$ Report No: RES00074 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF China: Jiangxi Eco-industrial Parks Project APPROVED ON 18-Jun-2020 TO People's Republic of China Urban, Resilience and Land East Asia And Pacific Regional Vice President: Manuela V. Ferro Regional Director: Anna Wellenstein Country Director: Mara K. Warwick Practice Manager: Yoonhee Kim Task Team Leader(s): Minghe Tao, Marcin Miroslaw Piatkowski The World Bank China: Jiangxi Eco-industrial Parks Project (P158079) ABBREVIATIONS AND ACRONYMS EIP Eco-industrial Park FM Financial Management FNIZ Fuzhou New Industries Zone IP Implementation Progress IPD Industrial Park Division JDRC Jiangxi Development and Reform Commission PDO Project Development Objective PMO Project Management Office POM Project Operations Manual PPMO Provincial Project Management Office R&D Research and Development TA Technical Assistance WB The World Bank The World Bank China: Jiangxi Eco-industrial Parks Project (P158079) @#&OPS~Doctype~OPS^dynamics@restrhybridbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P158079 China: Jiangxi Eco-industrial Parks Project Product/Financing Instrument Geographical Identifier Investment Project Financing (IPF) China Approval Date Current Closing Date 18-Jun-2020 31-Dec-2026 Original EA Category Partial Assessment (B) (PAD Approval Package-18 Jun 2020) Organizations Borrower Responsible Agency Fuzhou New Industries Zone, Jiangxi Development and Reform People's Republic of China Commission @#&OPS~Doctype~OPS^dynamics@restrhybridoperationstatus#doctemplate OPERATION STATUS Project Development Objective (DO) Original Development Objective To strengthen Jiangxi’s institutional and regulatory framework for eco-industrial parks (EIP) to be consistent with the International EIP Framework and demonstrate its implementation in the Fuzhou New Industries Zone. Disbursement Summary (in USD million) Source of Funds Net Commitment Disbursed Balance % Disbursed IBRD 200.00 20.50 179.50 10.25 i The World Bank China: Jiangxi Eco-industrial Parks Project (P158079) IDA -- -- -- 0 Grants -- -- -- 0 Policy Waivers Does this restructuring trigger the need for any policy waiver(s)? No @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate ii The World Bank China: Jiangxi Eco-industrial Parks Project (P158079) TABLE OF CONTENTS I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING ........................................................................................1 II. DESCRIPTION OF PROPOSED CHANGES ....................................................................................................................4 III. PROPOSED CHANGES ................................................................................................................................................5 IV. DETAILED CHANGE(S) ...............................................................................................................................................5 The World Bank China: Jiangxi Eco-industrial Parks Project (P158079) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. Background. China: Jiangxi Eco-industrial Parks Project (“The Project”) was approved by the World Bank’s (WB) Board of Executive Directors on June 18, 2020, and became effective on October 16, 2020. The Project Development Objective (PDO) is “To strengthen Jiangxi’s institutional and regulatory framework for eco- industrial parks (EIP) to be consistent with the International EIP Framework and demonstrate its implementation in the Fuzhou New Industries Zone.” 2. Proposed level 2 restructuring involves revision to the IBRD loan disbursement percentage for Components 2 and 3, and modification to implementation arrangements under Component 1. This will be the first restructuring of the Project. 3. Progress towards the Achievement of the PDO is rated Moderately Satisfactory (MS). The PDO is highly relevant to the World Bank Group China Country Partnership Framework for the period of 2020-2025 (Report No. 117875-CN). It specifically aligns with Engagement Area Two, which aims to promote green development with a focus on Objective 2.1: Facilitating the Transition to a Lower Carbon Energy Path, Objective 2.2: Reducing Air, Soil, Water, and Marine Plastics Pollution, and Objective 2.5: Promoting Low-Carbon Transport and Cities. Furthermore, the Project actively supports the CPF’s overarching objectives of strengthening policies and institutions and addressing regional and global public goods. The PDO is also aligned with China’s commitment to the Paris Agreement, which includes achieving carbon emission peaking by 2030 and carbon neutrality by 2060. Given the potential significant contribution of industrial sector to carbon emissions reduction , Jiangxi Eco-industrial Parks Project can play a pivotal role in this process. The decision to discontinue activities in S3 plot (discussed in paragraph 8(c)) aligns with the State Government directives for compact urban landuse. The FNIZ-PMO has accepted the WB recommendation to optimize the design of the buildings on the other three land plots (S1, S2, and S4) which