Projects and Loans in Asia & the Pacific

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Summary Table of Contents Introduction MDB Assistance Proposals - By Region & Country      Africa      Africa (page 2)   > Asia & Pacific      Europe & Central Asia      Latin Amer. & Caribbean      Middle East & N. Africa Acronyms 54     14-a. Cambodia: IDA—Rural Development PROJECT DATA (R) Forest Concession Management and Control Pilot (LIL); (Cr. 3365-KH): The project was approved, following LIL procedures, on 5 June 2000. Environmental assessment category B. US$5 million (IDA). Consulting services will be required to a) conduct inventories and to prepare strategic and operational forest management plans; b) design and conduct training programs; and c) assist in project management. Department of Forestry and Wildlife, 40 Preah Norodom Blvd., Phnom Penh, Cambodia. Tel: (855-23) 219-282, fax: (855-23) 214-966, e-mail: Secretariat@Camnet.com.kh. Contact: Mr. Ty Sokhun, director, Department of Forestry and Wildlife. DESCRIPTION OF PROJECT The project will assist the government in implementing management planning and control regulations on forest concessions. USAID'S COMMENTS Although this loan is small and may be helpful in controlling timber poaching, this is also perhaps the greatest environmental problem in Cambodia and if not undertaken carefully, could lead to exacerbation of the problem. This is particularly sensitive, given the repeated assertions of violations of the timber-cutting law there, which are the subject of several recent reports and an Asian Development Bank review in Cambodia. USAID's concern is whether this loan (which appears to facilitate additional timber harvests) complies with the spirit and letter of the bank's forestry policy. USAID also believes that the project should be a category A instead of B. The loan will prepare operational and strategic forest management plans, which usually means harvesting. Local aid may not be sufficient when controls on the export and purchasers' imports of illegally harvested logs are still insufficient, and therefore the question is whether $5 million is enough to control the problem. Congress has noted the lack of pursuit of concessionaires who have engaged in illegal logging, the lack of open access to government records concerning forest crimes monitoring, and the need for further information on the status of the involvement of Thai, Laotian, and Vietnamese officials in illegal timber trade. Therefore, we must approach such loans with great care and monitor their implementation as closely as possible. 14-b. Cambodia: IDA—Northeast Village Development (formerly Northeast Rural Development) PROJECT DATA Projected IDA funding: $5 million. Projected total cost: unknown. Tentative board date: May 1999. Stage: Negotiations completed. World Bank EA category B. Project I.D.: KHPE58841 (formerly KHPE45621). Project first entered: January 1997. Entry updated: April 1999. DESCRIPTION OF PROJECT The learning and innovation credit aims at improving rural livelihoods by piloting innovative approaches to the selection, financing, and sustainable operation of rural investment subprojects in select poorer districts of northeast Cambodia as part of a government decentralization initiative. USAID'S COMMENTS This activity will be directed at the provinces of the northeast. They are sparsely populated and have some of Cambodia's most pristine forests, including a large population of indigenous peoples. An environmental assessment category C seems to not fill this need for clearer understanding of potential impacts of investments on the environment. (The project was an EA category C when USAID first raised the issue.) For example, will roads be a part of this infrastructure investment? If so, what will be the impact on illegal logging? On forest degradation? Also, production is listed as an input. There are plans for large-scale plantations of palm oil, rubber, etc., which potentially have major environmental impacts if implemented. USAID noted the following in its 1999 report: The Agency would like to correct the statement in the World Bank's Environmental Data Sheet for the "North East Rural Development" project that indicated that "this support has already led to adoption by the government of significant short and long term policy changes for forestry, whose implementation is being monitored." Substantive policy recommendations in the forestry sector are only now being developed under the auspices of a World Bank Forestry Project. This project is tasked with developing recommendations that will affect forest policy, sustainable forest management, monitoring of illegal logging operations, and the legal environment conducive to sustainable forest resource use in Cambodia. The technical assistance team responsible for the policy recommendations is scheduled to complete its assignment by the end of May 1998. Additionally, the statement that "it is expected that it will lead to the adoption by the government of a National Environmental Action Plan in 1997" should also be amended. An executive summary of the final draft of the NEAP Action Plan was only recently circulated. It addressed 1) forest policy, 2) fishery and floodplain agriculture in the Tonle Sap region, 3) coastal fishery, 4) biodiversity and protected areas, 5) energy and the environment, and 6) urban waste. The World Bank responded that, having initiated a major effort on forest/logging policy in Cambodia over the past year, its managers are familiar with the value of and threats to the natural resources of the northeast part of the country. USAID has found that the proposed NE Rural Development Project will concentrate on raising incomes of poor farming households mainly in the Mekong River valley, from Kompong Cham up to Stung Treng, rather than in the two sparsely populated highland provinces of the northeast (Ratanakiri, Mondulkiri). The project would not include any large-scale plantation development. It would finance subprojects for the improvement of small-scale crop farming and livestock raising and possibly some nonfarm enterprise development. The project would help repair some roads and other basic infrastructure in the area, which has received virtually no public investment or maintenance for nearly 30 years, but would not get into new road or highway construction. Thus, it would not be opening forestland for commercial logging and would help discourage illegal tree felling by local residents by improving alternative income earning opportunities in agricultural and similar activities. By helping to establish village-based organizations for community development and by strengthening local government capacities for basic land-use planning, the project would help pave the way for a possible GEF-supported natural resource management/ biodiversity conservation project in the northeast of Cambodia. This possible GEF project would include the watershed areas of the three Mekong tributaries reportedly being considered for hydropower development by the NGO Multinationals Resource Center as well as critical riverine and wetland areas in the Mekong valley proposed as a RAMSAR site. Thus the proposed RDP does not raise significant environmental issues but, rather, helps develop local capacities and willingness to prevent them. Its environmental category rating will be decided at the concept review stage. 