Document of

The World Bank

Report No. 13570-KO

STAFF APPRAISAL REPORT

REPUBLIC OF KOREA

WASTE DISPOSAL PROJECT

NOVEMBER 14, 1994

Infrastructure Operations DivisionCountry Department IEast Asia and Pacific Region

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CURRENCY EQUIVALENT(As of October 31, 1994)

Currency Unit = Won

Won 1,000 = US$1.25US$1.00 = W 800

WEIGHTS AND MEASURES

1 centimeter (cm) = 0.394 inches1 meter (m) = 39.37 inches1 kilometer (km) = 1,000 meters or 0.62 miles1 square kilometer (km2) = 0.38 square miles1 hectare (ha) = 10,000 square meters or 2.47 acres1 cubic meter (m3) = 1,000 liters or 264 US gallons1 liter/capita/day (lcd) = 0.26 US gallons per capita per day1 metric ton (t) = 1,000 kilograms or 2,205 pounds

ABBREVIATIONS AND ACRONYMS

BOD = Biochemical Oxygen DemandEIA = Environmental Impact AssessmentEMC = Environmental Management CorporationFRR = Financial Rate of ReturnGovernment = Government of the Republic of KoreaKTP = Kunsan Specified Waste Treatment PlantMOE = Ministry of Environment

PCG = Pusan City GovernmentPSM = Pusan Sewerage Management OfficeSMP = Sewerage and Drainage Master PlanSSA = PSM Sewerage Special AccountSWA = KTP Account

SWI = Specified Waste IncineratorWTP = Wastewater Treatment Plant

FISCAL YEAR

January 1 to December 31

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KOREA

WASTE DISPOSAL PROJECT

Contents

Page No.Loan and Project Summary i

I. THE BACKGROUNDA. Waste generation 1B. Environmental initiatives 1C. Waste disposal policies 1D. Waste management organization 2E. Previous Bank lending 3F. Rationale for Bank involvement 3

II. MANAGEMENT OF WASTE IN THE PROJECT AREAA. Project area 4B. Economic activity and generation of waste 4C. Waste management 5D. Waste recycling and reuse 6E. Demand for the project 6

III. THE PROJECTA. Objectives 7B. Description 7C. Status of preparation 7D. Cost estimate 7E. Financing plan 8F. Implementation 9G. Land acquisition 9H. Procurement 10I. Disbursement 11J. Environmental impact 11K. Supervision 12

IV. THE IMPLEMENTING AGENCIESA. Implementing agencies 13B. Organization and management 13C. Accounting and auditing 13D. Billing and collection 14E. Staffing and training 14

V. FINANCIAL ANALYSISA. Rate structure 15B. Fixed assets and revaluation 15C. Pusan sewerage special account 15D. Kunsan specified waste treatment plant account 17E. Monitoring and evaluation 18

VI. PROJECT JUSTIFICATIONA. Project benefits 19B. Rate of return 19C. Least-cost solution 20D. Affordability 20E. Project risks 21

VII. AGREEMENTS REACHED AND RECOMMENDATION 22

ANNEXES

1. Management of liquid and solid waste in the project area 232. Project description 313. Project cost estimate 354. Implementation schedule 485. Project implementation action plan 496. Estimated schedule of loan and project disbursement 507. Environmental impact assessment 528. Project supervision plan 609. Pusan sewerage special account: financial statements 6310. Kunsan waste treatment account: financial statements 6611. Assumptions for financial projections 6912. Pusan monitoring indicators 7213. Kunsan monitoring indicators 7314. Financial rate of return 7415. Documents and data available in the project file 76

ORGANIZATION CHARTS

1. Pusan City Government 782. Ministry of Environment 793. Environmental Management Corporation 80

MAPS

IBRD No 26341: Project location in Pusan 81IBRD No 26471: Project location in Kunsan 82

This report is based on the findings of October 1994 appraisal mission comprisingMessrs. Jaroslav Kozel, Finn Nielsen, Jack Fritz, John Nicholson, John Pettigrew andMs. Manida Unkulvasapaul. The project was reviewed by peers Messrs. Anil Somani, andAli Memon, and cleared by Messrs. Callisto E. Madavo, Director, EAl and Jeffrey S.Gutman, Chief, EAlIN.

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KOREA

WASTE DISPOSAL PROJECT

Loan and Project Summary

Borrower: Republic of Korea.

Implementing Pusan City and Environmental Management Corporation.Agencies:

Beneficiaries: Pusan City and Ministry of Environment.

Poverty: Not applicable.

Amount: US$75 million equivalent.

Terms: 15 years, including 5 years of grace, at the Bank'sstandard variable interest rate.

Commitment Fee: 0.75% on undisbursed loan balances, beginning 60 days aftersigning, less any waiver.

Onlending Terms: US$60 million to Pusan City on the same terms as the Bankloan, including foreign exchange and interest risks, plus0.05% administrative charge.

Financing Plan: See para. 3.6.

Net Present Value: Not applicable.

Staff AppraisalReport: 13570-KO.

Maps: IBRD No. 26341 and IBRD No. 26471.

KOREA

WASTE DISPOSAL PROJECT

I. THE BACKGROUND

A. Waste generation

1.1 Korea's industrialization, improved living standards and rapid urbanpopulation growth, has resulted in the generation of large quantities of variouswaste. Wastewater is projected to grow from 11 million m3/d in 1990 to 19million m3/d in 2001, solid waste from 145,000 t/d to 250,000 t/d, and specifiedwaste' from 3,000 t/d to 12,500 t/d. Construction of wastewater treatmentplants started only in the late 1970s but at a slow pace. Between 1985-90 thevolume of raw wastewater increased by 3 million m3/d while treatment capacityincreased only by 1.1 million m3/d causing further deterioration of the qualityof water in rivers, and adversely influencing the quality of some water supplies.Solid waste treatment consists primarily of disposal into landfills with overhalf of their capacity being filled up by 1994. They were established many yearsago and are simple dumps which are difficult to manage in a sanitary manner.There are few treatment facilities for specified waste as attention to itsenvironmental impact started to cause concern only in the early 1980s.

B. Environmental initiatives

1.2 The Government recognized the environmental deficiencies some time agoand created institutions, along with regulations, to control waste disposal. ThePollution Control Division established in 1973 became the EnvironmentalManagement Bureau in 1977 and, following increasing concern about theenvironment, it was upgraded to the Ministry of Environment (MOE) in 1990. In1991, the Basic Environmental Law, was passed to deal with specific problemsincluding water preservation, hazardous substance control and solid wastemanagement. Under the Law, the responsibility for management of the environmenthas been delegated to newly created departments in local governments.

C. Waste disposal policies

1.3 The protection of the country's rivers as sources of drinking wateris an important Government concern and in 1990 it issued the National WastewaterTreatment Plan aimed at preventing contamination of water sources, and preservingthe natural ecosystem. The action oriented Plan addresses the task by (a)relocating industries to eliminate pollution from upper catchment areas reservedfor water supply; (b) providing wastewater treatment plants (WTP) for industryand livestock farms; and (c) substantially reducing residential pollution byconstructing wastewater treatment plants. The Plan, now under implementation,

1 Korea identifies residential and non-toxic work-site waste as generalwaste. Specified waste includes 22 categories of toxic work-site waste such asacids and alkalis, oils, organic solvents, asbestos, pesticides, polychlorinatedbi-phenyl (PCB), and sludge containing heavy metals. In many countries these arecalled hazardous.

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aims at reducing the pollution reaching the rivers expressed as the BiochemicalOxygen Demand (BOD), from 960 t/d in 1990 to 450 t/d in 2001. Such an ambitiousgoal will be achieved not only with new wastewater treatment plants but withstricter regulation for the quality of their effluent and application of advancedtechnologies, such as reuse of treated wastewater. This project would supportconstruction of a treatment plant using such technology.

1.4 The solid waste policy was set out in 1993 in the National WasteDisposal Plan; it anticipates involvement of both private and public sectors,with the latter responsible for (a) policy and management, (b) filling in areaswhere the private sector faces difficulties which it cannot reasonably control,such as resistance to disposal sites, and (c) disposal of dangerous categoriesof specified waste. The goals for waste management are reducing the volume ofwaste, increasing recycling, permitting only sanitary landfills, and increasingincineration of waste to reduce the burden on landfill sites.

D. Waste management organization

1.5 The management of sewerage systems, treatment and disposal ofwastewater and disposal of general and specified waste is the responsibility oflocal governments supported by MOE. MOE is the key agency for protecting theenvironment, providing standards and guidelines for implementing environmentallaws, monitoring compliance, and reviewing environmental impacts of majorprojects. Its policy, regulations, planning, and project review functions arecentralized while the administration of the environmental programs, andmonitoring and enforcing functions are decentralized to regional offices. It alsoincludes two institutes and two corporations, the Korea Resources Recovery andReutilization Corporation (KRC) and the Environmental Management Corporation(EMC).

1.6 KRC, established in 1980, has now over sixty collection stationscountrywide collecting and recycling plastics, paper, iron, glass, tires and oil.EMC, established in 1987, manages a number of incinerators, sanitary landfills,industrial wastewater plants and specified waste plants. It also providestechnical assistance and loans to small and medium enterprises to help them buildenvironmental facilities for on-site recycling, and on-site treatment of wasteusing new clean technologies.

1.7 The collection and treatment of municipal wastewater is handled solelyby local governments; with regard to general waste they handle only about 35%,the remainder is collected, treated and disposed of by the private sector, whoseshare is expected to grow. Most specified waste is reused, treated at source,or disposed of at privately operated plants. The Government provides plants fortreatment of the heaviest concentration of pollutants, which represent a verysmall portion of the total volume of specified waste. To ensure satisfactory andsafe disposal of such highly polluted specified waste, MOE plans establishmentby 2001 of at least one specified waste disposal plant in each of itsenvironmental regions. Such plants will integrate intermediate treatment withfinal disposal and their incineration capacity is expected to reach 1,800 t/d in2001. Construction of an integrated specified waste disposal plant would besupported by this project.

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E. Previous Bank lending

1.8 The Bank helped finance five water supply projects, of which four arecompleted, and two sewerage projects; it also prepared a sewerage sector study.Through its involvement, the Bank helped to expand water supply services in 73municipalities, to establish national policies for water tariffs, to introducecorporate planning, computerized accounting systems, leak detection technology,and to improve leakage control programs and the organization of water supply andsewerage services. The last water supply project under implementation willprovide services to one city and four municipalities. The two sewerage projectsare also under implementation and will improve the environment in four cities,reduce health hazards and continue Bank support for technological andinstitutional advancement in the sector.

1.9 Bank evaluations indicate that the completed projects substantiallycontributed to institutional development (PPAR Nos. 8174 and 11950) and that allproject goals were achieved or surpassed (Report No. 11062 Annual Review onEvaluation Results -- OED, August 1992); they also state that well definedobjectives, with regard to project targets and commitment of responsibleagencies, contributed to the success. Based on these lessons, the proposedproject's objectives focus on key physical and institutional goals. Projectpreparation is at a satisfactory stage and the implementing agencies firmlysupport the project.

F. Rationale for Bank involvement

1.10 The project is consistent with the Country Assistance Strategy (CAS)discussed by the Board on December 23, 1993. The CAS and the graduation plan forKorea identified the need to improve the environment, which involves managingwastewater and solid waste, as an area in which the country would benefit fromBank participation. The Bank's past involvement in the water supply andwastewater sector puts it in a advantageous position to support innovations inmanagement of environmental projects and focus greater attention to waterpollution issues. The proposed project would help the Government expand andupgrade a major wastewater treatment plant. In addition, the project would linkwater conservation with pollution prevention by introducing the reuse of effluentfrom a wastewater treatment plant. Although new to Korea, this practice has beensuccessfully applied in several developed countries.

1.11 The specified waste component would represent a new initiative by theBank in Korea. A lack of technological expertise and operational experience inspecified waste management is acknowledged and the Government welcomes Banksupport in introducing advanced waste treatment equipment. Under the project,the Bank would support the Government long-term plans for managing specifiedwaste and assist in creating public facilities that would improve the treatmentof the most dangerous types of waste. The construction of these facilities wouldbe an important step in implementing MOE's national specified waste strategy.

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II. MANAGEMENT OF WASTE IN THE PROJECT AREA

A. Project area

2.1 The project would be located in Pusan and Kunsan. Pusan is Korea'ssecond largest city and major seaport on the southeast corner of the Koreanpeninsula 440 km from Seoul. Kunsan city lies on the west coast 220 km south ofSeoul. Pusan is an important cultural and commercial center and its governmentattaches great importance to improving the local environment. In Kunsan a newmajor industrial estate is being developed and attention is given to protectingthe environment. Selection of these localities for the project was influencedby local commitment to progressive environmental policies: Pusan is taking aleading role in the reuse of treated wastewater effluent, and Kunsan would havea model specified waste plant which would be replicated elsewhere.

B. Economic activity and generation of waste

2.2 Pusan's harbor and city center lie east of the Nakdong river and itsurban development extends along a narrow coastal plain into mountains to thenorth. Its population has tripled from about 1.3 million in 1963 when the thenmunicipality was upgraded to special city status, to about 4 million in 1993 andis projected to reach nearly 5 million in 2001. Its administrative area alsogrew from 360 km2 in 1963 to 526 km2 in 1994. Pusan has more than 40,000factories employing about 600,000 people in light industries such as chemicals,textiles and leather as well as heavy industries including metallurgy,engineering and shipbuilding.

2.3 The Janglim catchment area which extends along the eastern bank of theNakdong river, is one of four main wastewater catchments in Pusan. At presentthe area is fairly evenly divided between residential and industrial development.The population was about 840,000 in 1991 and is projected to increase to 1.1million by 2001. There is nearly 20 km2 of mixed industry but this is expectedto decrease substantially by 2001 in response to Pusan's land use policy underwhich industry is being moved out of Janglim across the Nakdong river and thevacated land is used for residential development.

2.4 Kunsan city lies in the northwestern corner of Chunbuk province on thesouth bank of the Kum river mouth. Its population of 350,000 will grow to450,000 in 2001 through both immigration and expansion of the city area from 355km2 to 495 km2. The area will be increased by incorporation of neighboringdistricts and also through land reclamation. Kunsan city as well as the wholeChunbuk province have relatively recently become the target for Government plansfor major industrial expansion. Just for that purpose, land has been reclaimedon the south side of the Kum river and a phased development of 43 km2 is inprogress. All of the 6 km2 first phase has been taken up by heavy and lightindustry and development of the 16 km2 second phase has started.

2.5 In 1992, local governments of Chunbuk province collected and disposed10,100 t/d of general solid waste from a population of 5.6 million and 5,200industrial and commercial establishments. In the same year industries generated150 t/d of specified waste of which 120 t/d were treated at source by three majorindustrial establishments and 30 t/d were disposed of by the private sector. It

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is estimated that the quantity of specified waste will increase to 170 t/d and320 t/d in 1997 and 2001, respectively.

C. Waste management

2.6 Sewerage services in Pusan are managed by the Pusan SewerageManagement Office (PSM) of the Construction Bureau. The sewerage system ismainly of the combined type, carrying both rainfall runoff and wastewater. Ithas been developed over many years and initially was for drainage purposes; ittherefore includes open channels along streets as well as buried conduits. Underthe sewerage master plan (SMP) there is an ongoing program of interceptor sewerconstruction to convey wastewater to treatment plants and thus achieve a massivereduction in surface water pollution with consequent benefits to public health.Two major plants (Suyeong and Janglim) are already in operation and a third, atNambu (previously named Yongho), is being constructed under a Bank supportedproject. The Janglim plant has a treatment capacity of 330,000 m3/d and inaccordance with the SMP the project would increase Janglim's capacity to 615,000m3/d by 2001. The third and final stage of Janglim development under the SMPwould increase the capacity to 711,000 m3/d in 2011.

2.7 Under the existing system, maintenance of combined drainage isdecentralized to the city districts. Wastewater treatment, interceptors andsewage pumping stations, are operated and maintained by the treatment plant unitsheaded by directors. Accordingly, Janglim is and will continue to be operatedand maintained by the Janglim director and staff under the overall supervisionof the PSM sewerage division (para 4.2). The division provides technicalguidance and, as required by the budgets of the respective WTPs, allocates fundsfrom the sewerage special account, managed by PSM. The existing organization issatisfactory (Chart 1).

2.8 Solid waste services in Pusan are provided by the Cleansing Departmentof the Environmental and Green Bureau. The department has three divisionsresponsible for: collecting and transporting waste; collecting and disposing ofnightsoil and septage; and operating the sanitary landfills and incinerators.Almost 35% of waste is collected and transported by private sector. Most of the4,800 t collected daily is disposed of at sanitary landfill; about 4% isincinerated or recycled. Nightsoil and septage are disposed of at sea.

2.9 Kunsan city is constructing a wastewater treatment plant for itsresidential wastewater as well as that from the adjacent industrial estates. Thefirst phase with a capacity of 200,000 m3/d will be operational in 1995. Furtherdevelopment during 2001-07 will increase capacity to 750,000 m3/d. General wasteis disposed of at a landfill operated by the city and located 8 km of the city.EMC is constructing and upon completion will operate an integrated specifiedwaste treatment plant about 10 km west of the city to treat and dispose ofspecified waste that will be generated in Chunbuk province, including the newindustrial estates in Kunsan. The waste disposal facility will include a securedlandfill and an incineration unit.

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D. Waste recvcling and reuse

2.10 Demand for water in Korea has increased to the point where it nowequals the annual rainfall run-off. As the amount available for consumptioncannot be increased to any significant degree, water resources have to beconserved and reuse offers an opportunity to reduce demand on the nation'sprimary water sources. Effluent from wastewater treatment plants can be polishedto a degree whereby, although not potable, it can be used by industry. Pusanwould be the first in Korea to offer substantial quantities of treated wastewaterfor industrial use.

2.11 Under the 1993 Comprehensive National Plan for Waste Disposal theroles of government, local government, businesses and individuals were placed inthe context of a policy aimed at environmental protection by reducing the volume,recycling and the appropriate treatment of waste. Nationally, residential wastedisposal figures for 1992 showed 8% of the total being recycled. In 1993,Pusan's cleansing department recovered for recycling only 30,000 t/y, or 2% oftotal collection. In response to the National Plan, Pusan intends to increaseits recycled proportion.

E. Demand for the project

2.12 Wastewater entering the Janglim WTP is already nearing the 330,000m3/d capacity and, as the interceptor sewer program progresses and connects upmore sections of the drainage area, flows are expected to increase to 615,000m3/d. Extensions to the plant are essential if unacceptable overloading is tobe avoided. In addition, there is a growing demand for water from already scarceresources and by introducing tertiary treatment, 615,000 m3/d can be madeavailable for industrial use. This would reduce the demand on the Nakdong sourceand would also make a like amount available for residential use which wouldotherwise be utilized by industrial consumers.

2.13 The Kunsan specified waste disposal plant would serve Chunbuk provinceand, in particular, the three development stages of the Kunsan industrialestates. The plant is a necessary facility to ensure satisfactory management ofmost hazardous waste substances generated in industries which would have seriousadverse impact on the environment if disposed of in an uncontrolled manner.

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III. THE PROJECT

A. Objectives

3.1 The key objectives are to support the Government in addressing inPusan city and Chunbuk province environmental, institutional and technologicalconcerns regarding wastewater and specified waste disposal; to reduce the healthhazards of surface and ground water contamination; and to promote the reuse oftreated effluent on a major scale.

B. Description

3.2 The project would have the following components:

(a) In Pusan, the second phase expansion of the Janglim wastewater treatmentplant (WTP) comprising the construction of: primary and secondary treatment unitsto increase its capacity from 330,000 m3/d to 615,000 m3/d; tertiary treatmentunits to treat the effluent for reuse as industrial water; 4.5 km of interceptorsewers; and two pumping stations;

(b) In Kunsan, the supply and installation of a specified waste incinerationunit (SWI) with a capacity of 60 t/d to burn waste generated in Chunbuk province.

3.3 The expansion of Janglim WTP would use an activated sludge processsimilar to the first phase; digested and dewatered sludge from both phases wouldbe disposed of at Senggok sanitary landfill. Tertiary treatment would entailflocculation, rapid upward flow filtration and disinfection. The pumpingstations would lift wastewater along newly constructed interceptor sewers. TheKunsan SWI would comprise of a rotary kiln incinerator and associated equipment;it would become an integral component of a comprehensive treatment and disposalplant including a secured landfill with leachate treatment, presently underimplementation. Consulting services to supervise construction of both componentsand training in managing SWI are also included. A detailed description of theproject is given in Annex 2, and the location of the proposed works is shown onmaps IBRD Nos. 26341 and IBRD 26471.

C. Status of RreRaration

3.4 The designs and bidding documents for the WTP in Pusan and thetertiary treatment would be completed in December 1994 and December 1995,respectively, by PSM assisted by consultants. The designs and draft biddingdocuments for the Kunsan component were completed in September 1994 by EMC andits consultants.