would not compromise the PDO achievements and expected outputs under Component 2. The Project is on-track to achieve its PDO, albeit with only limited results achieved up to date. 4. Overall Implementation Progress (IP) is rated Moderately Unsatisfactory, reflecting accumulated implementation and disbursement delays, caused by the three years of lockdowns due to Covid-19 which went into effect shortly before the approval of the Project in July 2020. The Project is now in its fourth year of implementation since the loan became effective, with US$20.5 million of the loan funds disbursed as of today. Nevertheless, implementation has significantly accelerated during this fiscal year. Two civil works and eight Technical Assistance (TA) contracts are being implemented out of a total of eighteen contract packages under the latest procurement plan. The contract for renewable energy (PV) system has been signed and is ready for implementation pending meeting the roof conditions of green buildings under the civil works contracts. With an additional civil works contract for plot S2 and three remaining TA contracts planned to be awarded in July 2024, the pace of implementation and disbursement is expected to accelerate further. Loan disbursements are estimated to achieve US$25 million by the end of FY24, and US$35 million by December 2024. Contract commitments are expected to reach US$105 million in July 2024, and all IBRD loan of US$200 million is expected to be committed by the end of calendar 2024. Upgrade of IP rating to Moderately Satisfactory will be considered at the end of FY24 based on the progress achieved at that time. Implementation progress by component is summarized below. Page 1 The World Bank China: Jiangxi Eco-industrial Parks Project (P158079) 5. Component 1 Description: Provincial-level EIP Standard, Monitoring Platform and Regulatory Framework (US$2 million, IBRD loan US$2 million). Component includes four activities: (1) Establishing a pioneering eco- industrial park (EIP) performance management system for Jiangxi Province; (2) Upgrading Jiangxi Province’s institutional and policy framework for EIPs to accelerate the decoupling of industrial growth and environmental impact, while sustaining and/or enhancing economic competitiveness and investment attractiveness; (3) Carrying out a detailed assessment for the FNIZ and at least three other IPs in Jiangxi to identify the investments and reforms needed to improve resource efficiency, reduce pollution, and meet the new provincial EIP standard to be developed under the Project; and (4) Enhancing capacity building and project management efforts. 6. Component 1 Status: The provincial EIP performance management system has been established with support from TA financed by the IBRD loan. All industrial parks will be connected to the system which will monitor their performance indicators in line with the EIP framework. TA continues to support activities led by the Industrial Parks Division (IPD) of the Jiangxi Provincial Development and Reform Commission (JDRC), which include site surveys, analytical work, training, and other capacity building activities to enhance the capacity of JDRC and inform the daily operation of IPD. 7. Component 2 Description: EIP Demonstration and Zero-waste Initiatives (US$252.44 million, IBRD loan US$184.88 million). This component supports the development and construction of EIP demonstration and zero-waste pilots in four land plots, including a smart EIP management center, to support park management functions on environmental quality and energy efficiency monitoring, e-government and financial services, research and development (R&D), and conference and exhibition areas; and mixed-use green incubators and neighborhoods, comprising rentable smart production spaces for automated production, green innovation R&D centers, and other auxiliary facilities. 8. Component 2 Status: (a) Plot S1: A smart EIP management center and two public parks. The overall planning design of plot S1 was approved by Fuzhou Municipal authorities on April 26, 2024. Feasibility Study Report, Preliminary Design Report, and Bidding documents are scheduled to be approved by JDRC before June 12, 2024, August 31, 2024; and September 30, 2024, respectively. International Competitive Bidding is expected to be completed by the end of December 2024. (b) Plot S2: Mixed-use green incubators and neighborhood. The National Competitive Bidding for this construction is expected to be launched in late May 2024 and be completed by the end of June 2024. (c) Plot S3: Mixed-use green incubators and neighborhood. It was agreed that the construction on this land plot will be dropped from the Project. The loan funds of US$48 million initially allocated for this construction are reallocated to upscale the activities on land plots S1, S2 and S4 in line with the government policies aimed at optimizing urban land utilization and promoting compact land development. FNIZ has been working on design optimization in observation of green building standards EDGE for the three plots to avoid compromising the achievement of PDO. This reallocation and design optimization will also contribute to the increased availability of loan funds. (d) Plot S4: Mixed-use green incubators and neighborhood. Construction commenced in Q4 of 2023 under two civil works contracts (for the total of CNY344.6 million or about US$50 million). The completion rate of the two contracts is currently 25 and 10 percent, respectively. 