FINANCING PLAN (IN US$):€¦ · Web viewApproved on behalf of the (Enter accountable GEF Agency). This proposal has been prepared in accordance with GEF policies and procedures

* For multi-focal area projects, indicate agreed split between focal area allocations

CEO Endorsement Template-V2 September 30, 2006

REQUEST FOR CEO ENDORSEMENT

Approved on behalf of the (Enter accountable GEF Agency). This proposal has been prepared in accordance with GEF policies and procedures and meets the standards of the GEF Project Review Criteria for CEO endorsement.

Yannick GlemarecDeputy Executive Coordinator, UNDP-GEFIA/ExA Coordinator

William Kwan, Deputy ChiefMontreal Protocol Unit, EEG/BDPProject Contact Person

Date: February 28, 2007Revised 26 March 2007, Revised 25 May 2007, Revised 3 July 2007

Tel. and email:+1 212 906 5150 [email protected]

FOR JOINT PARTNERSHIP**GEF PROJECT/COMPONENT ($)(Agency Name) (Share) (Fee)(Agency Name) (Share) (Fee)(Agency Name) (Share) (Fee)

GEFSEC PROJECT ID: 2932IA/ExA PROJECT ID: 3664COUNTRY: People's Republic of ChinaPROJECT TITLE: Alternatives to DDT Usage in the Production of Antifouling PaintGEF IA/ExA: United Nations Development ProgrammeOTHER PROJECT EXECUTING AGENCY(IES): Foreign Economic Cooperation Office, State Environmental Protection Administration (FECO/SEPA)DURATION: 4 yearsGEF FOCAL AREA: Persistent Org. PollutantsGEF STRATEGIC OBJECTIVES: Partnering in investments needed for NIP implementation to achieve impacts in POPs reduction and eliminationGEF OPERATIONAL PROGRAM: OP: #14COUNCIL APPROVAL DATE: August 2006COUNCIL APPROVED AMOUNT*: $11,610,000CEO ENDORSEMENT AMOUNT*:$10,365,000EXPECTED AGENCY APPROVAL DATE: July 2007EXPECTED SUBMISSION DATE OF MID-TERM REPORT: September 2009EXPECTED GRANT CLOSING DATE: June 2011EXPECTED SUBMISSION DATE OF

FINANCING PLAN ($)PDF Project*

GEFA

10,365,000B 295,000C

GEF Total 295,000 10,365,000Co-financing (provide details in Section d): Co-

financing)

GEF IA/ExA 20,000 Government 50,000 3,750,000Others 8,500,000Co-financing Total 70,000 12,250,000

Total 365,000 22,615,000Financing for Associated Activities If Any:

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** Projects that are jointly implemented by more than one IA or ExA


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1. FINANCING (for all the tables, expand or narrow table items as necessary)a) PROJECT COST

Project Components/Outcomes Co-financing ($) GEF ($) Total ($)1. Establish Project Management Institutions and Build Operational Capacity including project management budget/cost* in table b) below

979,760 670,240 1,650,000

2. Establish MIS and Website 336,600 374,300 710,9003. Establish or Revise Regulations, Standards and Action Plan

795,500 721,000 1,516,500

4. Adopt Multiple Means of Technological Support, Policy Induction, Market Regulation, and Awareness Raising and Education to Promote Conversion

9,717,900 7,625,000 17,342,900

5. Conduct Environmental Education to Promote Awareness

320,700 578,000 898,700

6. Monitoring and Evaluation 99,540 396,460 496,000Total Uses of Funds/project costs 12,250,000 10,365,000 22,615,000

* This item is the aggregate cost of project management; breakdown of this aggregate amount should be presented in the table b) below:

B) PROJECT MANAGEMENT BUDGET/COST1

ComponentEstimated consultant

weeksGEF($) Other Sources

($)Project

Total ($)

Locally recruited consultants* 2,822 137,740 383,260 521,000Internationally recruited consultants*

- - - -

Office facilities, equipment, local transportation

- 164,500 322,500 487,100

Travel 80,000 80,000 160,000Office supplies and communications

16,000 16,000 32,000

Total 398,240 801,760 1,200,000* Local and international consultants in this table are those who are hired for functions related to the management of project. For those consultants who are hired to do a special task, they would be referred to as consultants providing technical assistance. For these consultants, please provide details of their services in c) below:

C) CONSULTANTS WORKING FOR TECHNICAL ASSISTANCE COMPONENTS:

ComponentEstimated Consultant

WeeksGEF($)

Other Sources

($)

Project Total ($)

Locally recruited technical support consultants and local alternatives production personnel

11,810 522,400 1,657,740 2,180,140

National technical consultants*

2,895 1,071,000 933,000 2,004,000

International consultants* 146 409,000 96,000 505,000Total 14,851 2,002,400 2,686,740 4,689,140

1 For all consultants hired to manage project or provide technical assistance, please attach a description in terms of their staff weeks, roles and functions in the project, and their position titles in the organization, such as project officer, supervisor, assistants or secretaries.


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D) CO-FINANCING

Name of Co-financiers (source) Classification Type At Concept

($)At Work

Program ($)

At CEO Endorsement

($)*Government of China Nat’l Gov’t In cash 3,750,000 3,750,000 3,750,000Private Industry Private Sector In kind 8,500,000 8,500,000 8,500,000 (select) (select) (select) (select) (select) (select) Total Co-financing 12,250,000 12,250,000 12,250,000

* Reflect the final commitment amount of co-financiers and attach documents from co-financiers confirming co-financing commitments. Describe any difference of final commitment compared to those expressions of interest at concept stage or at work program inclusion.

2. RESPONSE TO REVIEWSA) COUNCIL

The following table summarizes changes made in the project document to address comments made by US, Switzerland and France for the August 2006 GEF Council Work Program.

Comment Responses/Revisions made Location Reference

US Comments: This project does not appear to be cost-effective. The amount of GEF funding requested by the project does not appear to be supported by the list of proposed activities. Please clarify the justification for the amount of funding requested. The project document should provide a more extensive description of how other countries have phased out the use of these products and how much money it cost to do so. A number of other countries (developed and developing) have phased out the products without the high expenses indicated in this particular proposal. The documentation on incremental costs should be improved.

