The World Bank's Board of Executive Directors approved on Thursday a US$172 million loan to China to help finance a Hunan Urban Development Project through support for a carefully selected set of priority investments to address specific regional needs in a sustainable manner.

Urbanization and urban development are central themes in China's overall development strategy.  The Government is promoting regional cluster development as one urbanization model, with a view to benefiting from the efficiencies that can be gained through economic integration of multiple urban areas. National and local governments play an important role in cluster development by creating and supporting the necessary policy and planning framework for the region/cluster, providing infrastructure to assist physical integration, and supporting improvements to livability, thus increasing the overall competitiveness of the region and thereby attracting investments and facilitating economic growth. 

Hunan Province, in south-central China, is at the median of Chinese provinces in most economic criteria with GDP per capita ranking seventeenth, 22 percent below national average. Both the national and Hunan Province governments attach high priority to the economic development of the CZT Region as one of the examples of cluster based urban development in China.  Development of the CZT Region is intended to be the basis upon which Hunan Province will transform from a largely agricultural province into a more balanced economy, with growth in tertiary sectors and high technology development.  The CZT Region has a total population of 12.1 million, of whom 3 million live in the three core city areas, and is the only significant urban agglomeration in the province.  Changsha, Zhuzhou and Xiangtan are physically linked by the Xiang River, an important tributary of the Yangtze River. 

A key focus of CZT integration has been the development of the Xiang River corridor as an economic and recreational resource, the minimization of the flood risk posed to the region by the Xiang River, and the provision of environmental and transportation infrastructure to support regional development.  Significant investments are required to meet the needs in these areas.  Further, the capacities of environmental infrastructure sector in Hunan Province need to be strengthened to improve efficiency and sustainability, inter alia through corporatization, full-cost recovery, and limited private participation. 

The approved project will help Hunan Province address some of these needs through financing the following five components:

· The Corridor component, to strengthen flood protection and develop a recreational (scenic) road along the embankment, in four selected sections of the three municipalities. 

· The Changsha Wastewater component, to increase the percentage of sewage collected and treated in  the municipality, and to develop the Changsha Municipal Drainage Company  into an autonomous public utility operating on commercial principles.

· The Zhuzhou Clean Coal component, to reduce air pollution in the CZT Region through the production and sale of low sulphur coal.

· Zhaoshan Scenic Area component, to improve livability in the CZT Region through the sustainable redevelopment of the Zhaoshan Scenic Area.

· Technical Assistance for Implementation and Institutional Development component, to assist in project implementation, and to build capacity in the CZT Economic Integration Office and other project agencies.

"Hunan Provincial Government, which  is strongly committed to the concept, has provided leadership on the CZT integration, and there is strong support for the concept amongst the officials of the three municipalities and the province, which will enable the cities to develop complementary economic roles, with each city building on its advantages", said the World Bank task manager, Raja Iyer. 

"The Bank can provide international experience and support in the crucial institutional development and capacity building. Further, the Bank will provide Hunan Province the benefit of its extensive global and China experience in urban development, flood protection, water pollution control, traffic management, cultural heritage, air quality improvement, institutional development, and financial management", he said.

(China.org.cn September 20, 2004)