9. Component 3 Description: Nature Based Solutions and Eco-system Services Restoration (US$12.63 million, IBRD loan US$9 million). Component finances upgrading of two public parks close to the land plot S1. The Page 2 The World Bank China: Jiangxi Eco-industrial Parks Project (P158079) upgrading includes pollution reduction and water quality improvement in two existing lakes, creation of public spaces for recreational and sports activities, ecological conservation and restoration, ecological education, and promotion of tourism around the water bodies. A canal connecting the lakes to Fu River will also be built to replenish lake water during the dry seasons. 10. Component 3 Status: Implementation progress under Component 3 has accelerated, although it is still behind the schedule. The approval for the land transfer from agriculture land to state-owned construction land was obtained and the approval of the land allocation will be in August 2024. The supplementary Environmental Impact Assessment is currently under preparation and is scheduled to be completed and approved by May 31, 2024, and June 30, 2024, respectively. The construction design is expected to be completed by June 30, 2024. The bidding process for the civil works contract with national competitive bidding method, under the Component 3 will be initiated in August 2024. 11. Component 4 Description: Technical Assistance, Capacity Building and Project Management (US$4.12 million, IBRD loan US$4.12 million). Component finances 10 TA contracts to support project implementation and enhance the capacity of the client in transforming FNIZ into ecological industrial park. Component also finances the incremental costs of project management, as well as study tours and training of stakeholders on topics that are relevant to the Project. 12. Component 4 Status: Seven contracts are now under satisfactory implementation with consultants providing inputs which are being incorporated in Project implementation. Three remaining contracts are expected to be signed by the end of June 2024. 13. Other Project Ratings and Compliance. (a) Environmental Safeguards. The Project follows the World Bank’s environmental safeguards policies and compliance is currently rated Satisfactory. The Environmental Management Plan agreed at appraisal has been implemented in full. (b) Social Safeguards. The project follows the World Bank’s social safeguards policies and compliance is currently rated Satisfactory. All required land acquisition and physical/economic resettlement activities have been successfully concluded. There are no legacy issues with the cancellation of the activities in S3 plot. For the ongoing subprojects, the affected people have been provided full compensation and no complaints have been raised. (c) Procurement. Procurement is rated Moderately Unsatisfactory due to delays compared to the original plan. Major activites have been entered into the STEP, resulting in the bulk of the loan amount being accurately reflected in the ongoing and planned activities. (d) Financial Management (FM). FM is rated Satisfactory, with no significant FM findings and all interim financial reports and audits cleared. Cumulative counterpart funds totaling CNY123.36 million have been disbursed, adequately supporting project financing. (e) Compliance with Legal Covenants. Compliance with the Project’s legal covenants is Satisfactory, with all covenants duly met and upheld. B. Rationale for Restructuring and Risks Assessment 14. Increase in the Loan disbursement ratio from 73 percent to 100 percent retroactively from October 16, 2020, for activities under components 2 and 3. As the pace of construction accelerates, to alleviate the fiscal Page 3 The World Bank China: Jiangxi Eco-industrial Parks Project (P158079) pressure on the local government and maximize the utilization of loan proceeds, FNIZ PMO proposed increase in the loan disbursement ratio from the current 73 percent to 100 percent for the activities associated with these components. This change will apply retroactively from the loan effectiveness date of October 16, 2020, with an estimated retroactive amount US$2 million. This will also accelerate the loan disbursement and is essential to secure the timely completion of all contracts by the Project closing date of December 31, 2026. 