2000 update: A March 2000 review commissioned by the Asian Development Bank found that Cambodian forest stocks were being depleted at a rapid rate. Such problems can be handled in a number of ways and often require the use of multiple tools at once. For example, the bank has procedures for listing and avoiding contracts with companies with which they have had significant difficulties, including difficulty verifying compliance with applicable policies and laws. Effective cooperation and action on these fronts to affirmatively ensure full compliance and take appropriate action when it is not evident can help considerably when dealing with the fragile and threatened ecosystems that many ancient native forests have become. USAID has some concerns about the forest concession loan (14a) that may also be applicable to the rural development loan (14b), to the extent that the later includes forestry or forest clearing. Since the World Bank's early 1990s ban on direct financing of logging in primary tropical forests, the bank has used a number of different types of loans to fund forestry reform. Bank support for "forestry reform" in many cases has not produced the positive results hoped for. The question then becomes whether to take the potential risks and how to limit them. Forest resources are depleted, in part in response to the demands of international trade. The bank could through such forestry reform projects and with the cooperation of its developed members, help ensure that forest exports and imports of its members or borrowers are accounted for in order not to contribute indirectly to the problem. The banks could help develop such a system, in cooperation with industrial countries. They could use a combination of satellite sensing and photography, computerized cooperation, and appropriate authorities and agreements, such as Appendix III listings under CITES by countries that limit harvests of a given species to help track regulated harvests and international trade in such species. Within that context, sustainable forestry in Cambodia and elsewhere might be more likely. 15-a. China: IBRD/IDA—Western Poverty Reduction and Inspection Panel Report (see below for 2000 update); Rural Development PROJECT DATA Projected IBRD/IDA funding: $60/100 million. Projected total cost: $334 million. Board date: June 2000. Stage: remaining $40 million request withdrawn. World Bank EA category B. Project I.D.: CNPE46564. Project first entered: April 1999. Entry updated: April 1999/August 2000 (below). DESCRIPTION OF PROJECT The World Bank describes this as follows: "The project seeks to reduce absolute poverty through a multisectoral program in an environmentally sustainable rural development that includes upland agriculture, rural infrastructure, social services, voluntary settlement, and rural enterprise development." USAID'S COMMENTS The following discussion by USAID, from 1999, is included as it provides key background information and an example of the Agency's role in the process. This is a miscategorized project. It should have been an environmental assessment category A (complete EA) instead of B (limited EA). The project will generate significant environmental and social impacts and clearly calls for a complete EA. The World Bank's policies call for projects that have significant resettlement, large-scale irrigation, drainage, waterways, flood control, land reclamation, and river basin development aspects to have complete environmental assessment (category A). The project has a major voluntary resettlement plan for an estimated 100,000 poor people currently living in marginal, eroded, and mountainous areas of eastern Qinghai. About 26,700 hectares of "suitable" land with adequate water resources have been identified in central Qinghai for resettlement. The irrigation development component entails the construction of a 40-meter-high dam, renovation of an existing 8-meter dam, and construction of an irrigation and drainage (wells) system on 26,500 ha in Qinghai. According to the project information document (PID), the principal environmental issues associated with the initiative include land leveling and soil erosion; saline and sodic soils; energy and timber supplies for settlers; livestock management; and land compensation. The PID observes that "the soil in much of the area Qinghai resettlement area is saline and a minor part of it is likely to be sodic as well. . . . Additional work is required to define the severity and extent of the sodic soils." Through field surveys, the bank should make sure that this question is resolved before approval. A full environmental assessment, completed with public consultation, would identify the appropriate alternatives and proper mitigation measures for developing these less-than-adequate soils. The PID also notes: "In the long-run, the development of good water management at the system level and at the field level is the key to avoiding salt problems. The supply of energy for cooking and heating and the demand for timber for construction purposes in Qinghai must be addressed before resettlement occurs. In the absence of adequate supplies there is potential for excessive demand on local timber resources particularly in the adjacent sensitive mountain areas." Again, a complete EA is necessary to resolve these issues. The remaining comments describe the situation faced by the World Bank's board of directors in mid-2000, as it was reconsidering the Western China Poverty Reduction Project. In 1999 the board delayed funding for WCPRP, pending a yearlong inspection panel review to determine whether the project had violated (or would violate) any safeguard policies. The panel found that despite assurances by management in the summer of 1999 that the project was in compliance, the proposed project was in violation of 7 of the 10 mandatory operational policies that have been designated as the bank's major safeguard policies. Those violated included the policies on environmental assessment, indigenous peoples, resettlement, information disclosure, and conversion of critical natural habitat. The panel described "policy illiteracy" in the bank and flaws in the bank's management process as reasons for the violations. The Chinese nonetheless requested board approval of management's decision to provide the remaining funds that had been withheld pending the report of the inspection panel. The U.S. position was to oppose bank involvement even if it might make the project marginally more acceptable, because the board could not be assured that the bank's own policies were not being violated. In a watershed development that has great implications for MDB projects and policies generally, the World Bank board took the unusual step of rejecting the bank management's recommendation in a vote on the Western China