China, People's Republic of : Yunnan Lincang Border Economic Cooperation Zone Development Project

Education / Pre-primary and primary

Health / Health system development

Water and other urban infrastructure and services / Other urban services - Urban flood protection - Urban sanitation - Urban solid waste management

Remote location and high poverty levels. Lincang Prefecture is situated in the remote southwest region of Yunnan Province on the border with Myanmar, and is characterized by significant urban and rural poverty. Per capita gross domestic product in the prefecture reached CNY21,967 in 2016 up 10.6% over 2015, however the annual disposable income of urban residents was CNY22,901 per capita, well below the People's Republic of China (PRC) average. The counties of Cangyuan Wa and Zhenkang are officially designated as national poverty counties, and are home to a large share of the prefecture's urban poor. Many Myanmar nationals live and work in these counties, which are located on the PRC-Myanmar border. Most are seasonal workers who increasingly secure manual jobs in factories established near the land ports and border cities of Lincang Prefecture. Many people from Myanmar use hospitals and schools in the three project counties in preference to the poor municipal services available in Myanmar. Most of the seasonal workers belong to ethnic minorities, which account for a significant proportion of the population in the three counties: 93.9% in Cangyuan Wa County (Wa is the major ethnic group), 52.2% in Gengma Dai and Wa County, and 31.5% in Zhenkang County.

Regional cooperation and integration potential. Lincang Prefecture''s location and 300 kilometer (km) border with Myanmar provide the potential for it to become an important trade gateway by which the PRC can reach key Indian Ocean ports, and thereby facilitate access to South Asia, the Middle East, and Europe. Lincang Prefecture complements other border regions of Yunnan by enabling the growing trade between the PRC and Myanmar, which reached $9.7 billion in 2015, up from $3.6 billion in 2010. Much of the trade originates at the local level, and is conducted largely by private sector small and medium-sized enterprises (SMEs). In May 2017, the ministries of commerce of the PRC and Myanmar signed a memorandum of understanding for the joint development of border economic cooperation zones. Lincang Prefecture''s comparative advantage is its location-along the shortest route from Kunming to Myanmar''s Kyaukpyu Port, on the Bay of Bengal. Yunnan''s economic and social development strategies have highlighted the potential for the border areas of Lincang Prefecture to become an important manufacturing and logistics hub along an economic corridor currently being developed through major investment projects such as the Kunming-Mandalay highway and the freight railway linking Kunming to Kyaukpyu.

Development needs. Lincang Prefecture''s poor infrastructure and the low competitiveness of its second- and third-tier cities are hindering the enhancement of cross-border trade, and the achievement of sustainable economic and social development. The existing customs and quarantine inspection facilities at Qingshuihe, the prefecture's main land port, are inadequate to handle the border crossing point's growing trade volume. Further, the current trading market area and warehouses are outdated and in poor condition, affecting the quality of logistical services provided to local traders and SMEs. A similar situation exists in the town supporting the land port. Qingshuihe''s urban road network is inadequate for current residential and commercial needs and the lack of road capacity makes urban areas difficult to access, causing economic losses and safety concerns for road users and pedestrians. Access to basic utilities is limited-26% of households lack access to clean piped water and 29% are not connected to the sewerage system. Municipal solid waste (MSW) management capacity is limited, sorting facilities are lacking, and collection systems are basic, resulting in considerable environmental pollution and general nuisance. Qingshuihe is crossed by the Nanting River, which lacks flood alleviation infrastructure; some areas experience seasonal flooding, causing significant economic losses. Limited customs and logistical facilities in the city and its land port inhibit the activity of local enterprises and traders, slowing the flow of goods across the border. In addition, the prefecture's border counties of Cangyuan Wa, Gengma Dai and Wa, and Zhenkang have outdated social services (e.g., schools and hospitals), and are unable to serve growing populations of local urbanrural residents, and of Myanmar migrants.

Lincang Border Economic Cooperation Zone. As a first step in addressing constraints to cross-border trade, as well as economic and social development in Lincang Prefecture, on

23 September 2013 the PRC''s State Council approved the establishment of a national-level border economic cooperation zone that aims to (i) eliminate bottlenecks created by inadequate infrastructure, (ii) promote cross-border trade and investment to improve living conditions of residents, (iii) promote sustainable regional economic and social development, and (iv) strengthen neighborly cooperation with Myanmar. The Lincang Border Economic Cooperation Zone (LBECZ) is comprised of several core industrial zones covering 3.47 square kilometers and located in the counties of Cangyuan Wa, Gengma Dai and Wa, and Zhenkang (including a tier 1 national port in Qingshuihe). To boost socioeconomic benefits, the LBECZ Management Committee has devised plans to develop 200 square kilometers of adjacent land in State Council-approved core industrial zones, which will provide complementary commercial and residential development areas; and additional industrial, logistics, and trading capacity. In light of the security situation in Myanmar, the LBECZ is instrumental in building cooperation dialogue with authorities in Myanmar (nationally and in Shan State) to enhance the development of the economic corridor beyond the PRC.