D. Cost estimate

3.5 The total cost, including physical and price contingencies, is W 218.6billion (US$273.3 million). Physical contingencies are estimated at W 8.6billion (US$10.7 million) or 4.5% of base costs, and price contingencies at W18.8 billion (US$23.6 million), or about 9% of base costs plus physicalcontingencies, and assume annual rates of inflation of 5% for local costs and2.2% for foreign costs for 1995 and thereafter. Cost estimates for WTP are based

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on detailed designs and bids received for on-going civil works and equipment andfor SWI are based on recent bids in Korea and elsewhere, increased to includetechnical assistance support by the supplier. Cost estimates are shown in Annex3 and summarized in Table 3.1.

Table 3.1: PROJECT COST ESTIMATES

Local Foreign Total Local Foreign Total Foreignas % of

---- Won billion--- -----US$ million ----- total

Treatment plants 70.83 52.15 122.98 88.54 65.19 153.73 42%Tertiary trtmt. 28.92 15.82 44.74 36.15 19.77 55.92 35%Implement. support 3.85 0.00 3.85 4.82 0.00 4.82 0%Land acquisit. 19.61 0.00 19.61 24.51 0.00 24.51 0%Base cost 123.21 67.97 191.18 154.02 84.97 238.98 36%Phys. contgencies 5.18 3.40 8.58 6.48 4.25 10.72 40%Price contgencies 14.61 4.23 18.84 18.27 5.29 23.55 22%Tot. project cost 143.00 75.60 218.60 178.76 94.50 273.26 35%Interest duringconstruction 16.63 8.84 25.47 20.79 11.06 31.85 35%Total financing

required 159.63 84.45 244.08 199.54 105.57 305.10 35%

E. Financing plan

3.6 The proposed Bank loan of US$75 million equivalent would finance 27%of the total financing required or 79% of the foreign exchange. At theGovernment's request, the Bank loan would finance only equipment and associatedmaterials. Civil works and project support would be financed locally through aUS$38.48 million loan from the Regional Development Fund, US$59.85 million loanfrom the Environmental Fund, US$19.45 million from the Pusan city generalaccount, US$100.23 million from internal cash generation, and US$12.10 millionfrom the Government through MOE's budget (Table 3.2). The financing plan wasconfirmed at negotiations.

Table 3.2: PROJECT FINANCING PLAN

Source Local Foreign Total % of Total----------US$ million--------

LoansIBRD 75.00 75.00 25%Regional devel. fund 38.48 - 38.48 13%Environmental fund 59.85 - 59.85 20%Capital contributionsMOE 12.10 - 12.10 3%Pusan general account 19.45 - 19.45 6%Internal cash 69.66 30,57 100.23 33%TOTAL 199.54 105.57 305.10 100%

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3.7 The borrower would be the Republic of Korea. The proposed Bank loan

would be for 15 years, including five years of grace, at the Bank's standard

variable interest rate. A part of the loan (US$60 million) would be onlent to the

Pusan city government on the same terms as the Bank loan, including the foreign

exchange and interest risks, plus 0.05% administrative charge. The execution of

subsidiary loan agreement between the Government and the Pusan city would be a

condition of disbursement for Pusan component. A separate project agreement

would be executed between the Bank and Pusan city with covenants on operational,

financial and monitoring aspects.

3.8 The remainder of the loan (US$15 million) would be passed on to MOE.

The foreign exchange and interest risks would be borne by the Government. MOE

would enter into Kunsan plant contract with EMC to build and operate the plant

under terms and conditions satisfactory to the Bank. These would include EMC's

obligation to proceed in accordance with the Bank's requirements on operational,

financial and monitoring aspects. The execution of the contract between MOE and

EMC would be a condition of disbursement for the Kunsan component.

F. Implementation

3.9 PSM would implement the Pusan component from January 1995 through June

1999 and EMC's solid waste treatment plants department would implement the Kunsan

component from January 1996 through June 1999. Consultants to assist with

supervision would be appointed for Pusan in January 1995 and for Kunsan in

January 1996. Their duties would include ensuring compliance with specifications

for works and goods, adhering to the construction schedule, testing and

commissioning completed works and preparing progress and other reports.

3.10 The project works are expected to be operating by June 1998 in Kunsan

and about one year later in Pusan; however, the test operation of new facilities

and some minor landscaping works would extend till December 1999. The

implementation schedule (Annex 4) is considered realistic since PSM, which would

implement the greater of the two components, has experience with projects of

similar size and composition, and the custom-made Kunsan component would be

carried out by a contractor with single responsibility for both civil works and

installation of equipment. In addition, as part of the contract, the contractor

would provide about one year technical assistance to train EMC staff in

management of incinerator operations.

3.11 During negotiations both implementing agencies confirmed adherence to

implementation action plans defining the scope and timing of actions needed to

carry out the project successfully. The plans are available in the project file

and summaries of the plans are shown in Annex 5.

G. Land acquisition

3.12 The expansion of the WTP in Pusan would be located on 8 ha of land

reclaimed from the Nakdong river by Korea Water Resources Corporation in 1988

allocated for this purpose by the city land-use plan. Pusan has purchased the

plot and would take possession in early 1995. The plot acquisition does not

involve involuntary resettlement or related compensation issues.

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3.13 The specified waste treatment plant in Kunsan would be located on 10ha of land reclaimed by the Korea Land Development Corporation from the Kum riverin 1988 and purchased by MOE in 1991. It has never been used and its acquisitiondoes not involve involuntary resettlement or related compensation issues.

H. Procurement

3.14 Procurement arrangements are summarized in Table 3.3:

Table 3.3: PROJECT PROCUREMENT ARRANGEMENTS(US$ million)

Project element Procurement method N.B.F. TotalICB LCB Costs

Civil works 2.50 - 134.61 137.11(O)a/ - - (0)

Equipment 102.33 3.00 - 105.33(73.00) (2.00) - (75.00)

Impl. support 5.69 5.69Land acquisition - - 25.13 25.13

Total 104.83 3.00 165.43 273.26Loan total (73.00) (2.00) (75.00)

aZ Civil works associated with Kunsan incineratorNote: All amounts include contingencies and those in parentheses are to befinanced by the Bank. N.B.F. are items not-Bank-financed.

3.15 Civil works, (US$134.61 million), implementation support comprisinghiring of consultants for construction supervision (US$5.69 million), and land(US$25.13 million), would be financed locally and procured through localprocedures.

3.16 Contracts for the supply, installation and commissioning of equipment,estimated at about US$102.33 million, would be procured through internationalcompetitive bidding (ICB) using the Bank's Standard Bidding Documents (SBD).Contracts for the procurement of the custom-made incinerator in Kunsan would beprocured through a two-stage bidding procedure among single responsibility pre-qualified bidders. At Government request, locally manufactured goods would begranted a preference of 15%, or the amount of customs duties, whichever is lower.

3.17 Under the Pusan component, materials and equipment packaged inindividual contracts that do not exceed US$250,000 each, and in aggregate amountsthat do not exceed US$3.0 million, would be procured through LCB proceduresacceptable to the Bank.

3.18 Prequalification procedures and contracts for goods amounting US$1.0million equivalent or more shall be subject to prior review by the Bank. TheGeneral Procurement Notice was published in the Development Business on July 16,1994.

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I. Disbursement

3.19 The proceeds of the Bank loan would be disbursed against either 100%of foreign expenditures for directly imported equipment and materials, 100% oflocal expenditures (ex-factory) for locally manufactured equipment and materials,or 65% of local expenditures for other equipment and materials procured locally.Disbursements for equipment contracts of US$1.0 million or less would be made onthe basis of Statements of Expenditures (SOE). Supporting documentation forthese expenditures would be retained by implementing agencies, made available forreview by Bank supervision missions, and regularly audited (para 4.6). Twospecial accounts of US$3.0 million (Pusan special account) and US$1.0 million(EMC special account) would be established by Pusan city and EMC at commercialbanks to facilitate loan disbursement. The special accounts would be replenishedmonthly or whenever the available balance in the accounts dropped below 50% ofthe initial deposit, whichever occurred first.

3.20 Project implementation would extend over five years. Disbursementwould be completed and the loan closed on June 30, 2000. A schedule of estimateddisbursements as well as a profile of disbursement under previous Bank-assistedwater and sewerage projects are shown in Annex 6.

J. Environmental impact

3.21 The project has been designed with the key objective of improving theenvironment and, consequently, would have a strong positive impact. Expansion ofthe Janglim WTP would reduce contamination of water in the Nakdong river andimprove water quality near the discharge area. Construction of Kunsan SWI wouldrender harmless specified waste generated in Chunbuk province. The environmentalimpact assessments (EIA) of both components were approved by MOE and summariesmade available to the Board in September 1994. The EIAs, MOE approval andmitigation actions, summarized in Annex 7, were reviewed during appraisal andfound satisfactory.

3.22 The Janglim interceptor sewers and WTP would collect and treat 615,000m3/d of raw wastewater that would otherwise reach the Nakdong river upstream ofthe salinity barrage via numerous small streams and ditches. It would reduce thepollution by about 60 t/d BOD and 109 t/d SS of which 46% would be removed as aresult of the expansion of the Janglim plant under this project. The Kunsancomponent would provide treatment for 60 t/d of specified waste. This wouldaccount for 23% of the amount generated in Chunbuk province in 1997 and 13% in2001. (The balance would be treated at source or by private waste disposalcompanies).

3.23 The proposed measures to mitigate the major negative impacts duringconstruction of both components include appropriate foundation of structures;provision of adequate drainage with retention ponds; protection against dust,noise, vibration and odor. These requirements would be included in theconstruction contract. In respect of operations, for the Pusan component,tertiary treatment facilities with a capacity of 615,000 m3/d would reduceresidual pollutants and a program would be designed to monitor water qualityaround the discharge area. Facilities generating odor would be roofed and

12

deodorized and a green belt around the plant established. For the Kunsancomponent automatically monitored air pollution control equipment would beinstalled with the incinerator; gases would be treated by a wet-alkali scrubberand an electrostatic dust collector would remove particulate matter. These itemsof equipment have been incorporated in the design and would form part of thespecification of the incinerator. The Janglim WTP and Kunsan SWI have beendesigned to satisfy the stricter environmental standards effective from January1999. The mitigating actions and standards for quality of effluent and emissionsare satisfactory.

3.24 Operational monitoring for compliance with the EIA, includingtreatment performance and environmental impacts would be conducted by the PSM andthe EMC for their components. Compliance with standards would be monitored by theprovincial and city governments and enforced by MOE's regional offices. Toconfirm planning assumptions on performance and also to strengthen mitigatingplans, PSM and MOE (para 4.1) would prepare a one-year environmental monitoringprogram which would begin six month prior to the start of operations. Duringnegotiations, an agreement was reached that by June 30, 1997 and June 30, 1998,MOE and Pusan city, respectively, would implement an environmental monitoringprogram, satisfactory to the Bank, to collect and evaluate data on performanceand the environmental impact of each plant and, upon evaluation of results, eachwould prepare a plan to mitigate potential adverse impacts and submit the planto the Bank for review. A detailed description of environmental status and impactis shown in Annex 7.

K. Supervision

3.25 The proposed project would be supervised in the field semi-annuallyto review implementation progress, technical and financial matters, quality ofconstruction, compliance with loan covenants and environmental requirements, andto discuss any relevant matters with the Government and implementing agencies.Office supervision at headquarters would involve reviews of progress reports,procurement actions and preparation of various project related correspondence.Supervision by the Bank would require about 96 staff-weeks over the life of theproject, of which about 46 staff-weeks would be in Washington and 50 staff-weeksin the field. Supervision would require expertise in sanitary engineering, waterand air pollution control, incineration, and financial analysis.

3.26 PSM and MOE would forward to the Bank semi-annual component statusreports, various annual financial and audit reports, and, within six months ofproject completion, an evaluation report on project implementation. The proposedsupervision plan, and outlines for progress and for evaluation reports are shownin Annex 8. During negotiations the implementing agencies confirmed concurrencewith proposed content of progress and evaluation reports.

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IV. THE IMPLEMENTING AGENCIES

A. Implementing agencies

4.1 The Pusan component would be implemented by the Pusan Sewerage ManagementOffice (PSM) of the city's Construction Bureau and the Kunsan component by theEnvironmental Management Corporation on behalf of the Waste Management and RecyclingBureau of MOE. The implementing agencies have carried out similar projects and areexperienced in project implementation. Once construction is completed, PSM willoperate the WTP and EMC the specified waste treatment plant (para 3.8).

B. Organization and management

4.2 Pusan city government (PCG), led by the mayor, functions through a numberof bureaus each headed by a director-general who is responsible for control,planning, and budgeting. Construction and operation of network facilities aregenerally decentralized to the city's 12 districts and 231 sub-districts. TheConstruction Bureau consists of divisions and management offices, including the PSM.PSM's two divisions are responsible for engineering, operation, planning,administration and accounting. Construction management is centralized in theconstruction center. PCG's and PSM's organizations are shown in Chart 1.

4.3 EMC's executive director for engineering heads three departments forengineering, WTPs and solid waste treatment plants. The solid waste treatment plantdepartment, headed by a manager, supervises and controls design and construction ofspecified waste treatment plants. The Kunsan specified waste treatment (KTP),scheduled to start in 1995, will be headed by a plant manager. Operations oftreatment plants is the responsibility of the executive director for plantmanagement. MOE's and EMC's organizational structures are shown in Charts 2 and 3.

C. Accounting and auditing

4.4 PSM's and EMC's accounting and budgeting procedures are satisfactory.Pusan city budgets are prepared according to Government's guidelines and approvedby the city council. Districts prepare their own budgets, which, after beingapproved by the district councils, are forwarded to the city bureaus for budgetsupport. Budgets are divided into general and special accounts. General accountsprovide for the majority of city operations while revenue-earning activitiesincluding water supply, sewerage, and housing are organized as financiallyautonomous special accounts. All general and special accounts follow traditionalgovernment cash flow accounting. The PSM sewerage special account (SSA) keepsseparate accounts for WTPs and central office administration, consolidates its ownactivities with those of the districts at the end of each year, and makesadjustments to comply with accrual accounting principles. The SSA consolidated yearend accounts are independently audited. PSM will maintain the project accounts.

4.5 Under EMC's control and supervision, each plant keeps computerizedcommercially-based accounts for its own activities. Within 15 days of the end ofeach month, accounts are sent to EMC head office to be checked and consolidated. TheKunsan specified waste treatment plant accounts (SWA) will be audited by auditorsacceptable to the Bank. Project accounts will be kept by EMC.

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4.6 During negotiations, assurances were obtained that the financialstatements of SSA and SWA would be audited by auditors acceptable to the Bank. Suchstatements and audit reports would also include a separate opinion on Statement ofExpenditures and the Pusan and EMC special accounts for the Bank loan, and would besubmitted to the Bank within six months of the close of each fiscal year.

D. Billing and collection

4.7 In agreement with the operating agencies the Pusan water agency (PWA)prepares monthly computerized combined bills for water supply, sewerage, and solidwaste. In 1994 there are 321,000 sewerage customer accounts. Meter reading is doneby the PWA site offices, and the results forwarded to PWA headquarters for billpreparation and updating the accounts receivable ledger. Bills are hand deliveredand are paid at banks, which transfer receipts into the individual agencies bankaccounts every two weeks. Payment is due within one month of delivery, and interestpenalties are charged on overdue accounts. If the combined bill is not paid withintwo months, PWA takes appropriate action including disconnection of the watersupply. Summaries of billings and collections, as well as overdue accounts, aresent to the districts twice per month. Accounts receivable at the end of 1993 wasequal to 45 days sales, and the bad debt provision for 1993 was one percent ofrevenues, both of which are acceptable.

4.8 Preparation of bills for the collection, and disposal of specified wasteis done at the individual plant, and this procedure will be adopted by SWA on thecommencement of its operation. The plant's or contractors' vehicles collect thewaste which is weighed and analyzed when it arrives at the plant. Tariffs are thenapplied to the waste content and details are recorded for month-end billings, whichitemize deliveries or collections from each customer during the month. Bills shouldbe paid direct to EMC within 25 days of the date of issue. Existing plants eachhave around 400 active customer accounts and have not experienced any bad debts.Monthly reports on billing are sent to EMC's head office by the middle of eachmonth. Accounts receivable for the specified waste plants at the end of 1993 wasequal to 30 days' sales, which is satisfactory.

E. Staffing and training

4.9 Staffing levels at PSM head office, WTPs, and district offices aresatisfactory. The present 280 permanent staff working on wastewater collection andtreatment is expected to increase to around 450 in 1999 when Nambu WTP and thesecond phase of Janglim WTP are in operation. MOE and MOHA hold training programsfor operational, technical, administrative, and accounting staff. All permanentemployees attend courses every year for two to three weeks, and additional specialtraining is provided after every five years of service.

4.10 Around 130 staff work at the existing specified waste plants, with 83 inthe technical and 47 in the general offices. EMC head office staff of 185 consistsof engineers, technicians and administrative employees. On-the-job training isprovided at the two plants, and all technicians receive annual training for one weekat the Government environmental training center. The Kunsan plant is expected tohave around 50 staff trained on the optimal operation of the facility, as well asmaintenance of the equipment. Also about 30 person months of overseas trainingwould be included in the SWI construction contract (para 3.10).

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V. FINANCIAL ANALYSIS

A. Rate structure

5.1 The Pusan sewerage tariff was introduced in 1985 based on an operationalcost estimate for six years, and remained unchanged until the end of 1993 when themultiple-year average tariff policy was abolished. In January 1994, the city councilapproved an increase of 9.9%, which raised the average sewerage rate to W 86.56/m3.Residential and commercial customers are billed at increasing block rates, based onmetered water consumption. Industrial, government and institutional customers arecharged at a fixed rate per cubic meter.

5.2 PSM annually reviews the levels of its sewerage charges to ensuresufficient revenues are generated to cover operating costs and depreciation, andprovide funds towards its capital expenditure program. To attain adequate levels ofcost recovery, PSM uses a cash generation target in its tariff calculation insteadof a rate of return on the value of fixed assets, due to the volatility of the valueof assets in Korea (for example, in the five year period to 1993 the value of landin PSM's asset register increased by 325%).

5.3 Charges for treatment and disposal of specified waste at plants operatedby EMC were first introduced in 1987 and would be adopted by KTP on commencement ofthe plant's operations. Tariffs are based on the method of treatment applied, whichinclude incineration, physical and chemical treatment, or landfill disposal. Tariffsvary, depending on the type, chemical composition, and calorific value of the wasteto be treated, and are set to cover operating costs including depreciation, acontribution to EMC head office costs, and, if required, compensation to adjacentresidents. The rates currently used were introduced in 1992, and requests fortariff adjustments proposed by EMC must be approved by MOE and EPB. Tariff policyrequires EMC to operate facilities without any Government subsidy.

B. Fixed assets and revaluation

5.4 SSA fixed asset register records details of all WTPs, pumping stations,interceptors, network, equipment and other assets, the value of which is recordedon the balance sheet. SSA fixed assets were revalued in 1993 and, to comply withfive year period between revaluation required for special accounts, should berevalued in 1998. PCG is responsible for ensuring that these assets are adequatelyinsured.

5.5 Following the construction of KTP, MOE will retain ownership of the plantand equipment, and the total cost of the plant construction will be recorded in itsasset register. EMC will operate the Kunsan facility on behalf of MOE, fully insurethe assets and maintain complete records of the assets it manages. These assetswould be depreciated in the SWA accounts, as the depreciation would be part of thecosts to be recovered by tariffs.

C. PSM sewerage special account

5.6 Past performance and present position. Since its inception, SSA'sfinancial performance has been satisfactory, as annual revenues have covered alloperation and maintenance costs, depreciation, and contributed to its investment

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program. Because SSA's sewerage tariffs remained unchanged from 1985 to the end of1993, revenues only increased in line with increased sewage volumes which have grownby 3% per annum since 1992. Depreciation increased in 1993 by over 50% followingthe revaluation of assets (para 5.4), and the effect was a fall in operating incomein 1993 by 33%. Internally generated funds financed around 45% of the 1992-93capital spending, while the rest was financed largely from local loans and equitycontributions from Pusan city and land developers.

5.7 Financial plan. SSA's capital spending requirements and financial planfor the 1995-99 project implementation period are shown in Table 5.1. The financialplan, including the Pusan city government contribution from its general account, theRegional Development fund and the Environmental fund loans, and their terms, wasconfirmed during negotiations.

Table 5.1: SSA FINANCIAL PLAN, 1995-99

Item Won billion US$ million %

SourcesGross internal cash generation 203.33 254.16 27Less: debt service 56.02 70.03 7Net internal cash generation 147.31 184.13 20Capital contributions

City general account 45.50 56.88 6Developers' contribution to WTPs 188.75 235.94 24Districts contributions-network 102.27 127.83 13

LoansRegional development fund 90.00 112.50 12Environmental fund 140.00 175.00 18IBRD - Nambu WTP 3.20 4.00 1IBRD - Janglim WTP 48.00 60.00 6

Total sources 765.03 956.28 100

RequirementsProposed project-Janglim WTP 194.10 242.62 25Interest during construction 25.04 31.30 3Project financing requirements 219.14 273.92 28Other WTP construction 468.24 585.30 61Network construction 102.27 127.84 13Others 10.19 12.73 2Change in working capital/cash -34.81 -43.51 -4

Total requirements 765.03 956.28 100

5.8 Future finances. SSA's financial performance should continue to besatisfactory throughout the projection period. The project would constitute about28% of SSA's estimated capital spending of W 800 billion between 1995-99. From 1995onwards, SSA will need to generate around 25% of its capital expenditurerequirements from internal sources to help finance its immediate and future

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investment needs. Financial projections for SSA to 2002 are shown in Annex 9.During negotiations, assurances were obtained that SSA would produce, for eachfiscal year starting in 1996, funds from internal sources equivalent to not lessthan 25% of the annual average of SSA's capital expenditure.

