Project Number: 42383 Loan and/or Grant Number(s): L2606, G0191 28 December 2012

People‘s Republic of China: Shanxi Small Cities and

Towns Development Demonstration Sector Project

Project Administration Manual

Contents

ABBREVIATIONS 4

I. PROJECT DESCRIPTION 1

II. IMPLEMENTATION PLANS 8

A. Project Readiness Activities 8 B. Overall Project Implementation Plan 9

III. PROJECT MANAGEMENT ARRANGEMENTS 12

A. Project Stakeholders – Roles and Responsibilities 12 B. Key Persons Involved in Implementation 13 C. Project Organization Structure 15

IV. COSTS AND FINANCING 16

A. Cost Estimates by Expenditure Category 16 B. Allocation and Withdrawal of Loan Proceed 24 C. Allocation and Withdrawal of Grant Proceeds 25 D. Expenditure Accounts by Outputs/Components 26 E. Expenditure Accounts by Year 27 F. Contract and Disbursement S-curve 27 G. Fund Flow Diagram 28

V. FINANCIAL MANAGEMENT 29

A. Financial Management Assessment 29 B. Disbursement 32 C. Accounting 33 D. Auditing 34

VI. PROCUREMENT AND CONSULTING SERVICES 35

A. Advance Contracting and Retroactive Financing 35 B. Procurement of Goods, Works and Consulting Services 35 C. Section 1: Process Thresholds, Review, and 18-Month Procurement Plan 35 D. Procurement Plan 38 E. Consultant's Terms of Reference (to be revised) 42 F. Capacity Building for Project Town Level 45 G. Budget 45

VII. SAFEGUARDS 46

A. Environmental Aspects 46 B. Environmental Assessment and Management Framework 47 C. Project Selection and Key Environmental Issues 47 D. Inception of the Environmental Impact Assessment Study 50 E. EIA Report Content 51 F. Public Consultation 57 G. Environmental Management Plan 58 H. EIA Approval 59 I. Resettlement Plan 60

VIII. PERFORMANCE MONITORING, EVALUATION, REPORTING AND COMMUNICATION 63

A. Project Design and Monitoring Framework 63 B. Project Design and Monitoring Framework (Noncore subprojects outputs) 68

C. Monitoring 68 D. Evaluation 86 E. Reporting 86 F. Stakeholder Communication Strategy 87 G. Labor Reemployment Framework 88

IX. ANTICORRUPTION POLICY 89

X. ACCOUNTABILITY MECHANISM 90

XI. RECORD OF PAM CHANGES 91

Appendix 1 SOCIAL DEVELOPMENT ACTION PLAN FOR VULNERABLE GROUPS 92

Appendix 2 LABOR RE-EMPLOYMENT FRAMEWORK 97

Appendix 3 UPDATED PROCUREMENT PLAN 101

Appendix 4 IMPLEMENTATION STATUS AND ACTION PLAN 107

Project Administration Manual Purpose and Process

1. The project administration manual (PAM) describes the essential administrative and management requirements to implement the project on time, within budget, and in accordance with Government and Asian Development Bank (ADB) policies and procedures. The PAM should include references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the PAM. The Shanxi provincial government (SPG) is wholly responsible for the implementation of ADB financed projects, as agreed jointly between the borrower and ADB, and in accordance with Government and ADB‘s policies and procedures. ADB staff is responsible to support implementation including compliance by SPG, and the implementing agencies (IA)—Pingyao Water Affairs Bureau (PWAB), the Xiaoyi City Engineering and Construction Management Office (XECM), and the Youyu Development and Reform Commission (YDRC), Xinghuacun Town Government XTG), Qingxu Housing and Urban-Rural Development Bureau (QHURD), Niangziguan Town Government (NTG) of their obligations and responsibilities for project implementation in accordance with ADB‘s policies and procedures. Further IAs will be added when future noncore subprojects are approved by ADB, In the event of any discrepancy or contradiction between the PAM and the Loan and Grant Agreements, the provisions of the Loan and Grant Agreements shall prevail.

After ADB Board approval of the project's report and recommendations of the President (RRP) changes in implementation arrangements are subject to agreement and approval pursuant to relevant Government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval they will be subsequently incorporated in the PAM.

Abbreviations

ADB = Asian Development Bank ADF = Asian Development Fund AFS = audited financial statements CQS = consultant qualification selection DMF = design and monitoring framework EARF = environmental assessment and review framework EIA = environmental impact assessment EIRR = economic internal rate of return EMP = environmental management plan ESMS = environmental and social management system FIRR = financial internal rate of return GACAP = governance and anticorruption action plan GDP = gross domestic product ICB = international competitive bidding IEE = initial environmental examination IPP = indigenous people plan IPPF = indigenous people planning framework LAR = land acquisition and resettlement LIBOR = London interbank offered rate NCB = national competitive bidding NGOs = nongovernment organizations PAI = project administration instructions PAM = project administration manual PCG = Pingyao county government PMO = project management office PPMS = project performance management system PRC = People's Republic of China QBS = quality based selection QCBS = quality- and cost based selection RRP = report and recommendation of the President to the Board SBD = standard bidding documents SEIA = summary environmental impact assessment SOE = statement of expenditure SPS = Safeguard Policy Statement TOR = terms of reference XOG = Xiaoyi city government YCG = Youyu county government

WEIGHTS AND MEASURES

km kilometer km2

square kilometer m2 square kilometer m3

cubic meter

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I. PROJECT DESCRIPTION

A. Project Overview 1. Location. Located in northern People's Republic of China (PRC), Shanxi Province is a national base for coal mining, coke production, and manufacturing of industrial equipment and machinery. The provincial population of 33.75 million was 43% urbanized in 2006. About 3.9% of the population lives in absolute poverty, compared with 2.5% nationally. 2. In recent years, small cities and towns in Shanxi Province have made substantial progress in facilitating economic growth. Some resource-based small cities and towns have taken advantage of the growth of mining and metals. Some located within metropolitan areas and development corridors play important roles as manufacturing centers, transportation hubs, or agroprocessing sites; while others have been successful in capturing multiplier effects in the service sector. Tourism has been a major driver of economic growth in small cities and towns because of significant historic and cultural assets 3. Growth has come at a considerable cost. In many towns, industrial development has outstripped local government capacity for urban management and infrastructure provision, resulting in degradation of local living conditions and the natural environment. Only 70% of households in Shanxi towns have access to piped drinking water as compared with more than 90% in most large cities. The large majority of Shanxi‘s 11 small cities and 561 towns lack wastewater treatment capacity. In the absence of widespread centralized heating and natural gas, coal-burning stoves serve as the main energy source for domestic heating and cooking. Only one in five towns have a solid waste treatment station. As a result of these inadequate municipal services, many areas of the province suffer from air, water, and land pollution, which threatens human health and reduces life expectancy. Local governments lack the capital and expertise to provide, in a timely fashion, the infrastructure that would mitigate the negative environmental and social impacts of their economic gains. 4. Project Rationale. The PRC is striving to develop small cities as a means to promote rural–urban integration and the emergence of a more harmonious society. The Project will increase economic, social, and environmental sustainability of small city and town development by improving urban infrastructure and municipal services. The improvements will (i) attract economic investment, especially in employment-intensive industries and services, by providing reliable international standard infrastructure such as roads, water supply, and sewerage; (ii) provide better living conditions and a decent urban environment to town residents by substituting centralized heating for household coal burning, treating wastewater before discharging it into the natural environment, and introducing sanitary practices in solid waste collection and treatment; and (iii) extend the benefits of growth to all residents across the socioeconomic spectrum by improving coverage and quality of basic municipal services. 5. Project Description. The Project aims to help promote balanced and environmentally sustainable urbanization; narrow the urban–rural gap; and improve production, employment, and living conditions in small cities and towns in Shanxi Province. The Project will assist the provincial and county governments to develop a mechanism for selecting and prioritizing subproject cities and towns with potential for employment generation, economic growth, and environmental improvement. Increased employment opportunities will contribute directly to the Government‘s goal of closing the rural–urban income gap, as farm workers will fill new industrial and service jobs in cities and towns. Activities to develop markets and create jobs by supporting urbanization and protecting the environment in small cities and towns are in line with ADB‘s strategic objective of promoting equitable growth in the PRC.

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6. Implementation Period. The Project will be implemented over 6 years from late-2009 to late-2015. the Project Implementation Plan is provided in Section II B. 7. Sub-projects. The subproject towns included in the Project have potential for stronger economic growth and employment generation to support Shanxi Provincial Government‘s policy for development of small cities and towns. The subproject towns are all strategically located in the province and their economy is largely based on tourism, resource processing, and light manufacturing. 8. The Project includes about seven subproject small cities and towns. Each subproject includes one or more components, consisting of capital improvements to urban infrastructure or municipal services. The eligible subsectors for the components include roads and associated services, water supply, wastewater management, solid waste management, river improvement, district heating, gas supply, area upgrading, and education. Detailed assessment and analyses were undertaken for the three core subprojects—Pingyao county, Wutong town, and Youyu county. Subsequent subprojects are being selected, prepared, and appraised during implementation. 9. Because of the varying degree of preparedness of the subsequent subproject cities and towns to be included in the Project and the possibility that some of them may change during project implementation, the Government agreed that the ADB sector loan modality is more appropriate as it allows greater flexibility during project implementation. 10. Subsequent Subprojects. The process for subproject identification, selection, preparation, and appraisal is presented below in section B, paras 18 –28). Further Details are found in the Subproject Appraisal Criteria and Report Template. Candidates for subsequent subprojects have been identified although there is the possibility that some of them may change during project implementation. 11. Core Subprojects. The Pingyao subproject includes the Huiji River improvement component, which will improve environmental quality, thereby supporting tourism development in the historic city center. The Wutong subproject has five components: (i) Caoxi road and associated services, (ii) heat supply, (iii) gas supply, (iv) wastewater treatment, and (v) education facilities. The subproject will provide basic infrastructure to improve environmental conditions and support expansion of the city to the northwest, where air pollution is lower. The Youyu subproject has five components: (i) heat supply, (ii) water supply, (iii) drainage and wastewater collection, (iv) roads and associated services, and (v) river improvement. In addition to providing citywide environmental improvements, this subproject will provide basic infrastructure to support the development of an urban expansion area to house workers migrating to the county seat to work in agroprocessing and other light industrial jobs. Technical analysis of the core subprojects was prepared during the project preparation. 12. Approved Noncore subprojects. As of 27 December 2012, the following noncore subprojects have been approved. The Nianziguan subproject (Part A) was approved by Shanxi Provincial Government, through the Shanxi Project Management Office on 9 December 2011 and subsequently approved by ADB in February 2012. The Nianziguan subproject (Part A) has one component: river improvement – Mian River. The Xinghuacun subproject has one component which is roads and associated services and includes three roads, namely Xinshi Road, Xinqu Zhong Road and Xinqu Nan Road. The Xinghuacun subproject was approved by Shanxi Provincial Government, through the Shanxi Project Management Office on 21 January 2012 and subsequently approved by ADB in February 2012. The Xinghuacun subproject has one

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component which is roads and associated services and includes three roads, namely Xinshi Road, Xinqu Zhong Road and Xinqu Nan Road. The Qingxu subproject (Part A) was approved by Shanxi Provincial Government, through the Shanxi Project Management Office on 21 December 2012 and subsequently approved by ADB on 24 December 2012. The Qingxu subproject (Part A) has one component which is river and lake improvement – Baishi River and Dong Lake. 13. Future noncore subprojects. Further noncore subprojects are under preparation, namely Nianziguan subproject (Part B), Qingxu subproject (Part B), and Jingsheng Town subproject and will be submitted for review and approval during implementation. 14. Support Water and Wastewater Utilities. To enhance the sustainability of the Asian ADB-financed water supply and wastewater infrastructure, the Multi-Donor Trust Fund under the Water Financing Partnership Facility will provide a $250,000 grant to be used to strengthen the institutional and financial management capacity of the entities involved in planning, financing, implementing, operating, and maintaining water and wastewater systems in the subproject small cities and towns. This includes water supply and wastewater service providers participating in core and subsequent subprojects. The assistance, to be administered by the Shanxi provincial government, will also focus on improving the provincial policy and regulatory framework for these providers and, where appropriate, the national framework. 15. Institutional Strengthening Services. Institutional strengthening services will be procured to support the project management office (PMO) during implementation of the sector Project as well as to strengthen the institutional capacity of provincial and city/town PMOs in the areas of managing small cities/towns development activities and implementing Asian Development Bank (ADB)-financed projects. The services fall into two categories: implementation support and training, and capacity building for project towns. Detailed terms of reference will be prepared during project implementation. 16. Beneficiaries. The Project will provide about 250,000 direct beneficiaries in the core subproject cities and towns with access to improved urban services and public facilities. Another 380,000 people in surrounding rural areas of the core subproject cities and towns will benefit from local economic development and increased employment opportunities. About 13% of the beneficiaries are poor. 12. Impact. The impact of the Project is improved environmental quality and increased employment generation in small cities and towns in Shanxi Province. 13. Outcome. The outcome of the Project is improved urban infrastructure and municipal services in about seven small cities and towns in the province.

14. Outputs. The expected outputs of the Project are provided below.

(i) Subproject 1: Pingyao County

1.1 Component 1: Huiji River Improvement: (a) Riverbed is dredged and embankments are constructed (b) Water storage reservoirs are built; rubber dams are

installed (ii) Subproject 2: Wutong Town

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2.1 Component 1: Caoxi Road and Associated Municipal Services Road is widened and reconstructed; drainage channel is improved

2.2 Component 2: Heat Supply New heat exchange stations and distribution network operating

2.3 Component 3: Gas Supply New gas supply storage and distribution system operating

2.4 Component 4: Wastewater Treatment WTTP and collection network operating

2.5 Component 5: Education Services Facilities New schools and vocational training center in use

(iii) Subproject 3: Youyu County

3.1 Component 1: Heat Supply

New heat stations, heat exchange stations, and distribution network operating

3.2 Component 2: Water Supply Drinking water production and distribution works operating

3.3 Component 3: Drainage and Wastewater Collection Combined storm-water drainage and sewerage network operating

3.4 Component 4: Roads and Associated Municipal Services New roads in the new town operating

3.5 Component 5: Flood Control Flood control channel is operating

(iv) Subproject 4: Nianziguan Town (Part A) 4.1 Component 1: Mian River improvement and flood control

(a) Riverbed is dredged and embankments constructed (b) dam installed

(v) Subproject 5: Xinghuacun Town 5.1 Component 1: Roads and Associated Municipal Services

New roads operating (vi) Subproject 6: Qingxu Urban Area (Part A)

6.1 Component 1: River and Lake Improvement

(a) Riverbed is dredged and embankments constructed (b) Lake improvements

(vii) Subsequent subproject cities and/or towns (not yet approved)

Urban infrastructure and services improved and operating (v) For all subprojects:

Infrastructure and service providers have increased capacity to plan, construct, operate, and maintain facilities

B. Process for Subproject Identification, Selection, Preparation, and

Appraisal

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15. Under the sector loan approach, the Shanxi provincial government (SPG), the designated Executing Agency, established a three-stage approach for (i) identification and selection, (ii) preparation, and (iii) appraisal of subprojects for inclusion in the Project. These procedures are currently being used for the selection and preparation of subsequent subprojects. SPG has delegated various actions and decisions for subproject processing to the Shanxi project management office (PMO), located in the Shanxi Construction Bureau. Stage 1: Subproject Identification and Selection 16. SPG has invited county-level city and county governments in Shanxi Province to express their interest in participating in the Project to be partly financed by an Asian Development Bank (ADB) loan. The following criteria will be used to identify and select subprojects: 17. The subproject must be in the urban development sector, i.e., related to the physical development of small cities and towns, with particular emphasis on infrastructure development. The eligible subsectors for subproject investment (the components) are roads and associated municipal services, water supply, wastewater management, river improvement, area upgrading, solid waste management, district heating, gas supply, area upgrading, and education.

18. The proposed subproject city or town must be a county-level city or county, or a town. The subproject must improve living conditions and/or enable employment generation, as follows:

(i) Improve living conditions by accomplishing at least one of the following: (1) remediating polluted areas in cities and towns; (2) lowering the rate of (or slow the rate of increase of) pollution of water, land, and/or air in urban areas; (3) treating solid waste or wastewater prior to discharge into the natural environment; and/or (4) increasing environmental sustainability of town development through more ecologically sensitive settlement patterns or infrastructure services.

(ii) Increase employment generation by accomplishing at least one of the

following:(1) facilitating investment in labor-intensive economic sectors including the service sector; (2) removing a specific infrastructure-related barrier to growth of an economic sector in the city or town (i.e., enabling economic growth through infrastructure service provision); (3) enabling the development of residential and/or mixed-use areas for employees of new or expanding businesses (i.e., providing roads and associated municipal services for urban expansion areas); (4) strengthening linkages of city and/or town economy with the larger metropolitan or subregional economy (including growth corridors and clusters); and/or (5) increasing access of the urban poor to economic opportunities.

(iii) The local government must confirm its ability and willingness to arrange

counterpart financing. (iv) The local government must confirm its willingness for the subproject to comply

with ADB safeguard policies and other requirements. (v) Implementation must be during 2009–2015.

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Stage 2: Subproject Preparation 19. Preparation by local governments involves designating an implementing agency (or initially an office of the government) to prepare project design documents including a project proposal and feasibility study report under the guidance of the Shanxi Development and Reform Commission (SDRC); with the help of the Shanxi PMO, an environmental impact assessment, and (if required) a resettlement plan to standards necessary to meet both domestic and ADB requirements. Governments must determine suitable institutional arrangements for project implementation and prepare a detailed financing plan. 20. Local governments can contract local design and other specialist institutes to carry out selected tasks involved in subproject preparation, including report production. To facilitate an orderly and consistent appraisal of the subprojects, the Shanxi PMO requires preparation of an integrated feasibility study in a common format (to ADB standards) for each proposed subproject, including technical, social, financial, economic, and institutional analysis. Stage 3: Subproject Appraisal and Approval 21. The ADB project team developed a detailed set of evaluation criteria, which was discussed and agreed with SPG. This is to ensure that appraisal of individual subprojects is conducted in accordance with ADB standards. The appraisal of the three core subprojects will also serve as guidance for the appraisal of subsequent subprojects. 22. Each subsequent subproject PMO will prepare a subproject appraisal reportand submit it to the municipal finance bureau and municipal development and reform commission for review and then to the Shanxi PMO for review. The Shanxi PMO will submit the appraisal report to the Shanxi Finance Bureau and SDRC for endorsement. 23. Rejected subprojects are to be referred to the relevant local governments with indications of where the preparations and proposals are deficient, and for additional preparation work (assuming the subprojects have a realistic chance of meeting the agreed evaluation criteria). 24. Subprojects approved by SDRC will be forwarded to ADB for approval. 25. All subproject approvals by ADB or SPG will only be made if

(i) the subproject includes an environmental impact assessment which has been endorsed by the Shanxi Environmental Protection Bureau and ADB, and has been subject to relevant public consultation and disclosure; and

(ii) a resettlement plan, meeting ADB requirements, has been prepared and approved by the relevant local government, and endorsed as satisfactory by ADB.

26. The Technical Analysis for the subprojects will follow the process carried out for the core subprojects and include the following analysis:

(i) Master Planning Issues (ii) Component Overview (iii) Existing Conditions and Problems (iv) Component Rationale (v) Applicable Standards, Codes, Design and Construction Guidelines (vi) Proposed Works

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(vii) Alternatives Comparison and Least-Cost Analysis (viii) Operation and Maintenance Arrangements (ix) Capacity Building Requirements (x) Tariff Regimes (if they apply)

27. The Economic and Financial Analysis for the subprojects should include the following information:

(i) economic rationale (ii) demand Analysis (iii) evaluation of individual components (iv) the economic internal rate of return (EIRR) (v) financial analysis of any revenue generating components (vi) approach to non-revenue generating components (vii) financial performance of subproject governments (viii) fiscal sustainability (ix) results of financial management assessment

28. Social Analysis for the subprojects will follow the process carried out for the core subprojects and include the following analysis:

(i) Socio-economic profile of the project town (ii) Service coverage and benefited population in each town (following Pingyao

example in the table below) (iii) Summary of consultation meetings and workshops and summary of views from

residents of the subproject towns (iv) Poverty information for subproject town (v) Average income and main sources of income (vi) Major benefits expected for residents (vii) Social Action Plan (viii) Affordability analysis if any of the components will include tariffs (ix) For Historic Towns including proposals for how residents can better benefit from

the projects and how the impact of tourism may be managed (x) Monitoring of socio-economic impacts and social action plan

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II. IMPLEMENTATION PLANS

A. Project Readiness Activities

Indicative Activities

2009 2010

Who responsible

Dec Jan Feb Mar Apr May Jun Jul

Advance contracting actions

EA

Retroactive financing actions

EA

Establish project implementation arrangements x

EA

ADB Board approval x

ADB

Loan signing x ADB/SPG

Government budget inclusion

x EA

Loan effectiveness

x ADB/MOF

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B. Overall Project Implementation Plan1

LOAN 2006-PRC: Shanxi Small Cities and Towns Demonstration Sector Project

FIGURE 2-2 IMPLEMENTATION SCHEDULE

(as of 6 Dec 2012) ACTIVITY

2010 2011 2012 2013 2014 2015 2016

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2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

ADB Loan Period

Loan effective

Loan closing

A.

Pingyao

1.

Land Acquisition and Resettlement

2.

Preliminary and Final Design

3.

Tendering

4.

Huiji River Improvement and Flood control

Subtotal

B.

Wutong township

1.

Land Acquisition and Resettlement

2.

Preliminary and Final Design

3.

Tendering

4.

Caoxi Road

5 Centralized Heating Supply

6 Education Facilities

1 To be updated annually and submitted to ADB with contract and disbursement projections for the following year. To be updated by

start-up consultants.

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7 Gas Supply

8 Wastewater treanment plant

Subtotal

C.

Youyu County

1.

Land Acquisition and Resettlement

2.

Preliminary and Final Design

3.

Tendering

4.

District Heating

5 Drainage and Wastewater Pipe System

6 Flood Control

7 Roads

8 Water Supply

Subtotal

D.

Other subprojects

1.

Land Acquisition and Resettlement

2.

Preliminary and Final Design

3.

Tendering

4.

Construction

Subtotal

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E.

Institutional Development

Total

Updated PAM

Actual/Plan

Source: Asian Development Bank.

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III. PROJECT MANAGEMENT ARRANGEMENTS

A. Project Stakeholders – Roles and Responsibilities

Project Stakeholders Management Roles and Responsibilities

Shanxi Provincial Government (SPG)

A project leading group (PLG), chaired by a vice-governor and comprising senior government officials of concerned bureaus and commissions, was established to provide overall guidance and support to project preparation and implementation.

A Project Management Office (PMO) located in the Shanxi Housing and Urban-Rural Development Bureau was established under the PLG to undertake and manage day-to-day project activities. In each subproject city and town, a PLG and PMO will be set up to liaise with the provincial PMO and oversee and manage the work undertaken by the implementing agencies.

In Pingyao, the Pingyao county Water Affairs Bureau (PWAB)

For the Huiji River improvement component

In Wutong, the Xiaoyi City Engineering and Construction Management Affairs Office (XECM)

For all Wutong components

In Youyu, the Youyu County Development and Reform Commission (YDRC)

For all Youyu components

In Nianziguan, the

Niangziguan Town Government (NTG)

For all Nianziguan Town components

In Xinghuacun, the

Xinghuacun Town Government (XTG)

For all Xinghuacun Town components

In Qingxu, the Qingxu Housing and Urban-Rural Development Bureau (QHURB)

For all Qingxu components

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ADB Administration and disbursement of loan of $100,000,000 to PRC for the Project.

Administration by ADB of a grant not exceeding the equivalent of $250,000 to PRC for the Project.

Responsible to support implementation including compliance by SPG, and the three implementing agencies (IA)—PWAB, XECM, and YDRC, of their obligations and responsibilities for project implementation in accordance with ADB‘s policies and procedures.

B. Key Persons Involved in Implementation

Executing Agency

Agency Name Officer's Name: Li Jinsheng Position: Deputy Director Telephone: Email address: szlizhifeng@sina.com

Office Address: Shanxi Housing and Urban-Rural Development Bureau 235 Jianshe Bei Rd, Taiyuan Shanxi, PRC

ADB

Country Director Staff Name: Hamid L. Sharif Position Country Director, PRCM Telephone No: +86 8573 0909 Email address: hsharif@adb.org

Deputy Country Director Staff Name: Dan Yang Position Country Director, PRCM Telephone No: +86 8573 0909 Email address: dyang@adb.org

Project Management Unit Head

Staff Name: Candice P. McDeigan Position PMU Head Telephone No: +86 10 8573 0909 Email address: cmcdeigan@adb.org

Mission Leader

Staff Name: Joanna Masic Position: Urban Development Specialist, EASS Telephone.: +86 10 8573 0845 Email address: jmasic@adb,org

Resettlement Specialist Staff Name: Song Ye

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Position: Sr. Safeguards Officer Telephone: +86 10 8573 0909 E-mail Address: mgupta@adb.org

Environment Specialist Staff Name: Ning Li Position: Environment Expert Telephone: +86 10 8573 0909 E-mail Address: lining.consultant@adb.org

Procurement Specialists Staff Name: Minhong Fan Position Sr. Procurement Officer Telephone: +86 10 8573 0909E-mail Address: mfan@adb.org

Disbursement Specialists Staff Name: Chongli An Position: Senior Financial Control Officer Telephone: +86 10 8573 0909 E-mail: chonglian@adb.org

Legal Counsel Staff Name: Position: Counsel Department: Office of the General Counsel Telephone: +632 6325521

Analyst

Staff Name: Yinghua Zhou Position: Associate Project Analyst Telephone: +86 10 8573 0909 E-mail: yzhou@adb.org

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C. Project Organization Structure

Shanxi Project Management Office (PMO) (Shanxi Province Housing and Urban-Rural Development

Bureau)

Xiaoyi City (Wutong) PLG

Youyu County PLG

Pingyao County

PLG

Pingding County Town

Subproject

PLGs

PMOs

PMO Water Affairs

Bureau - Huiji

River Improvement

PMO Xiaoyi City Engineering and Construction Management Affairs Bureau for Wutong Town - Caoxi Road and

Associated Municipal Services

- Wastewater Treatment - Heat Supply - Gas Supply - Social Services Facilities

PMO Youyu County Development

and Reform Bureau - Heat Supply - Water Supply - Roads and Associated

Municipal Services - Flood Control - Drainage and Wastewater

PMO Nianziguan Town Government

- Main River

Executing

Agency

Shanxi Province Small Cities and Towns Project Leading Group (PLG)

Fengyaong City

PMO Xinghuacun Town Government

- Roads

Qingxu Urban Areas

- PMO Qingxu HURB Lake and River

Other PLG

Subprojects Town

PMO

To be determined

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IV. COSTS AND FINANCING

A. Cost Estimates by Expenditure Category

1. The cost analysis summarizes costs using standard disbursement cost categories described in Table 1.

Table 1: Cost Analysis Categories

Code Component Description

03 Civil Works

Civil Works - Earth moving, excavation, cut and fill, and grouting etc

- Concrete work including rebar and formwork (e.g. foundations, building components, tanks, and bridge components etc)

- Metal fabrication (building framework, tanks, and other metal structures etc)

- Building construction on roads, embankments, and pipelines etc

- Landscaping, planting, and fences etc

- Plumbing, electrical wiring and other utility services

- Other construction services

- The cost of special purpose construction equipment will normally be included in construction contracts and considered a civil cost (e.g. earth movers, cranes, arc welding equipment, and site dewatering pumps etc).