Poverty Reduction Project. This move also greatly affects USAID, the Departments of Treasury and State, and other interagency cooperation. The U.S. executive director called for systemic reform in the bank to enforce safeguard environmental and related policies that NGOs and some agencies fear are being formally weakened as well as sometimes not enforced. USAID expects to be engaged in the bank's current revision of the safeguard policies and in the design of the new preapproval clearance mechanism and other remedies recommended by the U.S. executive director. On 7 July 2000, China withdrew its request for the remaining $40 million of the Western China Poverty Reduction Project. This was in response to the board vote of 64 percent (comprising generally the industrial nations' votes) rejecting bank management's proposal that the safeguard policies were general "guidelines" only and not to be enforced "mechanistically" or "literally." Although the United States opposed the project, in effect it created part of the majority of the board that was prepared to decide that the earlier decision would have to come back to the board pending further review. The U.S. executive director on the board called for management to address the overall World Bank weaknesses identified in the inspection panel report by making specific proposals, including those that Strengthen the role of internal bank networks to better control of operations, including a mechanism with approval authority to ensure policies are fully understood and respected in Washington and in the field Create a new compliance unit (as distinguished from the quality assurance and compliance unit established in 1998, and the inspection panel, which as currently constituted reviews a selection of projects and only those that are the subject of formal complaints) to ensure that no project is moved to the board without prior certification as to compliance with all applicable policies Institute personnel incentives and disciplines to support these policies After the panel's report and the withdrawal of the project, it was noted by many observers that the bank began the process of revising several of these policies as well as consolidating the Operational Policies and Bank Procedures, which are mandatory, and the Good Practices, which are for guidance only. In this ongoing process, NGOs have found a trend toward weakening the policies and moving some from mandatory to guidance status. Some expressed concern that if this is so, and if this trend continues with the current forestry, resettlement, indigenous peoples, and information disclosure policy revisions that are now under way, then stricter enforcement of weakened policies will mean less protection than it would otherwise appear. This has particular relevance for China and some other major borrowers who have operated with relative independence of MDB and other donors and lenders even with regard to the operation of projects subject to conditions. Throughout the 1990s China has been the bank's largest borrower with new commitments averaging $2.5 billion per year and 200 projects financed since lending began in 1981. By some measures the quality of performance has been higher than that of the average borrower. Still, concerns about the implementation of safeguard policies adopted since 1989 led the bank to establish a special Quality Assurance Group (QAG) Panel to review six major projects in China in Review of Safeguard Policies in China. These reviews occurred at the midpoint of their implementation. The General Accounting Office of the U.S. Congress reported in September 1998 in Multilateral Development Banks: Public Consultation on Environmental Assessments that of the projects surveyed, those in China tended to have less than adequate consultation. The Chinese government "typically submits project proposals for bank consideration only after much of the consultation and design are already complete." This limits the ability of the reviewing agencies, the consulted public, and the bank to have an impact on projects' designs, making it more likely that such projects will warrant being listed in this report. Although a dam was only one part of the withdrawn project, China has been among the most active dam builders in recent years, continuing with the Three Gorges Dam, which the bank informally rejected several years ago. Water diversions may reach a point where the river dries up entirely as the mouth of the Colorado River does in the United States at times. This has consequences for the ecosystems involved and even for major projects sharing the water. 15b. China: IBRD/IDA—Rural Development PROJECT DATA Guangxi Baise Multipurpose: Environmental assessment category A. US$400 million (IBRD). Consultants for project preparation and feasibility studies, a dam safety review panel, and a panel of international environmental and social experts have been appointed. Prequalification for two main civil works contracts will be undertaken soon. Youjiang Water and Power Development Corporation, 36 Jianzheng Rd., Nanning, Guangxi 530023, China. Tel: (86-771) 562-8529, fax: (86-771) 563-7491. Contact: Mr. Yang, general manager. DESCRIPTION OF PROJECT The project is designed primarily to protect Nanning and nine other downstream municipalities and counties against floods. The Baise Dam and Power Facilities component will consist of a 130-meter-high RCC dam and spillway, power facilities including a hydropower plant of 540 MW, two saddle dams, and underwater works for a navigation shiplift. The institutional development component includes strengthening the Youjiang River Basin Development Corporation and developing a flood forecasting and monitoring system along with operation procedures, including the EPP and related institutional reform. The project also includes a resettlement component and an environmental management component. Project preparation has been put on hold at the request of the Chinese government. USAID'S COMMENTS In the past two years, in depth reviews of the effects of dams and of China's weaknesses in regard to some safeguard policies, such as consultation with affected peoples, lead USAID to recommend particular caution with regard to such major dam projects as this. Given the fact that this large dam project is designed to protect a large region of ten cities and counties against flooding and that it will involve resettlement, and given the difficulties still encountered with resettlement, the environmental assessment process should begin early and review with the affected public a variety of options for flood control, including the use of ecosystem services, such as allowing flood plains to absorb more overflow and restoring ground cover upstream as well as downstream. USAID Recommends that the Bank: Address the "safeguard dilemma" as it may affect this project by Defining compliance, particularly with regard to resettlement and other changing policies. This may mean instituting, as the USED recommended in the Western China Poverty Reduction case, an accessible process by which compliance questions can be expeditiously determined with regard to this project before board action. Considering a safeguard fund to finance costs of meeting bank's safeguards where they exceed costs of meeting borrower's own Move beyond compliance: use safeguards more strategically by Undertaking environmental and social assessment early in the project cycle to illuminate options and alternatives Carry out a sector or recession assessment on macro issues raised by this project, such as land and water use as they effect flooding and the need for such a dam, even if it requires lengthening the project cycle and changing current budget practices Concentrate on enhancing participation and consultation and ensure confidential and culturally appropriate data-gathering techniques Make line management more accountable and give the sector coordinator oversight responsibility over the task manager Give external monitors more independence (through long-term contracts, for example). 