Document of The World Bank JZI'

FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 4159-CHA

STAFF APPRAISAL REPORT Public Disclosure Authorized

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT Public Disclosure Authorized

March 31, 1983

Projects Department Regional Office Public Disclosure Authorized East Asia and Pacific

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

Currency Unit - Yuan (Y)

US$1.00 = Y 1.75 (at time of appraisal) Y 1.00 = US$0.59

WEIGHTS AND MEASURES (METRIC SYSTEM)

1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 miles 1 hectare (ha) = 2.47 acres 1 million cubic meters = 810 acre-feet 1 ton = 1,000 kilograms (kg) = 2,205 pounds 1 kilogram (kg) = 2.2 pounds

ABBREVIATIONS

MAAF - Ministry of Agriculture, Animal Husbandry and Fishery CGB - Central General Bureau of State Farms and Land Reclamation HGB - Heilongjiang General Bureau of State Farms FIMO - Foreign Investment Management Office hp - horsepower kw - kilowatt. kV - kilovolt kVA - kilovolt-amps

FISCAL YEAR

January 1 - December 31 FOR OFFICIAL USE ONLY

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

STAFF APPRAISAL REPORT

Table of Contents

Page No.

I. BACKGROUND ...... 1

Introduction .1...... I The Agricultural Sector...... 1 Sector Development Issues and Strategy ...... 3 State Farms...... 4 Project Formulation. 6 Bank Group Lending for Agriculture ...... 7

II. THE PROJECT AREA ...... 8

Location ...... 8 Climate 8 Topography, Soils and Drainage.9 Population .10 Infrastructure .10 Agriculture .11 Mechanization .12

III. THE PROJECT .13

Project Description .13 Project Works .14 Agricultural Machinery ...... 16 Construction Machinery .17 Seed Processing Equipment...... 17 Technical Assistance ...... 18 Status of Engineering...... 19 Implementation Schedule...... 19 Cost Estimates .20 Financing ...... 21 Procurement .21 Disbursements ...... 21 Accounts and Audits .22 Environmental Effects ...... 22

This report is based on the findings of a pre-appraisal mission comprising T.E. Daves and T.B. Wiens (Bank), D.A.N. Hopkins, W.R. Johnston and J.K. Wang (consultants) in February 1982; and an appraisal mission comprising T.E. Daves and T.B. Wiens (Bank), L.J. Clarke, R.C. McGinnis, and L.S. Tay (consultants) in May/June 1982.

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

Page No.

IV. ORGANIZATION AND MANAGEMENT

General Bureau of State Farms and Land Reclamation . . . . 22 Financial Management ...... 24 Project Management and Execution ...... 26 Monitoring and Evaluation...... 27 Agricultural Support Services...... 27 Consulting Services ...... 30

V. AGRICULTURAL PRODUCTION ...... 30

Cropping Patterns ...... 30 Farming Practices ...... 30 Yields and Production ...... 31 Drying, Storage and Processing ...... 32 Subsidiary Production ...... 32

VI. MARKETS, PRICES, FARM INCOMES AND COST RECOVERY ...... 33

Market Prospects ...... 33 Prices ...... 33 Farm Incomes ...... 34 Cost Recovery ...... 35

VII. BENEFITS, JUSTIFICATION AND RISKS ...... 37

VIII. AGREEMENTS TO BE REACHED AND RECOMMENDATION ...... 40

TABLES IN TEXT

2.1 Agricultural Machinery Use ...... 12 2.1 Degree of Mechanization by Operation ...... 13 3.1 Drain Dimensions ...... 15 3.2 Cost Summary.0 ...... 4.1 Receipt of Government Funds by State Farms, 1980 . . . . . 24 4.2 Profits and (Losses) of the State Farms ...... 25 4.3 Disposition of Profits in 1980 ...... 26 6.1 Crop and Input Farmgate Prices ...... 34 6.2 Rent and Cost Recovery ...... 36

ANNEXES

1. Project Land Development 2. Project Costs 3. Prices and Crop Budgets 4. Economic Analysis 5. Related Documents and Data Available in Project File - iii -

LIST OF FIGURES

3.1 Implementation Schedule 4.1 Organizational Structure - Ministry of Agriculture, Husbandry and Fisheries Animal 4.2 Organizational Structure 4.3 - General Bureau Organizational Structure of State Fanns - General Bureau Heilongjiang Province at Jiamusi, 4.4 Typical State Farm Organization 5.1 Chart Proposed Cropping Calendar

MAP

IBRD 16545R - Reclamation Areas

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

I. BACKGROUND

Introduction

1.01 The Government of China has requested Bank Group assistance in financing the Heilongjiang Grain Base Project in Northeastern China. The project would develop some 200,000 ha of virgin lands in Heilongjiang Province for production of wheat, maize and soybeans, and be implemented by the General Bureau of State Farms and Land Reclamation in the Ministry of Agriculture, Animal Husbandry and Fishery. The primary objectives of the project would be to help reduce China's growing foodgrain deficit and to increase the supply of marketable surplus grain for sale to the urban population. It would also provide experience in upgrading mechanized crop production which would be applicable to about 2 million hectares now cultivated by state farms in Heilongjiang and would serve as a model for the development of other uncultivated land in the province. Principal features of the project would be the drainage works needed to bring the land into cultivation; agricultural machinery for full mechanization of farming operations; additions to the existing fleet of construction equipment and provision of roads, housing and supporting infrastructure. Training in equipment operation and maintenance and in construction techniques would be provided. The project would also include technical assistance in the fields of planning, training, equipment maintenance, construction operations and seed production.

The Agricultural Sector /1

1.02 Agriculture in China, including crops, livestock, forestry and fisheries, provides sustenance to nearly 1 billion people, is the source of income for some 290 million agricultural workers and their dependents, and accounts for about 30% of the country's GDP. China produces about 40% of the world's annual rice harvest, 14% of the wheat, 10% of the maize and 16% of the cotton and the tea. It also accounts for 40% of the world's swine herd. Among the developing economies, China accounts for more than 30% of the total farming population. The production organization for Chinese agriculture includes collective units under the commune system (89% of cropland and 80% of rural income), state farms (4% and 4%) and private plots assigned to families on communes and state farms (7% and 16%).

/1 For details on China's agricultural sector see "Annex C: Agricultural Development" in China: Socialist Economic Development, Report No. 3391-CHA. 1.03 The agricultural sector is dominated by grain production, which accounts for some 60% of total agricultural output, and 80% of cropland. Of the country's 960 million ha, only about 10.4% or 100 million ha are arable lands available for sustained cropping. The ratio of population to arable land is just under 10 persons per ha. Slightly less than half of China's arable land is irrigated. In global terms, China's agricultural sector accounts for less than 8% of the world's arable land but provides enough food for about 22% of the world's population. This is possible because of the generally high standards of crop production. Paddy yields, about 4 tons per ha, are nearly 50% higher than the average for all developing countries. Maize yields are up to 50% higher than those in Thailand and three times those in the Philippines. Sugarcane yields approach those reported for developed countries. The national average cropping intensity is about 150%.

1.04 Agriculture has been a high priority sector of the Chinese economy for more than 30 years, with special attention given to grain production in efforts to attain self-sufficiency. Investment in agriculture has averaged about 20% of total national investment, and this proportion has increased in recent years. In general, China's efforts to develop agriculture have been broadly successful. Growth in food production has more than kept pace with population growth and almost all Chinese now have access to adequate quan- tities of food. Imports of agricultural products and production inputs have been limited to only about 25% of all imports, and exports of raw and processed agricultural products have contributed about 80% of all foreign exchange earnings.

1.05 The Government controls the marketing and pricing of agricultural products and inputs. It fixes production quotas for the major crops: grains, oilseeds, cotton and sugar, which are purchased and distributed by state-managed procurement agencies at predetermined prices. A portion of the production in excess of the quotas, the amount of which is determined before each harvest according to projected yields, is sold to the Government at above-quota prices which are also pre-determined. The rest of the sur- plus production can be sold to the Government at negotiated prices or on the free market. Production quotas are also established for a range of cash crops and livestock products. Minor crops, such as vegetables and other products grown in household plots, are sold in rural markets at prices regulated either by the provinces or counties. This marketing and pricing system has been maintained since the 1950s, although the importance and scope of free markets have varied over time. Policy reforms since 1976 have expanded the operation of free markets. The two most important marketing agencies for agriculture are the Bureau of Foodgrains of the Ministry of Commerce, which procures and distributes grain and oilseed crops, and the All China Federation of Supply and Marketing Cooperatives, which purchases most cash crops and distributes some agricultural inputs and tools, and consumer goods in the rural areas. Some products, such as sugar, rubber and pigs for slaughter, are purchased by specialized branches of the Ministry of Commerce. - 3-

Sector Development Issues and Strategy

1.06 A major task in the agricultural sector is to reduce imports of grains and cotton. The gap between domestic supply and demand for food and fiber appears to be widening. Net imports of grains, including soybeans, reached 13.2 million tons in 1981, slightly more than in 1980, 3.3 million tons more than in 1979 and 8.5 million tons over the 1976-78 average. Most of the imports are wheat, which reached 12.7 million tons, and maize at 1.2 million tons. Cotton imports were about 570,000 tons in 1981, about 200,000 tons less than in 1979 and 1980 but more than 60% above the 1976-78 average. At the same time, efforts are needed to raise the incomes and living stand- ards in rural areas. In the rice-growing areas most of the relatively easy gains in production through irrigation and the use of new high-yielding crop varieties and fertilizers have been achieved. In Northern China, where wheat, soybean and maize are the main crops, there are prospects for increased production through irrigation and drainage, better harvesting techniques and improved seed production. Expansion of the land base and improvement of land productivity are becoming much harder and more expensive with the need to upgrade production in environmentally less favorable areas.