Materials - Major purchases of project materials that are procured separately from associated construction services (e.g. aggregate, rock, steel, cement, sand, wood, rebar, pipes, asphalt, seedling trees, grass seeds and paving blocks etc)

15 Equipment (including Installation)

Equipment, Vehicles, Furniture

- General purpose vehicles (cars and trucks etc)

- General purpose tools (e.g. landscape and building maintenance equipment etc)

- Office furniture and equipment (desks, cabinets, computers, copiers, and phones etc)

Capital Goods - Electrical equipment (e.g. motors, pumps, controllers, electrical panels, telecommunication antennae etc)

- Mechanical equipment (e.g. overhead cranes, water and wastewater treatment process equipment, meters and other measuring devices, gates, refrigeration, heating and air conditioning etc)

- Special purpose vehicles for project operations (e.g. bulldozers and compacters used in a landfill operation, and warehouse vehicles etc)

- Other larger machinery and equipment manufactured off site

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Code Component Description

09 Research and Development

- Scientific investigations (e.g. water quality modeling, bench test of a treatment process, archaeological investigation, and survey of flora and fauna etc)

- Technical support services (e.g. agricultural extension and small business etc)

- Demonstration projects (crop production, soil conservation, and water harvesting etc)

21 Consultancy and Training (Consulting Services)

- Any costs relating to consultant service during implementation

24 Other Training (Training and Fellowships)

- Technical training for project operations (training in water or wastewater treatment, Scada, and hydrological modeling for reservoir operations etc)

- Training in ADB procedures

- Training in project and enterprise management (finance and accounting etc)

- Other training (e.g. participatory methods, WUAs, IWRM, etc)

Land Acquisition and Resettlement

- Land purchase

- Compensation for loss of assets and livelihood

- Cost to resettle displaced persons (new housing, new land, retraining, moving costs, and costs to assist the host community etc)

- LAR monitoring

Environmental Protection

- Any costs of construction and procedure relating to environmental protection during project implementation

Bidding Documents and Expenses

- Any costs relating to bidding documents and expenses

Taxes and Duties

- VAT and other taxes and duties on goods and services

Project Management and others

- Project reporting, project audits

- Project accounting and financial management

- Funds to purchase initial inventories of materials and supplies and finance startup activities for project administration and operation (do not double count with other items)

- Implementation of management software and methods (e.g. accounting software and project management procedures etc)

- Assistance to develop new institutions (e.g. WUAs etc)

- Any other costs relating to project management ADB = Asian Development Bank, IWRM = integrated water resources management, LAR = land acquisition and resettlement, SCADA = Supervisory Control and Data Acquisition, VAT = value added tax, WUA = water user association. Source: Cost categories provided in ADB, 2005. Financial Management and Analysis of Projects (Section 3.4.3, page 6).

2. Estimated costs in the Feasibility Study Reports document labor, materials, equipment, taxes, etc. For estimation of total costs, physical and price contingencies and financing charges during implementation are estimated.

18

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3. Capacity building costs are incorporated into each component under ―institutional strengthening.‖ Total base costs for capacity building comprise (i) $2.5 million for the implementation support and training consulting services, which will be borne by the subproject cities/towns, and (ii) a $250,000 grant from ADB for capacity building of water and wastewater service providers. 4. The following key assumptions have been made:

(i) Taxes and duties are shown separately. Tax assumptions are as follows:

Tax Rate Base

Value Added Tax 17.0% Sales

Tax on civil works contracts 3.38% Sales

Composite Tax on Other Items 5.5% Sales

(ii) Exchange Rate:2 CNY6.95 = $1 (iii) All costs are in mid-2008 prices. (iv) Physical contingencies are computed at 10%. (v) Price contingencies based on expected cumulative inflation over the

implementation period are as follows:

2008/09 2009/10 2010/11 2011/12 2012/13

Foreign rate of price inflation (%/year) 6.8% 0.7% 1.4% 0.4% 0.5%

Domestic rate of price inflation (%/year) 5.5% 5.0% 5.0% 5.0% 5.0% Assumed rates (2008 to 2013) are provided by the Asian Development Bank.

(vi) Financing costs include capitalized interest and commitment fee charges.

Interest during construction has been assumed at 4.5% which comprises of the London interbank offered rate plus the spread. Front end fees are assumed to be waived. Interest rates and terms are as follows:

Interest Rates & Terms

Interest rate

Commitment charge

Total period of

the loan in years

Grace Period

Interest capitalized into loan

Commitment fee

capitalized into loan

ADB Loan

4.5% 0.15% 25 6 100% 100%

ADB = Asian Development Bank.

5. The summary costs and financing by expenditure account (Tables 2-5) are provided below:

2 Source: Agreed between PMO and ADB estimate of appreciating CNY exchange rate.

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Table 2: Costs and Financing by Expenditure Account

Item Total Cost Financing by Expenditure Account ($ million)

ADB Loan

Finance Share (%)

(CNY

million)

($

million)

ADB

Loana

Multi-Donor Trust Fund

b

Pingyao

County

Youyu

County Xiaoyi/ Wutong

Other

County

A. Base Costs

I. Construction

Civil Works 717.4 102.5 61.0 2.0 8.1 8.6 22.7 60%

Equipment (including installation and materials)

171.5 24.5 24.5 0.0 0.0 0.0 0.0 100%

Land Acquisition and Resettlement 145.4 20.8 0.0 11.9 0.0 0.0 8.8

Other Costs b 153.8 22.0 0.0 2.3 5.2 4.1 10.3

Subtotal (I) 1,188.1 169.7 85.5 16.3 13.3 12.7 41.9 50%

II. Institutional Strengthening

Consulting Services and Training 17.5 2.5 2.5

0.0 0.0 0.0 0.0 100%

Capacity Building (grant) c 1.8 0.3 0.0 0.3

d 0.0 0.0 0.0 0.0

Subtotal (II) 19.3 2.8 2.5 0.3 0.0 0.0 0.0 0.0

Subtotal Base Costs (I + II) 1,207.3 172.5 88.0 0.3 16.3 13.3 12.7 41.9 51%

B. Contingencies 281.9 40.3 0.0 5.6 4.9 3.1 26.7

C. Financing Charges during Implementation 83.7 12.0 12.0 0.0 0.0 0.0 0.0 100%

Total Project Costs 1,572.9 224.7 100.0 0.3 21.9 18.3 15.8 68.5 45%

Note: Numbers may not sum precisely due to rounding. a

The ADB loan will cover bank charges and taxes and duties or works, supplies, equipment and services financed by ADB. b Under the Water Financing Partnership Facility funded by the governments of Australia, Austria and Norway

c Includes $370,000 for project implementation and training-related equipment.

Source: Asian Development Bank estimates.

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Table 3: Costs and Financing by Expenditure Account

Pingyao Total

Total Cost Financing by Expenditure Account ($million)

ADB Loan

Finance Share

CNY (million)

$ (million)

ADB ADB Pingyao Youyu Xiaoyi/ Other Expenditure

Loan Grant County County Wutong County Account

A. Base costs

I. Construction

1. Civil Works 127.51 18.22 16.21 2.01 89%

2. Equipment (including installation and materials)

5.72 0.82 0.82 0.00 100%

3. Land Acquisition and Resettlement 83.60 11.94 0.00 11.94

4. Other Costs 16.34 2.33 0.00 2.33

Subtotal (I) 233.17 33.31 17.03 16.28 51%

II. Institutional Strengthening

1. Consulting Services and Training 3.08 0.44 0.44

Subtotal (II) 3.08 0.44 0.44 100%

Total Base Costs (I + II) 236.25 33.75 17.47 16.28 52%

B. Contingencies 39.23 5.60 5.60

C. Financing Charges During Implementation

10.30 1.47 1.47 100%

Total Subproject Costs 285.79 40.83 18.94 21.89 46%

Financing by Source of Funds. Totals may not sum precisely due to rounding.

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Table 4: Costs and Financing by Expenditure Account Youyu Total

Total Cost Financing by Expenditure Account

($ million) ADB Loan

Finance Share

CNY (million)

$ (million)

ADB ADB Pingyao Youyu Xiaoyi/ Wutong

Other Expenditure Account

Loan Grant County County County

A. Base costs

I. Construction

1. Civil Works 59.24 8.46 0.33 8.13 4%

2. Equipment (including installation and materials)

84.88 12.13 12.13 0.00 100%

3. Land Acquisition and Resettlement 0.00 0.00 0.00 0.00

4. Other Costs 36.54 5.22 0.00 5.22

Subtotal (I) 180.66 25.81 12.46 13.35 48%

II. Institutional Strengthening

1. Consulting Services and Training 2.59 0.37 0.37 0.00 100%

Subtotal (II) 2.59 0.37 0.37 0.00

Total Base Costs (I + II) 183.25 26.18 12.83 13.35 49%

B. Contingencies 34.47 4.92 4.92 0%

C. Financing Charges During Implementation

14.98 2.14 2.14 0.00 100%

Total Subproject Costs 232.70 33.24 14.97 18.27 45%

Financing by Source of Funds. Totals may not sum precisely due to rounding.

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Table 5: Costs and Financing by Expenditure Account

Xiaoyi/Wutong Total Total Cost Financing by Expenditure Account ($ million) ADB

Loan

Finance Share

CNY $ ADB ADB Pingyao Youyu Xiaoyi/ Wutong

Other Expenditure

Account

(million) (million) Loan Grant County County County

A. Base costs

I. Construction

Civil Works 125.13 17.88 9.27 8.60 52%

Equipment (including installation and materials)

22.32 3.19 3.19 0.00 100%

Land Acquisition and Resettlement 0.00 0.00 0.00 0.00

Other Costs 28.48 4.07 0.00 4.07

Subtotal (I) 175.92 25.13 12.46 12.67 50%

II. Institutional Strengthening

Consulting Services and Training 2.59 0.37 0.37 0.00

Subtotal (II) 2.59 0.37 0.37 0.00 100%

Total Base Costs (I + II) 178.51 25.50 12.83 12.67 50%

B. Contingencies 21.55 3.08 3.08

C. Financing Charges During Implementation

14.98 2.14 2.14 0.00 100%

Total Subproject Costs 215.05 30.72 14.97 15.75 49%

Financing by Source of Funds. Totals may not sum precisely due to rounding.

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Table 6: Costs and Financing by Expenditure Account Subsequent Subproject Cities/Towns Total

Total Cost Financing by Expenditure Account ($ million) ADB Loan

Finance Share

CNY $ ADB ADB Pingyao Youyu Xiaoyi/ Wutong

Other Expenditure

Account

(million) (million) Loan Grant County County County

A. Base costs

I. Construction

Civil Works 405.53 57.93 35.22 22.71 61%

Equipment (including installation and materials)

58.62 8.37 8.37 0.00 100%

Land Acquisition and Resettlement

61.76 8.82 0.00 8.82

Other Costs 72.41 10.34 0.00 10.34

Subtotal (I) 598.32 85.47 43.60 41.88 51%

II. Institutional Strengthening

Consulting Services and Training 9.24 1.32 1.32 0.00

Subtotal (II) 9.24 1.32 1.32 0.00 100%

Total Base Costs (I + II) 607.56 86.79 44.92 41.88 52%

B. Contingencies 186.68 26.67 26.67

C. Financing Charges During Implementation

43.42 6.20 6.20 100%

Total Subproject Costs 837.65 119.66 51.12 68.54 43%

Financing by Source of Funds. Totals may not sum precisely due to rounding.

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B. Allocation and Withdrawal of Loan Proceed

Table 7: Allocation and Withdrawal of Loan Proceeds

(Shanxi Small Towns and Cities Development Demonstration Sector Project)

CATEGORY ADB FINANCING

Amount Allocated Percentage and

Number Item $ Basis for Withdrawal

Category Subcategory from the Loan Account

1 Civil Works 61,040,000

1.1 Pinyao 16,211,000 89 percent of total expenditure

1.2 Youyu 333,000 4 percent of total expenditure

1.3 Xiaoyi Wutong 9,272,000 52 percent of total expenditure

1.4 Subsequent Projects

35,224,000 61 percent of total expenditure

2 Goods 24,506,000

2.1 Pinyao 817,000 100 percent of total expenditure*

2.2 Youyu 12,126,000 100 percent of total expenditure**

2.3 Xiaoyi Wutong 3,189,000 100 percent of total expenditure*

2.4 Subsequent Projects

8,374,000 100 percent of total expenditure*

3 Institutional Strengthening and Training**

2,500,000 100 percent of total expenditure*

4 Interest and Commitment Charges

11,954,000 100 percent of amount due

Total 100,000,000

*Including taxes and duties

**Including project implementation and training equipment

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C. Allocation and Withdrawal of Grant Proceeds

(per Schedule 2 of the Grant Agreement)

Category ADB Financing

No.

Item

Amount Allocated

$

Percentage and Basis for Withdrawal from the Grant

Account

1 Remuneration and Per Diem 125,000 100 percent of total expenditure*

2 Air Travel 11,000

3 Equipment 12,000 100 percent of total expenditure*

4 Training/Workshops/Study Tours

65,000

4A Training 15,000 100 percent of total expenditure*

4B Workshops 15,000 100 percent of total expenditure*

4C Study Tours (Domestic and Overseas)

35,000 100 percent of total expenditure*

5 Miscellaneous 37,000

5A Land Transportation 4,000 100 percent of total expenditure*

5B Office 3,000 100 percent of total expenditure*

5C Communications 3,000 100 percent of total expenditure*

5D Translation / Interpreting 10,000 100 percent of total expenditure*

5E Report Preparation 7,000 100 percent of total expenditure*

Total 250,000

*Exclusive of any local taxes.

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D. Expenditure Accounts by Outputs/Components

SUMMARY COST ESTIMATES AND FINANCING PLAN

Table 8: Summary Cost Estimates

Item CNY million $ million

% of Total Costs

Foreign Exchange

Costs

Local Currency

Costs Total Costs

Foreign Exchange

Costs

Local Currency

Costs Total Costs

A. Base Costs a

I. Construction

Civil Works 143.5 573.9 717.4 20.5 82.0 102.5 46% Equipment (including installation and materials) 34.3 137.2 171.5 4.9 19.6 24.5 11% Land Acquisition and Resettlement 0.0 145.4 145.4 0.0 20.8 20.8 9% Other Costs

b 46.1 107.6 153.8 6.6 15.4 22.0 10%

Subtotal (I) 223.9 964.2 1,188.1 32.0 137.7 169.7 76% II. Institutional Strengthening

Consulting Services and Training 17.5 0.0 17.5 2.5 0.0 2.5 1%

Capacity Building (grant)

c 1.8 0.0 1.8 0.3 0.0 0.3 0%

Subtotal (II) 19.3 0.0 19.3 2.8 0.0 2.8 1% Total Base Costs (I + II) 243.2 964.2 1,207.3 34.7 137.7 172.5 77%

B. Contingencies

Physical Contingency d

24.3 96.4 120.7 3.5 13.8 17.2 8% Price Contingency

e 32.5 128.7 161.2 4.6 18.4 23.0 10%

Contingencies Total 56.8 225.1 281.9 8.1 32.2 40.3 18% C. Financing Charges during Implementation

f

Interest during implementation—ADB loan 80.2 0.0 80.2 11.5 0.0 11.5 5% Commitment charges—ADB loan 3.5 0.0 3.5 0.5 0.0 0.5 0% Total Financing Charges during Implementation 83.7 0.0 83.7 12.0 0.0 12.0 5% Total Project Costs 383.6 1,189.3 1,572.9 54.8 169.9 224.7 100%

Note: Exchange rate used: CNY6.95 = $1. Numbers may not sum precisely because of rounding. a In mid-2008 prices.

b Includes expenditures for project preparation, management, survey and design, supervision, bidding, and environmental impact assessment.

c Actual grant amount is $250,000.

d Physical contingencies computed at 10%.

e Price contingencies computed by year and expenditure type based on cumulative domestic and foreign price inflation.

f Interest during construction computed at 4.5% based on the London interbank offered rate and spread.

Source: Asian Development Bank estimates.

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E. Expenditure Accounts by Year

{Graph(s) show contract awards and disbursement over the life of the project, and annually base on the contract awards and disbursement projections.} This section will be completed by the start-up consultants based on the contract award and disbursement projections

F. Contract and Disbursement S-curve

Updated Contract Awards and Disbursement Projections

8 September 2011

Contract Awards (in USD million) Disbursements (in USD million)

Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total

2010 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

2011 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

2012 0.000 0.960 0.830 2.160 4.530 0.000 0.000 0.960 1.040 2.000

2013 5.000 6.000 6.000 6.000 23.000 5.000 5.000 4.000 4.000 18.000

2014 4.470 6.000 8.000 8.000 26.470 2.500 4.000 7.500 11.000 25.000

2015 14.500 10.500 11.500 9.500 46.000 7.500 8.500 7.500 11.500 35.000

2016 0.000 0.000 0.000 0.000 0.000 14.500 5.500 20.000

100.000 100.000

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G. Fund Flow Diagram

LENDING ARRANGEMENTS AND INDICATIVE FLOW OF FUNDS

Loan

Relending a

Onlending

a

Onlending a

Onlending

a

PMO

Agency

PMO = project management office, IA = implementing agency. a Relending and onlending of the Asian Development Bank loan will be on the same terms and conditions as

those received by the Ministry of Finance. Lending, Relending, Onlending Repayment Source: Asian Development Bank.

Direct Payments to Suppliers and Consultants

Asian Development Bank

People‘s Republic of China Ministry of Finance

Shanxi Provincial Government Finance Bureau

Jingzhong Municipal Government

Finance Bureau

Shuozhou Municipal Government

Finance Bureau

Lüliang Municipal Government

Finance Bureau

Other Municipal Governments Finance Bureau

Pingyao County Government

Youyu County Government

Xiaoyi City Government

Other county-level city or county governments

Water Affairs Bureau

Youyu County Development and Reform Bureau

Xiaoyi City Engineering and Construction Management Affairs Bureau

(Wutong Town)

Other Implementing

Agencies

Shanxi PMO

Implementing

Agency

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V. FINANCIAL MANAGEMENT

1. A financial analysis was done for the revenue-generating components: gas, heating, water, and wastewater. Financial sustainability analysis was undertaken for the nonrevenue-generating river improvements, roads, and education. Financial management assessments were made of SPG, implementing agencies, and operating companies.

A. Financial Management Assessment

i. Introduction 2. The financial management assessment of the executing agency (EA), the Shanxi Provincial Government (SPG), and the three implementing agencies (IA)—Pingyao Water Affairs Bureau (PWAB), the Xiaoyi City Engineering and Construction Management Office (XECM), and the Youyu Development and Reform Commission (YDRC). The financial management assessment has been carried out using the financial management assessment questionnaire (FMAQ) provided by the Asian Development Bank (ADB).3 3. PWAB, XECM, and YDRC are all government departments. PWAB will implement the Huiji River improvement component. XECM will implement all project components but operate only the non-revenue generating ones. YDRC will do similar to XECM. 4. The financial management assessment covers a broad range of issues including legal status and statutory reporting requirements, fund flow arrangements, staffing, accounting policies and procedures, budgeting system, accounting and management controls and internal and external auditing. The responses from the IA reveal the accounting and financial capacity needs during project implementation and operations after project completion. Issues and risks associated with their financial management systems have been identified and appropriate risk mitigation measures proposed to improve project design and implementation. The questionnaires are administered to the finance departments of the IAs.

ii. Description of the Executing Agency 5. Shanxi Provincial Government. The International Division of the Financial Bureau of SPG will execute the Project. This division has a nine staff and is headed by a Director. SPG will be responsible for the receiving loan funds from the Ministry of Finance (MOF) and transferring these funds to the IAs. SPG has previous experience with the World Bank but not the ADB.

iii. Brief Description of the Implementing Agencies 6. Pingyao Water Affairs Bureau. PWAB is a government department under Pingyao County Government and is responsible for irrigation and water related activities. A Director is in charge of PWAB and has separate divisions for technical, agriculture and water, finance, personnel and administration. PWAB has 310 staff. The Manager of the Finance Division is in charge of all financial activities and is assisted by an accountant whose main function is recording and analysis of expenditure since PWAB does not generate income. The Finance Division prepares a Balance Sheet and Income Statement but not the Statement of Cash Flows because all financial transactions are routed through a Current Account with the Finance

3 ADB. 2005. Financial Management and Analysis of Projects. Manila.

30

Bureau. PWAB will be responsible for implementing and subsequent management of the Huiji river improvement and area upgrading component. 7. Xiaoyi City Engineering and Construction Management Office. XECM is a recently established government department (December 2007) that will be responsible for implementation of all project components. XECM staff came from the Construction Bureau so they are experienced in construction of office and residential buildings, roads, bridges and other infrastructure. XECM employees around 40 people, who are mostly technical with college degrees. It has separate divisions for engineering, finance, municipal affairs and administration. XECM will be responsible for implementing all project components. 8. Youyu Development and Reform Commission. YDRC employs 12 people and is expected to hire more from other agencies. YDRC‘s role is to construct municipal infrastructure and once construction is complete to hand it over to an operating company (in the case of revenue generating assets such as wastewater, water supply and heating). The Finance Division is headed by a Chief and an accountant reports to him. The accountant will be in charge of day-to-day record keeping and processing of transactions. The Finance Division prepares separate financial statements -only a Balance Sheet and Revenue and Expenditure Account are prepared as all transactions are routed through a Current Account with the Finance Bureau. YDRC will be responsible for implementing all components under the project.

iv. Results of the Financial Management Assessment 9. Shanxi Provincial Government. SPG has a sound financial management system in place. Internal controls are satisfactory. SPG has previous experience with the World Bank in executing projects of this nature. However, some training in ADB procedures will be required. The Audit Bureau carries out the external audit and SPG ensures that audits will be carried out regularly. The audit is in the nature of a transaction audit with emphasis on compliance with existing regulations. 10. Pingyao Water Affairs Bureau. Most of the accounting processing of PWAB is carried out centrally at the Pingyao Finance Bureau. PWAB has one staff to record all transactions and send for processing. Given that PWAB is only implementing one component, this arrangement should be satisfactory for the future although some capacity building will be needed. PWAB prepares accounting statements (only a Balance Sheet) in accordance with government accounting rules. There are no explanatory notes to the accounts. PWAB has a prescribed financial procedure that lays down duties and responsibilities of key finance staff, procedures for record keeping and cash management. These procedures are generally followed, and internal controls such as segregation of duties, proper authorisation of transactions, payroll controls, regular bank reconciliations etc are adopted. The Audit Bureau carries out the external audit and SPG ensures that audits will be carried out regularly. The audit is in the nature of a transaction audit with emphasis on compliance with existing regulations. 11. Xiaoyi City Engineering and Construction Management Office. XECM is a line department directly responsible to the city government. The finance division has a staff of two people responsible for all areas. Although this level of staffing creates some difficulty in proper segregation of duties, most of the transaction processing is carried out by the finance bureau. They will also need to be trained in ADB procedures since XECM has not implemented an ADB funded project before. XECM prepares accounting statements (which is the Balance Sheet and Revenue and Expenditure Account) in accordance with government accounting rules. There are no explanatory notes to the accounts. The Audit Bureau carries out the external audit and SPG

31

ensures that audits will be carried out regularly. The audit is in the nature of a transaction audit with emphasis on compliance with existing regulations. 12. Youyu Development and Reform Commission. YDRC is a line department directly responsible to the city government. The finance division has a staff of two people responsible for all areas. This level of staffing creates difficulty in proper segregation of duties, although most of the transaction processing is carried out by the finance bureau. They will also need to be trained in ADB procedures since YDRC has not implemented an ADB funded project before. YDRC prepares accounting statements (which is the Balance Sheet and Revenue and Expenditure Account) in accordance with government accounting rules. There are no explanatory notes to the accounts. The Audit Bureau carries out the external audit and SPG will ensure that audits will be carried out regularly. The audit is in the nature of a transaction audit with emphasis on compliance with existing regulations.

v. Conclusion 13. The loan implementation consultant will review the financial information systems and procedures of the IAs and propose modifications, if necessary; draft terms of reference for external auditors, specifically with regard to conducting a systems audit; prepare a financial management plan; assist in implementing the financial management plan; prepare a program of financial training seminars and courses for different levels of accountants and financial managers; and develop a methodology for the periodic review of the water supply tariff. 14. With the assistance of the international and national loan implementation consultants, the capacity of the IAs will be strengthened in: (i) efficient operations of the water supply facilities; (ii) functional areas covering administration, finance, accounting, and business planning; and (iii) management information system, and cost management and control. 15. All the IAs will be provided with thorough training in ADB loan processing, policies and procedures as well as methods for the effective management of foreign exchange risks. The respective IAs will establish a well-staffed project management office. Separate subsidiary accounts will be established for the Project to ensure that project management activities can be separately accounted for. 16. All IAs should review and evaluate their budgeting policies and procedures to ensure that these provide effective cost control such as budget setting based on both physical and financial targets and clear accountability for cost control. IAs should strengthen their policies and procedures in these areas to prevent wasteful use of resources. 17. All IAs must consistently follow PRC‘s accounting and auditing standards to ensure the timely and accurate interpretation of the financial position and performance of the IAs and the proper use of project expenditures according to the loan agreement while taking efficiency and economy into account. Each IA should keep accounts in accordance with relevant PRC accounting standards and subject to independent external audit by suitably qualified commercial or government auditors. All IAs should meet ADB requirements for auditing arrangements and submit audited financial statements and project accounts to ADB annually. 18. The IAs‘ staff concerned should be trained in ADB loan processing and policies and related procedures for procurement and disbursement, among others.