16. India: IFC/ADB—Balagarh Power Company Limited PROJECT DATA Project number: 4897. Company: Balagarh Power Company Limited. Environmental category A. Projected board date: uncertain. Date SPI disclosed: 9 May 2000. Project sponsor and major shareholders of project company: the projects sponsors are CESC Limited (CESC) and Southern Energy Asia-Pacific Limited (SEAP). CESC is an existing IFC client in which IFC has made two previous investments. CESC is a vertically integrated utility company that owns and operates the generation, transmission, and distribution system that serves the metropolitan Calcutta area. In existence for over a hundred years, it is a publicly traded company listed on the local stock exchanges in India. SEAP is a wholly owned subsidiary of the Southern Company (Southern) of the United States. It operates a number of independent power projects in the Asian market. Southern is a reputable and financially strong electric utility with assets worldwide. Its ownership in SEAP is held through a direct wholly owned subsidiary, Southern Energy Inc. (SEI), which holds Southern's other international assets. Southern is the largest producer of electricity in the United States. It operates more than 36,000 MW, including 23,891 MW of coal-fired plant. SEI directly operates more than 4,000 MW outside the United States and has an ownership interest in more than 15,000 MW. SEI has operations in Argentina, the Bahamas, Brazil, Chile, China, Germany, the Philippines, Trinidad and Tobago, and the United Kingdom. Southern has assets of more than $36.2 billion and employs 25,000 people in the United States and some 6,600 people overseas. In 1998, Southern reported a net income of $977 million on revenues of $11.4 billion. Shares of Southern, a widely held corporate stock, are traded on the New York Stock Exchange. The project company, Balagarh Power Company Limited (BPCL), a newly organized enterprise set up to develop, own, and operate the project, will have the following ownership structure: Shareholder % Ownership CESC Limited 30.2 SEAP Mauritius 26.0 CESC/other investor 7.0 Hanjung 10.0 AIDEC 13.9 ADB 8.0 IFC 5.0 Total equity 100.0 Total project cost and proposed IFC investment. Estimated at $572 million. The proposed IFC investment consists of a senior A loan of $45 million for IFC's account, a senior B loan of up to $100 million for the account of participants, and an equity investment of up to 5 percent (US$9.2 million) of the common stock of BPCL for IFC's account. Location of project and description of site. The Balagarh power plant will be located on a greenfield site on Balagarh Island in the River Hugli, 70 km north of Calcutta. The site was originally earmarked for a power plant to be built by the West Bengal State Electricity Board. However, in an effort to attract private sector investment into power generation, the state government has invited CESC to develop the proposed site as an independent power project. The proposed site is well situated, with close access to major road and rail links and plentiful cooling water supplies from the River Hugli. The project will affect eight residential structures and about 1,600 people who own or use the agricultural land for the site. DESCRIPTION OF PROJECT The Balagarh project is to build, own, and operate a 2 x 250 MW coal-fired thermal power plant. The project is expected to be implemented over a 33-month schedule, with the first unit entering commercial operation toward the end of 2003 and the second one 3 months later (for a total of 36 months). The energy output will be used entirely by CESC and sold under the basis of a two-part tariff power purchase agreement. Primary equipment will include two pulverized coal steam generators, one for each of two turbine generators, designed to burn high-ash low-volatile pulverized coal as the principal fuel supplemented by light diesel oil for start-up and heavy fuel oil during low-load operation. The two steam-generating units will be sized to ensure adequate margin over the requirements of the turbines and to provide for auxiliary steam load and future degradation. Each boiler will be equipped with all required air preheaters, soot blowers, and fans. The turbo generators will use a regenerative feed-heating and reheat system, and the condenser will operate on a closed-cycle cooling system. A fully mechanized coal handling system to handle 2.8 million metric tonnes per year and partially covered storage capacity at the site sufficient for about 30 days reserve will also be provided. Coal for the plant will come from mines owned by Eastern Coalfields Limited in West Bengal and Bihar. These mines are about 200 km from the plant site and are connected by existing rail links. These mines are well developed and are presently in production. Coal reserve estimates indicate there is ample supply to cater for the plant throughout its lifespan. It is proposed that under an operation and maintenance agreement with BPCL, a CESC/SEAP joint venture will operate, maintain, and repair the facility according to international industry practices using their own engineering and operation and maintenance staff. BPCL is proposing to implement the project through a lump-sum turnkey engineering, procurement, and construction contract with Hanjung of South Korea for the design, construction, procurement, supply, erection, installation, and commissioning of all mechanical, electrical, control, and instrumentation plant and equipment, as well as the power station civil works. Development impact/IFC role/fit with World Bank Group strategy. This project will ensure secure and reliable power supply for the city of Calcutta and improve the efficiency of electricity generation in the region. A more reliable power supply should also help stimulate overall growth in economic activity in the area. It will moreover create local contract employment during the construction period, as well as permanent local jobs during operations. Private investment in the power sector would reduce the need for public investment and enable the government of West Bengal to deploy more resources to meet poverty alleviation and