1.07 To meet these challenges, the Government has begun to implement some new policies aimed at giving farm workers more production incentives. Acreage quotas for particular crops have been relaxed, although minimum grain marketing quotas are still imposed. This gives greater freedom in crop choices and production decisions to the individual brigades and production teams which make up communes and state farms. In 1979, the purchase prices of most agricultural products were increased by an average 26% for grains but somewhat less for most other products. One result of these actions, coupled with generally favorable weather and heavier inputs of chemical fertilizer, has been a sharp increase in agricultural production; agricultural output grew by almost 9% in 1978 and 1979, 2.7% in 1980, and 5.7% in 1981. To encourage specialization in crops having comparative advantage in production in particular regions, the Government has given a guarantee to regions best suited to cash crop production that their basic food needs will be assured from government stocks, which are to be supplied through increased surpluses and government purchases in areas specializing in food grain production. The policy of easing requirements for regional and local food self-sufficiency is likely to result in an increase in the proportion of the food grain supply that needs to be marketed. Currently about 20% of food grains are purchased by the Government to supply the urban population, cash crop areas, chronically deficit regions, and to provide for emergency stocks. The marketed percentage has fallen slightly since the new policies began in 1977; reversing this trend, therefore, is a major task facing the Government.

1.08 The needed increase in food grain production and marketed sur- pluses are not likely to be forthcoming without particular encouragement and assistance to areas best suited to grain production. The Government has designated some areas, particularly the Northeast Region, as grain base regions and initiated programs to rapidly increase their grain production -4- and marketable surplus. The Government is also giving high priority to irrigation, drainage and saline land reclamation in the North China Plain. To further enlarge available financial resources, the state farms, which have the primary responsibility for new lands development, will now be allowed to retain for reinvestment all operating profits earned up to 1986 on newly developed land. In mid-1980, the Government decided to concentrate its land development and farm mechanization program in the Northeast, especially Heilongjiang province, where labor-intensive farming is precluded by the long winters which permit cultivation of only a single grain crop. Since a large area of land is needed to support a family, and essential crop operations must be performed in very short time periods, there is in fact no alternative to mechanization and both the state farms and the communes in Heilongjiang are highly mechanized.

State Farms

1.09 State farms now produce only about 2% of China's grain but with over 35% of it marketed, about double the commune average, they provide over 4% of the marketed surplus. The Government projects that by 1985 they will produce almost 3% of the grain crop and market 45% of production, to account for 9% of all marketing. The 2,400 state farms would account for almost 20% of the 35 million ton projected annual increase in grain production between 1979 and 1985. Because of their location in the drier and colder areas of the country, state farms also tend to be well suited for production of grains that are imported in large amounts, especially wheat.

1.10 The General Bureau of State Farms and Land Reclamation, which was recently incorporated into the Ministry of Agriculture, Animal Husbandry and Fishery, was founded as the Ministry of State Farms and Land Reclamation in 1956. However, the first state farms date back to the 1940s before the founding of the PeopleTs Republic when the revolutionary armies established and operated farms to supply themselves with foods. These farms were mostly on virgin lands in Heilongjiang province, where the land cultivated by state farms has grown from about 30,000 ha in 1949 to 960,000 in 1959 and now to about 2 million ha. As Heilongjiang development proved successful, additional areas on China's borders were opened up as state farms. Between 1957 and 1965 the cultivated area in all provinces expanded from one to three million ha, with another million ha brought into production since 1970. At present, state farms cover 30 million ha, with 4.5 million ha under cultivation, 4.5% of the nation's cultivated area. There are over 2,000 state farms and more than 6,000 farm-managed industrial enterprises employing 4.8 million people. Farms specializing in the production of food and cash crops number 990; rubber and other tropical tree crops, 160; livestock, 425; fruit and tea, 288; and ginseng and deer farms, 83.

1.11 State farms concentrate on areas that are either technically too difficult or geographically too isolated to be developed as traditional farming communities. In the more fertile and densely populated areas of China almost all land suitable for cultivation has long since been developed and occupied. Most communes are located on these lands, which account for over 90% of all cultivated land in China. State farms, by their nature, are mostly located in less-developed "border" regions, such as: Heilongjiang, Nei Monggol, Ningxia, Gansu, Xinjiang, Qinghai, Xizang, Yunnan, and Hainan Island. These border areas comprise about 60% of China-s land area, but only a small percentage of the land is suitable for cultivation.

1.12 In accordance with the Government's plan to increase the marketed crop surplus, major land development programs are planned by the General Bureau of State Farms and Land Reclamation for the period 1981-86. The plans call for the development of 1.1 million ha of currently unused land for field crops, 60,000 ha for tree crops, and 2.2 million ha for improved pasture. The total estimated cost of the programs is Y 7.1 billion (US$4.0 billion). Food crops would still account for the major portion of total investment, yet significant emphasis would now be given to livestock and cash crop production, with a view to creating greater opportunities for linkage to industry and also to increasing the meat supply.

1.13 In addition to their land development tasks, state farms have helped to provide employment for excess labor from agriculture and other sectors; encouraged and managed settlement of the more economically backward border regions; demonstrated modern farming methods, and provided technical assistance to communes. Until recently their financial performance was poor, but since the return of professional management in 1977, after the Cultural Revolution, the farms have sharply increased productivity and financial performance. Yields are generally above those on communes in adjacent areas and annual per capita incomes on state farms averaged US$255 in 1979, compared to the nationwide commune average of US$83. The higher incomes on state farms are partly explained by their lower work force per ha, about a third of that of communes (which control virtually all of the land suitable for labor- intensive production and multiple cropping), and larger quantities of machinery and equipment with which to work. The state farms also benefit from government efforts to upgrade management and labor skills.

1.14 Climatic factors in the areas of major concentration for state farms generally preclude the labor intensive approach to agriculture characteristic of most parts of China. Without heavy mechanization of field operations in areas like Heilongjiang, progress in bringing land into culti- vation would have been greatly slowed. The development of these zones has thus been considerably influenced by China-s capacity to produce an appro- priate volume and range of agricultural equipment and machinery. While much success in this regard has been achieved, the design standards and effi- ciency of local manufacture still leave considerable room for improvement. The Government is taking steps to upgrade the design and manufacture of farm machinery. Smaller and less efficient producers are being closed and a higher degree of specialization introduced. Also, advanced technology is being acquired through licensing agreements and joint ventures with foreign farm equipment manufacturers; recent agreements are for diesel engines and combined harvesters. The proposed project would support the Government's - 6 -

objectives of modernizing farm mechanization by providing a large number or farm managers, operators and technicians with experience in the use of modern farm machinery.

1.15 Further improvement in state farm development is also expected frorr a number of other approaches now being studied and implemented. Among these are decentralized decision making with most decisions on management and investment now being left to individual farms, increased mechanization, and an expansion of private plots. Tillage techniques are being revised to reduce soil distubance, conserve moisture, and promote decay of crop resi- dues. The farms are also seeking to expand sideline processing and manu- facturing in order to absorb new labor force entrants and workers released as machinery used in agricultural operations is upgraded. Continued efforts are required to further increase worker incentives; adjust output mixes and levels to the new price relationships and less restrictive quotas; identify economically appropriate levels and modes of mechanization; improve crop management, particularly through greater use of improved plant varieties and other modern inputs; and improve training of workers for agriculture and the rapidly expanding sideline industries. The proposed project would help to meet some of these objectives.

Project Formulation

1.16 About 1.7 million ha of uncultivated land in Heilongjiang Province is suitable for agriculture if provided with roads and drains. Of this area, the Heilongjiang General Bureau of State Farms (HGB) controls 700,000 ha, and the remainder consists of small tracts adjacent to excisting communes. The proposed project would develop 200,000 ha of the area controlled by t1he 11GB. The lands to be developed consist of 75 individual blocks ranging from 1,000 ha to 10,000 ha on 30 existing state farms (Annex 1). Land develop- ment would entail construction of a system of surface drains and access roads. No land levelling would be needed and clearing would be a simple matter of removing weeds and grasses. The HGB has successfully developed similar lands covering some 900,000 ha in Heilongjiang.

1.17 The project plan, prepared by the HGB, was reviewed by a Bank mission in August 1981. During this mission and subsequent missions (preappraisal February 1982 and appraisal June 1982) the details of the proposal were refined, particularly the agricultural machinery and con- struction equipment package, and the technical details of the drainage works. Also, a component was added to provide seed processing and storage equipment.

1.18 Although there is a long history of land development and mechan- ized farming in Heilongjiang, the project would include a number of innova- tions which are expected to have a significant impact on land already cultivated in the province, as well as on land still to be brought into production. Farm machinery, of a more advanced design than presently used in Heilongjiang, would be introduced to improve techniques for land preparation, planting, cultivating, and harvesting; most of this equipment - 11 -

would be imported. The HGB has already pioneered the use of imported machinery on two state farms with considerable success. The improvement in crop management coupled with the seeds component, are expected to lead to crop yields significantly higher than currently achieved in the province. The project would also introduce improved construction methods, particularly the use of imported hydraulic backhoe excavators, some mounted on amphibious undercarriages, for drain excavation; the present practice of excavation by bulldozers is slow and costly. Also provided by the project would be technical assistance to help the HGB in (a) implementing its planning and training programs, (b) strengthening equipment maintenance and spare parts control, (c) planning and executing construction operations, and (d) improving seed quality.

Bank Group Lending for Agriculture

1.19 The Bank-s strategy for lending in China's agriculture sector is to support the Government's efforts to raise agricultural production through the more efficient use of land and water resources and improvements in the support services such as research and agricultural education. Projects are also being selected for their demonstration and catalytic impact in addition to immediate income generation. Suitable opportunities are likely to be found among a wide range of activities and locations. The first Bank Group operation in the agricultural sector, a $60 million IDA credit for the North China Plain Agriculture Project (Credit 1261-CHA), was approved by the Executive Directors on June 15, 1982. This project will provide irrigation and drainage for 200,000 ha covering parts of nine counties and be the first large-scale attack on soil salinity and waterlogging in China. Work is proceeding in all nine counties and progress has been especially good on excavation of the drainage systems. A second project, the Agricultural Education and Research Project (Cr. 1297-CHA) for $75 million, was approved by the Executive Directors on November 2, 1982. This will support the Government's program for strengthening higher education and research in agriculture. In addition to the proposed Heilongjiang Grain Base Project, other projects for possible future Bank Group financing are a Rubber Development Project in Guangdong Province and a Rural Credit Project focussing on Guangxi and Hubei Provinces. The Rubber Project is expected to assist in new planting of about 20,000 ha and replanting of some 15,000 ha with highyielding clones. The Rural Credit Project is expected to include assistance in agriculture, livestock and poultry, tree crops, and agro-industrial processing and would offer numerous opportunities for technology transfer and employment creation. -8-

II. THE PROJECT AREA

Location

2.01 The proposed project would be located in Heilongjiang Province, the northeastern most province of China, which takes its name from the river forming its northern border, the Heilongjiang, which is one of the world-s great rivers. The province is bordered by Nei Monggol Province, in the west, the USSR in the north and east and Jilin Province in the south. Two major tributaries of the Heilongjiang are the Songhua, which flows across the province, and the Wusuli, which forms its eastern border. Most of the province is flat to rolling plain with large areas of swamps and marshes especially along the rivers. The land slopes to the northeast with low mountains along the south, southeast and western borders. The project would cover a total area of 200,000 ha of which 182,000 ha are on 25 existing farms in the Sanjiang Plain Region in the northeast part of the province, and 18,000 ha are on 5 farms in the Lesser Xinganling Region in the northwest (Map IBRD 16545).

