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DocuLment of

The World Bank

FOR OFFICIAL USE ONLY

MICROFICHE COPYReport No. 9904-KO

Report No. 9904-KO Type: (SAR)

KOZEL, J / X80443 / D8007/ AS2IN

STAFF APPRAISAL REPORT

REPUBLIC OF KOREA

PUSAN AND TAEJON SEWERAGE PROJECT

JANUARY 31. 1992

Infrastructure Operations Division

Country Department I

East Asia and Pacific Region

This document has a restricted distribution and may be used by recipients only in the perforntmnce of

their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EVUIVALENTS(as of 31 July 1991)

Currency Unit = Won (w)

W 1.00 =t' $O.00143US$1.00 = . 720

WEIGHTS AND MEASURES

1 meter (m) = 39.37 inches1 kilometer (km) = 1,000 meters or 0.62 mile1 square meter (m2) = 10.8 square feet1 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 cubic meter per second (m3/sec) = 22.82 million US gallons per day1 liter (1) = 0.26 US gallons1 liter per capita per day (lcd) = 0.26 US gallons per capita per day1 million liters per day (Mld) = 1 thousand cubic meters per day1 metric ton (t) = 1,000 kilograms or 2,205 pounds

ABBREVIATIONS AND ACRONYMS

SOD - Biochemical Oxygen DemandFRR - Financial Rate of ReturnICB - International Competitive BiddingLCB - Local Competitive BiddingMOC - Ministry of ConstructionMOE - Ministry of Environment

MOF - Ministry of FinanceMOHA - Ministry of Home AffairsNTP - Nightsoil Treatment PlantNWIP - National Water Improvement ProgramNWTP - National Wastewater Treatment PlanOSROK - Office of Supply, Republic of KoreaPCG - Pusan City GovernmentPCR - Project Completion ReportPGA - Pusan General AccountPSA - Pusan Sewerage Special AccountPTSP - Pusan and Taejon Sewerage ProjectSMPs - Sewerage Master Plans

SOE - Statement of ExpenditureSS - Suspended Solids

STP - Sewage Treatment PlantTCG - Taejon City Government

TGA - Taejon General Account

TSA - Taejon Sewerage Special Account

FISCAL YEAR

January 1 to December 31

K5R-E FOR OFFICIAL USE ONLY

PUSAN D TAJON SEEAGEPROE

Loan and Project Summary

Bogrower: Republic of Korea

B.neficiarilis Pusan and Taejon City Governments

Amounts US$40 millicn equivalent

Termr2 15 years, including 5 years of grace, at the Bank's standardvariable interest rate

Relgnding T!j1m1s The same terms as the Bank loan, including foreign exchangeand interest risks, plus a 0.05% p.a. handling charge

Proiect The proposed project supports the Government's 1990-96Descrigpnoan National Wastewater Treatment Plan to improve the water

quality in Korea's rivers and coastal waters by, among otherthings, constructing sewage treatment plants in two of thelargest municipalities. Under the project, sewage treatmentplants would be constructed or expanded in Pusan and Taejon,Korea's second and sixth largest cities. The project wouldinclude construction of: (a) the first phase of Yongho sewagetreatment plant in Pusan, with a daily maximum capacity of340,000 m3/d, a sewage pumping station and about 11.4 km ofinterceptoro to carry sewage to the plant; and (b) the secondphase of Wonchon Dong treatment plant in Taejon and 11.9 km ofinterceptors, to double existing capacity on completion.Technical assistance would also be provided to (i) helpsupervise treatment plant construction and (ii) update thecities' Sewerage Master Plans (SMPs), including a review ofpolicies and management systems for sewerage activities anddesign of a program to convert the sewer systems fromcombined-type systems, carrying both stormwater andwastewater, to hygienically superior separate systems whicbcarry wastewater in sanitary sewers and stormwater in storrisewers.

BLenefits The project would improve the environment in Pusan and Taejonand nilks: and reduce health hazards for the local populations by

providing wastewater treatment for a total of about 1.75million people and increasing the population served by sewagetreatment from 45% to 60% in Pusan and from 35% to 55% inTaejon. Updating of the cities' SMPs under the project wouldnot only establish programs for the conversion to moresanitary and environmentally acceptable separate sewer systemsbut would also def ine procedures to streamline subsectorinstitutional arrangements, which may be replicated by othermunicipalities. While the project's civil works componentspresent no special risks, implementation of the SMPs to be

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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updated under the project and realization of th. environmentalbenefits expected from the conversion to manLtary r.wersystems 1ie beyand the project's time-frame and conueq'aentlycannot be ausured. However, popular pressure now bsingexerted in Kore, for much st.ong-r environmental protectionmeasures significantly incresase the probability that the SNPwill be carried out through the year 2001 as now planned.

Estimated Cost: Local Er-iun T2tl- - - - (USS million) - - -

Sewage Treatment Plants 69.2 55.4 124.6

Interceptors 49.0 11.0 60.0Technical Assistance 3.0 0.1 3.1Land Acquisition 41.2 0.0 41.2

Bass Cost 162.4 66.5 228.9

Physical contingencies 8.1 3.3 11.4Price contingencies 19.1 5.3 24.4

Total Project Cost L& 189.6 75.1 264.7

Interest during construction 5.2 2.2 7.4

Total Financing Required 194.8 77.3 222 1

Financina Plant

Internal Cash Generation 122.1 - 122.1Regional Development Fund 40.3 - 40.3Cities' General Accounts 27.1 37.3 64.4

Central Government 5.3 - 5.3IBRD - 40.0 40.0

Total 194.8 77_3 2221

Estimated Disbursements:

IBRD FY 2219 2i22 1i99- - - - (US$ million) - - -

annual 12.0 22.0 6.0

Cumulative 12.0 34.0 40.0

Rate of Returns Not applicable

MIRE' IBRD Nos. 23319 and 23320.

LA Includes taxes estimated at US$23.2 million equivalent.

Table of Contents

Pam W>.

Loan and Project Summary . . . . . . .. . . .

A. Water Resources . . . . . . . . . . . . . . . . . . . . . . 1B. Population Trends . . . . . . . . . . . . . . . . . . . . . 2

C. Service Levels . . .. . .. .. . . . . . . . . . . . . . . 2D. Sector Organization ... . . . . . . . . . . . . . . . . . . 3

E. National Wastewater Treatment Plan . . . . . . . 3

F. Previous Bank Involvement in the Sector . . . . . . . . . . 4G. Rationale for Bank Involvement in the Proposed Project . . . 5

II. PROJECT AREA, SERVICES AND DEMAND . .. . . . .. . . .. . . . . 6A. Project Area . . . . . . . . . . . . . . . . .. 6B. Urban Growth and Economic Activity . . . . . . . . . . . . . 6C. Water Supply Services . ..... ....... . . . . .. 6D. Sewerage Services and Drainage . . . . .. . . . . . . . . ..E. Solid Waste Disposal . . ..... . .. . .... S. 8

F. Sewerage Master Plans . * ....... . . . . . . . ... 8G. Demand for Sewerage Servic.. .. . . 8

III. THE PROJCT . . . . . . . . . . . . . . . . . . . . . . . . . . 10A. Objectives . .. . . . . . . . .. . .10

B. Description . .. . . . . ... . . ... 10C. Status of Project Preparation . . . . . . . . . . . . . . . 10

D. Project Cost . . . . . . . . . . . . . . .... 10

E. Financing Plan . .. . . .. 11

F. Implementation.. . . . . . . ... 12G. Land Acquisition . . . . . . . . . . . . . ... 13H. Procurement.... 14I. Disbursement . . . . . . . . . . . . . . . . . . . . . . . . 15J. operation and Maintenance ..... . . . ...... . .... . 15K. Environmental Impact ..... ..... . . .. . . . . 15L. Supervision.. . . . .. .... . . . . .. ..... 17

IV. THE IMPLEMENTING AGENCIES . . . . . . . . . . . . . . . . . . . . 18A. Implementing Agensi . . .. . . . . . . .. . . 18B. Organ' 4on and Management ..... .. .. . . . . . . . . . 18C. Accc-l - and Auditing . . . . . . . . . . . . . . . . . . . 18D. Bili .4 Collections . . . . . . . . . . . . 19S. Staffing and Training . . . . . . . . . . . . . . . . . . . . 19

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VI FINACIAL ANALYSIS . .. I I I ..I. I . . I .I . .I II 20

A. Rate Structurs and Revenue IIIII o I .I . 20B. ?ixedAssetsandRevaluation .. I I I .. I.I.. 20C. City Finances I . I I I .I . .20

D. Pusan Sewerage Special Account I I I I I . I I I I I . I I 21

V. Taejon Sewerage Special AccountI .. .22

F. Monitoring and valuatnon IIIIIIII IIIIII I. 24

VI. PR0 =T JUSTIFICAION I . . . .I. .. I. I I . .I. . .. I. I I 25A. Project Benefits . . . . I I I I I I . . . I . . . .I 25

B. Rate of Return I I I I . I . I I I I I I I .. 26

C. Lart-coet Solution I I OI 26D. Affordability .I.I. . ... II..... . ....I . I. 27

S. Environmental Impact I .I.I. 27F. Project Risks ... . . . . . . . . . . . . . 28

VII. AGREEMENTS REACHD -Agj) RECOMMENDATION I I I . I .. 29

1. Existing Water Supply and Sewerage Facilities2. Project Des'ription3. Project Cost4. Implementation ScheduleS. Estimated Schedule of Loan Disbursement6. Project Supervision Plan7. Pusan Sewerage Special Accounts Financial Statement.S. Taejon Sewerage Special Account: Financial Statements9. Assumptions for Financial Projections10. Environmental Impact Assesoment11. Monitoring Indicators12. Pusan and Taejon Financial Rate of Return13. Documents and Data Available in the Project File

ORGA;IIZATION CHARTS1. Ministry of Environment2. Ministry of Construction3. Pusan Sewerage Division4. Taejon Sewerage Division5. Typical District in a Special City

IBRD No. 23319: Project Location in PusanIBRD No. 23320s Project Location in Taejon

This report is based on the findings of an appraisal mission of Messrs/Mmes. J.

Kozel, Task Manager, F. Nielsen (EAlIN), H. Unkulvasapaul, E. Greenwood, and J.

Nicholson, (Consultants) who visited Korea in July 1991. The report was reviewedby Mr. C. Fernandez (KAlIE), edited by Ms. Patricia Brereton-Miller and cleared

by Messrs. J. Gutman, Chief, EAlIN and C. Madavo, Director, EAlDR.

IQBZA

PUSAN AND TAEb7ON SEM&WZR iDL§ZZC

f. THE SEC=O

A. Water Resources

1.1 Korea has enjoyed several decades of economic growth, marked byimprovement of livin^ standards, expansion of industry and intensification ofagriculture. Together. these factors have caused water demand to grow from 80%of the total average annual run-off of Korean rivers in 1980, to 110% in 1990,with 155% expected in the year 2001.

1.2 Korea's rivers are its only reliable water source since geologicalconditions are not conductive to significant groundwater development. Annualrun-off of the rivers, at 25.7 billion m3, however, is not evenly distributed:about two thirds is concentrated in the three summer months. Retention of thesehigh flows has been provided through construction of dams to store water forvarious uses. The dams' storage supplied about 18% of total water demand in 1980but is projected to supply 36% in 2001. However, due to scarcity of suitablesltes for further development as well as pnpulation pressure on land, theconstruction of large dams is being phased out. Since the volume of waterresources cannot be further enhanced from storage, the re-use of water by varioususers along the rivers will increase.

1.3 The quality of water in the principal rivers varies. Quality isrelatively good in the upper and middle courses of the Han and Geum Rivers, withheavier pollution occurring only in the lower stretches. However, the Nakdongand Youngsan Rivers have been seriously polluted from their middle courses. Somebranch rivers which flow through large cities or industrial complexes cannot beused for water supply, and their pollution levels exceed even the levelsconsidered acceptable for use in irrigation. Nany local water courses carrygreat volumes of domestic and industrial wastes and are septic and malodorous.

1.4 The major polluting sources in 1989 were livestock farming (41%),population (37%) and industry (22%). Additional pollution was caused byagricultural run-off, which washed into the river system part of theapproximately 2.0 million tons of fertilizer used by farmers.

1.5 Recognizing that further increases in the quantity of water availableare limited, the Government is focusing its water management efforts onpreserving and improving water quality by, among other things, systematicmonitoring of water quality in rivers and coastal waters, initiating studies onthe degradation of natural waters by wastes, organized sequencing of water usesin order to provide the highest quality water only where it is needed and lowerquality water to consumers with less stringent requirements, treating wastesbefore their discharge into water courses, and providing incentives to inducewater conservation. Adequate treatment of wastewater prior to its discharge intorivers has therefore become important in Korea both to protect the env.roamentand, in particular, to ensure the future availability of water resources formultiple uses.

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S. 2Mlatio.L ZrnDg

1.6 Korea's population in 1990 was *etimated at 43.8 million, of which 34.6million were urban, living in 246 munLeLpalitiee. While th- country's overallpopulation growth rate declined to about 1.7% in 197080 and to lses than 1% inth- lait decade, tho urban population expanded by 3.2% p.a. during 1980-87. Asa perventage of the total population, the urban population grew from 50% in 1970to 791 in 1990, ane is expected to exceed 80% of the total population by the year2000. This burgeoning of the urban population makes improved water managementa necessity nationwide.

C. nervice Levels

1.7 Water SuLi1. Piped water supply services reached 84% of the populationin 1990. The cities were generally better served, at 90%, compared to 57% inrural areasl the unserved population relied mainly on wells. Country-wide, watersupply production increased from 158 liters per capita per day (lcd) in 1970 to345 lcd in 1990. This rapid growth in per capita demand during the last 20 yearsreflects the alleviation of shortages in water supply, industrialization, rapidurbanization and higher living standards.

1.8 Sanitation and Sewerace. Homes in Korea use traditional toilets, withexcreta holding tanks, and flush toilets. The flush toilets are connected eitherdirectly to a sanitary sewer or to a combined sewerl in the latter case the lawrequires pre-treatment before the discharge, consisting of a septic tank forhomes or more sophisticated facilities for hotels, apartments, etc. to removesolid contents from the toilet wastes. The percentage of population with flushtoilets is fast growing, reaching 61% in 1989, and projected at 80% by 2001.

1.9 The contents of holding tanks (nightsoil) and septic tanks (sludge) arecollected by the municipalities or private contractors and disposed of innightsoil treatment plants (NTP). In 1989, the municipalities operated 154 NTPswith a combined treatment capacity of 13,000 m3 per day (m3/d). With expansionof conventional sewage treatment plants, the role of NTPs in the cities willeventually be confined to the cities' non-sewered fringe areas. However, NTPswill remain a low-cost environmental protection measure for most provincialtowns, at least in the foreseeable future.

1.10 Most municipalities have combined drainage systems which carry bothstormwater and wastewater and discharge the mix directly into the nearest river.Solids are eliminated through the individual septic tanks which are mandatory forall buildings. Recent large-scale urban development schmes include separatesewer systems in which stormwater is conveyed to the nearest stream by a stormsewer and wastewater (sewage) is collected and conveyed to treatment plants bysanitary ewers. In 1390, about 25% of Korea's urban population was served byseparate sewer systems.

1.11 From the point of view of public health, the separate sewer system ismuch superior to the combined system since it ensures that wastewater is confinedwithin the system and in not allowed to contaminate the environment. While theadvantages of separate systems are understood, the Government also recognizesthat rapid conversion of the citiles' exitLng combined sewers to separate sewer

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systems would be extremely expanslve and cause dLsruptLons durlng constructitn.It has therefore decided on an alternatLve way to make combLned sewers mt. -

manltary and effectlve by (a) step-by-stsp conversion of existLng combLnesdzyste-m to separate systems and (b) constructLon of interceptors along the rlversto collect flows from comblned sewer outlots and to delivor raw sewage to thetreatment plant. Because atormwater in combLned *ewers vastly exceedswastewater, the interceptors are designed to dLicharge overflows lnto the rlverdurlng heavy ralna. Pollutlon from overflows la at present relatively low,eatlmated at 3% to 5% of the annual volume of sewage. The lnterceptors thereforesubstantLally reduce pollution ln lnner-clty rivers.

1.12 Sewage treatment plants (STP) ln Koroa's major cltles mainly use aconventLonal actlvated sludge process whlch la partLcularly suLtable for largecommunltles and areas wlth hlgh population denaltles where land li at a premlum.In 1990, about 20 munLclpalitLes had STPz either in operation or underconstructLon, with a total capacity of 5.6 milllon m3/day to serve about 31% ofthe urban population.

D. Sector Organlzation

1.13 Key Lnstitutions in wastewater management are the Ministry ofEnvLronment (MOE) and the MiLnitry of Constructlon (MOC). MOE's prlncipal roleis Ln regulating, monitoring and enforclng water pollutlon control activltles.It is involved ln the construction and operation of lndustrlal wastewatertreatment plants, and was recently mado responsLble for planning and coordlnatlngconstructLon of municipal wastewater treatment plants. MOC's prLncLpal role isin monitorlng and managLng water resources, Lncluding construction and operatlonof dams. MOC also provides guidelines for the plannlng and deolqn of municipalsewer systems and coordinates system constructlon and operatlon. Theorganlzational structures of MOE and MOC are shown in Charts 1 and 2.

1.14 Other agencLes involved ln the sub-sector are the munLcLjatlitLes whlchare responsible for development, operation and maintenance of sewerage systems,includlng treatment facilltles, and the Mlnlstry of Home Affalrs (MOHA), whlchprovides advioory asosLtance to municipal systems and consolidates themunLcipalitLes' statistical lnformatlon. The alloc-tlon of flnancial resourcesand forelgn loans to the various agencles li declded by the EconomLc PlannlngBoard and the HMnLstry of Flnance (MOP).

E. Natlonal Wastewater Treatment Plan

1.15 In 1987, to strengthen water pollutlon control, MOC began preparatlonof a long-term develoiment plan for improved water supply and wastewatertreatment facilities and Lnvitod the Bank to assiot ln that task. The Bankreport, Korea - Iseerae and Wastewatcr Hanaaements Issues. OLons andR9commendal&o2n (April 1968), helped formulate the National Water ImprovementProgram (KWJP) which was approved by the Government ln September 1989.

1.16 The two key elements of the NWIP, upgrading of municlpal water suppllesand improvement of water quality in rlvers and coastal waters, are each coveredby an actlon plan. Measures related to water quality are Lncluded in theNatlonal Wastewater Treatment Plan (NWTP), whlch will be implemented during 1990-

96 at an estimated cost of W 2,136 billion (US$3.1 billion). The NWTP addressesthe major polluting sources throughs (a) relocation of some industries toeliminate pollution sourcas from upper catchment areas reserved for water supply;(b) provision of wastewater treatment plants for industry and livostock farms;and (c) substantial reduction of municipal pollution through tne constructionof *swage treatment plants in 64 municipalities to increase the population servedfrom 31% in 1990 to 65% in 1996. Government's financial support to the citiesfor improving sewerage facilities is based on the self-financing capacity of thecities and varies from 60% to 80% of construction costs for interceptors andsewage treatv.nt plants. However, the six largest cities, i.e., those withpopulations gr£atsr than one million and with the status of a "Special City",haveto finance all their investment.

F. grevious Bank Involvement in the Sector

1.17 To date, the Bank has financed five water supply projects and prepareda sewerage sector study which assisted the Government to formulate its seweragesector strategy (para 1.15). The First Water Supply Project (Loan 2072-R0, 1982)expanded water services Ln five cities. The Project Performance Audit Report(PPAR) (No. 8174, 1989, SecM39-1544) found that the project was successful,although demand took longer than expected to materialize in some of the cities.The Second Water Supply Project (Nakdong Barrage, Loan 2350-K0, 1984) eliminatedsea water intrusion in the Nakdong delta, increased the water '-ailable formunicipalities in the Nakdong basin, transferred technology in leak detection,established a computerized accounting system for water operations in more than20C municipalities, and resulted in establishment of a Natural EnvironmentPreservation Area for migratory birds in the Nakdong estuary. Tho ProjectCompletion Report (PCR) (No. 8675, 1990, GecM90-753) found that the project wascompleted on time, successfully achieving o! surpassing all of its objectives.

1.18 The Third Water Sup9 ly Project (Metropolitan Region, Loan 2491-R0, 1985)provided about 1.3 million m /day of water to 25 municipalities within the SeoulMetropolitan Region, improved the organization of water and sewerage services inthe Region, established corporate planning in the Korea Water ResourcesCorporation (ROWACO),I and assisted the Government to establish nationalpolicies for bulk water tariffs. The project was successfully completed aftera one-year extension and achieved all of its objectiveas. The PCR is underpreparation. The Fourth Water Supply Project (Namgang and Taegu, Loan 2615-So,1986) expanded water servicea in 14 municipalities and contributed to improvingthe organization of water and sewerage services in the project area. It wassuccessfully completed as scheduled and achieved its objectives. The PCR isbeing prepared. The Juam Regional Water Supply Project (Loan 3178-KO, 1990) willprovide water services in nine municipalitiec, including Kwangju, increase theefficiency of leakage control programs, and support improvements in the planningand information systems of the project agencies.

t y KOWACO is a semi-autonomous public corporation under MOC, which operatesregional systems providing water in bulk to groups of municipalities andindustrial zones, and builds and orerates multipurpose dams.

1 19 These Bank-supported projects were implemented largely by MOC, with someinvolvement of several municipalities and kOWACO. All projects achieved theirphysical and institutional objectives within the established achedulec (with theexception of the one year delay in Ln. J491-KO) and estimated cost. In allcases, the projects were prepared up to the detailed design stage at the time ofappraisal, procurement was grouped into major contracts, ard institutionalcomponents were directed at improving existing well-defined procedures inreasonably managed and disciplined agencies. The agencis were responsive to andmaintained the projects' institutional improvements after completion of works.The lessons learned from past lending indicate that (a) an advanced level ofproject preparation at appraisal, (b) disciplined and well-managed implementingagencies and (c) well-defined project objectives contribute substantially to aproject's success.

1.20 The design of the proposed project incorporates elements of theexperience gained by the Bank during implementation of provious projects inKoress appraisal took place after the detailed designs of proposed facilitieswere completed; procurement of each civil works as well as equipment are groupedinto major contracte; and institutional objectives focus on key developmentaspects.

G. Rationale for Bank Involvement in the Proposed PrQiect

1.21 The proposed project to construct or expand sewage treatment facilitiesin two of Koreats largest cities would be a logical outgrowth of the Bank'sinvolvement in the 1988 sewerage sector study (para. 1.15) by providing the Bankwith an opportunity to assist the authorities to implement the study's two mainreconmendations, i.e., to increase construction of wastewater treatmentfacilities and to accelerate conversion of combined sewers. Both activitieswould have a substantial, lasting and positive hygienic and environmental impactby improving the quality of life in Korea's two large cities through efficientcollection and treatment of the wastewater which now leaves the cities' rivershighly polluted.