social development objectives. Despite the considerable development delays, this project will be one of only a handful of independent power projects developed to date in India under the revised Electricity Act Guidelines published in 1991. It will also be the first to sell its output directly to a creditworthy private utility. The project will not require state and central government counterguarantees. Its revenues will be directly funded, on a pass-through basis, by the tariff charged to CESC's customers. This project will help demonstrate to both government and private investors that power projects can be structured without the need for government support, provided that output from such projects is tied to a creditworthy distribution company and a functioning regulatory framework. The overall World Bank Group strategy for India is aimed at helping the country achieve an "accelerated growth with equity" strategy that aims to double per capita income by 2010 and thereby significantly reduce poverty. To achieve this objective the bank group has concentrated on supporting policy reform, social and environmental issues, and private and financial sector development. Within the bank group's overall strategy, IFC's attention over the medium term will be on a) developing the infrastructure sector (power, telecom, ports, roads, and urban infrastructure), b) developing the financial sector, c) greater participation in agribusiness as agriculture reforms progress, d) support for export-oriented projects, especially in the high-tech sector, and e) increased private participation in the social sector through technical assistance programs and direct investments. This project is consistent with a) the overall World Bank Group strategy of promoting private sector development in India and b) IFC's strategy of promoting private investment in the power sector in India. In addition to the development impact, IFC participation in the project will provide direct long-term financing, help mobilize additional sources of long-term debt, and ensure that the project is implemented in an environmentally sound manner. Environmental and social issues. This is a category A project, according to IFC's Procedure for Environmental and Social Review of Projects, because it may result in significant adverse environmental and social impacts that are sensitive, diverse, or unprecedented. The locations of environmental documents in locally affected communities are Office of the district magistrate, Hooghly, West Bengal BPCL office near the site at village of Sripur, Balagarh, West Bengal Local library in village of Sripur, Balagarh, West Bengal Office of the block land and land reforms officer (BL & LRO), Jeerut, West Bengal Balagarh Power Company Limited head office, CESC House, Chowringhee Square, Calcutta 700 001, West Bengal In addition, a leaflet containing the nonexecutive summary for both the environmental impact assessment and the resettlement action plan has been prepared in vernacular and kept at all the above places for distribution to the interested persons. To contact the project company, write to Mr. J. Chakrabarty, Project Manager, Balagarh Power Company Limited, CESC House, Chowringhee Square, Calcutta 700 001 India. Tel/fax: + 91 33 225 5557; e-mail: jc@rpgnet.com. (This summary of project information is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC's activities. This document should not be construed as presuming the outcome of the board decision.) USAID'S COMMENTS The Agency has several concerns about the environmental design of this project: Whether cleaner renewable sources of energy on and off the grid are available If conservation (e.g., inclining block) rates have been considered The effects of the high-ash-content coal and whether these could be reduced through the use of more efficient mining equipment to separate lower quality material from the coal before it is burned The impact on ambient air quality, given decade-old statistics used in the materials provided to U.S. agencies to review The impact of the increased coal mining on the natural environment and people of Bihar An earlier loan to Coal India of $530 million to start, expand, or modernize two dozen open-pit coal mines was to demonstrate how India's coal resources could be put to use in a way that does no harm. But in summer 2000, after villages were bulldozed, followed by unsuccessful resettlement and retraining (among other problems), the World Bank agreed to India's request to cancel the remaining half of the loan. Nevertheless, the mining of more coal to fuel new plants raises similar questions of resettlement and effects on endangered tigers and indigenous peoples in Bihar and Bengal. USAID is also concerned whether by helping finance so much power production from traditional carbon-based fuels with subsidized loans the MDBs are not only unnecessarily adding pollution but also putting private investors and renewable power providers at a disadvantage. 17. Indonesia: IBRD—Transport PROJECT DATA (R) Ports Environment Improvement: Date of negotiations is to be determined. Environmental assessment category B. PID: IDPE40892. US$4.2 million (IBRD). Consulting services to be determined. Ministry of Communications, Gedung Karra, Lt. 4., J.I. Merdeka Bar, No. 8, Jakarta, Indonesia. Tel: (62-21) 784-2440; 381-1308, fax: (62-21) 384-2190. DESCRIPTION OF PROJECT The project will help the government in implementing policies that address the environmental issues of maritime transport. The objectives are to a) develop the capacity for appropriate disposal of ship wastes, b) upgrade the capacity for oil-spill prevention and contingency planning, and c) develop the capacity to manage pollution from contaminated dredged materials. USAID'S COMMENTS While the World Bank is commended on such projects intended largely to improve environmental control capacity and performance, USAID has found that such projects, if not properly designed, can perversely have negative environmental impacts. Ship wastes, contaminated dredged materials and oil spills are in most cases, highly dangerous materials. They require careful comparisons of alternatives, and at least some means of ensuring that funding most of the process does not lead to greater harm being done by a closely related part of the project. For example, a Baltic state within the last two years, completed a similar harbor dredging operation with MDB assistance, while still dumping toxic dredged material in a manner which the MDB advised against, by funding that portion of the project by itself. The USEPA has completed an exhaustive environmental impact statement and analysis of alternatives for handling contaminated river and harbor bottom materials in the Hudson River valley. It reviewed, for example, whether to leave the material undredged or to risk spreading contamination by disturbing the bottom in removing it. The next questions in such cases include whether to incinerate any toxic dredge material or dump it in a sealed and clay-lined landfill, for example. In regard to harbor transport hazards, oil spills and invasive