Strategic fit. The development of the LBECZ is supported by the national and provincial strategic frameworks for urban development and RCI. The PRC''s Thirteenth Five-Year Plan for National Economic and Social Development, 2016-2020 and the National New-Type Urbanization Plan, 2014-2020 both call for the development of small and medium-sized urban centers in key strategic border areas of the PRC, and establishment of border economic cooperation zones. Similar focus for the PRC is the development of border areas and the enhancement of cross-border cooperation to promote connectivity and strengthen economic partnerships in the spirit of open regionalism. Additionally, RCI constitutes an important means to increase integration with the regional and global economy, and is highlighted as a priority in the Thirteenth Five-Year Plan. In 2016, the State Council approved a list of key border areas and trade ports, and identified actions for their development, while the governments of the PRC and Myanmar began an ambitious cooperation program in 2014 intended to develop a 'PRC-Myanmar corridor from Kunming to the sea port of Kyaukpyu, in which the LBECZ plays a key role. The corridor includes highway and railway links, as well as key urban and logistic centers. Many sections of the corridor in both countries are already under construction, with others in the planning and design stage.

Urban development and RCI are integral to Yunnan Province''s Thirteenth Five-Year Plan, which emphasizes (i) strengthening cooperation with the GMS countries, (ii) participating in major international economic corridors linking Yunnan and the GMS, and (iii) serving as the gateway for the PRC's southeast region. However, Yunnan Province is constrained by its low urbanization rate; despite rapid development in the Kunming area, many of the province's small and medium-sized cities suffer from inadequate urban infrastructure and limited connectivity. Through the GMS, Yunnan has been prioritizing the development of economic corridors, while highlighting the importance of cross-border cooperation as a way to enhance the benefits for neighboring countries, particularly Myanmar. Yunnan''s RCI action plan includes priority investments for development of the PRC-Myanmar corridor through Lincang Prefecture, which are intended for financing by various sources, including the PRC and Yunnan governments, multilateral development banks, and the private sector.

The project (i) supports Strategy 2030 of the Asian Development Bank (ADB) in making cities more livable, fostering RCI, and accelerating progress in gender equality; (ii) is in line with (a) ADB''s urban and water operational plans by promoting green, competitive, and inclusive cities; and (b) ADB''s operational plan for RCI by strengthening connectivity between economies; (iii) is consistent with ADB''s country partnership strategy for the PRC, 2016-2020 in terms of facilitating inclusive urbanization and enhancing RCI; (iv) is included in the country operations business plan for the PRC, 2018-2020, which references inclusive development of small cities; (v) is aligned with the latest strategic priorities of the GMS, and (vi) is in support of the achievement of several sustainable development goals of the United Nations related to health, education, sanitation, economic growth, and sustainable cities.

Continuity of development initiatives and lessons learned. The project is part of ADB''s continuous engagement to assist Yunnan in achieving green and sustainable urban development, and support the PRC in enhancing RCI. The project design incorporates lessons learned from previous ADB-financed urban development projects in Yunnan, as well as in small and medium-sized cities in the PRC. These lessons include enhanced implementation arrangements with integral capacity support from the Yunnan provincial authorities and improved design of project components in order to further support urban-rural integration. The project will also build on ADB''s experience from recent urban development and RCI projects in strategic border areas of the PRC on key issues such as construction and management of logistics and industrial parks and on the role of cross-border migrant workers.

Value addition of ADB assistance. By designing a multisector project that includes urban, social, and trading infrastructure, ADB has strengthened a holistic approach that enhances competitive, green, and inclusive development in the small and medium-sized urban centers of this border region. The project is thus aligned with the livable cities vision endorsed by both the PRC and ADB. Throughout the project implementation, ADB will provide recommendations to LBECZ regarding their master plan review process to introduce best practices in urban planning and development. Although the project is being implemented entirely in the PRC, ADB has ensured cross-border spillover effects by designing each component so that Myanmar nationals will also be beneficiaries. This is particularly the case for (i) trading markets and logistics parks, which will accommodate farmers and traders from Myanmar; and (ii) schools and hospitals, which will benefit large numbers of children and other family members from Myanmar. Output 4 of the project (on institutional capacity development) includes features that complement the infrastructure components, thereby enhancing their RCI impact. Some of these features, such as those focusing on SMEs and technical and vocational education and training, will be designed to enhance the capacity of entrepreneurs and workers from Myanmar. The project will also be effectively mainstreaming gender equality through its social infrastructure and services components. For instance, the hospitals will have specialized maternity and obstetrics and gynecology departments promoting safe motherhood and women's reproductive health, and the schools will have gender-inclusive design features and will be staffed by at least 60% women.

Economic growth potential for LBECZ and border areas of Myanmar enhanced; benefits of regional cooperation and integration in LBECZ and border areas of Myanmar realized; and living conditions and public health of residents of LBECZ and border areas of Myanmar improved

Competitiveness of urban centers, logistics and industrial parks, and land ports in project counties and LBECZ enhanced

Cross-border trade infrastructure improved

Integrated urban environment infrastructure in Mengding and Qingshuihe National Port areas improved

Social infrastructure and services improved

Institutional capacity of involved agencies improved

1. Three civil works packages were awarded and ongoing;

2. One ICA package was awarded;

3. One civil works package was awarded and ongoing;

4. Three start-up consultants were mobilized in 2019, three consulting firms were recruited and mobilized.