Climate

2.02 Nearly all of HeilongjiangIs state farms are distributed across the northern third of the province and are subject to a temperate-to-cold continental climate. The area is affected by Siberian air currents in winter with cold, dry conditions lingering for many months and in summer it receives warm, moist air from the Pacific. Spring brings heavy winds and little rain, precipitation being concentrated in the summer and autumn months. Occasionally there are torrential rains, with sudden changes in temperature in spring and autumn. July is the warmest month with a mean temperature of 200 to 220 C and an absolute high of 38.50C; January has aL mean temperature of -190 to -220C, with an absolute low of -440C. The temperature stabilizes above freezing between April 5 and 10. The frost- free period ranges from 105 to 140 days with the first frosts in the fall between September 15 and 20. Freeze-up begins about mid-October, with EL solid freeze period of 150 - 200 days; the freeze depth being 1.5 - 2.5 m.

2.03 Precipitation in the project area is relatively abundant, the annual average being 500 to 600 mm in the east and 450 to 500 mm in the north with a maximum of 880 mm and a minimum of 330 mm. Precipitation in the June to August period accounts for 60 to 70% of the annual rainfall. Only 10-15% of the precipitation falls during April and May when the crops are planted. Spring droughts are not uncommon but in general the rainfall regime is favorable for crop production. Annual evaporation averages 1100 to 1250 mm; in the summer relative humidity is 75% to 83% and in the spring 50% or more. In the winter, winds are westerly and northerly; in the summer - 9 -

easterly and southerly. Average wind velocity is 3.5 to 4.5 m/s, with maximum wind velocity being 20 to 40 m/s, occurring primarily in the spring. The area enjoys a long period of sunshine with strong solar radiation. April to September sunshine amounts to 1300 to 1500 hours. Annual solar radiation is 110-120 kilocalories/sq cm, with 50-55 kilocalories/sq cm from June to September. This is essentially the same as in the middle and lower reaches of the Yangtze River Valley.

Topography, Soils and Drainage

2.04 The proposed project would be located in two areas in the pro- vince, the Sanjiang Plain Region and the Lesser Xinganling Region. The low-lying Sanjiang Plain was formed by alluvial deposits from the Heilongjiang, Songhua, and Wusuli rivers. The Plain is between 50 m and 80 m above sea level and slopes from southwest to northeast. It is flanked on the south by the Wanda mountain range which rises in altitude to between 300 and 700 meters above sea level. The plain is very flat with scattered patches of swamp. Drainage and flooding problems are common, however, river channel control and drainage projects have allowed development of large areas for agriculture. The Lesser Xingan range of mountains runs from the northwest to the southeast within the Lesser Xinganling Region. The state farms in this area are located on the gently sloping foothills of the mountain range and on the high plains, at altitudes varying between 120 and 650 meters above sea level. This was among the first of the northern regions in Heilongjiang to be opened up, and there are now continuous, adjoining farms throughout. Most cultivation is done on slight slopes, hills, and in broad, flat valleys, interspersed with secondary forest areas. The undeveloped areas are generally located adjacent to existing cultivated land in small valleys. Most of the project areas in this region do not require drainage.

2.05 There are five principal soil types in the project area: white clay soils, meadow soils, black soils, brown soils and swamp soils. The white clay soils are the predominant type and cover about 49% of the project area. A 20 cm layer of black, silty-clay soil with about 5-7% organic matter content, overlays a white, sticky clay. These soils have poor internal drainage, relatively low nutrient status and can be difficult to work, but with drainage and adequate fertilization, have given good crop yields. The meadow soils are the next most important type and account for 28% of the area. These are dark loams or clay loams. The surface layer of black soil is from 50 to 100 cm deep, has very good physical qualities and nutrient status and is relatively resistant to drought and waterlogging. The black soils which cover 8% of the project area are deep loams with a black surface layer up to 100 cm thick. These soils have excellent physical properties, an organic matter content of 8-10%, very good nutrient status and good internal drainage. These are the best soils in the project area. The brown soils, which account for 4% of the area, have a black clayey, surface layer of about 30 cm overlaying sandy, porous material. These soils - 10 -

are easy to work, have good permeability, but are of low fertility. About 4% of the project area is under swamp soils. These are very deep, fertile soils with shallow peat surface layers, which are highly productive whien drained.

2.06 The combination of flat relief and poor internal drainage in the soils makes the Sanjiang Plain highly susceptible to waterlogging and surface ponding if excess water from the summer rains is not removed by drainage. The areas along the rivers require flood embankments to keep the land from being flooded during periods of high runoff. The Beian and Jiusan Sub-Bureaus require no flood protection, but do need some surface drainage to remove excess precipitation from the cultivated land. Steps have already been taken to correct drainage problems where land development has taken place. This has been done with surface drains to the rivers, improvement of natural channels, and the construction of flood control dikes. Work to upgrade the standards of the drainage systems continues on many state farms.

Population

2.07 Heilongjiang now has 109 state farms, covering some 6.7 million ha of land, including 2.0 million ha under cultivation, 700,000 ha reclaimable for cropping, 1.5 million ha suitable for forests, 500,000 ha of grassland, and 200,000 ha of water surface. The present state farm population is 1.6 million, with a work force of 667,000 including 300,000 workers engaged in agriculture of which 100,000 are agricultural maintenance workers. The typical farming unit is a production brigade comprising 70-80 families with about 135 workers and farming some 1,000 ha. On average, workers receive incomes of Y 930 per annum from all sources, including wages and bonuses from agriculture of Y 600, other collective income of Y 130, and the remainder from private side activities. Total annual income per household (4.5 persons) averages about Y 1,670 (US$960). The HGB estimates that about 15% of the total state farm labor force could be withdrawn from employment without affecting production. Moreover some 93,000 middle school graduates, belonging to state farm families, currently await permanent work assign- ments. Although labor required by the project would be drawn from among experienced farm workers, the latter would be replaced by members of this pool of surplus labor, and no additional labor from outside the Heilongjiang state farm system would be needed.

Infrastructure

2.08 Although most of the farms are situated in outlying border regions, all are linked to the provincial transportation network. Railheads are established at several farms in each sub-bureau, which serve as collec- tion and distribution centers. Farms that are somewhat removed from the nearest rail line have good road or river connections. Although tied to the State's electrical power network, the farms have their own supplemental power stations. There is a telephone, radio and television network directly - 1] -

serving individual units. The farms have their own enginletl14<,l and water conservancy brigades, drainage and irrigation stations and equip- ment. There are more than 100 large and small farm machiner-w, rVi available to repair and produce farm machinery and parts. fheirL a wide range of social, health and technical educational services. lhe state farms in the area run more than 700 industrial enterprises .ith an annual output value of about Y 650 million.

Agriculture

2.09 Most of the project area farms produce primarily grain and legumes. Industrial crops and others (vegetables, fodder, green manure, etc.) account for only about 9% of the cropped area. Wheat and soybean are the major crops. In 1980, wheat covered 50% of the area, soybean 30%, and corn, rice and miscellaneous grains 10%. Wheat accounted for 66% of total grain, and soybean and other legumes 24%. In 1980, out of a total Heilongjiang state farm production of 3.4 million tons of grain and legumes, about 60% or 1.9 million tons, was sold to the State. The farms own 150,000 head of cattle, 650,000 hogs, 130,000 sheep and goats and 34,500 deer. Annual production consists of 480,000 slaughter hogs, 13,000 slaughter cattle, 20,000 tons of milk, 540 tons of wool, 5,500 kg of deer antler, and 1,000 tons of poultry. The total value of agricultural output in 1980 was Y 1.2 billion of which 82% was from crops and 18% was from forestry, stock-raising, sideline activities and fishing.

2.10 Because of the short growing season, farms in the project area can only grow one crop of spring wheat, soybean or maize per year. Crop rotations on the farms vary with climatic and soil conditions. In the old established farms of the Sanjiang Plain Region, a three-crop equal acreage system of crop rotation is often practiced. However, recently reclaimed areas are regarded as unsuitable for maize, for which there is a limited demand, hence in these areas wheat makes up 50%, soybean 30%, and miscel- laneous grains, mainly maize, no more than 20%. Farms in the Lesser Xinganling Region produce almost no maize due to the shorter frost-free period, and devote the bulk of their land to wheat. Most farm operations are fully mechanized. Recently cultivation techniques have tended toward reduced tillage, to conserve moisture and, on reclaimed land, to accelerate the decay of surface vegetation. Organic fertilizers are little used in the project area, however measures are now being considered to increase their role. One approach consists of planting fuel forests and augmenting local coal production to release to agriculture the crop residues currently consumed as household fuel; another consists of expanding the area planted to green manure following wheat; a third is expanding livestock production to increase manure sources. Chemical fertilizers are now applied on more than 80% of the sown area, at an average rate of 68 kg/ha of nutrients. The proportion of phosphorus to nitrogen is generally two to one. Fertilizer requirements are estimated from field trials and from annual soil testing now carried out on 25% of the total cropped area. However, efficient levels - 12 -

and methods of application are difficult to achieve because of shortages of appropriate machinery and of the most suitable fertilizer formulations. The area to which herbicides are applied has greatly increased in the last few years. Virtually all wheat is treated with herbicides, while some 80% of the soybean area and somewhat less of the maize is also treated, supplemented by mechanical weed control.