5.9 Between 1995 and 2002, SSA's revenues and operating income are expectedto increase by around 160%, and net income after interest expenses by 102%.However, net internal cash generation is only expected to increase by 27% over thesame period due to a substantial increase in debt service payments, from W 7.5billion in 1995 to W 35.6 billion by 2002. To adjust financing, the plan includedadditional loans of W 281 billion (82% local and 18% IBRD). SSA's current ratio isprojected not to fall below 3.3 during the period which is satisfactory.

D. Kunsan specified waste treatment plant account

5.10 Present position. The first phase of the sanitary landfill at the Kunsanspecified waste treatment plant is scheduled to open in 1995 when the firstfinancial transactions of income and expenditures would occur and be recorded in theSWA accounting system.

5.11 Financial plan. SWA's capital spending requirements and financial planfor the 1995-98 landfill and incineration project implementation period are shownin Table 5.2. The financial plan was confirmed during negotiations.

Table 5,2: SWA FINANCIAL PLAN, 1995-98

Item Won billion US$ million %

SourcesGross internal cash generation 4.11 5.14 14Less: Debt service 0.85 1.06 3Net internal cash generation 3.26 4.08 11Capital contributions - MOE 13.65 17.06 47Loans - IBRD 12.00 15.00 42

Total sources 28.91 36.14 100Requirements

Proposed project 24.51 30.64 85Interest during construction 0.43 0.54 1Project financing requirements 24.94 31.18 86Landfill construction (balance) 1.14 1.42 4Change in working capital 2.83 3.54 10

Total requirements 28.91 36.14 100

5.12 Future finances. SWA's financial performance during the 1995-2002 periodis set to produce sufficient revenue to cover operating expenses that includedepreciation, a contribution towards EMC headquarter costs, and adequate funds tocover all compensation payments. To achieve this target, SWA tariffs will need tobe periodically adjusted. SWA's projected income statements, balance sheets,

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statements of sources and application of funds for 1993-2002 are listed in Annex 10;the underlying financial assumptions are given in Annex 11. During negotiations,assurances were obtained that SWA would produce, for each of its fiscal yearscommencing 1996, total revenues equivalent to not less than the sum of SWA's totaloperating expenses including operation and maintenance costs and depreciation, andtotal indirect expenses paid to EMC not to exceed 25% of total revenues and wouldtake all necessary measures including adjusting the structure or levels of itstariffs in order to meet such requirements.

E. Monitoring and evaluation

5.13 Performance would be monitored against the implementation schedule (Annex4) and the project implementation plan (Annex 5) while the implementation agencies,operational, financial and managerial performances will be assessed against themonitoring indicators in Annex 12 and 13. During negotiations, assurances wereobtained that PSM and MOE (para 4.1) would send the Bank no later than March 31 andSeptember 30 of each project year, commencing on March 31, 1996, semi-annual projectprogress reports, including revised project cost estimates and implementingschedules and no later than September 30 of each project year, commencing onSeptember 30, 1996, annual updated financial projections.

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VI. PROJECT JUSTIFICATION

A. Project benefits

6.1 The project would contribute to sustained environmental development,provide consumers and industries with better services, and a general improvementin the population health and welfare. In Janglim, the intercepter sewers and WTPwould collect and treat 615,000 m3/d of raw wastewater that would otherwise flowvia numerous small streams into the Nakdong river upstream, and into the estuarydownstream of the salinity barrage. The pollution reaching the river would bereduced by about 28 t/d of BOD and 50 t/d of SS as a result of expansion of theplant under this project (para 3.22). This would reduce the health risk forcommercial fishing, water sports and recreation from contact with polluted water,improve air quality by eliminating unpleasant odors, improve the city's overallenvironment, and protect beaches which are important for extensive tourism in thearea. The provision of tertiary treatment for up to 615,000 m3/d of watersuitable for industrial use would create additional benefits: first, it wouldreduce residual pollution by 5 t/d BOD and 6 t/d SS, and second, for any quantityof treated effluent used by industry, the Pusan fresh water sources would beavailable for residential use to the same extent.

6.2 The major benefits of KTP are clearly environmental. The plant wouldprovide intermediate and final disposal for the most hazardous wastes in asituation where the generators find it increasingly difficult to find safe andpublicly acceptable methods of treatment and disposal. The incinerator woulddispose of 60 t/d of specified waste which, in 1997, would represent 23% of thequantity generated throughout Chunbuk province. The immeasurable benefitprovided by the incinerator would be in the safe elimination of the waste insteadof it being scattered throughout the countryside, damaging the environment andendangering the public.

B. Rate of return

6.3 The economic rate of return has not been evaluated for followingreasons. The detailed information regarding various impacts of the presentpollution on water quality to current and potential users, including potentialdamage caused by inappropriate disposal of specified waste is not readilyavailable and the generation of such data is considered impractical. Also, themethodologies available for estimating the economic benefits which would resultfrom protecting or improving the quality of the environment have manylimitations.

6.4 The financial rate of return (FRR) of the Pusan component which inconstant prices relates the sewerage revenues to the capital and operating costof sewerage facilities, was computed to provide an indication of minimum economicreturn. The FRR, estimated at 5%, is considered adequate in light of thebeneficial nature of the project, and is considerably less than the economicrate. Non-quantifiable benefits are significant. In addition to improved healthand cleaner environment, the project is also beneficial for the expansion oftourism in the Pusan area. The sensitivity analysis assessing an increase in thecapital cost by 10%, and a one-year delay in project construction plus a 10Xincrease in operating costs would bring the FRR down to 3% which is adequate.

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Computation of the FRR, and assumptions used, are shown in Annex 14.

6.5 In case of the Kunsan component, the FRR assessment is to be appliedfor the entire specified waste treatment plant. Its financial viability andsatisfactory performance require that at a minimum, revenues should cover alloperating and maintenance expenses including depreciation. The financialdiscipline imposed is intended to encourage efficient management of the entity.The break-even covenant (para 5.12) imposes a zero FRR, and, therefore itscalculation is meaningless and not presented.

C. Least-cost solution

6.6 The design of the Pusan component represents the least-cost solutionfor expanding the capacity of Janglim WTP. The location of the plant, the phasingof its expansion, the treatment technology, and the alignment and design of thesewers were selected after evaluation of several alternatives during preparationof Pusan's sewerage master plan. The second phase expansion of the plant wouldbe essentially the same in the scale and type of treatment units to thoseconstructed in the first phase (para 3.3). The method of treatment (activatedsludge) is quite appropriate for large communities and for areas with a highpopulation density where the cost of land is at a premium. The provision of afiltration plant using flocculation, rapid upward flow filters and disinfection(para 3.3) represents the least-cost solution for improving the WTP effluent toa standard of quality suitable for industrial use.

6.7 Private waste disposal enterprises operating in the country have beenavoiding investment in plants handling most polluted specified waste essentiallybecause of fear that the public would prevent operation of the facility once theinvestment has been made. These circumstances have lead the Government, throughthe National Comprehensive Waste Disposal Plan (paragraph 1.6), to take theinitiative and establish integrated waste treatment plants in major industrialestates. It also decided that the pricing for treatment and disposal should notdeter generators from using treatment facilities, and has set tariffs to achievea break-even position, however, without any form of operational subsidy. KTP,as the first integrated specified waste treatment plant to be implemented underthe Plan, would use state-of-the-art technology to set standards for futurespecified waste treatment plants and to serve as a training facility. Its design,location and chosen technology represent the least-cost solution for the task.

D. Affordability

6.8 Charges for water supply and sewerage in Korea are reasonable, and donot impose an undue burden on household incomes. The average water supply tarifffor residential use is W 229.8 per cubic meter (US$0.29), and for sewerage is W86.5 (US$0.11). The total water supply and sewerage charge per capita equatesto less than one percent of average incomes. For the lowest income currentlyaround W 310,000 per month, and one wage earner per low- income household, thewater and sewerage charge at the new projected levels would represent less than4% of gross household income throughout the projection period. A measure of thewillingness to pay for sewerage services is that bills are paid within 40 daysof delivery, and the amount written-off as uncollectible is less than one percentof total billing.

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E. Project risks

6.9 Non significant risks are expected during implementation; at Jangliman almost identical treatment plant was constructed on an adjacent site whereground conditions are similar and the interceptor sewers and pumping stations tobe built in the catchment area do not present any unusual difficulties. In Kunsanthe Government has regular consultations with the public in the project area andintends to continue in this way during construction in order to maximize publiccooperation. The decision to execute both components within the planned schedulehas been taken and financing is being secured.

6.10 The possibility that the facilities may not be operated properlyposes a potential risk to the environment. However, monitoring instruments to beinstalled as part of the project, linked witn local vigilance and theGovernment's capacity to take legal action in response to negligence, would limitlong-term risks to a minimum.

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VII. AGREEMENTS REACHED AND RECOMMENDATION

7.1 During negotiations, assurances were obtained from the Government and thePusan city that:

(a) By June 30, 1997 and June 30, 1998 MOE and Pusan city, respectively, wouldimplement an environmental monitoring program, satisfactory to the Bank, tocollect and evaluate data on plants' performance and environmental impact and,upon evaluation of results, each would prepare a plan to mitigate potentialadverse impacts and submit the plan to the Bank for review (para 3.24);

(b) The financial statements of SSA and SWA would be audited by auditors acceptableto the Bank. Such statements and audit reports would also include a separateopinion on Statement of Expenditures and the special account for the Bank loan,and would be submitted to the Bank within six months of the close of eachfiscal year (para 4.6);

(c) SSA would produce, for each fiscal year starting in 1996, funds from internalsources equivalent to not less than 25% of the annual average of SSA's capitalexpenditure (para 5.8);

(d) SWA would produce, for each fiscal year starting in 1996, revenues equal to notless than the sum of its total operating expenses, including operation andmaintenance costs and depreciation, and total indirect expenses not to exceed25% of total revenues, and would take all necessary measures includingadjusting the structure and levels of its tariffs in order to meet suchrequirements (para 5.12);

(e) Pusan city and MOE would send the Bank semi-annual project progress reports,including revised project cost estimates and implementing schedules no laterthan March 31 and September 30, of each project year, as well as their annualupdated financial projections no later than September 30 (paras 3.26 and 5.13).

7.2 During negotiations the following was confirmed: (a) adherence to theimplementation plans defining the scope and timing of actions needed to carry outthe project; (b) the SSA financial plan, including the Pusan city contribution fromits general account, as well as the regional development and environmental fundloans and their terms, and (c) the SWA financial plan (paras 3.11, 5.7 and 5.11).

7.3 The loan would be onlent in amount US$60 million equivalent to the Pusancity on the same terms as the Bank loan, including the foreign exchange and interestrisks, plus 0.05% administrative charge. Execution of subsidiary loan agreementbetween the Government and the Pusan city, and of Kunsan plant contract between MOEand EMC would be the condition of disbursement for the respective component (paras3.7 and 3.8)

7.4 Subject to the above assurances and conditions, the proposed projectconstitutes a suitable basis for a Bank loan of US$75 million equivalent, for aperiod of 15 years, including a grace period of five years, at the Bank's standardvariable interest rate. The borrower would be the Republic of Korea.

ANNEXES

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ANNEX 1Page 1

KOREA

WASTE DISPOSAL PROJECT

MANAGEMENT OF LIOUID AND SOLID WASTE IN THE PROJECT AREA

Project area

1. Pusan city lies in the south-east of the Korean peninsula; it is the second

largest city and principal sea-port. It's population has grown from 1.3 million in

1963 to about 3.9 million in 1990 and it is expected to grow to 4.8 million by 2001.

Due to boundary extensions and land reclamation, it's area has expanded from 350.3

km2 in 1963 to 529.4 km2 in 1989. Pusan is divided into twelve administrative

districts (Gu) and 231 sub-districts (Dong).

2. Kunsan city lies in the north-west of Chunbuk province on the south bank of

the Kum river 220 km southwest of Seoul. Its population of 350,000 will grow to

450,000 in 2001 through both immigration and expansion of boundaries. Its area of

355 km2 will be increased to 495 km2 by incorporation of neighboring districts and

by land reclamation. The integrated specified waste treatment plant (KTP), is beingconstructed within the Kunsan city area in the second industrial estate which is

situated on reclaimed land on the south bank of the Kum river mouth, about 10 kmwest of Kunsan city center.

Economic activity

3. Pusan is Korea's gateway for international trade. It is also an important

manufacturing center with light industries such as chemicals, textiles and leather

as well as heavy industries including metallurgy, manufacturing and shipbuilding.Many of the businesses are small and those with fewer than 300 employees make up 90%

of the 600,000 people employed by manufacturing companies; about 2% is employed in

heavy industry, 37% in light industry and 61% in services.

4. Until recently Chunbuk province with two million population has had a minorshare in the country's growth but the Government is now implementing industrial

expansion in the region. In the Kum river mouth the Korea Land Development

Corporation is reclaiming land and providing serviced plots for a major complex of

three industrial estates located west and southwest of Kunsan, with total area ofabout 43 km2. The first estate (6 km2) has been completed with almost all plots

taken by heavy and light industries. The land for the second estate (16 km2) isbeing reclaimed in phases; services for industrial sites on the first phase werecompleted in 1993 and selling of plots is proceeding. Kunsan city has also commencedconstruction of a wastewater treatment plant, and EMC has started secured landfill

for specified waste. The third estate (21 km2) is in the planning stage. The first

estate, when fully developed will employ about 6,000 and the second about 16,000.

Pusan water supply, sewerage. drainage and waste management

Water supply

5. Water supply services are managed by the Pusan water agency, a self financing

2 4

ANNEX 1Page 2

municipal corporation. In 1990 water services were provided to 3.8 million peopleor 97.6% of the population. The daily average production was 1.5 million m3/d, or360 lcd (including about 38% of non-revenue water). There were 294,000 serviceconnections of which 78% were residential using 61% of the total supply; of theremainder 30% were commercial/ industrial and 9% were for public use. The wateragency plans to expand production and distribution capacities and is alreadyconstructing two river intakes and treatment plants for an additional 1.1 millionm3/d made up of 300,000 m3/d of industrial water and 800,000 m3/d of drinking water.These plants are being developed in stages and are expected to be producing by 1995and completed by 2001. Production and sales are shown in Table A 1.1.

Table A 1.1: Pusan-Actual and projected water production and sales

1986 1991 1996 2001 2006Daily Average in 1000 m3/d

Production capacity-drinking 2000 2500 2800 3600 n/aof 11 industrial 0 0 0 300 300

Actual production 1245 1674 2035 2238 n/aWater Sales drinking 685 1071 1465 1790 n/a

It II industrial 0 0 0 275 550

Sewerage and drainage master plan

6. The 1993 revised sewerage and drainage master plan (SMP) has a 2011 timehorizon and proposes 9 sewerage districts each with own sewers, interceptors,pumping stations and WTPs. The plan defines the sewered area as being the built uparea provided or to be provided with a sewer. A summary of the plan's projection ofsewer planning areas and related populations is shown in Table A 1.2.

Table A 1.2: Pusan-Sewer planning area and population

Item/Year 1996 2001 2006 2011Master plan area km2 --------647.28--------Sewered area km2 176 193 207 229Total population million 4.5 4.6 4.7 4.8Sewer plan population million 4.3 4.5 4.6 4.7

7. The total plan area for 1996 is 176 km2, the districts served by WTP's atJanglim, Suyeong and Nambu (formerly Yongho) accounting for 50, 40 and 42 km2, whichtogether is 132 km2 or 75% of the whole sewer plan area. Each of the three districtshas more than one million inhabitants and together make up more than 75% of Pusan'spopulation. Table A 1.3 shows the areas of these three districts and the otherdistricts combined, the projected population for 1996 and 2006 and the lengths ofinterceptor sewers proposed in the plan.

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ANNEX 1Page 3

Table A 1.3: Pusan-Treatment districts

Treatment District District Interceptordistrict Area km2 Population (mill) Sewer km

1996 1996 2006 1996Janglim 50 1.01 1.11 47Suyeong 40 1.15 1.11 27Nambu 42 1.15 1.14 21Others 44 0.99 1.25 38Total 176 4.30 4.61 133

8. The projected daily average flow of domestic, commercial and industrialwastewater generated in the treatment districts is shown in Table A 1.4.

Table A 1.4: Pusan-Wastewater volumes in 1000 m3/d

1991 1996 2001 2006 2011Janglim 330 440 518 572 603Suyeong 320 420 460 480 460Nambu 315 417 471 490 485Others 185 323 551 708 942Total 1150 1600 2000 2250 2490

9. The plan evaluated alternative arrangements for collecting storm andwastewater and recommended separate systems to be implemented by 2006. Initiallyinterceptor sewers would be provided with storm overflows which would be modifiedlater to become trunk mains in the sanitary sewerage system.

Sewerage and drainage system

10. The development of the drainage and sewerage systems is lagging behind SMPprojections but the trend is improving. Sewer connections have increased from287,000 in 1990 to 321,000 in 1994, now serving about 97% of the population. Thedrainage system at present is about 30% piped, the rest being ditches alongsideroads and open channels. Until the systems function separately the city is concernedto prevent raw sewage solids from entering open drains. The city regulations,therefore, require all premises to be equipped for pre-treatment (mainly by septictanks) before discharging into public sewers.

Wastewater treatment

11. The WTP expansion program has been in progress since 1984; the first plant,completed in 1988, being the first phase of Suyeong (286,000 m3/d); the second phasenow under construction will be completed in 1997. At Janglim the first phase(330,000 m3/d) was completed in 1991 and at Nambu the first phase (340,000 m3/d)will be in operation by 1996. The construction program proposed in the SMP forconstruction of treatment plants is shown in Table A 1.6

26

ANNEX 1Page 4

Table A 1.6: Pusan-Treatment plant capacity

1991 1996 2001 2006 2011Janglim 1000 m3/d 330 330 615 615 711Suyeong " 286 286 550 550 550Nambu " - 340 584 584 584Others - - 694 973 1094Total " 616 956 2443 2719 2939

12. The existing as well as proposed treatment plants use a conventional activatedsludge process whereby sludge is digested, dewatered and disposed of at the city'ssanitary landfill. (Some sludge is now temporarily disposed of at sea).

Operation and maintenance

13. Sewerage services are provided by the Pusan Sewerage Management Office (PSM)of the Construction Bureau. The drainage system is maintained by the district andsubdistrict construction divisions. The WTPs, including interceptor sewers andwastewater pumping stations are operated and maintained by the respective WTP staffof about 100 at each plant. The WTP directors report to PSM. Financing the operationand maintenance of the sewerage system is provided from the sewerage special accountadministered by PSM, and the districts.

Solid waste

14. Solid waste services are provided by the Cleansing Department (CD) of theEnvironmental and Green Bureau. The CD has three divisions which deal with thecollection and transportation of waste, nightsoil and septage, and controls theoperation of the sanitary landfill sites and incinerators. Solid waste operation ispartly privatized and 27 companies under contract with the districts deal with abouta third of the work; the remainder is dealt with by the city employees. Most of the1.75 million tons collected annually goes to sanitary landfill but some isincinerated or recovered for recycling. CD has a program of incinerator installationas shown on Table A 1.7.

Table A-1.7: Pusan-Program for general waste incinerators

Location Number Unit Total Completioncapacity capacity year---------t/d---------

Dadae 1 200 200 1995*Hwamyoung 2 200 400 1997Haewoondae 2 200 400 1996Noksan 1 300 300 1999Shinpyung 1 300 300 1996*

*- Under construction.

15. There is very strong local resistance to sanitary landfill sites throughoutKorea, and Pusan is no exception. The department has had difficulty in obtaining

27

ANNEX 1Page 5

present sites at Ulsuk and Senggok both of which are located west of the city. Ulsukclosed recently, but Senggok, with sufficient capacity to last until the year 2000,will open in 1995. The department anticipates continued local resistance for theforeseeable future and in its plans for development, recognizes that as an importantfactor when identifying disposal methods and potential sites.

Nightsoil and septage disposal.

16. Nightsoil and septage are collected and transported to a treatment plant atKamjong on the Nakdong river where, after passing through grit channels, the liquoris pumped on to barges for disposal at sea. During 1993 about 2,600 m3/d ofnightsoil and 5,500 m3/d of septage were removed; the quantity of nightsoil isexpected to decrease substantially over the next ten years as properties areconnected to the sewerage system.

Water reuse

17. For the past twenty years the Government has adopted a number of courses andpolicies to delay and eventually reverse the serious deterioration of theenvironment resulting from rapid urban expansion and industrial growth. Inparticular, these policies have aimed at restoring the environment along thenation's rivers and coastline. As a result of Government direction, communitieswithin a river basin are expected to treat their liquid waste to meet MOE standards.Pusan is actively supporting central Government policies in this regard and since1984 has been constructing interceptor sewers to minimize the discharge ofwastewater into rivers and coastal waters, and to convey intercepted wastewater totreatment plants designed to produce effluent of high quality.