The direct use of DDT in agriculture is illegal and banned in China, other uses of DDT including use of DDT as an intermediate in the production of dicofol, in the production of antifouling paint, and for disease vectors are regarded as legal under existing regulatory framework. A detailed list of regulations and standards on DDT and the production, distribution and use of DDT-based antifouling paint is revised

Section IV, Part V, Table 5 (Page 79)

The GEF project budget under Activity 3.5 - Strengthen capacity and enforcements, under Outcome 3, has been reduced from $450,000 to $420,000 to reflect elimination of the purchase of three patrol boats for monitoring and data collection

Section III, Total Budget and Workplan, page 47 - 57

The GEF project budget under Activity 5.1 - Prepare publicity materials to promote environmental education and awareness raising, under Outcome 5, has been reduced from $1,000,000 to $498,700 to reflect consolidation of promotion and awareness activitiesThe GEF project budget under Activity 5.2 - Mobilize NGOs to promote environmental education and awareness, under Outcome 5, has been reduced from $800,000 to $400,000 to reflect reduction of focal points and consolidation of activities with NGOs


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DDT was first used as booster biocide in antifouling paint in the 1950s, and since then DDT based antifouling paint was produced and used extensively on various types of sea vessels until when it was largely replaced by new generation products such as TBT based antifouling paint and non-TBT self-polishing antifouling paint in 1960s and beyond. As TBT is banned by the International Convention on the Control of Harmful Antifouling Systems on Ships, 2001, However, to-date DDT based antifouling paint remains in use by many small and medium sized fishing boats in China because of its high effectiveness, suitable working life (only 1 year required), and low price in spite of the extreme harm that DDT can cause to the human health and the ecosystem.

While it is recognize that some countries (e.g. EU countries) have established rules and procedures to authorize biocides and their placing on the market. Biocides such as Irgarol 1051, Diuron, Sea Nine 211 etc. are certified by some countries for use in antifouling paints. However, their environmental soundness is being questioned by more and more researches on their bioaccumulation and eco-toxicity effects after years’ of use in antifouling paints. For instance, for Sea Nine 211 (rewarded with the “Green Chemistry Challenge Award” by the U.S. EPA for its environmental safety as marine antifouling agent), recent results show that nominal concentrations of 32 and 100 nM are able to exert a long-term effect on natural phytoplankton communities. Sea Nine 211 was also found to be more toxic than Irgarol and Diuron using D. magna, Vibrio fischeri and suspension cultured fish cells in toxicity bioassays. Some reported concentrations may be sufficient to harm sea urchins and algae. In Sweden, the use of Sea Nine 211 is subjected to some restrictions. Therefore, continued use of Sea Nine 211 in

Section IV, Part V, f) Candidate Alternative Technologies, page 82


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the future should be considered carefully and investigations for other antifouling methods should continue. Substantial evidences show that other most commonly used biocides such as Irgarol 1051 and Diuron have similar or even more negative situation in terms of their environmental soundness. Therefore their experience on phasing out cannot be adopted.

Cost experience of previous patch tests, both in China and abroad, were referred to in calculating the cost for the patch test proposed in this project.

In response to the US comments, budget adjustments in the amount of $905,000 were reduced from the total project budget.

Switzerland Comment The Swiss’ concerns can be categorized into two main areas:

1. The project should subsidize and promote already existing alternatives, instead of developing new alternatives which take time and resources, and may end up with a risk of lack of success in developing the alternatives or may not be developed successfully within the framework of this project.

2. Many aspects of the proposal do not need GEF funding, they should be implemented by the Government of China itself;

1. While it is recognize that some countries (e.g. EU countries) have established rules and procedures to authorize biocides and their placing on the market. Biocides such as Irgarol 1051, Diuron, Sea Nine 211 etc. are certified by some countries for use in antifouling paints. However, their environmental soundness is being questioned by more and more researches on their bioaccumulation and eco-toxicity effects after years’ of use in antifouling paints. For instance, for Sea Nine 211 (rewarded with the “Green Chemistry Challenge Award” by the U.S. EPA for its environmental safety as marine antifouling agent), recent results show that nominal concentrations of 32 and 100 nM are able to exert a long-term effect on natural phytoplankton communities. Sea Nine 211 was also found to be more toxic than Irgarol and Diuron using D. magna, Vibrio fischeri and suspension cultured fish cells in toxicity bioassays. Some reported concentrations may be sufficient to harm sea urchins and algae. In Sweden, the use of

Section IV, Part V, (f) Candidate Alternative Technologies, page 82

Section III, Part 2 and Part 3, page 50 - 52


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Sea Nine 211 is subjected to some restrictions. Therefore, continued use of Sea Nine 211 in the future should be considered carefully and investigations for other antifouling methods should continue. Substantial evidences show that other most commonly used biocides such as Irgarol 1051 and Diuron have similar or even more negative situation in terms of their environmental soundness. Therefore their experience on phasing out cannot be adopted.

2. All the incremental costs for each activity in the project are calculated following the basic GEF criteria of incrementality, as outlined in the GEF Council document.

The GEF funding to the components in the project is especially needed to enable China to ensure compliance with the obligations of the Convention and to contribute to global environmental benefits. Without such funding, China will not be in a sound financial condition to implement those activities.

It is important to note that, as reflected in Section III, Part 2 and 3 – The Project Workplan and Budget under Government of China and Private Industry co-financing, for Outcome 1 – Establish Project Management Institutions and Build Operational Capacity, of the total $1,650,000 budget, Chinese Government is contributing co-financing of $979,760 (59%) of the budget. For Outcome 3 – Establish or Revise Regulations, Standards and Action Plan, the Chinese Government is providing co-financing of $795,500 (53%) out of the $1,516.500 budget.

From the prospective of the total project budget, it is also worth noting that Chinese Government and its industry have been able to mobilize a significant total co-financing of $12.25 million USD (54%) against the total project budget of


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$22.615 million USD.

France Comment:a) Chinese naval painting private companies are described as key partners and co-financers of the project. According to the document, the main private partners are nevertheless to be chosen later through a tendering process. How can the company co-financing be guaranteed considering this tendering process?

b) The project should ensure that it reaches small family or individual business as much as big companies involved in antifouling painting production.