32

19. The IAs should further improved internal control system. Though internal control procedures are generally followed, such as proper authorization of transactions, payroll controls, regular bank reconciliations, etc., improvements to internal control is required in the area of segregation of duties to ensure that separate persons handle authorization, recording and custody of assets and/or transactions. To address this, it is recommended that additional staff be recruited during project implementation.

B. Disbursement

20. The Loan proceeds will be disbursed in accordance with ADB‘s Loan Disbursement Handbook (2007, as amended from time to time),4 and detailed arrangements agreed upon between the Government and ADB. 21. Pursuant to ADB's Safeguard Policy Statement (2009) (SPS),5 ADB funds may not be applied to the activities described on the ADB Prohibited Investment Activities List set forth at Appendix 5 of the SPS. All financial institutions will ensure that their investments are in compliance with applicable national laws and regulations and will apply the prohibited investment activities list (Appendix 5 of the SPS) to subprojects financed by ADB. 22. The ADB loan funds will be disbursed in accordance with procedures in ADB‘s Loan Disbursement Handbook (2007, as amended from time to time). 6 To expedite project implementation through timely release of loan proceeds, SPG will establish an imprest account promptly after loan effectiveness at a commercial bank acceptable to ADB.7 Only one imprest account will be established at the provincial finance bureau, which will be responsible for municipal and county withdrawal applications. 23. Disbursements from the imprest account to the implementing agencies will be based on actual expenditures with full supporting documents, which is in line with the Ministry of Finance internal regulations. Withdrawal applications will demonstrate, among other things, that the goods and/or services have been produced in or from ADB members, and are eligible for ADB financing. The maximum amount to be deposited to the imprest account will not exceed the estimated ADB share of eligible project expenditures to be financed through the imprest account for the next 6 months or 10% of the loan amount, whichever is lower. The statement of expenditure procedure will be used for liquidation and replenishment of the imprest account and reimbursement of eligible expenditures not exceeding $200,000 per individual payment. No withdrawal will be made from the loan account for subprojects in which one or more of the implementing agencies is a legally registered company until the following condition has been met: the Ministry of Finance submits to ADB certification that (i) the subproject government and the company have entered into an onlending agreement; and (ii) such onlending agreement contains the same financial terms and conditions and other obligations as required in the Loan Agreement. SPG will set up a separate bank account for the $250,000 grant from the Multi-Donor Trust Fund under the Water Financing Partnership Facility, which will be used for the engagement of consultants, and conduct of training programs and workshops. 24. The request for initial advance to the imprest account should be accompanied by an Estimate of Expenditure Sheet8 setting out the estimated expenditures for the first six (6) months of project implementation, and submission of evidence satisfactory to ADB that the

4 Available at: http://www.adb.org/Documents/Handbooks/Loan_Disbursement/loan-disbursement-final.pdf

5 Available at: http://www.adb.org/Documents/Policies/Safeguards/Safeguard-Policy-Statement-June2009.pdf

6 Available at: http://www.adb.org/documents/handbooks/loan_disbursement/chap-06.pdf

7 Bank charges on the imprest account will be financed from the ADB loan.

8 Available in Appendix 29 of the Loan Disbursement Handbook.

33

imprest account has been duly opened. For every liquidation and replenishment request of the imprest account, the borrower will furnish to ADB (a) Statement of Account (Bank Statement) where the imprest account is maintained, and (b) the Imprest Account Reconciliation Statement (IARS) reconciling the above mentioned bank statement against the EA‘s records.9 25. SOE records should be maintained and made readily available for review by ADB's disbursement and review mission or upon ADB's request for submission of supporting documents on a sampling basis, and for independent audit.10 26. Before the submission of the first withdrawal application, the borrower should submit to ADB sufficient evidence of the authority of the person(s) who will sign the withdrawal applications on behalf of the borrower, together with the authenticated specimen signatures of each authorized person. The minimum value per withdrawal application is US$100,000, unless otherwise approved by ADB. The borrower is to consolidate claims to meet this limit for reimbursement and imprest account claims. Withdrawal applications and supporting documents will demonstrate, among other things that the goods, and/or services were produced in or from ADB members, and are eligible for ADB financing. 27. Water Financing Partnership Facility (WFPF) Grant Disbursement Procedures. The Shanxi Finance Bureau will set up a separate bank account for the $250,000 WFPF grant to be used for engaging consultants, and conducting training programs and workshops. Grant proceeds will be disbursed in accordance with ADB‘s Loan Disbursement Handbook. 28. The Shanxi Provincial Finance Department will establish immediately after the effective grant date (90 days after grant signing), a separate imprest account at a commercial bank acceptable to ADB. The imprest account shall be established, managed, replenished and liquidated in accordance with ADB's Loan Disbursement Handbook and detailed arrangements agreed upon between the Recipient and ADB. The currency of the imprest account shall be the United States Dollar. The initial amount to be deposited into the imprest account shall not exceed the lower of (i) the estimated expenditure to be financed from the imprest account for the first six months of Project implementation, or (ii) the equivalent of $50,000. 29. The statement of expenditures (SOE) procedure may be used for reimbursing eligible expenditures for eligible expenses and to liquidate advances provided into the imprest account, in accordance with ADB's Loan Disbursement Handbook and detailed arrangements agreed upon between the Recipient and ADB. Any individual payment to be reimbursed or liquidated under the SOE procedure shall not exceed the equivalent of $10,000.

C. Accounting

30. SPG will maintain separate project accounts and records by funding source for all expenditures incurred on the Project. Project accounts will follow international accounting principles and practices. The Shanxi PMO will coordinate with the city and town PMOs to prepare semiannual progress reports indicating progress made, problems encountered during

9 Follow the format provided in Appendix 30 of the Loan Disbursement Handbook.

10 Checklist for SOE procedures and formats are available at: http://www.adb.org/documents/handbooks/loan_disbursement/chap-09.pdf http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Contracts-100-Below.xls http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Contracts-Over-100.xls http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Operating-Costs.xls http://www.adb.org/documents/handbooks/loan_disbursement/SOE-Free-Format.xls

34

the period under review, steps taken or proposed to remedy the problems, proposed program of activities, and progress expected in the coming 6 months. The implementing agencies will keep records to allow the identification of goods and services financed from the loan proceeds, following accounting principles and practices prescribed by the Accounting Law of the PRC. This law requires that the financial statements will generally follow recognized accounting standards. The implementing agencies will set up and maintain separate project accounts and records.

D. Auditing

31. SPG will cause the detailed consolidated project accounts to be audited in accordance with International Standards on Auditing by an auditor acceptable to ADB. The audited accounts will be submitted in the English language to ADB within 6 months of the end of the fiscal year by the executing agency. The annual audit report will include a separate audit opinion on the use of the imprest accounts and the SOE procedures (as applicable). The Government and SPG have been made aware of ADB‘s policy on delayed submission, and the requirements for satisfactory and acceptable quality of the audited accounts. ADB reserves the right to verify the project's financial accounts to confirm that the share of ADB‘s financing is used in accordance with ADB‘s policies and procedures. For revenue generating projects only, ADB requires audited financial statements (AFS) for each executing and/or implementation agency associated with the project. The financial statements of the project accounts and the annual corporate financial statements for implementing agencies will be subject to external audit by the SPG audit bureau. The audits will be carried out in accordance with PRC audit regulations and must meet ADB requirements. A separate auditor‘s opinion on the use of the imprest account and statement of expenditure will be part of the audit reports. The implementing agencies‘ annual audited financial statements and audited project accounts will be submitted to ADB no later than 6 months after the end of the fiscal year throughout the implementation period.

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VI. PROCUREMENT AND CONSULTING SERVICES

A. Advance Contracting and Retroactive Financing

1. All advance contracting and retroactive financing will be undertaken in conformity with ADB‘s Procurement Guidelines (February 2007, as amended from time to time) (ADB‘s Procurement Guidelines)11 and ADB‘s Guidelines on the Use of Consultants (2007, as amended from time to time) (ADB‘s Guidelines on the Use of Consultants).12 The issuance of invitations to bid under advance contracting and retroactive financing will be subject to ADB approval. The borrower, SPG (the Executing Agency and the Implementing Agencies: (i) in Pingyao, the country Water Affairs Bureau for the Huiji River improvement component, (ii) in Wutong, the Xiaoyi City Engineering and Construction Management Affairs Office for all components, and (iii) in Youyu, the Youyu County Development and Reform Commission for all components, have been advised that approval of advance contracting and retroactive financing does not commit ADB to finance the Project. 2. ADB approved SPG‘s request to use advance contracting and retroactive financing for recruitment of consultants, training, and procurement of goods and civil works; and retroactive financing of eligible expenditures up to $20 million (equivalent to 20% of the ADB loan), incurred before loan effectiveness, but not more than 12 months before the signing of the Loan Agreement.13 Advance contracting will include (i) prequalification of contractors, (ii) preparation of tender documents, (iii) evaluation of bids, and (iv) recruitment of consultants. All advance contracting and retroactive financing will be undertaken in conformity with the ADB Procurement Guidelines and Guidelines on the Use of Consultants. The issuance of invitations to bid under advance contracting and retroactive financing will be subject to ADB approval. The PRC Government, SPG, and the implementing agencies have been advised that approval of advance contracting and retroactive financing does not commit ADB to finance the Project.

B. Procurement of Goods, Works and Consulting Services

3. All procurement of goods and works will be undertaken in accordance with ADB‘s Procurement Guidelines.

C. Section 1: Process Thresholds, Review, and 18-Month Procurement Plan

i. Project Procurement Thresholds 4. Except as the Asian Development bank (ADB) may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

11

Available at: http://www.adb.org/Documents/Guidelines/Procurement/Guidelines-Procurement.pdf 12

Available at: http://www.adb.org/Documents/Guidelines/Consulting/Guidelines-Consultants.pdf 13

Advance action on the procurement and recruitment of consultants, and the posting of the general procurement notice on the ADB website, will facilitate the start of the advance action process. ADB Management approved advance contracting and retroactive financing at the management review meeting on 12 November 2008.

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Table 9: Procurement of Goods and Works

Method Threshold

ICB for Worksa $ 10,000,000 or more, ICB for Goodsa $ 1,000,000 or more NCB for Worksa More than $100,000 but less than $10 million NCB for Goodsa More than $100,000 but less than $1 million Shopping for Works $100,000 or less Shopping for Goods $100,000 or less

ICB = international competitive bidding, NCB = national competitive bidding. a

Refer to ADB. 2008. Local Procurement. Project Administration Instructions. PAI 3.04. Manila (para. 3,

national competitive bidding).

ii. ADB Prior or Post Review 5. Except as ADB may otherwise agree, the following prior or post review requirements apply to the various procurement and consultant recruitment methods used for the project

Table 10: Review Requirements

Procurement Method Prior or Post

ICB for Works Prior ICB for Goods Prior NCB for Works The first NCB procurement documents should be submitted for review and

approval; subsequent NCB will be subject to post reviews NCB for Goods Shopping for Works

Post

Shopping for Goods

Post

ICB = international competitive bidding, NCB = national competitive bidding. 6. Before the start of any procurement ADB and the Government will review the public procurement laws of the central and state governments to ensure consistency with ADB‘s Procurement

Guidelines.

Table 11: Review Requirements

Procurement Method Prior or Post

QCBS Prior QBS Prior Other selection methods: CQS, LCS, FBS, and SSS

Prior

Individual Consultants Prior CQS = consultant qualification selection, FBS = fixed budget selection, LCS = least-cost selection, QCBS = quality- and cost-based selection, QBS = quality-based selection, SSS = single source selection.

iii. Goods and Works Contracts Estimated to Cost More Than $1 Million

7. The following table lists goods and works contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

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Table 12: Goods and Works Contracts Estimated to Cost More than $1 Million

Shanxi PMO Reference Number General Description

Contract Value

$ (million) Procurement Method

Pre-Qualification of

Bidders Expected Date of

Advertisement

Goods

B-YY-01-01a Design, supply, and installation of

district heating (heat source; sub-stations; pipeline network; automated control; electrical supply)

10.73 ICB yes Q1 2010

Works

A-PY-01-01 Huiji River embankments, rubber dam, pump stations, housing, temporary engineering

8.97 NCB yes Q1 2010

A-PY-01-02 Huiji River improvement, seepage-prevention in the reservoir, bottom-protecting engineering, power transmission line, other construction

9.24 NCB yes Q1 2011

A-YY-04-01 Road base and pavement; curbs, gutters, drainage, and greening; electric supply and lighting

4.75 NCB no Q1 2012

A-XY-03-03 Construct one employment training center (adult vocational school)

4.45 NCB no Q1 2010

A-XY-02-01 Heat exchange station, supporting facilities, and pipeline network

3.46 NCB no Q1 2010

A-XY-03-02 Construct one secondary school (age 12–15)

3.35 NCB no Q1 2010

A-XY-01-01 Caoxi road base and pavement; curbs, gutters, drainage; greening

2.43 NCB no Q1 2010

A-XY-04-01 Gas supply pressure-adjusted station (transmission, and distribution system)

1.69 NCB no Q1 2010

ICB = international competitive bidding, NCB = national competitive bidding. First column is Shanxi PMO reference number: A = civil works, B = equipment. a Based on the detailed design, the SPMO will further review this package with the intention of dividing it into

several ICB and NCB packages.

iv. Consulting Services Contracts Estimated to Cost More Than $100,000 8. The following table lists consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

Table 13: Consulting Services Contracts Estimated to Cost More Than $100,000

General Description Recruitment

Method

Advertisement Date

(quarter/year)

International or National Assignment Comments

Project Implementation Project Management Capacity Building

QCBS (80:20)

or CQS

Q3 2010 Both (About 158

person-months of international and national consulting services)

Multiple Contracts

CQS = consultants qualification selection, QCBS = quality- and cost-based selection.

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v. Goods and Works Contracts Estimated to Cost Less than 1 Million and Consulting Services Contracts Less than $100,000

9. This table groups smaller-value goods, works and consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

Table 14: Goods and Works Contracts Estimated to Cost Less than $1 Million and Consulting Services Contracts Less than $100,000

Item General Description

Contract Value

(cumulative) ($ million)

Number of Contracts

Procurement/ Recruitment

Method

Civil Works Civil works for water supply transmission, treatment, and distribution pipeline; drainage; construction of schools

1.88 3 NCB

Equipment Pipelines for sewage and stormwater, wastewater pumping and treatment equipment, furniture and equipment for schools, heating equipment, rubber dams for river

4.6 9 NCB

Consulting Services and Capacity Building

Training (including project implementation and training equipment)

To be determined

To be determined

CQS or LCS

NCB = national competitive bidding.

10. All consultants will be recruited according to ADB‘s Guidelines on the Use of Consultants.14 The terms of reference for all consulting services are detailed in Section D.

D. Procurement Plan

vi. Indicative List of Packages Required Under the Project 11. The following table provides an indicative list of all procurement (goods, works and consulting services) over the life of the project. Contracts financed by the Borrower and others should also be indicated, with an appropriate notation in the comments section.

14

Checklists for actions required to contract consultants by method available in e-Handbook on Project Implementation at: http://www.adb.org/documents/handbooks/project-implementation/

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Table 15: Indicative List of All Procurement

General Description

Estimated Value

(Cumulative) ($ million)

Estimated Number of Contracts

Procurement Method

Domestic Preference Applicable Comments

Goods 5.42 10 NCB 10.73 1 ICB

Works 44.54 14 NCB

Estimated Number of Contracts

Recruitment Method

Type of Proposal Comments

Consulting Services and Capacity Building

2.5 Multiple (To be determined)

QCBS, CQS and/or S

international and national

Simplified and Bio-Data

Includes consulting services (about 158 person-months), training, study tours and project implementation equipment

CQS = consultants quality selection, ICB = international competitive bidding, LCS = least-cost selection, NCB = national competitive bidding, QCBS = quality- and cost-based selection, S = shopping See ADB. 2008. Recruiting Consulting Firms. Project Administration Instructions. PAI 2.02G. Manila (full, simplified or biodata proposal).

vii. Detailed Procurement Plan (ORIGINAL)

Ref. No. Contract Package Type and Description Category $

(million) Procurement

Method

Pingyao

A-PY-01-01 Huiji River embankments, rubber dam, pump stations, housing, temporary engineering

Civil Works $8.97 NCB

A-PY-01-02 Huiji River improvement, seepage-prevention in the reservoir, bottom-protecting engineering, power transmission line, other construction

Civil Works $9.24 NCB

B-PY-01-03 Huiji River public equipment and installation

Equipment $0.23 NCB

B-PY-01-04 Huiji River rubber dams (3) Equipment $0.59 NCB

Wutong

A-XY-01-01 Caoxi road base and pavement; curbs, gutters, drainage; greening

Civil Works $2.43 NCB

A-XY-02-01 Heat exchange station, supporting facilities, and pipeline network

Civil Works $3.46 NCB

A-XY-03-01 Construct two nursery schools (age 3–6) Civil Works $0.96 NCB

A-XY-03-02 Construct one secondary school (age 12–15)

Civil Works $3.35 NCB

A-XY-03-03 Construct one employment training center (adult vocational school)

Civil Works $4.45 NCB

A-XY-04-01 Gas supply pressure-adjusted station (transmission, and distribution system)

Civil Works $1.+69 NCB

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Ref. No. Contract Package Type and Description Category $

(million) Procurement

Method

A-XY-05-01 Wastewater treatment plant and pipelines Civil Works $1.52 NCB

B-XY-02-02 Equipment for heat supply Equipment $0.69 NCB

B-XY-02-03 Heating electrical supply and subsidiary equipment

Equipment $0.83 NCB

B-XY-03-04 Equipment for Schools Equipment $0.6 NCB

B-XY-03-05 Furniture for Schools Equipment $0.48 NCB

B-XY-05-02 Wastewater equipment for pumping and treatment

Equipment $0.60 NCB

Youyu

A-YY-02-01 Drainage civil works (earth work) Civil Works $0.88 NCB

A-YY-03-01 Flood control earth works and embankments

Civil Works $1.03 NCB

A-YY-04-01 Road base and pavement; curbs, gutters, drainage, and greening; electric supply and lighting

Civil Works $4.75 NCB

A-YY-05-01 Water transmission and water treatment plant upgrade

Civil Works $0.04 NCB

A-YY-05-02 Water supply pipeline for new area Civil Works $1.77 NCB

B-YY-01-01*

15

Design, supply, and installation of district heating (heat source; sub-stations; pipeline network; automated control; electrical supply)

Equipment $10.73 ICB

B-YY-02-02 Storm water pipelines Equipment $0.82 NCB

B-YY-02-03 Sewage pipelines Equipment $0.52 NCB

B-YY-03-04 Equipment for Water Treatment Plant Equipment $0.06 NCB

Shanxi PMCS-01

Project Start-Up Consultants $0.05 Individual Consultant Selection

multiple packages

Project Implementation, Project Management, Capacity Building, and Local Training through multiple contracts

Consultants $2.08 (Total)

Quality and Cost Based Selection or

CQS

multiple packages

Project implementation equipment Equipment $0.37 Shopping

TOTAL 28 $60.69

ICB 1 $10.73

NCB 24 $51.34

Other 3 $2.50

ICB = international competitive bidding, NCB = national competitive bidding.

viii. National Competitive Bidding Annex

12. The Borrower‘s Law of Tendering and Bidding of the People‘s Republic of China promulgated by Order No. 21 of the President of the People‘s Republic of China on 30 August 1999, are subject to the following clarifications required for compliance with the guidelines:

15

Based on the detailed design, the SPMO will further review this package with the intention of dividing it into several ICB and NCB packages.

41

(i) All invitations to prequalify or to bid shall be advertised in the national press, or official gazette, or a free and open access website in the Borrower‘s country. Such advertisement shall be made in sufficient time for prospective bidders to obtain prequalification or bidding documents and prepare and submit their responses. In any event, a minimum preparation period of 30 days shall be given. The preparation period shall count (a) from the date of advertisement, or (b) when the documents are available for issue, whichever date is later. The advertisement and the prequalification and bidding documents shall specify the deadline for such submission.

(ii) Qualification requirements of bidders and the method of evaluating the qualification of each bidder shall be specified in detail in the bidding documents, and in the prequalification documents if the bidding is preceded by a prequalification process.

(iii) If bidding is preceded by a prequalification process, all bidders that meet the qualification criteria set out in the prequalification document shall be allowed to bid and there shall be no limit on the number of prequalified bidders.

(iv) All bidders shall be required to provide a performance security in an amount sufficient to protect the Borrower and Project Executing Agency in case of breach of contract by the contractor, and the bidding documents shall specify the required form and amount of such performance security.

(v) Bidders shall be allowed to submit bids by mail or by hand. (vi) All bids shall be opened in public; all bidders shall be afforded an opportunity to

be present (either in person or through their representatives) at the time of bid opening, but bidders shall not be required to be present at the bid opening.

(vii) All bid evaluation criteria shall be disclosed in the bidding documents and quantified in monetary terns or expressed in the form of pass/fail requirements.

(viii) No bid may be rejected solely on the basis that the bid price falls outside any standard contract estimate, or margin or bracket of average bids established by the Borrower and Project Executing Agency.

(ix) Each contract shall be awarded to the lowest evaluated responsive bidder, that is, the bidder who meets the appropriate standards of capability and resources and whose bid has been determined (a) to be substantially responsive to the bidding documents, and (b) to offer the lowest evaluated cost. The winning bidder shall not be required, as a condition of award, to undertake responsibilities for work not stipulated in the bidding documents or otherwise to modify the bid as originally submitted.

(x) Each contract financed with the proceeds of the loan shall provide that the suppliers and contractors shall permit ADB, at its request, to inspect their accounts and records relating to the performance of the contract and to have said accounts and records audited by auditors appointed by ADB.

(xi) Government owned enterprises in the Borrower‘s country may be permitted to bid if they can establish that they (a) are legally and financially autonomous, (b) operate under commercial law and (c) are not a dependent agency of the Borrower and Project Executing Agency.

(xii) Rebidding shall not be allowed solely because the number of bids is less than three.

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E. Consultant's Terms of Reference (to be revised)

ix. Scope of Services 13. Institutional strengthening services will be procured to support the project management office (PMO) during implementation of the sector Project as well as to strengthen the institutional capacity of provincial and city/town PMOs in the areas of managing small cities/towns development activities and implementing Asian Development Bank (ADB)-financed projects. The services fall into two categories: implementation support and training, and capacity building for project towns. This section provides a brief description of the services to be provided and a budget based on estimated labor inputs by type of specialist. Detailed terms of reference will be prepared during project implementation.

x. Implementation Support and Training 14. Consulting and Training Services. The ADB sector loan modality involves specific requirements for PMOs in the area of subproject selection, preparation, appraisal, and implementation. While the participating cities/towns will be responsible for preparing their own subprojects, the PMO will have to give them guidance in this area, review and comment on the products prepared by the cities/towns, and package the subsequent subproject submission to the ADB. These additional tasks, not found in conventional loan projects, create additional requirements for implementation support. These terms of reference require both (i) conventional implementation support related to project management, financial management, and procurement support; and (ii) sector-specific implementation support related to management of subproject development in accordance with ADB requirements. The scope of work for implementation support is as follows:

(i) Project Management. The Consultant will contribute to the successful planning, design, implementation, and operation of the Project through the provision of support to the Shanxi project management office (SPMO), city/town PMOs, and implementing agencies (IAs). The Consultant will assist the SPMO to establish project management and monitoring systems in order to track the technical and financial progress of all subprojects and components included in the sector Project. In close collaboration with SPMO, the Consultant will set up a new or expand/refine an existing management information system (MIS) to manage all technical and financial information about the Project. An effective document control system will be designed and put into operation. The Consultant will assist SPMO produce reports for the ADB on construction progress, withdrawals and payments. The Consultant will assist SPMO to establish strong consultative processes with the local PMOs, IAs, local communities, and other stakeholders.

(ii) Financial Management. Review arrangements made by the PMOs and IAs for project budgeting, accounting, internal control, financial reporting and auditing; and assist with formulating and implementing improvements to these systems as required. Assist the PMOs to estimate, budget, effect, and track all expenditures under the Project. The MIS system will include a financial management module. The Consultant will generate periodic financial reports that PMOs can use to plan and program their activities. Evaluate the year-by-year compliance with ADB loan covenants dealing with counterpart funds, tariff reform, financial management, and the financial performance of revenue generating IAs and assist with reporting as required.

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(iii) Procurement. Assist the PMOs to conduct all procurement in accordance with ADB requirements, including prequalification, tender evaluation, and contract award. Assistance will be provided for procurement of civil works, equipment, technical assistance, training services, and other goods and services required for Project implementation.

(iv) Subproject Appraisal. The Consultant will assist SPMO to communicate to the subproject cities/towns the requirements for selection and preparation. After the local PMOs prepare the draft feasibility study reports, environmental impact assessments (EIA), and resettlement plans (RP), the Consultant will assist SPMO to appraise the subprojects based on the criteria established in the Loan Agreement. The appraisal will be followed by preparation of a final package of documents (project description, summary EIA, social analysis, economic analysis, etc.) for submission to ADB.

