Revitalizing Northeast China and Promoting Investment Workshop in Harbin

Toru Shibuichi
Country Director
People's Republic of China Resident Mission
Asian Development Bank

Distinguished participants, ladies and gentlemen, on behalf of the Asian Development Bank, it is my great pleasure to participate in this important forum as an associate and present the keynote address on Revitalizing Northeast China and Promoting Investment. I wish to congratulate our hosts - the Ministry of Finance, the Heilongjiang Provincial Government, the Office of Revitalizing Northeast of the State Council, and the World Bank - for successfully organizing this important forum in Harbin City and for the excellent arrangements.

China's transition from a centrally planned to a market economy has been remarkable. Per capita income has increased significantly over the last 20 years and the incidence of poverty has reduced drastically. China's economic growth has been impressively strong and steady, driven by growing integration with the world economy and market-building reforms. China would be recognized as one of the world's great development success stories. However, China's transition is still ongoing with some great challenges ahead such as maintaining economic growth while protecting the environment and balancing regional development through promoting growth in the western and central provinces and revitalizing the northeast provinces.

ADB has actively participated in the development of the Northeastern provinces of China spanning a period of more than ten years. During these years ADB has financed 19 investment projects and 21 technical assistance (TA) projects in this region, covering water supply and wastewater treatment, environmental improvement, road development and power transmission, for $2.7 billion, and $11.8 million, respectively.

Harbin City, the site for this workshop, is one of the larger metropolitan areas located on the shores of the Songhua River. The Songhua River is considered a "mother river", as it provides water for industries, agriculture and human consumption. It is one of the seven major river basins of China and is the third longest river in China after the Yangtze and Yellow Rivers, running through the Provinces of Jilin and Heilongjiang and the Inner Mongolia Autonomous Region.

Ladies and gentlemen, when he presided a meeting last Friday, 13 January, Premier Wen Jiabao said "water and land resource management and environment protection are the major strategic issues for revitalizing the industrial belts". He also stressed that the water quality deterioration tendency, especially along the Songhua River and Liohe River, must be resolutely curbed. ADB appreciate Premier's critical comments on water and environment issues about the Songhua River. Yes, in fact, many experts, including those of ADB, had earlier recognized that proper management of water resources and environmental pollution would be two very important issues that would be directly linked to successful and sustainable economic development. Now, many experts consider these two factors as the most crucial to further successful economic development in China and are highly relevant to the Northeastern provinces.

The Songhua River is seriously polluted and is now acknowledged by the State Environmental Protection Administration as being one of the four most polluted basins in the country. Pollution in the Songhua River is impairing both natural resources and economic development within the region. The pollution levels are high in relation to both conventional pollutants such as organic pollution, nutrients and heavy metals. and micro pollutants, some of which are known to be toxic to both animal and human life. These are largely due to continuous discharge of untreated domestic sources of wastewater. The water quality has reached the level where it is unsuitable to sustain current water uses and the unique natural resources downstream of the Songhua River Basin and the San Jiang Plain. The recent accidental pollution spill on the Songhua River has resulted in further short-term adverse impacts on aquatic life and the security of domestic water supply. Additionally, the Songhua River Basin is the major sub-basin of the Heilongjiang/Amur international river system, impacting on conditions downstream particularly in the Russian Federation and in the Sea of Okhotsk.

In the last five years Songhua River water management has become a long-term focus of ADB assistance. ADB supported Songhua river flood damage rehabilitation and flood management project, and associated wetland protection in the San Jiang Plain. Besides these, ADB has also supported the Harbin Water Supply Project with a loan of $100 million. The Project responded to the problem facing Harbin City by the development of an alternative clean drinking water source. ADB has also supported the Jilin Water Supply and Sewerage Development Project with a loan of $100 million, directly addressing pollution control in the Songhua River Basin. Since the preparation of the Harbin Water Supply Project the importance of the Songhua River Basin water pollution issues has become part of a continuing policy dialogue between the ADB and the PRC Government. With the uncertainty about the extent of the Songhua River Basin pollution and its clean-up, ADB has provided a technical assistance grant to study the situation in the Songhua River Basin and to find appropriate mid- and long-term responses to the Songhua River Basin pollution.

The ADB-financed $1 million Songhua River Study, which has been completed, was designed to focus on Government priorities for the Songhua River Basin. The main objective was to support the Government in the development of the Songhua River Basin Management Plan that would be incorporated into the 11th Five Year Plan with the context of the North East Revitalization Strategy.

The Study enjoyed an extended level of cooperation and coordination among Central and Provincial Governments, including the Ministry of Water Resources, the Song Liao River System Protection Leading Group, and the three northeast provincial governments; ADB and the consultant. We would like to take this opportunity to thank the Government again for their support to the Study.

The key outputs from the TA, which were well received by all the stakeholders, include:

(i) The development of a long term vision for the Songhua River Basin. This consists of a strategic plan encompassing the identification of water quality objectives and targets, reforms and strengthening of the existing river basin and pollution control management practices;

(ii) Strengthening and developing the capacity of key organizations responsible for pollution control and management at both the river basin and regional level;

(iii) Identification of knowledge gaps relating particularly to non-point sources of pollution, water quality assessment and water quality inventories; and

(iv) The development of the long-term strategic investment plan for the Songhua River Basin, which includes the identification of the prioritized strategic investment plan totaling almost RMB29 Billion Yuan to be implemented over the next 15 years.

An Immediate Action Plan, or Songhua River Basin Environmental Revitalization Program has been defined suitable for implementation during the 11th Five Year Planning period. The total investment amounts to $ 2.0 billion including proposed external lending support of about $ 1 billion. The Investment Program is divided into two phases, proposed to start in 2007 and 2009. Phase 1 is assigned highest priority with implementation as soon as possible.

Phase 1 of the Investment Program includes a long term programmatic component, building capacities and facilitating necessary reforms. The physical investment component covers domestic wastewater systems, an industrial wastewater treatment fund and point source pollution monitoring. All of the subprojects are fully identified with up to half of the feasibility studies completed.

Technical and financial support for the implementation of the Investment Program has been proposed on the basis of an innovative series of loans and grants that could be provided through ADB's recently approved Multitranche Financing Facility. The Multi-tranch Financing Facility is similar to a stand-by credit line whereby the ADB Board would approve a loan amount from $500 million to $1.5 billion to be disbursed in 2-5 tranches. This would provide the borrower more flexibility in delivering a medium- to long-term environmental management program such as those in large urban areas and river basins

The South China Morning Post of 24 November reported that "there is need to ensure that the (NE) provinces come to sensible arrangements that require cross-boundary coordination". This cross-boundary coordination is exactly what the Songhua River Study was designed for and successfully managed to develop a framework for. The disaster that recently happened now further underscores the importance of implementing the recommendations in the Study. Had it happened a few months later, SRB might have already been able to respond in a joint cross-boundary manner.

ADB involvement in the region and in the Songhua River Basin is on a long-term commitment basis. ADB is ready and equipped to continue its assistance to the Songhua River Basin and the revitalization of the northeast provinces. ADB is open to significant investments for inclusion in its forward program to comprehensively address pollution control in the Songhua River Basin.

I wish you all a very successful and fruitful workshop.

Thank you for your attention.