species in ballast water are just two of several issues that are best confronted publicly. That way the public and independent experts can debate the choices of requiring double-hulled or lined tankers, and a variety of blocking and cleaning techniques to control oil spills, and whether to require high-seas ballast water exchange to reduce the likelihood of coastal invasive species introductions when ships take on cargo and release ballast water in port. The World Bank has also approved loans that did not do take these precautions. It has also approved loans (See, e.g., Tehran Sewerage -Ln. 4551-IRN- under Iran, below.) for much needed sewage treatment facilities, that unfortunately included plans to use sludge as fertilizer for food crops without evidence that the sludge would be tested for heavy metal, PCB, or other contamination before distribution. In category B assessments, alternatives are not always well reviewed, though ways of minimizing the harm of the planned option usually are. Therefore, USAID recommends that either this project's B classification be reclassified as an A, or that the Bank otherwise require that as part of the capacity building, the agencies will conduct public reviews of drafts discussing such alternatives before undertaking new operations or adopting new regulations, so as to ensure the project succeeds in reaching its goals. 18. Thailand: ADB—Samut Prakarn Wastewater Management Project PROJECT DATA The total project cost is estimated at US$750 million, with funding from three sources: US$230 million from ADB and the balance from the Japan Bank for International Cooperation and the government of Thailand. ADB's role: A partner in the development of the project and one of the three financiers. Government of Thailand's role: project owner and one of the three financiers. Executing agency: Pollution Control Department/Ministry of Science, Technology, and Environment. Loan approval dates: loan No. 1410—Thailand was approved 7 December 1995, and supplementary loan No. 1646—Thailand 3 December 1998. Status: as of 1 December 2000, overall implementation progress was estimated at 48 percent. Under ADB's portion of the loan, expenditures have reached 39 percent and contract awards 99 percent. Completion date: the project is targeted to be completed by 31 December 2003. © 2001 Asian Development Bank. DESCRIPTION OF PROJECT The Samut Prakarn Wastewater Management Project, costing about US$750 million and partly financed by ADB (US$230 million), aims to improve the environment in one of Thailand's most polluted provinces. It is designed to manage industrial, commercial, and residential wastewater that currently flows to the sea through open canals and rivers in a heavily populated area. The wastewater poses health hazards for up to a million people and pollutes large stretches of coastal areas in the Gulf of Thailand. The project has adopted an integrated approach that tackles wastewater pollution both at the source and final treatment points, representing a significant attempt to proactively minimize wastewater pollution. The project includes the collection and treatment of domestic and pretreated industrial wastewater. The treatment plant is designed to treat wastewater after industry has pretreated it to remove toxic elements in accordance with Thai government standards. Under the project, the pretreated industrial wastewater will be collected by sewer pipes and carried to a treatment plant designed to further decompose and purify up to 525,000 cubic meters of wastewater a day. ADB believes that the Thai government's approach to the wastewater management problem in Samut Prakarn is technically sound and will help improve the environment. ADB and the government of Thailand welcome the views of civil society and stakeholders about the project. The local pollution situation. Samut Prakarn, located southeast of Bangkok, is the most heavily industrialized and polluted province in Thailand. Straddling the Chao Phraya River, the province has one million people and more than 5,000 factories. The sanitation and wastewater management facilities in the province are ineffective in dealing with the large wastewater flows from industrial, commercial, and residential sources. The result has been severe degradation in water quality and deterioration in public health, as evidenced by the incidence of water- and sanitation-related diseases. Many of the waterways are ecologically weakened. Most of the beneficial uses of the water from the Chao Phraya River have been lost. Owing to the severity of the pollution, the government of Thailand designated the province as a "pollution control area" in 1994, giving it priority for government-funded environmental improvements. Background. The project is designed to improve wastewater management facilities in Samut Prakarn Province, Thailand, where water pollution poses serious environmental and health risks. The project consists of wastewater collection systems (sewers and associated pumping stations), a central wastewater treatment plant, wastewater and effluent monitoring systems, a program for cleaner production and industrial efficiency, and capacity-building of government agencies responsible for managing wastewater. Overall objectives. The project seeks to improve the quality of the province's environment and public health by providing modern, reliable, and cost-effective wastewater collection and treatment facilities. Complementary programs are being carried out to improve environmental monitoring and enforcement as well as to promote cleaner production for industry. Rationale. The project supports the Thai government's policy of developing comprehensive wastewater management strategies in severely polluted areas. Further degradation of the environment and deterioration of public health are inevitable without the implementation of a comprehensive wastewater management program. Centralized wastewater collection and treatment was determined to be the most technically sound and appropriate approach for the situation—as well as the most cost-effective—when combined with an industrial pollution prevention program and enforcement of pollution control regulations. Treatment plant location. Klong Daan, Samut Prakarn Province, Thailand: a lightly populated area of low ecological value. Local mangroves have diminished because of the area's extensive shrimp farming. How the project works. A wastewater treatment plant will collect wastewater from factories and households using a system of more than 300 kilometers of sewer pipes. The treatment plant, which is only one component of the management strategy supported by the project, is designed to break down and purify domestic wastewater along with industrial wastewater after it has been partially pretreated to remove toxic elements (as required by the Thai government). The treated wastewater will be released through a 3.4-km outfall pipe into the Gulf of Thailand. Capacity. The plant will have the capacity to treat up to 525,000 cubic meters of wastewater a day. Expected benefits. Improved health and quality of life. By