18. Pusan is now advancing beyond the level of purification and discharge oftreated wastewater and proposes to further treat wastewater from Janglim plant toa standard suitable for industrial use. This policy is expected to bring twobenefits. First, it would reduce the quantity of treated effluent discharged intothe Nakdong river; and second,it would enable the Pusan water agency reduce thequantity of water which it would otherwise take from the Nakdong river.

Kunsan specified waste disposal

Waste policy and strategy

19. Government waste policy anticipates involvement of both private and publicsectors with the latter responsible for (a) policy and management, (b) filling inareas where the private sector faces difficulties which it cannot reasonablycontrol, such as resistance to disposal sites, and (c) disposal of dangerouscategories of specified waste. The strategy goals for waste management are reducingthe volume of waste, increasing recycling, permitting construction only of sanitarylandfills, and increasing incineration of waste to reduce the burden on landfillsites which are difficult to acquire. The policy goals are shown in Table A 1.9.

28

ANNEX 1Page 6

Table A 1.9: National solid waste disposal targets

1992 1997 2001Residential wastetotal quantity (t/d) 70,400.0 84,500.0 92,815.0generation/person (kg/d) 1.5 1.5 1.4recycled (%) 7.9 20.0 30.0incinerated (%) 1.5 4.2 25.0landfill (%) 89.2 65.8 45.0of which sanitary landfill (%) 58.0 83.0 100.0costs charged to producer (%) 12.0 60.0 100.0Work-site wastetotal quantity (t/d) 76,040.0 109,300.0 157,200.0of which

specified waste (t/d) 3,800.0 6,120.0 10,700.0general waste (t/d) 72,240.0 103,180.0 146,500.0

recycled (%) 54.0 60.0 65.0incinerated (%) 13.0 17.0 15.0landfill (%) 33.0 23.0 20.0

20. MOE identifies (a) general waste which includes residential waste and non-toxic work-site waste and (b) specified waste, which includes toxic work-site waste.There are currently 22 specified waste categories, such as acids and alkalis, oil,organic solvents, asbestos, mining ash, pesticides, polychlorinated bi-phenyl (PCB),sludge containing heavy metals and animal residues. In many countries these areclassified as hazardous.

21. For various reasons, -one being the uncertainty in forecasting the generationof specified waste and the other the concern that the public would not allowoperation after the facilities were built-, the private sector has little presencein intermediate treatment (incinerators, high temperature crackers, etc.) and almostnone in the final treatment of specified waste. In order to eliminate unacceptableor illegal disposal of specified waste the Government plans that by 2001 the publicsector will complete expanded intermediate treatment facilities in six MOE regions,including Chunbuk.

Generation of specified waste in Chunbuk

22. The generation of specified waste in Chunbuk province where the Kunsan plantis located, is currently about 45,000 t/y and estimated to increase to about 50,000t/y in 1997 and 95,000 t/y in 2001. The largest component is waste oil which willreach approximately 25,000 t/y in 1997 and 57,000 t/y in 2001, of which 56% and 48%respectively, will be recycled at source. Other waste constituents, such as organicsolvents, plastics and heavy metal sludge will have significantly lower rates ofrecycling. The projections of specified waste quantities generated in Chunbuk areshown in Table A 1.10.

29

ANNEX 1Page 7

Table A 1.10: Kunsan-Generation of specified waste in Chunbuk Province

1997 2001Oil t/y 24,821 56,628Organic solvents " 263 367Synthetic polymers " 2,767 4,156Contaminated sludge 22.268 33.441Total " 50,119 94,592

23. On the basis of these projections, it is estimated that approximately onethird to one fifth of generated specified waste would be incinerated by the newplant at Kunsan with the remainder being treated by private operators. The estimateof specified waste to be treated by the Kunsan incinerator is shown in Table A 1.11.

Table A 1.11: Kunsan-Specified waste to be incinerated by SWI

1997 2001Oil t/y 9,140 17,247Organic solvents 268 333Synthetic polymers 27 43Contaminated sludge 6.354 1.377Total 15,789 19,000

Specified waste management facilities, operation and maintenance

24. EMC treatment and disposal plants for specified waste are located in Onsan andHwasung. The Onsan plant is located on a 4 ha site in a coastal industrial area,about 20 km north of Pusan. It consists of a physical-chemical treatment plant, dualrotary kiln incinerator, solid stabilization operations, and landfill cells. Theplant has a capacity of 127 t/d based on 22 t/d of incineration, 30 t/d of physical-chemical treatment and 75 t/d of landfill disposal.

25. The Hwasung plant is located in the rural area of Hwaseon district, some 80km southwest of Seoul. The plant is designed to treat and dispose of specified wastefrom the Seoul region and PCBs from the entire country and has a capacity of 60 t/dbased on 1 t/d of incineration of PCB and organic phosphates, 19 t/d of physical-chemical treatment and 40 t/d of solidification and landfill disposal.

26. The Kunsan specified waste treatment plant is being built in phases. Thespecified waste landfill consists of three separate cells (capacity 3 x 71,000 m3),each protected against leakage by 40 cm of clay mixed with bentonite and two layersof high density polyethylene membrane between three layers of geotextile. Leachatewill be treated in the plant's own facility using activated sludge process followedby sand filtration, activated carbon and ion-exchange filtration. The volume ofleachate will be minimized by covering the active cells by roofing and filled cellsby a polyethylene membrane between two geotextile layers and 1.0 m soil cover. Theimpermeability of the protective lower shell will be monitored by eight wellslocated around the landfill. The pressure of groundwater on the protective shellwill be controlled by drainage and wells. The incinerator is described in Annex 2.

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ANNEX 1Page 8

Demand for the Pusan and Kunsan components

27. In Pusan the rapid extension of the interceptor system discharging to JanglimWTP will increase the load on the plant far beyond it's capacity of 330,000 m3/d.The proposal to increase capacity by 285,000 m3/d to 615,000 m3/d is timely sincethe maximum daily flow is expected to reach 607,000 m3/d by 2001. The proposal byPSM to introduce tertiary treatment and thus provide a substantial supply of watersuitable for industrial use responds positively to Government policy in this regard.The Pusan water agency supplies domestic, industrial and commercial consumers sothat the contribution that Janglim can make for industrial use would increasepotable water availability for other consumers and defer the need for increasedabstraction from the Nakdong river.

28. There is at present no capacity in Chunbuk province for treatment and disposalof the most hazardous specified waste. The projections for the province indicatethat out of total generation of 95,000 t/y in 2001, the generators would treat onsite about 35,000 t/y and private operators would treat and dispose of further about30,000 t/y of the lesser contaminated specified waste, leaving about 30,000 t/y ofthe most contaminated waste without a capacity for its treatment and final disposal.Since the private sector has not sought and is not planning to establish facilitiesfor these waste there is a need for public sector to provide these services.

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ANNEX 2Page 1

KOREA

WASTE DISPOSAL PROJECT

PROJECT DESCRIPTION

1. The project includes Pusan and Kunsan components. The detailed description ofphysical facilities is as follows:

2. The Pusan component includes expansion of the wastewater treatment plant (WTP)at Janglim comprising the construction of primary and secondary treatment units(285,000 m3/d) to increase the current capacity from 330,000 m3/d to 615,000 m3/d;tertiary treatment units to render the WTP effluent suitable for reuse as industrialwater; 4.7 km of interceptor sewers ranging from 0.35 m to 1.35 m in diameter; andtwo pumping stations of 45,800 m3/d and 89,800 m3/d capacity.

Wastewater treatment

3. Janglim WTP is located on the east bank near the mouth of the Nakdong riverand serves one of the city's principal wastewater catchment districts. The districtis about 27 km long and 4-5 km wide bounded along it's length by the river to thewest and a range of hills to the east. Wastewater generated in the district isconveyed to the WTP by 35 km of interceptor sewers made of pipes varying in diameterfrom 0.4 m-1.8 m and box sections up to 3 m x 2 m near the WTP. Construction of theinterceptor system is on-going and at present about half the district is served.Three pumping stations are in operation and a further eight are being constructedor planned with a completion target of 1997.

4. The WTP is being developed in three phases. The first, with a capacity of330,000 m3/d was commissioned in 1990. The second would increase capacity by 285,000m3/d to 615,000 m3/d and the third, scheduled for 2005, would add 96,000 m3/d,providing a final capacity of 711,000 m3/d.

5. The treatment technology for each phase is a conventional activated sludgeprocess and the treatment units are similar, except for the final settling tankswhich are circular in the first phase and rectangular in the second phase. Thesecond phase of the treatment plant includes the following elements: (a) primarytreatment including screens, grit removal chambers and settling tanks; (b) secondarytreatment including aeration tanks with diffused air and settling tanks; (c) primarysludge concentration in thickeners, surplus activated sludge concentration bycentrifuge and dewatering of the combined sludges on belt press filters; (d)effluent disinfection; (e) pumping equipment for lifting wastewater and sludgehandling; and (f) buildings to house pumps, blowers, disinfection equipment, sludgedewatering equipment and stores. The administration buildings built under the firstphase which includes control room, laboratory and social facilities, would beextended. The sludge digesters built under the first phase have sufficient capacityto deal with sludge from both phases. Dewatered sludge and solids collected atscreens and grit removal chambers from both first and second phases (160 t/d intotal) would be disposed of at Senggok sanitary landfill. The potential of heavymetals presence in the sludge is lessening as a result of land use policy underwhich factories are moving from the Janglim catchment to new specialized industrial

32

ANNEX 2Page 2

estate at Noksan west of Nakdong river. The development phases of Janglim WTP areshown on Table A 2.1

Table A 2.1: Janglim-Development of treatment capacity

Phase 1 2 3Operational start:Actual (planned) 1990 (1998) (2005)Wastewater catchment area km2 32 51 54Population 1000 639 1113 1197Generated wastewater:

daily average 1000 m3/d 321 518 604daily maximum " 365 607 711hourly maximum 544 894 1048

Treatment capacity 330 615 711Interceptor sewers km 10 47 47Pumping stations number 3 8 11

6. The type and size of second phase key treatment units and supportingfacilities are shown on Table A 2.2

Table A 2.2: Janglim-Second phase treatment plant units

Treatment Unit No. of Units DimensionsInlet pumps 4 2.4 m dia x 90 m3/min (screw type)Grit chambers 4 18m x 3.5m x 1.3m deep v = 0.27 m/sPrimary settling tanks 15 46.4m x 10.8m x 3.2m deepAeration tanks 15 43m x 8.8m x 10.5m deepSecondary settling tanks 15 63m x 10.8m x 3.5m deepSludge thickenersfor secondary sludge 2 centrifuges - 60 m3/hour eachDewatering belt press 4 150 kg/m/hr (3m wide)Various buildings 8,500 m2 floor area

7. The second phase would include provision to combat negative environmentaleffects normally occurring during plant operation, such as odor from raw sludgemovement, and noise from air blowers and pumping equipment. All units, except forsecondary settling tanks, would be covered with a roof on which would be a park withsport facilities. Deodorizing equipment would be installed and working areas wouldbe ventilated to ensure safe working conditions. Buildings housing noisy machinerywould have adequate sound insulation. Roofing would also be provided for the firstphase sludge thickeners.

Tertiary treatment

8. Tertiary treatment, located on the site of the first phase, has been designedto accept final effluent from the WTP and produce water of a quality suitable fornon-potable use, and made available to the water agency to satisfy demand from

33

ANNEX 2Page 3

industrial estates in the area surrounding Janglim. The plant would have aproduction capacity of 615,000 m3/d. Treatment would be by means of flocculationuising alum and polymer coagulants, filtration and disinfection. The coagulants wouldbe injected near the outlets from the aeration tanks. There would be ancillarypumping equipment and on-site reservoirs to store the treated water. The type andsize of the facilities to be constructed are shown on Table A 2.3.

Table A 2.3: Janglim-Tertiary treatment units

Unit No. Dimension/capacity

Filters (upward flow) 24 12m x 8m x 3m deepDisinfection 2 Ultra-violet lamp packsClear water reservoir 2 60,000 m3 (each)

Interceptor sewers and pumping stations

9. Wastewater is delivered to Janglim WTP through a system of interceptor sewersand pumping stations. About 35 km of these interceptors and eight pumping stationsare already operational and work is planned in respect of a further 12 km of sewersand three pumping stations. The interceptor program is planned for completion by1998 and would have 47 km of sewers (42 km of circular sewers and 5 km of boxsection sewers) and 8 pumping stations. Two of the pumping stations, Kamchon 1 & 2,with capacities 45,800 m3/d and 89,800 m3/d, respectively, would be financed underthe project.

10. The Kunsan component includes the supply and installation of a specified wasteincinera on unit with capacity of 60 t/d.

Specified waste treatment plant

11. The incinerator would be an integral component of a comprehensive treatmentand disposal facility (Kunsan integrated specified waste treatment plant - KTP)which also includes a secured landfill and leachate treatment plant, already underconstruction and scheduled completion in 1995. KTP is a part of the Kunsan SecondIndustrial Estate located on land reclaimed on the southern bank of the Kum riverestuary, about 20 km west of Kunsan city and 230 km southwest of Seoul.

12. The incineration unit would include storage for liquid and solid waste, ashredder, a rotary kiln, a secondary combustion chamber, combustion air preheater,a semi-dry scrubber, electrostatic precipitator and stack. The equipment wouldinclude monitoring equipment for the safe operation of the various parts of the unitand safety equipment to cope with any potential hazard within the plant andautomatic monitoring instrumentation for sensing emissions from the stack. Uponcompletion of acceptance tests the supplier of the incinerator (contractor) wouldprovide for operational and maintenance training with the aim of establishing soundfinancial management and technical practices, including commercial relationship withthe incinerator customers. The contractor would provide (i) an incineratorsuperintendent; (ii) an operating engineer; and (iii) an environmental trainingspecialist, and would arrange for extensive overseas training of operational staff.

34

ANNEX 2Page 4

13. The generation of specified waste in Chunbuk province is currently about45,000 t/y estimated to increase to 70,000 t/y and 129,000 t/y in 1997 and 2001,respectively. Approximately one third of the 1997 amount would be incinerated in KTPwith the rest being treated by private operators. A large amount of waste are oils,primarily lubricating oils with unknown levels of heavy metals and a little sulfur,waste paints and lacquers from a variety .:f manufacturing operations and dewateredindustrial sludge; these would be incinerated because of the potentially high heavymetal content.

14. Emissions from the incinerator would be controlled by special equipment. Botha semi-dry scrubber and electrostatic precipitator are to be installed in order toremove 80% to 95% of the S02 and 95% of particulate matter. The use of a dryemission control system would eliminate a specialized wastewater treatment otherwiseneeded for wet system. The ash would be disposed of along with other solidindustrial wastes at the plant's secured landfill. The emission levels would meetKorean standards for stationary combustion sources for 1999, which are satisfactory.Stack monitoring would be carried out through the use of a continuous emissionmonitoring system which would be monitored on-line by MOE's regional office inChonju, Chunbuk province.

Delivery of specified waste in Kunsan

15. Transportation of specified waste is generally the responsibility of EMC,currently carried out in conjunction with the two specified waste incinerators atOnsan and Hwasung. Transport to the Kunsan site would be provided about equally byEMC and private sector environmental companies. Handling of specified waste wouldbe carried out according to the guidelines and procedures specified by law.

35

ANNEX 3Page 1

KOREA

WASTE DISPOSAL PROJECT

PROJECT COST ESTIMATE

List of Tables

1. Table A 3.1 Pusan and Kunsan Base cost and contingenciesannual expenditures in US$

2. Table A 3.2 Pusan and Kunsan Base cost and contingenciesannual expenditures in Won

3. Table A 3.3 Pusan and Kunsan Total cost incl. contingenciesannual expenditures in US$

4. Table A 3.4 Pusan and Kunsan Total cost incl. contingenciesannual expenditures in Won

5. Table A 3.5 Pusan Base cost and contingenciesannual expenditures in US$

6. Table A 3.6 Pusan Base cost and contingenciesannual expenditures in Won

7. Table A 3.7 Pusan Total cost incl. contingenciesannual expenditures in US$

8. Table A 3.8 Pusan Total cost incl. contingenciesannual expenditures in Won

9. Table A 3.9 Kunsan Base cost and contingenciesannual expenditures in US$

10. Table A 3.10 Kunsan Base cost and contingenciesannual expenditures in Won

11. Table A 3.11 Kunsan Total cost incl. contingenciesannual expenditures in US$

12. Table A 3.12 Kunsan Total cost incl. contingenciesannual expenditures in Won

KOREA ANNEX 3WASTE DISPOSAL PROJECT Page 2PROJECT COST - PUSAN AND KLJNSAN COMPONENTS

Table A 3.1: Base Coat and Conmingencies, Anmul Expendture in USS

- MILLION WON- % Of -MILLION USS- Phys. % MILLION USSWORKS Base Contm- ForeignLocal Foreign Total Coat Local Foreign TOal gcies 1995 1996 1997 1998 1999

1. Treatment PlantCivil Works 54373 9595 63968 33.5% 67.97 11.99 79.96 5.0% 15.0%/. 7.75 23.99 32.61 11.74 3.87Equipment 16454 42562 59016 30.9%/ 20.57 53.20 73.77 5.0% 75.0% 0.00 22.13 29.57 19.44 2.63

2. Tertiary treabtentCivil Works 25124 4434 29558 15.5% 31.41 5.54 36.95 5.06/ 15.0/o 0.00 3.69 18.47 12,93 1.85Equipment 3795 11384 15178 7.9K 4.74 14.23 18.97 5.0% 75.0% 0.00 0.00 7.59 9.49 1.90

3, Project SupportConstrucionSupervis 3856 0 3856 2.0/o 4.82 0.00 4.82 5.0% 0.0% 0.55 1.31 1.41 1.41 0.14

4.LandAcq.&Compens 19611 0 19611 10.3% 24.51 0.00 24.51 0.0%/o 0.0/ 24.51 0.00 0.00 0.00 0.00

BASECOST 123213 67974 191187 100.0% 154.02 84.97 238.98 35.6% 32.81 51.12 89.65 55.02 10.38PHYSICAL CONTINGENCIES 5180 3399 8579 4.5% 6.48 4.25 10.72 39.6% 0.41 2.56 4.48 2.75 0.52PRICECONTINGENCIES 14615 4228 18843 9.9% 18.27 5.29 23.55 22.4% 0.81 3.18 9.59 7.93 2.04

TOTALPROJECTCOST 1/ 143008 75601 218609 114.3% 178.76 94.50 273.26 34.6% 34.03 56.86 103.72 65.70 12.94

1/ lnchudes taxs equivali to about USS3 1.3 millionDue to rounding the last digit in totals may appear different than the sum of digits

10-Oct-94

KOREA ANNEX 3

WASTE DISPOSAL PROJECT Page 3

PROJECT COST - PUSAN AND KUNSAN COMPONENTS

Table A 3.2: Base Cost and Contingencies, Annual Expenditures in Won

-MILLION WON- % Of -MILLION USS - Phys. % - MILLION WON--

WORKS Base Contin- Foreign

Local Foreign Total Cost Local Foreign Total gencies 1995 1996 1997 1998 1999

1. Treatmnent Plant

Civil Works 54373 9595 63968 33.5% 67.97 11.99 79.96 5.0% 15.0% 6197 19190 26087 9395 3098

Equipment 16454 42562 59016 30.9% 20.57 53.20 73.77 5.0% 75.0% 0 17705 23655 15556 2101

2. Tertiary treatmentCivil Works 25124 4434 29558 15.5% 31.41 5.54 36.95 5.0% 15.0% 0 2956 14779 10345 1478

Equiprnent 3795 11384 15178 7.9% 4.74 14.23 18.97 5.0% 75.0% 0 0 6071 7589 1518

3. Project SupportConstructionSupervis 3856 0 3856 2.0% 4.82 0.00 4.82 5.0% 0.0% 437 1048 1131 1131 109

4.LandAcq.&Compens 19611 0 19611 10.3% 24.51 0.00 24.51 0.0% 0.0% 19611 0 0 0 0

BASECOST 123213 67974 191187 100.0% 154.02 84.97 238.98 35.6% 26245 40899 71723 44016 8304

PHYSICAL CONTINGENCIES 5180 3399 8579 4.5% 6.48 4.25 10.72 39.6% 332 2045 3586 2201 415

PRICECONTINGENCIES 14615 4228 18843 9.9% 18.27 5.29 23.55 22.4% 651 2548 7670 6341 1634

TOTALPROJECTCOST 1/ 143008 75601 218609 114.3% 178.76 94.50 273.26 34.6% 27227 45491 82979 52558 10353

1/ Includes taxes equivalent to about US$31.3 millionDue to rounding the last digit in totals may appear different than the sum of digits

10-Oct-94

KOREA ANNEX 3

WASTE DISPOSAI PROJECT Page 4

PROJECT COST - PlJSAN AND KUNSAN COMPONENTS

Table A 3.3: Total Cost Including Contingencies, Annual Expenditures in US$

------ MILLION WON ----- % Of --- MILLION US$ ---- Phys. % -----------Million U'SS-----------