2.11 Crop yields for wheat currently average about 1.6 t/ha, soybean 1.3 t/ha, and maize 2.5 t/ha. The highest average yields recorded for the Heilongjiang state farms are 2.1 t/ha for wheat, 1.4 t/ha for soybean, and 2.9 t/ha for maize. Some state farms and brigades have regularly achieved yields exceeding 3 t/ha, 2 t/ha and 4 t/ha for wheat, soybean, and maize, respectively. The gap between average and advanced performance suggests considerable yield increases could be achieved with adequate drainage, improved seeds, and proper management.

Mechanization

2.12 Agricultural machinery is widely used by the state farms in Heilongjiang (Table 2.1).

Table 2.1: AGRICULTURAL MACHINERY USE

Cultivated Machine type Quantity area/machine (ha)

Crawler tractors (55-75 hp) 12,530 170 Wheeled tractors (28-55 hp) 7,560 280 Combines (60-105 hp) 10,650 200 Implements 114,800 - Trucks (65-180 hp) 6,190 350 Trailers 11,940 180 Fuel tankers 330 6,490

The degree of mechanization (1.4 hp/ha) is high by Chinese standards, with 100% of the major tillage operations being carried out with tractors, ploughs and harrows. Hand labor is used mostly for the lighter work such as spraying, but is also employed in cultivating and harvesting crops like maize for which local 'equipmentdesigns are not suitable. Moreover, the nature of the Chinese equipment is such that labor requirements for even mechanized operations are high. - 13 -

Table 2.2: DEGREE OF MECHANIZATION BY OPERATION

Operation % of area mechanized

Plowing 100 Harrowing 100 Planting 93 Cultivating 82 Harvesting 85 Spraying 50 Fertilizing 84

The standard power unit for all tillage operations is the 75 hp crawler tractor, which is also used with the planting equipment, swathers, and trailed combines. Much of the equipment in use is obsolete by modern standards but steps are being taken to improve designs. Also, demonstration farms using a broad selection of imported farm machinery have been operating in the project area for the last four years

2.13 The production brigades own and operate the standard agricultural machinery, while the state farms retain ownership of the larger construction machines such as bulldozers and ditchers and carry out land development. Each production brigade is responsible for routine maintenance of its equipment, but intermediate repairs are handled at the sub-farm level and major overhauls at the farm level. Service facilities are well-equipped, staffed with experienced and well-trained mechanics, and quality of work is good. There would be few problems in servicing and repair of imported machinery, assuming training programs are conducted and spare parts provided.

III. THE PROJECT

Project Description

3.01 The project would develop some 200,000 ha of unused land for production of food grains and soybeans in Heilongjiang Province. By introducing modern agricultural machinery on a large scale the project would support the Government s program to upgrade mechanized farming techniques throughout the province. The main features of the project are:

(a) development of 200,000 ha of uncultivated land through drainage and land clearing including construction of about 2,100 km of main and branch drains, 7,800 km of lateral and sublateral - 14 -

drains, 370 km of flood embankments, and 24 drai- L;pi,--., stations;

(b) construction of about 1,500 km of rural roads anr 320a km ; farm roads;

(c) construction of sub-farm and brigade headquarters including housing for about 8,000 families, community facilities, officas, workshops, stores and utilities;

(d) construction of drying floors and grain stores;

(e) procurement of agricultural machinery to permit full mechanization of farm operations in the project area;

(f) procurement of earthmoving equipment for drain and embankment construction;

(g) procurement of seed processing equipment; and

(h) technical assistance in the fields of planning, training, equipment maintenance, construction operations, and seed production; and

(i) overseas training and study tours.

Project Works

3.02 Drainage and Land Clearing. Drains would be constructed in nearly all of the 75 blocks of land to be developed. The basic system consists of sublaterals at a spacing of 400 m which discharge into laterals at 1,000 m spacing. The laterals flow into the main and branch drains which in turn discharge into the rivers. Most of the rivers which would receive outflow from the project areas have already been deepened, widened and provided with flood embankments. However, about 110 km of existing embankments would be improved and 260 km of new embankments constructed. The drains would be designed to remove in 48 hours the runoff from a five-year storm (80 mm in 24 hours and 120 mm in 72 hours). The embankments would be designed to contain floods with a return period of 20 years. Pumping stations would be required for about half of the project area where gravity flow would be prevented by high river levels in the flood season. Sluice gates would, however, be constructed on all main outlets to allow gravity flow at low river levels. Altogether 24 pumping stations with a combined capacity of 11,000 kw would be constructed. Pump motors at 13 of the stations would be electric and the remainder would be diesel. Further details of the drainage are given in Table 3.1. The terrain is flat and no land leveling would be required. Some low spots in the fields would have to be filled in using soil from drain excavation and covered with topsoil taken from drain and road alignments. The natural vegetation consists of reeds and grasses and would be burnt and plowed in. - 15 -

Table 3.1: DRAIN DIMENSIONS

Type of drain Spacing Depth Bed width Length ------(meters) ------(km)

Main 4,000 2.5-3.5 4-12 700 Branch 2,500 1.5-2.5 3-6 1,400 Lateral 1,000 1.0-1.5 1.0-1.5 3,900 Sublateral 400 0.7-1.0 0.5 3,900

3.03 Roads. About 1,500 km of rural roads would be constructed linking the subfarms and brigades to the state farm headquarters and the railway system. Individual sections of road would be 20 to 30 km in length and fit into the existing road system. They would be designed and constructed to the Ministry of Communication's Grade IV (single lane) Standard. This is the lowest grade road in MOC's technical design standards and is used where traffic is less than 200 vehicles per day. Traffic on these roads will be highly seasonal and reach a peak during the harvesting season. Road embank- ments, generally 1 to 1.5 m high, would have a top width of 6.5 m. A 3.5 m pavement would be provided consisting of a 20 cm crushed rock sub-base and a 10 cm surface layer of compacted gravel. Bridges would be double lane with a width of 7 m. About 2,200 km of farm roads, about 5 m wide, would be constructed along most of the lateral drains. They would consist of compacted earth excavated from the drains.

3.04 Drying Floors and Grain Storage. Heavy rains can occur during the harvesting period and this creates a large demand for drying (para. 5.06). Sun drying has proved to be feasible in areas adjacent to the project. Therefore, about 500,000 sq m of drying floors would be constructed. In general, these would be reinforced concrete about 15 cm thick and they would be cambered to shed rainwater. A reinforced section some 20 cm thick and 4 m wide would run down one side to carry trucks and trailers. Grain stores would be constructed at each drying floor. These would be galvanized metal steel frame structures with capacity to store four to five week's output from the drying floor.

3.05 Housing and Buildings. Housing, community buildings, offices, stores and workshops would be built for the 18 sub-farms and 57 brigades responsible for project hectarage (para. 4.05). In general, schools, offices, and housing would be in two- or three-storey buildings. All public buildings would have wood or coal-fired hot water central heating and domestic water supply systems. Central sewage systems and central heating for residences would be available only at the sub-farm complexes. Housing would be grouped around a core of public facilities such as shops, health centers, bath houses, nurseries, schools, library, and office spaces - 166

surrounding a central square. North of each residential area would be a sports field, a drying floor, grain and farm equipment storages and repair shops. To the south would be orchards and tree nurseries and land reserved for private plots where families would raise vegetables and other cash crops. Windbreaks would be planted to the north and west. About 30 ha would be used for subfarm headquarters and 15 ha for brigades. Housing and social and commercial buildings would use about half the space, the rest would be for production related facilities, orchards, and private plots. Subfarms would have more space in public buildings than brigades since they would function as centers for administration, cultural affairs and production related services. Electricity for the new communities would be supplied in part from power plants owned by the state farm system and in part from the national grid. About 400 km of 6.6 kV distribution line would be built together with seven 1000 kVA substations. Several remote brigades would be served initially by diesel generators. The existing telephone network would be expanded by construction of 560 km of line.

Agricultural Machinery

3.06 The basic sources of draft power in Heilongjiang at present are 55 to 75 hp crawler tractors. They are used for virtually all plowing, harrowing and planting and also for towing combines. The tractors have a low working speed, less than 4 km/hr, and low fuel efficiencies. The combination of these tractors and the rather primitive implements currently used leads to poor land preparation, seeding and cultivation. Most of the combines presently in use are of an out-of-date design and lack special heads for soybeans and maize. As a result, harvesting losses are significant. In general, with their fleets of slow, small units, the farms do not have the capacity to speed up operations when land preparation or harvesting is delayed by weather conditions. Increasing the numbers of machines would be only a partial solution to these problems and the Government has therefore embarked on a long-term program of modernization in areas where farming is heavily mechanized such as Heilongjiang. Initially, this has to be based on imported equipment since domestic production of more advanced designs is some years away.

3.07 An important consideration in equipment selection is the size of the tractor. If the same machine is used for tillage, seeding and cultiva- tion, a high tractor utilization rate can be achieved. A suitable tractor, which would have enough power to carry out tillage operations quickly and efficiently and yet be small enough to perform well in inter-row cultiva- tion, would be a wheeled tractor in the range of 125-140 hp./l Imported tractors in this power range have been in service for four years on the Youyi State Farm and have been highly effective. A detailed study of cropping patterns and farming operations shows that a total of 500 tractors

/1 PTO hp. - 17 -

would be needed for the project area. Of these, about 350 would have four-wheel drive to provide added traction, save fuel, and reduce tire wear. All tractors would have dual rear wheels. A total of 200 self-propelled combines in the 150-170 hp range would be required to ensure timely harvesting. A flexible header and a pick-up header would be provided with each combine, and corn headers would be provided for about one-third of the combines. Other equipment to be procured for the project would include 65 hp wheeled tractors, mainly for transportation, 120 hp self-propelled combines, disc harrows, swathers, sprayers, trailers, and grain trucks. An equipment list is shown in Annex 2.