(v) Environmental Management Plan Implementation. The Consultant will assist the provincial and local PMOs to implement the environmental management plans (EMP), including development of procedures, preparing the format of EMP reports, reviewing environmental monitoring reports prepared by the IAs, and verifying that agreed EMP mitigation measures are implemented.

(vi) Social, Ethnic Minority, Labor Re-Employment, and Resettlement Implementation Support. Prepare and assist with operationalization of detailed procedures for implementation of ethnic minority development plans and labor re-employment plans (where they exist), as well as RPs. Develop protocols for monitoring these dimensions; assist SPMO to collect the necessary data and documentation from the local PMOs. Integrate social, ethnic, and resettlement data project into the Project‘s MIS and document control systems.

(vii) Vocational Education Program Implementation. Assist the Town of Wutong to complete its labor market study and tailor the curricula of the new vocational training center to meet the needs of the industrial and other employers in the town.

(viii) Project Performance Monitoring System: The Consultant will use the design and monitoring framework (DMF) developed during the project preparatory technical assistance to prepare and put into operation a project performance monitoring system (PPMS). The PMO will use the PPMS, with Consultant support, to track the achievement of project outputs, outcomes, and impacts using the indicators defined in the DMF. The PPMS will provide data and analysis for reporting on Project progress to the ADB.

15. Training. The objective of the training is to strengthen the ability of the provincial and local PMOs to execute environmentally, socially, and economically sustainable urban development projects, including the proposed ADB-financed sector Project. The training will take the form of workshops, on-the-job coaching, and advisory services in the various aspects of managing urban development projects (planning, engineering, environmental, social, financial, economic, and institutional). The following training services can be provided directly by the Consultant and/or through domestic training providers under subcontract to the Consultant.

(i) Project Management. The Consultant will organize and conduct workshops on key aspects of project management including subproject controls, phasing, scheduling, coordination, information management, and reporting. The knowledge learned and skills acquired in the workshops will be put into practice with on-the-job technical assistance provided by the Implementation Support specialists.

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(ii) Financial Management: The Consultant will provide training to the provincial PMO and IAs in (a) ADB procedures for disbursement, reporting, and related matters; (b) internal financial control including, separation of functions, conflict of interest and other anti-corruption safeguards; and (c) management of foreign exchange funds. Additional training will be provided to IAs and town officials in tariff setting, billing and tariff collection for urban services.

(iii) Procurement Support. The Consultant will organize and conduct training to the executing agency (EA) and IAs on ADB Procurement Guidelines, prequalification, tender evaluation, and award procedures.

(iv) Strategic Planning and Management. Training seminars with local government leaders, including PMO and IAs, will cover urban growth management, planning for inclusive urban development, planning for rural-urban integration, linking infrastructure investments to economic growth objectives, transportation, and traffic management. In-country and overseas field visits will also be provided.

(v) Urban Environmental Management. Training in EMP objectives, content, institutional framework, implementation, and data acquisition and reporting requirements. Additional training to EA/IAs on environmental regulatory framework, environmental impact analysis, monitoring methods and laboratory techniques.

(vi) Resettlement Plan Implementation. Training to IAs and other involved personnel on required actions under the approved RP, including monitoring and reporting requirements.

(vii) Social Impact Monitoring, Labor Re-Employment Framework, and Ethnic Minorities Development Plan Implementation. Training to IAs and other involved personnel on required actions under the approved EMDP, including monitoring and reporting requirements. Develop and train the local PMOs in the use of a monitoring protocol for social and poverty dimensions of subprojects.

(viii) Operation and Maintenance. Provide on-the-job training for O&M staff required for use and maintenance of procured assets by: (a) reviewing provisions for training stipulated in bidding documents, (b) evaluating training programs and materials provided by equipment suppliers, and (c) recommending supplementary training as deemed necessary. Conduct workshops and on-the-job training to O&M agencies managers on O&M procedures and performance indicators for topics including road inspection and maintenance, WTP and WWTP operations, heat and gas supply O&M, and other relevant topics.

(ix) Start-Up Services. Two consultants will be engaged to assist the PMOs and IAs to expedite project implementation start-up through provision of support in project management and procurement prior to recruitment of the loan implementation consultant (see Annex 1).

16. Study Tours. Study tours will be undertaken to destinations in China and overseas to provide additional training in small city/town growth management, demand-driven urban infrastructure delivery, and inclusive urban planning and development. 17. Historic Town Development Study. This small TA study will develop a strategy for how to develop Shanxi Province‘s historic and otherwise distinctive towns with a view to maximizing social, economic, and environmental sustainability. 18. Office Operation, Transport, and Equipment. This component will strengthen the capacity of SPMO through provision of support for office operations, local transportation, and office equipment.

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F. Capacity Building for Project Town Level

19. This component will strengthen the capacity of the city/town PMOs and IAs through provision of support for office operations, office equipment, local transportation, and study tours.

G. Budget

20. The budget for the implementation support and training is presented below.

Table 16: Budget for Implementation Support and Training

Category/Task

International Person-Months

National Person-Months Total Cost

Implementation Support and Training

Consulting and Training Services 13.5 144.0 $850,000

Study Tour $500,000

Capacity Building for SPG $450,000

Historic Town Development Strategy Study $100,000

Office Operation, Transport, Equipment $160,000

Miscellaneous $190,000

Subtotal – Implementation Support and Training $1,800,000

Capacity Building for Project Towns (Office Operation, Transport, Study Tour) $700,000

Subtotal – Capacity Building for Project Towns $700,000

TOTAL $2,500,000

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VII. SAFEGUARDS

A. Environmental Aspects

1. The Project is classified as environment category A. Extensive public consultations involving surveys, meetings with stakeholders, and focus group discussions were undertaken during project preparation. The project EIA is based on the results of the EIAs prepared for three core subprojects, which present the types and nature of subsequent subprojects under the Project. An SEIA was prepared and circulated to ADB‘s Board of Directors, and posted on the ADB website on 20 October 2008. An environmental assessment and management framework for subsequent subprojects was also developed. 2. The Project is expected to generate substantial environmental benefits. Improved roads will reduce travel times and vehicle emissions per trip, thereby helping improve air quality. Water supply and wastewater treatment will reduce the discharge of pollutants to rivers and groundwater. River improvement will provide flood protection, thereby reducing economic loss and public health hazard due to flooding. District heating and gas supply will improve efficiency, eliminate a considerable number of small and inefficient boilers, reduce the quantity of coal used, and replace coal-burning stoves in individual dwelling units, thus reducing the emission of greenhouse gases. This Project will have positive effects on climate change, supporting the PRC‘s climate change initiatives. 3. Adverse impacts on the physical and natural environment during the construction and operating phases of the Project will be largely insignificant, given strong project management and implementation of recommended mitigation measures identified in the environmental management plan. The plan includes institutional strengthening for implementing mitigation measures and undertaking monitoring requirements, and will be continuously developed as the Project progresses to provide more details so that all mitigation requirements are met. 4. The subsequent subprojects under this sector loan are required to meet ADB‘s environmental impact assessment requirements. An environmental assessment and management framework (see below) was prepared as an instruction manual to assist the Shanxi PMO, subproject PMOs, implementing agencies, and local design institutes in preparing and reviewing EIA reports and environmental management plans for subsequent subprojects according to ADB requirements. It describes the environmental criteria for selecting and implementing subprojects, key environmental issues, conduct of the EIA, preparation of the EIA reports, and review procedures. Training was provided to SPG on implementing the environmental assessment and management framework. 5. The Project supports climate change adaptation including (i) incorporation of climate change issues, such as energy efficient measures, in urban master plans; (ii) comprehensive water management, such as long-term water availability forecasting for new development areas and adopting comprehensive water balance measures during project implementation; (iii) sustainable wastewater and solid waste management including sludge digestion and biogas extraction; (iv) improved urban roads management and reduced pollution from cars through improved connectivity and better travel conditions; and (v) promotion of clean energy for more efficient central heating.

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B. Environmental Assessment and Management Framework

6. The Project is a sector loan that includes core subprojects that have already been prepared and appraised and subsequent projects that will be appraised during implementation. The three core subprojects are Pingyao County, Wutong Town (Xiaoyi City), and Youyu County. A Summary Environmental Impact Assessment (SEIA) report and an Environmental Management Plan (EMP) have been prepared under this PPTA for these subprojects. The subsequent subprojects coming on line under this sector loan will also be required to meet the environmental impact assessment requirements of the Asian Development Bank. This report is prepared as an instruction manual to assist the provincial Project Management Office (PMO), the subproject PMOs, the executing agency (EA), the implementing agencies (IAs) and the local design institutes (LDI) in the preparation and review of the environmental impact assessment (EIA) report and the environmental management plan (EMP) for the non-core subprojects according to ADB requirements. 7. This Project has been classified by ADB as a Category A project. As such, an EIA report and an EMP must be prepared for the non-core subprojects. It is understood that some non-core subprojects may only need an environmental impact assessment table under the domestic system. The environmental impact assessment table does not meet ADB requirements. Further, all domestic environmental impact assessment approval, whether in report or table form, must be by the provincial Environmental Protection Bureau (EPB). In terms of the number of reports, each province has the flexibility of preparing (i) one EIA report and one EMP for all subprojects combined, (ii) one EIA report and one EMP for each subproject, or (iii) one EIA report and one EMP for each component of a subproject. For simplicity, the use of the term ‗project‘ in this document refers to a subproject that may have a number of components, or a single component in a subproject. 8. This report describes the environmental criteria in selecting projects, their key environmental issues, steps in conducting the EIA study and preparing the EIA report and EMP, and procedures for reviewing the reports.

C. Project Selection and Key Environmental Issues

9. A project must be demonstrated to have environmental improvement benefits before it can be selected. Some examples are shown below together with a description on their environmental benefits and key environmental issues that need to be addressed in the EIA report. These examples are not inclusive and other projects may be selected as long as their environmental improvement benefits are demonstrated. 10. Water Supply. This includes the construction of water treatment plants (WTP), reservoirs, pumping stations and transmission and distribution pipelines. Water supply projects will improve the environmental and public health conditions of the residents by providing reliable and good quality drinking water, thus having environmental and social benefits to the community. Key environmental issues that need to be addressed in the EIA report include the following:

(i) Description of the water source: whether it is surface water or ground water. (ii) Quality of the water: use monitoring data to demonstrate the quality meets

drinking water standards. If not, what measures or treatment processes will be designed to improve quality. For example, if the water is high in fluoride content, what process will be designed to remove it.

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(iii) Verification on the feasibility of using this water source: questions that need to be answered in the EIA report include: (a) what is the total supply capacity of this water source? (b) what is the existing total extraction quantity of this source? (c) how much will be extracted by the project? (d) with the project, is there cumulatively over-extraction? (e) if there is over-extraction, what are the mitigation measures?

(iv) Protection of the water source: describe or development plans to protect this water source from polluting activities in the watershed.

(v) Disinfection: for WTP, what is the disinfection agent and what measures are included in the design to ensure safe storage and application.

(vi) Excavated soil: for pipeline construction, provide information on (a) the total quantity of soil to be excavated, (b) the quantity be re-used for backfilling, (c) the quantity to be disposed of, (d) the name(s), location(s) and capacities the disposal and/or temporary storage

sites. 11. Wastewater. This includes the construction of wastewater treatment plants (WWTP), pumping stations, and collection pipelines or culverts. The provision of wastewater collection and treatment will improve the quality of receiving surface and ground water bodies. It will also improve sanitary and public health conditions of the community. Key environmental issues that need to be addressed in the EIA report include the following:

(i) Existing condition of the receiving water body: provide monitoring data to show the existing quality of surface and ground water that are receiving wastewater (treated or untreated) now and/or will be receiving treated wastewater provided by the Project.

(ii) Treatment process: provide information on the treatment process proposed for the WWTP and the discharge standard to be achieved.

(iii) Waste reduction: by provision of the WWTP, what are the quantities of pollutants that will be reduced from discharging into the receiving water bodies per year. Pollutants should include biochemical oxygen demand (BOD5), chemical oxygen demand (CODCr), suspended solids (SS), ammonia nitrogen (NH3-N), total nitrogen (TN) and total phosphorus (TP).

(iv) Odor: what measures are included in the design for odor removal at the WWTP and pumping stations, and what will the odor concentration be after removal.

(v) Sludge: provide information on the quantity of sludge (after dewatering) produced and how and where will the sludge be re-used or disposed of.

(vi) Disinfection: for WWTP, what is the disinfection agent and what measures are included in the design to ensure safe storage and application.

(vii) Excavated soil: for pipeline construction, provide information on (a) the total quantity of soil to be excavated, (b) the quantity be re-used for backfilling, (c) the quantity to be disposed of, (d) the name(s), location(s) and capacities the disposal and/or temporary storage

sites. 12. Solid Waste. This includes the provision of solid waste treatment facility, solid waste collection equipment such as garbage truck and compactor, waste transfer station, and dust bins. These will improve the sanitary conditions of the community, having environmental and

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public health benefits. Key environmental issues that need to be addressed in the EIA report include the following:

(i) Leachate collection and treatment of the solid waste treatment facility: provide information on how the ground water underneath the site will be protected from leachate seepage, how the leachate will be collected and treated (with what treatment process).

(ii) Methane gas collection and treatment of the solid waste treatment facility: provide information on how the methane gas generated will be collected and treated. The use of methane gas to generate electricity for on-site use is encouraged. If the methane gas is allowed to escape into the atmosphere or is flared, implications on green house gas (GHG) emission and climate change need to be assessed.

(iii) Air pollution: provide information on air emissions from the facility, these include dioxin for incinerator and odor for landfills and composting plants. Provide information on air/odor control measures and emission concentrations after the provision of these measures.

13. River Improvement. This includes river dredging and realignment, river widening, embankment works, installation of rubber dam and landscaping of the river banks. River improvement will provide benefits in flood control, thereby reducing the risks of property loss and public health hazards due to flooding. Key environmental issues that need to be addressed in the EIA report include the following:

(i) Dredged river sediment: provide information on: (a) the quantity of dredged river sediment. (b) the location for its temporary storage and dewatering. (c) the location for its ultimate disposal.

(i) Water quality: dredging will result in the release of SS to the water column, which will increase the turbidity of river water. Provide information on how to control the release of SS from dredging activities.

(ii) Odor: river sediment can be anoxic and high in organics and sometimes hydrogen sulfide (H2S). This results in the release of bad odor when river sediment is disturbed during dredging. Provide information on odor impacts during dredging operations and at the dredged spoil temporary storage site, and mitigation measures to control the odor.

14. District Heating. This includes the construction of central heating station, heat exchange station and heat supply pipeline. The provision of district heating will reduce reliance on small boiler rooms and household stoves, which are inefficient and polluting. Household stoves burning coal will also create indoor and outdoor pollution, as well as respiratory diseases from inhalation of coal dust. The provision of district heating also economize coal use, reducing coal burning and thus GHG emissions, with positive effects on climate change. Key environmental issues that need to be addressed in the EIA report include the following:

(i) Coal: if coal is the fuel source for the central heating station, provide information on the sulfur content of the coal used, and the quantity of coal used.

(ii) Air emissions: provide information on (a) the dust removal and flue gas desulfurization equipment at the central

heating station.

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(b) the concentrations of sulfur dioxide (SO2), total suspended particulates (TSP) and/or PM10 emitted at the central heating station.

(iii) Excavated soil: for pipeline construction, provide information on (a) the total quantity of soil to be excavated. (b) the quantity be re-used for backfilling. (c) the quantity to be disposed of. (d) the name(s), location(s) and capacities the disposal and/or temporary storage

sites. (iv) Benefits: provide information on benefits that could be achieved by having district

heating: (a) the number of small boiler rooms and household stoves that will be

eliminated. (b) the quantity of coal use that will be reduced per year. (c) the quantity of bottom ash that will be reduced per year. (d) the quantity of SO2 emission that will be reduced per year. (e) the quantity of nitrogen oxides (NOx) emission that will be reduced per year. (f) the quantity of TSP and/or PM10 emission that will be reduced per year. (g) the quantity of carbon dioxide (CO2) that will be reduced per year due to

reduced coal burning. 15. Transportation. This includes the construction of new road, upgrading of existing road, installation of municipal services such as cables and pipelines, and road side landscaping. Although road projects generally provide more economic benefits than environmental benefits, road condition and network improvement will result in better network connectivity and travel conditions. This will lead to shorter travel time per vehicle trip, with benefits in less fuel consumption and less vehicle emissions. This will reduce GHG emissions and therefore will have positive effects on climate change. Key environmental issues that need to be addressed in the EIA report include the following:

(i) Traffic forecast: although traffic forecast is not environmental, yet it forms the basis for predicting future traffic emissions and traffic noise. Therefore, traffic forecast up to a design horizon of 15 to 20 years must be provided by the feasibility study, so that the EIA team can use the figures to predict future traffic emissions and noise, and propose appropriate mitigation measures if needed.

(ii) Construction phase air quality: asphalt or concrete batching plants are the main air pollution sources during road construction. Provide information or design requirements on their air pollution control requirements, such as equipped with dust removal bags, etc. Also provide specifications on where they can or cannot be sited, based on information on the locations of air sensitive targets such as schools, hospitals, temples and residential areas.

D. Inception of the Environmental Impact Assessment Study

16. EIA studies usually start near the completion of the feasibility study (FS), after the draft feasibility study report (FSR) has been compiled. This is because the EIA relies much on the information provided in the FSR. Yet it is encouraged that the EIA study and the FS be carried out in parallel rather than in sequence. The EIA team needs information from the FS team. The FS team also needs input from the EIA team on the environmental pros and cons of various design alternatives, as well as the design and specifications of the mitigation measures. Working in parallel interactively between the FS team and the EIA team will reduce the amount of re-work and will therefore shorten the time and program of these tasks.

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17. Selection of the right EIA design institute to conduct the EIA study and prepare the EIA report is of utmost importance. The degree of details required by ADB in the EIA report is much more than that required locally. An EIA design institute with internationally funded project experience is preferred. If one cannot be found, the EIA design institute should at least have adequate experience, staffing and capability to produce all the information mentioned in this report. 18. The selection of the FS design institute is also important, because it will have a direct bearing on the quality of the EIA report. Again, ADB requires much more details in the FS than what are required locally. In fact, ADB‘s ‗FS‘ requirement is approximately equivalent to the completion of preliminary design in China. Therefore, the FS design institute for the subprojects must have the experience, staffing, capability and willingness to complete the preliminary design of the subproject components in order to meet ADB requirements. An institute with general consulting experience will not be able to meet ADB requirements. 19. Upon start of the EIA study, the EIA team should complete the following tasks as soon as possible:

(i) Site Visit. The EIA team should visit the project sites as soon as possible to get an understanding of the environmental conditions in the vicinity. During the site visit, all targets sensitive to air, noise and water pollution from the project must be identified and documented. Sensitive targets include residential areas, hospitals, schools, temples, cultural heritage sites, protected areas on conservation and ecology, national parks and nature reserves, water gathering grounds, and water bodies such as rivers and streams. These should be photographed and with their relative distances to the project sites measured and documented.

(ii) Baseline Monitoring. Air quality, noise and water quality (surface and/or ground water depending on the project component) should be conducted as soon as possible. Monitoring locations should be selected at representative sensitive targets identified in the site visit. Routine monitoring data from the local Environmental Monitoring Station can be used as substitution. However, such data must be collected from locations relevant to the project and must be collected less than 12 months ago.

(iii) Public Consultation. ADB requires two rounds of public consultation. The first round should be conducted at EIA inception. The purpose of the first round is to describe the project to the stakeholders and to solicit their views, concerns and suggestions so that these could be adequately considered in the EIA study. It should be conducted as soon as the EIA study is started and should be in form of a public forum. More details on public consultation are provided in later sections.

E. EIA Report Content

20. Annex 1 provides the content page of the EIA report. It lists the items that should be in the report in order to meet ADB requirements. Again, the EIA report can be prepared for a subproject (which might have more than one component and information needs to be provided for each component), or it can be prepared for just one subproject component (in which case more than one EIA reports will be prepared to support a subproject if the subproject has more than one component) Detailed information required under each item is described below.

i. Chapter 1 – Introduction

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21. This chapter sets the scene for the report. It provides an overview of the big picture from the provincial level. It describes the project background, the reasons and needs for having the project, government policies in supporting the project, present status of infrastructure related to the project in a provincial setting, and highlights of benefits. The following information should be included in this Chapter.

(i) Describe the status and provide statistics on small cities and towns in the province.

(ii) Describe the present problems (economic, social and environmental) in the small cities and towns in the province.

(iii) Describe government policies in supporting the urbanization of small cities and towns.

(iv) Describe government actions taken to-date in the urbanization of small cities and towns.

(v) Describe the need for the Project and provide statistics on the present status of the project in the province. For example, if it is a wastewater treatment project, provide statistics on how much wastewater was generated in the province last year, how many WWTPs were in operation in the province last year and what was the total treatment capacity. How much pollutant was discharged to the water bodies in the province last year. What was the water quality in the rivers in the province last year. If it is a solid waste management project, provide statistics on how much municipal solid waste (MSW) was generated in the province last year; how many solid waste treatment facilities were in operation in the province last year and what was the total treatment capacity. Description should be quantitative with the citing of relevant statistics, rather than merely qualitative.

(vi) Briefly describe the economic, social and environmental benefits of the project.

ii. Chapter 2 – Description of the Project 22. This chapter sets the scene for the project and describes the technical aspects of the project. This chapter differs from Chapter 1 in the sense that Chapter 1 looks at the issues from the provincial level and this chapter looks at the issues from the project city/town level. The following information should be provided in this chapter.

(i) Briefly describe the project city/town, such as its location within the province, area, population and economy (e.g. industry, agriculture, tourism) etc.

(ii) Describe the problems on and the need for the project, by using statistics rather than just qualitatively. For example, if the project is district heating, provide information on the following in the subproject city/town: (a) what is the present coverage of central heat supply in the project town/city. (b) how many small boiler rooms and household stoves are being used for

heating in the project area. (c) what and where is the existing heat supply source and what is its supply

capacity. (d) what fuel does the heat supply source use, and if coal, how much coal and

what is the sulfur content of the coal. (e) what dust removal and flue gas desulfurization equipment does the heat

supply source have. (f) what is the air emission output of the heat supply source presently. (g) With this project, how many small boiler rooms and household stoves will be

eliminated, and how much air pollutant loads will be reduced as a result.

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(h) how much coal usage will be reduced with the provision of this project. (i) how much central heat supply coverage will be increased with the provision

of this project. (iii) Describe the technical aspects of the project. For example, for district heating,

provide the following information: (a) how many central heating stations and how many heat exchange stations,

and what are their capacities. (b) their locations. (c) describe the dust removal and flue gas desulfurization equipment at the

central heating stations. (d) describe the heat exchange mechanism at the heat exchange stations. (e) how many km of heat supply pipelines.

iii. Chapter 3 – Description of the Environment

23. This chapter provides information on the existing environmental conditions of the project city/town, with focus on the component sites. It includes 9 sections respectively on atmosphere and climate, topography and geology, noise, water, waste, ecology, fisheries, economic development, and social and cultural resources. Information required by each section is described below. 24. Atmosphere and Climate. Provide information specific to the project city/town on the following:

(i) Climatic condition. (ii) Annual average temperature, minimum temperature, maximum temperature,

relative humidity, number of frost free days. (iii) Annual average rainfall, minimum rainfall, maximum rainfall. (iv) Predominant wind direction and wind speed. (v) Existing air quality based on baseline monitoring results conducted under the EIA

study (provide numerical values of air pollutant concentrations). (vi) Describe whether the existing air quality meet or exceed applicable ambient air

quality standards. 25. Topography and Geology. Provide information specific to the project city/town on the following:

(i) Topography and landform. (ii) Geological features. (iii) Soil characteristics.

26. Noise. Provide information specific to the project city/town on the following:

(i) Day time and night time environmental noise based on baseline monitoring results conducted under the EIA study (provide dB[A] values).

(ii) Day time and night time traffic noise based on baseline monitoring results conducted under the EIA study (provide dB[A] values).

(iii) Describe whether the noise levels meet or exceed the noise standards applicable to the noise functional zones of the respective monitoring locations.

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27. Water. This includes both surface water and ground water. Provide information specific to the project city/town on the following:

(i) Rivers, lakes, reservoirs and marine water (for coastal subproject cities/towns) present in the project cites/towns.

(ii) Existing surface water quality conditions and the water quality classification of these water bodies based on the baseline surface water quality monitoring conducted under the EIA study (provide numerical values of water quality pollutants).

(iii) Ground water aquifer. (iv) Existing ground water quality conditions and the water quality classification

based on the baseline surface water quality monitoring conducted under the EIA study (provide numerical values of water quality pollutants).

(v) If surface and/or ground water are used for drinking water, provide their total supply capacities and their existing extraction amount.

(vi) Total quantities of industrial and domestic wastewater generated and discharged into the water bodies each year.

(vii) Number of WWTP and total treatment capacity. 28. Waste. Provide information specific to the project city/town on the following:

(i) Total quantity of MSW generated each year. (ii) Types and number of solid waste treatment facilities and their total treatment

capacity. (iii) Present status of waste collection and transfer.

29. Ecology. Provide information specific to the project city/town on the following:

(i) Percent forest coverage. (ii) Dominant vegetation types and plant species. (iii) Dominant animal and wildlife species. (iv) Dominant freshwater and/or marine species. (v) Habitats and presence of protected, threatened or endangered species at the

project sites. (Note: if absence, state this fact in the report) (vi) Whether the project site or construction works will encroach onto protected areas

such as nature reserves or water gathering grounds. (Note: if no, state this fact in the report)

30. Fisheries. Provide information specific to the project city/town on the following (Note: this section may not be applicable to inland project city/town). Information should include both fresh and salt water species of commercial importance, as well as both capture and culture fisheries.

(i) Dominant fish and shellfish species of commercial importance. (ii) Commercial fisheries production and revenue each year.

31. Economic Development. Provide information specific to the project city/town on the following:

(i) Description of land use such as residential, industrial, agricultural, etc. (ii) Description of transportation infrastructure on roads, rails, air, etc.