During the PDF-B phase, extensive consultations with these private antifouling paint manufacturing companies have been conducted to help them understand the significance and methodological approaches in order to guarantee their interest and support in this project. The project has always put an emphasis on leveraging co-financing from these enterprises during the PDF-B phase. As a result, written co-financing commitments have been secured by the China Convention Implementation Office (CIO) of SEPA from several companies, with total committed amount exceeding the needed co-financing as planned in the project brief. In communications and meetings during the PDF-B phase, some other companies who have not submitted written commitment have orally expressed their willingness to participate in the scheme and commit to co-financing. CIO has seen a well-mobilized industry of fishing ship antifouling paint manufacturers for phase out of DDT based antifouling paint after the PDF-B activities, and do not foresee any risk in terms of co-financing from the industry. In order to assure full and fair competition, a tendering process will be employed as proposed in the Project Document under Activity 4.2 to achieve Outcome 4. Upon completion of the tendering process, CIO is sure that winning companies will either be contracted with renewal of the written commitments or new participants will be contracted with commitment for co-financing.

Survey during the PDF-B phase has not found backyard production of antifouling paint by families or individuals. Most of the fishing ship antifouling paint manufacturing companies in China are medium to small in scale except a couple of larger enterprise that also produce other types of paints. During the implementation of this project, our focus of interaction with enterprises will concentrate only on the segments of antifouling paint for fishing ships, from test, production, distribution, to


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marketing. Competitiveness of the medium to small enterprises in the tendering process can be improved by strengthening their comparative advantages such as locality familiarity, lower labor cost, well-delivered after-sales services in the locality etc. Consortium of these enterprises will be also encouraged to combine their respective advantages. In conclusion, this project can ensure that it reaches and provides a fair competition to medium to small enterprises.

B) GEF SECRETARIAT

GEF SECRETARIAT CONCEPT AGREEMENT REVIEW ON WORK PROGRAM INCLUSIONAPRIL 10, 2006

Comments Responses

Alternative technologies / products

Comments: The discussion of available alternatives and their advantages/disadvantages and what to do about it is unclear in the Executive Summary, as well as in the Project Brief. The three proposed alternatives seem to have major disadvantages. Is the project to improve on these alternatives at the table in annex suggested?

- The statement that GEF alternative will support "very promising and already available technologies" is not supported by the earlier description of the limitations of the alternatives.

More detailed description of the development status of the alternatives is made in f) Candidate Alternative Technologies, Section IV Part V in the Project Document, as well as in page 3 and 4 under Outcome 4 of the Executive Summary to verify their availability in a technical sense. It can now clearly see that the disadvantages associated with the alternatives are lack of testing and application to move from laboratory scale experiment to scale production in factory, as well as the currently high price of (imported) alternatives. This can be overcome with the support of this project within the first year of project implementation.

“Very promising and already available technologies” has a two-fold meaning. First, “very promising” refers to the environmental soundness and the room for technological improvement and cost reduction. Second, “already available” refers to the mature status of research and development of these alternative technologies at least in laboratory experiments and trials. In fact, most of these alternatives technologies have achieved successful patch test results. (Page 3 and 4, Outcome 4 of the Executive Summary)

Amounts of DDT and non-DDT based antifouling paints

Comments: The IC analysis notes that production of DDT based antifouling paint has decreased

During intergovernmental negotiations of Stockholm Convention and after China signed the


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since 2002, in favor of what, TBT?

- 10,000 and 20,000 of antifouling paint are quoted as being used per year.

Convention, China has launched large scale campaigns to raise awareness of the public and related industries on the harms of POPs, including DDT, and the Government’s intention to phase out these POPs. Producer, dealers and some better-off end users of DDT based antifouling paint have actively switched to other alternatives (TBT based and other alternatives). As a result, from 2002 to 2005, DDT used for antifouling paint production has seen a decrease but still reached cumulative 1,000 MT as the bulk of end users (mainly fishermen) have to stick to the use of DDT based antifouling paint due to their limited affordability of those other alternatives.

10,000 and 20,000 MT antifouling paints are quoted as being used per year respectively following the justifications below: The PDF-B survey shows that China has

300,000 fishing ships widely distributed along its 18,000 km coastline, which consumes 10,000 MT antifouling paints annually, half (5,000 MT) of which is DDT based, while the remaining 5,000 MT is TBT based antifouling paint

It is estimated by China Maritime Bureau that commercial ships navigating in domestic sea territory will consume about 20,000 MT TBT based antifouling paints annually with a working life of 3 years, this is in addition to TBT used in fishing ships, therefore total consumption of TBT based antifouling paint is 25,000 MT per year

In addition, there are 35,000 MT consumption of TBT/DDT free antifouling paint by ocean-going commercial ships, making the total antifouling consumption of 65,000 MT per year (Page 1, Executive Summary)

Cost-effectiveness

Comments: Can the claim that the environmental and health damage from DDT in antifouling paint far exceed the baseline cost be substantiated? (Besides the substantive point which is of interest to me, it is a strange way to word this)

The cost effectiveness section needs strengthening.

No systematic evaluation has been done regarding the socio-economic and environmental impacts of DDT uses since 1950s. Marine environmental quality degradation, aquatic product quality degradation and yield decrease, and human health damage are caused by interactive factors including marine eutrophication, over harvest, and many other complicated factors, of which DDT use in antifouling paint is only one of the most important factors. There is a lack of thematic data and research to this use. Therefore, it is not possible to precisely evaluate the cost of environmental quality degradation and human health damage by using


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such methods as shadow price, opportunity cost, preventive payment, or medical care cost. Also, the benefits from using alternatives will also be difficult to evaluate. However, some practical estimation are made based on the data gathered from the PDF-B phase and literature review, and the results show the implementation of this project will achieve a significant cost-effectiveness. Part V, Section IV in the Project Brief provides more details regarding the analysis of cost-effectiveness.

During the project implementation, M & E activities will gather the needed data for a more precise and comprehensive evaluation of the project cost-effectiveness. See also Section 4 b) of the Executive Summary

Sustainability

Comments: Please elaborate on sustainable production phase out (quota system for example)

Due to the urgency to stop this DDT usage in the production of antifouling paint, the project does not rely on a quota system, but adopts multiple means including policies, technological and market instruments to switch the production of DDT based antifouling paint to the production of alternatives swiftly in the beginning phase of project implementation, with the market instruments to play the decisive role in the latter stage and to sustain the production of alternatives after the completion of the project based on the established regulatory systems and improved capacities from the project, and the opportunity for profit by the manufacturers. (Outcomes 3 and 4, page 3 of Executive Summary)

Indicators and targets in Log Frame

Comments: The Log Frame includes numerous indicators and targets. Probably too many to be useful as a tool to access whether, ultimately, the project is a success or not. It would be useful to pull out some sort of "results" table with a limited number of the most meaningful quantifiable indicators and targets, one/two per component.