Construction Machinery

3.08 The present practice is to construct drains using 75 hp crawler tractors fitted with a bulldozer blade. This is a slow and inefficient process because material is handled many times before it is finally moved outside of the drain cross-section. The problem is compounded by the fact that most of the uncultivated lands are saturated or flooded during much of the construction season. Bulldozers are used for excavation in Heilongjiang because very few backhoes or other types of excavator have been produced in China. The project would provide a 62-unit fleet of 130- 140 hp backhoe excavators, 2 of which wouuld be mounted on amphibious undercarriages. Such equipment would be more productive and fuel efficient than bulldozers and has several other advantages. The side slopes of the drain could be much steeper (1.5:1 to 2:1 depending on soil type and depth of drain) compared to the flat slopes (usually flatter than 2.5:1) resulting from bulldozer excavation; this would reduce excavation quantities and the amount of land taken up by drains. It would also be possible with amphibious excavators to construct one or two main drains in each block, through to their outfalls; this would help to drain much of the surplus water from the blocks before starting work on the remaining drains. Other equipment to be procured would include self-propelled elevating scrapers to replace bulldozers in road construction, together with compactors and motor graders. Provision would also be made for purchasing several items of specialized equipment, such as ditchers to be used to excavate sublaterals (Annex 2).

Seed Processing Equipment

3.09 Eight seed processing plants would be installed at state farm seed multiplication brigades in or near the project areas. Imported equipment supplied to each plant would include two complete seed dryer and cleaning lines, bagging machines and scales and a seed treatment machine. Receiving and surge bins and seed storage bins would be purchased locally (Annex 2). Each plant would have a total capacity of 6 tons/hr for wheat, 5 tons/hr for soybeans and 4 tons/hr for maize, and would process enough seed over a 200 day operating season to plant about 50,000 ha. Thus, the eight plants - 18 -

would serve the project areas plus an additional 200,000 ha. These plants, together with five somewhat smaller plants now under construction on other Heilongjiang state farms, would provide improved seed processing for about 30% of the state farm land in the Province.

Technical Assistance

3.10 Training. The Heilongjiang state farms run an extensive training program during the winter. Since 1979, about 5,000 farm managers have received training in farm management and agronomy, and about 70% of them are expected to take refresher courses in the next four years. In addition, about 25% of the workers on each farm obtain some form of training each year. The main emphasis is on elementary crop husbandry and machinery operation and maintenance. In recent years courses in livestock and agro-industry have been introduced. The project would support and strengthen the training programs by making provision for 24 man-months of consultant service to allow for visits by short-term external experts. The training component of the project would also include provision for a series of study tours for selected personnel. A group of plant breeders and agronomists would vist Canada and the USA to study plant breeding, seed production, processing and distribution in areas climatically similar to Heilongjiang Province. A second group of agronomists and farming system specialists would study production practices for wheat, maize and soybeans in Canada and the USA, with particular emphasis on tillage methods, timing of herbicidal applications and harvest and pest-control practices. A third group would visit some ongoing Bank-financed agricultural projects in other countries to study approaches to project management.

3.11 Seed Development. In order to improve seed quality for Heilongjiang's state farms, HGB has recently established a Seed Company and is carrying out an overhaul of seed research, production and distribution. The project would support this effort by providing 24 man-months of consult- ant assistance in plant breeding and in the organization and management of the seed production and processing system. Provision would also be made for introduction of new varieties particularly for maize, and for training of Chinese personnel at foreign universities and research centers.

3.12 Equipment Maintenance. The contracts for the supply of imported farm machinery and construction equipment would provide for training of state farm personnel in equipment maintenance. To be effective, this would have to be integrated into a maintenance system encompassing all farms under the control of the HGB. Such a system already exists and standards of equipment maintenance are good, but it would need to be expanded and strengthened to handle a wider variety of equipment including types unfamiliar to the state farms. About 12 man-months of consultant services would be provided to assist the HGB to upgrade its equipment maintenance and spare parts control system including training of personnel. - 19 -

3.13 Management and Planning. The project would provide six man-months of consultant assistance to the Central and Heilongjiang General Bureaus, and the sub-bureaus in techniques of financial planning, accounting, and economic and financial analysis. Provision would also be made for purchase of computers and computer software and training in their use.

3.14 Construction Operations. Most of the excavation of drains and construction of roads would be carried out using equipment which is new to the state farms. The effective use of this equipment and the timely completion of the project works would require a more systematic approach to the planning of construction operations than is currently the practice. About 12 man-months of consultant services would therefore be provided to assist staff of the HGB in construction planning.

Status of Engineering

3.15 Detailed drainage studies following uniform design standards (paras. 3.02) have been carried out by the sub-bureau engineers for all development units, and the capacity and alignment of all main, branch and lateral drains, the alignment of flood embankments, and the location and capacity of drainage pumping stations have been determined. Detailed quantity estimates for excavation and structures have been prepared for the above elements. Sublateral drains have not yet been laid out in detail but would follow a standard layout and design which would provide a basis for quantity estimates. A fairly high degree of accuracy is possible in estimating earthwork quantities for drainage works because of the very flat terrain. The alignments of access roads have been selected and the designs for the sub-farm and brigade headquarters have been completed. Quantity estimates for roads and buildings are based on standard designs. Technical specifications for farm machinery and construction equipment were finalized in March 1983 and general conditions of contract for equipment to be provided through ICB follow closely the document used for the University Development Project. A complete set of bid documents for imported equipment will be finalized by early January 1983.

Implementation Schedule

3.16 The project would be implemented over a four-year period beginning in April 1983 (Figure 3.1). Construction of drains, roads, and buildings would be carried out by construction units already established in each of the sub-bureaus and state farms involved in the project (para. 4.12). These units would use their existing equipment to start work in 1983 and imported equipment would be introduced in 1984. For the first year, work would be concentrated on main and branch drains, flood embankments, and the installa- tion of temporary pumps to reduce flooding and improved working conditions for future years. Some sections of access road would also be built to facilitate movement of equipment and materials. A detailed work plan for the first year has been prepared by the HGB. About 20,000 ha of land would be developed in early 1983 in areas with minimum drainage needs, and about - 20 -

60,000 ha would be developed in each of the following three years. An assurance was obtained from the Government that by September 30 of each year a detailed work program and financing plan for the following year would be prepared for Bank review. Procurement actions for imported and local farm machinery would begin in early 1983 with first deliveries in late 1983. Equipment deliveries would be completed by June 1986.

Table 3.2: COST SUMIARY

For- For- Fcreign Local eign Total Local eign Total exchange --- (Y million) --- -- (US$ million) -- (%)

Drainage works 41.3 13.7 55.0 23.6 7.8 31.4 25 Land clearing 16.3 3.6 19.9 9.3 2.1 11.4 18 Roads 28.8 6.8 35.6 16.4 3.9 20.3 19 Buildings 88.1 0.0 88.1 50.4 0.0 50.4 0 Drying floors 4.7 1.6 6.3 2.7 0.9 3.6 25 Agricultural machinery 57.1 98.8 155.9 32.6 56.5 89.1 63 Construction machinery 1.1 19.2 20.3 0.6 11.0 11.6 95 Seed processing equipment 0.9 3.0 3.9 0.5 1.7 2.2 77 Technical assistance 0.2 2.8 3.0 0.1 1.6 1.7 94 Administration 3.8 0.0 3.8 2.2 0.0 2.2 0

Base Cost 242.3 149.5 391.8 138.4 85.5 223.9 38

Physical contingency 22.2 3.9 26.1 12.7 2.2 14.9 15 Expected price increases 36.4 19.4 55.8 20.8 11.1 31.9 35

Total 300.9 172.8 473.7 171.9 98.8 270.7 36

Front-end Fee 0.0 0.5 0.5 0.0 0.3 0.3 100

Total Project Cost /a 300.9 173.3 474.2 171.9 99.1 271.0 37

/a Import duties are normally levied by the Government on imported equip- ment and would amount to about Y 40 million. Since this is not a cost to the Government it is excluded from the above cost summary.

Cost Estimates

3.17 The total project cost in end-1982 prices is US$271 million with a foreign exchange component of US$99.5 million or 37% of the total cost. Unit prices for civil works and buildings are based on similar works recently completed in the vicinity of the project area. The prices were applied to quantity estimates derived as explained in para. 3.15. Prices for local equipment are based on data provided to the HGB by local suppliers. For imported equipment, costs are based on list prices obtained from foreign manufacturers. Physical contingencies of 15% have been applied to civil works and 10% to buildings. Expected price - 21 - increases amount to 13% of the base cost plus physical contingencies and are based on annual escalation rates for both foreign and local components (excluding local machinery) of 8% in 1983, 7.5% in 1984, 7% in 1985, and 6% in 1986. The Government plans to hold prices for farm machinery at present levels for the next two or three years. Details of the project costs are given in Annex 2 and a cost summary is shown in Table 3.2.

Financing

3.18 Bank Group financing of US$80.3 million would consist of an IDA Credit of SDR 41.3 million (US$45 million) and a Bank Loan of US$35.3 million (including a front-end fee of $0.3 million), and would cover 30% of project costs. The balance of US$191 million, or Y 334 million, would be provided by a Central Government grant of Y 130 million, a contribution of Y 86 million from the HGB and Y 118 million from the state farms participating in the project. These local funds would be pooled in a single account and would not be earmarked for an; specific pro'ect component. The procecds of the loan/credit would be devoted to equipment procured almost entirely through international competitive bidding (generally equipment of advanced design not commonly manufactured in China) and the services of foreign consultants.

Procurement

3.19 International competitive bidding (ICB) in accordance with Bank Group guidelines would be the procedure followed in the procurement of almost all the relatively sophisticated equipment to be financed under the loan and credit, including: agricultural machinery (total to be financed US$63 mil- lion), construction equipment (US$12 million) and seed processing equipment (US$2 million). Items of equipment estimated to cost individually not more than $100,000 and aggregating not more than $2.5 million would be procured on the basis of three price quotations under procedures satisfactory to the Bank and Association. Domestic manufacturers would be awarded a preference of 15% or the customs duty, whichever is lower, in bid evaluation. It is expected that the agricultural equipment would be procured in four main contracts, two covering the self-propelled combines and two the tractors and remaining equipment. Other equipment, such as small tractors and combines, vehicles and primary tillage implements (US$38 million), together with construction materials used in civil works would be procured under local procedures which have been reviewed and found acceptable to the Bank. Civil works (US$74 mil- lion), buildings (US$59 million), and drying floors (US$4 million) would be constructed by units already established in the sub-bureaus and state farms.