1.22 The project also responds to a primary government objectivesenvironmental protection. Korea's growing industrialization, high populationdensity, and very limited water resources have caused the Government to Flace toppriority on efficient use of water and maintenance of water quality in rivers.Environmental protection of water resources in Korea is now not merely anaesthetic and hygienic consideration but an issue of economic survival. Sectoragencies recognize the seriousness of this situation and look to the Bank forassistance in identifying technical, managerial and administrative innovationsto deal with these problems. Through the project preparation the Bank has beenproviding this assistance, drawing on its familiarity with the Korean watersupply and sewerage sector, its experience in supporting sector developmentworldwide, and its particular interest in addressing environmental issues, aninterest now shared with the Korean Government.

II. P!ROJEC;T AREA. SERVICES MND DEMAN

A. Proict Ar-a

2.1 The project would be carried out in the Special Citieo of Pusan andTaejon. Pusan, Korea's *econd largeet city and the country's largest port, issituated about 440 km southeast of Seoul. Tasjon, the sixth largest city, issituated about 160 km mouth of Seoul in tho central part of the country. Bothcities are important cultural and commercial centers, and both have allocatedgreat importance to improving the local environment. In selecting these citiesfor inclusion in the project, consideration was given to their importance in thecountry's devolopment, the need for the proposed improvements, and the cities'coanitment to emploaentation of these works.

B. Urban Growth and Economic Activity

2.2 Puan. Pusan extends along a narrow plain expanding from the southernsea shores to mountain ranges in the north. Its population has tripled fromabout 1.3 million in 1963, when the municipality was upgraded to Special Citystatus, to about 3.9 million in 1990, and is projected to reach 4.8 million inthe year 2001. Its administrative area aloo grew from 360 km2 in 1963 to 435 km2in 1988 to 526 km2 today.

2.3 Pusan has more than 40,000 factories employing almost 600,000 pereonsin major light industries like chemicals, textiles and leather as well as heavyindustries like metallurgy, machinery and shipbuilding. The port handlea about50% of the country's export traffic and 95% of it. container traffic.

2.4 Taeton. Taejon's growth owes much to it. geographical setting as themajor transportation junction linking the Seoul metropolitan area, the industrialsoutheast, and the agricultural southwest. In addition, to reduce populationpressure on the capital, the Government is transferring several research andeducation institutions (para 2.5) and moving some of its administrative officesfrom Seoul to Taejon. To reflect that decision, the Taejon administrative areawas enlarged from 88 km2 to 537.5 km2 in 1989 when Taejon was upgraded to SpecialCity status. Its population reached about 1.06 million in 1990 and i. projectedto grow to 1.65 milllon by the year 2001.

2.5 Manufacturing in Taejon consists mainly of labor-intensive lightindustries such as textiles, leather and needlework located in about 500factories employing about 50,000 persons. Although Taejon has a relatively weakindustrial base, a new science town and a high-tech ind6dtrial complex, to becompleted in 1992 and 1995, respectively, will allow substantial expansion ofscience and technology-oriented industries.

C. Ztexr SuDolv Swzvice

2.6 Water sujply services in the project cities are managed by the Pusan andTaejon Water Agencies, which are both self-financing municipal corporations. In1990, the Pusan Water Agu..cy pyovided service to commerce, industry and 3.8million residential consumers (97.5% of the city population) through 294,000connections. Average production was 1.5 million m /d or 360 lcd, about 38% of

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which was non-revenue water; about 61% of water sales were to residentialconsumers, 30% to commerce and industry, and 9% for public use. The capacity ofthe water supply system is about 2 million m3/d, and the Agency plane to expandproduction and distribution Zacilities to 2.5 million m /d in 1995 and 2.8million m)/d in 2001.

2.7 In 1990, the Taejon Water Agency provided service to commerce, industryand 904,000 residential consumers (85% of the city population) through 89,000connections. Average production was 303,000 m3/d or 335 lcd, of which 36% wasnon-revenue water. About 61% of water sales was to residential consumers, 34%to comerce and industry, and 5% for public use. Production capacity is nowabout 410,000 m3/d, but production and distribution facilities will be expandedin five-year stages to reach about 1.0 million m3 /d by 2001.

D. Seweraae Services and Drainace

2.8 Sewerage services in Pusan and Taejon are provided by the citiesSewerage Divisions. The sewerage systems are mainly the combined type and wereconstructed gradually over many years, initially for drainage purposes. As aresult, they consist of both open channels along roads and buried conduits.WastewLter is permitted to enter the systems only after solids are removed inseptic tanks, which are compulsory for all buildings

2.9 The Pusan system covers over 118 km2 (1990) or 83% of the city's built-up area. Some 3.7 million people or 95% of the city's population is servedthrough 294,000 connections. The system has a total length of 4,200 km, of which37 km are separate sanitary sewers, including interceptors. The population withflush toilets, about 2.6 million or 67% of the city population, disposes ofwastewater through septic tanks in the sewerage system; the remaining 1.3 millionpeople use traditional toilets in combination with vaults to store nightsoil.The daily maximum generation of wastewater is estimated at about 1.3 millionm3/d, of which about 0.53 million m3/d is treated at the Suyeong and Janglimwastewater treatment plants, serving about 1.8 million or 46% of population.Nightsoil and sludge from septic tanks, amounting to about 1,300 m3/d, iscollected by contractors and disposed of in the Yongho and Kamjeong nightsoiltreatment plants.

2.10 The Taejon system, covering over 51 km2 or 70% of the city's built-uparea, serves about 0.8 million people or 73% of the city population through92,600 connections. The system's total length is 1,360 km, of which 147 km areseparate sanicary sewers, including interceptors. The population using flushtoilets, about 0.48 million or 46% of the total city population, disposes ofwastewater through septic tanks in the sewerage system; the remaining 0.58million people use traditional toilets combined with vaults to store nightsoil.The daily maximum generation of wastewater is estimated at about 0.3 millionm3/d, of which about 0.13 million m3/d is treated at Wonchon Dong wastewatertreatment plant, serving about 0.4 million people or 38% of the city population.Nightsoil and sludge from septic tanks, amounting to about 500 m3 /d is collectedby contractors and disposed of in the Samcheon nightsoil treatment plant.

B. Solid Waste Diucogal

2.11 The solid waste generated in Pusan, totallng about 8,500 t/d, iscollected by the city and deposited in the Sugdae-dong sanitary landfill, locatedabout 25 km from the city center. The landfill has been in use since 1987 andis expected to be filled in 1992. Studies of new landfill sites are ongoing.

2.12 In Taejon, the city collects about 1,600 t/d of solid waste out of atotal generation of 1,700 t/d. The remaining 100 t/d are collected by privatecontractors or disposed of in household plots. The c!.ty's solid waste sanitarylandfill, located about 5 km from the city center, is also expected to be filledby 1992. A new site, about 12 km from the city center and with an expectedcapacity for about 15-20 years, has been identified and a feasibility study forthe site is being prepared.

F. Sewerage Master Plans

2.13 The development of sewerage systems in Korea has been guided by seweragemaster plans; the plan for Pusan was completed in 1974 and that for Taejon in1982. Besides providing "as made" drawings of the existing sewerage system andidentifying locations for wastewater treatment plants, the master plans assessthe level of pollution in receiving water bodies and the state of repair ofcombined drainage and sewerage systems, and recommend approaches to systemexpansion.

2 14 During the preparation of studies and designs for the wastewatertreatment plants to be constructed under the proposed project, therecommendations of the relevant master plans were reviewed and their validityconcerning the location of treatment plants confirmed. At the same time, anearlier recommendation favoring separate sewer systems citywide was revieed byaccepting combined systems in the city's built-up areas and separate systems innew housing and industrial developments. However, the review of master plans wasgeneral and did not provlde the details needed for the city to manage furtherdevelopment of the systems. A detailed updating of the sewerage master plans forboth Pusan and Taejon is therefore included in the proposed project (para 3.12).

G. Demand for Sewerage Services

2.15 The target for development of sewerage services during about the nextten years is to provide the cities' entire populations with sewerage services,including full secondary treatment of all wastewater generated in the planningareas. Accordingly, the sewerage development program for Pusan proposes toachieve the following by the year 2001: (a) the phasing out of separate nightsoiltreatment; (b) increasing wastewater treatment capacity to 1.6 million m3/d or98% of average dally generation of wastewater in the city; and (c) expansion ofthe swer system to 7,700 km, of which 1,500 km would be sanitary sewers and 130km interceptors.

2.16 Also by the year 2001, the Taejon sewerage development program proposesto achieve: (a) the phasing out of separate nightsoil treatment; (b) increasingthe treatment capacity to 0.8 million m3/d or 100% of the average daily

generation of *ewage in the city; and (c) expansion of the newer system to 3,200km, of which 760 km would be sanitary sewers and 100 km interceptors.

2.17 Details of the water supply and sewerage services provided in both Pusanand Taejon ar- given in Annex 1.

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III. THE PROJECT

A. Obiectives

3.1 The objectives of the proposed project are to: (a) improveenvironmental conditions in two of Korea's largest cities; (b) reduce pollutionin the country's water courses and coastal waters, which is crucial for the well-being of a large part of the population; (c) reduce the health hazards associatedwith contaminated river water, particularly for the lowest-income populationwhich is most exposed to this water; and (d) continue supporting technologicaland institutional improvements in the sector.

B. Description

3.2 The project would be implemented over a five-year period and would havethe following components:

(a) in Pusan, construction of the first phase of Yongho sewagetreatment plant, with a daily maximum capacity of 340,000 m3/d,a sewage pumping station, and about 11.4 km of large-diameterinterceptors. The treatment plant would use an activated sludgeprocess and anaerobic digestion of sludge, which would bedewatered and disposed of at a sanitary landfill; and

(b) in Taejon, construction of the second phase of Wonchon Dongsewage treatment plant and 11.9 km of interceptors, to increasedaily maximum capacity from 150,000 m3/d at present to 300,000m3/d at completion. The treatment process would be the same asthat used in the first phase and in the Pusan plant.

Under both components, technical assistance would be provided to: (i) update theSewerage Master Plans of the project cities, including a review of policies andmanagement systems for sewerage activities and design of a program for theintroduction of separate sanitary sewer systems in the cities; and (ii) provideengineering services to supervise construction of the treatment plants. Adetailed description of the project components is given in Annex 2, and thelocation of the proposed works is shown on Maps IBRD 23319 and IBRD 23320.

C. Status of Proiect Preparation

3.3 The Pusan and Taejon Sewerage Divisions completed engineering designsfor both civil works components with the assistance of consultants in May 1991and December 1990, respectively. Both designs follow Korean design standards forsewerage facilities, with some minor modifications based on the latest experiencein Japan and the United States. Works in Taejon have already begun, due to adeadline imposed by the opening in August 1993 of an international tradeexposition, Expo '93.

D. Proiect Coat

3.4 The project would have a total estimated cost of W 190.6 billion(US$264.7 million), including taxes estimated at US$23.2 million equivalent but

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excluding interest during construction. The foreign currency requirement icestimated at W 54.1 billion (US$75.1 million) or 28% of the total. The Pusancivil works component is expected to cost about W 148.8 billion (US$206.6million), of which W 35.6 billion (US$49.4 million) or 24% of the component'stotal cost would be foreign exchange. The Taejon component is estimated to costabout W 41.8 billion (US$58.1 million), of which W 18.5 billion (US$25.7 million)or 44% of the component's total coat would be foreign exchange. The Taejoncomponent would have a higher foreign currency requirement than the Pusancomponent mainly due to the use of a different technology for sludge digestionwhich requires more equipment. Project technical assistance is expected tototal 1,450 person-months, to be provided by local consultants.

3.5 Base costs reflect end-1991 price levels. Physical contingencies areestimated at US$11.4 million or 5% of base costs. Price contingencies areestimated at US$24.4 million, or about 10% of base costs plus physicalcontingencies, and assume the following annual rates of inflation: for localcosts, 9% for 1991 and 5% for 1992 and thereafter; and for foreign costs, 3.4%for 1991 and thereafter. Cost estimates are based on detailed designs, bidsreceived for ongoing civil works in Taejon and recent contracts for similarworks. The cost estimates are shown in Annex 3 and summarized in Table 3.1.

Table 3.1: PROJECT COST ESTIMATE

Local Foreign Total Local Foreign Total Foreign as----Won billion-- -- USS million----- % of total

Treatment Plants 49.8 39.9 89.7 69.2 55.4 124.6 44Interceptors 35.3 7.9 43.2 49.0 11.0 60.0 18Technical Assistance 2.1 0.1 2.2 3.0 0.1 3.1 3Land Acquisition 29.7 0.0 29.7 41.2 0.0 41.2 0

Base Cost 116.9 47.9 164.8 162.4 66.5 228.9 29

Physical Contingency 5.8 2.4 8.2 8.1 3.3 11.4 29Price Contingency 13.8 3.8 17.6 19.1 5.3 24.4 22

Total Project Cost 1 5 j_J 54 1 190.6 189.6 7S 1 264.7 28

Interest duringConstruction 3.7 1.6 5.3 5.2 2.2 7.4 30

Total FinancingRequired 140.2 55.7 195,9 194.8 7.73 272.1 28

E. Financing Plan

3.6 The proposed Bank loan of US$40 million equivalent would finance about15% of the total project cost or 53% of the foreign exchange requirement,excluding interest during construction financed locally. At the Government's

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request, the Bank loan would finance only materials and equipment for theproject. Civil works and technical assistance would be financed locally througha loan of US$40.3 million from Regional Development Fund, capital contributionsof US$64.4 million from the cities' General Accounts, US$122.1 million frominternal cash generation, and US$5.3 million am a central government contributionrelated to Fxpo '93 in Taejon. Th- project financing plan is suimmarized in Table3.2.

Table 3,Zs PROJECT FINANCING PLAN

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

Loans

IBRD - 40.0 40.0 15Regional Devt. Fund 40.3 - 40.3 15

Cacital ContributLons

Cities' General Accounts 27.1 37.3 64.4 24Internal Cash Generation 122.1 - 122.1 44Central Government 5.3 - 5.3 2

TOTAL 194.8 2J77.3 272, 100

3.7 The borrower would be the Republic of Korea. The proposed Bank loanwould be for 15 years, including five years of grace, at the Bank's standardvariable interest rate. The loan would be re-lent in equal amounts of US$20million to the Pusan City Government (PCG) and the Taejon City Government (TCG)on the same terms as Bank loan plus a 0.05% p.a. handling charge. The executionof Subsidiary Loan Agreements between the Central Government and the Pusan and

Taejon City Governments is a condition of effectiveness of the Bank loan. Theforeign exchange and interest riaks on the loan would be borne by PCG and TCG.Separate Project Agreements including operational, financial and monitoringcovenants, would be executed between the Bank and the cities.

F. Implementation

3.8 The Sewerage Divisions of the Pusan and Taejon City Governments wouldcarry out the project and operate and maintain the completed facilities.Implementation would be under the overall supervision of the Sewerage Divisions'Directors, who are experienced engineers. Day-to-day construction supervisionwould be provided by consulting engineers appointed in April and December 1991in Taejon and Pusan, respectively. The consultants' duties would includeverification of compliance with specifications for works and goods, supervision

of construction, testing and commissioning of completed works, advising ontraining of staff to operate the completed facilities, and preparation ofdocuments for procuring treatment plant equipment.

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3.9 The project implementation period would be from 1990 to 1994, includingcommissioning and start-up operations of the completed facilities, The schedule(Annex 4) is based on previous experience and performanc' of the implementingagencies with construction of similar worLo& and is coneidered realistic.

3.10 Civil works in Pusan would be divided into four contracts, three for theinterceptors, including the pumping station, and one for the sewage treatmentplant. Construction of interceptors started in November 1991 and would end inSeptember 1994. About 4.8 km of interceptors would be constructed in an open cutand tho remaining 6.6 km with the tunneling method to avoid disrupting trafficon heavily traveled roads. Civil works for the treatment plant would be carriedout from December 1991 to December 1994. The equipment contract would beawarded in September 1992 and installation completed in December 1994. Start-upoperation of the treatment plant is planned for July 1994, with the completionof testing in December 1994 when the plant would start full operations. Thisschedule is considered realistic since it was achieved during construction of twosimilar treatment plants (Suyeong and Janglim) completed in 1989 and 1990.

3.11 Civil works in Taejon are divided into three contracts, which have allbeen awarded to local contractors. The first interceptors contract (5.7 km)started in early-1990 and completed in March 1991; the second contract (6.2 km)was completed in December 1991. The sewage treatment plant contract started inDecember 1990 with scheduled completion in December 1993. The equipment contractwould be awarded in May 1992 and installation completed in December 1993. Thecommissioning and start-up operation of the treatment plant is planned forSeptember 1993, with the completion of testing in December 1993 when the plantwould start full operation.

3.12 Consultants to undertake the Sewerage Master Plan studies were appointedin July and November 1991 in Pusan and Taejon, respectively, and will completethe assignments in December 1992. The description of consultant duties is shownin Annex 2 and terms of reference for the studies are available in the ProjectFile. The consultants terms of reference are satisfactory. During negotiations,assurances were obtained that the project cities will complete updating theirSewerage Master Plans by December 31, 1992.

G. Land Accruisition

3.13 Land is required for both the Pusan and Taejon treatment plants and thePusan pumping station. The interceptors are constructed on land owned by thecities. The Pusan Sewerage Division has purchased about half of the landrequired for the treatment plant in 1990, and the remainder in December 1991.Land is owned and used by two commercial corporations for storage of containersand for sorting scrap metals. Both companies have other branches with suitableland to which they are moving their operations. Land needed for the pumpingstation is now used for commercial car wash which will be moved to other locationafter the land is compensated in June 1992.

3.14 The Taejon Sewerage Division has purchased most of the land for theWonchon Dong treatment plant and in June 1991 it has satisfactorily compensatedsix families who have now left the lend. Negotiations on compensation of theremaining 11 houses, of which Glight were family-owned used for living and three

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were commercial propertioe were comp 1 -ted in December 1991. 'he compensation offamilies included besides the monetary component al3o a right to purchase aserviced plot on cost in nearby land development scheme, recently completed. Theowners of comercial properties agreed with monetary compensation only. Theconditions and procedures used for resettlment of compensated families werefound satisfactory by the Bank and in accordance with Bank policies forinvoluntary resettlement.

H. Prourement

3.15 The project would be executed through seven civil works and two supplycontracts. All seven civil works contracts are locally financed and procuredunder local procedures; of these works three contracts (US$19.1 million) areunder construction in Taejon.

3.16 The bulk of equipment, totaling about US$65.3 million, would be procuredthrough international competitive bidding (ICB), following Bank guidelines. Alsoin accordance with Bank guidelines, a preference margin equal to the amount ofthe customs duties or 15% of the C.I.F. bid price (whichever ia lower) would begranted for domestic goods at bid evaluation. Various materials contracts, notexceeding US$300,000 each and aggregating about US$1.5 million for bothcomponents, would be procured through local competitive bidding (LCB) procedures,which are satisfactory to the Bank. Civil works (US$148.7 million) and technicalassistance (US$3.5 million) will be locally financed and procured. Prior Bankreview would be needed for goods contracts over US$1.0 million each, which wouldinclude about 98% of the value of Bank-financed equipment. The proposedprocurement arrangements are shown in the Table 3 3.

Table .3 : PROJECT PROCUREMENT ARRANGEMENTS(USS million)

Project Element Procurement Method N.B.F. TotalICB LCB Other Costs

Civil Works - 148.7 - 148.7 148.7

Equipment 65.3 3.0 - 28.3 68.3(38.0) (2.0) (40.0)

Technical Assistance 3.5 3.5 3.5

Land Acquisition -4 - 44.2 44 2

TOTAL 65.3 151.7 47.7 224,7 264.7(38.0) (2.0) (0.0) (40.0)

All figures include contingencies, and figures in parentheses are amountsfinanced by the Bank. NMB.F. are amounts Not Bank-Financed.

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I. Disbursement

3.17 The procwede *f the Bank loan would be disbursed againot 100% of foreignexpenditures for dirt-tly imported equipment and materialu; 100% of localexpenditure- (*x-factcry) for locally manufactured *quipment and materials? and65% of local expenditures for other equipment and materials procured locally.Disbursemnts for equipment contracts costing US$1.0 million or less each wouldbe made on the basis of Statements of Expenditure (SOE). Supportingdocumentation for these expenditures would be retained by the cities, madeavailable for review by Bank supervision missions, and regularly audited byindependent auditors (para. 4.5). An IBRD Special Account of US$2.CI million,representing an estimated average of 4 months' disbursement, would be e. lishedby each city to facilitate loan disbursement against eligible expenditues. TheIBRD Special Account would be replenished quarterly or whenever the availablebalance in the account drops below 50% of the initial deposit, whichever occursfirst.

3.18 While project implementation would extend over five years from 1990 toend-1994, the Bank loan would be disbursed in three years, which is the timeallocated in the project schedule for manufacture and installation of Bank-financed equipment. Project works are expected to be in operation by end-1994,but payments may extend through mid-1995, The loan closing date would thereforebe December 31, 1995. A schedule of estimated disbursements as well as a profileof disbursements under previous Bank-aesisted water and sewerage projects isgiven in Annex 5. Since the Bank is financing only equipment and materials forthe project the disbursement profile is not considered relevant to the proposedproject.

J. oneration and Maintenance

3.19 When completed, project works would be operated and maintained under theoverall supervision of the Pusan and Taejon Sewerage Divisions. Under theexisting system, maintenance of combined drainage systems is decentralized to thecity districts (Gu). Wastewater treatment plants, including interceptors andsewage pumping stations, are operated and maintained by the respective treatmentplant centers. The Sewerage Divisions provide technical guidance and, asrequired by the budgets of the respective units, allocate funds from SewerageSpecial Accounts, which are managed and administered by the Sewerage Divisions(see para. 4.5). This existing allocation of duties and responsibilities isreasonable and would also be extended to facilities to be provided under theproject.

K. Environmental Imoact

3.20 Korea's very advanced environmental leg: ilation, endorsed in 1990,consists of an Environmental Policy Basic Law complemented by regulations forair, noise and vibrations, water quality, hazardous chemicals, and settlement ofenvironmental disputes. Accompanying the regulations are a series of standardsto be observed by all parties, including municipalities. Failure to comply withthe regulations incurs heavy penalties and even imprisonment, with the intentionof punishing both individuals and institutions not in compliance. With these

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onforcement capabilities, the Ministry of Environment (MOE) has ensuredcompliance with its regulations.