The table for M&E work plan looks comprehensive but includes too many "responsible parties" To be meaningful, that column should only list the main "Party" responsible for the particular M or E activity, not all the people involved.

Some most meaningful indicators are extracted from the Log Frame in the Executive Summary and added to Table 2 in the Project Brief as key impact indicators.

Only the main "Party" responsible for the particular M&E activity is kept in Table 1 - for M&E work plan in the revised Project Brief.

Longer term monitoring and evaluation


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Comments: It is unlikely that levels in organisms will be seen to decrease over the life of the project (4 years) in a significant way as suggested, but the project should established a baseline against which longer term progress can be gauged. This implies that the Chinese authorities establish a monitoring protocol and commit to reported to the COP under Art. 16 on reductions in environmental levels of DDT in the coastal zone as a result of the phase out of DDT used as antifouling paint.

Activity 2.2 under Outcome 2 in the Project Brief has been revised to include the establishment of a mechanism to ensure long-term information flow to facilitate reporting requirements, after completion of the project. (Outcome 2, page 3 of Executive Summary)

Co-financing

Comments: The contribution expected from the private sector needs to be better described to provide justification for the claim of US$8.5 million co-financing from the enterprises.

During the PDF-B phase the CIO has had extensive communication with antifouling paint manufacturers and achieved positive response from them in providing co-financing to the project. The CIO published a call for expression of interest in its official website (www.chinapops.org), and notified all the antifouling paint manufacturers in China by email, telephone and meeting. So far, 7 enterprises have submitted their commitment to providing co-financing. Their in-kind contributions in fixed assets have also been verified by independent asset evaluation entities. During project implementation, 3 to 5 enterprises will be selected to provide a total co-financing of 68 million RMB, or equivalent of 8.5 million USD, for production and promotion of alternatives in this project.

In-kind co-finance from enterprises will cover land acquisition and plant construction, production equipment, analytical instruments, raw materials, employee salary, enterprise R & D and training, and advertisement expenses. Letters of commitment to providing co-finance are annexed to Annex E of the Executive Summary.

Education and awareness raising

Comments: Nearly 2 Millions "incremental costs" for funding education and awareness raising" seems extremely high.

DDT based antifouling paint is sold to local paint stores, ship maintenance plants or individual fisherman and thus it would be risky if these key stakeholders are not fully involved in phasing out of DDT based antifouling paint. The risk may be increased with the 12 million stakeholder fishermen sparsely distributed along the coastal provinces. It would therefore be hard to realize the project’s objectives without improving the awareness and promoting consumption choice of this group towards more environmentally friendly products.

2 million USD will cover the expense of activities to conduct extensive interactions with the stakeholders, especially the end users. A major part


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http://www.chinapops.org/

of the budget will be used by NGOs in civil society, local universities and non-profit entities to undertake environmental awareness raising activities and promotion of the alternatives.

It is noted that the budget was reduced down to $1,125,000 prior to the August 2006 in response to comments of one Council Member. The budget was subsequently revised to $898,700 in response to GEFSEC’s comments of 11 June 2007. Please see later sections for more details.

GEF SECRETARIAT CONCEPT AGREEMENT REVIEW ON CEO ENDORSEMENTJUNE 11, 2007

Comments Responses

Comments: Regarding activity 1.4, please note that GEF funds cannot be used for study tour – only co-financing can be utilized for such activities.

The comment was noted by the Government of China and UNDP. In response to the comment, the project document and project budget have been revised to reflect the cost as being supported by co-financing, to guarantee and maximize gaining experience on the learning process of testing, selection, development and production of alternatives.

Comments: When added together, personnel and project management costs amount to nearly 30% of the GEF grant, including around $730,000 for international consultants. This is unacceptable high.

We would like to remind of the fact that the FSP is a four-year project with project activities spanning over the full 48 months, covering three separate geographic regional areas. After careful review of the activities and the budget, total project budget for technical assistance activities has been revised from $2,805,900 down to $2,002,400. This reflects the revised budget of international consultants of $409,000, national technical consultants of $1,071,000, locally recruited technical support consultants and local recruited production personnel to support the production of alternatives of $522,400. The revised total technical assistance budget thus accounts for only 19.3% of the total revised GEF grant of $10,365,000. Together with the project management budget, it now accounts for 23.2% of the total revised GEF grant, instead of nearly 30% prior to this budget adjustment.

This level of funding for technical experts is attributable to the high degree of technical assistance and training required to be provided by national and international consultants to achieve successful and sustainable transfer of technology. This is an essential incremental project cost which project organizers and stakeholders believe to be necessary for the project’s success and for China’s


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successful adherence to the Stockholm Convention in the elimination of DDT.

As was highlighted and emphasized in the comments of several Council Members (US, Switzerland, and France) that the experience and existing alternatives of developed countries should be well explored to contribute significantly to the selection and development of alternatives to antifouling paint in this project. This will only be possible with adequate engagement of international consultants contributing to the transfer of technology, through sharing their experience and expertise of the developed countries. The revised $409,000, international consultants cost (118 consultant weeks) over the 4 year duration of the project, at an average of $102,250 per year now represents only 4% of the revised total GEF grant, a cost that is considered fully justified and necessary to achieve the major objective of technology transfer.

It is further noted that international consultants will provide technical guidance and overall technical assistance to ensure sound technical decision-making and management of the project by the national technical teams; introduce international perspective to guide the establishment of the MIS; introduce international experience to facilitate the revision of regulations, policies, standards, compulsory rules of inspection of ship products, strengthen capacities of related departments in monitoring, enforcement and replication of standards. Of most significant will be the contribution of international consultants in introducing alternatives technologies, in terms of selection, testing, performance evaluation, products improvement and alternative production process to ensure the most appropriate and cost-effective alternatives are selected. Without the experience and expertise of the international consultants, the adoption of alternative technologies and production of alternatives will not be possible. To benefit from their experience, international consultants will also contribute technically to promote and raise awareness to facilitate acceptance of the selected alternatives, as well as contributing to effective monitoring and mid-term and final evaluations.