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(iii) Description of key industrial sectors, key industries and production statistics. (iv) Description of agricultural products and production statistics. (v) Social-economic indicators such as GDP, GDP per capita, urban annual average

wage, farmers‘ useable income level, unemployment, poverty levels etc. 32. Social and Cultural Resources. Provide information specific to the project city/town on the following:

(i) Population and communities (e.g., ethnic groups, number of villages/towns, etc). (ii) Number and types of health facilities such as hospitals, clinics, number of

hospital beds. (iii) Number and types of educational facilities such as kindergartens, primary and

secondary schools, vocational training institutions, universities, etc. (iv) Description of municipal services such as heating supply, power supply, water

supply, wastewater and solid waste collection and treatment, etc. (v) Any resources or land being used by indigenous ethnic minority groups. (vi) Description of cultural heritage resources such as archaeological sites, cultural

resources, heritage protection sites, etc. (Note: if there is none or the project site and construction activities will not encroach onto these sites, state so in the report).

iv. Chapter 4 – Alternatives

33. This chapter describes various alternatives that have been considered during the FS and EIA study. The pros and cons of each alternative should be discussed, to support the decision on the alternatives selected. Provide information on the following:

(i) With-project and Without-project Alternatives. This compares the project with the no project scenario. Explain the benefits of having the project, and compare them with the dis-benefits of not having the Project.

(ii) Specific Alternatives Discussion. Describe the alternatives considered for the subproject or subproject component. Depending on the nature of the component, alternatives may involve (a) site selection, (b) road/pipeline alignment, (c) treatment technology/process, (d) disinfection technology/process, (e) construction method, (f) construction (e.g. piping, embankment, road surface) material, (g) environmental protection/emission control technology/process, etc. Explain how and why the final selection on each alternative was made.

v. Chapter 5 – Anticipated Environmental Impacts and Mitigation Measures

34. This chapter starts with describing the positive impacts and environmental benefits of the project, followed by information on the environmental standards used in the EIA study, environmental impacts during construction and operation, mitigation measures needed to reduce such impacts, and resettlement. The following information should be provided in this chapter.

(i) Positive impacts and environmental benefits: describe the project‘s positive impacts and environmental benefits. The description should be both qualitative and quantitative, with numerical values on tons of pollutant (e.g. SO2, CODCr, etc) reduced, number of small boiler rooms demolished, tons of coal use reduced, % of coverage increased, etc.

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(ii) Environmental standards: provide information on national and local standards on air quality, noise, surface and ground water quality, soil, etc. used for assessing environmental impacts in the EIA study. Cite the national or local regulation numbers.

(iii) Impact and mitigation measures during the construction phase: Provide information on the assessment results on air quality, noise, water (surface and ground) quality, waste, ecology and cultural heritage during the construction phase. Focus should be on the key environmental issues of the project (see examples in Paragraphs 5-10). The following should be noted: (a) the assessment results should be quantitative, for example, give the

concentration of TSP and the construction noise level at No. 4 Primary School 20 m away from the construction site boundary, the total quantity of excavated soil from wastewater pipeline construction, etc.

(b) compare these results with the environmental standards to see if they comply with or exceed the relevant standards.

(c) if there is exceedance, propose mitigation measures that will reduce the environmental impact to acceptable levels.

(d) also list these mitigation measures in the environmental management plan (EMP)

(iv) Resettlement: Provide information on (a) area of land to be permanently acquired by the project, (b) area of land to be temporarily occupied by the project, (c) how much of the land to be permanently acquired is cultivated land, (d) area of buildings to be demolished, and (e) number of persons to be resettled due to the project. The land to be permanently acquired represents resources that will be permanently lost and that cannot be replaced.

(v) Impact and mitigation measures during the operation phase: Provide information on the assessment results on air quality, noise, water (surface and ground) quality, waste, ecology and cultural heritage during the operation phase. Focus should be on the key environmental issues of the project (see examples in Paragraphs 5-10). The following should be noted: (a) the assessment results should be quantitative, for example, give the loadings

of BOD5 and CODCr discharged from the WWTP, the traffic noise level at No. 4 Primary School in year 2020 in day time and at night, etc.

(b) compare these results with the environmental standards to see if they comply with or exceed the relevant standards.

(c) if there is exceedance, propose mitigation measures that will reduce the environmental impact to acceptable levels.

(d) also list these mitigation measures in the environmental management plan (EMP)

(e) assess impact from demand on resources as well, e.g. the quantity of ground water extracted by the water supply project and assess such impact due to increased demand on this resource.

(f) also describe pollutant reductions during the operation phase, e.g., the amount of BOD5 and CODCr reduced from discharging into the river due to the provision of WWTP by the project, the number of small boiler rooms demolished which will result in the reduction of how many tons of SO2 emission per year due to the provision of district heating, etc.

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vi. Chapter 6 – Economic Assessment 35 This chapter describes the economic benefits of the project. These may include promotion of tourism or industrial development due to environmental infrastructure provided by the project. The economic internal rate of return (EIRR) for the project must also be presented.

vii. Chapter 7 – Environmental Management Plan 36. A comprehensive Environmental Management Plan (EMP) has to be prepared as an Annex to the EIA report. The requirements of the EMP are described in later sections. This chapter in the EIA report summarizes the key components of the EMP, which include (i) a summary of environmental impacts and their respective mitigation measures, (ii) a summary of the environmental monitoring plan, (iii) public consultation needs during the construction and operation phases, (iv) responsibilities of various parties during the implementation of the EMP, and (v) cost estimates for implementing the EMP.

viii. Chapter 8 – Public Involvement and Disclosure 37. This chapter describes the public consultations conducted during the EIA study. ADB requires two rounds of public consultation. Information to be provided in this chapter includes (i) the dates and locations of the two rounds of public consultation, (ii) the number and make up (e.g. government representatives, village leaders, private citizens, etc) of participants in each round, (iii) questions, concerns, ideas, suggestions raised by the participants, and (iv) how are the questions, concerns, ideas and suggestions raised by the participants answered in the EIA study and report. More information on conducting public consultation will be provided in later sections.

ix. Chapter 9 – Conclusions 38. This chapter summarizes the findings of the EIA study. It should include information on (i) project benefits including both economic and environmental benefits, (ii) summary of significant environmental impacts during the construction and operation phases, and their respective mitigation measures, (iii) the use of irreplaceable resources such as the area of land and associated habitats and resources that will be permanently lost due to permanent land acquisition, and (iv) highlights of the environmental management plan including environmental monitoring requirements.

F. Public Consultation

39. ADB requires two rounds of public consultation during the EIA study. The first round should be conducted shortly after the start of the EIA study. The purpose of the first round is to introduce the project and to solicit views from the stakeholders so that their concerns, ideas and suggestions can and will be addressed during the study. The second round should be conducted after the draft EIA report is completed. The purpose of the second round is to present the EIA findings and mitigation measures to the stakeholders, and to answer their concerns and suggestions raised in the first round. Any concerns and suggestions raised in the second round of public consultation should be addressed and incorporated into the final EIA report. 40. Public consultation could be in form of internet information disclosure (with mechanism to receive feedback), questionnaire survey, workshop, public forum, etc. However, ADB prefers public forum, which provides an interactive process among the project proponent, the EIA

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design institute and the stakeholders. Stakeholders invited to the public forum should be representative of various community groups whom could be affected by the project, including government officials, village representatives, private citizens residing within or near the project sites, school masters, hospital administrators, etc. 41. The EIA design institute is responsible for organizing and conducting the public forum, with assistance from the local PMO, EA and IA on provision of (i) stakeholder contact list and (ii) venue, date and time of the forum. The local PMO should prepare an invitation letter listing the venue, date, time, and contact person information for the forum. The EIA design institute should prepare a Consultation Document (preferably short and not more than 4 pages) to describe (i) the project, (ii) benefits of the project, (iii) potential environmental impacts and (iv) relevant mitigation measures, with (v) a map showing the project location. Since the first round is at EIA inception and the purpose is to solicit initial views, concerns and suggestions from the stakeholders on the project, the document should focus on project introduction and project benefits, particularly when there won‘t be any EIA findings on impacts and mitigation measures at such early stage. For the second round, focus of the document should be on presenting potential environmental impacts and mitigation measures, and how the first round queries are dealt with in the EIA study. 42. The invitation letter and the consultation document should be sent to the stakeholders, based on the compiled stakeholder contact list, at least one week before the date of the forum. Two days before the forum, the EIA design institute should contact the invited participants by phone, to ensure that they receive the consultation document and to remind them to attend the forum. Experience indicated that such personal touch would increase the attendance rate of the forum. 43. The forum should be chaired by the local EA or IA and conducted by the EIA design institute. The participants should be encouraged to express their views, concerns, ideas and suggestions. The EIA design institute is responsible for taking notes and recording all discussions in the forum, and for producing the meeting minutes for the forum to be included in the EIA report.

G. Environmental Management Plan

44. The EMP should include four main items. These are (i) environmental mitigation measures, (ii) environmental monitoring, (iii) public consultation, and (iv) institutional strengthening and training. These four items are described below. 45. The EMP should include a table listing the implementation of the mitigation measures. An example/template is shown in Annex 2. All mitigation measures mentioned in the EIA report should be listed in this table, covering the detailed design, construction and operation phases. It is important to include the detailed design phase because some mitigation measures will become part of a facility and will have to be designed and included in the specifications for tendering. Examples are leachate and methane gas collection and treatment systems for landfill projects, dust removal and flue gas desulfurization equipment for central heat supply projects, safety designs for disinfection facilities involving the storage and use of chlorine in WTP and WWTP projects, etc. It is important to clearly state the responsibilities, on who is responsible for implementation and who for supervision. Cost estimates should be provided. Cost estimates also need to be provided. Costs for items that will become a permanent part of the facility, such as the examples mentioned above and road side landscaping etc, and for items that are already included in the daily operational costs of the project should not be included in this table to avoid

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double counting since these should already have been included in the overall project cost. Costs to be included in the table should be mostly temporary measures during the construction stage, such as the watering of construction site to and haul roads to reduce dust, temporary noise barriers around noisy machines, sedimentation basins and perimeter drainage ditch to control muddy site runoff, temporary chemical toilets for construction workers etc. 46. Based on results of impact assessment and the locations of sensitive targets such as residential areas, hospitals, schools, temples, rivers, etc, a monitoring plan should be compiled for the construction and operation phases. An example/template is shown in Annex 3. The plan should be impact and location specific. For example, if the facility does not have any sensitive target within 1 km during construction, there may not be any need to conduct air and noise monitoring, or the monitoring frequency could be less. The plan should also be very specific on the parameters to be monitored, the total number of monitoring locations, the exact locations (= location and name of each sensitive target) where monitoring is to be carried out, and the frequency and duration of monitoring. The table should also list clearly who is responsible for doing the monitoring and who is responsible for supervision. Cost estimates should be provided for undertaking such monitoring. For the operation phase, cost estimates should be provided for the first year, and the need to continue monitoring after the first year should be reviewed at the end of the first year. For example, if monitoring of operational noise from pumping stations shows compliance in the first year, it is unlikely that the results would change after the first year and such monitoring can therefore stop after 1 year. 47. The need for public consultation should be addressed in the EMP, with the numbers and types of public consultation during the construction and operation phases listed. This is an important public relations means to get the stakeholders involved and informed in the project. An example/template is shown in Annex 4. Cost estimates for conducting such consultation should also be provided. 48. Institutional strengthening and training of the local PMO, EA, IA and other parties involved in the project is important in ensuring that they have the capacity to implement the EMP. An example/template on training is shown in Annex 5, with cost estimates provided. The training program should be based on the nature of the project (for example, solid waste management training for solid waste projects), the need of the PMO, EA and IA etc and the level of environmental awareness of workers and communities.

H. EIA Approval

49. The Provincial EPB is responsible for approving the domestic EIA reports. The Provincial PMO is responsible for signing off the EIA reports to ensure that these reports meet ADB requirements, except EIA reports for the following projects:

(i) Solid waste projects involving incineration. (ii) Solid waste projects involving landfill and/or composting facilities without leach

and/or methane gas collection and treatment. (iii) District heating projects without dust removal and flue gas desulfurization

equipment for the central heat supply station using coal as fuel. (iv) Water supply projects using ground water as water resource. (v) Water supply projects using more than 5% of the surface water flow as water

resource. (vi) Wastewater treatment projects with WWTP having a total design capacity of

more than 100,000 m3/d and discharging into a Class III or better water body.

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(vii) Projects that would impinge on water gathering ground, nature conservation area, protected ecological habitat and/or protected heritage site.

50. EIA reports for the above categories should be submitted to ADB for approval. ADB also has the discretion of selecting other EIA reports for approval. 51. The Provincial PMO should review all EIA reports not belonging to the above categories to ensure that the information needs presented in this document are provided in the reports and that the impacts are acceptable with the implementation of mitigation measures described. After review to ensure compliance with ADB requirements, the Provincial PMO should then sign off the EIA reports and submit copies to ADB for filing.

I. Resettlement Plan

52. The Project includes three core subprojects and subsequent subprojects—all require some land acquisition and population resettlement. The resettlement planning and implementation is designed to ensure that those affected will be better off, or at least not worse off, as a result of the Project. Overall, the land acquisition and resettlement impacts of the Project will be significant. Three full resettlement plan reports were prepared for the three core subprojects. 53. The scope of the project impacts is mainly determined by the measurement survey on the basis of the feasibility study reports. Based on the resettlement impacts identified (physical and economic displacement), the construction of the three core subprojects will affect 1,453 households or 5,007 people because of permanent land acquisition; relocate 23 households or 95 people due to the demolition of residential structures; and affect 22 enterprises, one shop, and one government agency with 1,151 employees. In total, 96.6 hectares will be acquired permanently, 57.6 hectares are cultivated land (Table A12). Along with land acquisition, 5,604 square meters (m2) of residential houses and 13,703 m2 of nonresidential houses will be demolished, causing relocation of 23 households and 95 people, and affecting 22 enterprises, one shop, and one agency. In addition, associated productive assets, ground attachments, and basic infrastructure and facilities will be affected. 54. To avoid or minimize land acquisition and resettlement, local officials and village and street committees were closely consulted during preliminary and final feasibility study stages. 55. The resettlement plan and compensation for the permanent land loss is based on Document 28: State Council Decision to Deepen Reform and Strictly Enforce Land Administration in October 2004; Land Administration Law of PRC (the People‘s Republic of China) in 1998 and updated in 2004; Shanxi Provincial Government Decree on Shanxi Province Compensation and Distribution Method for Land Acquisition of Rural Collectives issued on 17 October 2005; and Shanxi Provincial Government 193 Decree on Opinion on Land Compensation for Construction Project issued in December 2005. The resettlement plan and compensation for house demolition is based on the PRC, provincial, and municipal urban housing demolishment administration regulations. Based on consultations with local governments and affected people, and general practice in Pingyao, Xiaoyi (where Wutong is located), and Youyu counties, the respective municipal project management offices (PMOs) and implementing agencies adopted a set of compensation standards. The resettlement principles established for the Project are (i) land acquisition and involuntary resettlement should be avoided or minimized where feasible by developing and comparing a series of design alternatives; (ii) compensation and entitlements provided are based on market value or replacement value and must be adequate to allow those affected to at least maintain their pre-project standard of living, with the prospect of improvement; (iii) land temporarily occupied and

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the period for disruption are to be kept to a minimum; (iv) all people affected, legal and illegal, are to be taken into consideration and accounted for; (v) the per capita landholding after land acquisition will be sufficient to maintain the previous livelihood standard; (vi) where land allocation per capita is not sufficient to maintain the previous livelihood standards, other income-generating activities will be provided for; (vii) a preferential policy will be provided to vulnerable groups in such things as compensation, payment of special fund, minimum living guarantee, and employment; (viii) all those affected will be adequately informed about eligibility, compensation rates and standards, livelihood and income restoration plans, and project timing; and (ix) close monitoring and timely actions will be carried out to identify and resolve any problems.

Table 17: Summary of Land Acquisition

Subproject

Permanent Land Acquisition

Total Area

(mu)a

Of which Farmland

(mu)a

Affected Households

Affected People

Pingyao Huiji River Treatmentb 868.92 284.89 579 2,435

Wutong New Town Development 85.68 85.68 758 2,118 Youyu New Town Development

c 494.00 494.00 116 454

Total 1,448.6 864.57 1,453 5,007

a 15 mu is equivalent to 1 hectare.

b For Pingyao Huiji River treatment component, among 19,307 square meters (m

2) to be demolished, are 5,604 m

2

of residential structures affecting 23 households and 95 people, and 13,703 m2 of nonresidential structures

affecting 22 enterprises, one shop, and one agency. c The households affected by the Youyu flood control component are part of households affected by the Youyu new

town development component. Source: Asian Development Bank estimates.

56. Those affected will be notified about the key elements of the resettlement plan prior to loan appraisal by the Asian Development Bank (ADB). On various occasions during meetings, interviews, focus group discussions, public consultation workshops, and community consultation meetings, local representatives have participated in the planning; their concerns have been integrated into the resettlement plans. The resettlement information booklet for each subproject was distributed to affected villages and households in August 2008. The resettlement plans will be provided to village offices and resident committees, and posted on the ADB website after their approval. The respective project implementing agencies will establish project resettlement units for supervising implementation, continuing public consultation, monitoring progress, and responding to grievances. The grievance address procedures are well established and explanations are included in the resettlement information booklets. 57. For land acquisition, land compensation will be paid in cash to the affected villages to be used as basic social insurance for the farmers whose land is newly acquired. Resettlement subsidies and payment for standing crops will be paid to those affected. For residential houses and nonresidential buildings (enterprises and shops) to be demolished, compensation will be paid to owners, including those without building title. The payment will be made in cash according to the appraised value of the property. The households that have to relocate will receive a relocation allowance. Compensation for standing crops, auxiliaries, and other assets will be paid directly to those affected. Income losses resulting from reduced production, sales, and wages caused by the Project will be compensated in cash. 58. The resettlement strategy encompasses (i) replacement of housing and (ii) restoration of livelihoods and income. People losing housing in rural areas have two compensation options: to receive cash compensation, or cash compensation plus provision of a land plot for house construction (by the affected person). Assistance will be provided to construct new houses or find available housing close to the original homes, when preferred by those affected. The

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respective municipal PMOs, implementing agencies, and local governments will provide necessary assistance for house construction and relocation during resettlement implementation. 59. The measures for economic rehabilitation include (i) provision of employment opportunities during construction and operation of the Project; (ii) provision of basic social insurance to those affected whose land is newly acquired; (iii) land compensation and resettlement subsidy deposited in banks for income earnings from interest; (iv) development of economic crops with higher economic value; (v) promotion and development of new enterprises and self-employed secondary and tertiary businesses (i.e., small business, tofu production, transportation, entertainment, and catering services); and (vi) provision of technical training to those affected to increase their marketable skills. Relocated enterprises and shops will be provided with the options of compensation and resettlement. The same shops will reemploy the affected employees. 60. Vulnerable households will receive additional assistance from the municipal or county civil affairs bureau. The PMO and implementing agency will monitor implementation to ensure vulnerable persons receive adequate compensation, housing arrangements, special funds, and special assistance to restore their living conditions and incomes. 61. Each PMO and implementing agency will have at least two full-time staff responsible for land acquisition and resettlement. The staff from each subproject resettlement unit will take the lead responsibility for coordinating the planning, implementation, financing, and monitoring of land acquisition and resettlement. They will work closely with relevant village officials, land administration bureaus, and house demolishment offices; and will be responsible for supervision and monitoring of resettlement (e.g., delivery of entitlements, selection of new housing sites, restoration of incomes, provision of replacement land, and other economic measures). A training program will be organized for the resettlement officers. 62. The cost estimate for land acquisition and resettlement for the three core subprojects is about $18.0 million, equivalent to CNY122.4 million in 2008 prices, including contingencies. Resettlement implementation will be completed prior to subproject construction. Most resettlement activities will occur between March and June 2009. Detailed measurement surveys will be conducted in each village, neighborhood, house, enterprise, and shop; and the compensation contracts will be negotiated and signed with village committees, households, and enterprises. Based on these surveys, the resettlement plans will be updated and submitted to ADB for review and approval. 63. Internal and external monitoring of resettlement plan implementation will be conducted. Monitoring methodologies are specified in the resettlement plans. Each implementing agency will be responsible for internal supervision and monitoring to ensure compliance with resettlement plan provisions. The PMO and implementing agencies have agreed to a set of supervision milestones with ADB to ensure timely and effective implementation of resettlement activities. External monitoring and evaluation will be carried out by an independent agency under contract to the PMO and implementing agencies. External monitoring reports will be forwarded directly to the Shanxi PMO and ADB. 64. As a sector loan, the Shanxi PMO is responsible for developing subsequent subprojects. A resettlement framework was prepared to assist the local and Shanxi PMOs. The framework is in accordance with relevant ADB publications and provides procedures for informing affected villages and households about the project scope and impacts, identifying affected persons, providing compensation, and resolving complaints. The PMOs have stated their commitment to applying this framework.

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VIII. PERFORMANCE MONITORING, EVALUATION, REPORTING AND COMMUNICATION

A. Project Design and Monitoring Framework

Design Summary Performance Targets/Indicatorsa

Data Sources/ Reporting

Mechanisms Assumptions and

Risks

Impact

Improved environmental quality and increased employment generation in small cities and towns in Shanxi Province

By 2018 (baseline year 2007), in small cities and towns in Shanxi Province

Average days of air quality above grade II in county-level cities increased to 240 per year Surface water quality in the middle and lower reaches of the Fen River increased from class V to class IV

b

Unemployment reduced to and maintained at no more than 4.5% Per capita annual disposable income of urban households increased by 6%

Provincial statistics bureau reports Provincial environmental protection bureau Provincial labor affairs bureau

Assumptions

11th FYP and small city and town master plans effectively implemented

Strong provincial economic development trends continue after the 11th FYP

Applicable environmental laws are effectively enforced

Risks

Implementing agencies do not use suitable external monitoring agencies; performance data are not collected

Urban development pressures outpace planned infrastructure development

Outcome

Improved urban infrastructure and municipal services in about seven small cities and towns in Shanxi Province

By 2015 (baseline year 2007), in the subproject cities and towns (specific indicators provided for three core subproject cities and towns: Pingyao, Wutong, and Youyu) All components

Public satisfaction with environmental conditions increase:

c

- At least 75% of population satisfied with environmental conditions

d

District heating components

Percentage of urban population with access to centralized heating increased: - Wutong from 0% to 25% - Youyu from 33% to 47% - Others cities and towns: TBD

Provincial statistics bureau Provincial environmental protection bureau Provincial housing and urban-rural development bureau County labor bureau County poverty relief office County water affairs bureau Annual environmental statistics

Assumptions

Project financing is provided on time

Relevant authorities offer strong support to the city and town PMOs and implementing agencies on capacity development for project implementation and operation

Effective stakeholder participation and ownership is developed

Different specialist disciplines are well coordinated

Land acquisition and resettlement policies

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Design Summary Performance Targets/Indicatorsa

Data Sources/ Reporting

Mechanisms Assumptions and

Risks

River improvement components

Percentage of improved river course (length) or lake perimeter in urbanized areas increased: - At least 80% of river course or lake perimeter in urbanized area improved Road components

Area of paved roads increased: - Wutong by 12% - Youyu by 15% - Others cities and towns: TBD Education components

Number of people receiving municipally provided vocational training increased: - Wutong to 500 per class and 10 classes per year

e

- Others: TBD Water supply components

Percent change in urban population with access to piped water increased: - Youyu by 28% - Others: TBD Wastewater management components

Percentage of urban population served by wastewater collection system (sewer network) and drainage network increased: - At least 75% of urban population is served by wastewater collection system (sewer network) - At least 50% of the urbanized area is served by the storm-water drainage system Revenue-generating components (water, wastewater, heating)

Tariff gradually increased to achieve full cost recovery

Municipal records and statistics Statistical records and data of small cities and towns District heating companies

are effectively implemented; stakeholders accept and cooperate with the implementation process Project design and construction are implemented effectively

Risks

Local geological conditions affect construction activities

Exceptional weather affects the annual effective construction period

Costs are much higher than anticipated

Major amendments and changes to the master plans in the subproject cities and towns

Outputs Subproject 1: Pingyao County Component 1: Huiji River Improvement

Riverbed is dredged and embankments are constructed

By 2015

7.2 km of Huiji river rehabilitated

From All:

Regular implementing agency reports on contract expenditure and works progress Monitoring of project implementation and progress by ADB review missions

Assumptions

Project financing is provided on time

Relevant authorities offer strong support to the city and town PMOs and implementing agencies on capacity

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Design Summary Performance Targets/Indicatorsa

Data Sources/ Reporting

Mechanisms Assumptions and

Risks

Water storage reservoirs are built; rubber dams are installed Subproject 2: Wutong Town Component 1: Caoxi Road and Associated Municipal Services

Road is widened and reconstructed; drainage channel is improved Component 2: Heat Supply

New heat exchange stations and distribution network operating Component 3: Gas Supply

New gas supply storage and distribution system operating Component 4: Wastewater Treatment

WWTP and collection network operating Component 5: Education Services Facilities

New schools and vocational training center in use Subproject 3: Youyu County Component 1: Heat Supply

New heat stations, heat exchange stations, and distribution network operating Component 2: Water Supply

Drinking water production and distribution works operating

Three rubber dams constructed

1.8 km of arterial road constructed, street lighting and traffic lights installed, drainage channel adjacent to Caoxi Road reconstructed 66MW secondary heat substation and district heating pipeline constructed Gas supply system (5.9 million m

3/year) for residential area

constructed A new 4,000 m

3/day WWTP and

12.3 km of wastewater collection network constructed One vocational school, one junior high school, and two nursery schools constructed New boiler station (116 MW), district heating substations, and distribution network constructed Two new wells (total 1,920 m

3/day)

and new water distribution network constructed

Works supervision, construction, completion, and acceptance records Information from final accounts of works Monitoring reports on institutional development including number of staff trained, areas of training, and strengthened organizations and procedures Xiaoyi City

f Public

Affairs Management Bureau (all components) Xiaoyi City Transportation Bureau and Water Affairs Bureau Xiaoyi City District Heating Company Xiaoyi Gas Supply Company Xiaoyi Wastewater Company Xiaoyi City Education Department and Wutong town government Youyu Development and Reform Commission Youyu Construction Bureau County records and documents

development for project implementation and operation

Effective stakeholder participation and ownership is developed Different specialist disciplines are well coordinated Land acquisition and resettlement policies are effectively implemented; stakeholders accept and cooperate with the implementation process

Project design and construction are implemented effectively

Risks

Local geological conditions affect construction activities

Exceptional weather affects the annual effective construction period

Costs are much higher than foreseen

Unforeseen land acquisition and resettlement issues, which could constrain efficient implementation of the project works and restoration of livelihoods of those affected

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Design Summary Performance Targets/Indicatorsa

Data Sources/ Reporting

Mechanisms Assumptions and

Risks

Component 3: Drainage and Wastewater Collection

Combined storm-water drainage and sewerage network operating Component 4: Roads and Associated Municipal Services

New roads in the new town operating Component 5: Flood Control

Flood control channel is operating Subsequent subproject cities and/or towns

Urban infrastructure and services improved and operating For all subprojects:

Infrastructure and service providers have increased capacity to plan, construct, operate, and maintain facilities

Combined storm-water drainage and sewerage network rehabilitated 10.1 km of secondary and tertiary roads constructed; street lighting, electrical power, and telecommunication lines installed 4.85 km of river course rehabilitated and landscaped By 2015

TBD By 2015

Shanxi PMO and the subproject city and town PMOs and implementing agencies: Prepared and implemented a 6-year (2009–2016) training plan for project management, O&M, financial management, and institutional capacity building Improved organization structure and financial management systems

Activities Subproject 1: Pingyao County 1.1 Huiji River Improvement

Activity (1) Design the facilities, acquire land, and tender the works by 2010. Activity (2) Rehabilitate 7.2 km of Huiji River by 2012. Activity (3) Construct three rubber dams by 2012. Subproject 2: Wutong Town 2.1 Caoxi Road and Associated Municipal Services

Activity (4) Design the facilities, acquire land, and tender the works by 2010. Activity (5) Reconstruct 1.8 km of arterial road by 2012. Activity (6) Install street lighting and traffic lights by 2012. Activity (7) Reconstruct drainage channel adjacent to road by 2012. 2.2 Heat Supply

Activity (8) Design the facilities, acquire land, and tender the works by 2010. Activity (9) Construct new secondary heat substation (66 MW) by 2013. Activity (10) Construct district heating pipeline network by 2013. 2.3 Gas Supply

Activity (11) Design the facilities, acquire land, and tender the works by 2010. Activity (12) Construct new gas supply system for residential area (5.9 million m

3/year) by

2013. 2.4 Wastewater Treatment

Inputs ADB

$100 million loan with timely disbursement based on the construction schedule of the works:

Civil works $61.0 million

Equipment: $24.5 million

Consulting services: $2.5 million

Financing charges during implementation: $12.0 million

WFPF Grant

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Activity (13) Design the facilities, acquire land, and tender the works by 2010. Activity (14) Construct new wastewater treatment plant with capacity of 4,000 m

3/day by

2013. Activity (15) Construct 12.3 km of new wastewater collection network. 2.5 Education Services

Activity (16) Design the facilities, acquire land, and tender the works by 2010. Activity (17) Construct two nursery schools by 2012. Activity (18) Construct one junior high school by 2014. Activity (19) Construct one vocational school by 2014.

