than in the past. program on the legal background, objectives, and potential impacts of the COCODEs. The third module on Participatory Budgeting took place in 2007. The course exposed the participants to the The first module of the training program, a ten-week concept of participatory budgeting and how individuals course on the forming of COCODEs, was launched in and communities can work with the municipalities in the 2005 and re-broadcast in 2006, with over 3,000 registered budgetary process and show their priorities. Among a participants in two-thirds of the country. This course significant number of registered participants inscribed in marked the first time that local communities were this module, 55 percent were women. empowered, through the government, on a large scale to be systematically linked to the public investment The initiative has produced 60 hours of didactic radio, decision making. reached more than 6,000 participants and distributed 19 THE WORLD BANK China Urban Development Quarterly Issue 4 9~12 . 2007 more than 18,000 textbooks. Students who participated benefit greatly from capacity building and knowledge in all 3 modules were awarded a diploma in citizen sharing programs. Distance learning methodologies participation. The program has reached a large body of could help local communities improve their development learners--community leaders, students, municipal planning and management, and monitoring and evalua- officials, and others--and has had a multiplying effect tion of local municipalities through greater knowledge when other organizations have taken an interest and and participation of local citizens and communities. delivered programs themselves, using the prepared materials. During the course of the three deliveries, new Information about the Guatemala Municipal Radio leaders emerged and former participants have taken Program can be accessed at http://go.worldbank.org/ leadership and ownership of the program, replacing QLNHVR6IJ0 SEGEPLAN officials and "professional" tutors who had earlier run the program. In addition, university students have taken an active interest in the COCODEs training (For more information, please contact Victor Vergara program and shown great commitment to their local at Vvergara1@worldbank.org or Sabine Palmreuther communities. at Spalmreuther@worldbank.org at the World Bank Institute's Urban and Local Government Program) The program's importance to the future human, social, and economic development of Guatemala is recognized by a wide range of stakeholders, including the Govern- ment and the executing agencies. They are committed to continuing the work to ensure its sustainability and success; a replication of the program is envisaged for Corrigendum the 2008 academic year. A great opportunity exists to learning more about how the Guatemalan Municipal Radio Program might also be In the last issue, two pictures accompanying the article of interest to other countries who wish to promote "Restoration of the Daming Palace of Tang Dynasty" support for more citizen participation in the implementa- had incorrect captions. The captions should be "Layout tion of their national decentralization policies. For China, of Daming Palace, from the ancient capital city of Xi'an, this model of capacity building may also have useful by Wang Zheng" and "Photo of Hanyuan Hall before implications. China has made significant progress, but it the restoration project" is clear that rural and remote local governments would Disclaimer The China Urban Development Quarterly is originally published in Chinese for the Chinese audience. The English translation seeks to promote understanding of urban development issues in China to a wider audience. The findings, interpretations, and conclusions expressed herein are those of the author(s), and do not necessarily reflect the views of the International Bank for Reconstruction and Development / The World Bank and its affiliated organizations, or those of the Executive Directors of The World Bank or the governments they represent. China Urban Development Quarterly is a joint production of World Bank East Asia and Pacific Region Urban Develop- ment Unit and Urban and Local Government Program of World Bank Institute. The Quarterly is an environment-friendly publication, printed in soy ink and on recycled paper. Please visit the Quarterly's website www.ChinaUrbanQuarterly. org, and send your feedback to UrbanQuarterly@worldbank.org 20