3.21 With the assistance of consultants, the project cities prepared forMOE's review Environmental Impact Assessments for the proposed investments. Inapproving the project, MOE required various measures to reduce negativeenvironmental impacts during construction and operation of the facilities. Theactions required during construction are standard for all construction sites andcover reduction of dust, washout of soil from the construction site, the mode oftransporting excavated and construction materials, and restrictions ontranmporting materials during peak traffic hours. These requirements are

included in specifications for the project's civil works contracts, andcompliance will be enforced by construction supervision staff. With regard to

operations, MOE requires sanitary greenbelt around sewage treatment plants,facilities to prevent excessive odor and noise, investigation of ways to use

digested sludge for agriculture in addition to or instead of disposal at sanitarylandfills, and, specifically for the Pusan works, dlscharge of effluent from thecompleted plant from a sea outfall reaching beyond the sub-bay, and, for the

Taejon component, the securing of land for a possible tertiary treatment facilityas a contingency in case that it would be required in the future.

3.22 The cities have accepted and are complying with these actions. Designsinclude sanitary greenbelt around the treatment plants, deodorizing facilitiesat the plants, roofs covering all technological units at the Pusan plant and

sludge thickenere in the Taejon plant. The Pusan authorities are exploring theuse of digested sludge from other treatment plants for agricultural purposes.

In Taejon, all currently produced digested and dewatered sludge is used by alandscaping company; consequently, landfill disposal should be rare. The current

practice used for disposing at sanitary landfills in both cities is appropriate.The sludge is deposited in separate sections together with materials from

construction demolition; the generated leachate is treated before discharge.The Pusan sea outfall reaching beyond the sub-bay will be constructed as part of

the reclamation of the entire sub-bay scheduled for completion by 2001, and landfor a possible tertiary treatment facility in Taejon has been secured in thecity's land use plan. These actions are considered satisfactory.

3.23 The overall environmental impact of the project would be highlypositive. While full restoration of water quality in water courses and coastal

waters in the project area would be achieved only gradually by the year 2001, theproject's positive environmental effects would be achieved more quickly, as it

would considerably reduce pollution of inner-city rivers and drains through theconstruction of interceptors and would bionificantly improve water quality in the

recipient water bodies through the treatment of sewage. The Yongho plant inPusan would daily remove about 36 tons of biochemical oxygen demand (BOD) and 34

tons of suspended solids (SS) which are now polluting the environment.Similarly, the Wonchon Dong plant in Taejon would daily remove about 27 tons of

BOD and 24 tons of SS, about half of which would be directly attributable toworks under the proposed project. A detailed assessment of the project'senvironmental impact is provided in Annex 10.

3.24 Both treatment plants to be constructed under the project represent one

of several plant expansion phases, with others following shortly. Designs for

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this current phase of plant investment and assessment of the relatedenvironmental impacts were prepared on the basis of likely assumptionsextrapolated from currently available data. However, subsequent phases of plantexpansion would benefit from an evaluation of the actual performance ofconstructed plants. Therefore, during negotiations, assurances were obtainedthat six months prior to completion of each treatment plant, the relevant projectcity will implement an Environmental Monitoring Program, satisfactory to theBank, to collect and evaluate data on the plant.' performance and theenvirormental impact of plant operations.

L. SpaevisiQn

3.25 Project superviaion by the Bank would require about 58 staff-weeks overthe life of the project, of which about 18 staff-weeks would be at hoadquartersfor review of progress reports, procurement actions, correspondence, etc. and 40staff-weeks would be in the field. Supervision would be provided by sanitaryengineering and financial staff as well as specialists in water pollution controland environmental issues. The borrower's contribution to supervision wouldentail reports on various specific subjects, including regular reporting onimplemen-ation progreos and coordination of Bank field visits. A projectsupervision plan is given in Annex 6.

! ~~~~~~~-18-

IV. THE IMPLEMENTING AGENCIES

A. Imoplmentina Agenciee

4.1 The project would be implemented by the Sewerage Divisionu of the PusanCity Government (PCG) and the Taejon City Government (TCG), assisted byconsultants (para. 3.8). The Divisions are considered capable of handling thisresponsibility in view of their recent satisfactory performance in implementingtwo similar projects in Pusan and one in Taejon.

B. Oroanization and Manacement

4.2 Municipal services in Pusan and Taejon are provided by the CityGovernments which are organized into bureaus for finance, health, industry,construction, etc. The bureaus, hea.ded by Director Generale reporting to theMayors, are responsible for overall planning, budgeting and general guidance ofthe respective activities. Operation, maintenance and construction of facilitiesare generally decentralized to the city districts (Gus). The PCG and TCGconstruction bureaus are divided into a number of divisions, including theSewerage Divisions.

4.3 Besides providing overall planning, budgeting and technical guidance tothe districts, the Sewerage Divisions are directly responsible for theconstruction and, through the treatment plant centers, for operation of sewagetreatment facilities, including interceptors. The districts are responsible forconstruction, operation and maintenance of both combined and separate seweragenetworks. In Pusan, these activities are carried out by the districts'Construction Divisions, whie in Taejon the activities are divided between theConstruction and Sewerage Sections of the Construction Division. Theorganizational structure of the cities is shown in Charts 3 to 5.

C. Accounting and Auditino

4.4 Budgets are prepared under MOHA guidelines and approved by the CityMayors and councils. Revenue and expenditures of the cities are divided betweenthe City General Accounts and Special Accounts. Revenue-earning activities suchas water, sewerage, and housing are organized as City Special Accounts which areexpected to be financially autonomous. The project Sewerage Divisions wouldmaintain the project accounts within their Sewerage Special Accounts.

4.5 The Pusan Sewerage Special Account (PSA) and the Taejon Sewerage SpecialAccount (TSA) separate assets, liabilities, revenues and expenses relating tosewerage operations. Using accrual accounting, the Sewerage Divisions of PCG andTCG consolidate their own activities with those of the districts and prepareannual income statements and balance sheets. The accounts of the cities and theSewerage Divisions are satisfactorily audited by public accounting firms.Monthly financial reports comparing budgeted figures witn actual results areprepared for both the city Construction Bureaus and divisional management.During negotiations, assurances were obtained that the financial statements ofPSA and TSA will be audited by independent auditors acceptable to the Bank, andthat such statements and audit reports, with the audit also including a separateopinion on Statements of Expenditure and the Special Accounts for the Bank loan,

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will be submitted to the Bank within six months of the close of each fiscal year.

D. Billing and Collectlons

4.6 The preparation of combined bills for water supply, sewerage,electricity, television, solid waste, and gas (Pusan only) is the responsibilityof an Integrated Billing Section in each district of the two cities. Maintenanceof the computerized billing and accounts receivable system in contracted out toprivate computing firms which provide suammry reports, including details ofdelinquent account", to the districts and utility companie-. The system workssatisfactorily. Bills, which are paid at banks, are due for payment within onemonth of the billing date, and interest penalties are charged on overdueaccounts. If the combined bill is not paid within two months, providers ofutility services are notified so they can take appropriate action. Accountsreceivable for PSA and TSA at the end of 1990 were equal to 33 and 42 days' salesrespectively, which is satisfactory.

E. Staffina and Training

4.7 About 500 staff work on sewage collection and treatment in Pusan and 125staff in Taejon. Staff numbers and efficiency are satisfactory; there are lessthan two employees per thousand sewerage connections in both Pusan and Taejon,which is comparable to levels in efficient utilities in other countries.

4.8 Training in management, administration and accounting is organized atthe national level by MOHA. MOC is responsible for engineering and technicaltraining. These arrangements are satisfactory. Consulting services to beprovided under the project would, among other things, identify further trainingneeds of technical staff (Annex 2).

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V. FIUNCIAL ANALYSIS

A. Rate Structure and Revenue

5.1 Sewerage tariff policies were introduced in Korea in 1983 and determinedon the basis of MOHA guidelines requiring that tariff, be valid until December31, 1991. Accordingly, each municipality established sewerage tariffs to recoverits estimated operation and maintenance expenses, depreciation and interest onborrowing. Sewerage tariffs for Pusan and Taejon were established in 1985,based on estimated 1985-91 expenses. No tariff increases were approved duringthis period. Domestic and commercial customers are billed at increasing blockrates, based on metered water consumption. Government and industrial customersar- charged at a fixed rate per cubic meter. In 1990, the average sewerage ratewas W 80 per m3 in Pusan and W 73 per m3 in Taejon.

5.2 A recent draft of a national tariff study prepared by consultants forMOC recommends that tariffs be reviewed annually and in principle be set at alevel sufficient to cover operating expenses, including depreciation, and providea rate of return on net revalued fixed assets. The study recommends that therate of return should be assessed separately for each city or town and should beat a level which would permit a portion of capital expenditure to be financedfrom internally-generated funds. The recommendations of the study are includedin HOCs guidelines on methodology for setting sewerage tariffs after January 1,1992, when the validity of current tariffs terminates and responsibility forvarious aspects of urban management, including the setting and approval ofsewerage tariffs, will start to be decentralized to the cities. This process isexpected to take from one to three years. Within that transitional period MOCwill remain responsible for review and approval of sewerage tariffs proposed bythe cities to ensure that the recommended methodology is being followed.

B. Fixed Assets and Revaluation

5.3 When the Sewerage Special Accounts were established by PCG and TCG in1988 and 1986, respectively, fixed assets were valued at replacement cost lessdepreciation, and treated as an equity contribution. Since Korean law coveringSpecial Accounts requires the revaluation of fixed assets every five years, thefixed assets of PSA and TSA should be revalued as at December 31, 1992 andDecember 31, 1990, respectively. The TSA revaluation was completed in October1991. During negotiations assurances were obtained that the fixed assets will berevaluated periodically in accordance with Korean law.

C. P

5.4 PcG and TCG finances are satisfactorily managed. Both cities havegenerated cash surpluses on their General Accounts and, in aggregate, on theirSpecial Accounts in recent years. A summary of the cities' financial status in1989 and 1990 is avaLlable in the Project File.

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D. Pusan Sewerace Siecial Account

5.5 Past Performance and Present Position. Since its inception, PSA'sfinancial performance ham been satisfactory, am indicated by its revenues whichincreased by 30% between 1988 and 1990, despite the lack of tariff increasesduring the period. In 1990, the rate of _..turn was 4.7%. (Previous operatingexpenses and rates of return are not comparable to 1990 data as assets anddepreciation were not fully introduced into the accounts until 1990.)Internally-generated funds financed about 60% of 1988-90 capital spending. Otherfinance was provided by capital contributions from PCG and loans. At December31, 1990, long-term debt was only 12% of total capitalization, and PSA had astrong current ratio of 4.4.

5.6 Financlal Pla. PSA's capital spendlng requiroments and financlal planfor the 1990-95 project implementatLon perLod are as follows:

Table 5.1: PSA FINANCIAL PLAN, 1990-95

Item W billion USS million %

SourcesGross Internal Cash Generation 188.80 262.22 62Less Debt Service 28.53 39.62 9Net Internal Cash GeneratLon 160.27 222.60 53

Capital ContributLonsPGA and Developers-Network 35.21 48.90 11PGA-STP Prcjects 55.49 77.07 19

LoansIBRD 14.40 20.00 5Regional Development Fund 21.00 29.16 7overseas Economic Cooperation

Fund of Japan 8.20 11.40 3Reductlon in Working Capital 8 Q6 11 20 2

Total Sources 30263 420 32 100

ReouirementProposed Project 148.76 206.61 49Interest During Construction ,100 1.32 -Total Financing Requirements 149.76 208.00 49

Other Sewerage Treatment Projects 100.04 138.94 33Network Construction 35.21 48.90 12Others 12.62 24.48 -- 6

Total Requlrements 302,63 420 32 lOQ

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5.7 The PSA financial plan, including the Pusan City contribution from theGeneral Account and the Regional Development Fund Loan and its terms, wasconfirmed during negotiations.

5.8 Future Finances Financial projections for PSA during 1991-98 are givenin Annex 7. innex 9 shows the assumptions used in preparing financialprojections for both PSA and TSA. Based on the projections, PSA's financialperformance should continue to be satisfactory throughout the projection perLod.

5.9 The project would constitute about 28% of PSA's estimated capitalspending of W 525 billion between 1990 and 1998. To help finance this largeprogram, a 5% rate of return would need to be achieved in 1992. This wouldrequire an estimated 15% tariff increase in January 1992 and future tariffincreases estimated to annually average about 7%.

5.10 The tariff increase required from January 1, 1992 cannot be expectedsince, on the same date, the newly elected City Council will assumeresponsibility for tariff setting, among other things. Consequently, it isexpected that the validity of existing tariffs will be extended and new tariffsintroduced in the course of 1992 with any shortfall of revenue being met from theCity's General Account (para 4.4). Thi3 would be satisfactory. Duringnegotiations, assurances were obtained that starting from January 1, 1993, PCGwill charge sewerage tariffs yielding adequate revenue to meet operation andmaintenance costs, including depreciation, and debt service payments in excessof depreciation, as well as provide a rate of return of at least 5% p.a. on netfixed revalued assets in operation.

5.11 Between 1991 and 1998, PSA's net internal cash generation is expectedto increase 2.6 times, mainly because of revenue increases and the continuationof relatively low debt payment levels. PSA's working ratio (operating expensesexcept depreciation, as a percent of revenues) would be at satisfactory levels,not exceeding 32% throughout. Sewage volumes would increase by an average annualrate of about 9.5% during this period. Long-term debt, as a percentage of totalcapitalization, would be in the low range of 7% to 12% between 1991 and 1998.It is estimated that about 56% of PSA's 1991-98 capital spending could befinanced from internally-generated funds, thus reducing the burden of financingcapital spending from PCG's General Account.

E. TAeion Sewerage Special Account

5.12 Past Performance and Present Position. TSA's revenues and expensesincreased by 31% and 27% respectively between 1988 and 1990, a period of notariff increases. There was little variation in net operating income, and ratesof return were less than 1% in each year. Internally-generated funds financedonly about 17% of 1988-90 capital spending, the rest being financed largely fromequity contributions provided from TCG general revenues. At December 31, 1990,long-term debt was only 5.8% of total capitalization, and TSA had a strongcurrent ratio of 4.4.

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5.13 Financial Plan. TSA'e capital spending requirements and financial planor its 1990-94 project implementation period are as followas

Table 5.2s TSA FINANCIAL PLAN, 1990-94

Item W billion US$ million %

SourcesGross Internal Cash Generation 38.03 52.82 34LestS Debt Service 7.12 9.89 6Net Internal Cash Generation 30.91 42.93 28

Capital ContributionsCentral Government - Expo '93 3.80 5.28 3TGA and Developers Network 48.22 66.97 44Korean Land Devt. Corporation 4.93 6.85 5

LoansIBRD 14.40 20.00 13Regional Development Fund 8.00 11.11 7

Total Sources 110.26 153.14 100

&9MAuKrementProposed Project 41.84 58.11 38Interest During Construction 0.59 0.82 _Total Financing Requirements 42.43 58.93 38

Phase 3 STP 12.30 17.08 11Network Construction 37.35 51.88 34Others 12.06 16.75 11Additions to Working Capital 6.12 8.50 6

Total Requirements 110.26 153.14 100

5.14 The TSA financial plan, including the Taejon City contribution from itsGeneral Account, the Regional Development Fund loan and its terms, and theCentral Government contribution was confirmed during negotiations.

5.15 Future Finances. TSAIs financial projections are shown in Annex 8. Theproject would constitute about 15% of TSA's estimated capital spending of W 270billion between 1990 and 1998. To help finance TSA's immediate and futureinvestment needs, a 3% rate of return would need to be achieved in 1992, whichwould in turn require a tariff increase of about 56% in January 1992.

- 24 -

5.16 Like Pusan, Taejon faces practical difficulties in arranging a tariffincrease starting on January 1, 1992 (para. 5.10). Accordingly, duringnegotiations, assurances were obtained that from January 1, 1993, TCG will chargesewerage tariffs that would yield adequate revenue to meet operation andmaintenance costs, including depreciation, and debt service payments in excessof depreciation, as well au provide a rate of return of at least 3% p.a. on netfixed revalued asnets in operation.

5.17 Between 1991 and 1998, TSA's net internal cash generation is expectedto increase by about 4.8 times, mainly because of the 1992/93 tariff increasesand the continuation of relatively low debt payments. TSA's working ratio wouldbe at satisfactory levels, not exceeding 38% throughout the period. Sewagevolumes during 1991-98 would increase by an average annual rate of about 13%.Long-term debt as a percentage of total capitalization would be in the very lowrange of about 5% to 12% during the period. It is estimated that TSA will beable to finance abaut 32% of its 1990-98 spending from internally-generatedfunds, thus reducing the burden on TCC's General Account.

F. Monitoring and Evaluation

5.18 Project performance would be monitored against the implementationschedule (Annex 4) while the implementing agencies' operational, financial andmanagerial performance will be assessed against the monitoring indicators givenin Annex 11. During negotiations, assurances were obtained that PCG and TCGwould send the Bank semi-annual project progress reports, including revisedproject coot estimates and implementing schedules, not later than March 31 andSeptember 30 of each project year, as well as their updated financial projectionsnot later than September 30 of each project year.

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VI. PREM= JUSTIFICATION

A. Project Benefits

6.1 The right of every citizen to enjoy a safe and pleasant environment wasrecently added to the Korean constitution. Accordingly, the Government hauadopted various policies and programs with the ultimate goal of improving thecondition of the country's overall environment, which was allowed to deteriorateduring past decades of rapid economic development. One of the main environmentalprograms would arrest the growing pollution of national water resources andgradually restore them to their original state. Since a substantial portion ofwater pollution is generated by the population (para. 1.4), the Government'seffort focuses on the accelerated construction of municipal sewage treatmentplants under its Nationel Wastewater Treatment Plan (para. 1.16). This Plan,which is one of the most ambitious clean-up programs in a developing country,will help sustain urban and industrial growth, with minimum adverse effects onthe environment and, at the same time, will substantially contribute to graduallyimproving the water quality of the country'a rivers. The proposed project wouldhelp the Government implement this program ia the cities of Pusan and Taejon andwould thus contribute to the protection of the nation's water resources.

6.2 The direct benefits of the project would come from removing domestic sewagefrom the inner-city rivers and improving the living standards of the cities'populations, eepecially those living and working in close proximity to waterwayswhich are now polluted by a considerable volume of raw sewage (paras. 2.9-2.10).The interceptors to be constructed under the project would ensure that anincreased volume of wastewater would be contained within the system and notallowed to contaminate inner-city waterways. This would reduce the health riskfrom contact with river water, improve the air quality by eliminating unpleasantsewage odors from the atmosphere, and improve the cities' visual and aestheticenvironment. The project works would also increase property values in areasadjoining the currently polluted waters and, in Pusan, would remove a substantialportion of the wastewater currently polluting the city's harbor, facilitatecontrol of pollution from ships, and help improve the appearance of both theharbor and the local beaches, which are important to tourism. This shouldbenefit the local tourism industry ae well as fishing and the harvesting ofseaweed.

6.3 Other project benefits would be derived from updating the Sewerage MasterPlans, using modern computer-based technologies (para 3.12). The updated Planswould support the cities' ambitious development plans covering the next decadeand, by including detailed programs for the conversion to more sanitary separatesewerage systems as well as procedures to streamline institutional arrangementsin the sub-sector, would allow both Pusan and Taejon to upgrade the sanitationservices they provide. In addition, the approval of appropriate sewerage tariffsbeing sought under the project would assist the sewerage agencies to meet theirfinancial objectives, thus helrtng to ensure an undisturbed flow of finance forplanned development and improvement of the systems (paras 5.10 and 5.16).

6.4 The main beneficiaries of the proposed sewage treatment plants would beusers of the currently polluted river water downstream of Taejon and of thecoastal waters in the Pusan area. The Taejon treatment plant would reduce

- 26 -

pollution in the downstream river, which is used by the neighboring communitiesto extract water for domestic and industrial consumption and for agriculture.The Pusan treatment plant would treat a substantial volume of raw sewage nowpolluting Pusan harbor (Annex 10, para. 14), which is the largest in Korea, andreduce the pollution load now reaching the adjoining Bay famous for its touristresorts and sandy beaches.

B. Rate of Return

6.5 A valuation of project's economic benefits in monetary terms has not beenmade because the data on changes in water quality and respective impacts oncurrent and potential water users in the project locations are not available.Also, the methodologies available for estimating the economic benefits whichwould result from improving the quality of water in recipient to a particularstandard have many limitations.

6.6 The financial rate of return (FRR) which in constant prices relates thesewerage revenues to the capital and operating cost of sewerage facilities wascomputed aA an approximate indication of minimum economic return. FRR for Puinanamounts to about 10% and for Taejon to 5%. These are adequate considering thesocial nature of the project and the intangible health and environment benefitscited above. The difference in the two cities's FRR is attributable largely tomore demanding financial performance covenant (tariffs to provide rate of returnon assets of 5% in Pusan as compared to 3% in Taejon, due to relatively smallercapital contribution from General Accounts in Pusan than in Taejon) as well asto the economies of scale benefiting larger facilities in Pusan. Detailedcomputation of FRR, including assumptions used are shown in Annex 12.

C. Least-cost Solution

6.7 The technical alternatives selected for the project represent the least-cost solutions to improving the sewerage systems in both Pusan and Taejon. Thelocations of the sewage treatment plants, the scale of their phased expansion,and the treatment technology, interceptor alignments, and design of the Pusanpumping station were selected based on an evaluation of several alternativesstudied during preparation of the Sewerage Master Plans for the project cities(paras. 2.13-2.14). In both plants, treatment would be carried out using theactivated sludge process, which has been found to be the most appropriate forlarge communities and in areas of high population density where the cost of landis at a premium.

6.8 The Sewerage Master Plans for the project cities were prepared up to eightyears ago when the cities' characteristics and development plans were clearlydifferent from the present situation; nevertheless, the contents of the Plans interms of delineating catchment areas and locating the treatment plants are stillconsidered accurate. However, to ensure that subsequent phases of the plants'expansion represent optimal choices and least-cost œolutions, the Plans would beupdated under the proposed project to take into consideration developments withinthe cities since the Plans were prepared and, consequently, the changing watersupply and sewerage requirements. Factors to be considered in the Plans'updating include expansion of the city boundaries, establishment of new

- 27 -

industries and industrial estates, the relocation of other industries, and thenow housing areas built.

D. Affordability

6.9 Sewerage charges in Korea are now very low, and the tariff increaseproposed for both project cities as of January 1, 1993 is not expected to imposean undue burden on households at the lowest income levels. The lowest paidworkers are mainly in unskilled jobs like street cleaners and laborers, with anestimated monthly income in the first quarter of 1991 of about W 400,000. Sincethe average household contains four persons and 1.5 wage *arners, the lowestaverage household income is about W 600,000 a month. Assuming that suchhouseholds consume about 250 lcd of water, the average sewerage charge at theincreased levels proposed would represent 0.35% of gross household income inPusan and 0.37% in Taejon.