Subproject 3: Youyu County 3.1 Heat Supply

Activity (20) Design the facilities, acquire land, and tender the works by 2010. Activity (21) Construct new heat-only boiler station (116 MW) by 2015. Activity (22) Construct district heating substations and distribution network by 2015. 3.2 Water Supply

Activity (23) Design the facilities, acquire land, and tender the works by 2010. Activity (24) Construct two new wells with production of 1,920 m

3/day by 2015.

Activity (25) Construct new water distribution network in urban expansion area by 2015. 3.3 Drainage and Wastewater Collection

Activity (26) Design the facilities, acquire land, and tender the works by 2010. Activity (27) Rehabilitate the combined storm-water drainage and wastewater collection network by 2015. 3.4 Roads and Associated Municipal Services

Activity (28) Design the facilities, acquire land, and tender the works by 2010. Activity (29) Construct 10.1 km of secondary and tertiary streets in new expansion area by 2015. Activity (30) Install street lighting, electrical power, and telecommunications works on new streets by 2015. Activity (31) Carry out landscaping by 2015. 3.5 Flood Control

Activity (32) Design the facilities, acquire land, and tender the works by 2011. Activity (33) Reconstruct 4.85 km of river course in urbanized area by 2013. Activity (34) Carry out landscaping by 2013.

Institutional Capacity Building for Project Management

Activity (35) Strengthen financial management and corporate governance in water and wastewater agencies and companies in any subproject city or town with a water supply or wastewater component by 2016. Activity (36) Complete necessary organizational arrangements for implementing agencies (hiring staff; setting up accounting systems; and improving financial, administrative, and human resource policies and procedures) by 2010. Activity (37) Develop plans, budgets, and procedures for loan implementation and project control in Shanxi PMO by 2011. Activity (38) Complete Shanxi PMO and implementing agency staff training (training on ADB procedures, procurement, traffic management, road maintenance, water supply, pollution control, environmental monitoring, and financial management) by 2016. Activity (39) Shanxi PMO and implementing agencies refine the PPMS and establish targets and procedures no later than 6 months after loan effectiveness.

$0.25 million

Government and implementing agencies

About $124.5 million equivalent (CNY859.0 million) in counterpart funds with timely disbursement based on the construction schedule of the works

ADB = Asian Development Bank, FYP = five-year plan, km = kilometer, km2

= square kilometer, m = meter, m2

= square meter, m

3 = cubic meter, MW = megawatt, PMO = project management office, PPMS = project performance

management system, O&M = operation and maintenance, TBD = to be determined, WFPF = Water Financing Partnership Facility, WWTP = wastewater treatment plant. a The target of impact should be 3–5 years after project completion.

b The PRC classifies surface water quality using five categories. Class V is polluted and class IV is water for

industrial water supply and recreational waters that have no direct human contact. c Public satisfaction in base year 2008 from project preparatory technical assistance survey. Percent improvement

will come from the PMOs. d TBD during subproject appraisal and monitored as part of the PPMS.

e Number of students per class and number of classes per year may be revised upon completion of the training

curriculum. f Xiaoyi City agencies will operate and maintain heating, gas, roads, and wastewater infrastructure in Wutong.

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B. Project Design and Monitoring Framework (Noncore subprojects outputs)

Outputs Subproject 4: Niangzuan Town (Part A) Component 1: Mian River Improvement and Flood control

Riverbed is dredged, embankments are constructed Barrage and dam installed Subproject 5: Xinghuacun Town Component 1: Road and Associated Municipal Services

Roads are constructed; underground network infrastructure installed. Component 6: Qingxu Urban Area (Part A) Component 1: River and Lake Rehabilitation

Riverbed is dredged and embankments constructed; Lake improved

By 2015

3.71 km of the Mian river rehabilitated from Tao River Bridge to the existing rubber dam on Pingyang Lake Barrage and dam constructed 7.36 km of road constructed; street lighting, water and wastewater networks installed 3.5km dredging, and river embankment, landscaping, barrage construction. Lake improvements including water conveyance, landscaping and pathways.

From All:

Regular implementing agency reports on contract expenditure and works progress Monitoring of project implementation and progress by ADB review missions Works supervision, construction, completion, and acceptance records Information from final accounts of works Monitoring reports on institutional development including number of staff trained, areas of training, and strengthened organizations and procedures

Assumptions

See above

C. Monitoring

i. Project performance monitoring 1. The PPMS indicators, their relevance, and monitoring practicalities were discussed with the Shanxi and subproject PMOs and implementing agencies during project preparation. The indicators are based on the monitoring indicators in the design and monitoring framework including (i) job creation; (ii) service level; (iii) water supply, wastewater treatment, district heating coverage, and other operating performance measures; (iv) water quality and incidence of seasonal flooding in rivers in subproject towns; (v) public satisfaction with the urban environment; (vi) relevant social and economic data; (vii) traffic conditions in subproject towns; (viii) air pollution reduction indicators; and (ix) increase in public awareness of environmental protection. At the start of project implementation, the Shanxi, city, and town PMOs and implementing agencies, with the loan implementation consultant‘s assistance, will develop comprehensive PPMS procedures to generate data systematically on the inputs and outputs of the components, as well as the indicators to be used to measure the project impact. The PMOs

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will (i) refine the PPMS by expanding it to include subsequent subprojects and adjusting for any changes in the city master plan, (ii) confirm achievable targets, (iii) finalize monitoring and recording arrangements, and (iv) establish systems and procedures for the PPMS no later than 6 months after loan effectiveness. Disaggregated baseline data for output and outcome indicators gathered during project processing will be updated and reported quarterly through the {executing agency's} quarterly progress reports and after each ADB review mission. These quarterly reports will provide information necessary to update ADB's project performance reporting system.16 2. Project Review. In addition to joint project reviews carried out at least once a year, ADB, SPG, and the implementing agencies will undertake a comprehensive midterm review 2 years after the start of project implementation. This will include a detailed evaluation of the scope, implementation arrangements, resettlement, achievement of scheduled targets, and progress on the agenda for policy reform and capacity-building measures. Feedback from the PPMS activities will be analyzed. 3. Compliance Monitoring. Arrangements for monitoring agreed covenants—policy, legal, financial, economic, environmental, and others—are as follows. Loan 2606-PRC: Shanxi Small Cities and Towns Development Demonstration Sector

Status of Compliance with Loan and Grant Covenants

(As of 5 December 2012)

Covenant Status of Compliance

General 1 The Borrower shall cause SPG to carry out the Project with

due diligence and efficiency and in conformity with sound administrative, financial, engineering, environmental, urban (urban road, river improvement and area upgrading) and social (education) development, and public facility (wastewater, water supply, gas supply, heating, and solid waste management) practices. (Loan Agreement, Article IV, Section 4.01 [a])

Being complied with.

2 In the carrying out of the Project and operation of the Project facilities, the Recipient shall perform, or cause to be performed, all obligations set forth in Schedule 5 to this Loam Agreement. (Loan Agreement, Article IV, Section 4.01[b])

Being complied with.

3 SPG and each IA shall (i) maintain separate accounts for the Project; (ii) have such accounts and related financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any

Being complied with.

16

ADB's project performance reporting system is available at: http://www.adb.org/Documents/Slideshows/PPMS/default.asp?p=evaltool

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Loan 2606-PRC: Shanxi Small Cities and Towns Development Demonstration Sector

Status of Compliance with Loan and Grant Covenants

(As of 5 December 2012)

Covenant Status of Compliance

event not later than six (6) months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the covenants of the Loan Agreement as well as on the use of the procedures for imprest account/statement of expenditures), all in the English language. SPG shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.(Project Agreement, Section 2.09 [a])

4 SPG and each IA shall enable ADB, upon ADB's request, to discuss the Project's and the IA‘s, financial statements and their financial affairs from time to time with the duly appointed auditors pursuant to Section 2.09(a) here above, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of SPG and the IA unless SPG and the IA shall otherwise agree. (Project Agreement, Section 2.09 [b])

To be complied with.

5 SPG and each IA shall enable ADB's representatives to inspect the Project, the Goods and Works financed out of the proceeds of the Loan, all other plants, sites, properties and equipment of the concerned IAs related to the Project and any relevant records and documents. (Project Agreement, Section 2.10)

Being complied with.

Use of Proceeds of the Loan

6 The Borrower shall make the proceeds of the Loan available to SPG upon terms and conditions satisfactory to ADB. Except as ADB may otherwise agree, the terms of the proceeds of the Loan made available to SPG shall include (i) commitment charge and interest at the rates identical to those applied to the Loan; (ii) a repayment period including a grace period identical to those applied to the Loan; and (iii) SPG bearing the foreign exchange and interest rate variation risks. (Loan Agreement, Article III, Section 3.01 [a])

Being complied with.

7 The Borrower shall, through SPG, cause the proceeds of the

Loan to be made available to the IAs through the following arrangements: (i) in case that an IA for a Subproject is an arm or part of the concerned Local Government or a public utility

Being complied with.

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institution acting as an arm or a part of the concerned Local Government, the portion of the Loan proceeds for the concerned Subproject shall be made available to the IA through the finance bureau of the concerned Local Government; or (ii) in case that an IA for a Subproject is a legal entity independent from the concerned Local Government, the portion of the loan proceeds for the Subproject shall be provided under an Onlending Agreement to be entered between the finance bureau of the concerned Local Government and the IA. (Loan Agreement, Article III, Section 3.01 [b])

8 The Borrower shall through SPG cause that the following

amounts of the Loan proceeds be made available to the Selected Subprojects and the Subsequent Subprojects: (i) To the IAs of the Selected Subprojects in an amount of $48,879,000; and (ii) To the IAs respectively subject to a total amount of $51,121,000 for the Subsequent Subprojects (Loan Agreement, Article III, Section 3.01 [c])

Being complied with

9 The Borrower shall cause SPG, and through SPG cause the

IAs to apply the proceeds of the Loan to the financing of expenditures on the Project in accordance with the provisions of this Loan Agreement and the Project Agreement. (Loan Agreement, Article III Section 3.01 [d])

Being complied with.

10 The Goods, Works and consulting services and other items of

expenditure to be financed out of the proceeds of the Loan and the allocation of amounts of the Loan among different categories of such Goods, Works and consulting services and other items of expenditure shall be in accordance with the provisions of Schedule 3 to this Loan Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and ADB. (Loan Agreement, Article III, Section 3.02)

Being complied with.

11 Except as ADB may otherwise agree, all Goods, Works and consulting services to be financed out of the proceeds of the Loan shall be procured in accordance with the provisions of Schedule 4 to this Loan Agreement. ADB may refuse to finance a contract where Goods, Works or consulting or services have not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the

Being complied with.

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contract are not satisfactory to ADB. (Loan Agreement, Article III. Section 3.03)

Allocation and Withdrawal of Loan Proceeds

12 Percentages of ADB Financing.. Except as ADB may otherwise agree, the items of the Categories and Subcategories listed in the Table shall be financed out of the proceeds of the Loan on the basis of the percentages set forth in the Table. (Loan Agreement, Schedule 3, para. 2)

Being complied with,

13 Interest and Commitment Charge

The amount allocated to Category 4 is for financing interest and commitment charge on the Loan during the implementation period of the Project. ADB shall be entitled to withdraw from the Loan Account and pay to itself, on behalf of the Borrower, the amounts required to meet payments, when due, of such interest and commitment charge.

Being complied with.

14 Reallocation

Notwithstanding the allocation of Loan proceeds and the withdrawal percentages set forth in the Table, (a) if the amount of the Loan allocated to any Category appears to be insufficient to finance all agreed expenditures in that Category, ADB may, in consultation with the Borrower, (i) reallocate to such Category, to the extent required to meet the estimated shortfall, amounts of the Loan which have been allocated to another Category but, in the opinion of ADB, are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the withdrawal percentage applicable to such expenditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made; and (b) if the amount of the Loan then allocated to any Category appears to exceed all agreed expenditures in that Category, ADB may, in consultation with the Borrower, reallocate such excess amount to any other Category. (Loan Agreement, Schedule 3, para 4)

To be complied with.

15 Disbursement Procedures

Except as ADB may otherwise agree, the Loan proceeds for financing Goods, Works, and consulting services and other items shall be disbursed in accordance with ADB‘s ―Loan

Being complied with.

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Disbursement Handbook‖ dated January 2007 (ADB‘s Loan Disbursement Handbook), as amended from time to time. (Loan Agreement, Schedule 3, para. 5)

16 Imprest Account; Statement of Expenditures

(a) Except as ADB may otherwise agree, the Borrower shall cause SPG to establish after the Effective Date, an imprest account at a bank acceptable to ADB. The imprest account shall be established, managed, replenished and liquidated in accordance with ADB's Loan Disbursement Handbook, and detailed arrangements agreed upon between the Borrower and ADB. The currency of the imprest account shall be dollar. The initial amount to be deposited into the imprest account shall not exceed the lower of (i) the estimated expenditure for the first six months of Project implementation, or (ii) the equivalent of ten (10) percent of the Loan amount. (b) The statement of expenditures (SOE) procedure may be used for reimbursement of eligible expenditures of the Project and to liquidate advances provided into the imprest account, in accordance with ADB's Loan Disbursement Handbook and detailed arrangements agreed upon between the Borrower and ADB. Any individual payment not exceeding $200,000 shall be replenished, liquidated, reimbursed using the Statement of Expenditure Procedure. (Loan Agreement, Schedule 3, para. 6

Being complied with.

17 Retroactive Financing

Withdrawals from the Loan Account may be made for reimbursement of reasonable expenditures incurred under the Project before the Effective Date, but not earlier than 12 months before the date of this Loan Agreement in connection with items to be retroactively financed, subject to a maximum amount equivalent to 20 percent of the Loan amount (Loan Agreement, Schedule 3, para 7)

No retractive financing made.

Award of Contract

18 Except as ADB may otherwise agree, Goods and Works shall only be procured on the basis of the methods of procurement set forth below:

International Competitive Bidding

National Competitive Bidding

Shopping

Being complied with.

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The methods of procurement are subject to, among other things, the detailed arrangements and threshold values set forth in the Procurement Plan. The Borrower may only modify the methods of procurement or threshold values with the prior agreement of ADB, and modifications must be set out in updates to the Procurement Plan. (Loan Agreement, Schedule 4, para. 3)

19 Domestic Preference. The Borrower may grant a margin of

preference in the evaluation of bids under international competitive bidding in accordance with paragraphs 2.55(a) and 2.56 of the Procurement Guidelines for domestically manufactured Goods. (Loan Agreement, Schedule 4, para. 4)

To be complied with.

20 National Competitive Bidding. The Borrower and ADB shall ensure that, prior to the commencement of any procurement activity under national competitive bidding, the Borrower‘s national competitive bidding procedures are consistent with the Procurement Guidelines. Any modifications or clarifications to such procedures agreed between the Borrower and ADB shall be set out in the Procurement Plan. Any subsequent change to the agreed modifications and clarifications shall become effective only after written approval of such change by the Borrower and ADB. (Loan Agreement, Schedule 4, para. 5)

Being complied with.

Selection of Consulting Services

21 Quality- and Cost-Based Selection. Except as ADB may otherwise agree, and except as set forth in the paragraph below, the Borrower shall apply quality- and cost-based selection for selecting and engaging consulting services. (Loan Agreement, Schedule 4, para, 6)

Being complied with.

Industrial or Intellectual Property Rights

22 (a) The Borrower shall ensure that all Goods and Works procured (including without limitation all computer hardware, software and systems, whether separately procured or incorporated within other goods and services procured) do not violate or infringe any industrial property or intellectual property right or claim of any third party. (b) The Borrower shall ensure that all contracts for the

Being complied with.

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procurement of Goods and Works contain appropriate representations, warranties and, if appropriate, indemnities from the contractor or supplier with respect to the matters referred to in subparagraph (a) of this paragraph. (Loan Agreement, Schedule 4, para. 7

23 The Borrower shall ensure that all ADB-financed contracts

with consultants contain appropriate representations, warranties and, if appropriate, indemnities from the consultants to ensure that the consulting services provided do not violate or infringe any industrial property or intellectual property right or claim of any third party. (Loan Agreement, Schedule 4, para. 8)

Being complied with.

ADB's Review of Procurement Decision

24 All contracts procured under international competitive bidding procedures and contracts for consulting services shall be subject to prior review by ADB, unless otherwise agreed between the Borrower and ADB and set forth in the Procurement Plan. (Loan Agreement, Schedule 4, para. 9)

Being complied with.

Executing Agency

25 SPG shall be the EA for the Project. The Provincial PLG, which has been established, and is chaired by a vice governor and comprises senior government officials of concerned bureaus and commissions, shall provide overall guidance and support to the preparation and implementation of the Project. The Provincial PMO established under the Provincial PLG and located in the Shanxi Housing and Urban-Rural Development Bureau shall undertake and manage the day-to-day activities in connection with the Project. (Loan Agreement, Schedule 5, para 1)

Complied with.

26 In each Subproject city or Subproject county, a City PLG or

County PLG shall be established to lead the implementation of the Subproject, and a City or County PMO shall be established to liaise with the Provincial PMO and oversee and manage the work undertaken by the IA. (Loan Agreement, Schedule 5, para. 2)

Complied with.

Implementing Agency 27 The IAs for the Subprojects shall be the following:

(a) in case of the Selected Subprojects, (i) Pingyao County Water Affairs Bureau

Complied with for core projects.

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for the Pingyao Subproject; (ii) Xiaoyi City Engineering and Construction

Management Affairs Office for the Wutong Subproject;

(iii) Youyu County Development and Reform Commission for the Youyu Subproject; and

(b) (b) in case of the Subsequent Subprojects, the agency(ies) appointed by the EA of the Project for the Subsequent Subproject(s).

28 (a) Each IA shall, promptly as required, take all action within

its powers to maintain its corporate existence, to carry on its operations, and to acquire, maintain and renew all rights, properties, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its business. (b) Each IA shall at all times conduct its business in accordance with sound administrative, financial, environmental, and where applicable, urban (urban road, river improvement or area upgrading) and social (education) development, and public facility (wastewater, water supply, gas supply, heating, and solid waste management) practices, and under the supervision of competent and experienced management and personnel. (c) Each IA shall at all times operate and maintain its plants, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound administrative, financial, engineering, environmental, maintenance and operational practices, and where applicable, urban (urban road, river improvement or area upgrading) and social (education) development, and public facility (wastewater, water supply, gas supply, heating, and solid waste management) practices (Project Agreement, Article II, Section 2.11)

Being complied with.

Shanxi Project Management Office 29 (a) SPG shall furnish to ADB all such reports and

information as ADB shall reasonably request concerning (i) the Loan and the expenditure of the proceeds thereof; (ii) the Goods, Works and consulting services and other items of expenditure financed out of such proceeds; (iii) the Project; (iv)

Being complied with.

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the administration, operations and financial condition of SPG to the extent relevant to the Project; and (v) any other matters relating to the purposes of the Loan. (b) Without limiting the generality of the foregoing, SPG shall furnish to ADB semi-annual reports on the execution of the Project and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the six months under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following six months. (c) Promptly after physical completion of the Project, but in any event not later than three (3) months thereafter or such later date as ADB may agree for this purpose, SPG shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by SPG of its obligations under this Project Agreement and the accomplishment of the purposes of the Loan. (Project Agreement, Article II, Section 2.08)

30 (a) SPG and each IA shall (i) maintain separate accounts

for the Project; (ii) have such accounts and related financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than six (6) months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the covenants of the Loan Agreement as well as on the use of the procedures for imprest account/statement of expenditures), all in the English language. SPG shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to

Being complied with.

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time reasonably request. (b) SPG and each IA shall enable ADB, upon ADB's request, to discuss the Project's and the IA‘s, financial statements and their financial affairs from time to time with the duly appointed auditors pursuant to Section 2.09(a) hereabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of SPG and the IA unless SPG and the IA shall otherwise agree. (Project Agreement, Article II, Section 2.09)

31 SPG and each IA shall enable ADB's representatives to

inspect the Project, the Goods and Works financed out of the proceeds of the Loan, all other plants, sites, properties and equipment of the concerned IAs related to the Project and any relevant records and documents. (Project Agreement, Article II, Section 10)

Being complied with.

Counterpart Funding

32 The Borrower shall cause SPG, the concerned Local Governments or IAs to ensure that all counterpart funding be provided in a timely manner for the concerned Subprojects, including any additional counterpart funding required for any shortfall of funds or cost overruns. (Loan Agreement, Schedule 5, para. 4)

Being complied with.

33 The Borrower shall cause SPG, the concerned Local

Governments or IAs to ensure that adequate funding is allocated in each fiscal year for the O&M of the Project facilities, which shall be operated and maintained in accordance with the best engineering practices. (Loan Agreement, Schedule 5, para. 5)

Being complied with.

Change in Ownership

34 The Borrower shall cause SPG, the concerned Local Government or IAs to ensure that all counterpart funding be provided in a timely manner for the concerned Subprojects, including any additional counterpart funding for any shortfalls of funds or cost overruns. (Loan Agreement, Schedule 5, para. 6)

Being complied with for some subprojects.

35 The Recipient shall make the proceeds of the Grant Being complied with.

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available to SPG and shall cause SPG to apply the proceeds of the Grant to the financing of expenditures on the Project in accordance with the provisions. (Grant Agreement, Article II, Section 3.01)

36 The Goods and consulting services and other items of

expenditure to be financed out of the proceeds of the Grant and the allocation of amounts of the Grant among different categories of such Goods and consulting services and other items of expenditure shall be in accordance with the provisions of Schedule 2 to this Grant Agreement, as such Schedule may be amended from time to time by agreement between the Recipient and ADB. (Grant Agreement, Article II, Section 3.02)

To be complied with.

37 Except as ADB may otherwise agree, all Goods and

consulting services to be financed out of the proceeds of the Grant shall be procured in accordance with the provisions of Schedule 3 to this Grant Agreement. (Grant Agreement, Article III, Section 3.03)

Being complied with.

38 Withdrawals from the Grant Account in respect of

Goods and consulting services shall be made only on account of expenditures relating to (a) Goods which are produced in and supplied from and consulting services which are supplied from such member countries of ADB as shall have been for procurement, and (b) Goods and consulting services which meet such other eligibility requirements as shall have been specified by ADB from time to time. (Grant Agreement, Article III, Section 3.04)

To complied with.

39 (a) The Recipient shall cause the Project to be carried

out with due diligence and efficiency and in conformity with sound applicable financial, business and development practices. (b) In the carrying out of the Project, the Recipient shall perform, or cause to be performed, all obligations set forth in Schedule 4 to this Grant Agreement. (Grant Agreement, Article IV, Section 4.01)

Being complied with.

40 The Recipient shall make available to SHURBD through SPG,

promptly as needed, the funds, facilities, services and other resources which are required, in addition to the proceeds of the Grant, for the carrying ouf of the Project.