cleaning up the environment and raising water quality, the project will directly benefit one million residents by improving public health through lower incidence of water- and sanitation-related diseases. The quality of life will improve for low-income families, many of whom often live close to factories in low-lying, flood-prone areas and are most exposed to polluted waterways. Cleaner environment. The project will annually remove an estimated 72,000 tons of pollutants and about 90 tons of heavy metals from wastewater entering the sea. This will significantly improve water quality, thus enhancing mussel and fish farming yields. Cost recovery. The polluter-pays principle will be implemented for the first time in Thailand, where industry, which causes 80 percent of the pollution, will pay 80 percent of the clean-up costs. Cost savings. For medium to serious polluters in the food and textile industries, the cost of using the centralized systems is estimated to be 1.3 to 40.0 times less per cubic meter than onsite treatment. USAID'S COMMENTS The project is the subject of complaints by villagers near the construction site. Over the course of the preparation of this report these issues became the basis for the first formal complaint filed with the ADB inspections panel. The complaints include allegations that the project was miscategorized as a B, allowing it to avoid a full environmental assessment; that approval was based on a different site 20 kilometers away from the one eventually chosen for the plant; that very different impacts and potentially dangerous characteristics of the chosen site (as well as resulting inefficiencies) were not properly assessed, thus avoiding certain efficiency requirements of Thai law; and that heavy metals and toxic pollutants remaining in the discharge water will be concentrated in the release or "outfall" area and will harm people, aquatic life, and livelihoods. It is also the subject of separate inquiries by authorities concerning allegations of irregularities in the land purchase and decision-making process. In particular, complainants allege the violation of the "National Environmental Quality Act of 1992, the Factory Act (1992), and the 1997 Constitution in matters relating to . . . public consultation and participation and the Environmental Impact Assessment requirements." They note that the affected communities of Samut Prakarn province acknowledge the need for wastewater management, and that they do not oppose a project that will deal with the problem properly. However, they aver that [T]he relocation of the project to Klong Daan resulted in various ADB policy violations. These include Bank's Policies on Environmental Assessment, Involuntary Resettlement, Economic Analysis, Incorporation of Social Dimensions in Bank Operations, Benefit Monitoring and Evaluation, Confidentiality and Disclosure of Information, Governance, Anticorruption, Internal Audit, Fisheries, Supplementary Financing of Cost Overruns, Bank's Operational Missions, and its Poverty Reduction Mandate. The ADB's inspection policy (approved 1995, published 1996) calls for interim reports to be sent to a committee of the board. The ADB inspection policy permits the bank management or the Board to suspend disbursements to projects, but gives little guidance on the circumstances that should cause it to take such action. Whether a person who claims to be harmed by a project under review can have the project (and the harm) suspended during that review also may depend on the agreement between the bank, the borrower, and other parties as well as on any available domestic legal or injunctive remedies. Therefore, whatever the outcome of this case, it illustrates the need to ensure that there are effective means of enforcing bank policies and applicable domestic laws. 19-a. Vietnam: IDA—Rural Development PROJECT DATA (R) National Water Resources Management: preappraisal was scheduled for June 2001. Environmental assessment category to be determined. US$130 million (IDA). Consulting services to be determined. Ministry of Agriculture and Rural Development (MARD), 2 Ngoc Ha St., Hanoi, Vietnam. Tel: (84-4) 733-0782, fax: (84-4) 824-7133. Contact: Mr. Pham Hong Giang, vice minister, MARD. DESCRIPTION OF PROJECT The project will introduce integrated water resource management to selected basins. 19-b. Vietnam: IDA—Transport PROJECT DATA (R) Mekong Transport and Flood Protection: negotiations were tentatively scheduled for September 2000. Board presentation was scheduled for October 2000. Environmental assessment category A. PID: VNPE42927. US$110 million (IDA). Consulting services to be determined. Ministry of Transport and Communications, 187B Tay Son St., Hanoi, Vietnam. Tel: (84-4) 851-1278, fax: (84-4) 852-1013. Contact: Mr. Pham Ngoc Thuy, general director, PMU1. DESCRIPTION OF PROJECT The project will support the government's efforts to complete the rehabilitation of Highway 1. It will emphasize protecting flood-prone sections in the central coastal area and improving the surface transportation system in the Mekong Delta. USAID'S COMMENTS Projects 19-a and -b involve potentially many environmental issues related to the water basin management questions described in the following section of USAID's 1999 report. Whereas the Mekong Delta Water Resources Project was classified as a category B, the Mekong Transport and Flood Control Project is an A. This should allow informed discussion of the effects of waterborne transport interfaces with highway transport, dikes versus bridges, and other issues. The nationwide water resource project will almost surely call for an "A" categorization, given the intense criticism of the lack of review in just the Mekong Delta Project in 1999 below. 19-c. Vietnam: IDA—Mekong Delta Water Resources Development PROJECT DATA Vietnam Projected IDA Funding: $102 million. Projected Total Cost: $148 million. Board date: 4 May 1999. Stage: approved. World Bank EA category B. Project first entered: April 1999. Project information updated: April 1999. (The project was active in 2001 and expected to continue through 2005.) DESCRIPTION OF PROJECT The Mekong is the 10th largest river in the world. This project will support completion of salinity control and water-delivery systems to improve agricultural production and increase rural income in some of the poor regions in the lower Delta. The proposed project would cover five subproject areas in six provinces with a total area of 535,000 ha (14 percent of the Mekong Delta). Four of the subprojects—South Mang Thit (225,682 ha), Quanlo-Phuonghiep (178,900 ha), Baring-Talim (31,000 ha), and Tiep Nhat (54,000 ha)—are in the lower Delta. The Omon-Xano subproject (45,430 ha) is in the middle Delta. Each area is a unique hydraulic unit. The basic approach to the development of the subprojects in the lower Delta is to prevent salinity intrusion by extending existing dikes and installing 200 additional sluice gates on canals serving the agricultural areas, together with completion and improvement of existing irrigation systems. The sluice gates would close at low