On the other hand, to ensure effective adaptation of alternative technologies and to achieve sustained phase-out of antifouling paint, the involvement and interaction of national technical consultants and national technical support consultants are critical to undertake technical activities in establishing MIS


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and devising system for effective data collection, processing and analysis of data and facilitating the sharing of information for periodic monitoring and reporting, which will sustain even after the completion of the project, to fulfill China’s reporting role as was specifically required to ensure sustained phase-out. The participation of national technical experts cannot be undermined in their contribution of their experience to the revision of regulations, production and use standards, promoting voluntary certification and labeling programme. Again, the need for national technical experts and technical support consultants in the process of on-ship testing, selection, performance evaluation, research for products improvement, production, promoting and raising awareness for the acceptance of alternatives, as well as the involvement of production personnel in the scale and full production operations of the selected alternatives, cannot be emphasized enough, especially taking into consideration their knowledge and experience of local conditions and the consumption behaviours of the antifouling paint consumers. Their involvement will actually contributed to cost-effectiveness in reducing the reliance on the higher cost of international consultants. In addition, national technical consultants will also be recruited to undertake activities in promoting and raising awareness of consumers to facilitate the acceptance of selected alternatives as well as taking steps to ensure the sustained phase-out effort. National technical consultants will also be contributing their expertise in the monitoring and evaluation process.

With the extensive involvement of national technical consultants that is critical to the achievement of the project objectives of acquiring, developing, improving, producing and promoting the appropriate alternatives, the revised amount of $1,071,000 for national technical experts (1,547 consultant weeks) over the four year duration of the project (at $267,750 per year, at the rate of $692 per week) covering the three geographic regional areas, this 10.3% of the total revised GEF grant is considered necessary and very cost-effective.

Similarly the cost of $522,400 for technical support consultants plus the production personnel for the actual production of the selected alternatives, (2,830 consultant/person weeks) for a four year duration (at $130,600 per year) to cover the three regional areas and several production enterprises, at the average cost of $185 per week is well justified considering the extent and importance of these


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technical support consultants and production personnel in undertaking the actual workload that will contribute to the realization of available alternatives being properly developed and produced as means to achieve the phase-out objective of this FSP.

It is important to re-emphasize again that the phase out of antifouling paint consumption, thus the elimination of DDT used as additives in the production of antifouling paint, cannot be achieved without proper transfer of technology. Such transfer of technology and the sustainability of phase-out efforts through revision of regulations and standards, as well as changing consumption behaviour of the end-users, will only be possible with the extensive involvement and interactions of both international and national technical experts. It is thus strongly believe, and confirmed during the PDF-B phase that the revised technical assistance budget amounting to only 19.3% of the revised total GEF grant to provide technical assistance is imperative and well justified the $2,002,400 budgeted for international and national technical experts to cover the extensive scope of activities in three geographic regional areas, in order to realize the availability of technically, economically and environmentally feasible alternatives to DDT-based antifouling paint.

Comments: Costing of international consultants at $3,480/week appears excessive.

The cost of $3,480 per week, average to the rate of about $580 per day worked, based on a six-day work week. The rate is comparable to the standard daily rate of international technical consultants of similar qualifications, in the average daily rate ranging from $550 to $700 per day worked, paid by international organizations for the caliber and scope of works required of the anticipated international consultants.

Comments: $920,000 GEF resources are allocated for a component on “Environmental education to promote awareness.” The justification for, and cost of, such a component is weak.

As stated in the project brief, a hallmark of the project is the need to interact extensively with a large number of paint shops, ship maintenance plants, and fishermen as the end users of the alternatives. The successful promotion and acceptance of selected alternatives by the 12 millions fishermen is critical and is the fundamental requirement for a successful and sustained phase-out effort as these end users are extremely sensitive to cost and their incomes and environmental awareness being low. They are a vulnerable and adversely affected group in the


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context of rapid industrial and agricultural development in the coastal areas of China due to significant deterioration of the coastal marine environment quality and reduction of economic fish species and catch. It is very difficult for them to afford higher-price alternatives to DDT based antifouling paint. The end-users’ characters in terms of economic status and education level and possible responses to new products are carefully analyzed under the sections of Stakeholder involvement, TBT based antifouling paint or other harmful and cheap antifouling systems, and Hard-to-change consumption behaviours on page 20-21 of the revised Project Document.

Therefore, apart from the project activities dedicated to alternatives development and production, it is concluded that extensive awareness raising campaigns supported by innovative and cost-effective approaches must be adopted to bring the end user fishermen the right information to understand the risk of exposure to DDT, to realize the benefits of switching to alternatives and the harms of continuous use of DDT based antifouling paint and secure their desire to stop the use of DDT based antifouling paint by pointing out the impact to their health directly. Without such extensive campaigns to promote the acceptance of selected alternatives, even if DDT based antifouling paint is no longer produced, it is highly possible that DDT based antifouling paint users will simply turn to the use of high efficiency, low price organotin based antifouling paint. In this situation, this TBT based antifouling paint will constitute a significant risk to undermine the success of phasing out DDT based antifouling paint.

Originally, $2 million was budgeted under Outcome 5 to cover activities to conduct extensive interactions with these stakeholders, including improving their environmental awareness, providing incentives, etc. Following up on the suggestion of the US Council Member to reduce the budget, China has looked into feasibility of reducing the cost for Outcome 5. As a result, the awareness raising and education strategy was adjusted. For example, “train the trainer” workshops will be held in one of the 3 sea areas bringing NGO representatives from other sea areas, while the original plan was to have such workshops in each of the 3 sea areas. The original plan of establishing one focal point in one fishing village in each county has been revised to having one focal point in each coastal municipality, which will


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reduce the number of focal points from more than 100 to around 50. The environmental education activities were collapsed into the NGO interactions with the focal points. Corresponding with the adjustments, the total budget was reduced to $1,125,000, it is now further reduced to $898,700. The GEF grant supporting this Outcome is reduced from $921,300 to $578,000, a further reduction of $343,300. Co-financing is increased from $203,700 to $320,700. The total budget allocation of $898,700 for this Outcome 5, with $578,000 covered by GEF grant, is to cover the minimum activities if we are to make the conversion from DDT based antifouling paint to alternatives among the fishermen a success.