To be complied with.

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(Grant Agreement, Article IV, Section 4.02)

41 The Recipient shall enable ADB's representatives to inspect the Project, the goods financed out of the proceeds of the Grant, and any relevant records and documents. (Grant Agreement, Article IV, Section 4.03)

Being complied with.

42 The Recipient shall ensure that the activities of its

departments and agencies with respect to the carrying out of the Project are conducted and coordinated in accordance with sound administrative policies and procedures. (Grant Agreement, Article IV, Section 4.04)

Being complied with.

43 The Recipient shall take all action which shall be necessary on

its part to enable SHURDB to perform its obligations under the Project Agreement, and shall not take or permit any action which would interfere with the performance of such obligations. (Grant Agreement, Article IV, Section 4.05)

Being complied with.

44 (a) The Recipient shall exercise its rights under this

Grant Agreement in such a manner as to protect the interests of the Recipient and ADB and to accomplish the purposes of the Grant. (b) No rights or obligations under the financing arrangements shall be assigned, amended, abrogated or waived without the prior concurrence of ADB. (Grant Agreement, Article IV, Section 4.06)

Being complied with.

Withdrawal of Grant Proceeds

45 Withdrawal from the Grant Account shall be made in the currency in which the Grant is denominated. the Recipient shall furnish to ADB sufficient evidence of the authority of the person authorized to sign applications for withdrawal and the authenticated specimen signature of each person. (Grant Agreement, Article VII, Section 7.01)

To be complied with.

46 The Recipient shall furnish to ADB such documents and other

evidence in support of the application for withdrawal as ADB shall reasonably request, whether before or after ADB shall have permitted any withdrawal requested in the applicatioin. (Grant Agreement, Article VII, Section 7.02)

To be complied with.

47 Each application for withdrawal and the accompanying To be complied with.

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documents and all other evidence must be sufficient in form and substance to satisfy ADB that the Recipient is entitled to withdraw from the Grant Account the amount applied for and that the amount to be withdrawn from the Grant Account is to be used only for the purposes specified in the Grant. (Grant Agreement, Article VII, Section 7.03)

48 Payment by ADB of amounts which the Recipient is entitled to

withdraw from the Grant Account shall be made to or on the order of the Recipient. (Grant Agreement, Section VII, Section 7.04)

To be complied with.

49 General

The table attached to this Schedule sets forth the Categories of Goods, Works and consulting services and other items of expenditure to be financed out of the proceeds of the Grant and the allocation of amounts of the Grant to each such Category (hereinafter called the Table). (Reference to "Category" or "Categories" in this Schedule is to a Category or Categories of the Table and reference to ―Subcategory‖ or ―Subcategories‖ in this Schedule is to a Subcategory or Subcategories of a Category.) (Grant Agrement, Schedule 2, para. 1)

To be complied with.

50 Percentages of ADB Financing The table attached to this Schedule sets forth the Categories of Goods, Works and consulting services and other items of expenditure to be financed out of the proceeds of the Grant and the allocation of amounts of the Grant to each such Category (hereinafter called the Table). (Reference to "Category" or "Categories" in this Schedule is to a Category or Categories of the Table and reference to ―Subcategory‖ or ―Subcategories‖ in this Schedule is to a Subcategory or Subcategories of a Category.) Percentages of ADB Financing (Grant Agreement, Schedule 2, para. 2)

To be complied with.

51 Reallocation

Notwithstanding the allocation of Grant proceeds and the withdrawal percentages set forth in the Table. (a) if the amount of the Grant allocated to any Category or Subcategory appears to be insufficient to finance all agreed expenditures in that Category or Subcategory, ADB may, by notice to the Recipient, (i) reallocate to such Category or Subcategory, to the extent required to meet the estimated

To be complied with.

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shortfall, amounts of the Grant which have been allocated to another Category or Subcategory but, in the opinion of ADB, are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the withdrawal percentage applicable to such expenditures in order that further withdrawals under such Category or reallocation cannot fully meet the estimated shortfall, reduce the withdrawal percentage applicable to such expenditures in order that further withdrawals under such Category or thereunder shall have been made; and (b) if the amount of the Grant then allocated to any Category appears to exceed all agreed expenditures in that Category or Subcategory, ADB may, by notice to the Recipient, reallocate such excess amount to any other Category or Subcategory. (Grant Agreement, Schedule 2, para. 3)

52 Disbursement Procedures

Except as ADB may otherwise agree, the Grant proceeds for financing Goods, Works, and consulting services and otther ―Loan Disbursement Handbook‖ dated January 2007 (ADB‘s Loan Disbursement Handbook), as amended from time to time. (Grant Agreement, Schedule 2, para. 4)

To be complied with.

53 Imprest Account; Statement of Expenditures (a) Except as ADB may otherwise agree, the Recipient shall cause SPG to establish after the Effective Date, an imprest account at a commercial bank acceptable to ADB. The imprest account shall be established, managed, replenished and liquidated in accordance with ADB's Loan Disbursement Handbook and detailed arrangements agreed upon between the Recipient and ADB. The currency of the imprest account shall be Dollar. The initial amount to be deposited into the the estimated expenditure to be financed from the imprest account for the first six months of Project implementation, or (ii) , or (ii) the equivalent of $50,000. (b) The statement of expenditures (SOE) procedure may be used for reimbursement of eligible expenditures for eligible expenses and to liquidate advances provided into the imprest account, in accordance with ADB's Loan Disbursement Handbook and detailed arrangements agreed upon between the Recipient and ADB. Any individual payment to be reimbursed or liquidated under the SOE procedure shall not exceed the equivalent of $10,000. (GA, Schedule 2, para. 5)

To be complied with

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Procurement and Consulting Service

54 General All Goods consulting services to be financed out of the proceeds of the Grant shall be subject to and governed by the Procurement Guidelines, and the Consulting Guidelines, respectively. (Grant Agreement, Schedule 3, para. 1)

Being complied with.

55 All terms used and not otherwise defined in this Grant

Agreement have the meanings provided in the Procurement Guidelines and/or the Consulting Guidelines, as applicable.. (Grant Agreement, Schedule 3, para.2)

Being complied with.

Procurement for Goods and Works

Except as ADB may otherwise agree, Goods and Works shall only be procured on the basis of the methods of procurement set forth below: Shopping The methods of procurement are subject to, among other things, the detailed arrangements and threshold values set forth in the Procurement Plan. The Recipient may only modify the methods of procurement or threshold values with the prior agreement of ADB, and modifications must be set out in updates to the Procurement Plan. (Grant Agreement, Schedule 3, para. 3)

To be complied with.

56 Selection of Consulting Services

Single-Source Selection method or Consultants‘ Qualification Selection method. Except as ADB may otherwise agree, the Recipient shall apply the single-source selection and/or consultants‘ qualification selection, in with ADB‘s Guidelines on the Use of Consultants (2007, as amended from time to time), for selecting and engaging consulting services. (Grant Agreement, Schedule 3, para. 4)

Being complied with.

57 Industrial or Intellectual Property Rights

(a) The Recipient shall ensure that all Goods and Works procured (including without limitation all computer hardware, software and systems, whether separately procured or incorporated within other goods and services procured) do not violate

To be complied with.

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or infringe any industrial property or intellectual property right or claim of any third party. (b) The Recipient shall ensure that all contracts for the procurement of Goods and Works contain appropriate representations, warranties and, if appropriate, indemnities from the contractor or supplier with respect to the matters referred to in subparagraph (a) of this paragraph. (Grant Agreement, Schedule 3, para. 5)

58 The Recipient shall ensure that all ADB-financed contracts

with consultants contain appropriate representations, warranties and, if appropriate, indemnities from the consultants to ensure that the consulting services provided do not violate or infringe any industrial property or intellectual property right or claim of any third party. (Grant Agreement, Schedule 3, para. 6)

Being complied with,

59 ADB‘s Review of Procurement Decisions

All contracts procured under international competitive bidding procedures and contracts for consulting services shall be subject to prior review by ADB, unless otherwise agreed between the Recipient and ADB. (Grant Agreement, Schedule 3, para. 7)

Being complied with.

4. Environment Monitoring. The subsequent subprojects under this sector loan are required to meet ADB‘s environmental impact assessment requirements. An environmental assessment and management framework was prepared as an instruction manual to assist the Shanxi PMO, subproject PMOs, implementing agencies, and local design institutes in preparing and reviewing EIA reports and environmental management plans for subsequent subprojects according to ADB requirements (see below). It describes the environmental criteria for selecting and implementing subprojects, key environmental issues, conduct of the EIA, preparation of the EIA reports, and review procedures. Training was provided to SPG on implementing the environmental assessment and management framework. 5. Resettlement Monitoring: Internal supervision and monitoring of resettlement plan implementation will be conducted by the implementing agencies to ensure compliance with the provisions of the resettlement plans. To ensure that affected people have been adequately compensated and rehabilitated, the implementing agencies will keep ADB informed of the progress in implementing the resettlement plans through quarterly/semi-annual progress reports through the PMO until resettlement is completed. The implementing agencies will also prepare resettlement completion reports at the completion of resettlement. The PMO will prepare one consolidated resettlement completion report and submit it to ADB. External resettlement M&E will be also conducted. The PMO will engage an independent agency acceptable to ADB to

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monitor and evaluate resettlement progress and to forward M&E reports to ADB, semiannually during resettlement implementation and annually for 2 years after the completion of resettlement. 6. The IAs shall ensure that: (i) adequate staff and resources be committed to supervision and internal monitoring of the implementation of each subcomponent RP and provide ADB with semi-annual monitoring reports during resettlement implementation and a resettlement completion report for each subcomponent; (ii) an independent agency acceptable to ADB be contracted to carry out monitoring and evaluation, including data disaggregated by gender where applicable, and forward reports to ADB semi-annually; (iii) ADB be promptly advised of any substantial changes in the resettlement impacts and, if necessary, a revised RP be submitted to ADB for its approval; (iv) construction contract specifications include requirements to comply with the RPs and ensure prompt payment and delivery of entitlements to compensate APs for any permanent and temporary Project impacts to APs; and (v) the construction and demolition contractors be supervised to ensure compliance with requirements of the RPs, applicable laws and ADB‘s Policy on Involuntary Resettlement. 7. Poverty and Social action plans. A number of key social aspects indicators are proposed for monitoring. Most of these have been incorporated into the project design and monitoring framework (PDMF) and project performance management systems (PPMS), including (i) increase of per capita annual disposable income of urban households; (ii) increase of the number of employed persons, including the poor, women or ethnic minority people; (iii) reduced incidence of water and air related diseases; and (iv) increased public satisfaction with the environment. In addition, the indicators set in the social action plan will be also monitored. 8. Apart from internal monitoring by the IAs, PMOs and related departments, an external monitoring organization, such as a qualified consulting company or a research institute, will be engaged. The monitoring reports will be prepared and submitted twice a year 9. SPG and the concerned Local Governments shall conduct prior review of the impact of increased water supply, gas supply, wastewater and heating tariffs on the poor and gradually establish or implement a pricing policy favorable to the poor households and ensure that no tariff adjustment affect the minimum living standard of the poor. Impacts on the poor households by the Project during and after implementation shall be monitored and included in the PPMS report. 10. SPG, the concerned Local Governments and the IAs shall ensure that all civil works contractors engaged under the Project provide (i) timely payment of wages; and (ii) necessary safety protection measures to all workers (with such measures being included in civil works contract and monitored by construction supervision consultants). The IAs shall set employment targets for the poor, ethnic minorities and women who meet the job requirements for all construction and maintenance activities and ensure that the contractors provide the workers with adequate on-the-job training, use local unskilled labor, not differentiate wages based on gender, and monitor the Project impact on poverty in accordance with guidelines set forth in the PPMS. 11. The social action monitoring and reporting schedule is at Appendix 1. A similar table should be prepared for the noncore subprojects.

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D. Evaluation

12. After loan signing, project inception mission is fielded. This continues the work done during processing and initiates the process of project implementation. The main function of the inception mission is to establish a working relationship between the ADB and EA staff directly involved in implementing the Project. ADB, the Government, SPG and IA will review project implementation jointly at least once a year and will undertake a comprehensive midterm review 2 years after the start of project implementation. This review will include detailed evaluation of the scope, implementation arrangements, resettlement, achievement of scheduled targets, and progress on the agenda for policy reform and capacity development measures. Feedback from the PPMS activities will be analyzed. Within 6 months of physical completion of the Project SPMO will submit a project completion report to ADB. 17

E. Reporting

13. The Shanxi PMO will coordinate with subproject PMOs to prepare semiannual progress reports indicating (i) progress made, (ii) problems encountered during the review period, (iii) steps taken or proposed to remedy the problems, (iv) the proposed program of activities, and (v) progress expected in the next 6 months. The implementing agencies will keep records to allow the identification of goods and services financed from the loan proceeds following accounting principles and practices prescribed by the Accounting Law of the PRC. This law requires that financial statements generally follow recognized accounting standards. The implementing agencies will set up and maintain separate project accounts and records. The financial statements of the project accounts and the annual corporate financial statements for implementing agencies will be subject to external audit by the audit bureau of the city or county concerned, SPG audit bureau, and the state audit bureau. 14. The audits will be carried out in accordance with the PRC audit regulations and must meet ADB requirements. A separate auditor‘s opinion on the use of the imprest account and statement of expenditure will be part of the audit reports. The implementing agencies‘ annual audited financial statements and audited project accounts will be submitted to ADB no later than 6 months after the end of the fiscal year throughout the implementation period. SPG and the implementing agencies will submit reports and information to ADB concerning the use of the loan proceeds, project implementation, and implementing agency performance. These reports will include (i) semiannual progress reports, (ii) annual reports, and (iii) a project completion report not later than 3 months after project completion. The table below sets out all the reporting requirements for the project.

17

Project completion report format available at: http://www.adb.org/Consulting/consultants-toolkits/PCR-Public-Sector-Landscape.rar

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Project Report Requirements

Name of the report/documents Timing of Reporting Reference

Semiannual progress reports on project implementation (Annual reports)

Every six months until project completion. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the six months under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following six months.

PA, Article II Section 2.08 (b)

Project Completion Report Within 3 months after the physical completion of the Project

PA, Article II Section 2.08 (c)

Audited financial statements of the Project accounts Auditor's Report (including Auditor's opinion)

Before 30 June of each year from 2010 throughout the implementation period (6 months within the end of each fiscal year)

PA, Article II Section 2.09 (a)

External Resettlement Monitoring Reports

Semi-annually during resettlement implementation

PA Schedule Para. 49

Resettlement completion report (provided for each part)

When the resettlement process completed

PA Schedule Para. 49

Environment Monitoring Report (Internal)

Monthly during construction PA Schedule Para. 53

Environment Monitoring Report (External)

Semi-annually PA Schedule Para 53

Ethnic Minorities Monitoring Report (External)

Semi-annually PA Schedule Para 50

F. Stakeholder Communication Strategy

15. During project preparation, local government and line agencies, villagers, enterprises, local groups, and other people likely to be directly affected by the Project were consulted. These consultations covered project scope, technical design, environmental concerns, land acquisition and resettlement issues, living standards, employment prospects, and economic development potential. The PPTA team conducted a household survey, a survey of local business, Focus Group Discussions, community meetings, and key informant interviews to assess potential project benefits and adverse impacts, and generate comments and suggestions in formulating mitigation measures. To ensure equal benefit from the Project, separate consultations were

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conducted with the poor, women, and other vulnerable groups. For the assessments on environment and resettlement, consultations were held with representatives of affected households. Consultations indicate that the Project has a high level of public support and feedback was taken into consideration in the Project design and in the formulation of the environmental management plan (EMP), the RPs, and in the social development action plans.

G. Labor Reemployment Framework

16. A labor reemployment framework was prepared for the core project. The central heating system construction in the core projects will unavoidably induce small boilers‘ closures after the component operates. As a result, labor or employees may be laid off. The scope of this framework is for the laborers/employees18 working in small boilers that may be closed after construction of the central heating components. Labor reemployment may also be required in the noncore subprojects, for example if any land used currently by factories or state-owned enterprises needs to be acquired. Appendix 2 sets out the requirements for any labor reemployment in the case of the noncore subprojects and should be followed and for the SARs for the noncore subprojects which include any labor or employee lay offs.

18

Including the temporary labor and permanent labor

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IX. ANTICORRUPTION POLICY

1. ADB‘s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the Government, SPG, PMOs, and implementing agencies. Consistent with its commitment to good governance, accountability, and transparency, ADB reserves the right to investigate directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project. To support these efforts, relevant provisions of ADB‘s Anticorruption Policy are included in the loan regulations and the bidding documents for the Project. In particular, all contracts financed by ADB in connection with the Project shall include provisions specifying the right of ADB to audit and examine the records and accounts of the Executing Agency and all contractors, suppliers, consultants, and other service providers as they relate to the Project. This is in line with ADB‘s PRC country partnership strategy (2008–2010), which includes the promotion of good governance by supporting reform and capacity development in corporate governance. SPG has indicated its commitment to fight corruption and a number of anticorruption actions are included as covenants in the Loan and Project Agreements.19 Under these covenants, SPG will

(i) involve the agencies responsible for oversight of each implementing agency in bidding and construction to enhance construction quality control, and supervise effective work;

(ii) introduce a dual-signing system in which the civil works contract winner also signs an anticorruption agreement with the implementing agency;

(iii) periodically inspect the contractors‘ activities related to fund withdrawals and settlements; and

(iv) engage the loan implementation consultant to support the Shanxi PMO and city and town PMOs and implementing agencies to ensure good governance, accountability, and transparency in project operations.

2. ADB reserves the right to investigate, directly or through its agents, any violations of the Anticorruption Policy relating to the Project.20 All contracts financed by ADB shall include provisions specifying the right of ADB to audit and examine the records and accounts of the executing agency and all Project contractors, suppliers, consultants and other service providers. Individuals/entities on ADB‘s anticorruption debarment list are ineligible to participate in ADB-financed activity and may not be awarded any contracts under the Project.21 3. To support these efforts, relevant provisions are included in the loan agreement and the bidding documents for the Project.22

19

In line with ADB‘s country partnership strategy (2008–2010) for the PRC, which includes the promotion of good governance.

20 Available at: http://www.adb.org/Documents/Policies/Anticorruption-Integrity/Policies-Strategies.pdf

21 ADB's Integrity Office web site is available at: http://www.adb.org/integrity/unit.asp

22 GACAP II Guidelines available at: http://www.adb.org/Documents/Guidelines/GACAP-II-Guidelines.pdf. See also Sourcebook: Diagnostics to Assist Preparation of Governance Risk Assessments: http://www.adb.org/documents/books/Diagnostics-to-Assist-Preparation-of-GRAs/default.asp.

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X. ACCOUNTABILITY MECHANISM

1. People who are, or may in the future be, adversely affected by the project may address complaints to ADB, or request the review of ADB's compliance under the Accountability Mechanism.23

23

For further information see: http://compliance.adb.org/.

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XI. RECORD OF PAM CHANGES

1. The PAM is a living document subject to change after ADB Board approval of the project's RRP. It is concise yet informative, providing checklists of all activities related to project implementation along with the necessary procedures for the SPMO and the IAs to effectively implement and monitor the project.

Date Changes/Events

December 2011 (these changes listed here were agreed during loan review mission)

Revised procurement plan based on minor change in scope (2 August 2011) Revised accountability mechanism section based on guidance from COSO (7 October 2011) Updated S-Curve to reflect delays in project start-up (28 September 2011)

December 2012 (these changes here were agreed by email with SPMO)

Revisions include noncore subprojects for Nianziguan (Part A), Xinghuacun and Qingxu (Part A) Update implementation schedule Procurement Plan was approved on 23 December 2011

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Appendix 1

Social Development Action Plan for Vulnerable Groups24

Social Risks Mitigation Measures Policy Basis

Targets Costs &

Expenses Funding Source

Responsible Agencies

Timing Monitoring Indicators

Common Risks

Vulnerable groups such as the poor, women are excluded from job opportunities during construction and operation period

A. Job creation during construction

Priority given to poverty laborers.

Priority given to labor of ethnic minorities.

Priority given to women labors.

Provision of technical training;

Provision of employment information and guidance.

Project loan Agreement

All communities in the project area with special measures for vulnerable groups - 30% of the unskilled work will be targeted for the vulnerable group

The project will direct create about 8,952 person-years of work, 70% will be unskilled at total wages of CNY454.35 million.

Covered by project

EA, Implementing Agencies, Labor and social security bureau, Women‘s Federation

2009-2012

Numbers laborers from floating population, women, affected people, poverty stricken households, and other vulnerable people employed by the project

Land acquisition and house demolition, income losses

B. Income recovery resettlement affected people

Identification of vulnerable groups

Formulating income restoration measures and find replacement land to lease;

Crop compensation for all the floating population who lease land in the project areas;

Compensation for

Project Agreement Resettlement Plan

All affected persons, with special measures for vulnerable groups including floating population, MLSS recipients, women-headed households and vulnerable people

Detailed cost estimate for income restoration/ recovery program of AP is in each of the RP.

Project and local government Covered by resettlement budget

Executing Agency, Implementing Agencies house demolition management office, land management bureau, Labor & Social Security Bureau; Women‘s Federation

2009-2012

Compensation standards; Availability of funding sources; Incomes of APs minimally restore to the previous standards, Especially floating population, women, poor people, and other

24

Vulnerable groups consist of poor ethnic minorities, poverty stricken households, poor women and women-headed households, project-affected people, and other vulnerable people. The categories of vulnerable groups are not mutually exclusive.

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Social Risks Mitigation Measures Policy Basis

Targets Costs &

Expenses Funding Source

Responsible Agencies

Timing Monitoring Indicators

their temporary shelters,

Eligibility to apply for buying economic houses or renting of low-rate houses of Nanning City;

Provision of skills training;

Provision of employment information and guidance to secure a new job.

vulnerable people.

Lack of affordability of water supply, tariffs, sewage treatment, heating and gas supply tariffs;

C. Reduction or exemption from sewage and solid waste tariffs for the poverty groups.

Urban residents of

MLSS25 are

exempted from paying solid waste treatment tariff.

Urban residents of MLSS received 50% reduction of sewage treatment tariff.

To be formulated

Population below urban and rural poverty line as defined by central and local governments

Annual budget for poor reduction program

Civil Administration Bureau

Civil Administration Bureau

2010 onward

Notices of tariff reduction or exemption policy to be formulated

Lack of public environmental consciousness

D. Public Environmental and Hygiene Education Program

Awareness and prevention water-

Local government policy

Project beneficiaries, business people, service and restaurant industries, local governments,

Annual budget for environment and public health education programs

Local government finance bureau

Health Bureau, District community, Environmental Protection Bureau

2010 onward

Incidents of water-borne and air borne diseases; Annual household expenses for health.

25

In 2006, the minimum living standard scheme (MLSS) is Y145 per capita per month, 140 Y, and 150Y in Pingyao, Xiaoyi and Youyu respectively. The number of people under MLSS is 11,187 which are 10.9% of the urban population. The urban poor in the Project Implementation Area (PIA) is about 102,169 (56.8%) of the total PIA population. The MLSS also covers poor ethnic minority groups.

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Social Risks Mitigation Measures Policy Basis

Targets Costs &

Expenses Funding Source

Responsible Agencies

Timing Monitoring Indicators

borne disease

Environment protection education through poster and pamphlet , radio and TV and public meeting

Awareness of recycling and solid waste management

Lack of awareness of Sexually Transmitted Infection (STIs), HIV/AIDS during the project construction activities

E, Construction Safety and Awareness of Sexually Transmitted Infection (STIs), HIV/AIDS

Ensure the safety of contractors and campsites through the safety guidelines developed and incorporated into contracts with all contractors

Awareness and prevention on STIs/HIV/AIDS campaigns through posters and pamphlets at construction site and service centers, radio and TV and public meetings

Periodic inspection by the Executing Agency

Project loan agreement, national labor safety and health standard

All contractors and construction workers All workers understand dangers of STIs and HIV/AIDS

Project Local l Health Bureau and Civil Affairs Bureau

Covered by the Project and local governments

Executing Agency and Implementing Agencies Local governments

2009 - 20012

Signed contract No. of workers injured; No. of accidents; No. of inspections

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Social Risks Mitigation Measures Policy Basis

Targets Costs &

Expenses Funding Source

Responsible Agencies

Timing Monitoring Indicators

Specific Risks

Pingyao

Lack of solid waste collecting and treatment system for the towns and villages along the Huiji river

System construction should be considered

Local government policy

Residents Business people Local government

TBD local government finance bureau

Local 2009 onward

Annual household expenses for health.

Wutong

Lack of polices for encouraging villagers moving to new place , specially for vulnerable groups

Consultation with residents including vulnerable groups and formulate moving plan and policies

Local PMO Wutong villagers Migration program

Local government finance

EA, Implementing Agencies, Local government Labor and social security bureau,

2009-- Preferential policy to be formulated Special measures to be formulated for vulnerable groups

Not accepted by host areas villagers

Consultation with host areas villagers and formulate the compensation policies for their land losses

Including the host areas villagers as beneficiaries.

RP FSR

Villagers in host area

Detailed cost estimate for income restoration/recovery program of AP is in each of the RP.

Project and local government covered by resettlement budget

EA, Implementing Agencies, Local government

2009-- Compensation standards; Availability of funding sources;

No industry enter permit policies

Formulate industry enter permit policies to avoid environment pollution

Local government policies

Industries Police formulating program

Local government finance

Environmental Protection Bureau

2009-- Incidents of water-borne and air borne diseases; Annual household expenses for health.

Youyu

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Social Risks Mitigation Measures Policy Basis

Targets Costs &

Expenses Funding Source

Responsible Agencies

Timing Monitoring Indicators

No allowance for carts on the new roads

Design a non-machine lane for donkey carts

Local government policies

Villagers

Project cost ADB loan Communications Administration Bureau

2009- Specific transportation sign and lane for donkey car

Poor families excluded by poverty migration program

Formulate policies for poor family relocations in Youyu County, such as low rent housing, subsidies etc.