WORKS Total Contin- Foreign 1995 1996 1997 1998 1999

Local Foreign Total Cost Local Foreign Total gencies

I rreatment PlantCivil Works 63808 10584 74392 34.0% 79.76 13.23 92.99 5.00/ 15.0% 8.32 26.95 38.31 14.43 4.98

Equipment 19544 47247 66791 30.6% 24.43 59.06 83.49 5.0% 75.0% 0.00 24.29 33.47 22.59 3.14

2. 'I'ertiary treatmentCivil Works 30344 4954 35298 16.1% 37.93 6.19 44.12 5.0% 15.0%' 0.00 4.15 21.70 15.89 2.38

Equipment 4661 12817 17478 8.0% 5.83 16.02 21.85 5.0% 75.0% 0.00 0.00 8.56 11.02 2.270)

3. Project SupportConstruction Supervis 4548 0 4548 2.1% 5.69 0.00 5.69 5.0% 0.0% 0.59 1.48 1.68 1.76 0.18

4. Land Acq. & Compens 20101 0 20101 9.2% 25.13 0.00 25.13 0.0% 0.0% 25.13 0.00 0.00 0.00 0.00

TOTAL PROJECT COST 1/ 143008 75601 218609 100.0% 178.76 94.50 273.26 34.6% 34.03 56.86 103.72 65.70 12.94

1/ Includes taxes equivalent to about US$31.3 million

Due to rounding the last digitPi totals may appear different than the sum of digits

10-Oct-94

KOREA ANNEX 3

WASTE DISPOSAL PROJECT Page 5

PROJECT COST - PUSAN AND KUNSAN COMPONENTS

Table A 3.4: Total Cost Including Contingencies, Annual Expenditures in Won

--- MILLION WON--- % Of ---- MILLION US$ ---- Phys. % --------- Million WON--------

WORKS Total Contin- Foreign 1995 1996 1997 1998 1999

Local Foreign Total Cost Local Foreign Total gencies

1. Treatment PlantCivil Works 63808 10584 74392 34.0% 79.76 13.23 92.99 5.0% 15.0% 6656 21556 30650 11547 3984

Equipment 19544 47247 66791 30.6% 24.43 59.06 83.49 5.0% 75.0% 0 19431 26774 18075 2512

2. Tertiary treatmentCivil Works 30344 4954 35298 16.1% 37.93 6.19 44 12 5.0% 15.0% 0 3320 17364 12714 1900

Equipment 4661 12817 17478 8.0% 5.83 16.02 21.85 5.0% 75.0% 0 0 6850 8813 1815

3. Project SupportConstructionSupervis 4548 0 4548 2.1% 5.69 0.00 5.69 5.0% 0.0% 471 1184 1342 1409 143

4.LandAcq.&Compens 20101 0 20101 9.2% 25.13 0.00 25.13 0.0% 0.0% 20101 0 0 0 0

TOTAL PROJECT COST 1/ 143008 75601 218609 100.0% 178.76 94.50 273.26 34.6% 27227 45491 82979 52558 10353

I / Includes taxes equivalent to about US$31.3 million

Due to rounding the last digit in totals may appear different than the sum of digits

10-Oct-94

KOREA ANNEX 3

WASTE DISPOSAL PROJECT Page 6

PROJECT COST - PUSAN COMPONENT

Table A 3.5: Base Cost and Contingencies, Annual Expenditures in US$

---- MMILLION WON ---- % Of -- MILLION USS-- Phys. % ------ MILLION lTSS----- -----

WORKS Base Contin- Foreign

Local Foreign Total Cost Local Foreign Total gencies 1995 1996 1997 1998 1999

I. Treatment PlantCivil Works 52673 9295 61968 36.6% 65.84 11.62 77.46 5.0% 15.0% 7.75 23.24 30.98 11.62 3.87

Equipment 10504 31512 42016 24.8% 13.13 39.39 52.52 5.0% 75.0% 0.00 15.76 15.76 18.38 2.63

' Tertiarn treatmentCivil Works 25124 4434 29558 17.4% 31.41 5.54 36.95 5.0o 15.0% 0.00 3.69 18.47 12.93 1.85

Equipment 3795 11384 15178 9.0% 4.74 14.23 18.97 5.0% 75.0°.o 0.00 0.00 7.59 9.49 1.90

' Project SupportConstruction Supervis 2186 0 2186 1.3% 2.73 0.00 2.73 5.0% 0.0% 0.55 0.68 0.68 0.68 0.14

4 Land Acq. & Compens 18600 0 18600 11.0% 23.25 0.00 23.25 0.0% 0.0% 23.25 0.00 0.00 0.00 0.00

S.wSE COST 112882 56624 169506 100.0% 141.10 70.78 211.88 33.4% 31.54 43.37 73.49 53.10 10.38

?HYSIC.AL CONTINGENCIES 4714 2831 7545 4.5% 5.89 3.54 9.43 37.5% 0.41 2.17 3.67 2.66 0.52

??dCE CONTINGENCIES 13418 3629 17046 10.1% 16.77 4.54 21.31 21.3% 0.78 2.76 8.10 7.63 2.04

O j7.'-LPROJECTCOST 1 131013 63084 194098 114.5% 163.77 78.86 242.62 32.5% 32.74 48.30 85.26 63.39 12.94

:-rJiuL taxes equivalent to about US$27.5 million

.stc, rounding the last digit in totals may appear different than the sum of digits

I r)-Oct-94

KOREA ANNEX 3

WASTE DISPOSAL PROJFCT Page 7

PROJECT COST - PUSAN COMPONENT

Table A 3.6: Base Cost and Contingencies, Annual Expenditures in Won

MILLION WON- % Of --- MILLION US$ - Phys. % -----------MILLION WON------

WORKS Base Contin- Foreign

Local Foreign Total Cost Local Foreign Total gencies 1995 1996 1997 1998 1999

1. Treatment PlantCivil Works 52673 9295 61968 36.6% 65.84 11.62 77.46 5.0% 150% 6197 18590 24787 9295 3098

Equipment 10504 31512 42016 24.8% 13.13 39.39 52.52 5.0% 75.0% 0 12605 12605 14706 2101

2. Tertiary treatmentCivil Works 25124 4434 29558 17.4% 31.41 5.54 36.95 5.0% 150% 0 2956 14779 10345 1478

Equipment 3795 11384 15178 9.0% 4.74 14.23 18.97 5.0% 75.0% 0 0 6071 7589 1518

3. Project SupportConstruction Supervis 2186 0 2186 1.3% 2.73 0.00 2.73 5.0% 0.0% 437 547 547 547 109

4. Land Acq. & Compens 18600 0 18600 11.0% 23.25 0.00 23.25 0.0%1b 0.0% 18600 0 0 0 0

BASIC COST 112882 56624 169506 100.0% 141.10 70.78 211.88 33.4% 25234 34698 58789 42482 8304

PHYSICALCONTINGENCIES 4714 2831 7545 4.5% 5.89 3.54 9.43 37.5% 332 1735 2939 2124 415

PRICE CONTINGENCIES 13418 3629 17046 10.1% 16.77 4.54 21.31 21.3% 625 2205 6477 6105 1634

TOTAL PROJECT COST 1/ 131013 63084 194098 114.5% 163.77 78.86 24262 32.5% 26191 38637 68205 50711 10353

I/ Includes taxes equivalent to about US$27.5 million

Due to rounding the last digit in totals may appear different than the sum of digits

10-Oct-94

KOREA ANNEX 3WASTE DISPOSAL PROJECT Page 8

PROJECT COST - PUSAN COMPONENTTable A 3.7: Total Cost Including Contingencies, Annual Expenditures in US$

--- MILLION WON --- % Of -- MILLION USS---- Phys. % ---Million US -------

WORKS Total Contin- Foreign 1995 1996 1997 1998 1999

Local Foreign Total Cost Local Foreign Total gencies

1. Treatment PlantCivil Works 61815 10253 72068 37.1% 77.27 12.82 90.08 5.0% 15.0% 8.32 26.10 36.40 14.28 4.98

Equipment 12568 35061 47628 24.5% 15.71 43.83 59.54 5.0% 75.0% 0.00 17.27 17.78 21.35 3.14

2. Tertiary treatmentCivil Works 30344 4954 35298 18.2% 37.93 6.19 44.12 5.0% 15.0% 0.00 4.15 21.70 15.89 2.38

Equipment 4661 12817 17478 9.0% 5.83 16.02 21.85 5,0% 75.0% 0.00 0.00 8.56 11.02 2.27

3. Project Support _

Construction Supervis 2560 0 2560 1.3% 3.20 0.00 3.20 5.0% 0.0% 0.59 0.77 0.81 0.85 0.18

4. Land Acq. & Compens 19065 0 19065 9.8% 23.83 0.00 23.83 0.0% 0.0% 23.83 0.00 0.00 0.00 0.00

TOTAL PROJECT COST 1/ 131013 63084 194098 100.0% 163.77 78.86 242.62 32.5% 32.74 48.30 85.26 63.39 12.94

1/ Includes taxes equivalent to about US$27.5 millionDue to rounding the last digit in totals may appear different than the sum of digits

10-Oct-94

KOREA ANNEX 3

WASTE DISPOSAL PROJECT Page 9

PROJECT COST - PUSAN COMPONENT

Table A 3.8: Total Cost Including Contingencies, Annual Expenditures in Won

- MILLION WON - % Of - MILLION USS - Phys. % Million WON

WORKS Total Contin- Foreign 1995 1996 1997 1998 1999

Local Foreign Total Cost Local Foreign Total gencies

1. Treatnent PlantCivil Works 61815 10253 72068 37.1% 77.27 12.82 90.08 5.0% 15.0% 6656 20882 29122 11424 3984

Equipment 12568 35061 47628 24.5% 15.71 43.83 59.54 5.0% 75.0% 0 13817 14221 17078 2512

2. Tertiary treatmentCivil Works 30344 4954 35298 18.2% 37.93 6.19 44.12 5.0% 15.0% 0 3320 17364 12714 1900

Equipment 4661 12817 17478 9.0% 5.83 16.02 21.85 5.0% 75.0% 0 0 6850 8813 1815

3. Project SupportConstructionSupervis 2560 0 2560 1.3% 3.20 0.00 3.20 5.0% 0.0% 471 618 648 681 143

4. Land Acq. & Comipens 19065 0 19065 9.8% 23.83 0.00 23.83 0.0% 0.0% 19065 0 0 0 0

TOTAL PROJECT COST 1/ 131013 63084 194098 100.0% 163.8 78.86 242.62 32.5% 26191 38637 68205 50711 10353

1/ Includes taxes equivalent to about US$27.5 million

Due to rounding the last digit in totals may appear different than the sum of digits

10-Oct-94 -

KOREA ANNEX 3

WASTE DISPOSAI PROJECT Page 10

PROJECT COST - KUNSAN COMPONENT

Table A 3.9: 13ase Cost and Contingencies, Annual Expenditures in USS

--- MILLION WON % Of MILL.!ON USs- Phys. % -MILLION US$-----

WORKS Base Contin- Foreign

Local Foreign Total Cost Local Foreign Total gencies 1995 1996 1997 1998

1. Treatment PlantCivil Works 1700 300 2000 9.2% 2.13 0.38 2.50 5.004, 15.0% 0.00 0.75 1.63 0.13

Equipment 5950 11050 17000 78.4% 7.44 13.81 21.25 5.0% 65.0% 0.00 6.38 13.81 1.06

2. Project SupportConstrudcion Supervis 1670 0 1670 7.7%o 2.09 0.00 2.09 5.0% 0.0% 0.00 0.63 0.73 0.73

3. Land Acq. & Comnpens 1011 0 1011 4.7% 1.26 0.00 1.26 0.0% 0.0% 1.26 0.00 0.00 0.00

BASE COST 10331 11350 21681 100.0% 12.91 14.19 27.10 52.3% 1.26 7.75 16.17 1.92

PHYSICALCONTINGENCIES 466 568 1034 4.8% 0.58 0.71 1.29 54.9% 0.00 0.39 0.81 0.10

PRICE CONTINGENCIES 1197 600 1797 8.3% 1.50 0.75 2.25 33.4% 0.03 0.43 1.49 0.30

TOTALPROJECTCOST I/ 11994 12517 24512 113.1% 14.99 15.65 30.64 51.1% 1.30 8.57 18.47 2.31

I/ Includes taxes cquivalcnt to about US$3.8 million

Due to rounding the last digit in totals may appear different than the sum of digits

10-Od-94

KOREA ANNEX 3

WASTE DISPOSAL PROJECT Page 11

PROJECT COST - KUNSAN COMPONENT

Table A 3.10: Base Cost and Contingencies, Annual Expenditures in Won

-MILLION WON- % Of -MILLION US$ - Phys. % -MILLION WON-

WORKS Base Contin- Foreign

Local Foreign Total Cost Local Foreign Total gencies 1995 1996 1997 1998

1. Treatment PlantCivil Works 1700 300 2000 9.2% 2.13 0.38 2.50 5.0% 15.0% 0 600 1300 100

Equipment 5950 11050 17000 78.4% 7.44 13.81 21.25 5.0% 65.0% 0 5100 11050 850

2. Project SupportConstruction Supevis 1670 0 1670 7.7% 2.09 0.00 2.09 5.0% 0.0% 0 501 585 585

3.LandAcq.&Compens 1011 0 1011 4.7% 1.26 0.00 1.26 0.0% 0.0% 1011 0 0 0

BASIC COST 10331 11350 21681 100.0% 12.91 14.19 27.10 52.3% 1011 6201 12935 1535

PHYSICALCONTINGENCIES 466 568 1034 4.8% 0.58 0.71 1.29 54.9% 0 310 647 77

PRICECONTINGENCIES 1197 600 1797 8.3% 1.50 0.75 2.25 33.4% 25 343 1192 237

TOTALPROJECTCOST 1/ 11994 12517 24512 113.1% 14.99 15.65 30.64 51.1% 1036 6854 14774 1848

1/ Includes taxes equivalent to about US$3.8 million

Due to rounding the last digit in totals may appear different than the sum of digits

10-Oct-94

KOREA ANNEX 3WASTE DISPOSAL PROJECT Page 12

PROJECT COST - KUNSAN COMPONENT

Table A 3.11: Total Cost Including Contingencies, Annual Expenditures in USS

-MILLION WON- % Of -MILLION USS- Phys. % -Million USS-

WORKS Total Contin- Foreign 1995 1996 1997 1998Local Foreign Total Cost Local Foreign Total gencies

1. Treatment PlantCivil Works 1993 331 2324 9.5% 2.49 0.41 2.91 5.0% 15.0% 0.00 0.84 1.91 0.15

Equipment 6977 12186 19163 78.2% 8.72 15.23 23.95 5.0% 65.0% 0.00 0.00 0.00 0.00

2. Project SupportConstruction Supervis 1988 0 1988 8.1% 2.48 0.00 2.48 5.0% 0.0% 0.00 0.00 0.00 0.00

3. Land Acq. & Compens 1036 0 1036 4.2% 1.30 0.00 1.30 0.0% 0.0% 1.30 0.00 0.00 0.00

TOTAL PROJECT COST I/ 11994 12517 24512 100.0% 14.99 15.65 30.64 51.1% 1.30 0.84 1.91 0.15

1/ Includes taxes equivalent to about US$3.8 millionDue to rounding the last digit in totals may appear differert than the sum of digits

10-Oct-94

KOREA ANNEX 3

WASTE DISPOSAL PROJECT Page 13

PROJECT COST - KUNSAN COMPONENT

Table A 3.12: Total Cost Including Contingencies, Annual Expenditures in Won

-MILLION WON- % Of MILLION USS- Phys. % -Million WON-

WORKS Total Contin- Foreign 1995 1996 1997 1998

Local Foreign Total Cost Local Foreign Total gencies

1. Treatnent PlantCivil Works 1993 331 2324 9.5% 2.49 0.41 2.91 5.0% 15.0% 0 674 1527 123

Equipment 6977 12186 19163 78.2% 8.72 15.23 23.95 5.0% 65.0% 0 5614 12553 997

2. Project SupportConstruction Supervis 1988 0 1988 8.1% 2.48 0.00 2.48 5.0% 0.0% 0 566 694 728

3. Land Acq. & Compens 1036 0 1036 4.2% 1.30 0.00 1.30 0.0% 0.0% 1036 0 0 0

TOTAL PROJECT COST 1/ 11994 12517 24512 100.0% 14.99 15.65 30.64 51.1% 1036 6854 14774 1848

1/ Includes taxes equivalent to about USS3.8 nillion

Due to rounding the last digit in totals may appear different than the sum of digits

10-Oct-94

48

ANNEX 4Page 1

KOREA

WASTE DISPOSAL PROJECT

IMPLEMENTATION SCHEDULE

Year 1995 1996 1997 1998 1999Quarter 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

Pusan component

Wastewater treatment plantcivil works x x x x x x x x x x x x x x xequipment x x x x x x x x xtesting x x x x

Tertiary treatmentcivil works x x x x x x x x x x xequipment x x x x xtesting x x x x

Supervision x x x x x x x x x x x x x x x x x

Landacquisition x

Kunsan component

Incineratorcivil works x x x x x x x xequipment x x x xtesting x x xtechnical assistance x x x x

Supervision x x x x x x x x x

Landacquisition x

49

ANNEX 5Page I

KOREA

WASTE DISPOSAL PROJECT

PROJECT IMPLEMENTATION ACTION PLANS

Project Task |TActivity starts Activity ends

Pusan Component

1) detailed designs-wastewater plant 93.12 94.12

-tertiary treatment 95.03 95.12

2) civil contract -wastewater plant 95.01 95.04

-tertiary treatment 96.01 96.04

3) construction civil works:

-wastewater plant 95.04 98.12

-tertiary treatment 96.04 98.12

4) equip. contract -wastewater plant 95.11 96.03

-tertiary treatment 97.01 97.04

5) manufacture, installation equipment:

-wastewater plant 96.03 98.06

-tertiary treatment 97.04 98.06

6) testing & commissionning: _

-wastewater plant 99.01 99.06

-tertiary treatment 99.01 99.06

Kunsan Component

1) prequalification of bidders 94.11 95.02

2) first stage bidding 95.04 95.07

3) second stage bidding 95.07 95.10

4) detailed designs 95.11 96.10

5) manufacture,installation equipment 97.04 97.12

6) testing and commissionning 97.09 98.02

7) start commercial operation 98.06 N/A

Note: 93.12 means December 1993

50

ANNEX 6Page 1

KOREA

WASTE DISPOSAL PROJECT

ESTIMATED SCHEDULE OF LOAN DISBURSEMENT(in US$ million)

Bank's Year and -----------------Loan Disbursement------------------Fiscal Semester --In Semester-- --Cumulative-- --- Total---Year Ending Pusan Kunsan Pusan Kunsan Amount X

1996 31-Dec-95 0.0 0.0 0.0 0.0 0.0 030-Jun-96 6.0 0.0 6.0 0.0 6.0 8

1997 31-Dec-96 6.5 2.0 12.5 2.0 14.5 1930-Jun-97 9.5 2.5 22.0 4.5 26.5 35

1998 31-Dec-97 10.0 4.0 32.0 8.5 40.5 5430-Jun-98 11.0 5.0 43.0 13.5 56.5 75

1999 31-Dec-98 11.0 1.0 54.0 14.5 68.5 9130-Jun-99 3.0 0.5 57.0 15.0 72.0 96

2000 31-Dec-99 2.0 0.0 59.0 15.0 74.0 9930-Jun-00 1.0 0.0 60.0 15.0 75.0 100

5 1

ANNEX 6Page 2

KOREA

WASTE DISPOSAL PROJECT

ESTIMATED SCHEDULE OF PROJECT DISBURSEMENT(in US$ million)

Bank's Year and ---- Project Disbursement------ SectorFiscal Semester Loan ---- In Semester--- Cumulat. Disbursem.Year Ending Cumul. Pusan Kunsan Total(%) Profile(%)

1996 31-Dec-95 0.0 32.0 1.5 33.5 530-Jun-96 6.0 24.0 4.0 61.5 13

1997 31-Dec-96 14.5 25.0 4.5 91.0 3030-Jun-97 26.5 42.0 9.0 142.0 54

1998 31-Dec-97 40.5 43.0 8.0 193.0 7230-Jun-98 56.5 32.0 2.0 227.0 86

1999 31-Dec-98 68.5 31.0 1.0 259.0 9730-Jun-99 72.0 7.0 0.6 266.6 98

2000 31-Dec-99 74.0 5.0 0.0 271.6 10030-Jun-00 75.0 1.6 273.2

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ANNEX 7Page 1

KOREA

WASTE DISPOSAL PROJECT

ENVIRONMENTAL IMPACT ASSESSMENT

General

1. The Ministry of Environment (MOE) is the key agency for protection of theenvironment in Korea through establishment of policies, standards, and guidelinesfor the implementation of the environmental laws; evaluation of Environmental ImpactAssessment (EIA) prepared for various projects; and monitoring of ambientenvironmental quality.

PUSAN COMPONENT

2. The component comprises the second phase expansion of Janglim WTP increasing itscapacity from the existing 330,000 m3/d to 615,000 m3/d. The WTP effluent isdischarged through the Janglim stream into the Nakdong river downstream of thesalinity barrage. Detailed description of the component is given in Annex 2.