Disbursements

3.20 Disbursements for the list of equipment to be procured through ICB would be at a rate of 100% of the foreign exchange cost of imported equip- ment or 100% of ex-factory bid price of local equipment; and 100% of total costs for consultant services and overseas training and study tours. No disbursement would be made for civil works, buildings or materials. The loan/ credit would be allocated as follows: equipment US$74.7 million; technical assistance and overseas training and study tours US$2 million; unallocated US$3.3 million; and front-end fee US$0.3 million. It is estimated that disbursements would be completed by June 1987. Estimated schedules of expenditures and disbursements are given in Annex 2. - 22 -

Accounts and Audits

3.21 The HGB currently maintains a detailed set of financial accounts from the farm level on up covering capital construction and production. These accounts are paralleled by accounts maintained within the banking system, and there are mandatory cross-checks at each admini-strativele!vel between the two sets of accounts. Thorough audits are conducted in the event that significant discrepancies are detected. The HGB would maintain a separate project account in sufficient detail to record expenditures;on civil works and buildings, and equipment procurement. An assurance would be obtained that the HGB would maintain such accounts and that they would be audited annually by independent auditors. Pending the establishment mnd staffing of a separate audit authority, such an audit would be carried out by the Ministry of Finance. Audited accounts would be submitted to the Bank within six months of the close of each financial year.

Environmental Effects

3.22 The swamp lands between the Heilongjiang and the Wusuli rivers are rich in wild life. While reclamation of some swamp lands would cause a reduction in the size of the habitat, the Chinese authorities have set: aside large areas to remain undeveloped and left in their natural condition. Five major wildlife reserves encompassing 230,000 ha have been established within and adjacent to the Sanjiang Plain. About 77,000 ha of the total reserve are part of the marshland ecosystem of the Plain. Also, because of the abund- ance of water areas that would remain at full project development, and the importance of small grains in the cropping system, fish and waterfowl disturbance by the project would be low. Areas developed for agriculture many years ago, in the general area of the proposed project, have proved to be environmentally stable. The thick top soils with a high organic content are resistant to wind erosion, and the very flat slopes do not present: any erosion problems from rainfall. Environmental protection officials at: both the provincial and national levels have reviewed and approved the project proposal. A program of environmental monitoring would be included in the project's work plan for monitoring and evaluation (para. 4.13).

IV. ORGANIZATION AND MANAGEMENT

General Bureau of State Farms and Land Reclamation

4.01 Central General Bureau. As one of four general bureaus in the Ministry of Agriculture, Animal Husbandry and Fishery (MAAF), the others being Animal Husbandry, Fishery, and Commune Enterprises, the Central General Bureau of State Farms and Land Reclamation (CGB) has overall responsibility for policy determination, planning and administration of the state farms (Figure 4.1). Some activities in the spheres of planning, policy research, reporting, research and education have been transferred to separate offices within MAAF, although the extent of such transfers remains ambiguous. In the proposed project, the CGB's Planning Office would exercise an oversight function and its Foreign Affairs Office would retain primary responsibility for liaison with the Bank. The organization of the CGB is shown in Figure 4.2. - 23 -

4.02 The CGB has five subsidiary organizational levels: provincial, sub-provincial, farm, sub-farm and brigade. In Heilongjiang Province, the state farm organization consists of a Provincial General Bureau, 9 sub- bureaus and 109 farms covering about 2 million ha under cultivation. The Sanjiang Plain Region has 4 sub-bureaus and 52 farms with 1.25 million ha under cultivation (64% of the total); the Lesser Xinganling Region has 2 sub-bureaus, 28 farms and 485,000 ha under cultivation (25%); and the Songnen Plain Region, which is not included in the project, has 3 sub- bureaus, 23 farms and 213,000 ha under cultivation (11%). Within the larger farms, sub-farms exist as either free-standing production units or as management links between the brigades and the farm.

4.03 Heilongjiang General Bureau. The project would be implemented by the Heilongjiang General Bureau (HGB), which is technically a part of the Provincial Government under the authority of its Standing Committee, but is also responsible to the CGB (Figure 4.3). In principle, allocation of personnel, production quotas and sales and working capital are determined by the Provincial Government, while the CGB is responsible for administration of state farms, investment, material supply and production planning. Also, in principle, profits of state farms belong to the Provincial Government, but, in practice the HGB has considerable independence in their use. Although the total amounts of investment funds are determined by the Central or Provincial Governments, disposition is the responsibility of the HGB. Disposition of these funds must be reported to the CGB or the Provincial Government but does not require their approval. Under the leadership of a director and six deputy-directors, the HGB maintains divisions and offices responsible for overall leadership of the diverse activities conducted on state farms, and direct administration of major institutions and enterprises serving the entire system. The HGB's administrative role extends to such governmental functions as provision of health, education, research, and cultural services.

4.04 Sub-Bureaus. Delivery of administrative and agricultural support services is largely concentrated at the sub-bureau level. Sub-bureau headquarters, situated on railheads, are on the scale of market towns and provide an extensive infrastructure in support of a group of subordinate farms. The sub-bureau directors and their staff of engineers, agricultural- ists and other technical and management specialists, exercise general super- vision over farm management and investment planning and execution by the farms, with which they are in day-to-day communication.

4.05 Farms. Farms in the project area are organized in three tiers, the state farm, the sub-farm and the brigade (a typical farm organization is shown in Figure 4.4). Farms over 5,000 ha in area are usually divided into sub-farms, with much of the farm management conducted at the lower level. Farms smaller than 5,000 ha are not subdivided into sub-farms; the brigades answer directly to the farm. Alternatively, on a few farms there are no brigades and the sub-farms are the lowest level of management unit. Farms and their sub-units are run by professional managers, supported by a specialized staff, and advised by an elected workers' council. The basic unit of management is the brigade, comprising 70-80 families responsible for - 24 - a cultivated area averaging some 1,000 ha, about 7.3 ha per farm worker, but on land developed by the project it would average 4,000 ha, with over half the area to be worked by sub-farms averaging some 10,000 ha in size and having no brigade sub-units. The larger production unit size is intended to take advantage of economies of scale by saving investment in buildings and managerial personnel, while permitting an upgrading of quality standards in these aspects.

Financial Management

4.06 Historically, financial management of the state farms has been highly centralized, with the Government receiving all profits, absorbing losses, and making most financial decisions. However, beginning in 1979 a "Work Responsibility" program was implemented under which a high degree of financial autonomy was conferred on subordinate organizational units. This program has been fully implemented in Heilongjiang, where the HGB retains all of its profits, and the Central Government does not automatically absorb its losses. However, the Central Government continues to provide four types of funding for state farms: the Basic Construction Fund for major invest- ments; the Working Capital Fund, a one-time grant of about Y 400/ha for newly developed land; the Small-Scale Farmland Capital Construction Fund for afforestation, small water conservancy projects and road construction; and the Administration Fund for schools, research institutes and other organiza- tions (Table 4.1). The State Farms Basic Construction Fund is administered by the CGB and the other Funds by the Provincial Bureau of Finance. In the absence of major land development projects, allocations from these funds to Heilongjiang state farms would total about Y 160 million annually.

Table 4.1: RECEIPT OF GOVERNMENTFUNDS BY THE STATE FARMS, 1980

Central Share of General Heilongjiang Bureau General Bureau ------(Y million) ------

Basic Construction Fund 615 149 Working Capital Fund 134 30 Small-scale Capital Construction Fund 206 60 Administrative Fund 61 20 Other /a 642 0

Total 1,658 259

/a Of which Y 420 million to compensate state farms for losses; Y 179 million to subsidize grain and edible oil consumption of workers aLnd staff; Y 43 million for other purposes. 4.07 Prior to 1979, the state farms had continuously run at a loss, with about Y200 million of the annual losses attributable to various quasi-governmental social expenditures and to the support by state farms of large numbers of unemployed youth. The price reforms of 1979 restored a measure of profitability and by 1980, annual after-tax profits of the state farms had reached Y 659 million, of which 55% was attributable to the HGB (Table 4.2). However, crop damage in 1981 due to flooding dealt a

Table 4.2: PROFITS AND (LOSSES) OF THE STATE FARMS

Year Total Heilongjiang - (Y million) ------

1975 (379) (98) 1976 (468) (217) 1977 (425) (253) 1978 (93) (17) 1979 397 101 1980 659 361 1981 192 (346)

temporary setback to the Heilongjiang state farms. While the Central Government received no share of profits, in 1980, a normal crop year, it collected about Y 109 million of agricultural taxes, and Y 392 million of other taxes, primarily commercial and industrial, from the state farms. Of the total taxes paid by state farms, Y 89 million (18%) was from Heilongjiang, of which Y 48 million was from the agricultural tax and Y 41 million from other taxes. One-third of the profits which remain for Heilongjiang state farms are turned over to the HGB, 10-20% goes to the sub-bureaus, and the remainder is kept by the state farms and their sub-units. Ultimate disposi- tion of retained funds must be reported to and approved by the HGB in detail. Use of profits is governed by the rule that 60% should go to productive investment, 10-20% to a reserve fund, and 10-20% be distributed as bonuses (limited to a maximum of one-sixth of the total wage bill) or otherwise used for worker and staff benefits. Disposition of profits in 1980 is shown in Table 4.3.

4.08 Since the 1979 management reforms, a growing proportion of financ- ing for basic construction has come from retained profits. This trend is expected to continue in the future, although the severe and exceptional floods in 1981 forced Heilongjiang state farms to turn to bank lending as a tempo- rary source of working capital. Special disaster relief of Y 18 million was made available to the HGB by the Central Government and the Province in 1981 and 1982 to help reduce this burden. - 26 -

Table 4.3: DISPOSITION OF PROFITS IN 198U

All state HeiJL a ang Item farms state farms ------(Y million)

Basic construction 350 223 Reserves 91 67 Bonuses 199 71 Loan repayment 19 0

Total 659 361

4.09 Financing for the proposed project would not place an inordinate burden on the HGB or its subordinate farms. State farm contributions would be relatively small in the first two years of the project, allowing time for repayment of debt stemming from the 1981 floods. At least one half of total farm contributions could be financed from profits arising from the project before 1986. Contributions from HGB funds can draw on reserves totaling over Y 105 million, normal annual receipts from state farms of Y 30 million, and annual receipts from the Central Government for all investment purposes of Y 110 million.