6.10 However, the level of sewerage tariffs would relate to the efficiency ofimplementation and operation of project facilities. The sensitivity analysioassessing (a) an increase in the capital cost by 10%; and (b) an increase in theoperating cost by 10% indicated that tariffs are most sensitive to the capitalcost. An increase in the capital cost of 10% would increase tariffs by about 9%while same increase in operating cost results in a tariff increase of 1%. A worstscenario assuming 10% increase in capital and operating cost would result in a10% increase of tariffs. This would raise the charges as a proportion of grosshousehold income from 0.35% to 0.39% in Pusan and from 0.37% to 0.40% in Taejon.The combined water and sewerage charge, including these possible adverse effectswould be about 1.5% to the households in both cities. This is only a fraction ofthe 4% to 6% coneidered affordable for water and sewerage services in otherdeveloping countries. The expected continuation of increases in per capita andhousehold incomes in Korea would reduca these percentages even further.Estimated future tariffs after project works are in operation would notsignificantly affect affordability.

E. Environmental Impact

6.11 The Government of Korea places high priority on the efficient use of waterand the improvement and maintenance of water quality. As a result, it haslaunched a National Wastewater Treatment Plan which, when completed, would makeKorea one of the few developing countries with extensive sewage treatmentfacilities in place and functioning. The proposed project would supportimplementation of this Plan in the country's second and sixth largest cities,with the key objective of substantially improving the condition of theenvironment in these cities by removing pollution from wastewater discharges intothe cities' rivers and coastal areas. At completion, the facilities constructedunder the project would remove pollution equivalent to about 36 tons of SOD and34 tons of suspended solids each day in Pusan and about 27 tons of BOD and 24tone of suspended solids in Taejon (Annex 10). Implementation of project workswould provide proper treatment for about 60% and 50% of sewage generated in Pusanand Taejon, and consequently result in a major improvement of the environment inthe project area, higher living standards for the local population, andelimination of damage from raw sewage by eliminating offensive odors, improvingthe appearance of waterways, and reducing sludge and litter in the harbor and onthe beaches of Pusan. Furthermore, as part of the project, the cities will

- 28 -

institute an Environmental Monitoring Program to collect and evaluate relevantdata on pollution in all water courses, so that ongoing water pollution controlcan be adeuately managed and future facilities may be optimally designed.

F. Proj2*t Risks

6.12 The project's civil works components present no special risks. A possiblerisk could be that delays in adequate tariff increases would limit internal cashgeneration. In view of commitments of the cities it can be assumed that such ashortfall would be compensated from the general revenues and would not result indelays of construction. Implementation of the SMPs to be updated under theproject and realization of the environmental benefits expected from theconversion to sanitary separate sewer systems lie beyond the project time frameand consequently cannot be assured. Howaver, popular pressure now being exertedin Korea for much stronger environmental protection measures significantlyincreasos the probability that the SHPs will be carried out by the year 2001 asnow planned.

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VII* AMENTS EACHED MM RECOMMATION

7.1 During negotiations, assurances were obtained from the Pusan and TaejonCity Governments that:

(a) the Cities will complete updating their Sewerage Master Plans by December31, 1992 (para. 3.12);

(b) six months prior to completion of each project treatment plant, the citieswill each implement an Environmental Monitoring Program, satisfactory tothe Bank, to collect and evaluate data on the plants' performance and theenvironmental impact of plant operations (para. 3.24);

(c) the cities' Sewerage Special Accounts will be audited by independentauditors acceptable to the Bank, and such statements and audit reports,with the audit also including a separate opinion on Statements ofExpenditure and the Special Accounts established for the Bank loan, willbe submitted to the Bank within six months of the close of each fiscalyear (para. 4.5);

(d) the fixed assets will be revaluated periodically in accordance with KoreanLaw (para 5.3);

(e) the Pusan and Taejon City Governments will charge, from January 1, 1993,sewerage tariffs yielding adequate revenue to meet operation andmaintenance costs, including depreciation, and debt service payments inexcess of depreciation, as well as provide a rate of return of at least 5%and 3% p.a. on net fixed revalued assets in operation in Pusan and Taejon,respectively (paras. 5.10 and 5.16); and

(f) the cities will send to the Bank semi-annual progress reports, includingupdated project cost estimates and implementation schedules, not laterthan March 31 and September 30 of each project year, as well as updatedfinancial projections for their Sewerage Special Accounts no later thanSeptember 30 of each project year (para. 5.18).

7.2 During negotiations, the financial plans for the Pusan and TaejonSpecial Sewerage Accounts for the project period, including the CentralGovernment contributions, the cities' contributions from the General Accounts,and the availability of the Regional Development Fund loans and their lendingterms, were confirmed with the Government of Korea and the Pusan and Taejon CityGovernments (paras. 5.7 and 5.14).

7.3 Signing of Subsidiary Loan Agreements between the Central Government andthe Pusan and Taejon City Governments will be a condition of loan effectiveness(para. 3.7).

7.4 Subject to the above assurances and conditions, the proposed projectconstitutes a suitable basis for a Bank loan of US$40 million equivalent, for aperiod of 15 years, including a grace period of five years, at the Bank'sstandard variable interest rate. The borrower would be the Republic of Korea.

- 30 -ANNEX 1Page 1

KOREAPUSAN AND TAEJON SEWERAGE PROJECT

EXISTING WATER SUPPLY AND SANITATION FACILITIES

PUSAN CQMPONENT

Zo2Vlation

1. Pusan, located about 440 km south-east from Seoul, is Korea's secondlargest city and largest port. It has both light industri-e such as chemicals,textiles and leather as well as heavy industry such as metallurgy, machinery andshipbuilding concentrated in more than 40,000 factories employing near to 600,000persons.

2. Pusan's population has tripled from about 1.3 million in 1963, whenthe municipality was upgraded to the special City status, to about 3.9 millionin 1990, and in expected to grow to 4.8 million in 2001. Its administrative areaalso grew from 360 knm in 1963 to 435 km2 in 1988 and was increased to 526 1m2 in1989. Administratively, the city is divided into 12 district. (Gu) and 220 sub-districts (Dong).

Water SUPD1V

3. The water supply services are managed by the Pusan Water Agency whichis a self-financing municipal corporation. Water services were provided in 1990to 3.8 million, or 97. 5% of the population. The daily average production was 1.5million m/d, or 360 lcd (including about 38% of non-revenue water). Out of294,000 service connections in 1990 about 78% were residential, using about 61%of water supplied; of the remaining usage about 30% was commercial and industrialuse, and 9% was public use.

4. The production capacity of the water supply system is about 2 millionme/d and the facilities include three water intakes, five water treatment plantsof sizes varying from 8,000 m3/d to 1.0 million m3/d, two balancing reservoirswith the total volume of 2.0 million m3 and about 10,000 km of pipes of variousdiameters, of which the distribution network is 7,700 km. The Water Agency plansexpansion of production and distribution capacities to 2.5 million m/d and 2.8million m3/d in 1995 and 2001, respectively. The past and projected dailyaverage water production and sales are shown in Table A-l.1.

Table A-1.1Pusan - Water Production and Sales

1986 1991 1996 2001------Daily Average in 1,000 ml/d-------

Water Production 1,245 1,674 2,035 2,238Water Sales 685 1,071 1,465 1,790

Sewerace MKater Plan

5. The initial sewerage master plan, prepared in 1974 under Germangovernment assistance, proposed to combine 14 natural drainage catchments withinthe City into three treatment districts, each served by several wastewaterpumping stations and one wastewater treatment plant. This plan was updated in1984 in connection with preparation of a long-term plan for the city. Theupdated plan has recommendeds (a) elimination of several pumping stations byincreasing the number of treatment districts from three to six; and(b) completion of the separation of the existing combined sewerage system in the

- 31 -ANNEX 1Page 2

entire City area in 2001. The plan defines the sewer planning area as being thebuilt-up area provided or to be provided with a sewer. The summary of the masterplan's projection of sewer planning areas and respective population in ehown inTable A-1.2.

Table A-1.2Pusan - Projected Sewer Plannirsg Area and Population

ItmLYouar 1986 1291_ 1996 L201

Admin Area km2 468.6 468.6 468.6 468.6Sewer Plan Area kmR 105.6 117.1 128.5 142.7Total Population mil 3.85 4.20 4.60 4.80Sewer Plan Pop. mul 3.49 3.84 4.08 4.28

6. The area of the proposed six treatment districts, the projectedpopulation for 1991 and 2001, and the length of interceptors as proposed in the1984 master plan update are shown in Table A-1.3.

Table A-1.3Pusan - Projected Treatment Districts

Treatment District District Population Length ofDistrict Area km2 -1991- -2001- Interceptors

thoueand km

Suyeong 42.06 1,188 1,300 29.3Janglim 44.63 790 954 48.0Yongho 35.37 1,220 1,342 21.8Yeongdo 18.01 570 600 25.5Songjeong 0.81 19 30 1.7Bansong 1 88 5-6 S8 1.6Total 142.76 3,843 4,284 127.9

7. The projected daily average flow of domestic, commercial, andindustrial wastewater generated in the treatment districts, and the capacitiesof treatment plants to be in operation in fiv- years planning periods are shownin the Table A-1.4 and Table A-1.5, respectively.

- 32 - ANNEX 1

Page 3

Table A-1. 4Puean - Projected Wastewater Flows by Districts

Treatment 1L2i 1Distriet -----Daily Average Flow in 1,O00n------

Suy-ong 213 291 366 442Janglim 300 352 425 490Yongho 234 299 378 456Y-ongdo 113 140 174 204Songjeong 3 5 7 10Bansong 14 17 20Total 874 1,101 1,367 1,622

Table A-1.5Pusan - Projected Treatment Plant Capacities

Treatment 1986 19 2001District -----Daily Average Flow in 1,00 m3 -

Suyeong 230 320 420 420Janglim --- 300 500 500Yongho --- 240 460 460Yeongdo --- --- 200 200Songjeong --- --- 10 10Bansong --- 20 --- 20Total 230 880 1,590 1,610

8. The master plan evaluated alternative arrangements for collection ofstorm and wastewater and recommended the separate systems as a least costsolution to be imp.emented by 2001. The interceptors to be constructed andprovided with storm overflows in the interim would be later modified and serveas trunk mains within the sanitary sewer system. The projected development ofthe drainage and sewerage system and served population are shown in Table A-1.6and A-1.7.

Table A-1.6Pusan - Projected Drainage and Sewerage System

1986 1991 1996 2001-------- Aggregate Length in km---------

Interceptors 38 73 100 128Sanitary Sewer ---- 130 730 1,455Drainage 4,691 5! 60Q 5,790 5 983Total 4,729 5,805 6,620 7,566

- 33 -ANNEX 1Page 4

Table A-1.7Pusan - Projected Serviced Population

--- Population in 1,000----------

Total Population 3,850 4,200 4,600 4,800Sewer-d Population 3,492 3,842 4,083 4,284Treated Population 1,040 2,866 4,282 4,284

Sewerace System

9. The development of the drainage and wastewater collection system issubstantially behind the above master plan projections. The built-up area in1990 was 142 km2, of which 118 km2, or 83% war provided with sewers. The totallength of the system was about 4,205 km, including 4,168 km of combined sewers,32 km of interceptors, and 5 km of sanitary sewers. The number of sewerageconnections in 1990 reached 94,000 connecting about 95% of the population.

10. The combined systeme normally include open gutters along roads,unsuitable for receiving raw sewage. The city regulations, therefore, requireeach premise to arrange for pre-treatment (mainly by septic tanks) beforedischarging into public sewers.

Sewage Treatment

11. The construction of treatment plants also started later and with somemodifications as compared to the master plan. The first plant completed in 1988was the first phase of Suyeong (230,000 m3/d)g its final capacity of 420,000 m3/dis expected to be in operation in 1998. The second plant completed in 1990 wasthe first phase of Janglim (300,000 me/d); its final capacity of S00,000 m3/d isplanned to be in operation in 2001. The next is the first phase of Yongho, tobe completed in 1994, and increased from planned 240,000 m3/d to 270,000 m3/d.The current construction program for treatment plants is shown in Table A-1.8.

Table A-1.8Pusan - Treatment Plant Construction Program

Treatment Plant 1991 1996 1998 2021-Average Capacity in 1,000 m3/d-----

Suyeong [2301 (2301 420 420Janglim (300] (300) [3001 500Yongho --- 270 (2701 460Yeongdo --- 200 200Songjeong - --- 10 10Bansong - 20 20Total (530) 800 1,220 1,610

Note: numbers in brackets indicate completed capacities

12. The existing as well as proposed treatment plants use a conventionalactivated sludge process, including sludge digestion in anaerobic tanks followedby dewatering and disposal in the city's sanitary landfill.

13. The maintenance of the sewerage system, with the exception oftreatment plants, interceptors and sewage pumping, is provided by the districtand sub-district construction divLisons. The treatment plants, interceptors, and

- 34 -ANNEX 1Page 5

sewage pumping stations are operated and maintained by the respectLve treatmentplant staff.

14. The treatment plant units are headed by the di, ctors who report tothe mayor through the director general of the construction bureau. They aresupported by a staff of about 100 at each Suyeong and Janglim plants. Financingof operation and maintenance of the entire sewerage system is provided from thesewerage special account administered by the sewerage division.

Njahtsoil Disoosal. and Treatment

J5. In 1990, the population of about 1.3 million (33%) were usingtraditional toilets in combination with a vault to store the nightsoil, and theremaining 2.6 million (67%) used flush toilets discharging into septic tanks.The nightsoil as well as the sludge from septic tanks is collected by privatecontracors and disposed of in the two nightsoil treatment plants (NTP) locatedat Yongho and Kamjeong. The NTP at Yongho consists of anaerobic digestion andactivated sludge process with a total capac'tty of 1,250 kilo-liters (kl) per day.The NTP at Kamjeong uses three technologies in parallel, namely the Zimpro method(high temperature under high pressure), anaerobic digestion and wastestabilization ponds, with a total capacity of 2,200 kl per day. In 1989 theplant processed daily about 1,300 kl, of which 700 kl was nightsoil and 600 klsludge from septic tanks. The digested and dewatered sludge is sold to farmers.

16, In 1990 the Yongho NTP treated about 400 kl per day. The treatmentfacilities include anaerobic digestion tanks, sludge thickeners, and sludgedewatering on belt press machines. Gas generated during anaerobic digestion isused for heating the digestion tanks. The dowatered sludge is either disposedof in the city's sanitary landfill or sold to farmers. The supernatant istreated by an activated sludge process and after treatment is diecharged in theYongho River and the Suyoong Bay.

Solid Waste Management

17. In 1985 the city collected daily about 8,500 t of solid waste anddisposed it in Seokdae Dong sanitary landfill. The sludge from Suyeong andJanglim STPe amounting to 120 t/d is deposited in that landfill. The city isstarting separation of wastes; it is now being applied by users and arrangementsare under preparation for separate collection and reuse.

TAEJON COMPONENT

Ponulation

18. Taejon, located about 160 km south from Seoul, is Korea's sixthlargest city. Its manufacturing consists mainly of labor-intensive lightindustries such as textiles, leather and needlework concentrated in about 500factories employing over 50,000 persons. Though Taejon has a relatively weakindustrial base, the new science town (Taedok) and the high-tech industrialcomplex with planned 150 enterprises, tj be completed in 19912 and 1995,respectively, will provide for substantial expansion of science and technology-oriented industries.

19. To reduce the immigration pressure on the capital the Governmentdecided several years ago to move a number of the country's administrativeoffices from Seoul to Taejon. To reflect that decision the Taejon administrativearea was gradually enlarged from 88 km2 in 1980 to 204 km2 in 1983 and finally to538 km2 in 1989, when Taejon was upgraded to Special City status. Throughabsorption of noighboring localities, the population increased from 0.65 millionin 1980 to 0.80 million in 1983, and reached over 1.0 million in 1989 with 1.65million expected in 2001. Its administrative area of 537 km2 is divided intofive districts (Gus), which are further subdivided into 76 sub-districts (Dongs).

- 35 -ANNEX 1

Page 6

Water SuODly

20. The water supply services are managed by the Taejon Water Agencywhich is a self-financing municipal corporation. Water servicos were providedin 1990 to 904,000, or 85% of the population. The daily average production was303,000 m3/d or 335 lcd (including about 36% of non-revenue water). Out of89,000 service connections in 1990 about 75% were residential, using about 61%of water supplied.

21. The production capacity of the water supply system in 1990 was409,000 m'/dt the facilities include four water intakes, five water treatmentplants of sizes varying from 9,000 m3/d to 300,000 m'/d, balancing reservoirs withthe total volume of 117,000 m3, and about 3,400 km of pipes of various diameters,of which the network with diameters greater and smaller than 50 mm was 840 km and2,550 km, respectively. The Water Agency is expanding its production anddistribution facilities to 609,000 m'/d to be in operation in 1991, and plans toexpand its capacity to about 1.0 million m3/d by 2001.

Table A-1.9Taejon - Water Production and Sales

-- Daily Maximum in 1,000 mO/d-i--

Water Production 357 436 724 940Water Sales 226 285 545 750Water Connections (1,000) 84 94 129 153

Sewerage Master Plan

22. The initial sewerage master plan which outlined the improvements ofthe sewer system and treatment of wastewater up to year 2001 was prepared in1982. The plan was updated in 1989 prior to preparation of the detailed designof the second phase of the treatment plant to reflect the changes in populationprojections and enlarged administrative area. The city's administrative area isnaturally divided into six drainage basins all finally discharging into KapchonRiver. Within these basins the 1989 plan defines the sewer planning area asbeing the built-up area either provided or to be provided with sewer. Theprojected sewer planning area is shown on Table A-1.10.

Table A-1.10Taejon - Projected Sewer Planning Area

1989 1221 2199 2Q00----------- Area in M--------------

Administrative Arsa 538 53.' 538 538Sewer Planning Area 66 77 90 97Area Served by Sewers 42 51 NA NAServed by Interceptors 22 47 75 97

23. The updated projections of wastewater generated in the sewer planningarea are based on the following assumptions: (a) domestic--on past and projectedwater supply, leakage ratio, and losses during water use; (b) industrial--on unitdemand of water for various light industries and unit demand per employee forhigh-tech industrial complex; and (c) infiltration - on the present ground water

- 36 -ANNEX 1Page 7

infiltration rate for the existing sewers and a reduced rats for future newsewers. The projections of generated wastewater by various sources are shown onTable A-1.1l

Table A-l.llTaejon - Projected Wastewater Flows by Sources

198 199 i99 2=2- Daily Maximum Flow in 1,000 m3-----

Domestic 225 334 478 592Industrial 71 91 107 131Infiltration 7A _9 1Total 370 518 690 831

24. The 1989 revision of the master plan follows the principalrecommendations of the 1982 plan concerning the proposed construction ofinterceptors and treatment plants in four phases up to year 2001. Themodifications, resulting from the faster growth and enlargement of the city area,include a longer interceptors, as a result of moving t:ie third and fourth phaseof the treatment plant from Wonchon Dong to a new lo ation at Tae Dong, about 14km downstream. However, the 1989 revision recommen4ed maintaining the combinedsystem in already built up areas and adopting the separate systems only in nowdevelopments. This represents a major departure from the initial master planwhich recommended the separate system as the least cost solution. The phasingof treatment plants, length of interceptors, wastewater flows and relatedpopulation as projected in the 1989 plan are shown on Tables A-1.12 throughA-1.14.

Table A-1.12Taejon - Projected Treatment Capacities

Treatment Plent Phase (1] (2] [3] t4]Planned in OyeratioLn I= 199 Z z21

----Daily Maximum Flow in 1.000 m3/d---

Wastewater Generated 450 610 690 831Collected by Interceptors 180 340 690 831Treatment Capacity (1501 300 600 830

Notes Numbers in brackets indicate completed facilities

Table A-1.13Taejon - Projected Drainage and Sewerage System

,2--9, ,1991 £6 22----- Aggregate Length in km-

Interceptors 29 40 72 94Sanitary Sewers 74 110 366 765Drainage 1200 1,459 1,681 2,350Total 1,357 1,600 2,119 3,209

- 37 -ANNEX 1Page 8

Table A-1.14Taejon - Projected Serviced Population

1990 ~1993 i96 QQ--- Population in 1,000--

Total Population 1,060 1,350 1,500 1,650Sewered Population 1,000 1,200 1,368 1,517Intercepted Population 380 750 1,350 1,517Treated Population 316 650 1,200 1,517

Sewerage System

25. The built up area in 1990 was 73 knm, of which 51 kin, or 70% wassewered, providing services to about 1.0 million, or 87% of population. Thetotal length of the system was about 1,500 km, including 1,355 km of combinedsewers, 108 km of sanitary sewers and 39 km of interceptors. The number ofsewerage connections which are billed sewerage charges has increased from 77,300in 1986 to 92,600 in 1990.

26. The combined systems normally include open gutters along roads,unsuitable for receiving raw sewage. The city regulations, therefore, requireeach premise to arrange for pre-treatment (mainly by septic tanks) beforedischarging into public sewers.

Sewage Treatment Plant

27. The sewage treatment plant (150,000 e3/d maximum capacity) is locatedat Wonchon Dong, which was the point where the recipient, the Kapchon River,crossed the boundary of the city before extension of its administrative area.It uses a conventional activated sludge process, followed by sludge thickening,anaerobic digestion and dewatering. Dewatered sludge is currently given to aprivate landscaping company free of charge. The plant primary treatment has beenin operation since December 1986 and in full operation from June 1990. FromDecember 1990 the plant also receives through the interceptor all nightsoilcollected in the city after its pre-treatment in the nightsoil treatment plantat Samcheon (para 29 below).

28. The maintenance of the sewerage system, with the exception oftreatment plant and interceptors, is provided by the districto and sub-districts.The treatment plant and interceptors are operated and maintained by the treatmentplant section. The section is headed by the plant director who reports to themayor through the director general of the construction bureau. He is supportedby a staff of 55 of which 44 are technical and 11 administrative personnel.Financing of operation and maintenance of the entire sewerage system is providedfrom the sewerage special account administered by the sewerage division.

Niahtsoil DieDosal and Treatment

29. The nightsoil collected in 1990 reached a daily average of 515 kl,of which 205 kl was the nightsoil and 310 kl the septic tanks sludge. Thenightsoil as well as sludge from septic tanks is collected by private contractorsand disposed in Samcheon NTP operated by the city's Cleansing Department. Itis further estimated that about 200 kl/d of nightsoil and sludge isuncontrollably disposed, or used in gardens and farms. The NTP has a capacityof 300 kl/d and consists of grit chamber, screening, anaerobic digestion andactivated sludge treatment for supernatant. In December 1990 the biologicaloperations of the plant (anaerobic digestion and activated sludge treatment foreupernatant) were discontinued and after processing it through the grit chamberand screening the collected volume, is now being discharged in the Wonchon Dong

- 38 -ANNEX 1

Page 9

sewag, treatment plant through the main interceptor. The NTP in scheduled toclose in 1996 aft-r a new nightsoil discharge station In built, together with thethird phac- of the treatment plant at Tao Dong.