It should also be noted that a major part of the budget will be used by NGOs in civil society, local universities and non-profit entities to undertake environmental awareness raising activities and promotion of the alternatives. For example, activity 5.2 is a NGOs driven activity. With “Train the Trainers” workshops, about 50 volunteers from NGOs in civil society and universities in each of the coastal province will be trained and mobilized to conduct community based education and awareness raising. The NGOs will help to set up focal points in communities and fishermen organizations for long-term promotion of alternatives and awareness raising, conduct environmental education activities in local middle and primary schools, and establish partnership among governmental agencies, enterprises, NGOs, general public and end-users to strengthen interactions. As China is promoting rural sustainable development, the designed activity could be mainstreamed into the process, resulting in more co-benefits for national and global environment. Such innovative and community based involvement and activities are considered important and critical interactions necessary to generate a sustainable acceptance of alternatives and a willingness to change their consumption behaviours.

Given the scopes and the wide community involvement of these activities, the revised amount of $578,000 GEF grant, over the four-year duration, in three geographic regional areas, is considered the minimal required and very cost-effective financial support.

Comments: The overall travel budget is $534,000, plus around $250,000 of local transport.

The budget for the project was established on a bottom-up basis by calculating expense costs by


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This is unacceptable high. several categories (Managerial Staff, International Consultant, National Consultant, Technical Support Consultants, Travel, Subcontract, Equipment, Consumables, Communications and Local Transport) to achieve 6 Outcomes through the implementation of 22 activities. Travel needs were assessed based on all travel-related projected expenditures, including minimal travel by international consultants to and within China, by national experts within China, trainees to training sites, trained trainers to communities, project inspections and monitoring, and other such travel. Given the project’s scope and complexity, the geographic regions that it covers, and the 48 month time span of the project duration, the travel requirements and its corresponding costs represent the appropriate and necessary level to achieve project goals. Local transport is an important component to conduct data collection, provide technical assistance, and promote community based awareness raising activities, as well as to carry out effective monitoring and evaluation mechanism to ensure the technical soundness of the project. In re-evaluating the activities of the project, the overall travel budget is now reduced to $426,510 for the four-year duration to cover the cost of occasional international travel of international consultants and domestic travel of national consultants necessary to ensure successful testing, evaluation, and eventually adaptation of viable alternatives.

General Comments The objective of the project is to phase out the use of DDT as additives in the production of antifouling paint, through further research and development, production, promotion, distribution and use of alternative products. The experience gained in phasing out DDT based antifouling paint will contribute to the phase out effort of TBT based antifouling paint and support China’s acceding to the IMO Convention, in order to establish a long-term mechanism to protect marine environment and human health from pollution of harmful antifouling system.

The end of project situation will be the availability of locally produced, good quality, effective and reasonable cost alternatives to Chinese fishermen to replace the annual consumption of about 5,000 MT of DDT based antifouling paint, thus eliminating 250 MT of DDT used for the production of the 5,000 MT DDT based antifouling paint. The project will impact on the consumption behaviour


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of 12 millions stakeholder fishermen sparsely distributed along the 18,000 km coastline, making their livelihood in 300,000 fishing ships.

With the implementation of the project, the following expected outputs will be achieved:

- An information system with database of technical, socio-economic and environmental indicators and model. A mechanism for data collection, processing, analysis, transmission to facilitate information sharing and to ensure long term information flow to support China’s reporting requirement on monitoring. It will also serve as a mechanism during project implementation to facilitate effective monitoring and evaluation.

- Availability of alternatives through testing, selecting, evaluating, further researching and developing of existing alternative products and finally acquiring alternative technologies.

- Successful selection and support for local production, distribution and promotion of locally manufactured alternatives to replace the consumption of DDT based antifouling paint.

- Sound environmental management of DDT at contaminated sites and equipment by identifying levels of contamination sites equipments of the DDT production plant and all DDT based antifouling manufacturing sites, and developing concrete cleaning activities.

- Established and revised relevant policies, regulations and standards, action plans and strengthened capacity of institutional framework and infrastructure to ensure successful phase out of DDT based antifouling paint, and to promote sustainability of phase out efforts.

- A voluntary certification and labeling programme in the antifouling paint sector established to facilitate compliance.

- Elevated awareness and sustainable developed consumption behaviour of stakeholder fishermen targeted to promote acceptance of alternative products, and to realize the harms of DDT based antifouling paint

- An effective monitoring and evaluation system established to monitor and evaluate progress of project implementation, and the successful achievement of project objectives.

- Established institution and mechanism to facilitate effective project management and coordination, to guarantee maximum project


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achievements.

The major contribution to the achievement of the project objectives and expected outputs will depend on the successful transfer of technology. To generate maximum benefit from the experience of developed countries that had phase-out DDT based antifouling paint, and to assess the existing alternatives for adaptation, the appropriate, and adequate involvement and interaction of both international and national technical experts is indispensable.

Significant effort is required to properly assess the various existing available alternatives through on-ship test to ensure that correct selection of a number of qualified alternatives for extensive review by technical experts, both international and national, to undertake further research and development prior to actual adaptation for local production.

Major investment is required in the preparation for the local production of the selected alternatives, and incentive scheme will need to be deployed to attract manufacturers to push the supply and promote the scale production of alternatives. Incentive scheme will also be needed to facilitate the distributors, dealers and users of mass purchase in order to promote the distribution and use of the alternatives.

Public awareness is critical to disseminate information on DDT threat to human and environmental sustainable development, to bring about consumption behaviour changes, to accept the selected good quality, reasonable cost alternatives. It is important to note that DDT based antifouling paint is used by 12 millions fishermen who are characterized by a lower level of education and awareness about environment and health. They are also dispersedly distributed along the 18,000 km. coastal line. All these constitute great challenges for carrying out environmental education and promoting awareness, while the change of their procurement attitude and behavior is critical to the successful conversion to environmentally friendly alternatives. Without improved knowledge and awareness about the characteristics of harmful antifouling systems among the fishermen, the fishermen will very likely to respond by switching to simply non-DDT based but still environmentally detrimental alternatives such as organo-tin antifouling paint even if the production and supply of DDT based antifouling paint is stopped with this project interventions. To


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evaluate more correctly possible economic pressure the project will be induced, careful investigation has been undertaken among large number of fishermen. We found the baseline on price increase of antifouling paint for fishermen is 20% higher than the present market average price, so one of specific properties of the selected antifouling paint will be price consideration. We do agree with the GEF Secretariat that appropriate and acceptable price structure will be one of the most important factors in determining the behaviour of consumers. Therefore, in addition to the effort to establish reasonable priced alternatives, the high quality and safety of the alternatives will also be promoted through environmental education and awareness raising activities to entice the adequate consideration by the fishermen to accept the alternatives, knowing the danger of DDT, the toxic effect on human health that will impact on them directly.