Assessment of environmental imDact

3. The Pusan Sewerage Management Office (PSM), the implementing agency, submittedthe Janglim WTP EIA study to MOE in December 1986, prior to constructing the firstphase. The report assessed the impacts for a capacity of 580,000 m3/d (consideredto be final at the time) of which 330,000 m3/d was to be implemented during thefirst phase.

4. The EIA study considered alternatives of plant location and discharge point, ofseparate and combined sewerage and treatment, and of sludge treatment. The proposedsite, discharge point, combined sewer, and landfill disposal for sludge wereselected, on an economic and technical basis. As required by law, the potentialnegative impacts on the environment of the selected alternative were evaluated andmitigation measures identified.

5. During construction, the main impacts would include possible subsidence ofreclaimed land, which would be minimized by using appropriate foundation forstructures. Operation of heavy equipment and transport of construction materialswould increase the level of air pollutants, noise and vibration, but the impactwould be small, temporary, and the noise and vibration within acceptable standards.Mitigating actions are necessary for air pollutants since the existing level,especially of TSP, were already high. It was proposed that these impacts would bereduced using technology and equipment with low noise and vibration; carrying outconstruction according to the guidelines for reduction of noise and vibrationgeneration; limiting working hours; and implementing measures reducing dust: waterspraying, car washing, speed limits,etc.

6. The impacts and proposed mitigating actions during operation are summarized inTable A 7.1.

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ANNEX 7Page 2

Table A 7.1: Janglim WTP environmental impact and mitigating actions

Assessed environmental impact Proposed mitigating actions

* Increased level of noise and odor: * Use technology, and designnoise from equipment would be 26-42 equipment with low noise anddBA (standard 50): odor would be vibration; operate facilitiesabout 0-1 degree which is within the according to the guidelines tostandard (2 degree). prevent noise and odor; install

sound-proofing in buildings and* Increased level of air pollutants, individual equipment; cover odorbut modelling suggested that generating facilities; and installincrease would be small. deodorizer.

* Increased level of chemical oxygen * Ensure effective operation of thedemand (COD) in the Nakdong river WTP and compliance with the effluentmouth within 1 km distance from the standardsdischarge point of the Janglimstream which receives the dischargeof the WTP effluent; the increasewould be small: by 0.4-1% after thefirst phase WTP and 0.7-1.7% afterthe second phase.

* Increased amount of solid waste * deposit refuse, solids andt/d 1st phase 2nd phase dewatered sludge from the 1st phaserefuse 3.3 5.8 in the nearby municipal landfillsolids 6.6 11.0 site; carry out study for compostingdewatered sludge 67.0 118.0 and incineration for the dewateredtotal 76.9 134.8 sludge from the 2nd phase

* Increased traffic volume. * Construction of a new road(Janglim-Kimhae) would alleviatetraffic congestion in the area.

Requirement for mitigating actions

7. MOE approved the EIA report in June 1987 and directed the city to implement thefollowing measures:

(a) Strengthen soft ground and install temporary drainage channel duringconstruction to prevent land subsidence and soil loss into the river.

(b) Establish a 30 m greenbelt around the WTP; implement effective measures tominimize dust generation during construction.

(c) Extend the outfall about 3 km downstream from the Janglim stream dischargepoint; to protect water quality in Nakdong river, study the possible use ofseparate sewer with respect to economy and operation of the WTP.

(d) Design the treatment plant to service factories which do not pretreat theirwastes prior to discharge.

(e) Install deodorizing facilities and cover the sludge thickeners.

54

ANNEX 7Page 3

(f) Use composting for stabilization of sludge during the second phase; takenecessary measures to prevent vermin and other unhygienic conditions duringsludge transportation.

(g) Establish and implement the "environmental management plan", which would includemitigating measures; compliance with MOE requirements; and a program for regularresearch on water quality, ecology, and seabed.

Status of mitigating actions and operations

8. The city constructed the first phase of the WTP during 1987-1990 and theoperation started in January 1991. Key EIA approval requirements were met duringconstruction and operation and monitoring was periodically carried out. Waterquality sampling in 1989 and 1992 suggested significant improvement of COD level inthe Nakdong river upstream of salinity barrage from 11 mg/l in 1989 to 3 mg/l in1992 mainly due to construction of interceptors; the COD levels near the dischargearea (0.5-3 km) ranged from 2-6 mg/l. The impact on water quality in the Nakdongriver before and after the start of WTP operation was evaluated by the city duringOctober 1990-April 1991; the results of the field tests are as follows:

Location in relation to COD. mg/l SS. mg/lthe Janglim stream Before With With Before With Withdischarge point WTP 1st 2nd WTP 1st 2nd

About 2.7 km upstream 7 7 4 17 17 7Near the discharge point 77 35 20 72 31 18About 1 km downstream 21 11 7 24 17 11About 2 km downstream 11 5 5 14 14 8About 3 km downstream 8 4 4 13 11 7

Note: lst- primary treatment; 2nd -secondary treatment; the salinity barrage is 3km upstream of the discharge point

9. The improvement in readings upstream of the discharge point is considered dueto raw wastewater being collected by the new interceptor sewers and prevented fromentering the river. Surface salinity (S) in the area ranged from 11-18 parts perthousand (ppt) near the discharge point and 25-33 ppt at 3 km downstream. The studyconcluded that the first phase impact is limited to the discharge area, andextension of the outfall 3 km downstream from the existing discharge point woulddegrade the water quality near the Dadaepo beach and fisheries areas.

10. In 1992 MOE requested an explanation from the city regarding the agreements onthe installation of deodorizer and covering of thickeners; the disposal of sludge;and the extension of the outfall. The city confirmed its intention to installdeodorizers and cover the thickeners, during construction of the second phase. Withregard to disposal of sludge, the city confirmed that composting of the sludge asproposed in the EIA is considered inappropriate since lead (Pb) level may exceed thestandards for fertilizer to be used for agricultural purpose as proved inexperiments conducted in Seoul. Further, the city carried out a study in respect ofincineration (two, 150 t/d each) in 1994, including environmental impacts andconsultation with local residents; it concluded that due to its high cost thismethod should be considered after 2001. Towards the end of 1995 the city will start

55

ANNEX 7Page 4

operating a new sanitary landfill in Senggok and it was agreed that the dewateredsludge will be digested and disposed of at that landfill until 2001.

11. Due to potential adverse impacts to the nearby fishing grounds and the high costof the outfall, the city carried out a study on tertiary treatment, includingpossible non-potable reuse. It was found that the pollutant levels of the finaleffluent would be further reduced to BOD 8 mg/l, COD 10 mg/l, and SS 8 mg/l. In viewof demand for water reuse the city proposed to construct tertiary treatment with acapacity of 615,000 m3/d within the second phase of Janglim expansion.

12. Due to various changes in the project scope as compared to that approved by MOEin June 1987 the city submitted an amendment report on the environmental impacts ofthe proposed second phase WTP to MOE in early September 1994. The report specifiesthat the major negative impacts would include (i) during construction: possibleground subsidence, soil erosion, and increase in air pollution and noise levels; and(ii) during operation: increase in air pollution, noise, and odor levels and waterpollution near the discharge area. It proposes that the impact during constructionwould be minimized by using SEC foundation method; provision of temporary drainageand storage ponds; and implementation of air/noise preventive measures. Duringoperation, measures would be taken to reduce noise and odor levels, establishmentof a green belt, selection of efficient equipment, and installation of noiseabsorbing and deodorizing facilities. The thickeners and sludge storage shed of thefirst phase would be covered with light roofing; the main units of the second phasewould have a concrete roof which would be developed as a recreational area.

13. Testing carried out in July 1994 during high and low tide showed that the waterquality near the discharge point was COD 1-2 mg/l, SS 8 mg/l, and S 16-22 ppt whilethat at a distance of 3 km downstream was COD 2 mg/l, SS 10-11 mg/l, and S 23-24ppt. A dispersion model indicated that the discharge of 615,000 m3/d withconcentration of 15 mg/l COD expected after secondary treatment would increase CODnear the discharge point by not more than 0.1-0.4 mg/l, and discharge withconcentration of 10 mg/l COD expected after tertiary treatment would increase CODin this area by not more than 0.07-0.27 mg/l. It is estimated that the dischargewould reduce the salinity level by 3-20%, which is relatively small compared to thesalinity change (40-50%) during the opening of gates at salinity barrage todischarge the river flow (average flow is 400 m3/sec).

14. The compliance would be monitored regularly by the city and periodically by MOE.Monitoring of treatment efficiency and water quality near the discharge area willbe carried out at least six months before and six months after the completion ofthis component. The monitoring program will be submitted to the Bank for review insufficient time prior to start of monitoring activities. Upon evaluation of resultsthe city would prepare a plan to mitigate potential adverse impacts and submit theplan to the Bank for review.

Requirements for treatment performance

15. Beginning January 1996, MOE's standards for treatment plant effluent will behigher. The BOD concentration will be changed from 30 mg/l to 20 mg/l and SSconcentration from 70 mg/l to 20 mg/l. The projected performance of the Janglim

56

ANNEX 7Page 5

plant in 1999 would be 13 mg/l BOD and 16 mg/l SS, which complies with newstandards. Tertiary treatment would further reduce BOD and SS to 8 mg/l.

Impact on receiving waters

16. From about 280,000 m3/d of wastewater treated at present, a minimum of 26 t/dBOD and 47 t/d SS (inflow BOD 106 mg/l, SS 185 mg/l; effluent BOD 13 mg/l, SS 17mg/i) are removed by the WTP. Completion of the interceptor sewers in 1999 wouldincrease wastewater volume to 615,000 m3/d. Without this component, only 330,000m3/d would be treated and the remaining 285,000 m3/d (30 t/d BOD, 52 t/d SS) wouldbe discharged into the river. At completion of this component, including tertiarytreatment, the treatment capacity would be increased to 615,000 m3/d, and about 60t/d BOD and 109 t/d SS would be removed while the remaining 5 t/d BOD and 5 t/d SSwould be discharged into the river. The sludge would be digested and dewatered andtogether with screenings and grit (160 t/d), would be disposed of at the Senggoksanitary landfill.

Monitoring and institutional capacities

17. Monitoring of WTP performance and water quality near the discharge area isconducted daily by the Janglim WTP. Monitoring of water quality in the Nakdong riverand the discharge into public sewers of industries located outside the industrialestates is carried out by the city through the cooperative effort of the districts,the environmental and green bureau, and the office of health and environmentalresearch (OHER). The OHER also monitors water and air pollution and is well equippedwith qualified staff and instruments for analysis of environmental samples. PusanMOE monitors industrial discharges from estates, the water quality in the Nakdongriver catchment area, and air quality in Pusan city.

KUNSAN COMPONENT

18. The component would include construction of a high temperature incinerator(rotary kiln) with a capacity of 60 t/d. The flue gas will be directed into a seriesof pollution control devices, comprising a semi-dry alkali scrubber and anelectrostatic dust collector, before being emitted to the atmosphere through a 30m high stack. Ash will be collected and disposed of at the specified waste landfill.The incinerator is part of the Kunsan Integrated Specified Waste Treatment Plant(KTP). The nearest community (Naechondong) is about 5 km from the site. The detaileddescription of the project is given in Annex 2.

Assessment of environmental impacts

19. The Environmental Management Corporation (EMC) would be the implementing andoperating agency. A site selection study was carried out in late 1988 and the Kunsansite was selected based on technical, economic, legal, and environmental grounds.An EIA study for KTP was carried out in 1992, and included public consultation. Thereport was submitted for review in January 1993 and was approved in May 1993. Itpresented the existing conditions, assessed the impacts on the natural, living, andsocial environment, and proposed mitigating actions. The impact due to operation ofthe incinerator was based on 100 t/d in year 2001 (two units). Potential impactsduring operation and the proposed mitigation measures are summarized in Table A 7.2.

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ANNEX 7Page 6

Table A 7.2 Kunsan incinerator environmental impacts and mitigation measures

Environmental impacts Proposed mitigation actions

* Emission of air pollutants from * Install a semi-dry alkalithe incinerator (based on 51,600 scrubber,(remove 80-95% of S02 andNm3/hr of flue gas) would exceed the HC1), SCR and a dust collectorstandards to be in effect in January (remove 95%); the air pollutant1, 1999; thus removal of TSP and levels after removal and the amounthydrochloride acid (HC1) is needed: of pollutant emission would be:

Emission level Standard(without treatment)

S02 ppm 150 300 S02 50 ppmHC1 ppm 700 50 HC1 30 ppmN02 ppm 50-200 (150) 200 N02 150 ppmCO ppm 200-600 (400) 600 CO 400 ppmTSP mg/Sm3 100-10,000 (1,000) 80 TSP 50 mg/Sm3

* A model indicated small increase * Install automatic stack monitoringof ambient air pollutants; the final of S02, N02, TSP, CO, HC1 and carrylevels are within the standards; the out routine monitoring of someexpected increase, background level, specific toxic pollutants at leastand final concentrations at Oshido once a month.which are located about 800 m fromthe proposed site would be: * Carry out routine monitoring of

Increase Background Standard ambient air quality.S02 ppb 0.39 4 50HC1 ppb 0.04 - -N02 ppb 0.23 4 50CO ppb 0.28 300 8000TSP ug/m3 0.12 51 150

* Ash generation would be about 10% * Ash would be collected andof incinerated amount; generation of landfilled on-site; the wastewaterblowdown from boiler would be 0.15 would be treated in an on-sitem3/d (2-5% boiler capacity). wastewater treatment facility.

Note: Nm3/hr=normal cubic meter per hour; mg/Sm3-milligram per standard cubicmeter; ppm=parts per million; ppb=parts per billion; ug/m3=microgram per cubic meter

Reguirement for mitigating actions

20. As part of the EIA approval, MOE's requirements for the KTP include (i)continuous dialogues with the residents; (ii) measures to prevent adverse impactsduring construction: prevent soil erosion and ground subsidence, comply with MOE'sguidelines for dust control, pave the access road, install green area; (iii)installation of the specified waste treatment plant, bring in and store varioustypes of specified wastes (liquid, semi-solid, solid); (iv) elimination of odorsfrom waste storage facility and ash pit; (v) prevention of traffic congestion andestablish transportation plans to prevent waste delivery vehicles from passing intodowntown and high-density population area; and (vi) implementation of the proposed

58

ANNEX 7Page 7

"environmental management plan", including the investigation of noise and odor inthe nearby residential areas.

21. MOE's requirements related to operation of the incinerator include:

(a) Install an electrostatic dust collector, semi-dry alkaline scrubber, includingautomatic monitoring equipment for TSP, S02, HC1; based on the monitoringresults, install additional pollution control facilities;

(b) Establish and implement measures to prevent dispersion of fly ash duringstorage, transportation, and landfill, especially the plan for dust screens;

(c) Install sound-proof facilities to reduce noise generation from equipment andtraffic, and study the traffic impacts on the residents, including the possiblechanges in routes;

(d) Provide adequate spare parts to prevent abnormal operation; establish andimplement checking of incinerator and pollution control facilities.

Status of mitigating actions

22. EMC has agreed to comply with MOE's requirements. To comply with the newclassification for specified waste issued in 1993, MOE reviewed the amount ofspecified waste to be generated and waste feed and proposed construction of a 60 t/dnon-slagging type incinerator (650-1,200 C during operation). Prior to flue gastreatment generation of air pollutants was estimated to be 800 ppm HC1, 200 ppm S02,150 ppm N02, 400 ppm CO, and 1,000 mg/Sm3 TSP. With installation of an electrostaticdust collector, semi-dry alkali scrubber and a selective catalytic reduction systemfor NOX reduction, the levels of all air pollutants will be within the standards.

23. To ensure effective operation and maintenance of the facilities, adequate spareparts and training of personnel will be provided, and an automatic stack monitoringequipment for S02, HC1, TSP, CO, and N02 will be installed with on-line connectionto MOE regional office in Jeonju. Some specific toxic air pollutants from the stackwill be monitored more than once a month. At least two ambient air qualitymonitoring stations will also be established in the nearby residential areas. Thespecifications for emission performance, the on-line stack monitoring, and theambient air quality monitoring stations, including those required by Jeonju MOE, arepart of the bidding document and the supplier will provide supervisory and technicaladvice for 1 year.

24. To evaluate the environmental impact of the incinerator EMC would implement amonitoring program to measure various parameters six months before and six monthsafter the start of incinerator's operation. The monitoring program will be submittedfor Bank review prior to the start of the monitoring activities. Upon evaluatingresults of such monitoring EMC would prepare a plan to mitigate potential adverseimpacts and submit the plan to the Bank.

Requirements for treatment performance

25. From January 1999, MOE standards for emission of air pollutants will bestrengthened from the present 100 mg/Sm3 TSP and 80 ppm HC1 to 80 mg/Sm3 TSP and 50ppm HC1; the standards for CO, S02, N02 will remain at 600 ppm, 300 ppm, and 200ppm, respectively. The specification for the incinerator requires performance at 40

59

ANNEX 7Page 8

mg/Sm3 TSP, 25 ppm for HC1, 300 ppm for CO, 150 ppm for S02, and 100 ppm for N02,which would ensure the compliance of the new standards.

Impact on the environment

26. The component is a part of the Government effort to ensure safe disposal ofspecified waste in the country. It would treat 60 t/d of the specified wastegenerated in Chunbuk province, including waste oil, organic solvents, syntheticpolymers, and contaminated sludge. This will account for nearly 23% and 13% of thetotal specified waste generation in 1997 and 2001. Remaining will be treated anddisposed of at source or by private waste disposal companies.

Monitoring and institutional capacities

27. EMC will carry out daily monitoring of treatment performance of the KTP and ofair pollutants from the incinerator. MOE will monitor the compliance of the EIArequirements, pollution control of the industrial complex, air and noise quality,and water quality in the rivers and coastal waters. Since MOE's regional office wasestablished in May 1994, its present capacity is inadequate to carry out thesetasks. It will be strengthened to ensure effective monitoring (on-line and periodic)of performance of the incinerator and the levels of air pollutants in the nearbyresidential areas.

Public consultation

28. Consultation with the public and affected groups was carried out during thepreparation of KTP, which complies with Bank policy and is considered to besatisfactory. During the preparation of the EIA report, consultation with the publicand residents was carried out through the media and public announcement and writtencomments were considered and recorded. The residents objected to the initialproposal of developing the Kunsan specified waste treatment and disposal facilitiesfor the Honam Region and expressed their concerns about safety and transportation.A series of consultations were held during 1992-93 to obtain agreement among variousgroups. Based on the latest meeting in September 1993, it was agreed that (a) thefacilities would be used only for the specified wastes that are generated in Chunbukprovince; (b) MOE would provide several benefits to Kunsan city, includingconstruction of access roads to the treatment plant; and (c) If required, apercentage of the revenues of KTP would be allocated to the Regional DevelopmentFund for use as a subsidy for welfare facilities. MOE intends to maintain closeconsultation with the residents during the preparation, construction, and operationstages.

60

ANNEX 8Page 1

KOREA

WASTE DISPOSAL PROJECT

PROJECT SUPERVISION PLAN

Bank Supervision Input into Key Activities

1. The staff input indicated in the table below is in addition to regularsupervision needs at headquarters to review progress reports, procurement actions,correspondence, etc. , which is estimated at 12 staff weeks during FY96, 8 staffweeks during FY97 through FY99 and 10 staff weeks in FY 2000. Accordingly, thetotal Bank supervision input is estimated at 96 staff weeks, of which 46 staff weekswould be at the headquarters and 50 staff weeks in the field.

Bank Field Supervision Input into Key Activities

ApproximateDates Expected Skill Staff Input(month/year) Activity Requirements (staff weeks)

Oct/1995 Supervision mission Project Engineer(civil work progress Financial Analystprocurement) Procurement Specialist

Incineration Specialist 8

May/ 1996 Supervision mission(work progress, pro- Project Engineercurement, financial Financial Analystperformance) Incineration Specialist 6

Oct/1996 Supervision mission(work progress, fi- Project Engineernancial performance) Financial Analyst 4

May/1997 Supervision mission(work progress, fi- Project Engineernancial performance, Financial Analystenvironmental aspects) Incineration Specialist

Environmental Specialist 81998/1999 Supervision missions

(three mission revie- Project Engineerwing work progress, Financial Analystfinancial status, Environmental Specialistenvironmnetal aspects, Incineration Specialist 24evaluation report)

61

ANNEX 8Page 2

Borrower's Contribution to Supervision

2. Overall coordination of the project would be the responsibility of theTreasury Division, Treasury Bureau, MOF. This would include inter alia (i)providing guidance to PSM in Pusan, and to EMC in Seoul, on timing and form ofreporting implementation progress; (ii) arranging meetings with the PSM and EMCofficials during mission's field visits; (iii) chairing mission's opening and wrap-up meetings in MOF; and (iv) ensuring timely information to the Bank and proposalsfor the satisfactory resolution of any unexpected issue occurring duringimplementation. Monitoring of the project and reporting on progress would be theresponsibility of the implementing agencies.