Solid Waste NUanament

30. In 1989 the city collected daily about 1,600 t of solid wastes outof about 1,700 t generated daily in the city and disposed this quantity in thesanitary landfill which is expected to be filled during 1992. A new site witha capacity for about 15-20 years has been identified near to the proposodexpansion of the sewage treatment at Tas Dong and the feasibility study is underpreparation. It is expected that the surplus of dowatered sludge from the sewagetreatment plant, which would be not disposed otherwise, would be disposed in thenew sanitary landfill.

- 39 -ANNEX 2Page 1

KOREAPUSAN AND TAEJON SEWERAGE PROJECT

PROJECT DESCRIPTION

PUSAN COMPONENT

1. The component include. construction of the first phase of the sewagetreatment plant, one sewage pumping station and 11.4 km of interceptors.

Sewaae Treatment Plant

2. The sewage treatment plant will be situated at Yongho, the site ofthe existing night.oil treatment plant and will treat wastewater generated in itstreatment district, which includes the city's central and harbor areas, southeast peninsula, and adjoining eastern coast north of Yongho. The plant,Lncluding interceptors, with the capacity to collect and treat all wastesgenerated in the district will be constructed in two phases: the first phase,to be implemented under this project, will serve the central and east harborareas, central part of south east peninsula, and a part of eastern coast northof Yongho; the second phase will serve the remaining area. The areas of thetreatment district involved in each phase, respective population, length ofinterceptors and treatment capacities are shown in Table A-2.1

Table A-2.1Pusan - Development Phases of Yongho Treatment Plant

Phase I Fhase IX Total1994 1998 [2001]

Treatment District km2 20.90 14.47 35.37Design Population mil 0.94 0.40 1.34interceptors km 11.40 10.54 21.94Treatment CapacityDaily Average m3/d 278,000 178,000 456,000Daily Maximum m'/d 340,000 217,000 557,000Hourly Maximum mn/h 492,000 320,000 812,000

3. The treatment plant will use the conventional activated sludgeprocess for both phases. the facilities will consist of (i) pre-treatment units,including screens, grit chamber and primary settling tanks; (ii) aeration tanks;(iii) secondary settling tanks; (iv) chlorine mixing tank; (v) sludge thickeningtanks; (vi) sludge digesters; (vii) dewatering of digested sludge; (viii) rawsewage pumping station; (ix) various equipment such as sludge pumps, aerationblowers and stand-by generator; and (x) administration building, includingcontrol room, laboratory, workshops, social facilities, and deodorizationcontrum. The treatment units are expected be identical in type and sizing inboth phases.

4. The operation of existing nightsoil treatment at Yongho will bephased out during the construction of the conventional plant, its sludgedigestion and dewatering units reconditioned, and incorporated into the newplant. The nightsoil operations will be transferred in the Kamjeong plant whichhas adequate capacity for such an increase.

S. The type and sizing of key treatment units and supporting facilitieoto be constructed in Phase I are shown in Table A-2.2.

- 40 -ANNEX 2

Page 2

Table A-2.2Pusan - Major Facilities of the Treatment Plant

Treatment Unit Number of Unite D 2menuion of a Unit

- grit chamber 4 4.0 m x 18.0 m x 4.0 m- settling tank 25 9.0 m x 38.0 m x 2.5 m- aeration tank 25 9.0 m x 35.0 m x 11.0 m- secondary settling tank 25 9.0 m x 60.5 m x 3.2 mI- chlorination mixing tank 1 4.0 m x 225.0 m x 4.0 m- sludge thickeners

- primary sludge 2 12.5 m diameter x 4.0 m- secondary sludge 2 (25.6 m diameter x 3.6 m]

- digester 3 (egg shape, each 7,000 m3]- d-watering vacuum filter 6 [11 m3/h each)- pumping plant 6 3 x 120 m3/m; 3 x 65 m3/m- administration/control building three stories

Note: brackets identify existing units to be incorporated in the plant

6. The plant aesign focuses on mitigation of environmental impacts, suchas odor from raw sewage and noise from pumps and blowers, as well as on itsaesthetic appearances all tanks are roofed, air is deodorized in the centralfacility located in the administration and control building and the structuresare design to protect against noise. The surface of the plant is designed as acombination of a park and recreational facility, with 30 m wide green belt aroundthe plant, the roof over both primary and secondary settlers and aeration tanks(225 m x 135 m) equipped with recreational facilities for various sportsaccessible to neighbors, and roofo over oludge thickening tanks provided withgreenery.

sewac* Pumoina Station

7. The pumping station is located about 25 m deep under the crossing oftwo main roads, 2.4 km west from the Yongho plant. The interceptor entering thepumping station has a diameter of 2.6 m to be constructed by tunneling method.The inflow is by gravity. The pumping station will be equipped with fivevertical sewage pumps (2 x 140 mn/m; 3 x 110 m3 /m) and will lift the sewage byabout 16.0 m in the existing boxed sewer (6.0 m x 2.5 m) which will bring thesewage, again by gravity, into the treatment plant at Yongho. Besides thepumping plant the main facilities of the pumping station will include the gritchamber, screens, transformers, deodorization facility, safety overflow and liftto a loading bay for removal of solids retained in the grit chamber and onscreens.

ItDergtm2

S. The interceptors in the total lengths of 11.4 km include theconstruction of new conduits (8.8 km) and the existing concrete channel of theDa-ycon River (1.6 km). The new conduits will be constructed mainly by thetunneling method to avoid disruption of heavy traffic in the center of the cityand along main roads. All facilities are designed for maximum hourly flowsprojected for final stage (9.4 m3/sec at the treatment inlet). The location,dimensions and length of interceptors to be included in the project are shown inTable A -2.3.

- 41 -ANNEX 2Page 3

Table A-2.3Pusan - Intercepting Sewers

River, Bnk ZY 2iMgnliQn Lenghthl_i cLm1P l

Dasyson N/A tunnel dia 2.6 m 808 25

Daeyeon center box various from 1,6177.0 x 2.7 m to N/A2.6 x 2.6 m

N/A N/A tunnel dia 2.6 m 3,523 5 - 30

Dongchon right box various from 1,7352.0 x 2.2 m to1.5 x 1.7 m 5 - 6

Dongchon left box 1.5 x 1.7 m 1,540 5 - 6

Coast N/A pipe various from 2,200350 to 1350 mm N/A

Total 11,423

TAEJON COMPONENT

9. The component includes construction of the second phase of the sewagetreatment plant and 11.9 km of interceptors.

Sewaae Treatment Plant

10. The first two phases of the eewage treatment plant are situated atWonchon Dong to treat wastewater generated in the city'a central area, industrialestate, and Taedok science town. The remaining parts of the city as well as thefurther increase of wastewater within the first two phases will be directedtowards the new location for the following two phases at Tae Dong, situated 14 kmdownstream. The areas of the treatment district involved in each phase,respective population, length of interceptors and treatment capacities are shownin Table A-2.4.

Table A-2.4Taejon - Development Phases of Wonchon Dong Treatment Plant

Phase I phas II T2tal1990 1993 120011

Treatment District km2 22.15 25.08 47.23Design Population mil 0.40 0.35 0.75Interceptors km 29.47 10.70 40.17Treatment Capacity

Daily Average m3/d 130,500 137,900 268,400Daily Maximum m3/d 150,000 150,000 300,000Hourly Maximum m3/h 211,200 234,600 445,800

11. Both phases of the treatment plant use the conventional activatedsludge process. Facilities will consist of (i) pre-treatment unit., including

- 42 -ANNEX 2Page 4

screens, grit chamber and primary settling tanks; (ii) aeration tanks; (iii)secondary settling tanks; (iv) chlorine mixing tank; (v) sludge thickening tanks;(vi) sludge digesters; (vii) dewatering of digested sludge; (viii) raw *ewagepumping station; (ix) various equipment such as sludge pumps, aeration blowers,and stand-by generator; and (x) administration building, including laboratory,workshops and social facilities.

12. The type and sizing of key treatment units and supporting facilitiesto be constructed in Phase II are shown in Table A-2.5.

Table A-2.5Taejon - Major Facilities of the Treatment Plant

Treatment Unit Number of Units Dimensions of a Unit

- grit chamber 0 completed under Phase I- settling tank 4 36.5 m diameter x 3.0 m- aeration tank 12 8.0 m x 78.0 m x 5.0 m- secondary settling tank 4 43.0 m diameter x 3.2 m- chlorination mixing tank 1 3.0 m x 168.0 m x 3.0 m- sludge thickener:

- primary sludge 2 15.5 m diameter x 3.0 m- secondary sludge 2 11.5 m diameter x 4.0 m

- digester 3 egg shape, each 3,500 m3- dewatering vacuum filter 8 3.0 m width/unit- pumping plant 4 100 m3/min- administration building 0 completed under Phase I

13. The plant architectural design focused on mitigation of environmentalimpacts, such as odor from raw sewage and noise from blowers includes, besidesa 30 m wide green belt around the plant, the deodorization facilities, and noiseabatement structures.

Interceptore

14. Phase II includes construction of a greater length of interceptorsthan initially expected in the design mainly due to the city's effort to improveits appearance in connection with the EXP0'93. The conduits are constructed ofcircular pre-stressed concrete pipes except for about 3.6 km of main collectorwhich is a rectangular box constructed in situ. The conduits are designed forhourly maximums projected for 2001. The location, dimensions and lengths ofinterceptors to be constructed within the project are shown in Table A-2.6.

- 43 -ANNEX 2

Page 5

Table A-2.6Taejon - Intercepting Sewers

River Elnk TvD Dimensions Lsnath iml

Daedong right circular various from 2,830700 to 1,200 mm

Kapchon left box variou from 1,6002.5 x 2.0 m to2.0 x 1.5 m

circular 1200 mm 3,350

Yudung left box 1.5 x 1.2 m 1,980

left circular various from 1,320700 to 1100 mm

Yuseong left circular 800 mm 800

Total 11,880

TECHNICAL ASSISTANCE

Sewerace Master Plane

15. The updating of Sewerage Master Plans (SMP) would consist of (a) thecollection, review and assessment of data, documents and studies; (b) fieldphysical surveys, sampling, laboratory teating and evaluation of findings,including updating of euisting "as-made" drawings; (c) formulation of masterplan, including the key implementation phases, environmental impact assessment,and cost estLmates with identification of least-cost proposals; (d)recommendation on policies, design standards, and required organization forsatisfactory management of sewerage affairs; and (e) preparation of preliminarydesigns for the next implementation phase. The SMPs data base would be developedwith the maximum use of computers to simplify their maintenance, later updatingand amendments.

- 44 -

ANNEX 3

KOREA Page I

PUSAN AND TAEJON S£ERAGE PROJECT

Table 1: Project Cost - Pusan Component

------- MILLION WON ...... X OF -- M- ILLION USS ------ Physical X

WORKS BASE Contin- Foreign

Local Foreign Total COST Local Foreign Total gencies............. _. .................................. .......................... ........................................................ _...................

1. Treatment Plant

Civil Works 34935.0 6165.0 41¶'0.0 32.30X 48.52 8.56 57.08 5.02 15.0%

Equipment 4473.2 17892.8 se2366.0 17.572 6.21 24.85 31.06 5.0X 80.0X

2. Interceptor & Pumpiru StatIon

Civil Works 30821.9 5439.2 36261.0 28.49X 42.81 7.55 50.36 5.02 15.02

Equipment 426.8 1707.2 2134.0 1.682 0.59 2.37 2.96 5.02 80.02

3. Prrject Support TA

Master Plan Study 450.0 50.0 500.0 0.392 0.63 0.07 0.69 5.02 10.02

Construction Supervision 500.0 0.0 500.0 0.39V 0.69 0.00 0.69 5.0X 0.0O

4. Land Acq. & Compensoaton 24400.0 0.0 24400.0 19.17X 33.89 0.00 33.89 5.0 0.02

BASE COST 96006.9 31254.2 127261.0 100.002 133.34 43.41 176.75 24.62

PHYSICAL CONTINGENCIES 4800.3 1562.7 6363.1 5.002 6.67 2.17 8.84 24.6X

PRICE CONTINGENCIES 12374.9 2757.4 15132.2 11.892 17.19 3.83 21.02 18.22___................. ........................ ......................................................

TOTAL COST 1/ 113182.0 35574.2 148756.3 116.892 157.20 49.41 206.61 23.92

1/ Includes taxes equivalent to about USS17.9 million

bue to rounding the last digit In totals may appear different that the sum of digits

06-sep-91

- 45 -

ANNEX 3KOaREA Page 2

PUSA AND TAEJON SEWERAGE PROJECT

Table 2: Project Cost -T"Jon Coaponent

------- MILLION WON ---- X OF --- MILLION US$ --.-. Physical I

WORKS BASE Contin- Foreign

Local Foreign Total COST Local Foreign Total pnczi

1. Treatment PlantCivil Works 6744.8 1190.3 7935.0 21.13X 9.37 1.65 11.02 5.0% 15.0%

Equipment 3670.0 14680.0 18350.0 48.85x 5.10 20.39 25,:Q 5.0% 80.0%

2. Interceptor * PLp1ng StationCivfl Works 4080.0 720.0 4800.0 12.78M 5.67 1.00 6.67 5.0% 15.0%Equipment 0.0 0.0 0.0 0.00% 0.00 0.00 0.00 5.0% 0.0%

3. Project Support TAMaster Plan Study 450.0 50.0 500.0 1.33X 0.63 0.07 0.69 0.0% 10.0%

Construction Supervision 716.0 0.0 716.0 1.91% 0.99 0.00 0.99 0.0% 0. 0%

4. Land Acq. & Coapnsation 5260.0 0.0 5260.0 14.00% 7.31 0.00 7.31 5.0% 0.0%............. ........................................ _.... . . . .............. .... ...... ...............................................................

BASE COST 20920.8 16640.3 37561.0 100.00% 29.06 23.11 52.17 44.3%

PHYSICAL CONTINGENCIES 987.7 829.5 1817.3 4.84% 1.37 1.15 2.52 45.6%

PRICE CONTINGENCIES 1412.2 1046.7 2458.9 6.55% 1.96 1.45 3.42 42.6X...........................................................................................................................

TOTAL COST 1/ 23320.7 18516.4 41837.2 111.38% 32.39 25.72 58.11 44.3%

I/ Includes taxe equvalent to about US5.3 milionDue to rounding the last digit in totals my appear dIfferent than the sun of digits

06-Sep-91

- 46 -

ANNEX 3KOREA Page 3

PUSA ANID TAEJON SiUE'VGE PROJECT

Table 3: Project Cost - Pusan Cowpnnt_....._._.... _*_................................................................................................... ....... ................... ,.,,,..,,,,,,, ............ ,,,,

- MILLION * --- - XILLIOMUS .WORKS Foreign

Local Foreign Total 1990 1991 1992 1993 1994I .. ... ...... ................ ............... ............................... ........................................................................

1. Treatment PlantCivil Works 42357.10 6969.71 49326.81 14.1X 0.00 6.86 23.23 19.4? 18.94Equip.nt 5513.88 20435.03 25948.91 78.82 0.00 0.00 10.42 14.41 11.21

2. Interceptor & Pumping StationCivil Works 37422.52 6155.10 43577.62 14.12 0.00 6.05 17.57 21.47 15.43Equipepnt 529.92 1959.71 2489.63 78.7X 0.00 0.00 0.00 2.89 0.57

3. Project Support TAMaster Plan Study 517.66 54.66 572.32 9.62 0.00 0.23 0.57 0.00 0.00Construction Supervislon 609.60 0.00 609.60 0.02 0.00 0.08 0.24 0.26 0.27

4. Lend Acq. 4 Co2penhation 26231.36 0.00 26231.36 0.02 19.57 14.87 1.99 0.00 0.00

TOTAL PROJECT COST 1/ 113182.05 35574.21 148756.25 23.92 19.57 28.09 54.02 58.50 46.42

I/ Includes texe equivalent to about US#17.9 millionDue to rounding the Last digt in totals my appear different that the sum of dfgits06-Sep-91

- 47 -

ANNEX 3KREA Page 4

PUSAN AND TAEJOW SEWERAGE PROJECT

Table 4: Project Cost - Teejon Coeponent

-- .. MILLIOWO ------ ---------- MILLION US ---WORKS Foreign

Local Foreign Total 1990 1991 1992 1993

1. Treatment PlantCivIl Works M76.95 1304.44 9031.39 14.4X 0.00 3.91 4.67 3.96Equipmsnt 4347.63 16399.85 20747.48 79.0X 0.00 0.00 12.71 16.11

2. Interceptor & Puwping StationCIvil Works 4331.10 759.04 5090.14 14.9X 3.13 3.94 0.00 0.00EquIpemnt 0.00 0.00 0.00 0.0 0.00 0.00 0.00 0.00

3. Project Support TAMater Plan Study 506.47 53.11 559.58 9.5X 0.00 0.00 0.38 0.40Construction Supervision 795.47 0.00 795.47 0.0K 0.00 0.15 0.46 0.49

4. Land Acq. & Compensation 5613.10 0.00 5613.10 0.0X 3.80 3.15 0.84 0.00_.................... ............................................. ................ ................................. ..... ...... .........

TOTAL PROJECT COST 1/ 23320.72 18516.43 41837.15 44.3% 6.93 11.16 19.05 20.96

I/ Includes taxes equivalent to about US5.3 millionDue to rourding the last digit in totals may appear different than the sum of digits

06-Sep-91

AMUX 3KOREA Pae 5

PUSAN AND TAEJON SEVERAGE PROJECT

Table 5: Project Cost - Pusan and Taejon Cowponents

.................. ..................................... .... o.......................... ........................ ................................................. ,_

.. .---- NILLION VON ------ X OF ---- ILLION US$ ----- X ------- MILLION US$ --------vIoRS BASE Foreign

Local Forelgn Total COST Local Foreign Total 1990 1991 1992 1993 1994.... ..... ...... ............. _ ...... ........................... ............................................................. ......... ................. o^._...... . .. ..

Pusan CeOmaent 96006.9 31254.2 127261.0 77.22 133.3 43.4 176.8 24.61 18.64 25.65 46.80 48.73 36.93Taejon C qonent 20920.8 16640.3 37561.0 22.81 29.1 23.1 52.2 44.3X 6.65 10.37 17.04 18.'' 0.00................ . .... ....... .... .. ... ........................................ ...................................................................................... .. .. ------

BASE COST 116927.6 47894.4 164822.0 100.02 162.4 66.5 228.9 29.11 25.3 36.0 63.8 66.8 36.9PHYSICAL CONlINGENCIES 5788.1 2392.2 8180.3 5.02 8.0 3.3 11.4 0.0 1.3 1.8 3.2 3.3 1.8PRICE CONTINGENCIES 13787.1 3804.0 17591.1 10.7X 19.1 5.3 24.4 0.0 -0.1 1.4 6.1 9.3 7.6

.... ..... ... .... .......................... ........................................................ ..................... ---------------------------------------... ............... .._.... ....... .........

TOTAL PROJECT COST l/ 136502.8 54090.6 190593.4 115.62 189.6 75.1 264.7 28.42 26.50 39.26 73.07 79.46 46.42

I/ Irnludes taxes equivalent to about USS23.2 miltlinDue to ro mding the last digit In totels my appear different than the su of digits06FSep-91

ANNEX 3

KtEA Page 6

PU AND TAEJO SEERAE PROJECT

Teble 6: Project Cost - Pusam nd Taejon Summry

.... ..... ______.... .. .. ____._.. _...... _......... ............................... _............................

------- MILLION VI ------ X OF X .......... NILLION USS ---------

WORKS OF ForeIgn

Local Foreign Total TOTAL 1990 1991 1992 1993 1994

Puumn Component 113182.0 35574.2 148756.3 0.8 0.2 19.6 28.1 54.0 58.5 46.4

TaeJan Cboxnent 23320.7 18516.4 41837.2 0.2 0.4 6.9 11.2 19.1 21.0 0.0

TOTAL PROJECT COST 1/ 136502.8 54090.6 190593.4 1.0 0.7 26.5 39.3 73.1 79.5 46.4

1/ Includes taxes equivalent to about USZ3.2 million

Due to roudiwng the last digit In totala way appear different then the sun of digits

06-Sep-91

ANNEX 3KOREA Pe" 7

PUSAN AND TAEJON SEIJERA6E PROJECT

Table ?: Project Cost - Project Sumnary~~~~~~~~.......................................... ................................................................. _............................. .................................................................

----------UON-------- - of --- - --- ----- - Physical X ------- MILLION USS -------Local Foreign Total BASE Local Foreign Total Contin- Foreign

COST gexcies 1990 1991 1992 1993 1994...................................................................... ............................................................................................

1. Treatment Plants

Cfvit Works 41,679.8 7355.3 49035.0 29.8X 5T.9 10.2 68.1 5.0X 15.0X 0.0 9.9 24.1 19.3 14.8Equippent 8,143.2 32572.8 40716.0 24.7Z 11.3 45.2 56.6 5.0X 80.0X 0.0 0.0 20.8 26.4 9.3

2. Interceptors & Pqpifng StationC,vlt Works 34,901.9 6159.2 41061.0 24.9X 48.5 8.6 57.0 5.0C 15.0% 3.0 9.2 15.1 17.6 12.1Equpeent 426.8 1707.2 2134.0 24.9X 0.6 2.4 3.0 5.02 80.02 0.0 0.0 0.0 2.5 0.5

3. Project Support TA

Naster Plan Study 900.0 100.0 1000.0 0.62 i.3 0.1 1.4 0.0 10.02 0.0 0.2 0.8 0.3 0.a tnConstruction SupLervison 1,216.0 0.0 1216.0 0.71 1.7 0.0 1.7 0.02 0.02 0.0 0.2 0.6 0.6 0.2

4. Land Acq. & Coapensatlon 29,660.0 0.C 29660.0 18.02 41.2 0.0 41.2 5.02 0.02 22.3 16.5 2.4 0.0 0.0

BASE COST 116,927.6 47894.4 164822.0 100.02 162.4 66.5 228.9 29.12 25.3 36.0 63.8 66.8 36.9PNWSICAL COUTINGEICIES 5,788.1 2392.2 8180.3 5.02 8.0 3.3 11.4 29.22 1.3 1.8 3.2 3.3PRICE CONTINGElCIES 13,787.1 3804.0 17591.1 10.71 19.1 5.3 24.4 21.6¶ -0.1 1.4 6.1 9.3

TOTAL COST OF THE PROJECT 136,502.8 54090.6 190593.4 115.62 189.6 75.1 264.7 28.42 26.5 39.3 73.1 79.5 46.4

1) Includes taxes equivalent to bout USS23.2 millionDue to romading the last digits in totals my appear different than the sus of digits

05-Jul-91

- 51 -ANNEX 4

KOREA

PUSN MMD 0JON SEWERAE PROGJC!