15. Proposed adjustment is based on increased availability of loan funds due to the (i) relocation of construction activities from land plot S3 to land plots S1, S2 and S4 and corresponding optimization of funding; (ii) agreement to finance the contract for photovoltaic system for green energy (about CNY30.7 million or US$4.24 million) under Component 2 with the counterpart funds; (iii) savings of about US$20 million or around 27% of the cost estimates from two awarded civil works contracts, incurred due to the competitive bidding process; and (iv) appreciation of US dollar to Chinese Yuan. 16. Changes to the implementation arrangements under Component 1. Implementation arrangements for Component 1 were not clearly outlined in the project documents at the onset of the Project, resulting in the lack of clarity in the roles and responsibilities of the Provincial Project Management Office (PPMO) and the IPD of JDRC in terms of the overall coordination of component implementation and leadership in mainstreaming component deliverables in policies and regulations related to industrial parks in the Jiangxi province. This led to suboptimal collaboration between project implementing entities and consultants providing inputs on the key aspects of reforms as well as slow uptake of their recommendations. 17. The responsibilities of the concerned divisions within the JDRC in relation to project implementation will be explicitly defined and restructured by amending the Project Operations Manual (POM). The JDRC and WB have agreed during the Mid-Term Project Review that while the PPMO shall continue to coordinate and be responsible for the overall implementation of Component 1 as provided in the Project Agreement, IPD shall play greater role in leading and coordinating technical work consistent with IPD’s institutional mandate, performed by the TA consultants. As IPD holds administrative authority over industrial parks in Jiangxi Province, IPD shall 1) coordinate data collection exercises in selected industrial parks to facilitate the implementation of TA; 2) provide guidance to the pilot industrial parks in implementing the actions aligned with the international EIP framework; 3) take a more active role in reviewing TA deliverables and utilize TA results to inform its decision-making, policy formulation, and regulatory reforms toward eco-transformation of EIPs in Jiangxi; 4) lead the deployment and commissioning of the EIP monitoring platform, ensuring effective application of TA results in selected industrial parks of Jiangxi Province. 18. Risks Assessment. Overall Risk is currently rated Substantial. Proposed restructuring will not affect the Overall risk rating or ratings of individual risks. Risk ratings will be reassessed at the end of FY24 based on the progress achieved and the outlook at that time. II. DESCRIPTION OF PROPOSED CHANGES 19. Change to the IBRD financing rate from 73 percent to 100 percent for all activities under Components 2 and 3. Category (1) – Goods, works and non-consulting services in the Withdrawal Table in Section III.A of Schedule 2 to the Loan Agreement (Loan Number 9119-CN) will be amended accordingly. This change will apply retroactively from the loan effectiveness date of October 16, 2020. Page 4 The World Bank China: Jiangxi Eco-industrial Parks Project (P158079) 20. Change to Disbursement Estimates. The project’s disbursement estimates will be updated and adjusted to reflect the change in the loan disbursement rate. See Section IV for the details. 21. Changes to Institutional Arrangements under Component 1. Updated and clarified responsibilities of IPD will be reflected in the POM subject to the World Bank no objection. @#&OPS~Doctype~OPS^dynamics@restrhybridsummarychanges#doctemplate Summary changes III. PROPOSED CHANGES Operation Information Proposed Changes Operation Information Proposed Changes Disbursements Estimates Yes Reallocations Yes Disbursements Arrangements Yes Institutional Arrangement Yes Development Objective No Loan Closing Date Extension No Safeguard Policies Triggered No Loan Cancellations No ISDS No Financial Management No MFD/PCE No Procurement No Results No Implementation Schedule No Risks No Legal Covenants No Conditions No Implementation Modalities No DDO No Clients No Appraisal Summary No Components No @#&OPS~Doctype~OPS^dynamics@restrhybriddetailedchanges-disclose#doctemplate IV. DETAILED CHANGE(S) COSTS & FINANCING Private Capital Facilitation Is this an MFD-Enabling Project (MFD-EP)? Page 5 The World Bank China: Jiangxi Eco-industrial Parks Project (P158079) Is this project Private Capital Enabling (PCE)? LOANS Reallocations IBRD-91190-001 Cancellations (if any): New Allocation: Currency: USD 0.00 0.00 Financing % (Type Total) Category Expenditure Current Actuals + Proposed No. Category Allocation Committed Allocation Current Proposed 1 GDs,Works and non- 193,880,000.0 1,765,184.60 193,880,000.0 73.00 100.00 CSs; 0 0 2 CSs, IOC and TRN; 6,120,000.00 819,466.12 6,120,000.00 100.00 100.00 Total 200,000,000.0 200,000,000.0 0 0 Expected Disbursements (in US $) (Absolute) Original Estimation at Preparation Actual Year Revised Estimation (Approval Package – 18 Jun 2020) FY2020 0.00 0.00 0.00 FY2021 15,720,000.00 0.00 0.00 FY2022 17,430,000.00 1,000,000.00 1,000,000.00 FY2023 37,900,000.00 0.00 0.00 FY2024 41,850,000.00 25,000,000.00 19,504,128.02 FY2025 36,670,000.00 50,000,000.00 0.00 FY2026 33,670,000.00 60,000,000.00 0.00 FY2027 16,810,000.00 64,000,000.00 0.00 Page 6