Origin and Scope of the Environmental Programme

China's outstanding economic growth over the past two decades has produced an improvement in the living standards of big portions of its population but at the same time it has had a critical impact on its natural environment. The demand for natural resources, including water, energy, land and wood has increased dramatically. Forest belts have been reduced due to the use of timber as well as population growth and pressure on the country’s surface, leading to devastating secondary impacts such as desertification, flooding and species loss. China's forest resources rank among the lowest in the world: deforestation, along with the overgrazing of grasslands and over-cultivation of cropland, has also contributed to an increase in sandstorms and desertification that are transforming China's North. More than a quarter of China's territory is now desert, and desertification is advancing at an annual rate of roughly 900 sq. miles. Another serious problem that menaces China is pollution, whose major sources are industrial waste produced by mills and factories, chemical plants, and other small highly polluting and largely unregulated township and village enterprises. Lack of adequate regulations on industrial, household emissions and waste have big responsibility in terms of water as well as air pollution. Particularly, water pollution is posing a serious and growing threat to water reserves. The result of this is that more than three-quarters of the water flowing through China's urban areas is considered unsuitable for drinking or fishing. Furthermore, acid rain, ozone depletion, global climate change, and biodiversity loss are only a few other dramatic problems faced by the eco-system in China. Besides the direct environmental degradation and pollution in China, a degenerated eco-system poses severe challenges to the economic welfare of people. Public health problems, mass migration, forced resettlement, and social unrest are all the consequence of the inadequate policy on the sustainable environment protection in the PRC.
In the light of this, the Italian government and the Chinese government have decided upon the execution of an Environmental Programme, which has been formalized in the “Record Of Talks Concerning the Perspectives of the Sino–Italian Soft Loan Development Cooperation 2003-2005” finalised and signed in Beijing on July the 9th, 2003. The initiative finds its logic in the new Sino-Italian Development Cooperation Framework and responds to the interest expressed by Chinese authorities to cooperate in the sector of Environment Protection. The Memorandum of Understanding, which regulates the execution of the Programme, was signed by the representatives of the Italian and Chinese governments on 18 September 2006.

Programme Objectives

The Programme intends to contribute to the efforts of limiting and reducing environmental pollution within the limits internationally agreed. It also intends to promote the sustainable exploitation of natural resources in compliance with the eco-environmental, economic and social objectives designed by the Country and recognized at the international level.

The General Objectives of the Programme are (i) to contribute to the Millennium Development Goals agreed at the United Nations level, (ii) to improve the sustainability of the socio-economic development of the Country and, (iii) to better the living conditions of the Chinese population in the most disadvantaged Provinces, in particular Central and Western Provinces.

The Specific Objective of the Programme is to contribute to lessen the environmental pollution and degradation in the People’s Republic of China by (i) reducing land, water and air pollution, (ii) restoring and protecting biodiversity, and (iii) introducing animal-friendly practices in the most disadvantaged Provinces, in particular Central and Western Provinces.

Programme Expected Results

The main Expected Results through which the Specific Objective will be achieved at Projects’ level are:

Land:

• reforestation and protection of existing forestlands achieved;
• new agro-forestry systems introduced;
• new tree orchards introduced;
• new sylvo-pastoral systems introduced;
• new systems of sustainable management for wild ecosystems established;
• new grasslands aimed at fighting and limiting desertification established;
• degraded rangelands restored.

Water:

• efficient systems for supply and distribution of drinkable water in rural and urban areas set up;
• efficient equipment and systems for effluent treatment for industrial and domestic activities supplied;
• small scale irrigation systems to support improvements in the land systems and desertification control set up.

Air:

• efficient systems for LPG extraction and distribution established with measurable impact in terms of carbon emission reduction;
• efficient “clean” heating, transport systems and industrial systems established with measurable impact in terms of carbon emission reduction.

