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LESSONS:

Gansu Clean Energy Development Project: Project Completion Report

sector: Energy | country: China, People’s Republic of

1. The successful project construction resulted from the high ownership of the project as promoted by the Government throughout the country. The Xiaogushan Hydropower Company (XHC) always took the initiative in solving problems in the provision of design documents, the timely delivery of equipment, the approach to dealing with accidents, and other areas. The owner’s initiative guaranteed appropriate procedures and timely action. [Main text, paras. 24,42]

2. The external supervising mechanism, effectively adopted, played an important role in improving the quality of the project. The selection and hiring of competent international and national consultants ensured that the quality standards required for projects with high investment costs were observed. [Main text, paras. 20,43]

3. roperly administered bidding processes were vital in obtaining advantageous bid offers. Following these processes, both in equipment procurement and in site construction, enabled savings in capital cost and ensured the quality of construction and equipment supply. Deviations between the final project costs and the appraisal estimates were noted to be marginal. [Main text, paras. 10,11,19,44]

4. For smooth project implementation, the required funds must be available on time. The availability of counterpart funds was a key issue, as the funds could not be secured until the project launching. ADB staff must carefully scrutinize counterpart fund arrangements and availability during project appraisal. [Main text, para. 45]

5. Comprehensive training in ADB procedures and guidelines and project administration for the project management staff at the start of and during project implementation helped improve project performance. The Project Management, financial management, and performance management capacity of the implementing agency was strengthened through domestic training, overseas study tours, and consulting services. [Main text, paras. 9,16,46]

6. The delegation of project administration to the resident mission resulted in more efficient communications between the executing agency, the implementing agency, and ADB. Thereby, resolving more efficiently various implementation issues. The PRC resident mission, among others, provided clear guidance and action plans for resolving key issues in financial management, environment and resettlement monitoring, benefit monitoring, and reporting. [Main text, paras. 22,47]

7. Land acquisition and resettlement were generally implemented well. Besides cash compensation for grassland acquired for the project, the implementing agency has provided annual fodder subsidy to households that were seriously affected. The special subsidy has largely helped to mitigate the loss of fodder from the acquired land. This is good practice and can be applied in future projects where the situation is similar. However, an area that would require improvement is the adequate cost estimation of land acquisition and resettlement (including government fees and resettlement monitoring cost); hence, ensure sufficient budget allocation particularl for future projects. [Main text, paras. 34-35,48(i); Appendix 13]

8. The implementation of the community development plan has greatly promoted local community development and enabled the local people to share harmoniously in project benefits. The community development plan, implemented by Xiaogushan Hydropower Company (XHC) and the local governments, covered local roads improvement, education, health, religious protection, electricity supply, water supply, telecommunications, technical training, and job opportunities. The plan was drawn up during project preparation and the early stages of implementation to ensure the development of local communities in harmony with traditional values and customs. Such a plan may be needed in other similar projects in the PRC; in which case, it should be included in the project budget. [Main text, paras. 36-37,48; Appendix 14]

9. An effective regime of ecological management for areas with construction projects can contribute to successful implementation of conservation measures in project reservoir area. In this energy project, soil and water conservation measures were implemented effectively in the reservoir area. Five percent of hydropower company’s annual tax payments to the municipal government (Zhangye) go into a special fund to be used to finance projects, and maintain and improve ecological functions in the reservoir area and the Qilian Mountain Nature Reserve. Projects were implemented jointly by the municipal forestry bureau and the local county or township government. The municipal financial bureau has issued financial management regulations specifically to manage the funds collected. A long-term project plan has also been prepared for the use of the special fund for works and projects in the reservoir protection area. Such institutional arrangements have provided a very effective financing instrument for the sustainable support of ecological conservation in the long run. [Main text, para. 48; Appendix 12, para. 12]

Lessons from Validation

People’s Republic of China: Gansu Clean Energy Development Project [Loan 2032-PRC]

The project has generated several positive lessons for future ADB operations. This validation agrees with these lessons: (i) Ownership – Assuming high ownership of a project by all participants should be promoted by project leaders and ADB; (ii) Consultants – Highly competent consultants should be engaged for high investment projects; (iii) Procurement – ADB should ensure that executing agency (EA) procurement staff are qualified and familiar with ADB procurement guidelines before project procurement starts; (iv) Timely fund availability – For smooth project implementation, the required funds must be made available on time; ADB staff must carefully scrutinize counterpart fund arrangements, particularly availability during project formulation; (v) Delegation to the Resident Mission – ADB should be aware of and judiciously select the earliest time at which supervision can be delegated to the resident mission; (vi) Land acquisition and resettlement – In cases of land acquisition and resettlement, for good community relations, subsidies (such as household food and/or animal feed) should be considered for seriously affected households; (vii) Environmental and social costs – A high level of attention should be given to environmental and social cost estimates at the time of appraisal, particularly regarding fees and cost estimates by government agencies; (viii) Social development – Community development plans should be considered and funding provided for in the project budget for other similar projects in the People’s Republic of China (PRC); (ix) Environmental protection and management – Special funds, to be managed by appropriate (national, provincial, or local) authorities, should be considered and funded by large development projects for environmental protection measures.

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