Finally, the expertise of international and national consultants will be instrumental in applying their respective international and national knowledge and experience to undertake the revision of policies, regulations and standards, develop effective action plans for formulation and enforcement, acquire technically feasible, economically viable, and environmentally friendly alternatives., and to effectively monitor, evaluate implementation and result of the project. This effort is critical to ensure the sustainability of the phase-out effect through the introduction of alternatives.

It is worthwhile to note that the project activities spans through out a duration of 48 months, covering three geographic regional sea areas. A detailed list of activities required to generate the 6 Outcomes are listed under Project Goal, Objective, Outcomes and Outputs/activities as described in detailed in pages 13 – 17 of the revised project document. All analysis regarding costs and required inputs need to be weighted again the amount of activities required to achieve the 6 Outcomes, especially taking into consideration that these activities will be conducted during the 48 months, and in three sea areas.

It is further noted that extensive discussions took place prior to and during Council Meeting with one Council Member who had concerns especially regarding the amount of GEF funding requested. Detailed explanations and justifications were discussed and provided to the satisfaction of the


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Council Member, resulting in a $905,000 reduction in the original GEF grant requested. With the reduction of $343,300 in the budgets to carry out environmental education and public awareness, we believe that subsequent to this further reduction, the revised total GEF grant of $10,365,000 now represents the minimum and appropriate GEF grant necessary to assist China in its successfully achieving and sustaining the phase-out of DDT based antifouling paint, to generate the local and global environmental benefits. The different components and costs have been calculated based on the minimal costs to ensure the cost-effectiveness of a GEF project.

C) REVIEW BY EXPERT FROM STAP ROSTER (IF REQUIRED)

Reviewer: Professor Paul K.S. Lam, Professor (Chair) of BiologyDepartment of Biology and ChemistryCity University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong SAR28 March 2006

1. General OverviewThis project addresses an important area related to the ecological and human health risks associated with the environmental release and occurrence of DDT, particular in regards to its use as an additive in antifoulants.Not withstanding some apparently negative comments, there are many positive aspects in the proposal to which the reviewer offers his full support. The review opted to concentrate on areas that need attention, and, perhaps, improvement. Comments are intended to improve the proposal so that it will have an even greater impact. Overall, the reviewer supports his initiative. Comment: no response necessary

2. Specific comments, observations and questionsSTAP Comments Responses & Location of Changes

Alternative technologies

Comment 1) The proponents have done a throughout literature review on the available technologies for developing alternatives to DDT-based antifouling paints. It is proposed that three technologies are relevant in this context. However, it appears that the range of alternative technologies is limited and that there is still a lot of room for further development in this area. More research is clearly needed although it may not be part of the present proposal. A more detailed risk-benefit analysis on the various technologies (with relevant key references given) would be instructive, and should be included in the proposal to establish the feasibility and credibility of the proposed project

Besides literature review, extensive field surveys to R&D institutions were conducted during PDF-B phase to learn state-of-the-art technologies and development trend. Survey of available alternatives in the market was also carried out to investigate commercialization status. A special workshop of experts was organized to brainstorm on suitable alternatives for this project. An international survey by phone, e-mails, and teleconferences was also conducted to learn international experience in developing sustainable alternatives. Based on the results of these works, a thematic report on alternatives and analysis of their applicability was extensively reviewed and concluded with the selection in principle of three candidate alternative technologies. In the revised project document under


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Section IV, Part V (including Table nos. 6, and 7) and on Page 3 and 4, under Outcome 4 of the Executive Summary, only the important findings and conclusions are extracted to highlight the selection of these suitable and sustainable alternatives.

Comment 2) Linkage between DDT- and TBT-based antifouling paints is not clear in the proposal…. It should be noted that one possible outcome may be that fisherman will turn to TBT-based paint when DDT-based formulations are under stricter control or “eliminated” This scenario should be explored and covered in the proposal.

As China ratified the Stockholm Convention, it is legally binding for China to phase out DDT. Since China has not yet acceded to the IMO Convention, TBT antifouling system is not subject to control at the moment. It is anticipated that the experience and capacity built on eliminating DDT as additive in antifouling paint in this project will contribute to China’s subsequent effort in phasing out TBT-based antifouling paint and other harmful antifouling systems. This need to strengthen the linkage of the phase out of DDT and the need to eliminating the risk in switching to TBT after strict control of DDT is further elaborated throughout the revised project document and Executive Summary.

Global environmental benefits

Comment: Concern with the major challenge of implementation of the new technologies/products on a large enough scale to effect an appreciable change in existing and future environmental levels of DDT. This proposal considers the best-case scenario only. It is necessary also to consider contingency plans in the event that the alternative technologies turned out to be not useful or the proportion of fishermen taking up the offer is too small – the worst-case scenario

There is some probability for the worst-case scenario to take place and the probability will be more likely to be triggered by other factors than high-level technologies. Full mobilization and buy-in of the end users, especially the fishermen, of the new products will be crucial to guarantee the success of the project. Significant efforts have been included under activities 4.3 and 5.2 in the revised project document, and Outcomes 3, 4 and 5 in pages 3 and 4 of the Executive Summary to fully mobilize end users, influence their consumption behaviours, forge partnership and promote alternatives including incentive schemes, to assure the sustained acceptance of the alternatives.

Replicability

Comment: It has to be emphasized that China is a country with a huge population and many unique socio-economic characteristics not shared by many nations. a direct transplantation of the current proposed work to another country will unlikely be productive or useful

Replicability of this project exists in 2 aspects: i) Experience in phasing out DDT to be replicated to phase out of TBT and other harmful antifouling systems in China and other similar regions and countries; ii) Experience in phasing out 5% of DDT used as additive to be replicated to the phase out of the remaining DDT in China and other similar regions and countries. While direct transplantation may not be realized as China is the only country still using DDT as additive in the production of antifouling paint, alternatives tested and produced locally at a more reasonable cost, will definite benefit other countries in the region. See


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Sustainability and Replicability under Part II of the project document and Replicability in Section 3 of the Executive Summary.

