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Seminannual Report on Project Administration and Technical Assistance Implementation for the Period Ending 30 June 1999 : Country Implementation Highlights
China, People's Republic ofThe number of ongoing loans increased to 48 with the approval of five loans and the closing of three, during the first half of 1999. Four loans were rated as partly satisfactory in terms of implementation progress and four in terms of development objectives, while two were rated unsatisfactory in terms of implementation progress. Two loans approved during the second half of 1997 and two loans approved during 1998 (one during the first half and one during the second half) were declared effective. Another five loans approved during the second half of 1998 were signed during the period and are awaiting effectiveness. Of the five loans approved during the reporting period, three have been signed and are awaiting effectiveness, and two are yet to be signed. Generally, physical implementation of the project portfolio is proceeding on schedule. Two projects underwent minor changes in scope while three underwent changes in implementation arrangements. The wide-ranging reform of the government structure to remove bureaucratic interference in economic activities and streamline government functions should improve transparency and expedite project processing and implementation. The major reorganization and consolidation of government departments and functions, approved by the National People's Congress in 1998, involves the consolidation of the number of ministries from 40 to 29 and downsizing the government bureaucracy by 4 million civil servants. Many of the functions and employees of the former line ministries have been spun off into state-holding corporations in key sectors. The Government's detailed plans for shifts of authority and functions were not finalized until the end of 1998 and implementation of consequent changes to provincial and local administrations was delayed. Changes in institutional arrangements and approval authority should have a substantial positive impact on ongoing and future Bank operations. Despite the overall satisfactory portfolio performance, implementation difficulties affected a few projects. The annual CPRM identified portfolio management issues such as the (i) shift of the Bank's target to interior provinces with institutions that are weaker and have less experience in dealing with aid agencies than the EAs on the east coast; (ii) delays in procurement in the power sector; (iii) poor commercial performance of State-owned enterprises in industrial and agro-industrial projects; (iv) problems in implementing large-scale resettlements; (v) delays in submission of required progress reports; and (vi) delays in loan signing and effectiveness. The Bank is continuing to provide assistance in strengthening the Government's institutional capacity, particularly in the areas of public procurement and the contracting industry. Financial management, including data collection and management reporting, is generally weak and needs strengthening. Consequently, more staff time or consultants input is needed during project processing to examine in detail the financial management capacity of EAs of proposed projects and to develop their financial management and reporting systems. Contract awards were only $387.2 million, or 79 percent of the semiannual projection of $491.1 million, and 46 percent of the annual projection of $848.7 million. This was due to lower than expected contract awards in all the sectors, but especially in agriculture and rural development, and water supply and urban development sectors. Disbursements of $320.8 million represented 108 percent of the semiannual projection of $297.7 million and 50 percent of the annual projection of $641.4 million. This was due to the larger than expected disbursements from all sectors except agriculture. There were no ongoing program loans. The disbursement ratio, however, decreased from 12.6 percent as of 30 June 1998 to 10.9 percent as of 30 June 1999 against the annual projection of 13.4 percent and the Bankwide average of 11.9 percent due to the increase in the undisbursed loan balance at the beginning of the year. Net resource transfer also markedly declined from $230.5 million as of 30 June 1998 to $181.0 million due to large loan service payments. Audited accounts were due for 33 loans; compliance was met for 26 loans. Compliance was delayed by less than six months for 6 loans and between 6 and 12 months for 6 loans. Compliance with environmental covenants was met in 18 of 48 ongoing loans and was ongoing for 30 loans. Compliance with social covenants was met for 12 loans, and was ongoing for 28 loans. Compliance was not met in the case of one loan and was not applicable to the remaining seven loans. Data on the PRC are summarized in Tables 25 and 26.  
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