3. In addition to regular financial reporting on the use of the loan andthe financial status of the implementing agencies as specified elsewhere, thefollowing reports on implementation progress would be submitted to the Bank:

Semi-annually: (a) project status report on implementation of Pusan and Kunsancomponents, prepared by PSM for Pusan and EMC for Kunsan;

Other: (b) environmental monitoring program prepared as a part ofproject status report due before June 30, 1997 by EMC forKunsan, and June 30, 1998 by PSM for Pusan, and

(d) evaluation report on implementation of both components,prepared by PSM for Pusan and EMC for Kunsan at completionof construction.

Outline of semi-annual component status report

4. The semi-annual component status report will be prepared by PSM for the Pusancomponent and EMC for the Kunsan component. The report should comprise adescriptive part and appendices; the descriptive part should not exceed twentypages and should cover the following items:

(a) General Description of the Component. A concise summary of componentobjectives, component description, its financing, initial and latestestimated costs, initial and latest schedule, key data of loan andproject agreements and of various amendments;

(b) Component Overview and Physical Accomplishment. Status of implementationprogress for each part of the component, procurement, information oninspection of manufacturing, input of supervising consultant;

(c) Component Financial Status. List of awarded contracts with dates ofaward, start and completion of contract, allowed time extensions, andvariations, contract amounts in various currencies and status ofdisbursement for contracts, projected and actual disbursement S-curvefor the total and the loan;

(d) Problems Affecting Implementation. Description of problems and proposedor taken actions.

5. Appendices will list component personnel provided by the implementing agency,the consultant and the contractor, key meetings, important visits on site,

62

ANNEX 8Page, 3

photographs, and location plan of the component showing planned and actual progress.

Outline of the evaluation report on component implementation

6. The evaluation report will be prepared by PSM for the Pusan component and byEMC for the Kunsan component.

7. The evaluation report on the component should not exceed ten pages and theperformance judgments and analyses should cover the following specific aspects:

(a) Component Objectives. A concise statement and evaluation of thecomponent's major objectives as presented in the SAR, including anychanges made during implementation. The evaluation will assess theclarity of the objectives, their realism, and whether they are importantfor the country and sector.

(b) Achievement of Component Objectives. An assessment of the component'ssuccess (substantial, partial, negligible) in achieving its majorobjectives - e.g. sector policy improvements, financial objectives,institutional development, physical objectives, other social objectives,environmental objectives, and public sector management and privatesector development.

(c) Implementation Record and Major Factors Affecting the Component. Ananalysis of the factors that affect component implementation. Thefactors are divided into those not generally subject to governmentcontrol, those subject to government control, and those subject to theimplementing agencies' control.

(d) Bank Performance. An assessment of the Bank's performance (highlysatisfactory, satisfactory, deficient) in component identification,preparation assistance, appraisal, and supervision.

(e) Borrower Performance. An assessment of the performance of the borrowerand implementing agencies (highly satisfactory, satisfactory, deficient)in preparing, implementing, and, where relevant, operating thecomponent.

(f) Assessment of Outcome. A rating of outcome (highly satisfactory,satisfactory, unsatisfactory, or highly unsatisfactory) based primarilyon how well the component achieved its objectives and how sustainableit is likely to be.

(g) Future Operation. A description and assessment of the plan for thecomponent's future operation, including understanding the measures tomaximize the component benefits, and the indicators for monitoring andevaluating future operations.

(h) Key Lessons Learned. A discussion of the most significant positive andnegative lessons learned from the component's implementation, showinghow they are reflected in the arrangements for its future operations.This section also identifies those lessons most relevant to similarongoing and future projects in this sector in Korea.

8. The implementing agencies will submit the evaluation reports to the Bank notlater than six months after completion the components.

KOREA ANNEX 9

WASTE DISPOSAL PROJECT Page I

PUSAN SEWERAGE SPECIAL ACCOUNTINCOME STATEMENT 1992-2002

(Millions of cwuent WON)<---- Actual----> Forecast ---------------------------- ----------------------- >

YearendedDecembet31 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

SEWAGE(THOUSAND TON/YEAR) 365468 376059 392594 416271 436764 457984 479414 503165 519952 545448 563665

AVERAGETARIFF(WON/TON) 79.81 78.74 86.56 95.13 104.58 114.97 126.40 138.95 152.82 168.01 184.79

INCREASE IN AVERAGE TARIFF -1.34% 9.92% 9.90% 9.93% 9.94% 9.94% 9.93% 9.98% 9.94% 9.99%

OPERATING REVENUES 29169 29612 33982 39599 45675 52653 60596 69915 79461 91640 104159

OPERATING EXPENSESPersonnel 3453 3522 4107 6077 6573 8834 9554 13713 16071 17739 24902

Electricity 1461 1345 1345 1802 1892 2535 2662 3808 4359 4678 6480

Chemicals 717 665 698 935 982 1316 1382 1977 2263 2429 3364

Maintenance 116 135 334 356 423 500 530 752 899 968 1031

Billing charge 668 650 650 396 457 527 606 699 795 916 1042 0

DistntclsO&M 111 92 114 127 140 154 169 186 202 223 242

Other costs 2253 1598 1678 1868 2058 2266 2491 2745 2978 3280 3559

Depreciation 9618 14480 14802 15047 17022 19152 25078 26163 29783 30522 30985

OPERATING EXPENSES 18397 22487 23728 26608 29546 35284 42473 50043 57351 60755 71605

OPERATING INCOME 10772 7125 10254 12991 16129 17369 18123 19872 22110 30885 32554

Less:Interest expense 2371 2570 2560 2446 3088 2929 2713 2440 5598 5325 4854

Add :Interestincome 3095 4781 4282 6225 2742 3479 2891 1045 2503 4509 6177

Other income 2720 -399 0 0 0 0 0 0 0 0 0

Foreign exchange gain (-loss) -1708 -5584 -4539 0 0 0 0 0 0 0 0

NETINCOME 12508 3353 7437 16769 15783 17919 18301 18477 19015 30069 33877

WORKING RATIO 0.30 0.27 0.26 0.29 0.27 0.31 0.29 0.34 0.35 0.33 0.39

OPERATING RATIO 0.63 0.76 0.70 0.67 0.65 0.67 0.70 0.72 0.72 0.66 0.69

NETF.ASSETSIN OPERATION 253605 369668 484559 484930 522831 601499 733480 839428 924230 999671 1003878

RATEOFRETURN 4.25% 1.93% 2.12% 2.68% 3.08% 2.89% 2.47% 2.37% 2.39%/6 3.09% 3.24%

KOREA ANNEX 9WASTE DISPOSAL PROJECT Pagc 2

SOURCE AND APPLICATION OF FUNDS 1992-2002(Millions of current WON)

<---- Actual-> -- Forecast------- ----------_ _ _ ___ ________ __ _ _ _ ~~~~~~~~~- -- -- Sununary - - - - - -----

Year endcd December31 1992 1993 1994 1995 1996 1997 1998 1999 1995-99 2000 2001 2002

SOURCE OF FUNDSNet incomc before interest expense 14879 5923 9997 19215 18871 20848 21014 20917 100865 24613 35394 38731Depreciation 9618 14480 14802 15047 17022 19152 25078 26163 102461 29783 30522 30985Othernoncashdebits&credits 1038 5438 4539 0 0 0 0 0 0 0 0 0

GROSS INTERNALCASH GENERATION 25535 25841 29339 34262 35893 40000 46092 47080 203326 54396 65916 69716

DEBT SERVICEAmortization 1923 3088 4158 5043 6018 7718 10318 13304 42400 17724 21444 30744lntercstchargedtooperations 2371 2570 2560 2446 3088 2929 2713 2440 13616 5598 5325 4854

TOTAL DEBT SERVICE 4294 5658 6717 7489 9106 10646 13031 15744 56016 23323 26769 35598

NET INTERNAL CASHGENERATION 21241 20183 22621 26773 26787 29353 33061 31335 147310 31074 39146 34118CAPITAL CONTRIBUnONSCity general account 1000 5000 6000 7000 8500 10000 10000 10000 45500 10000 10000 10000Developers contribution 23438 17889 27491 37749 37749 37749 37749 37749 188746 35985 35985 35985Othercapital contributions (Network) 13407 16788 17627 18509 19434 20406 21426 22498 102273 23622 24804 26044

TOTALCAPITALCONTRIBUTIONS 37845 39677 51118 63258 65683 68155 69175 70247 336519 69607 70789 72029

LOANSRcgional development fund 6000 13000 17000 10000 20000 20000 20000 20000 90000 20000 20000 10000Environmcntal fimd 0 9869 24200 20000 30000 30000 30000 30000 140000 20000 20000 20000IBRD-Nambu WTP 0 0 8000 3200 0 0 0 0 3200 0 0 0IBRD-Janglim phase II WTP 0 0 0 0 12800 20000 15200 0 48000 0 0 0

TOTAL LOANS 6000 22869 49200 33200 62800 70000 65200 50000 281200 40000 40000 30000

TOTALSOURCEOFFUNDS 65086 82729 122940 123231 155271 167508 167437 151582 765029 140681 149935 136146

APPLICATION OF FUNDSCAPITAL EXPENDITUREProposcdJanglirnphascllWTP 677 21246 28517 26191 38637 68205 50711 10353 194097 0 0 0Interest during construction 0 0 0 1364 3292 7344 7771 5273 25044 0 0 0OtherWTPprojects 5974 31173 61798 110400 81936 76079 107568 92252 468236 90153 100934 112091Network construction 13407 16788 17627 18509 19434 20406 21426 22498 102273 23622 24804 26044Others 631 1753 2037 2037 2037 2037 2037 2037 10185 2037 2037 2037

TOTAL CAPITAL EXPENDITURE 20689 70960 109979 158501 145336 174072 189513 132413 799835 115812 127775 140172CIANGE IN WKING CAPITAL EXCEPT C 27195 4960 -11323 8268 725 784 999 944 11720 -203 1309 1202

TOTAL 47884 75920 98657 166769 146061 174855 190512 133357 811555 115609 129083 141374CASH INCREASE (-DECREASE) 17202 6809 24283 -43538 9210 -7347 -23076 18225 -46526 25072 20852 -5227

TOTALAPPLICAnONOFFUNDS 65086 82729 122940 123231 155271 167508 167437 151582 765029 140681 149935 136146

DEBT SERVICE RATIO 5.9 4.6 4.4 4.6 3.9 3.8 3.5 3.0 3.6 2.3 25 2.0CONTRIBUTIONTOINVESTMENT 240.3% 28.1% 36.8% 18.1% 29.6% 24.6% 25.8% 45.9% 27.3% 33.9% 36.7% 28.8%4 YEAR AVE.CONTRIBUIION TO INVES 24.1% 27.8% 26.9% 24.4% 29.7% 31.1% 34.6% 35.8% 27.3% 33.0% 32.6% 28.8%

KOREA ANNEX 9WASTE DISPOSAL PROJECT Page 3

PUSAN SEWERAGE SPECIAL ACCOUNTBALANCE SHEETS 1992-2002

(Millions of curent WON)< -- Actual--------> '--------- --------- ------------------ ------------------- Forecast ------------------------- ---------------- ------>

At December31 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

ASSETSFIXED ASSETSFixedassetsinoperation 493282 881064 897121 911916 1031624 1160707 1519891 1585627 1805032 1849827 1877908Accumulated depreciation 148362 226882 241684 256731 273753 292905 405315 431478 461261 491783 522769

NETFIXEDASSETSINOPERATION 344920 654182 655436 655185 757871 867802 1114576 1154148 1343771 1358044 1355139Construction inprogress 6668 59087 153010 296716 322343 367332 543738 610416 506823 589802 701893

TOTAL FDIED ASSETS 351588 713269 808446 951901 1080215 1235135 1658314 1764564 1850594 1947846 2057032

CURRENT ASSETSCash 46719 53528 77811 34273 43483 36136 13060 31285 56357 77209 71981Accounts receivable 3421 3628 3776 4400 5075 5850 6733 7768 8829 10182 11573Inventories 489 636 637 637 737 844 1084 1122 1306 1320 1317Othcrs 27306 32069 20618 28312 28312 28312 28312 28312 26989 26989 26989

TOTAL CURRENT ASSETS 77935 89861 102843 67622 77607 71142 49189 68487 93481 115700 111861-- -======= _ _ ___ _ _ __nt

TOTAL ASSETS 429523 803130 911289 ###### 1157822 1306277 1707503 1833052 1944075 2063546 2168893== == = ---------- --- = = = == = = = = = = = = = = = ====== ======== ========= ======== =========

LLABILITIES 0 0 0 0 0 0 0 0 0 0 0CURRENT LLABILMESAccounts payable 356 385 407 456 506 605 728 858 983 1041 1227CurrentportionofLlTdebt 3088 3885 5043 6018 7718 10318 13304 17724 21444 30744 32784

TOTALCURRENTLIABILTES 3444 4270 5449 6474 8224 10922 14032 18582 22427 31786 34012

Longtermdebt 54181 78605 127029 154211 209293 268976 320871 353147 371702 380958 378174

TOTAL LIABILrTIES 57625 82875 132478 160685 217517 279898 334904 371729 394130 412744 412185

EQUITYAsset rvaluation surplus 0 305201 305201 305201 305201 305201 563946 563946 563946 563946 563946Retainedeamings 49102 52580 60017 76786 92569 110488 128789 147266 166281 196350 230226Capital surplus 39453 62343 113461 176719 242403 310558 379733 449980 519587 590376 662405Paidincapital 283343 300131 300131 300131 300131 300131 300131 300131 300131 300131 300131

TOTAL EQUITY 371898 720255 778810 858838 940304 1026378 1372599 1461322 1549945 1650802 1756708

TOTALLIABILTIES AND EQUITY 429523 803130 911288 #### 1157821 1306276 1707503 1833052 1944075 2063546 2168893

CURRENT RATIO 22.6 21.0 18.9 10.4 9.4 6.5 3.5 3.7 4.2 3.6 3.3L/TDEBT AS %OF CAPITALIZATION 12.6% 9.8% 13.9% 15.1% 18.1% 20.6% 18.8% 19.3% 19.1% 18.5% 17.4%DEBT/EQUrIYRATIO 0.15 0.12 0.17 0.19 0.23 0.27 0.24 0.25 0.25 0.25 0.23DAYSACCOUNTRECEIVABLE 43 45 41 41 41 41 41 41 41 41 41

KOREA ANNEX 10WASTE DISPOSAL PROJECT Page I

KUNSAN SPECIFIED WASTE ACCOUNTINCOME STATEMENT

(Millions of current WON)< -- ---------- -Forecast -- = = ----- -- >

YearendedDecembber31 1994 1995 1996 1997 1998 1999 2000 2001 2002

OPERATING REVENUESIncineration 0 0 0 0 2726 3286 3171 3020 2968Landfill 0 1492 1642 2071 2414 2796 3221 3695 4222

TOTAL OPERATING REVENUES 0 1492 1642 2071 5140 6082 6393 6716 7190

OPERATING EXPENSESPersonnel 0 533 576 623 1268 1371 1483 1603 1734Electricity & Fuel 0 30 31 33 498 522 549 576 605Equipment operating cost 0 37 39 40 220 231 242 254 267Material cost 0 0 0 0 344 361 380 398 418 CYMaintenance 0 154 162 170 599 629 660 693 728 aTLeachate treatment cost 0 10 11 11 12 12 13 14 14Depreciation 0 552 566 580 1683 1725 1768 1812 1917

TOTAL OPERATING EXPENSES 0 1316 1385 1458 4622 4851 5094 5351 5683

INDIRECT EXPENSESEMCHeadquarterexpenses 0 149 164 207 514 608 639 672 719

OPERATING INCOME 0 27 93 407 3 622 659 693 787

Less:Interest expenses 0 0 0 0 852 852 852 852 821Add :Interest income 0 0 27 67 103 145 239 347 465

NET INCOME 0 27 120 474 -746 -84 47 188 432

WORKING RATIO - 51.20% 49.86% 42.37% 57.20% 51.41% 52.03% 52.70% 52.39%AVERAGE NETFIXED ASSETS INOPERATION - 6165 12200 11932 23216 34209 33318 32361 32000RATEOFRETURN - 0.43% 0.76% 3.41% 0.01% 1.82% 1.98% 2.14% 2.46%

KOREA ANNEX 10WASTE DISPOSAL PROJECT Page 2

KUNSAN SPECIFIED WASTE ACCOUNTSOURCE AND APPLICATION OF FUNDS

(Millions of current WON)< ---- - ------------------------- Forecast ------------------------- -------------------- --- >

--------- ------ -* ------------------- --- - --- - -------------- ------- -------------- -suummary --------------- -- ---- _ --YearendedDecember31 1994 1995 1996 1997 1998 1995-98 1999 2000 2001 2002

SOURCES OF FUNDSINTERNAL CASH GENERATIONNet income before interest expenses 0 27 120 474 106 727 768 899 1040 1253Depreciation 0 552 566 580 1683 3380 1725 1768 1812 1917

GROSS INTERNALCASH GENERATION 0 579 686 1054 1789 4107 2492 2666 2852 3170

DEBT SERVICEAmostization 0 0 0 0 0 0 0 0 0 880Interest 0 0 0 0 852 852 852 852 852 821

TOTAL DEBT SERVICE 0 0 0 0 852 852 852 852 852 1701

NET INTERNAL CASH GENERATION 0 579 686 1054 937 3255 1640 1814 2000 1469CAPITAL CONTRIBUTIONSMOE contribution 12881 1036 6854 2774 2991 13654 0 0 0 1389Head office account 0 0 0 0 0 0 0 0 0 0 O

TOTAL CAPITAL CONTRIBUTIONS 12881 1036 6854 2774 2991 13654 0 0 0 1389

LOANSIBRD 0 0 0 12000 0 12000 0 0 0 0

TOTAL LOANS 0 0 0 12000 0 12000 0 0 0 0

TOTAL SOURCES OF FUNDS 12881 1614 7540 15828 3927 28909 1640 1814 2000 2858

APPLICATION OF FUNDSCAPITAL EXPENDITURESProposed project 0 1036 6854 14774 1848 24512 0 0 0 0Capitalized interest 0 0 0 426 0 426 0 0 0 0Landfill 12881 0 0 0 1143 1143 0 0 0 1389

TOTAL CAPITAL EXPENDITURES 12881 1036 6854 15200 2991 26080 0 0 0 1389CHANGE IN WORKING CAPITAL EXCEPT CASH 0 133 12 35 230 409 74 21 22 36

TOTAL 12881 1168 6866 15235 3221 26490 74 21 22 1425CASH INCREASE (-DECREASE) 0 446 674 593 707 2420 1566 1793 1978 1433

TOTALAPPLICATIONOFFFUNDS 12881 1614 7540 15828 3927 28909 1640 1814 2000 2858============= == ====== ========= ========= === == =~====== == = == = --- -- -- ---- ---- ==~====== = ==========-

DEBT SERVICE RATIO - - n/a 2.5 2.1 3.2 2.9 3.1 3.3 1.9NET INTERNAL CONT. TO INVESTMENT - 9.8% 6.7% 23.6% 10.9% n/a n'a n/a 103.2%% CAPITAL EXPEND OF NET F.ASSETS - 56.8% 128.9%/o 8.6% 36.8% 0.0% 0.0% 00% 4.3%

KOREA ANNEX 10WASTE DISPOSAL PROJECT Pagc 3

KLTNSAN SPECIFED WASTE ACCOUNTBAI.ANCE SHEET

(Millions of current WON)< -------- - ------- ---------- Forecast - ------ ------- ---------------

At December 31 1994 1995 1996 1997 1998 1999 2000 2001 2002

ASSETSFIXED ASSETSFixed assets in operation 0 12881 13203 13533 38104 39057 40033 41034 43449Accumulated depreciation 0 552 1132 1740 3466 5277 7177 9168 11314

NETFIXEDASSETSINOPERATION 0 12329 12072 11793 34638 33779 32856 31866 32135Construction in progress 12881 1036 7890 23090 1848 1848 1848 1848 1848

TOTAL FIXED ASSETS 12881 13365 19961 34883 36486 35627 34704 33714 33982

CURRENT ASSETSCash 0 446 1120 1713 2420 3986 5780 7758 9191Accounts receivable 0 124 137 173 428 507 533 560 599Inventories 0 18 18 17 51 49 48 47 47

TOTAL CURRENT ASSETS 0 588 1275 1903 2899 4542 6360 8364 9837

TOTAL ASSETS 12881 13953 21236 36786 39385 40170 41065 42078 43819

LLABILIMES 0 0 0 0 0 0 0 0 0CURRENT LIABILIT1ESAccounts payable 0 10 10 11 70 73 77 81 85Current portion of /Ir debt 0 0 0 0 0 0 0 880 880

TOTALCURRENTLIABILITIES 0 10 10 11 70 73 77 961 965

TRANSFERRED ASSETS 12881 13917 20771 23545 26536 26536 26536 26536 27924Long term debt 0 0 0 12000 12000 12000 12000 11120 10240

TOTAL LIABILITIES 12881 13927 20781 35556 38605 38609 38612 38616 39129

EQUITYAsset revaluation surplus 0 0 308 610 905 1771 2615 3437 4233Retained earnings 0 27 147 620 -125 -210 -163 25 457Head office account 0 0 0 0 0 0 0 0 0

TOTAL EQUITY 0 27 455 1230 779 1561 2452 3461 4690

TOTALLIABILITESANDEQUITY 12881 13953 21236 36786 39385 40170 41065 42078 43819---- ---- - = == - - - - - = = == = - -- - - -- -- = ~ = === = -- -- -=-- === =

CURRENT RATIO - 61.2 126.3 179.6 41.6 62.1 82.8 8.7 10.2LONG TERM DEBTS AS % OF CAPITALIZATION - 0.0% 0.0% 32.6% 30.5% 29.9% 29.2% 26.4% 23.4%DAYS ACCOUNT RECEIVABLE - 30 30 30 30 30 30 30 30

69

ANNEX 11Page 1

KOREA

WASTE DISPOSAL PROJECT

ASSUMPTIONS FOR FINANCIAL PROJECTIONS

General

1. The financial statements and projections were prepared by the Bankappraisal mission with the assistance of a local firm of consultants. Theprojections are in current Won.