Implmentation Schedule

1990 1991 1992 1993 1994JFMAMJJASOND JFHAMJJASOND JFMAMJJASOND JFWAMJJASOND JFMAMJJASOND

PUSAN COMPONENT

Interceptors andPumping Station -

Treatment Plant

Civil Works m. mmm mmmRmm mmmmmmmmi -- mmmmmi_mSUA

Equipment .. m m mmmminmmm,.m--

Commissioning

Project Support TA

Constr Supervis m mm . . , - - m

Master Plan Upgr MMSI mSX=mwsw

Land A?q & Comp. =ui10mmmmm mmiwmum-i--i mmmmm

TAEJO '-Q&_$VM

Interceptors m, = mm,.3ummmmmmm

Treatment PIant

Civil Works . . .1. ............m1.m MISMm. .......U....

Equipment 36,.--=...-

Commissioning anmm mm

Project Support TA

Constr Supervis .m- m m..." mm....-

Master Plan Upgr . . mm,. ....mm.

Land Acq & Comp

- 52 -ANNEX 5Page 1

KOREA

PUSAN AND TAEJON SEWERAGE PROJECT

ESTIMATED SCHEDULE OF LOAN DISBURSEMENTS(in US$ million)

Bank's Year and --- … Dioburaemnts------------------Fiscal Smster ------Actual -------- -----Cumulative ----- Disburs.Year Ending Pusan Taejon Project Pusan Taejon Project t

1992 30-Jun-92 - - - - - - 0%

1993 31-Dec-92 1.0 2.0 3.0 1.0 2.0 3.0 8a30-Jun-93 2.0 7.0 9.0 3.0 9.0 12.0 30%

1994 31-Dec-93 5.0 8.0 13.0 8.0 17.0 25.0 63%30-Jun-94 6.0 3.0 9.0 14.0 20.0 34.0 85%

1995 31-Dec-94 4.0 0.0 4.0 18.0 20.0 38.0 95%30-Jun-95 2.0 0.0 2.0 20.0 20.0 40.0 100l

1996 31-Dec-95 - - - 20.0 20.0 40.0 100%30-Jun-96 - - - 20.0 20.0 40.0 100%

Notes The project implementation period extends over five years. The Bank Loanfinances only equipment and materials part which will be implemented intwo and half years and disbursed over three years.

- 53 -

ANNEX 5Page 2

KOREA

PUSAN AND TAEJON SEWERAGE PROJECT

ESTIMATED SCHEDULE OF PROJECT DISBURSEMENTS(in US$ million)

Bank's Year and ----Cumulative Disbursements---- SectorFiscal Semester -----loan---- ---- Project--- DisbursementYear Ending USS mil US$ mil Profile (%)

1990 30 Jun 1990 0

1991 31 Dec 1990 29.0 11 530 Jun 1991 50.5 19 18

1992 31 Dec 1991 71.0 27 3630 Jun 1992 106.0 40 59

1993 31 Dec 1992 3.0 8 144.0 55 7330 Jun 1993 12.0 30 180.0 68 86

1994 31 Dec 1993 25.0 63 222.0 84 9730 Jun 1994 34.0 85 246.0 93 98

1995 31 Dec 1994 38.0 95 257.0 97 10030 Jun 1995 40.0 100 264.0 100

Notes The project implementation period extends over five years. The Bank Loanfinances only equipment and materials part which will be implemented intwo and half years and disbursed over three years.

ANNEX 6Page 1

KOREA

PUSAN AND TAEJON BWERAGOX PROJECT

PROJECT SUPERVISION PLAN

Bank Su2ervision Input into Xey Activities

1. The staff input indicated in the table below is in addition toregular supervision needs a_ headquarters for the review of progr-e reports,procurement actions, correspondence, etc., which is estimated at three staffweoke during FY92, four staff wGeks during each FY93 through FY95 and three staffweeks in FY96. Accordingly, the total Bank supervision input is estimated at 58staff weeks, of which 18 staff weeks would be at the headquarters and 40 staffweeks in the field.

Bank Supervision Input into Key Activities

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

Jun/1992 Supervision Mission Sanitary Engineer 6(progress reporting, Financial Analystwater qual.monitoring Environmental Spec.Sewerage Master Plan)

Oct/1992 supervision Mission Sanitary Engineer 4(interceptors,civil Financial Analystand mechanical treat-ment plants, progressSewerage Master Plans)

May/ 1993 Supervision Mission Sanitary Engineer 4(progress of works, Financial Analystreview draft SewerageMaster Plans and reco-mmendations)

Oct/1993 Supervision Mission Sanitary Engineer 10(Taejon plant start Financial Analysttest operations, ini- Environmental Spec.tiate drafting PCR forTaejon comp., startriver monitoring pro-gram in Taejon);individual wastes,landfills sites.

- 55 -

ANNEX 6Page 2

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

1994 Two tupervis. Missions Sanitary Engineer 12(Taejon commisioning, Financial AnalystPusan test operations, Environmental Spec.start river and coastalwater monitoring Pusan,draft PCR for Pusan andfinal for Taejon)

1995 Supervision Mission Sanitary Engineer 4(review monitoring Financial Analystof water quality in Environmental Spec.recipients, final PCR)

Borrower'l Contribution to Supervision

2 overall coordination of the project would be the responsibility ofthe Treasury Division, Treasury Bureau, MOP. This would include inter alia (i)providing guidance to the sewerage divisions in Pusan and Taejon on timing andform of reporting implementation progress; (ii) arranging meetingo with theCitioe' officials during mission's field visits; (iii) chairing mission's openingand wrap-up meetings in MOP; and (iv) ensuring timely information of the Bank andproposal for satisfactory resolution of any unexpected issue occurring duringimplementation. Monitoring of the project and reporting on progress would be theresponsibility of the respective sewerage divisions.

3 In addition to regular financial reporting on use of the Loan andfinancial status of implementing agencies as specified elsewhere, followingreports on implementation progress would be submitted to the Bank:

Quarterly: (a) progress report on implementation of Pusan and Taejoncomponents, prepared by consultants carrying out constructionsupervision; and

ib) progress report on preparation of Sewerage Master Plan inPusan and Taejon, prepared by consultants;

Annually: (c) annual summary progress report on all project activities,prepared by the respective sewerage divisions.

Other: (d) program for monitoring quality of water in recipients,prepared by the respective sewerage divisions;

(e) program for expansion of sanitary sewers in Pusan and Taejon,prepared by the sewerage divisions;

(f) PCR consolidated for Pusan and Taejon components.

- 56 -KOREA

PUSAN AD TAEJON SEUERAGE PROJECT ANNEX VPUSAN SEWERAGE SPECIAL ACCOUNT Page IINCOME STATEMENT 1988-1998

(Millions of current WON)..... Actual ----- ........................... Forecast ------------------

.... ............................................ ...................................................................................................

Year ended D*caW*r 31 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998., f_* X*Zw 9vwv***s"o ...................................................................................... ..................................................

SEWAGECTHOUSANO TON/YEAR) 262791 291135 333834 388161 434728 473505 501402 537772 575005 61069 645688AVERAGE TARIFFtWON/TON) 78.03 77.72 80.30 80.25 84.26 93.75 93.75 104.06 109.62 112.94 135.94INCREASE IN AVERAGE TARtFF -0.40K 3.33K -0.06X 5.00K 11.26X 0.00X 10.99M 5.35X 3.02X 20.37X

OPERATING REVENUS 20506 22626 26808 31151 36632 4391 47006 55959 63034 68971 8777

OPERATING EXPENSESPersornel 1060 1306 1787 2483 2737 2960 3201 3681 3981 4306 4657Electricfty 606 8a6 1096 1851 1981 2080 2184 3461 3634 3815 4006Chemicals 435 428 441 556 595 625 656 1040 1092 1146 1203Maintenance 236 269 564 1167 1277 1372 1475 2209 2361 2525 3843Integrated bilLing charges 212 347 456 502 602 688 765 861 967 1079 1197Districts 0 & N 71 106 128 2576 2819 3028 3256 4875 5211 5574 8482Others 98 99 505 824 987 1129 1256 1414 1588 1770 1965

Depreciation 1442 7454 7728 9331 10756 12194 12423 14694 16977 19061 24372. _....................................................................................

TOTAL OPERATING EXPENSES 4160 10855 12705 19290 21753 24075 25215 32236 35811 39276 49727

Less:Recovered-Yongho 1000 2000 2000 2000 2140 2404 2836 0 0 0 0...-.-................... .................................. ...........................................

OPERATING EXPENSES 3160 8855 10705 17290 19613 21671 22378 32236 35811 39276 49727

OPERATING INCOME 17346 13771 16103 13861 17019 22720 24628 23723 27223 29695 38050

Less:lnterest expenses 685 1062 1520 2423 2605 2974 3574 4083 4364 4634 4902Add :Other Ineome 105 81 472 472 505 567 669 829 1078 1473 2112

Foreign exchane gainloot) 0 2951 *3845 323 0 0 0 0 0 0 0

Amort. of deferred tiabfilite 579 579 580 Sao 579 0 0 0 0 0 0

NET INCOME 17345 16320 ^1790 12814 15497 20314 21724 20469 23937 26533 35260

WORKING RATIO 13.25X 15.03X 18.57X 31.97K 30.02 26.77n 27.21K 31.35X 29.88X 29.31K 28.89XAVERAGE NET FIXED ASSETS IN OPERAT 172248 172249 29860 327471 367381 406323 402651 474464 544453 593897 760.99RATE OF RETURN 9.49K 6.83J 4.72K 3.62K 4.05X 5.00K 5.41X 5.00K 5.00X 5.00X 5.00XNote:Due to roudfng, the lost dfgit In totals my appear different than the so of colums.

- 57 -

KOREA

PUSAN AND TAEJON SEWERAGE PROJECT ANNEX 7

PUSAN SEWERAGE SPECIAL ACCOUNT Page 2SOURCE AND APPLICATION OF FLWS 1988-1498

(ttilions of current WON)..... Actual. -------------------- Forecast -.--.------------

Year ended Dceiber 31 1988 1989 ¶990 1991 1992 1993 1994 ¶M95 ¶990-95 1996 1997.............................................................................................................................

SOURCES OF FUNDS

INTERNAL CASH GENERATION

Net income before Interest expens 18030 17382 13310 15237 18103 23288 25297 24552 119787 28301 31167

Depreciation 1642 7454 7728 9331 10756 12194 12423 16694 67126 16977 19061

Other non cash debits & credits *602 -3530 3369 -903 .579 0 0 0 1887 0 0..... ...................... ...... _...................

GROSS INTERNAL CASH GENERATION 18870 21306 24407 23664 28280 35481 37721 39246 188800 45278 50228..... ........ .... .... __ ....................................

DEBT SERVICEAmortization 190 198 236 616 1605 2590 2965 3340 11350 3715 4215

Interest chargoed to operations 685 1062 1520 2423 2605 2974 3574 4083 17180 4364 4634.----.............................................................................................................. ...............

TOTAL DEBT SERVICE 875 1260 1756 3039 4210 5564 6538 7423 28530 8079 8849...........................................................................................

NET INTERNAL CASH GENERATION 17995 20046 22651 20626 24070 29917 31183 31823 160270 37199 41379

CAPITAL CONTRIBUTIONSCity Genera( Account 8314 3600 1000 1000 6000 7000 15000 25490 55490 25000 8000

PGA and Developers-Network 18032 199312 4345 5500 5885 6179 6488 6813 35210 7153 7511........... .................... _._ .............................

TOTAL CAPITAL CONTRIBUTIONS 26346 202912 5345 6500 11885 13179 21488 32303 90700 32153 15511............................................ ...................................................................

LOANSRegional Development Fuid 0 0 3000 3000 3000 3000 4000 5000 21000 6000 7000

OECF 11935 7563 8195 0 0 0 0 0 8195 0 0IPRD 0 0 0 0 720 5040 7200 1440 14400 0 0

TOTAL LOANS 11935 7563 ¶1195 3000 3720 8040 11200 6440 43595 6000 7000... ... ..... ..... ... .. ... .. ... ... .. ... .. ... ..... ... .. .. . . ...........

TOTAL SOURCES OF FUNDS 56276 230521 39191 30126 39675 51137 63871 705o66 294565 75353 63890

APPLICATION OF FUNDSCAPITAL EXPENDITURESProposed project 0 0 13435 20880 38894 42120 23427 10000 l48756 0 0

Other STP projects 23565 25648 21007 0 0 0 29492 495f 100045 65030 54625Interest during construction 0 0 0 360 628 1076 1785 0 3849 0 0Network construction 5200 195812 4345 5500 5885 6179 6488 6813 35210 7153 7511

Others 2861 1823 3545 2000 2140 2247 2359 2477 14769 2601 2731... .. _._....__..__..__. .__..__. _..................._. _____........____.__............. _......................

TOTAL CAPITAL EXPENDITURES 31626 223283 42332 28740 47547 51622 63552 68836 302629 74784 64867CHANGE IN WORKING CAPITAL EXCEPT C 51 9 1048 -774 206 304 47 -81 751 60 131

TOTAL 31677 223292 43380 27966 47753 51926 63599 68756 303380 74844 64998CASH INCREASE(DECREASE) 24599 7229 -4189 2160 -8078 -789 272 1811 -8816 509 -1108

TOTAL APPLICATION OF FUNDS 56276 230521 39191 30126 39675 51137 63871 70566 294565 75353 63890£gmuamaue~zuuuuuuumuul tms_

DEBT SERVICE RATIO 21.6 16.9 13.9 7.8 6.7 6.4 5.8 5.3 6.6 5.6 5.7NET INTERNAL CONT. TO INVESTMENT 56.7X 72.9x 51.0X 74.5X 50.2X 57.42 49.02 "6.3K 52.72 49.7X 63.6%X CAPITAL EXPEND OF NET F.ASSETS 41.82 83.12 12.9X 8.82 11.62 12.82 15.92 12.6X 56.02 13.82 10.02