Sustainability

Comment 1): On a number of occasions, proponents stated that support of GEF is essential in implementation this project. This does call into question the sustainability of the project after the funding from GEF has expired. The proponents need to spell out clearly (a) what part of the long-term work requires GEF support; and (b) how China will be able to sustain the efforts upon expiry of funding from this project.

In the proposal, it was stated that the project “will select, through open bidding process those manufacturers that are technically and economically competitive and with sound business plans to produce and promote alternatives in the target market”. It is important to realize that the success of this project will depend crucially on the participation and cooperation of small and medium sized enterprises, as well as “backyard” factories. Some clear strategies need to be developed to ensure an active involvement of all parties concerned

The GEF support is essential to the project mainly due to the incremental nature that generates global environmental benefits based on the needs of domestic sustainable development. The global environmental benefits after the completion of the project will be sustained by i) established policy to ban DDT based antifouling paint and to protect marine environment and human health from pollution of harmful antifouling systems based on the technologies, experience and instruments obtained from phase out of DDT based antifouling paint, ii) strengthened capacity to implement the established policy, and iii) commercialized alternatives to play a dominant role in the market place.These same factors, together with China’s subsequent phase out actions on TBT based antifouling system, will also ensure sustainability of the phase out of DDT based antifouling paint, leading to the establishment of an environmentally sustainable antifouling system to ensure the sustainability of domestic benefits

Comment 2): The suggestion that “Favorable policies have been implemented by the state to encourage the development of ocean-going fishing and fishing in open seas, and reduce the number of small-sized fishing ships in coastal waters by encouraging fishermen adopt alternative sources of livelihood” is unrealistic in a vast developing country like China. The only way forward is to get them on board.

As reflected in the revised project document, besides compulsory phase out of DDT based antifouling paint, the project will create a bigger market for the alternatives by subsequently targeting at phase out of TBT based antifouling system. The small and medium sized enterprises can grasp this opportunity based on their local advantages on direct distribution to and interactions with the end users. They will be supported by this project to convert to production and distribution alternatives through technical trainings on available technologies. They will also be encouraged to form consortium to bid on participation and financial support to produce alternatives. Outreach efforts will demonstrate and promote to fishermen the benefits of using alternatives, including through community based activities and dealers, and incentive scheme.

Involvement of Stakeholders

Comment: The current proposal does mention the involvement of various stakeholders. the most important group that will require special attention

This project pays particular attentions to those characteristics with this group of end users. Firstly, the price of the alternatives will be carefully


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is the fishermen (the end-users). Given that China is a big country, and most of the end-users belong to a group which is “characterized by a relatively low level of education, environmental awareness and income”, the proponents need to have a detailed plan to work with the fishermen and convince them to adopt the new technologies and used the new products. , this is vital to the success of this project. Indeed, this project requires the support of feasible and affordable technologies, timely and appropriate legislation and a strong commitment to law enforcement. Environmental improvement in this case can only be driven by the above factors, without which the project has a very low chance of success.

considered and efforts will be deployed to decrease the cost through technological improvements and other means through the support of the project to a level acceptable to the end users. Secondly, innovative cultural and community based programs/strategy of demonstration, education, incentives and partnership will be developed to promote and convince the end users to accept the alternatives. PART II of the project document describes more details on these actions.

Capacity Building

Comment: There are plans for capacity building in the proposal. The plan is relatively clear for scientists, government officials, but is less clear for the “men on the ground”. These are the people that will ultimately determine the success or failure of the project. Not enough information is there to convince this reviewer that something really different will be introduced in this project. Setting up of local offices and organizing workshops will certainly help, but will not be sufficient to mobilize many millions of fishermen and fishing boat owners to make that change. Illegal use will be a challenge unless a real substitute for DDT-based antifouling paint is found which is technically feasible, economically viable, and environmentally friendly. There are always some risks in developing technologies of this nature, and help may be needed from the wider scientific community in this regard.

Capacity will be strengthened with community based NGOs, local government departments and institutions, local partnerships that will interact activities and interact with the end-users, especially the fishermen. Substantial efforts will be deployed to targeting the end-users in promoting and demonstrating the benefits of alternatives, to change their consumption behaviours with affordable price structure and incentives, as elaborated in the revised project document. The plan will be further fine tuned during project implementation to address the vast and diverse socio-economic background the project will cover.

Interaction with end-users

Comment: Costs involved setting up committees/offices, organize workshops/conference should be kept to a minimum so that more resources can be diverted to implementing the project at the ground level – interacting with fishermen and fishing boat owners. Rather than overseas study tour, it may be more profitable, if necessary, to invite relevant people to come to China to share experiences so that more local people can benefit

As reflected in the revised project document, the major components of the budget are allocated to achieving regulatory measures to ensure success and sustainability of the phase out of DDT based antifouling paint, through the promotion and production of suitable and environmentally sustainable alternatives, including China’s subsequent actions to achieve phase out of TBT based antifouling system, and through extensive environmental awareness education targeting the end-users. The largest budget goes to the selection, acquisition and technological improvements of alternative technologies and the reduction of production costs so that the fishermen can accept


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the alternatives without extra economic burden. Substantial amount will also be devoted to addressing and interacting with the fishermen to promote the alternatives and address their consumption behaviour on alternatives.

3. JUSTIFICATION FOR MAJOR CHANGES IN THE PROJECT, IF ANY2

N/A

4. REQUIRED ATTACHMENTS

a) Project Appraisal Documentb) Confirmed letters of commitments from co-financiers (with English translations)c) Agency Notification Template on Major Project Amendment and provide details of

the amendment, if applicable.

2 Provide justifications for any major amendments in the project, including an increase of project amount exceeding 5% from the amount approved by the Council. Justification for such amendments and the project document will be circulated to the Council for a four-week review period. For procedures to the approval for major amendments, refer to the Council paper: Project Cycle Update: Clarification of Policies and Procedures for Project Amendment and Drops/Cancellations, GEF/C.24/Inf.5


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http://gefweb.org/Documents/Council_Documents/GEF_C24/C.24.Inf.5_Project_Cycle_Update_FINAL.doc

http://gefweb.org/Documents/Council_Documents/GEF_C24/C.24.Inf.5_Project_Cycle_Update_FINAL.doc