Project Management and Execution

4.10 The organization for implementing the project would be based on the existing structure of the individual farms and their new decentralized relation to the Heilongjiang and Central General Bureaus. Project staff' would be drawn from existing sub-bureaus and offices within this system. A Project Coordinator at the Deputy Director General level in the CGB would be responsible for overall direction of the project, and have primary responsibility for liaison with the Bank Group and coordination with other Ministries. The Project Coordinator and his staff would monitor annual budgets, arrange for procurement of equipment required by the project, prepare applications for Bank disbursements, and exercise oversight on all aspects of project execution. The China National Technical Import Corporation of the Ministry of Foreign Trade would assist the CGB in procurement by handling bid invitation, bid evaluation, and contract award.

4.11 Primary responsibility for design, procurement and construction supervision would rest with the HGB, which was previously responsible for project preparation. Project headquarters would be located in Jiamusi, where a Foreign Investment Management Office (FIMO) in the HGB has been established to manage this and other externally-financed projects. The FIMO - 27 -

is comprised of a General Administrative Office and four sections: (a) construction, (b) technical, (c) financial and procurement, and (d) monitor- ing and evaluation. It would be responsible for scheduling the project- related work of the technical, financial and administrative offices and bureaus involved in the project. The FIMO would also prepare annual budgets, maintain project accounts, monitor and report on project progress and impact, assure proper operation and maintenance of project machinery and equipment, and organize training and technical assistance. The Manager of the FIMO reports to the Director General of the HGB, who has overall responsibility for state farm operations in the Province. The office is staffed by 13 specialists, including three drainage engineers, three machinery specialists, one building construction specialist, one agronomist, one planning specialist, two statisticians and two accountants. An assurance would be obtained that the FIMO would be maintained during project implemen- tation and be adequately staffed with experienced and qualified personnel.

4.12 Specialized construction teams responsible to HGB are located in each sub-bureau. The teams in sub-bureaus where most of the work would be undertaken (Jiansanjiang, Hongxinglong and Mudanjiang) would be equipped with machinery provided by the project. Together with a special bridge construc- tion team, they would be responsible for major works such as embankments, main and branch drains, pumping stations, rural roads, and bridges. Build- ings and minor works, such as laterals, sublaterals, and farm roads would be built by brigades in each participating state farm. Construction of major works would be supervised by HGB and sub-bureau engineers, who would also review periodically the work of engineers of the farms in supervising build- ings and construction of minor works. If, during construction, minor works and buildings are found not up to agreed technical standards or funds are used for purposes not agreed in an approved technical farm plan, the 1GB would suspend disbursement to that farm until the problem was corrected. Maintenance of drains, pumping stations and roads would be the responsibility of the state farms, supervised by the sub-bureaus and HGB.

Monitoring and Evaluation

4.13 This would be performed by staff of the FIMO (para. 4.11), assisted as necessary by economists from the Economic Research UJnit of the CGB. Production and income statistics and data on the physical and financial progress of the project would be collected from state farms on a regular basis, along with information derived from the project accounts. Special studies would be carried out to evaluate the efficiency of imported machinery and equipment in comparison with locally produced equipment in land reclamation and farming; and to monitor effects of the project on the environ- ment. The FIMO would also be responsible for preparing half-yearly progress reports to be submitted to the Bank within one month of the end of each half- year.

Agricultural Support Services

4.14 Agricultural Research. The HGB maintains an extensive and reasonably well equipped research network consisting of the Heilongjiang Farming and Land Reclamation Research Institute at Jiamusi, seven - 28 -

sub-institutes, one at each sub-bureau, and farm level research stations. At the bureau and sub-bureau levels, research staff includes 675 technical personnel with three or more years of post-secondary school training and 1,000technicians with secondary school training. The Researcrh Institute engages in plant breeding and varietal testing, machinery trials of foreign eauipment, soil testing and collection of domestic and foreign publication on agricultural techniques. The sub-institutes have equally broad functions, but in addition specialize in particular crops or subjects. For example, Hongxinglong Sub-bureau Research Institute is primarily responsible for maize breeding work. Research stations at the farm level emphasize the practical aspects of cultivation, seed testing, and chemical fertilizer experiments. The Research Institute also maintains close professional ties with the Heilongjiang Provincial Academy of Agricultural Sciences at Harbin. Most improved wheat and soy varieties planted on state farms derive from the Academy's Keshan County Research Station. In addition, the HGB maintains an Economic Research Institute and a Design and Planning Research Institute, which support the work of planning offices at each level of the system.

4.15 Technical Staffing and Education. Throughout the HGB system, there are about 35,000 technical personnel, of whom 6,300 have the equiva- lent of college-level training, and 16,000 have secondary or technical school level training. To maintain and upgrade the number and quality of technical and managerial staff, the HGB maintains an extensive educational and training system, including one university, eight post-secondary tech- nical schools, and 275 secondary schools, of which 39 are technical schools. Secondary schools are organized at the farm level. Technical secondary schools offer one year of training for ordinary secondary school graduates or three years for non-graduates, culminating in an examination which qualifies graduates as technical workers. Post-secondary technical schools offer more advanced training leading to technician positions in such specialities as land reclamation, economics, agricultural techniques, public health, teacher training, and agricultural machinery. The August First Farming and Land Reclamation College in Mishan County, with nationwide selection of students, trains engineers, accountants, economists, agrono- mists and animal husbandry specialists. The HGB maintains a Cadre Training School at Harbin, providing one-to-two month short training courses for farm and sub-farm chairmen. Each sub-bureau also maintains a cadre training school, and each farm runs short training courses in specialized subjects to upgrade their own personnel. Aside from the training system within the HGB, higher level technical staff are commonly drawn from agricultural colleges outside the province.

4.16 Seed. Provision of improved seed to each production unit is the function of the HGB's Seed Company, a recently organized unit which is just beginning to fulfill its responsibilities. The Company maintains offices at the bureau, sub-bureau and farm levels. Breeder seed is imported from outside, notably from Keshan county, or obtained from the Breeding Research Group of the Research Institute, and tested, multiplied and distributed under Seed Company management. Each state farm has an experiment station and/or a pure strain farm, normally occupying 1% of total farm area, which maintains - 29 -

self-crossing parent stock for maize and pure strains of other crops. Replication brigades multiply stock seed which is obtained once every four years from the pure strain farm. Production brigades obtain all seed from the replication brigades. Seed Company personnel provide technical direction and inspect and grade seeds. As this system is still under development and recently introduced improved seed varieties are still in the multiplication process, the quality of production seed falls short of the desired standard. Moreover, seed production operations are not well equipped. The project would provide equipment to strengthen seed processing operations, including drying, seed cleaning and other processing equipment. Also, technical assistance would be made available to assist in upgrading the breeding, replication and distribution system.

4.17 Fertilizer. Chemical fertilizer use has grown rapidly since 1979, and currently averages about 23 kg/ha nitrogen and 36 kg/ha phosphate. Experimental results for the project area indicate that marginal response rates to applications of chemical fertilizers are high for at least maize and soybeans. Recommended application levels to be applied on project land would exceed 100 kg/ha of total nutrient, with a somewhat greater proportion of nitrogen than presently applied. Provision of fertilizer and other inputs to the teams would be the responsibility of the Material Supply Bureau of the HGB, suboffices of which are established at each state farm. In the past the HGB has had priority in the supply of fertilizer, and no problem is expected in meeting future project requirements, but the HGB is discussing with the Government ways to increase the availability of more suitable formulations than presently used.

4.18 Agrochemicals. Pesticides are readily available in the project area through the Material Supply Bureau. Domestic production would be sufficient to meet project requirements. A variety of pre- and post- emergence herbicides are used in the project area, several of which are imported. The HGB is aware of the potential environmental hazards from the use of agricultural chemicals, including fertilizers, and seeks to minimize the posible damage through careful selection of chemicals and a program of periodic monitoring of soils and water.

4.19 Equipment Maintenance. The Material Supply Bureau of the HGB is generallly responsible for importing materials and parts from outside the project area and distributing them in accordance with orders received from the farms annually. In addition, the Agricultural Machinery Company of the Ministry of Agricultural Machinery and the Metal Products Company of the Ministry of Commerce maintain county outlets which are a local source of common materials and parts. Each state farm and each sub-bureau maintains a farm machinery repair shop which performs complete overhauls of tractors and other powered machinery at scheduled intervals, produces nonprecision parts, and can produce many types of implements. Present capacity, including personnel and machine tools, greatly exceeds requirements, and with some upgrading of diagnostic and repair equipment and added training in repair and maintenance of foreign machinery, these workshops would adequately service farm and construction machinery imported for the project. The - 30 -

project would provide technical assistance and train technicians in the repair and maintenance of imported machinery, and upgrade the spare parts inventory maintenance and distribution system.

Consulting Services

4.20 The HGB would employ consultants to assist in (a) the staff train- ing program, (b) development of the seed system, (c) maintenance of the equipment, (d) management and planning, and (d) construction operations Consultant assignments would be mostly of a short-term nature and would begin in the second half of 1983 and extend over three years. Total esti- mated consultant input is 78 man-months. The estimated overall manr-month cost for specialists would be about US$13,000 inclusive of salaries, overhead, overseas allowance, travel, and living expenses while in China. Assurance would be obtained that all consultants engaged under the project would be employed in accordance with the Bank's Guidelines on Consultant:s.

