Cleaning Up Water for Harbin, People's Republic of China

MANILA, PHILIPPINES (11 March 2003) - ADB is helping to provide a cleaner, more reliable water supply to the 3 million residents of the major Chinese city of Harbin through a loan of US$100 million equivalent approved today.

The Harbin Water Supply Project will improve long-term public health and promote urban development by tackling the city's water supply and water quality problems.

The country's seventh largest city and capital of Heilongjiang Province, Harbin currently receives its raw water from the Songhua River, which is severely polluted by untreated or partially treated wastewater discharged from upstream industries.

In related activities, ADB is helping to reduce pollution in the Songhua River and to put into the operation trans-jurisdictional provisions of the Government's Water Pollution Prevention and Control Act.

"The Harbin project will provide a clean and reliable source of water, reduce the incidence of waterborne disease and provide increased water supply and lifeline tariffs to the poor," says Sangay Penjor, an ADB Senior Financial Analyst.

If action is not taken, it is projected that the daily water deficit will reach 450,000 cubic meters in Harbin by 2005.

To meet this shortfall, a mid-size 356 million cubic meter reservoir will be built at Mopanshan, on the upper reaches of the Lalin River, about 175 km from the city.

Other major project components are a tunnel and river outlet works, water pipeline to Harbin, and treatment plant, and rehabilitation of the distribution system.

These works will meet the demand for high-quality treated water through till 2010. The reservoir system will have storage capacity to support a second phase of development to meet Harbin's needs up to 2019.

The project is expected to create at least 800 permanent jobs to operate the facilities, and 3,500 jobs during the five-year construction period.

When project water starts to flow in 2008, separation of the distribution system will be complete, so that the reservoir water will supply residential areas and the Songhua River will continue to serve industry.

Tariff reforms will ensure full cost recovery, while institutional strengthening will promote efficient operation and maintenance of the new system.

Tariff increases are expected to raise about US$70 million of a US$119.9 million equity contribution to the total project cost, which is estimated at US$399.5 million. Some US$179.6 million will come from domestic loans.

"The funding of the project directly from tariffs is a major reform in line with ADB's Water Policy and will have a demonstrable effect on water tariff reforms both in the PRC and the rest of Asia," Mr. Penjor points out.

"However, tariff increases will be waived for the poorest segments of society, estimated to number about 325,000, who will also get free connections and access to water where the supply has been limited."

ADB's loan comes from its ordinary capital resources, with a 25-year term, including a grace period of five years. Interest is determined in accordance with ADB's LIBOR-based lending facility.

The executing agency for the project, which is due for completion by end-2007, is the Harbin Municipal Government.