A. PUSAN COMPONENT

Income Statement

2. Operating revenues: Revenues have been projected to increase in line withestimated increased sewage volumes, and annual increases of sewerage tariffs.Sewage volumes are based on the following: Household and commercial - assumed toincrease in line with water lcd and growth in population using 1993 as the basefigure; Industrial and others - assumed to increase in line with growth inpopulation and per capita income projections, using 1993 as the base figure.Tariffs: Assumed to increase by 9.9% from January 1, 1995 and on each subsequentyear, to produce average cash generation equivalent to 25% of investment frominternal cash generation. Collection efficiency - based on past experienceestimated at 99%.

3. Operating expenses: 1992 and 1993 expenses are actual, and 1994 expensesare based on budget. Inflation has been added to expenses at 5% per annum for1995 and thereafter. Personnel: The projections include wages and salaries forSSA staff in WTPs and administration. Also included are additional staffingrequirements when new WTPs are placed in service, and a 3% annual increase in paylevels. Electricity, chemicals: Projected expenses are increased in proportionto additional WTP capacity. Maintenance: Projected to increase in line withincreased fixed assets in operation. Billing expenses: Projected expenses areincreased in proportion to the increase in operating revenues. District 0 & M:Projected expenses are increased in proportion to the increase in wastewaterquantities. Depreciation: The calculation of 1.65% p.a. has been made on theweighted average of all fixed assets in operation (including land) of the WTPs,pumping stations, interceptors and network.

Balance Sheet

4. Fixed assets: Include the WTPs, pumping stations, interceptors and network,(including land) and are revalued at annual projected local inflation rates. Thelast valuation was made in 1993, and the next valuation is scheduled for 1998.Accounts receivable: Based on past experience, these have been assumed to equal41 days sales. Inventories: These have been assumed to increase in proportion toadditional net fixed assets in service. Accounts payable: Historical figures havebeen projected to increase in line with operating expenses. Capital surplus:Additions consist of capital contributions from the city's general account,

70ANNEX 11Page 2

developers, and sewerage network constructed by districts.

Source and Application of Funds

5. Other capital contributions: City general account: Contributions from thePusan city general account to SSA. Developers' contributions: Actual andprojected contributions by land developers who construct the infrastructure forindustrial and residential development and make a contribution for WTPconstruction. District contributions: Actual and projected contributions forsewerage network constructed by district offices.

6. Loans: Regional development fund: Finance from this fund would be providedover 10 to 12 years, including two-year grace at variable interest rates between7% and 8%. Environmental fund: Finance from this fund would be provided over 10years, including five-year grace at 7% interest. IBRD The US$60 million (Won 48billion) Bank loan would be relent by the Government over 15 years, including 5years grace, at the Bank interest rate assumed at 7.10%. [commitment andadministrative fees at variable rates, and assumed to be included in the interestrate]

7. Interest during construction:A) Foreign. Capitalized interest charged at 7.10% p.a. on IBRD loan from

1996 through 1999. B) Local. Capitalized interest charged at 7% and 8% p.a. onRegional development fund and Environmental fund.

1995. 1996. 1997. 1998. 1999. Total-------------------------Won million----------------------------

IBRD 0 458 1630 2889 3432 8409Local 1364 2834 5714 4882 1841 16635

25044

B. KUNSAN COMPONENT

Income Statement

8. Operating revenues: Revenues have been projected to increase in line withestimated waste volumes by category, and annual increases in tariffs. Wastevolumes a)landfill; operations assumed to commence 1995: there are threecategories of waste plus transportation charges, with quantities handled assumedto increase annually in line with estimations in feasibility study.b)incinerator; operations assumed to commence 1998: there are four categories ofwaste with the mix changing in line with the feasibility study,(handling 60 t/dfor 315 days p.a.). Tariffs: Tariffs for landfill and incinerator assumed toincrease by 7.5% p.a.

9. Operating expenses: From commencement of operations, inflation has beenadded at 5% p.a. using 1994 as the base year. Personnel: The projections includewages and salaries for KWA staff for landfill and incinerator operations whenfacilities are assumed to be placed in operation. Also included is a 3% annual

71ANNEX 11Page 3

increase in pay levels. All other operating expenses: Assumed to commence whenfacilities are placed in operation. Depreciation: a)landfill; straight line over21 years, b)incinerator; straight line over 20 years.

Balance sheet

10. Fixed assets: Include the landfill and incinerator assets.

Source and application of funds:

11. Capital Contributions: Value of assets assigned for operational purposesto EMC by MOE.

12. Loan: The IBRD loan for US$15 million (Won 12 billion) would be relent bythe government over 15 years, including 5 years grace, at the Bank interest rateassumed at 7.10% [commitment and administration fees at variable rates, andassumed to be included in the interest rate].

13. Interest during construction: Capitalized interest at 7.10% p.a. on IBRDloan.

1995 1996 1997 1998 Total---------- Won million--------------------------

IBRD 0 0 426 0 426

KOREA ANNEX 12

WASTE DISPOSAL PROJECTPUSAN MONITORING INDICATORS (1992-2002)

<- Actual-> < _ -Forecast- -

YearendedDecember31 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

The following indicators will be included in progress reports sent to the Bank

1. Physical Indicators

Treatnentcapacity'000m3/d 616 616 616 956 956 1220 1220 1662 1812 1852 2443

Lengthofinterceptorsewerskm 70 70 70 80 90 98 105 112 119 129 129

Lengthofsanitarysewerskkm 330 332 507 621 735 842 950 1057 1164 1271 1419

Length ofcombined sewers km 3998 4104 4349 4490 4630 4702 4773 4845 4916 4988 5054

Seweredpopulation'000 1847 1958 2069 2152 2239 2329 2423 2521 2622 2728 2838

No.ofsewerageconns.'000 300 306 321 334 347 361 376 391 407 423 440

2. Operational indicators

No.ofdaysaccountsreceivable 43 45 41 41 41 41 41 41 41 41 41

Sewagebilled'OOOm3/year 4E+05 376059 392594 416271 436764 457984 479414 503165 519952 545448 563665

Sewagebilledperconn_m3/p.m 102 102 102 104 105 106 106 107 106 107 107

Averageseweragetariffwon/m3 79.81 78.74 86.56 95.13 104.58 114.97 126.4 138.95 152.82 t68.01 184.79

No.ofemployees 236 218 218 298 298 371 371 492 533 544 706

Employees/1000 connections 0.79 0.71 0.68 0.89 0.86 1.03 0.99 1.26 1.31 1.29 1.60

3. Financial parameters

4 Yr.ave.contribution to invest. 24.10% 27.82% 26.86% 24.43% 29.67% 31.15% 34.65% 35.84% 33.00% 32.60% 28.80%

Rate ofretum 4.25% 1.93% 2.12% 2.68% 3.08% 2.89% 2.47% 2.37% 2.39% 3.09% 3.24%

Working ratio 0.30 0.27 0.26 0.29 0.27 0.31 0.29 0.34 0.35 0.33 0.39

Operating ratio 0.63 0.76 0.70 0.67 0.65 0.67 0.70 0.72 0.72 0.66 0.69

Currentratio 22.63 21.04 18.87 10.45 9.44 6.51 3.51 3.69 4.17 3.64 3.29

Debt service ratio 5.95 4.57 4.37 4.58 3.94 3.76 3.54 2.99 2.30 2.50 2.00

Debt/equity ratio 0.15 0.12 0.17 0.19 0.23 0.27 0.24 0.25 0.25 0.25 0.23

4. Performance of existing and planned wastewater treatment plants

Suyeong '000 m3/day 286 286 286 286 286 550 550 550 550 550 550

Nambu '000 m3/day 0 0 0 340 340 340 340 340 340 340 584

Haewoondae '000m3/d 0 0 0 0 0 0 0 157 157 157 157

Noksan '000 m3/d 0 0 0 0 0 0 0 0 150 150 150

Jisa '000 m3/d 0 0 0 0 0 0 0 0 0 40 40

Jungang '000 m3/d 0 0 0 0 0 0 0 0 0 0 223

5. Performance of Janglim wastewater treatment plant

Treatmentcapacity 000m3/d 260 270 280 290 300 310 320 615 615 615 615

Biochenmical oxygen demand-outlet mg/l 11.5 13.2 13.4 13.0 13.0 13.0 13.0 8.0 8.0 8.0 8.0

Suspendedsolids-outletmg/1 15.5 18.4 14.6 16.0 16.0 16.0 16.0 10.0 10.0 10.0 10.0

Total phosphorus - outlet mg/I - 0.4 - 3.4 3.4 3.4 3.4 1.0 1.0 1.0 1.0

Total nitrogen - outletmg/l - 17.5 - 20.0 20.0 20.0 20.0 20.0 20.0 20.0 20.0

Incineration t/day

KOREA ANNEX 13WASTE DISPOSAL PROJECT

KUNSAN MONITORING INDICATORS (1993-2002)

- ----------- -------- - ----- --- Forecast---- -------------------------

1994 1995 1996 1997 1998 1999 2000 2001 2002

The following indicators will be included in progress reports sent to the Bank

1. Physical indicators

INCINERATORWaste oil t/y 0 0 0 9140 11167 13194 15220 17247 18604Waste paint lacquer t/y 0 0 0 268 284 301 317 333 349Wastesyntheticpolyester ty 0 0 0 27 31 35 39 43 47

W/W Sludge t/y 0 0 0 6354 5110 5471 3424 1377 0Total waste processed tVy 0 0 0 15789 16592 19001 19000 19000 19000

Daily processing rate (315 d/p.a.) t/d 0 0 0 50 53 60 60 60 60Fuel used m3/y *Availabilty factor % (270 days)Burn rate GKal/hSteam rate t/h

LANDFILLSludge tVy 0 13348 14087 14825 15564 16302 17041 17779 18518Waste asbestos etc.t/y 0 2168 2999 3830 4661 5493 6324 7155 7986

Waste - others t/y 0 78 82 85 89 92 96 99 103

2. Operational indicators

No.ofdays accounts receivable 30 30 30 30 30 30 30 30

No.ofemnployees 25 25 25 47 47 47 47 47No.of employees trained by contractor

3. Financial indicators

Contribution to investment 0.00% 9.80% 6.70% 23.60% 10.90% n/a n/a n/aRate ofreturn 0.43% 0.76% 3.41% 0.01% 1.82% 1.98% 2.14% 2.46%

Working ratio 0.51 0.50 0.42 0.57 0.51 0.52 0.52 0.52

Current ratio 61.2 126.3 179.6 41.6 62.1 82.8 8.7 10.2

Debt service ratio n/a 2.5 2.1 3.2 2.9 3.1 3.3 1.9

4. Performance of existing specified waste treatment plants

Onsan - incineration t/yWhaseong - incineration t/y

* To be completed by EMC afler contract negotiations.

74

KOREA ANNEX 14WASTE DISPOSAL PROJECT Page 1

PUSANCALCULATION OF FINANCIAL RATE OF RETURN

SUPPORTING DATA

Investment Cost excluding WonPrice Contingencies and Taxes Million

Treatment Plant

Civil Works 55350Equipment 36579

Tertiary TreatmentCivil Works 27109Equipment 13423

Project SupportConstruction Supervision 1966

Total Investment 134428

Phasing of Annual Investment: %

Year 1 132 203 364 265 56 0

Total 100

Notes to financial rate of return calculation

1. Revenues and expenditures are expressed in constant 1994 prices.

2. The project life is assumed to be 40 years.

3. All revenues and costs are consistent with the assumptionsin financial projections in Annex 9.

75

KOREA ANNEX 14WASTE DISPOSAL PROJECT Page 2

PUSANCALCULATION OF FINANCIAL RATE OF RETURN

(Million Won)

<----PROJE OJECT COSTS-----> <---PROJECT BENEFITS--->TOTAL NET

YEA INVEST. 0 & M COST REVENUES FLOW

-4 26886 26886 -26886-3 48394 48394 -48394-2 34951 34951 -34951-1 6721 6721 -67211 0 6444 6444 13628 71832 6444 6444 13628 71833 6444 6444 13628 71834 6444 6444 13628 71835 6444 6444 13628 71836 6444 6444 13628 71837 6444 6444 13628 71838 6444 6444 13628 71839 6444 6444 13628 7183

10 6444 6444 13628 718311 6444 6444 13628 718312 6444 6444 13628 718313 6444 6444 13628 718314 6444 6444 13628 718315 6444 6444 13628 718316 6444 6444 13628 718317 6444 6444 13628 718318 6444 6444 13628 718319 6444 6444 13628 718320 6444 6444 13628 718321 6444 6444 13628 718322 6444 6444 13628 718323 6444 6444 13628 718324 6444 6444 13628 718325 6444 6444 13628 718326 6444 6444 13628 718327 6444 6444 13628 718328 6444 6444 13628 718329 6444 6444 13628 718330 6444 6444 13628 718331 6444 6444 13628 718332 6444 6444 13628 718333 6444 6444 13628 718334 6444 6444 13628 718335 6444 6444 13628 718336 6444 6444 13628 718337 6444 6444 13628 718338 6444 6444 13628 718339 6444 6444 13628 718340 6444 6444 13628 7183

FINANCIAL RATE OF RETURN RETURN % 4.76

76

ANNEX 15Page 1

KOREA

WASTE DISPOSAL PROJECT

DOCUMENTS AND DATA AVAILABLE IN THE PROJECT FILE

Name of the Document Prepared by Date

(A) GENERALA 1 Water quality in Nakdong river

mouth Pusan city 07-1991A 2 Guidelines for reuse of treated MOE 06-1994

effluent

(B) REPORTS - PUSANB 1 EIA for the construction of Pusan city 12-1986

Janglim treatment plant(in Hangul)

B 2 EIA for the construction of Pusan city 03-1987Janglim treatment plant(Suppl. report-in Hangul)

B 3 EIA for sludge incinerator Pusan city 04-1994at Janglim treatment plant(in Hangul)

B 4 EIA for the construction of Pusan city 08-1994Janglim treatment plant(Modification plan- in Hangul)

B 5 Interim report on the 2nd stage Pusan city 05-1994Janglim treatment plant constructionproject

B 6 Reuse feasibility report Pusan city 09-1994B 7 Incinerator basic report Pusan city 09-1994B 8 Design report on the 2nd stage Pusan city 09-1994

Janglim treatment plant constructionproject

B 9 Amended sewerage master plan for Pusan city 03-1993Pusan city, Engineering report

B10 Project implementation plan Pusan city 10-1994Bll EIA approval by MOE MOE 06-1987

(C) REPORTS - KUNSANC 1 Environmental Impact Assessment MOE 01-1993

Chunbuk Specified Waste Treatment Plant(in Hangul)

C 2 EIA Supplemental Report MOE 04-1993Chunbuk Specified Waste Treatment Plant(in Hangul)

77

ANNEX 15Page 2

KOREA

WASTE DISPOSAL PROJECT

DOCUMENTS AND DATA AVAILABLE IN THE PROJECT FILE

Name of the Document Prepared by Date

C 3 Conditional Approval of EIA MOE 05-1993(in Hangul)

C 4 Explanations to Residents MOE 07-1993(in Hangul)

C 5 The Report on Feasibility Study EMC 04-1994(Data for IBRD Requirements) EMC

C 6 Summary of EIA EMC 08-1994C 7 Project implementation plan EMC 10-1994

CHARTS

KOREAWASTE DISPOSAL PROJECTOrganization Chart

PUSAN CITY

Mayor

Sewerage Management Flood Control Public Road IConstructionI Office Department I Department Admin. Dept.

II

Sewerage Planning Sewerage River DrainageDivision Division 0 Division Division

Nahmbu WTP | | Suyeong WTP| | aliWT

KOREAWASTE DIPOSAL PROJECTOrganization Chart

MINISTRY OF ENVIRONMENT

Mi ni ster

|Vice Minister

- -- - - - - - - - - _ -- - - - - - - - - State Corporations |

Emergency 'Plannig .nspector General 1 State C

General Office of Office of Bureau of Bureau Bureau u o Nat. Envir. Research InstituteAffairs Planning & Environmental Nature of Air of Water of Waste of Water 0 Central Env Disputes Coord CommisSection Management Policy Conservation Quality Quality Management & Sewage o Env. Officials Training Institute

& Recycling Treatment o Environmental Management Office

KOREAWASTE DISPOSAL PROJECTOrganization Chart

ENVIRONMENTAL MANAGEMENT CORPORATION

Board|

Chairman

Chief Secretr Internal Auditor0

Executive Director Executive Director Executive DirectorPlant Management Engineering General Affairs

Plant Management Engineering Wastewater Solid Waste Planning Acu Public

Department Department Treatment Plantsl Treatment Plants Department Department RelationsDepartment Department I Department

C)

IBRD 26341DEM PEOPLE'S 126 00 T. , 14'05'REPOF KOREA, - gO o~ul~S

*SEOUL PUSAN SepSPECIAL CITY E.press-ay

KY'UNGSANG iREP OF NMDO !KOREA NMD

Chonghonng* ToepoT 35 /JJ3515'

: - ' G euson / ( ~~~~~~~~~CHANGJON Mogpo(

= gt j ~~~~~~~~~ONCHON

12515' ! _L )nx = L {1, 12' 't KUPOU ,/ I SUMIN )

4f X ~~~~~TONGNAE ._ Suiyong

. R?ei t?,r .YUYON | Treatment

KIMHAE M I,a. lntINTERNATIONAL

, rz ~~~~~~AIRPORT . ' '! ; l a TUsc

-35 1 0Ors J e t 35 10

s> X ( Xj - *^ 8gS~~~~GAMJON a< , l S

Masron- Pusan Expressway

* | ~~~~PUSANJIN . POML/rf

--. . hAKJAN \/

CHWACHON, -. i J

Treatment

Plant

I,.. KAMCHON / C'HU

CHU CMU i &YC-4NGM1O Pusan BayJanglim -

_35-0s5' Sewage | Yongdo Sewage 35'05'-/ ~~~~~~Tenotment Treatment Plant

Nokson Plrant g l lndustrson Aron REPUBLIC OF KOREA

WASTE DISPOSAL PROJECT*Chun4g:"nB PUSAN SPECIAL CITY

TItzreent EXISTING PROPOSEDPlant U U SEWAGE TREATMENT PLANTS

South-Sea - INTERCEPTORSSouth SeoJ Z 0 PUMPING STATIONS

SEWAGE TREATMENT DISTRICTSThe bundories., colors, EXPRESSWAYS(TOLL)denominotions ond onyother informotion shown MAIN ROADSon this mop do notimply, on the port of '' RAILROADSThe World Bank Group. 0 1 2 3 4 5ony ,udgxent on the legoa ° I 3 DISTRICT (GU) BOUNDARIESstatus of any territory,or any endorsement KILOMETERS - _ CITY LIMITor occeptonce of suchboundories BUILT-UP AREAS

125-55' 126-00' 12505'

NOVEMBER 199

IBRD 26471DEM PEOPLE'S REPOF KOREA, _

*SEOUL

REP OFKOREA

Icho-g) /-

K.>rson * Toegu UIo t: I L C) Vi /

IMo5po C (rA t tM--' A ICHANGHANG

Ch.su . CITY

lav00

Waste Water Kunsan SpecifiedTreatment Plant Waste Treatment Plont

Kunscn 2nd IndustriolRs dntiol Are7tt Comp,o/xEstate , >< U

(Plonned) <General Waste 4)/V5r

KUNSN C YLandfill Sib CITYKunsan 2nd Industrial

Complex EstEte PLAN

I I NDSTIA COMPLEX ESAE

RKunsan 3rd bndustriol col,rs.\ Complex Estati d ( -l

\ ~~~~(Planned) g\~4

\~~~~~~~~~~~~~~~~~~~~te inomtr show

\ ~~~~~~~~~~~~~OKKU GUN

REPUBLIC OF KORA \ \

WASTE DISPOSAL PROJECT _ KUNSAN CITY o

* PROPOSED SPECIFIED WASTE TREATMENT PLANT

BUEXISTING SEWAGE TREATMENT PLANT

|INDUSTRIAL COMPLEX ESTATES

T-4 FUTURE RESIDENTIAL AREA

ROADS

RAILROADS Th. boundraries, colors,

CITY LIMIT ° 1 2 3 4 S the, infor-nt,o,, sho-

BUILT-UP AREA KILOMETERS The World Bank Gro°pany judg-ent on the leg.l

PROVINCE BOUNDARY status of any territory.or any endorsementor.acceptance of suchboundaries.

NOVE/ABER 1994