Innovating Water and Sanitation Services in China’s Rural Areas

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The World Bank’s Board of Executive Directors today approved a loan to China for Euro 89.10 million (US$100 million equivalent) to improve rural water supply and sanitation services in Sichuan Province through a public private partnership.

“This project will support improved water supply and sanitation services for more than 200,000 residents in rural areas in Sichuan,” said Martin Raiser, World Bank Country Director for China. “It will contribute to domestic and global public goods by protecting the environment through reduced discharge of untreated wastewater into the tributaries of the Yangtze River. The project also promotes a more transparent service and financing model through a public-private-partnership, which is performance-based and focuses on improved service delivery to customers. This is a new solution in rural areas, with potential demonstration effects in other parts of China and beyond.”

Access to water supply and sanitation services remains a challenge in many rural areas in China. In the project area, only 73 percent of rural residents have access to piped water supply; and only 15 percent of rural domestic sewage is collected and properly treated. Local governments in these areas often lack the financial means as well as the technical and managerial capacity for administering and delivering water and sanitation services. Well-designed public private partnerships are a way to improve such service delivery in China, while addressing fiscal challenges.

The Sichuan Water Supply and Sanitation Public Private Partnership Project will be implemented in selected peri-urban and rural areas of Jingyang District of Deyang City in Sichuan Province. The project will establish a modern water supply and sanitation utility through a 25-year performance-based investment and management contract, which will be signed between the Jingyang District and an experienced operator. The selection of the operator will be conducted through a competitive bidding process and in line with international best practices. The new utility will be required to provide quality services, which will be regularly assessed through customer satisfaction surveys and other feedback mechanisms. The local government will also receive technical assistance to effectively regulate the operator.

The project will finance water supply and sanitation infrastructure, including water treatment plants and pipelines, sewer networks and wastewater treatment plants, and household service connections. Nearly 235,000 residents are expected to benefit from these improvements.

The project will leverage commercial debt and equity, combined with the World Bank’s financing, and design a roadmap for tariff adjustments to improve operational cost recovery for sustainable rural water supply and sanitation services.

The project was prepared by a joint team of the World Bank and IFC, the World Bank Group’s private sector arm. It draws on both international practices and lessons learned from China’s own experience. It will be the first World Bank-financed public private partnership project in the water sector in China.

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