MANILA, PHILIPPINES - A US$120 million loan will help reduce environmental pollution to improve the quality of life for about 2.2 million people in Wuhai and Bayannur municipalities in the Inner Mongolia Autonomous Region, the People's Republic of China (PRC).

The funds will be used for new gas and heating supplies that will conserve energy and reduce pollution, as well as wastewater treatment facilities to protect water resources.

Large boilers will be installed to replace 396 small coal-fired boilers in eight areas -Dengkou, Hangjinhouqi, Linhe, Wuhai, Wulatehouqi, Wulateqianqi, Wulatezhongqi, and Wuyuan. Gas transmission and distribution systems will also be provided to replace the use of liquefied petroleum gas and coal.

In Wulateqianqi and Wulatezhongqi, treatment plants and a sewage network will be built to improve wastewater treatment. In addition, staff in relevant government agencies will be trained.

Recent rapid economic growth in China has led to worsening environmental pollution and ecosystem degradation. For instance, rising incomes and home ownership in urban areas have increased demands for gas and heating. Inner Monglia, in particular, has air pollution problems due to heavy reliance on coal as its primary fuel, especially for urban heating.

The region also generated 0.75 billion m3 of wastewater in 2004, only 44% of which was treated, the rest was discharged into the Yellow River and Wuliangsuhai Lake. Municipal wastewater is considered a major contributor to the pollution of China's rivers and lakes.

"Demand for gas, heating, and water supply for domestic and industrial use in Inner Mongolia has been increasing, imposing great pressure on its limited resources," says Siew Fing Wong, an ADB Senior Financial Specialist for Energy.

"Improved economic performance will not be sustainable unless there is an immediate response to the worsening trend of air and water pollution."

ADB's loan will cover 36% of the project's total estimated cost of $330.4 million. The loan carries a 25-year term, including a 5-year grace period. Interest will be determined based on ADB's LIBOR-based lending facility.

The balance will be financed by a $175.4 million equity from the project's implementing agencies and $35 million in domestic loans. The Government of Inner Mongolia is the executing agency for the project, which will be carried out over about 4.5 years.

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