tide, especially in the dry season, to prevent saline tidal flows from entering existing agricultural lands. They would open in periods of high freshwater flow to allow drainage and flushing of contaminants. This would create a year-round freshwater environment to allow an additional crop to be grown in the dry season. Improvement of drainage and inundation in the wet season would secure the second or third crop. Existing canals would be enlarged where necessary, and the density of secondary canals would be increased to improve water delivery capacity for irrigation and drainage. Tertiary canals and on-farm systems would be developed. The Omon-Xano area is above the salinity line. Fresh water is available year round. The main aims of this subproject would be to improve flood protection and drainage through extending embankments and building sluices and to improve secondary canals. Overall, the improved water delivery systems of over 3,000 km of irrigation and drainage canals, embankments, and structures would promote agricultural intensification and diversification by providing fresh water and through improved drainage. The project would facilitate rural transport through enhancements in canals, bridges, and canal-connected rural roads. The project would also develop a number of deep groundwater wells to provide drinking water to the rural population of the region (about a million people), as mitigation for expected declines in surface-water quality. The project involves resettlement of 1,650 families (moving homes), and compensation for 34,000 families expected to lose small parts of their farmland. It has a resettlement budget of $21 million, to be completely covered by the government (a problematic practice in some countries, but the government of Vietnam appears committed). The resettlement action plan appears to have been well done—a major improvement over the prior Vietnam Inland Waterways Project, which the U.S. government opposed. USAID'S COMMENTS The Agency finds that the project's limited environmental assessment inadequately addresses issues of surface and groundwater quality, fishery impacts, nutrition trends with specific reference to protein intake, waterborne diseases and pesticide exposure, and subsidence related to groundwater pumping. Such issues apply not only to the project area but also to downstream impacts where the fresh water meets the sea. The project should be classified as an environmental assessment category A because of the project's significant resettlement, and large-scale irrigation, drainage, waterways, flood control, land reclamation, and river basin development aspects. The bank says that it was given a category B because of the prior completion of a Mekong Delta Master Plan, which indicated a preference for these projects and included a regional environmental impact assessment. However, the area has a high international profile for environmental sensitivity, and a paucity of baseline data, as acknowledged by the project's EIA numerous times. The project does not convert nonagricultural lands, but its purpose is to control salinity intrusion and flooding so a formerly large area of seasonally brackish wetlands can be converted to a freshwater wetland regime. This will enable rice production to go from one or two crops per year to two or three crops (the bank says the third crop will usually not be rice, but other crops with less water demand). This type and scale of land reclamation or conversion can be ecologically significant, with diverse effects—on mangroves, fisheries, waterfowl, and disease vectors such as mosquitoes carrying Japanese encephalitis and malaria. The project environmental assessment examines (by subproject area) the issues of salinity, local hydrology, acidic soils, within-site fishery economics, and inhibition of transport, without ever looking at the cumulative picture or areas adjacent to the projects that are likely to be affected. A USAID-conducted interagency review (by NOAA, EPA, USAID, State, and Treasury) of the environmental assessment and related documentation concluded that the environmental studies were too narrow in scope and suffer from a serious lack of baseline data on a variety of potentially serious issues: Other than moving sluice gates from one location to another, there was no apparent consideration of development alternatives to the project. There are reports that some farmers prefer to pump—and are already illegally pumping—saline groundwater into some project areas to grow shrimp, which is more lucrative than rice. The sustainability of this practice is uncertain. The bank assumes that this was occurring in areas that had been excluded from the project, as they expressly redesigned it to avoid overlap with shrimp production areas. A variety of potentially serious issues were not even considered, such as several types of human health effects, delta subsidence, changes in Mekong flows attributable to upstream development or water-sharing agreements to be worked out under a forthcoming World Bank/GEF project, nutritional and other socioeconomic consequences of changes in common property regimes such as subsistence fisheries, gender, and economic aspects of farmer's operation and maintenance responsibilities. A host of other issues were briefly mentioned but dismissed without basic data collection: fisheries, sediment flows, water quality, protected areas, increased use of pesticides and fertilizer use. The environmental assessment and other studies seem to make widely conflicting statements about a variety of issues, sometimes in adjacent sentences (e.g., magnitude of increases in pesticide and fertilizer usage; contamination or isolation of deep aquifers). The mitigation plan suggests expanding a small existing integrated pest management program, but no funding was provided. The bank promised to discuss this with the Vietnamese government in relation to a separate agriculture bank project. Monitoring components are inadequate (total of $300,000). The bank promised to increase the monitoring program, especially regarding fishery, nutrition, water quality, and disease vectors. Industrialized countries have realized that while widely practiced in the past, conversion of wetland ecosystems, whether from wet to dry or from brackish to freshwater, is a major ecological sustainability issue. The United States is now spending billions of dollars to undo the billions it spent on such works in Florida, Louisiana, Texas, California, and other states. A cavalier attitude toward such delta modification has proven to be catastrophic in Senegal. It should not be taken lightly or dismissed as minor because sufficient data are lacking on the Mekong Delta. USAID believes this project should have had a far more comprehensive regional/sectoral environmental assessment, with baseline data collection, and including long-term sustainability issues. This should include an appropriate array of ecologists and social impact specialists, not just engineers and economists. Next Section: Europe and Central Asia

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