- 58 -KOREA

PUSAN AND TAEJON SEWERAGE PROJECT ANNEX 7PUSAN SEWERAGE SPECIAL ACCOUNT Page 3BALANCE SHEETS 1988-1998

(Mtillions of current IWI)---- Actual ----- ........................... Forecat ....................

~~~~~~~~~... . ..- ................................ ............................................................................................................ ..

At Decerber 31 1988 1989 1990 1991 ¶992 ¶993 1994 1995 1996 1997 ¶998

ASSETSFIXED ASSETSFixed assets in operation 79148 279763 347049 354549 454189 462616 471463 633359 643113 790017 1042481AcctutuLated depreciation 3480 10934 18662 27993 45963 58176 70600 85294 102271 143064 167436

.. ..... ... ................. ............................................................... ..............................

NET FIXED ASSETS IN OPERATION 75668 268829 328387 326556 408207 404439 400864 548065 540i842 646953 875044CONSTRUCTION IN PROGRESS ¶5721 38389 13435 34675 74197 ¶17393 172097 79038 ¶44068 198693 28678

....................... ............................................... .... .... ..................................... ................ ............

TOTAL FIXED ASSETS 91389 307218 341822 361231 482403 521832 572961 627103 684910 845645 90372

CURRENT ASSETSCash 4978 12207 8018 10178 2099 1310 1581 3392 3901 2793 2714Accounts receivable 2309 1971 2409 2596 3053 3699 3917 4663 5253 5748 7315Inventories 293 348 435 433 541 536 531 726 716 857 1159

................................ .................... ......................................... ......................

TOTAL CURRENT ASSETS 7580 14526 10862 13206 5692 5545 6030 8781 9870 9397 11187....... ..... .......................................................... ..... ............................

TOTAL ASSETS 98969 321744 352684 374437 488096 527377 578990 635884 694780 855043 914910

LIABILITIESCIRRENT LIABILITIESAccounts payabLe 2664 2372 1849 2807 3166 3504 3670 4691 5212 5716 7237Current portion of L/T debt 198 236 616 1605 2590 2965 3340 3715 4215 5800 S800

....... ...................... ..........................................................

TOTAL CURRENT LIABILITIES 2862 2608 2465 4412 5755 6468 7009 8406 9426 11516 13037

LONG TERN DEBT 24107 28695 43202 44274 45404 50480 58340 61065 62851 64051 66251DEFERRED LIABILITY 2318 1739 1159 579 0 0 0 0 0 0 0

......... .......... ..... ...... ................................................................ ..................... .........

TOTAI. LIABILITIES 29286 33041 4682t 49265 51160 56948 65349 69471 72277 75567 792M8...... ............ ...... .......... .. .............. ......................... ....................... ........................... ,

EQUITYAscet revaluation surplus 0 0 0 0 84382 84382 84382 84382 84382 199311 199311Retained earnings 17346 18258 30068 42881 58379 78692 100416 120885 144822 171355 206615Capitat surptus 8333 11933 12933 13933 19933 26933 41933 67423 92423 100423 113423Paid in capital 44004 258512 262857 268357 274242 280421 286909 293722 300875 308386 316273

......................... .............................................................................

TOTAL EQUITY 69683 288703 305858 325171 436936 470428 513641 566412 622502 779476 835622

TOTAL LIABILITIES AND EQWITY 98969 321744 352684 374436 488095 527377 578990 635884 694779 855042 914909

CURRENT RATIO 2.6 5.6 4.4 3.0 1.0 0.9 0.9 1.0 1.0 0.8 0.9LONG TERM DEBTS AS X OF CAPITALIZA 24.4X 8.92 12.2X 11.82 9.3X 9.62 10.1X 9.62 9.02 7.5X 7.2XDEBT/EQUITY RATIO 42.03X ¶1.44X 15.31% 15.15X 11.71X 12.117 12.72X 12.27X 11.612 9.692 9.49XDAYS ACCOUNT RECEIVABLE(NET) 41 32 33 30 30 30 30 30 30 30 30

- 59 -

KOtEA ANNEX 8PUSAN AND TAEJON SEUERAGE PROJECT Page 1TAEJON SESERAGE SPECIAL ACCUNTINCOSE STATEIENTS 198-1996(Nitliom of current WON)

-... Actual -- ............ I...........- Forecat ---------------

Year ended Decer 31 1988 1989 1990 1991 1992 1993 1994 199M 1996 1997 1998....... ........... _............................................ ................................................................................. _.......................

SEWAGE(THOUSAN0 TON/YEAR) 64345 72473 82278 97473 113056 123960 135324 146964 164945 176794 1869AVERAGE TARIFF(WON/TON) 70.98 71.43 73.08 73.08 86.82 109.76 125.S8 130.24 134.03 141.48 176.65INCREASE IN AVEtAGE TARIFF 0.64X 2.31X 0.00 18.l81X 26.41X 14.42X 3.711 2.91X 5.56X 24.862

OPERATING REVEhNlS 4567 5177 6013 7123 9616 13606 16994 19141 22107 2S012 33010

OPERATING EXPENSESPersenmeL 446 396 563 680 749 8t1 1618 1750 1893 2047 3690Electricity 205 205 275 357 382 401 842 84 928 975 2047Chmicals 31 36 50 46 49 51 108 113 119 125 262Maintenance 366 239 328 375 422 465 632 692 757 828 1348Integrated bilMing charge 0 225 268 351 436 502 576 656 773 870 966District. 0 & N 300 400 786 870 1080 1244 1426 1626 1916 2156 2393Others 18 15 35 42 47 51 101 109 118 128 230Depreciation 3671 3829 4094 4843 5440 5674 6538 7418 8793 10182 12365

IOTAL OPERATING EXPENSES 5037 5345 6399 7565 8605 9198 11840 13248 15297 17311 23300

OPERATING INCOME -470 -168 -386 -442 1211 4408 5154 S893 6810 7701 9710

Less:lnterest expenses 283 418 416 375 337 326 1789 2027 2305 2424 2267Add :Other incaome 158 189 260 283 303 318 334 350 368 386 406

Forelgn exchange gainCLoss) 508 379 -545 35 0 0 0 0 0 0 0_........... .... ................ _................._........

NET INCOME -87 -18 -1087 .498 1176 4400 3699 4216 4872 5663 784

WORKING RATIO 29.91X 29.28X 38.33X 38.21X 32.24X 25.90M 31.202 30.46X 29.422 28.502 33.132AVERAGE NET FIXED ASSETS IN OPERATION 97900 101134 111853 131052 144127 146934 171809 196420 226994 256688 323670RATE OF RETURN -0.482 -0.172 -0.35X -0.34% 0.84X 3.00% 3.00% 3.00X 3.002 3.00X 3.00XNote: Due to rounding, the lest digit in totals my appear different than the sum of coluts.

- 60 -

KOREA ANNEX 8PUAN AND TAEJON SEiRAGE PROJECT Page 2TAEJON 5EURACE SPECIAL ACCOUT

URCE AND APPLICATION OF FUNDS 196M-1M(tilliomn of current WON)

- A Actuat ------- --..--- .....-.- Forecast ....-----.--.--.. " 9 " ts _ry.

Year ed December 31 1908 1989 1990 1991 1992 1993 199 19-94 1995 1996 1997

INTERNAL CASH GENEtRATION 501CES OF FUNDSNot incme before interest expwe 196 400 -671 *124 1513 4726 5488 10932 6243 7172 MT87Daprecatiton 3671 3829 4094 4843 40 5674 6538 26589 7418 8793 10182Foreign exchae loes(galn) -508 *379 545 36 0 0 0 509 0 0 0

........................ ................................................. 9............................... .................. .... ........ ........

GR05S INTERNAL CASH GENEIRATION 3359 3850 36 46 6954 10400 12026 38031 13661 15971 18269............................................ ...................................................................................................

DEBT SERVICEAmortization 501 1679 637 687 687 812 1062 3884 1437 1437 1423Interest chargd to operationr 283 418 416 375 337 326 1769 3243 2027 2305 2424

......... ............... .. .. ...................... ........................................... .............................. ..........

TOTAL DEBT SERVICE 784 2098 1053 1061 1024 1138 2851 7127 3464 3742 3846"****............. - .. ^.......... .. . .**o................. o."".*. ............................ v.**.......... *

NET INTERNAL CASH GENERATION 2576 1752 2915 3622 5930 9262 9174 30903 10198 12229 14423CAPITAL CONTRIBUTIONCentrat Governent-EXPO 93 0 0 1000 1300 1500 0 0 3800 0 0 0City Genral Account 1198 2954 3388 2800 2000 2000 683 10871 3500 11000 4000Korean Land Developmnt Corporatfon 0 0 0 0 0 0 4928 4928 14212 20900 12540TGA and Developrs-Network 4996 3288 13580 5436 5816 6107 6412 37351 7070 7423 7794

................................... ................................................................. ...........................

TOTAL CAPItAL CONTRIBUTIONS 6194 6242 17968 9536 9316 8107 12023 56950 24782 39323 24334............. ...................................... .................................................................

LOANSRegional Development Fumd 1500 0 1000 2000 3000 0 2000 8000 4000 5500 0Other local lons 0 269 0 0 0 0 0 0 0 0 0OECF 118 2482 9 0 0 0 0 9 0 0 0IBRD 0 0 0 0 1440 10800 2160 14400 0 0 0

...........................................................................................

TOTAL LOANS 1618 2751 1009 2000 4440 10800 4160 22409 4000 5500 0...........................................................................................

TOTAL SOURCES OF FUNDS 10388 10745 21892 15158 19686 28169 25358 110263 38979 57052 38757u _ _ u a uu u guuuaguazuuuuuuuuuuauMNxNu.. Umuuuuuuusu

CAPITAL EXPENDITURES APPLICATION OF FUNDSSTP phas 1 3868 4948 0 0 0 0 0 0 0 0 0Proposd project(phese 2) 0 0 6062 6963 13711 10091 5000 41837 0 0 0STP phase 3 a 0 0 0 0 0 12300 12300 32300 47500 28500Interest during conatruction 0 0 0 132 384 943 0 1459 0 0 0NOtwork construction 4996 3288 13580 5436 5816 6107 6412 37351 707W 7423 7794Others 1735 2489 1611 2191 234 462 2585 11193 2714 2850 2992

TOTL CAPITAL EXPENDITURES 10599 10725 21253 14722 22266 19602 26297 104140 42083 57773 39286CHANGES IN WORKING CAPITAL EXCEPT CASH 51 37 5 79 274 398 298 1054 210 309 288

TOTAL 10650 10762 21258 14801 22540 20001 26594 105194 42293 S8082 39574CASH INCREASE(DECREASE) -263 -17 634 357 -2853 8168 -1237 5069 -3314 -1030 -817

...........................................................................................

TOTAL APPLICATION OF FUNDS 10388 10745 21892 15158 19 28169 25358 110263 38979 57052 38757

DEST SERVICE RATIO 4.3 1.8 3.8 4.4 6.8 9.1 4.2 5.3 3.9 4.3 4.7NET INTERNAL CONT. TO INESTNENT 24.32 16.32 13.72 24.6X 26.6X 47.2X 34.92 29.7X 23.7r 20.62 36.02X CAPITAL EXPEND. OF NET F.ASSETS 10.82 10.3X 17.82 10.32 15.32 13.22 13.52 52.72 21.32 22.5X 15.3X

- 61 -

KOREA ANNEX 8PUSAN AND TAEJON SEIERAGE PROJECT Page 3TAEJON SEIERAGE SPECIAL ACCOWiTBALANCE SHEETS 19B8-1996(Nilltins of currens WONl)

A ctuat .... Forecast --------------...... ..., , ........ ....................................... ..............................................................................................

At Decemer 31 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1M

ASSETS

FIXED ASSETSFixed assets fn operation 12694 137291 156355 191031 199192 207760 261153 270936 359781 370567 516292Accuwlated depreciation 29094 32923 37017 U264 53705 59378 65916 73334 103395 113577 125942

NET FIXED ASSETS IN OPERATION 97900 104368 119338 1. '767 145487 148382 19N237 197602 256386 256990 390351CONSTRUCTION IN PItOGRESS 3445 3873 6062 13157 27262 38296 11200 43500 91000 119500 0

. . .. . . ...... . . . .. . ;. .................... .. . ............ .. . ..... _. .. . ....................

TOTAL FIXED ASSETS 101345 108241 125400 155924 172749 186678 206437 241102 347386 376490 390351

CURRENT ASSETScash 2147 2133 2767 3124 271 8439 7202 3888 2858 2041 7176Accounts receivable 596 638 688 781 1076 1491 1862 2098 2423 2741 3618Inventories 27 25 36 43 44 45 59 60 77 78 118

.... ..... ........... ..................... ......... ... ... ..... .... ....................

TOlAL CURRENT ASSETS 2r70 2796 3491 3948 1390 9975 9123 6045 5358 4860 10912

TOTAL ASSETS 104115 111037 128891 159872 174139 196652 215560 247147 3527"4 381350 401262

LIABILITIES

CURRENT LIABILITIES

Accounts payable 55 58 114 135 157 174 262 288 322 353 541Current portion of L/T debt 1679 637 687 687 812 1062 1437 1437 1423 2864 2864

.. --........... .......................... ... .........................

TOTAL CURRENT LIABILITIES 1734 695 801 821 968 1236 1699 1725 1744 3216 3405

LONG TERM DEBT 4829 6567 7436 8711 12339 22077 24800 27364 31441 28s77 25713................... ...................................... -.-. @. . ....... .. ..... ...... ..... ....... ........ .....

TOTAL LIABILITIES 6564 7262 8236 9532 13307 23313 26499 29089 33185 31793 29118

EQUIITYAsset revaluation surplus 0 0 0 20645 20645 20645 205 20645 7795o 77950 77950Retained "mrnings 82 64 .1024 -1522 *346 4054 M3 11969 16842 22505 30353Capital surpLus 23657 29899 47867 51967 55s467 577 63078 80907 112690 129230 135786Paid in capitaL 73813 73813 73813 79249 85065 91172 97584 104654 112077 119871 128055

...........................................................................................

TOTAL EQWITY 97552 103776 120656 150339 160832 173339 189060 218058 319558 349556 372144

TOTAL LIABILITIES AND EWtITY 104116 111037 128893 159871 174139 196652 215560 247147 3527r 381349 401262

CURRENT RATIO 1.6 4.0 4.4 4.8 1.4 8.1 5.4 3.5 3.1 1.5 3.2LONG TERN DEBT AS X OF CAPITALIZATION 4.7X 6.01 5.8s 5.52 7.1X 11.3X 11.62 11.12 9.0X 7.6X 6.52

DEBT/EQUITY RATIO 6.73S 7.00X 6.83x 6.34X 8.272 13.45s 14.022 13.342 10.382 9.102 7.822

DAYS ACCOAIT RECEIVABLECNET) 48 45 42 40 40 40 40 40 40 40 40

- 62 -ANNEX 9

Page 1

KOREA

PUSAN AND TAEJON SEWERAGE PROJECT

Assumptions for Financial Projections

1. The financial projections were prepared by the Bank appraisal mission withthe assistance of a local firm of consultants. The projections are in currentWon. The following assumptions apply to both PSA and TSA except where stated.

Income Statements

2. Revenueos Revenues have been adjusted to the level required to produce aminimum of a 5% rate of return on net fixed asseto in operation from 1993 to 1998in PSA, and 3% in TSA. Assumptions were made that POO and TCG would increasetariffs by 15% and 56% on September 1, 1992, giving average annual increases for1992 of 5t and 18.81%, respectively. Estimates of sewage volumes were based onprojected water consumption.

3. Qerat&on ExDensess Projected 1991 expenses are based on budgeted figures.Inflation has been added to expenses at 5% per annum for 1992 and thereafter.Personnel, electricity, chemicals, and maintenance expenses cover the treatmentplants and the administration expenses of PC4 and ToG sewerage divisions.operation and maintenance expenses incurred at the district level relate to thesewerage network and are shown separately under the heading "District 0 & M".

4. Personne1j The projections includ e stimated additional staffingrequirements when the treatment plants are placed ln service, as well as a 3%annual increase.

5. Electricity and Chemicalos Projected expenses are based on increases in thevolumes of treated sewage.

6. Intearated Billinc Charge: Tne projected charges are lncreased inproportlon to the lncrease in sewage quantities.

7. Waintenanco and District O&M: Expenses are projected to increase inproportion to additlons to flxed assets in service.

S. Da2g81Ltjon3 Depreciation has been calculated at an average rate of 2.66%for Pusan, and 2.79% for Taejon based on average actual rates for 1990.

Balanc- Sheets

9. Fixed Assets: These are assumed to be revalued every five years inaccordance wlth Korean law covering Special Accounts. Revaluation rates arebased on actual and projected local inflatlon. A revaluation of PSA fixed assetsls assumed at the end of 1991 and 1997, and at the end of 1990 and 1995 for TSA.

- 63 -ANNEX 9Page 2

10. Accountg Receivable: Based on past experience, these have been assumed toequal 30 days for P8A, and 40 days for TSA.

11. XElveaoriess These have been assumed to increase in proportion toadditional net fixed assets in service.

12. Accounts Pavable: Historical figures have been projected to increase inline with operating expenses.

13. Capital SurDlus: Additions to capital surplus consist of capitalcontributions as shown in the source and application of funds.

14. Log2rs The cities Regional Development Fund is financed by the sale ofcompulsory bonds. The funds are used for development projects administered byother special accounts. Finance from the Regional Development Funds would beprovided over 10 years including a two year grace period at an 8% interest rate.

15. The US$40 million (Won 28.8 billion) Bank loan would be on-lent by theGovernment in equal amounts to PCG and TCG over 15 years, including 5 yearsgrace, at the Bank interest rate plus 0.05% p.a. handling charge. The on-lendinginterest rate has been assumed at 7.75%.

16. Source and Anolication of Funds: Other capital contributions relate toactual and estimated future network construction contributed from city funds anddevelopers. (KLDC agreed contribution for Taejon treatment plant, phase 3,represents equivalent expenditures for a separate treatment plant which KLDCshould normally construct in connection wi:h its land developments).

- 64 -ANNEX 10

Page 1

PUSAN AND TAEJON SEWERAGE PROJECT

Environmental Imp-act Assessment

General

1. Korea has very advanced environmental legislation, endorsed in August1990, consisting of an Environmental Policy Basic Law and complemented byseparate regulations for air, noise and vibrations, water quality, hazardouschemicals, and settlement of environmental disputes. The regulations areaccompanied by a series of standards to be observed by all involved bodies,including municipalities. Failure to comply with the regulations results inheavy penalties and even imprisonment, with punishment directed at both theresponsible individuals and institutions. The rulings of the Ministry ofEnvironment (MOR) are therefore taken very seriously by the cities. Pressurebeing exerted by city residents to protect and improve the urban environment isalso strongly influencing official decisions and leading to improved cityenvironments.

Pusan Sewae Trgeatment Plant

2. Assessment. An Environmental Impact Assessment (zrA) of projectactivities in Pusan was prepared by the city administration, assisted byconsultants (Samwha Engineering) in September 1987. The report assessed thepotential environmental impacts of the construction and operation of the Yonghosewage treatment plant (STP), which would have a maximum daily capacity of560,000 m3 in 2001.

3. The EIA differentiates between impacts occurring during constructionof the plant, which are similar at all construction sites and dealt with by MOE'sseparate standard regulations, and impacts occurring during the operation of thetreatment plant. Those related to operation of the treatment plant are summarizedin Table A-10.1.

- 65 -ANNEX 10

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Table A-10.1: Pusan - Summary of EIA Report

Identified Environmental ImDactg Procosed Mitigation MeasMres

a) Potential problems with settlement Special foundation recommended.due to unsuitable soils for foundationof structures.

b) Air pollution during operation No epecial measures required,of the plant. amounts are insignificant.

c) Odor from generated gases and noise Estimated to remain within Koreanfrom operation of equipment. standards. Greenbelt 30 m wide

around the plant to be grown as aprotection against possible increasein odor and noise levels. 1/

d) Disposal of the sludge generated The sludge will be disposed of inin the plant (31 t/d). the city'e sanitary landfill.

e) Improvement of seaweed production No verifying details provided.harvested at a farm in Suyeong Bay.

f) Improvement of water quality inPusan Bay to Class II (harbor area).

g) Improvement of water quality inSuysong Bay (receiving effluent fromYongho treatment plant).

1/ Proper operation of the plant should make it virtually odor-free.

4. The improvement ot water quality as shown in (f) and (g) above isbased on the following: the water quality in the Bays before (1986) and after theproject (2001) was projected on the basis of mathematical modelling. The resultsshowed substantial improvements of water quality in coastal water under variousflows in the rivers and combinations of tidal changes. For example:

Year ti 00 ear 1962001----COD mg/l---- ----COD mg/l---

Inner area 8.0 4.0 Inner area 3.0 1.5Outer area 1.0 1.0 Outer area 1.5 1.0

Notes COD - Chemical Oxygen Demand (used in saline waters).

5. Observations of the current water quality in the Suyeong sub-baywhich receives discharges from several small rivers indicated relatively highlevels of pollution (7-14 mg/l COD) as compared to the outer areas (COD less than2 mg/l). The report, therefore, recommended that the plant's effluent should bedischarged through an outfall into the Day near Tongsaengmal Point to avoidfurther pollution of the sub-bay. The outfall should be constructed aftercompletion of the reclamation of the sub-bay, which is propooed in the Pusan CityDevelopment Master Plan.

6. Required Mitiaatina Actions. MOE approved the city's EIA report inOctober 1988, after receiving several additional explanations, and set out thefollowing actions to be implemented by the city:

(a) prevention of soil erosion and deposition of sediment, and cleaningof vehicles transporting excavation materials during construction;

- 66 - ANNEX 10

Page 3

(b) foundation of water retaining structures on special piles;

(c) covering over water retaining structures and installation ofdeodorizing filters for sludge operations;

(d) planting of trees within a 30 m wide greenbelt around the plant;

(a) consideration given to using dewatered sludge for agriculture orcomposting;

(f) protection of receiving waters by using sanitary sewers, maintenanceof adequate planu performance, and pro-treatment of industrialeffluent suspected to be harmful to plant operation;

(gq discharging of treated effluent into the outer bay near TongsaengmalPoint, possibly through a diffuser; and

(h) preparation and implementation of an "after-project" environmentalmanagement plan to monitor ecological and environmental changesduring operations, including the impact on the nearby seaweedcultivation.

7. While MOE's approval applies to the final stage of the Yonghotreatment plant, expected to be completed in 2001, it implies that oome of thespecial mitigating actions should be used for the first phase, even when notslecifically identified. The approval does not specify any special requirementsregarding the construction or operation of interceptors or the pumping stationfor which the design proposals are environmentaly sound.

8. Status of Mitioatino Actions. The city has accepted fullresponsibility for mitigating actions and is complying or will comply with allof MOE's environmental requirements for construction, operation and monitoringof the first phase of the Yoigho plant. In this connection, it intends to:

(a) carry out a study of the use of dewatered sludge for agriculture orcomposting, prior to completion of the plant's final phase;

(b) study separation of the sewerage system in conjunction with updatingthe Sewerage Master Plan, which is scheduled to start before end-1991; the course of action will be decided once the study resultsare available;

(c) eliminate the possibility of toxic contamination of sewage fromuncontrolled industrial discharges due mainly to accidents byrelocating industrial establishments now in residential areas toseparate industrial estates. This is expected to be completed in1996. Industries with similar types of wastes are being groupedtogether and provided with pro-treatment to comply with MOE'sregulations for discharges into public sewers, with final(secondary) treatment at the existing plant at Janglim;

(d) discharge plant effluent into Suyeong Bay near Tongsaengmal Pointand, by the year 2001, carry out reclamation works in the sub-bay.A conduit will be constructed for the Yongho River, which is therecipient of Yongho treatment plant effluent, up to TongeaengmalPoint, where the reclamation works will end. The ongoing sub-bayreclamation has reduced the sub-bay area to less than half over thepast 15 years. The reclaimed land is being utilized for extension ofneighboring chemical-port facilities.

In addition, most interceptors passing through heavilv traveled roads andintersections will be constructed by tunneling to avoid traffic disturbances. Theremaining parts will be constructed in the river flood reserve, with only a minorimpact on the population during construction. The transport of excavated soils

- 67 -ANNEX 10

Page 4

and construction materials will be concentrated outside of peak traffic hours.The pumping station will be situat-d underground and its ventilation providedwith an effective deodorization filter. The procurement of land for these worksinvolves no resettlement or demolition of houses.

9. Reauirementg for Treatment Performance MOE'e standards require thateffluent from STPe should not exceed the following key parameters:

Parameter Up to 12/31/1995 From 1/1/1996

BODS mg/i 30 20SS mg/l 70 20Total Nitrogen (N) -- 60Total Phosphorus (P) -- 8

Note: BODS - Biochemical Oxygjen Demand (5-days laboratory test)SS - Suspended Solids

10. The new values to be appliee from 1996 may in general create somedifficulties for the cities since the operational experience at existing seweragetreatment plants in Korea shows that BODS and S in the final effluent arenormally above 20 mg/l. They may also require greater efforts to comply withrequirements for total N and P.

11. Environmental Imoact on Receivina Water. In 1996, about 340,000 m3/dwith average concentrations of 127 mg/l of BODS and 119 mg/l of S5 are expectedto be treated at the Yongho plant and discharged into Suyeong Bayl of the totaltreated, about 200,000 m3/d will originate in the catchment of the Tongchon River(draining into the harbor) and 140,000 m3/d in the western coastal catchment ofSuyeong Bay. By quantity, this will represent a load of 43.2 t/d of SODS and 40.5t/d of 8S, of which 25.4 t/d of SODS and 23.8 t/d of 5S will originate in theTongchon River catchment and 17.8 t/d of SODS and 16.7 t/d of SS in the Suyeongarea. The Yongho plant will remove about 36.4 t/d of BODS and 33.7 t/d of SS, andthe residual pollution of the Suyeong Bay will be equal to about 6.8 t/d of SODSand 6.8 t/d of S8. The summary review of the Yongho Plant's impact on removingthe generated pollution is shown in Table A-10.2