Biodiversity:

• management of Protected Areas improved :
• Protected Areas created under the supervision of the provincial administrations;
• wild ecosystems outside Protected Areas managed through sustainable systems;
• area of wild species habitats protected, restored or recuperated;
• wild species protected or recuperated.

Slaughtering techniques:

• new animal raising systems for farms and commercial units supplied;
• appropriate and modern slaughtering techniques adopted.

Project’s Activities

Projects’ eligible activities to achieve the above-mentioned Programme results are:

Supply of goods, which may include, among others:

• provision of equipment and systems for water pumping, treatment and distribution;
• provision of equipment and complete systems for small irrigation schemes;
• provision of equipment and systems for effluent treatment for different industrial and domestic activities;
• provision of equipment and systems for extraction, distribution and use of LPG;
• provision of equipment and systems for appropriate animal slaughtering and disposal of wastes.

Relevant services and Technical Assistance will be provided on testing procedures, installation, use and maintenance of equipment, complete warranty and post sale service.

Works, which may include, among others:

• establishment of timber, fodder and or/ fruit trees and/or grasslands plantations (including nurseries, small irrigation systems and other supporting activities required);
• improvement of grazing, fishing, hunting or extractive systems;
• land levelling.

Supply of services, which may include, among others:

• preparation and/or implementation of Management Plans of Protected Areas;
• establishment, demarcation and management of new Protected Areas;
• establishment of sustainable systems to manage wild ecosystems outside protected areas;
• management or protection of habitats for wild species;
• establishment of improved systems for commercial and domestic raising of animals;
• environmental impact studies;
• feasibility and economic studies;
• training through seminars, short and long term courses, that can enhance Personnel at different level (Administration or Management staff, Technical staff) as well as spread awareness on various environmental protection issues

Financing

The Government of Italy will provide the Soft Loan to the Government of the People’s Republic of China on the following conditions:

• Repayment period: 23 (twenty three) years (including a grace period of 11 years)
• Grace period: 11 (eleven) years
• Interest rate: nominal annual 0.15% (zero point fifteen per cent) payable at the end of each period of 6 months from the date of the first disbursement.

Each single Project may consider purchasing of goods, services and works from a minimum amount of Euro 3 million to a maximum amount of Euro 10 million. Should these figures not be suitable to reach the Programme objectives, they can be adjusted on case-by-case basis, provided that the Joint Committee that supervises the Programme approves them.

Eligibility

Projects can be proposed, among others, by public or private entities, companies, ministries, national, provincial and local administrations as well as state-funded agencies pursuing a specific result or by consortia of several Project Proposers that pursue various results based on the specific capacities of the different members of the consortium.

To be eligible Project shall:

• Be focused on at least one of the sectors of intervention
• Be located in the lower-income Central and Western Provinces
• Be consistent with Italian and Chinese environmental strategies
• Enhance Chinese Technical Expertise in environmental Protection
• Guarantee long-term sustainability
• Have a positive impact on local socio-economic development

Given the national and provincial situation in China, the objectives and priorities set for this Programme, the geographical focus will include mainly the following Provinces: Gansu, Guizhou, Guangxi, Inner Mongolia, Ningxia, Qinghai, Shaanxi, Sichuan, Tibet, Xinjiang, Yunnan.

Procurement

The Soft Loan shall be used only for purchasing goods and services related to the Programme, which must be of Italian origin; no more than 50% (fifty per cent) of the entire Soft Loan may be used to purchase goods, services and works having their origins in China or third countries. Services provided by United Nations agencies, organizations officially recognized by the UN or other governmental and non- governmental entities, which are branches of the Italian Ministry of Foreign Affairs or have signed agreements with it, shall be considered as having their origins in Italy.

The procurement activities for International Biddings will be carried out through contracts to be awarded through competitive biddings to Italian companies or consortia of Italian companies. The procurement activities for local biddings shall be carried out through contracts to be awarded through competitive biddings to Chinese companies or consortia of Chinese companies.
For further information please see the Procurement part.