Vulnerable groups in remote areas

Center government poverty migration program

Center government finance Local government finance

Local poverty reduction office

2009-- Migration population Livelihood condition before and after relocation

Relocation of heavily polluting industries to development area

Formulate industry entering permit policies to avoid environment pollution

Local government policies

Industries Industry development program

Local government Finance

Environmental Protection Bureau

2009- Environment indicators

No solid waste collecting and treatment system in expanded new town.

Consider implementing system

Local government policies

Residents in new town

Small city development plan within 5 years ( 2007-2012)

Local government finance bureau

Local government Health Bureau Environmental Protection Bureau

2009-2012

Incidents of water-borne and air borne diseases; Annual household expenses for health.

Employee cannot afford housing in expanded new town.

Lodging house built by industry enterprises and provide to employee for free or cheap price.

Local government Policies Coal plant measures

Employee

Industry development program

Local government budget industries budget

Local industry Local government

2009- The numbers Of employees; The charge of the new house

Drought areas, Lack of water resources

Integrate flood control with irrigation purposes

Local government policies

Residents living in county; Villagers around the new town

Project budget ADB loan and local finance

Executing Agency, Implementing Agencies

2009- Less flooding and new irrigation options

Source: Prepared by PPTO consultant after discussions with each PMO.

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Appendix 2 LABOR RE-EMPLOYMENT FRAMEWORK

A. Background and Scope of the Framework 1. Shanxi Small Cities and Towns Development Demonstration Sector Project (the Project) aims to help promote balanced and environmentally sustainable urbanization; narrow the urban-rural gap; and improve production, employment, and living conditions in small cities and towns in Shanxi Province. The Project includes 7 subprojects including 3 core subprojects in Pingyao, Youyu and Wutong, and 4 subsequent subprojects in Jingsheng city, Niangziguan City, Qingquan City, and Xinghuacun County.

2. Pingyao subproject has one component which is Huiji River Improvement. Wutong subproject has five components in the new planned town area: (i) Caoxi roads and associated municipal services, (ii) drainage and wastewater treatment, (iii) gas supply, (iv) heat supply, and (v) education facilities. Youyu subproject has five components for its urban expansion area: (i) roads, (ii) water supply, (iii) heat supply, (iv) drainage and wastewater collection, and (v) river improvement. Subsequent non-core subprojects have the following components: (i) roads, (ii) protection and rehabilitation of ancient architecture, and (iii) environment improvement and protection.

3. The central heating system construction will unavoidably induce small boilers‘ closures after the component operates. As a result, labor or employees may be laid off. The scope of this framework is for the laborers/employees26 working in small boilers that may be closed after construction of the central heating components. B. Preparation and Approval Procedures

4. For the Project‘s subprojects, where labor is unavoidably affected by the closure of small boilers, a labor re-employment plan (LRP) must be prepared and implemented according to the policies contained in this labor re-employment framework (LRF). 5. For the core subprojects the heat supply components in subprojects of Youyu and Wutong are to be built in new planed areas, which may not induce the existing small boilers‘ closures. Thus no labor is affected and no LRP is required. In the four subsequent non-core subprojects, there are no heat supply components proposed. However since the Project is categorized as a sector loan project and the subsequent subproject components may be changed, then if there are any negative impacts to laborers, the LRP should be prepared in accordance with this LRF. 6. The LRP is to be prepared by the subproject project management office (PMO) as an appendix of the subproject appraisal report (SAR), and then submitted to provincial PMO, who, after reviewing the plan will submit it to ADB for approval prior to implementation. The subproject PMOs, provincial PMO, and ADB staff will supervise and monitor the plan implementation. 7. According to this framework, the LRP should include the following contents:

(i) background and scope of the plan; (ii) objectives, policy framework, and entitlement; (iii) consultation and grievance redress participation;

26

Including the temporary labor and permanent labor

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(iv) mitigation of labor impacts plan; (v) institutional arrangements; (vi) budget and financing; and (vii) monitoring and evaluation.

C. Objectives, Policies Framework, and Entitlement 8. This Labor re-employment Framework (LRF) has been prepared for the Project as required under ADB policy for sector loans. The basic objectives of the LRF are to:

(i) guide the Executing Agency (EA) and implementing agencies (IAs) in managing the social risks of negative labor impacts;

(ii) serve as a binding document to confirm project policies and procedures regarding mitigation of labor impacts; and

(iii) provide direction in preparing, implementing, and monitoring the subproject LRP.

9. For labor unavoidably affected by the small boilers‘ closure, the re-employment plan‘s objective is to achieve equal, or better, income and living standards through consultative and participatory approaches, and manage social risks of labor laid off, forced labor, child labor, and discrimination at the workplace in line with PRC labor laws and regulations, as well as ADB‘s labor policies and requirements. 10. Having consulted the local governments and affected labor, the project implementing agencies (IAs) have adopted a set of re-employment options based on ADB‘s requirement of mitigation of labor impacts, the Labor Law of PRC (January 2008), and Announcement of the Minimum Wage Standards of the province (July 2006). The labor re-employment principles established for the Project are: (i) wherever feasible, labor impacts will be avoided or minimized through the development of design alternatives and the choice of the best alternative; (ii) entitlements provided must be adequate to allow those affected to at least maintain or, better yet, improve their pre-project standard of living; (iii) for all the affected labor, whether temporary or permanent, the reduction of salaries, wages or temporary subsidies will be taken into consideration and accounted for; (iv) the affected labor will be given work opportunities from other companies in the same sector as a priority; (v) if the income of the labor will be reduced, a re-employment plan or income-generating activities will be provided for; (vi) for re-employment, the vulnerable groups and the floating population will be given preference; (vii) all those affected will be adequately informed about their eligibility, employment and skill training opportunities and the project timing; and (viii) close monitoring and timely actions will be carried out to identify and resolve problems as they arise. D. Consultation and Grievance Redress Participation 11. Wide public participation and negotiation with the affected labor will be conducted, by means of questionnaire surveys, focus group discussions, key information providers‘ interviews, and stakeholders meetings. The following information will be needed: (i) the basic information of the small boiler stations proposed to be closed; (ii) the basic information of the affected workers, including their age, education, income, etc; and (iii) their attitudes to re-employment and income restoration. The opinions of related stakeholders, such as owners of small boiler stations, labor and social security departments, and IAs, on labor re-employment will also be heeded. 12. During the implementation of the re-employment plan for the affected workers of small boilers, a grievance redress participation and appeal channel is to be taken on the basis of the

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Law of the People's Republic of China on Mediation and Arbitration of Labor Disputes (May 2008):

(i) Step 1. Where a labor dispute arises, a laborer may have a consultation with the employing unit or request the labor union or a third party to have a consultation with the employing unit in order to reach a settlement agreement.

(ii) Step 2. Where a labor dispute arises and the parties are not willing to have a consultation or the consultation fails or the settlement agreement is reached but not performed, then an application for mediation may be made to a mediation institute27 or to the subproject PMO.

(iii) Step 3. Where the parties are not willing to mediate or the mediation fails or the mediation agreement is reached but not performed, an application for arbitration may be made to the labor dispute arbitration commission or Shanxi PMO.

(iv) Step 4. Where there is objection to the arbitration award, litigation may be initiated to a people's court unless otherwise specified herein.

E. Labor Impacts Mitigation 13. To minimize the impacts of job losses, a detailed labor re-employment plan will be prepared by subproject PMO through full consultation with the affected labor. All affected laborers have the entitlement to choose the re-employment provisions that meet their requirements. 14. The main re-employment options include: (i) PMO will ensure that labor that will be affected will be hired by existing institutions; (ii) for temporary labor, PMO will try to employ affected labor in the new boiler plant; (iii) if there is mismatch skills, a retraining program will be provided; and (iv) the last step will be retrenchment and compensation. F. Budget and Financing 15. Adequate resources will be allocated from the project budget for the various components and activities of the projects to implement the LRP. The full implementation cost of the LRP must be included in the project costs to ensure timely availability of the required resources for its proper implementation. G. Institutional Arrangements 16. Shanxi PMO will assume the overall responsibility for implementing the LRF. The roles of the IAs for the subprojects include implementation and supervision of the LRP if any. A social safeguards office within Shanxi PMO will coordinate the planning, implementation, financing, and reporting of the LRP. Also, the Labor and Social Security Bureau in each town or city will be involved and cooperate with each PMO to implement the LRP. H. Monitoring and Evaluation 17. In order to ensure that the re-employment scheme of the workers affected by the proposed closure of the small boilers can be fully implemented in accordance with the plan, regular monitoring and assessment should be made during the re-employment period of the

27

i) Enterprise labor dispute mediation commission; ii) Basic-level people's mediation institutes established in accordance with the law; iii) Institutes with labor dispute mediation function established in towns and villages and districts.

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affected workers. The monitoring and evaluation is divided into internal and external monitoring and evaluation. 18. The internal monitoring will be conduct by subproject PMO and the internal monitoring results will be incorporated into the Project progress report every six months to the ADB. For the external monitoring and evaluation, a qualified, independent organization28 that is entrusted as a resettlement monitoring and evaluation institute will also monitor the implementation of the LRP, and submit a monitoring and evaluation report to the subproject PMO and the ADB twice a year. In addition, the indicators of the monitoring will be incorporated into the Terms of Reference (TOR) of the resettlement monitoring.

28

The team leader of the organization should well understand related PRC labor laws and regulations, as well as ADB‘s labor policies and requirements, have at least 10 years experience in designing and/ or implementation social and resettlement components of development projects, preferably with work experience in the sector concerned .

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Appendix 3 UPDATED PROCUREMENT PLAN

(Approved 23 December 2011)

Ref. No. Contract Package Type and

Description Category

Estimated $ (million)

Procurement Method

Prior Review

Pingyao

A-PY-01-01 Huiji River Improvement (embankments, steel dam, bottom-protecting engineering, power transmission line, housing, temporary engineering, etc.).

Civil Works $8.97 NCB Yes

A-PY-01-02 Huiji River improvement works (seepage-prevention, embankment, landscaping, other construction, etc.)

Civil Works $9.24 NCB

B-PY-01-03 Steel dam. Equipment $0.82 NCB Yes

B-PY-01-04 Metal structure equipment and installation.

Equipment $0.91 GP

B-PY-01-05 Mechanic and electric equipment & installation.

Equipment $0.88 GP

Wutong

A-XY-01-01 Caoxi road base and pavement; curbs, gutters, drainage; greening

Civil Works $3.24 NCB

A-XY-02-01 Heat exchange station, supporting facilities, and pipeline network

Civil Works $4.18 NCB

A-XY-03-01 Construct two nursery schools (age 3–6)

Civil Works $1.23 NCB Yes

A-XY-03-02 Construct one secondary school (age 12–15)

Civil Works $4.12 NCB

A-XY-03-03 Construct one employment training center (adult vocational school)

Civil Works $5.98 NCB

A-XY-04-01 Gas supply pressure-adjusted station (transmission, and distribution system)

Civil Works $1.83 NCB

A-XY-05-01 Wastewater treatment plant and pipelines

Civil Works $2.06 NCB

B-XY-02-02 Equipment for heat supply Equipment $0.73 NCB

B-XY-02-03 Heating electrical supply and subsidiary equipment

Equipment $0.68 NCB Yes

B-XY-03-04 Equipment for Schools Equipment $0.67 NCB

B-XY-03-05 Furniture for Schools Equipment $0.50 NCB

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102

Ref. No. Contract Package Type and

Description Category

Estimated $ (million)

Procurement Method

Prior Review

B-XY-05-02 Wastewater equipment for pumping and treatment

Equipment $0.69 NCB

Youyu

A-YY-02-01 Drainage civil works (earth work)

Civil Works $0.88 NCB

A-YY-03-01 Flood control earth works and embankments

Civil Works $1.03 NCB

A-YY-04-01 Road base and pavement; curbs, gutters, drainage, and greening; electric supply and lighting

Civil Works $4.75 NCB

A-YY-05-01 Water transmission and water treatment plant upgrade

Civil Works $0.04 NCB

A-YY-05-02 Water supply pipeline for new area

Civil Works $1.77 NCB

B-YY-01-01*

29

Design, supply, and installation of district heating (heat source; sub-stations; pipeline network; automated control; electrical supply)

Equipment $10.73 ICB

B-YY-02-02 Storm water pipelines Equipment $0.82 NCB

B-YY-02-03 Sewage pipelines Equipment $0.52 NCB

B-YY-03-04 Equipment for Water Treatment Plant

Equipment $0.06 NCB

Qingxu

A-QX-01-01 Water storing, water connection and landscape and upgrade of Baishi river

Civil Works $8.03 NCB

A-QX-02-01 Civil works of northern East lake

Civil Works $4.02 NCB

A-QX-02-02 Landscape of northern East lake

Civil Works $5.98 NCB

Xinghuacun

A-FY-01-01 Xinshi road Civil Works $7.35 NCB

A-FY-02-01 Xinqunan road and Xinquzhong road

Civil Works $2.94 NCB

B-FY-01-02 Lamps and light poles equipment etc.

Equipment $0.32 NCB

B-FY-01-03 PE pipe rainwater engineering for Xinshi road

Equipment $0.79 NCB

29

Based on the detailed design, the SPMO will further review this package with the intention of dividing it into several ICB and NCB packages.

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103

Ref. No. Contract Package Type and

Description Category

Estimated $ (million)

Procurement Method

Prior Review

B-FY-01-04 Municipal infrastructure pipelines for Xinshi road and cable engineering

Equipment $0.92 NCB

B-FY-02-02 Xinqunan road, Xinquzhong road, municipal infrastructure pipelines and lighting cables etc.

Equipment $0.79 NCB

Niangziguan

A-PD-01-01 River improvement works- Dam

Civil Works $2.66 NCB Yes

A-PD-01-02 River improvement works-rubber Dam

Civil Works $0.43 GP

B-PD-01-02 River improvement equipment Equipment $0.93 NCB Yes

IST

Shanxi PMCS-01

Project Start-Up Consultants $0.06 Individual Consultant Selection

One package

Project Implementation, Project Management, Capacity Building, Study, and Local Training through multiple contracts, operations and equipment, local transportation (maximum of three vehicles)

Consultants $2.16 (Total)

Quality and Cost Based Selection (QCBS)

Multiple packages

One vehicle per seven sub-project towns

Equipment $0.28 Shopping

TOTAL 41 $104.99

ICB 1 $10.73

NCB 34 $89.54

GP 3 $2.22

Other 3 $2.50

Ref. No. Contract Package Type and

Description Category

Estimated $ (million)

Procurement Method

Prior Review

Pingyao

A-PY-01-01 Huiji River Improvement (embankments, steel dam, bottom-protecting engineering, power transmission line, housing, temporary engineering, etc.).

Civil Works $8.97 NCB Yes

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104

Ref. No. Contract Package Type and

Description Category

Estimated $ (million)

Procurement Method

Prior Review

A-PY-01-02 Huiji River improvement works (seepage-prevention, embankment, landscaping, other construction, etc.)

Civil Works $9.24 NCB

B-PY-01-03 Steel dam. Equipment $0.82 NCB Yes

B-PY-01-04 Metal structure equipment and installation.

Equipment $0.91 GP

B-PY-01-05 Mechanic and electric equipment & installation.

Equipment $0.88 GP

Wutong

A-XY-01-01 Caoxi road base and pavement; curbs, gutters, drainage; greening

Civil Works $3.24 NCB

A-XY-02-01 Heat exchange station, supporting facilities, and pipeline network

Civil Works $4.18 NCB

A-XY-03-01 Construct two nursery schools (age 3–6)

Civil Works $1.23 NCB Yes

A-XY-03-02 Construct one secondary school (age 12–15)

Civil Works $4.12 NCB

A-XY-03-03 Construct one employment training center (adult vocational school)

Civil Works $5.98 NCB

A-XY-04-01 Gas supply pressure-adjusted station (transmission, and distribution system)

Civil Works $1.83 NCB

A-XY-05-01 Wastewater treatment plant and pipelines

Civil Works $2.06 NCB

B-XY-02-02 Equipment for heat supply Equipment $0.73 NCB

B-XY-02-03 Heating electrical supply and subsidiary equipment

Equipment $0.68 NCB Yes

B-XY-03-04 Equipment for Schools Equipment $0.67 NCB

B-XY-03-05 Furniture for Schools Equipment $0.50 NCB

B-XY-05-02 Wastewater equipment for pumping and treatment

Equipment $0.69 NCB

Youyu

A-YY-02-01 Drainage civil works (earth work)

Civil Works $0.88 NCB

A-YY-03-01 Flood control earth works and embankments

Civil Works $1.03 NCB

A-YY-04-01 Road base and pavement; curbs, gutters, drainage, and greening; electric supply and lighting

Civil Works $4.75 NCB

A-YY-05-01 Water transmission and water treatment plant upgrade

Civil Works $0.04 NCB

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105

Ref. No. Contract Package Type and

Description Category

Estimated $ (million)

Procurement Method

Prior Review

A-YY-05-02 Water supply pipeline for new area

Civil Works $1.77 NCB

B-YY-01-01*

30

Design, supply, and installation of district heating (heat source; sub-stations; pipeline network; automated control; electrical supply)

Equipment $10.73 ICB

B-YY-02-02 Storm water pipelines Equipment $0.82 NCB

B-YY-02-03 Sewage pipelines Equipment $0.52 NCB

B-YY-03-04 Equipment for Water Treatment Plant

Equipment $0.06 NCB

Qingxu

A-QX-01-01 Water storing, water connection and landscape and upgrade of Baishi river

Civil Works $8.03 NCB

A-QX-02-01 Civil works of northern East lake

Civil Works $4.02 NCB

A-QX-02-02 Landscape of northern East lake

Civil Works $5.98 NCB

Xinghuacun

A-FY-01-01 Xinshi road Civil Works $7.35 NCB

A-FY-02-01 Xinqunan road and Xinquzhong road

Civil Works $2.94 NCB

B-FY-01-02 Lamps and light poles equipment etc.

Equipment $0.32 NCB

B-FY-01-03 PE pipe rainwater engineering for Xinshi road

Equipment $0.79 NCB

B-FY-01-04 Municipal infrastructure pipelines for Xinshi road and cable engineering

Equipment $1.04 NCB

B-FY-02-02 Xinqunan road, Xinquzhong road, municipal infrastructure pipelines and lighting cables etc.

Equipment $0.79 NCB

Niangziguan

A-PD-01-01 River improvement works- Dam

Civil Works $2.66 NCB Yes

A-PD-01-02 River improvement works-rubber Dam

Civil Works $0.43 GP

B-PD-01-02 River improvement equipment Equipment $1.03 NCB Yes

30

Based on the detailed design, the SPMO will further review this package with the intention of dividing it into several ICB and NCB packages.

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106

Ref. No. Contract Package Type and

Description Category

Estimated $ (million)

Procurement Method

Prior Review

IST

Shanxi PMCS-01

Project Start-Up Consultants $0.06 Individual Consultant Selection

One package

Project Implementation, Project Management, Capacity Building, Study, and Local Training through multiple contracts, operations and equipment, local transportation (maximum of three vehicles)

Consultants $2.16 (Total)

Quality and Cost Based Selection (QCBS)

multiple packages

One vehicle per seven sub-project towns

Equipment $0.28 Shopping

TOTAL 41 $105.21

ICB 1 $10.73

NCB 34 $89.76

GP 3 $2.22

Other 3 $2.50

ICB = International Competitive Bidding; NCB = National Competitive Bidding. Notes: 1) The cost estimates are based on the Preliminary Design Reports of each subproject in CNY with US$/CNY = 6.3000 2) The cost estimates do not include interest and commitment charges during project implementation

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Appendix 4 IMPLEMENTATION STATUS AND ACTION PLAN

(As of December 2012)

Ref. No. Contract Package Type

and Description Catego

ry million

Method

Prio

r Review

Contract

Signing

Status

Future Plan

Agreed Actions (if any)

Pingyao

A-PY-01-01

Huiji River Improvement (embankments, steel dam, bottom-protecting engineering, power transmission line, housing, temporary engineering, etc.).

Civil Works

$8.97

NCB YES Ready for signing

preparing

Start construction in April 2013

Follow closely EMP

A-PY-01-02

Huiji River improvement works (seepage-prevention, embankment, landscaping, other construction, etc.)

Civil Works

$9.24

NCB Ready for signing

preparing

B-PY-01-03

Steel dam. Equipment

$0.82

NCB YES Ready for signing

preparing

B-PY-01-04

Metal structure equipment and installation.

Equipment

$0.91

GP 2013 0% 2013 Inform ADB when equipment procured B-PY-01-

05 Mechanic and electric equipment & installation.

Equipment

$0.88

GP 2013 0% 2013

Wutong

A-XY-01-01

Caoxi road base and pavement; curbs, gutters, drainage; greening

Civil Works

$3.24

NCB 75% All to be complete by October 2013

Follow up on Progress, Environment and Resettlement Monitoring. Also, expedite land approvals by 2014 latest.

A-XY-02-01

Heat exchange station, supporting facilities, and pipeline network

Civil Works

$4.18

NCB 75%

A-XY-03-01

Construct two nursery schools (age 3–6)

Civil Works

$1.23

NCB YES 22-Dec-11

48%

A-XY-03-02

Construct one secondary school (age 12–15)

Civil Works

$4.12

NCB 22-Dec-11

60%

A-XY-03-03

Construct one employment training center (adult vocational school)

Civil Works

$5.98

NCB 65

A-XY-04-01

Gas supply pressure-adjusted station (transmission, and distribution system)

Civil Works

$1.83

NCB

65%

A-XY-05-01

Wastewater treatment plant and pipelines

Civil Works

$2.06

NCB

30%

B-XY-02-02

Equipment for heat supply Equipment

$0.73

NCB Expected 1-Aug-13

0% IA proposes to combine into 1 ICB package

Submit revisions to procurement plan for ADB for review

B-XY-02-03

Heating electrical supply and subsidiary equipment

Equipment

$0.68

NCB YES Expected 1-Aug-

0%

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2

13

B-XY-05-02

Wastewater equipment for pumping and treatment

Equipment

$0.69

NCB Expected 1-Aug-13

0%

B-XY-03-04

Equipment for Schools Equipment

$0.67

NCB Expected 1-Aug-13

0% IA proposes to combine two contracts into 1 ICB contract

B-XY-03-05

Furniture for Schools Equipment

$0.50

NCB Expected 1-Aug-13

0%

Youyu

A-YY-02-01

Drainage civil works (earth work)

Civil Works

$0.88

NCB 2014 0%

A-YY-03-01

Flood control earth works and embankments

Civil Works

$1.03

NCB 2015 0%

A-YY-04-01

Road base and pavement; curbs, gutters, drainage, and greening; electric supply and lighting

Civil Works

$4.75

NCB 2014 0

A-YY-05-01

Water transmission and water treatment plant upgrade

Civil Works

$0.04

NCB 2014 0%

A-YY-05-02

Water supply pipeline for new area

Civil Works

$1.77

NCB 2014 0%

B-YY-01-01

Design, supply, and installation of district heating (heat source; sub-stations; pipeline network; automated control; electrical supply)

Equipment

$10.73

ICB YES 2013 Realloc-ation to civil works & goods under prepara-tion (with MOF

Arrange loan reallocation

ADB and PPMO to follow up with MOF on reallocation request status

B-YY-02-02

Storm water pipelines Equipment

$0.82

NCB 2014 0%

B-YY-02-03

Sewage pipelines Equipment

$0.52

NCB 2014 0%

B-YY-03-04

Equipment for Water Treatment Plant

Equipment

$0.06

NCB 2014 0%

Qingxu

A-QX-01-01

Water storing, water connection and landscape and upgrade of Baishi river

Civil Works

$8.03

NCB 2013 0% Final updates to FSR

Finalize SAR by mid December

A-QX-02-01

Civil works of northern East lake

Civil Works

$4.02

NCB

2013 0%

A-QX-02-02

Landscape of northern East lake

Civil Works

$5.98

NCB

2013 0%

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3

Xinghuacun

A-FY-01-01

Xinshi road Civil Works

$7.35

NCB 16-Jul-12

2% Possible change to compaction method

Inform ADB of any contract variation

A-FY-02-01

Xinqunan road and Xinquzhong road

Civil Works

$2.94

NCB 16-Jul-12

6%

B-FY-01-02

Lamps and light poles equipment etc.

Equipment

$0.32

NCB YES if

ICB

IA request to merge equipment into 1 ICB contract to advertise in 2013

0% 2013 Submit request for change in procurement plan

B-FY-01-03

PE pipe rainwater engineering for Xinshi road

Equipment

$0.79

NCB 0% 2013

B-FY-01-04

Municipal infrastructure pipelines for Xinshi road and cable engineering

Equipment

$0.92

NCB 0% 2013

B-FY-02-02

Xinqunan road, Xinquzhong road, municipal infrastructure pipelines & lighting cables etc.

Equipment

$0.79

NCB 0% 2013

Niangziguan

A-PD-01-01

River improvement works- Dam

Civil Works

$2.66

NCB YES ADB reviewing approval of 1 bidder

0% Finalize contracting in 2012/early 2013

ADB to send further guidance by 15 Dec 2012

A-PD-01-02

River improvement works-rubber Dam

Civil Works

$0.43

GP Expected in 2013

0% Contract in 2013

Update ADB on status of works

B-PD-01-02

River improvement equipment

Equipment

$0.93

NCB YES Expected in 2013

0% Contract and install by 2013

Send to ADB for prior review by April 2013

IST

Shanxi PMCS-01

Project Start-Up Consultants

$0.06

Individual Consul-tant Selection

YES Unclear Terminated

Shanxi PMO to clarify status

ADB to review how to resolve

One package

Project Implementation, Project Management, Capacity Building, Study, and Local Training through multiple contracts, operations and equipment, local transportation (maximum of three vehicles)

Consultants

$2.16

Quality

and Cost Based

Selection QCBS

YES 2013 Restart

Restart and divide out individual consultants (5)

Revised ToRs to be submitted to ADB

Multiple package

One vehicle per seven sub-project towns

Equipment

$0.28

Shop-

YES 2013 Not starte

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s ping d

TOTAL 41 $104.99

ICB 1 $10.73

NCB 34 $89.54

GP 3 $2.22

Other 3 $2.50