- 68 -ANMNX 10Page 5

Table A-10.2: Puuan - Impact of the Yonaho Treatment Plant

taratr Puan Day Suyono Say Trll

Generated sewago '000 3/d 200.0 140.0 340.0

Generated pollution

BOD5 t/d 25.4 17.8 43.2SS t/d 23.8 16.7 40.5

Pollution removedin Yongho plant

80D5 t/d 21.4 15.0 36.488 t/d 19.8 13.9 33.7

Residual pollutionleaving Yongho plant

BODS t/d 0.0/l/ 6.8 6.8SS t/d 0.0/1/ 6.8 6.8

/,l/ Effluent from Yongho Plant will be discharged in Suyeong Bay.

12. augong SA. Suyeong Bay in scenically attractive and is mainly usedfor recreational activities. A small area is also used for seaweed cultivation.In 1990, on the basis of regular monitoring, the Bay was identified as havingwater quality of Claus It (COD less than 2 mg/l, coliform bacteria less than1,000 M4PN/l00 ml). The occurrence of "red tides" causing serious environmentaldamage has never been observed in the Say.

13. Suyeong sub-bay is protected from sea currents, and the dispersionof pollution during diurnal tides is limited. Current discharges of untreatedwastewater from three minor catchments (Namohon, Taeyeonchon, and Yonghochon)have about 17.8 t/d of BOD5 and 13.9 t/d of 88, resulting in relatively highpollution as compared with the rest of the Say. After completion of the project,the current discharge will be eliminated and collected by interceptors. Sub-baypollution will be limited to the residual load from the Yongho treatmeat plant,estimated at 6.8 t/d of BODS, or about 11.0 t/d of BOD5 le than at present.Such a roduction (about 62%) will represent a substantial improvement comparedto the existing situation.

Pusan Day

14. The Pusan Bay is mainly used as an international harbor. Portfacilities handle about 95% of Korea's container transport and slightly less thanhalf of its other sea transport. Observations of water quality in the TongchonRiver, near its opening into Pusan Bay, have indicated values in the ranges of60 mg/l of BOD5 in 1987 to 78 mg/l of SODS in 1989, with higher concentrationsduring the dry season. Water quality data for Pusan Bay in 1990 Indicated heavypollution in the upper part of the inner bay (harbor), with COD ranging from 2mg/l to 26 mg/I and coliform more than 70,000 MPN/100 ml, depending on the tidein the harbor and precipitation in the catchment. After completion of theproject, pollution in Pusan Bay will be limited to occasional discharges ofwastewater from storm water overflows. All other wastewater will flow into theYongho plant, and its residual pollution will be discharged into Suyeong Bay. Theproject would therefore substantially contribute to improving water quality inthe inner area of Pusan Bay and In Pusan harbor.

iS. A water quality monitoring and evaluation program in Suyeong Bay willbe establiehed under the project to study the impact of discharges from the

69 -ANNEX 10

Page 6

Yongho treatment plant on water quality in the sub-bay and in the Bay. Theobjective of the program is to identify the need for special dispersion outletsafter completion of the final stage of the plant. The information obtained fromthe study will also be an important input for the successful and effective futuremanagement of pollution control measures at the plant.

16. gonitorina and Institutional Capabilities. The city has highlyqualified personnel, supported by laboratory and other equipment, capabl, ofconducting reliable monitoring and research programs. The performance monitoringof the two existing STPs is satisfactory. The city also monitors water qualityalong Kwanganri Beach during the summer. The Health and Environment ResearchInstitute monitors water quality in main streams, rivers, and coastal areas andcooperates on several research projects with area universities and researchinstitutes such as the National Environmental Research Institute (NERI) of MOEand the Korean Institute of Construction Technology (KICT).

17. MOE's Regional Office in Pusan if also equipped with satisfactorylaboratories and qualified personnel. During construction and operation of theSTP, it will periodically monitor compliance with the EIA's standards fordischarge, as well as the environmental quality of the area. The city and MOE'sRegional Office have been effectively monitoring the compliance of industrialestablishments with the effluent standards.

Taeion Sewage Treatment Plant

18. Assessment. An EIA for the plant was prepared by the city with theaesistance of consultants (Hyundai Engineering) in December 1989. The reportassessed the potential environmental impacts related to construction andoperation of the treatment plant at Wonchon Dong which will be expanded by150,000 m3/d to a maximum daily capacity of 300,000 m3 in 1993. The reportstates that while this expansion phase will substantially contribute to improvingthe quality of bota the inner city and the receiving rivers, it is only thesecond of four phases proposed to treat all sewage generated in Taejon City. Theremaining two phases are planned to be completed in the year 2001.

19. The EIA differentiates between impacts occurring during constructionof the plant, which are similar at all construction sites and dealt with by OE'sseparate standard regulations, and impacts occurring during operation of thetreatment plant. Those related to operation of the plant are summarized in TableA-10.3.

Table A-10.3: Taeion - Summary of EIA Report

Identified Environmental Imoacts proo2sed Mitiaation Measures

a) Air pollution during operation No special measures required,of the plant. amounts are insignificant.

b) Odor from generated gases and noise Estimated parameters to remainfrom operation of equipment. within Korean standards. Greenbelt

30 m wide around the plant as aprotection against possible '-ncreasein odor and noise levels. 1/

c) Disposal of the sludge generated The sludge will be disposed of inin the plant (29 t/d). the city's sanitary landfill.

d) Improvement of water quality inreceiving Rapchon River.

1/ Proper operation of the plant should make it virtually odor-free.

- 70 - ANNEX 10Page 7

20. The status of water quality in receiving waters of the Kapchon Riverbefore (1986) and after the project (1994) were estimated in the report on thebasis of mathematical modelling as follows:

Gampling Point Year: 1i98 1L89 1 124in K_DchQn River mg/l: DODS DO BOD5 DO

6.0 km upstream 10.4 5.9 5.7 6.5

3.5 km upstream 12.0 5.1 6.6 5.8

At STP discharge 17.3 4.6 9.5 5.6

4.6 km downstream 14.9 4.6 8.6 5.6

Note: DO - Dissolved Oxygen

21. R2cuirements for Mitigating Actions. MOZ approved the city's EIAreport in March 1990, and set out the following actions to be implemented by thecity:

(a) prevention of soil erosion and deposition of sediment, and cleaningof vehicles transporting excavation materials during construction;

(b) proper foundations for water retaining structures;

(c) installation of deodorizing filters for sludge operations;

(d) planting of trees within a 30-m wide greenbelt around the plant;

(e) securing of a landfill site for sludge disposal;

(f) prevention of toxic substances from entering the treatment plant;

(g) implementation of an ecological study for the Kapchon River afterthe start of plant operations;

(h) securing of a site for possible tertiary treatment in case the needarises; and

(i) preparation and implementation of an "after-project" environmentalmanagement plan to monitor ecological and environmental changesduring operation of the treatment plant.

22. Status of Mitiaatino Actions. The city has accepted fullresponsibility for mitigating actions and is complying or will comply with allof OE's environmental requirements for the treatment plant, which are includedeither in the designs of facilities or in the contract for construction. The sitefor expansion of the plant if tertiary treatment is needed has been secured inthe city land-use plan.

23. A site for a new sanitary landfill with a capacity for about 15 to20 years has been identified near the proposed expansion of the STP at Tae Dongand the feasibility study is being prepared. The new oanitary landfill will startoperations from 1993, and it is expected that surplus dewatered sludge from theplant, which would not be disposed of otherwise, would be disposed in the newlandfill. At present, all dewatered sludge is given to a private landscapingcompany free of charge. There are indications that the established procedure willcontinue.

24. The operation of existing and construction of new interceptorspresent no major environmental problem. The conduits are located within floodreserves along the rivers and do not involve disturbance of traffic or demolitionof any property.

- 71 -ANNEX 10Page 8

25. Construetion of the treatment plant requires compensation for 17plot. and houses at the site. At appraieal, six families were compensated andleft the site. Negotiations are ongoing with the remaining eleven families, ofwhom six would be compensated for land plus houses and five for houses only(since the land owners were compensated earlier). The conditions and proceduresused for compensation and resettlement of now compensated families were reviewedby the Bank during project appraisal, found satisfactory and in accordance withBank policies for involuntary resettlement. The past and ongoing negotiationsare monitored by the Vice-Mayor to ensure that the achieved agreement issatisfactory to all parties. The Bank will be informed of the outcome ofnegotiations.

operation of Facilities

26. In 1990, the annual average SOD5 and SB at the entry point in theexisting STP (first phaas of Wonchon Dong) were 105 mg/l and 97 mg/l,respectively. The concentration increased from January 1991, when the plantstarted to receive the city's nightsoils BOD5 ranged from 111 mg/l to 188 mg/land SS from 99 mg/l to 184 mg/l. The effluent BOD5 and 8S during this period wereboth less than 14 mg/l. The treatment efficiency of the existing STP isconsidered adequate and satisfactory.

Environmental Impact on Receiving Haters

27. The project is designed to have a positive impact on both the innercity rivers upstream of the treatment plant and on the recipient watersdownstream of the plant. The monitoring of water quality in the inner city riversstarted only in 1990 when interceptors constructed under the first phase of theproject were in place. Since these represent less than 20% of the total lengthof conduits required to collect all wastewater along the rivers, the volume ofwastewater polluting the rivers is still considerable, resulting inconcentrations of BODS in 1990 of 20 mg/l to 40 mg/l. These concentrations willgradually be reduced with the ongoing construction of intercepting conduits. Anoticeable positive impact, however, is expected only after periods of heavyrains when floods wash away the organic sediments accumulated earlier in theriver beds.

28. In 1994, about 300,000 m3/d of water with an average concentrationof 110 mg/l of SODS and 100 mg/l of SS are expected to be treated at the WonchonDong plant and discharged after treatment into the Kapchon Riv .. ThjLs isequivalent to a load of 33 t/d of BODS and 30 t/d of SS. The plant will removeabout 27 t/d of BOD5 and 24 t/d of SS which would otherwise pollute the city'sinner rivers as well as the Kapchon River downstream of the plant. In theapproximately 15 km stretch between the Wonchon Dong plant and the confluencewith the Kum River, the Kapchon River water is currently not used for any purposeexcept occasional irrigation of small farms. The area will, however, be developedfor Taejon's new high-tech industrial complex to be completed in 1995. Inexpectation of this development, MOE has recently reclassified the Rapchon Riverto Clbas IV (SODS less than 8 mg/l) which could be achieved only after theinterceptors proposed for third phase of treatment expansion are constructed. Asummary review of the Wonchon Dong plant's impact on removing pollution is shownin Table A-10.4.

- 72 -ANNEX 10Page 9

Table A-10.4* Tacion - ZaDAct of the Wonchon Dona Plant

Paraw t-r Phase_ I iliUUL 11 Total

Generated *ewag- '000 m3/d 150.0 150.0 300.0

Generated pollution

SODS t/d 16.5 16.5 33.088 t/d 15.0 15.0 30.0

Pollution removedat Wonchon plant

BOD5 t/d 13.5 13.5 27.088 t/d 12.0 12.0 24.0

Residual pollutionleaving Wonchon plant

BODS t/d 3.0 3.0 6.0S8 t/d 3.0 3.0 6.0

29. Nonitorina and Institutional Caoabilities. The existing STP is wellequipped with highly qualified personnel and adequate equipment. The city and theRegional Office of MO0 in Taejon also monitor industrLal establishments withregard to their compliance wLth the standards for induatrial effluent dischargedinto public sewers.

Refer=nce Documents

30. The EIA reports, MOE approvals and environmental quality anddischarge standards are availabl& in the project file.

- 73 -KOREA ANNEX 11

PUSA AND TAEJON SEWERAGE PROJECT Page IOUSAN SEWERAGE SPECIAL ACCWUNTNINITORING INDICATORSOI988-1998)

...... Actual ------- -----..--.------. - Forecaut .

......................................................................................................................................................................... o*

Year erded D.cwer 31 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998.... .... ,...... ............ . . .. . .. .. . ....... .... ... .. .... . .. ..... ..... ......

1.The following indicators would be fncluded in prog"s reports to the Bnk.

2.Physical PartersSewage alled 100063/Year 262791 291135 333834 388161 43472 4350s 501402 537m 575G05 610696 645688# Sewr Connection. 274223 283816 287363 294224 301249 308441 315806 323346 331066 338970 347063

TotaL Length of Combined Sewr km 5055 5237 5420 5602 5639 S677 5715 5752 5790 5828 5867Total Length of Sonitary Sewr km 52 78 104 130 250 370 490 510 730 875 1020Total Treatment Capacity 10003/d 230 230 530 530 530 530 530 800 800 800 800

3.1anagement of Operating Agencies# :sys Accounts Receivable 41 32 33 30 30 30 30 30 30 30 30X Receivables on Billing 11.26X 8.71X 8.99M 8.33K 8.33K 8.33K 8.33X 8.33X 8.33X 8.33X 8.33X* of Eeployee 417 417 500 500 SOO 500 SOO 516 516 516 516ElpLoyee,/1000 Coniectfons 1.52 1.47 1.74 1.70 1.66 1.62 1.58 1.60 1.56 1.52 1.49

4.Financial parmtersAverage Sewrage Tariff Won/m3 78.03 77.72 80.30 80.25 84.26 93.75 93.75 104.06 109.62 112.94 135.94Working Relto 13.25K 15.=3X 18.571 31.97K 30.021 26.77 27.21X 31.35K 29.88K 29.31X 28.89KRate of Return 9.49X 6.83S 4.72K 3.62K 4.05X 5.U0O 5.41X 5.00K 5.00K 5.00 5.00KContribution to Invest mnt 56.74K 72.94X 51.3K 7.46K 50.19 57.37 48.99 46.35K 52.71K 49.661 63.59K

Debt Service Ratio 21.6 16.9 13.9 7.8 6.7 6.4 5.8 5.3 6.6 5.6 5.7Debt/Equity Ratio 42.03K 11.44X 15.31X 15.15X 11.7112.11X 12.72 12.27X 11.61K 9.69K 9.49K

S.Performance of Existing Treatment Plants

Pusan-suyeong 1,000 A3/d 290 290 290 290 290 290 290 2 290 290 290Pusa-janglim 1,000 /d 375 375 375 375 375 375 375 375 375Pusan-Yongho 1,000 OOOd 340 340 340 340

6.Performenoe of Yongho Treatment Plant

Biochemical Oxygen Demand 8005 outlet mg/I 30 20 20 20

Suspended Solids SS outlet mg/i 70 20 20 20

Total Phosphorus P outlet m9/I 8 8 8Total Nitrogen N outlet mg/I 60 60 60

- 74 -KOREA ANNEX 11

PUSAN AND TAEJON SEWERAGE PROJECT Page 2TAEJON SEWERAGE SPECIAL ACCOUMTNUITORING INDICATORS

...... Actua l- Forecast .....................

Year encWI De'ewber 31 1988 1989 1990 1991 1992 193 1994 1995 1996 1997 1998. .. .... .... ........... ..................... .. .. ... .... .... ...... .......... ......... ..... ........ .....

1.The foltowing indicators would be included in progess reports to the Bonk.

2.Physical ParemtersSewage Sil.ed 1000/Year 64345 72473 82278 97473 113056 123960 135324 146964 164945 176794 186869# Sewer Connectinn 82312 85969 90407 96763 103566 110847 118640 126981 135908 145463 155690Total Length of Combined Sawer km 1175 1250 1350 1450 1496 1542 1588 1635 1681 1815 1949Total Length of Sanitary Sewer km 65 74 92 110 161 212 263 315 366 446 526Total Treatment Capacity 100P3/d 150 150 150 150 150 150 300 300 300 300 600

3.Management of Operating Agencies# Days Accounts Receivable 48 45 42 40 40 40 40 40 40 40 40X Receivables on Silling 13.05X 12.32X 11.44 10.962 10.962 10.962 10.962 10.96X 10.96X 10.96X 10.962# of Enployees 125 125 125 125 125 125 180 180 180 180 260Employees/1000 Conwections 1.52 1.45 1.38 1.29 1.21 1.13 1.52 1.42 1.32 1.24 1.67

4FSinancial parietersAverage Sewerage Tariff Won/iu 70.98 71.43 73.08 73.08 86.82 109.76 125.58 130.24 134.03 141.48 176.65Working Ratio 29.91X 29.282 38.33X 38.21X 32.24 25.90 31.20 30.46X 29.42X 28.502 33.13XRate of Return -0.48X -0.172 -0.35X -0.34X 0.84K 3.00X 3.002 3.00X 3.00X 3.002 3.002Contribution to Investment 24.302 16.342 13.722 24.602 26.632 47.252 34.8f& 29.682 23.732 20.632 35.982Debt Service Ratio 4.29 1.84 3.77 4.41 6.79 9.14 4.22 5.34 3.94 4.27 4.75Debt/Equity Ratio 6.73n 7.002 6.83X 6.342 8.272 13.45X 14.022 13.342 10.38X 9.10X 7.822

S.Performance of Existing Treatment PlantsTaejon-Wonchon Dong I 1000n3/d 150 150 150 150 150 150 150 150 150 150 150Taejon-Wonchon Dong It 10000/d ISO 150 150 150 ISOTaejon-Tee Dong 1000m3/d 300

6. Performance of Wonchon Dong I & It Treatment Plants

Biochemical Oxygen Demand f005 outlet ms/1 30 30 30 30 30 30 20 20 20Suspended Solids SS outlet m/j1 70 70 70 70 70 70 20 20 20Total Phosphorus P outLet ao/1 8 8 8Total Nitrogen N outlet ng/1 60 60 60

- 75 -

ANNEX 12

KOREAPUSAN AND TAEJON SEWERAGE PRWOJECT

CALCULATION OF FINACIAL RATE OF RETURNSUPPORTING DATA

Pusan Taejon

Investmnt Coat excluding Mon WonPrice Contingo nies nd Texes filion Million

. .. ........... ................. ... .. _...

Treatwent Plant

Civil Works 39096 7534Equipmmnt 20567 17308

Interceptor , Pimping Station

Civil Works 34539 4246Equipent 1973 0

Project Suport TA

Construction Supervision 483 664, ....... ........

Total Investment 9659 29752

Phasing of Annual Investment: X, ................... ..............

Year 1 0 62 8 163 30 364 35 425 27 06 0 0

............... ........

Total 100 100

NOTES TO FINANCIAL RATE OF RETURN CALCULATION..... ............. ...................................

1. Revemies and expenditures are expressed in constant 1990 prfces.

2. The project tife is assiued to be 40 years for both cities.

3. All revenues and costs are consistent with the asmuiptions

for financale proJections in Amiex 9.

- 76 -

ANNUX 12Pag 2

KOREAPUSAN AND TAEJON SEUWAGE PROJECT

CALCULATION OF FINANCIAL RATE OF RETURNPUSAM COIPOMENT (NMltion Won)

- *OUTFLOUS- -3 '- - - - - -INFLOWS - - - - - -- METYEAR INVEST. 0 & N 0 & N DEPR. R.O.R. TOTAL FLOW

-4 0 0.3 733 7733-2 28990 -28998-1 33831 -338311 26096 2464 246 2416 4833 9714 -164322 2464 244 d416 4JS3 9714 9643 2464 2464 2416 4833 9714 96664 2464 2464 2416 4833 9714 96665 2464 246 2416 4833 9714 96666 2464 246 2416 4833 9714 96667 2464 246 2416 4833 9714 96668 2464 2464 2416 4833 9714 96669 2464 2464 2416 483. 9714 9666

10 2464 2464 2416 4833 9714 9666I1 2464 2464 2416 4833 9714 966612 2464 2464 2416 4833 9714 966613 2464 2464 2416 4833 9714 966614 2464 2464 2416 4833 9714 9666i5 2464 2464 2416 4833 9714 966616 2464 246 2416 4833 9714 966617 2464 2464 2416 4833 9714 966618 2464 2464 21,16 4833 9714 966619 2464 2464 2416 4833 9714 966620 2464 2464 2416 4833 9114 966621 2464 2464 2416 4833 9714 966622 244 2464 2416 4833 9714 966623 2464 2464 2416 4833 9714 966624 2464 2464 2416 4833 9714 966625 2464 2464 2416 4833 9714 966626 2464 2464 2416 433 9714 966627 2464 2464 2416 4833 9714 966628 2464 2464 2416 4833 9714 966629 2464 2464 2416 4833 9714 966630 2464 2464 2416 4833 9714 966631 2464 2464 2416 4833 9714 966632 2464 2464 2416 4833 9714 966633 2464 2464 2416 4833 9714 966634 2464 2464 2416 4833 9714 966635 2464 2464 2416 4833 9714 966636 2464 2464 2416 4833 9714 966637 2464 2464 2416 4833 9714 96638 2464 246 2416 4833 9714 966639 24h4 2464 2416 4833 9714 966640 2464 2464 2416 4833 9714 9666

FINANCIAL RATE OF RETURN X 9.54

- 77 -

ANNEX 12Pe 3

KOREAPUSAN AND TAEJON SErEAGE PROJECT

CALCULATION OF FINANCIAL RATE OF RETURNTAEJON COEWENT (Nilifon Won)

<- -OUTFLOWS- -3 <- - - - - INFLOS - - - - - N ETYEAR INVEST. 0 & N 0 & N DEPR. R.O.R. TOTAL FLOW

.__. .. .. ... .. .. __.. .. . . . .. . .. .________*. ... .. _. ... _.._. .. . ......................... -

-4 1785 -1785,3 4760 -4760-2 10711 -10711-1 12496 -124961 0 557 557 744 893 2193 17852 557 557 744 893 2193 1753 557 557 744 893 2193 17854 557 557 744 893 2193 17855 557 557 744 93 2193 17856 557 557 744 893 2193 17857 S57 557 744 8 2193 17858 557 557 744 893 2193 17859 557 557 744 893 2193 1785

10 557 557 744 893 2193 178511 557 557 744 893 2193 178512 557 557 744 893 2193 178513 557 557 744 893 2193 178514 557 557 744 893 2193 178515 557 557 744 893 2193 17i516 557 557 744 893 2193 1?rs17 557 557 744 893 2193 178518 557 557 744 893 2193 178519 557 557 744 893 2193 1785X.0 557 557 744 893 2193 178521 557 S57 744 893 2193 ,78522 557 557 744 893 2193 178523 557 557 744 893 2193 178524 557 557 744 893 2193 17825 557 557 744 893 2193 178526 557 557 744 893 2193 178527 557 557 744 893 2193 178528 SW7 557 744 893 2193 178529 557 557 744 893 2193 178530 557 557 744 893 2193 178531 557 557 744 893 2193 178532 557 557 744 893 2193 178533 557 557 744 893 2193 178534 557 557 744 893 2193 178535 557 557 744 893 2193 17836 557 557 744 893 2193 178537 5b7 557 744 893 2193 178538 557 557 744 893 2193 178539 557 557 744 893 2193 178540 557 557 744 893 2193 1785

FINANCIAL RATE OF RETURN X 4.91

- 78 -ANNEX 13

Page 1

KOREA

PUSAN AND TAEJON SEWERAGE PROJECT

DOCUMENTS AVAILABLE IN THE PROJECT FILE

Name of Document Prepared by Date

(A) GENERAL

A 1 The Environmental Policy Basic Law Government 08/1990approved by the Assembly 1/8/1990

A 2 The National Water Improvement Pro- Government 0,/1989gram (Comprehensive Policies forthe Supply of Clean Water

A 3 The National Wastewater Treatment Government 09/1989Plan

A 4 Current Status and Outlook of Water Government ../1987resources in Korea

A 5 Report on Important Official Min. Envir. 01/1991Operations

A 6 Environmental Quality and Discharge Min. Envir. 01/1991Standards

(B) REPORI;S BY CONSULTANTS

B 1 Sewerage and Drainage Study for Pu- Hyundai Eng. 9/1984san City - Master Plan Report,Volume. 1 and 2

B 2 Feasibility Study Report for Yongho Samwha Eng. 10/1983Treatment Plant and SewerageConstruction Worko

B 3 Final Design Report for Yongho Se- Samwha Eng. 10/1983wage Treatment Plant and SewerageConstruction Works (Tong ChonSanitary Sewerage)

B 4 Environmental Impact Study for the Samwha Eng. 09/1987Yongho Sewage Treatment PlantConstruction Project

B 5 Yongho Sewage Treatment Plant, Samwha Eng 05/1991Detailed Designs ReportPart A - Treatment PlantPart B - Sewers

B 6 Sewerage Project for Three District Nihon Suido 04/1982Cities - Volume 1 and 2, Sewer.xjeMaster Plan for Taejon City

B 7 2nd Phase Sewage Treatment Plant Hyundai Eng 12/1989Project for Taejon City - Prelimi-

- 79 -

ANNEX 13Page 2

Name of Document Prepared by Date

nary and Detailed Engineering Report

B 8 Environmental Impact Study for the Hyundai Eng. 12/1989Second Phase construction of TaejonSewage Treatment Plant

B 9 Research for Sewerage Tariff Struc- AnKwon Cons. 12/1990ture and Rationalization of Finan-cial Operations

(C) OTHER DOCUMENTS

C 1 Terms of Reference for Updating Pusan Staff 06/1991Sewerage Master Plan in Pusan

C 2 Terms of Reference for Updating Taejon Staff 08/1991Sewerage Master Plan in Taejon

C 3 Guidelines for Sewerage Improvement Min. Construc. 06/1990

C 4 Summary of Pusan and Taejon Finan- Bank Staff 07/1991cial Status

- 80 -

CHART 1

KOREA

PUSAN AND TAEJON 8EWERAGE PROJECT

Kinistry of Environment

Minister 1

Vice

Engineering TenFive and Departments

Bureaus Technology andBureau Institutes

Engineering Monitoring Technicaland and Development

Construction Analysis DivisionDivision Division

- 81 -

CHART 2

KOREA

PUSAN AND TAEJON SEWERAGE PROJECT

ministry of Construction

Minister

ViceMinister

l ~~~~Water S upplyllTen and Field

l Bureaus Sewerage Offices

Water SupplyPolicy and Sewerage

Planning Analysis DivizionDivision Division

KOREA

PUSAN AND TAEJON SEW8AG9 PROJECT

Pusan City

vice ~ -Twelve -IMayor ----------- Districts

l {~~~ ~~GU)X

Bureaus Construction

Bureau

I ~~~sewageDivisions Sewerage ----------- Treatment

Division Plants

rIl - Janglim Plant

Administrative Electrical Civiland & Mech'1 Works - Suyeoung Plant

Accounting Installations constructionsection se8tLan Sectonon

- Yongho Plant H

_

ROREA

PUSAN AND TAIJON SEWERAGE PROJECT

Taejon City

| Mayor l

ViceMayor -------------- Diustricts

l {~~~ ~ ~~GU)X

Bureaus Construction3ureau

|Divisions seerg ---___________- Treatment|

I I . ._ { _ I Wonchon Dong

Administrative Technicaland and 0

Accounting ConstructionSlJction Section

- 84 -

CHART 5

KOREA

PUSAN AND TAEJON SEWERAGE PROJECT

Typical Distriot (Gu) in a Special City

CityMayor ]

GeneralmanagerI

AssistantGeneralManager

General CityAdministrative Bureu

Bureau

Citizen Environmental Eleven Construction FourDivisions Protection Administrative Division City Divisions

Division Divisions

Integrated EnvironmentalBilling - Administrativs- AdministrativeSection Section Section

Military - Environmental CompeneationSection Guidance Section

SectionGrievance CivilSection - Cleaning Engineer One

Section Household - CivilRecord Engineer TwoSection

SewerageSection

CityImprovement

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KILOMETERS

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KOREAt/rrjlu>wv l Torsiof) EXISTING FIJEURE PROJECT36.- N * 361 I SEWERAGE TREATMENT PLANTS RIVERS

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FEBRUARY 1992