V. AGRICULTURAL PRODUCTION

Cropping Patterns

5.01 On lands adjoining the project areas, wheat occupies nearly 60% of the area, soybeans just over 30% and maize around 10%. Wheat is planted in mid-April and harvested in early August. Soybeans and maize are sown in May and harvested in late September or early October. The most common three-year rotation is wheat/wheat/soybean. A wheat/soybean/maize rotation is also practiced but to a limited extent. In the project areas, after they have been developed for cultivation, little or no maize would be planted for the first two or three years because of difficulties in establishing a suitable seed bed. Therefore, most of the farms would initially follow a wheat/ wheat/soybean rotation. In surrounding areas, maize is not a financialLy attractive crop at present yield levels. As seed quality improves due to the project's seed component, and as cultural practices improve, maize would become more profitable. At full development of the project's 200,000 ha, the area in a typical year under each crop is expected to be: wheat, 100,000 ha (50%); soybean 75,000 ha (37.5%); and maize 25,000 ha (12.5%).

Farming Practices

5.02 The current practice on most state farms is to carry out post-- harvest moldboard plowing followed by disc harrowing in the spring prior to planting. Recently, good results have been achieved in areas where post- harvest plowing has been eliminated for soybeans and maize. This reduction in tillage helps to promote decomposition of crop residues, conserve soil moisture, reduce compaction, and lower operating costs. Wheat would stLll be followed by post-harvest plowing because with the earlier harvest, weeds - 31 -

would otherwise have time to grow and form seeds. In the spring, tillage of the three crops would be performed by trailed tandem disc harrows. Another innovation recently introduced on a small scale is subsoiling which has shown good results on heavy clays. On the project lands, the timing and sequence of farming operations would follow existing practices except for the reduced tillage for maize and soybeans mentioned above and the selective use of subsoiling. However, with the more advanced equipment there would be a qualitative improvement in operations and, with faster and more powerful tractors and combines, tighter schedules would be feasible (Figure 5.1).

5.03 Wheat would be sown at a 255 kg/ha seeding rate by combination seed/fertilizer drills with press wheels. Soybeans, 90 kg/ha, and maize, 25 kg/ha, would be planted by twelve-row precision planters with fertilizer hoppers. Row spacing would be 15 cm for wheat, 50 cm for soybeans and 66 cm for maize. The improved planting equipment and techniques would lead to even planting depths, correct fertilizer placement and reduced seeding rates. Weed control would be through a combination of herbicides and inter-row cultivation. Pre-emergence herbicides would be applied to soybean land prior to planting and post-emergence herbicides would be applied on both soybean and maize fields. Cultivation with rotary hoes would be carried out just after crop emergence. Follow-up cultivations (1-3) would be performed as needed in conjunction with top dressing fertilizer applications. Fertilizer use on existing farms is rather low and on the project lands, it would be raised by about 150%. Nutrient applications per ha would be: wheat, N 50 kg and P 70 kg; soybean, N 35 kg and P 70 kg; maize, N 110 kg and P 60 kg.

5.04 All of the grain harvest would be handled using self-propelled combines. Because the wheat harvest, between July 20 and August 15, coincides with one of the wettest periods of the year the initial harvesting would be handled with trailed swathers when the grain moisture content would be approximately 30%. The cut wheat would be left to dry in a windrow until the moisture content fell to 20%. To assist rapid drying a maximum swath width of 4 to 5 m would be used. Direct combining of wheat would start about August 1-5 when the grain moisture content in the standing crop reaches about 20%. Thus the combines would be used with pick-up attachments to handle the swathed wheat and standard cutter-bar heads for the standing crop. Soybean would be harvested in September using combines fitted with a special floating head which follows the contour of the ground with a clear- ance of 3-4 cm without bulldozing, thus minimizing field losses by getting below the majority of the pods. Maize would be harvested immediately after the soybean crop using the same combine fitted with an eight-row cornhead. For all crops a straw chopper would be fitted to the rear of the combine giving even distribution of straw and stems back to the field.

Yields and Production

5.05 Yields at full development on the project lands are expected to be 2.1 ton/ha for wheat, 1.6 ton/ha for soybean, and 3.9 ton/ha for maize. - 32 -

Average yields on Heilongjiang's state farms are presently 1.6 ton/ha for wheat, 1.3 ton/ha for soybean, and 2.5 ton/ha for maize, however, some sub-farms and brigades have consistently attained yields above the estimated full development yields. Total production at full development would be 210,000 tons of wheat, 120,000 tons of soybean, and 110,000 tons of maize.

Drying, Storage and Processing

5.06 The increased production of grains and legumes on project farms would necessitate increased grain drying and storage capacity. The project would provide the needed facilities. For each of the 75 brigades and subfarms responsible for the newly developed land, about 0.75 ha of concrete drying floor and steel bin storage capacity for about 3,500 tons of gra-in would be built. The drying floors and about half of the grain storage would be located at the individual brigade or subfarm, usually no more than 4-5 km from the farthest fields cropped by the unit. The remaining storage capa- city would be installed at major collection points: state farm headquarters with rail access, generally within 30-40 km of the production units. The new drying floors would give adequate space for sun-drying of all the grain produced on project land. The storage facilities provided would permit storage of about 25% of the total crop at the production unit level and an additional 25% at the collection/shipping point, thereby allowing smooth flows of the wheat and soybean, most of which would be exported from the project area, to the granaries and processing mills near final markets. Existing facilities for storage and processing at final markets and for processing grains retained for local, project area, consumption are adequate to meet projected requirements. In addition to facilitating the flow of commodities to final markets, the new storage capacity would provide interseasonal storage of maize, most of which would be retained for use as livestock feed by the specialized livestock brigades on project area farms. Transport of grain from the production units to the nearest rail shipping points would be by trucks to be purchased by the project. Shipment to final markets would be by rail.

Subsidiary Production

5.07 Of the total gross value of production on project area state farms, currently about 6% is attributable to forestry, stock-raising, sideline industries and fishing, and 36% is industrial income (including processing, repair shops, etc.). In addition, substantial private income is generated through raising vegetables on private plots and hunting and gathering activities. With the project, the new or expanded brigades and sub-farms established on reclaimed land would add to production from these sources at about the same rates as present farms. However, as these activities would require added investments of unknown magnitude, their revenues have been excluded from estimates of economic benefit. - 33 -

VI. MARKETS, PRICES, FARM INCOMES AND COST RECOVERY

Market Prospects

6.01 ChinaTs production of the crops grown in the project area is insufficient to meet domestic consumption requirements and imports of these crops have grown in recent years. Net imports of grain, mainly wheat, were estimated at 12.9 million tons and net imports of soybeans at about 400,000 tons in 1981. Imports of these crops, expected to continue at about the same levels throughout the 1980s, have contributed to the Government's efforts to increase supplies of basic foodstuffs in the cities and ease procurement pressures in the rural areas. Government domestic grain procure- ment rose only about 4 million tons from 1977 to 1980, despite a 35 million ton increase in production. However, in the future, domestic procurements are expected to rise at a more rapid rate to meet the growing requirements of the large urban population and regions specializing in cash crops. The project area in Heilongjiang is one of the Government-designated Grain Base Regions that are expected to make major contributions to increased govern- ment procurements of grain and legumes. The incremental output from the project, 440,000 tons of grains and soybean at full development would be easily absorbed by the market, since it represents only about 3% of the imports required to meet domestic demands.

Prices

6.02 The state has a near monopoly on crop procurement, and determines all procurement prices and production quotas. Procurement prices had remained at about the same level for more than a decade until grain prices were iucreascd by 26% in 1979 and soybean prices by 50% in September 1981. Quota prices apply to the annual marketed surplus responsibility of each brigade, which is specified in the project area as 0.45 t/ha of land allocated to grain production. This quota level is not expected to change in the foreseeable future. Above-quota prices, which are 50% higher, apply to sales exceeding the quota. Soybean are not subject to quotas, but receive a reduced price for production designated as above-plan (80% of project soybean acreage).

6.03 A summary of the farmgate prices for 1982, 1985 and 1990 is shown in Table 6.1, and details are given in Annex 3. The financial farmgate prices for wheat and maize are weighted averages of quota and above-quota prices, and for soybean, of prices for planned and above-plan production. Newly developed land is exempt from quota for three years, therefore financial prices of grain for 1983-85 would be above-quota prices. In the past, crop procurement prices have been adjusted to reflect rising costs of production only at 5 to 10 year intervals. In the financial analysis it is assumed that all input and output prices, expressed in constant 1982 values, will remain unchanged from end-1982 levels. This assumption reflects the Governments commitment to maintain agricultural production incentives while avoiding undue inflationary pressure on urban wage or food subsidy levels. For the economic analysis of the project, farm input and output values are based on Bank Group commodity price forecasts, adjusted for international and domestic transport costs and expressed in end-1982 constant prices. - 34 -

Table 6.1: CROP AND INPUT FARMGATE PRICES (constant end-1982 values)

1982 1985 1990 ------(Y/ton)------

Wheat Financial 501 501 465 Economic 397 411 428

Soybean Financial 586 586 586 Economic 554 657 747

Maize

Financial 300 300 284 Economic 285 330 341

Urea Financial 930 930 930 Economic 448 473 513

Triple superphosphate Financial 480 480 480 Economic 405 441 480

Diesel Fuel Financial 460 460 460 Economic 604 604 695

Farm Incomes

6.04 The traditional concept of farm income derived from an indiviLdu- ally operated plot is not applicable in the project area, where the land is owned by the state and managed by state farms employing wage labor. The typical basic production unit in the project area would be a production brigade or.sub-farm with about 300 workers and staff farming about 4,000 ha of land. This has been taken as the scale for a notional farm budget analysis (Annex 3). At full development the typical 4,000 ha unit would have an annual before-tax income of about Y 1.3 million net of all production costs including labor. Net after-tax income would be Y 1.2 mil- lion, of which about Y 0.7-0.8 million would go to the HGB as the unit"s contribution to the HGB-administered pool of investment funds and to debt service on the Bank loan. After completion of loan repayment in 2000, the - 35 -

payment to the HGB would fall to Y 0.5 million annually, leaving Y 0.7 mil- lion for use by the production unit and its parent state farm. Based on the budgets for a typical unit, estimated after-tax income annually generated by the project and accruing to the participating state farms and the HGB would be Y 59 million (US$34 million).

6.05 The staff and workers on a typical 4,000 ha production unit would be drawn from about 160 families, with an average of 4.5 family members and 1.9 persons fully employed. The annual incomes of these families would average Y 2,175; Y 1,175 from wages and bonuses for farm and sideline activity work, Y 350 from private plots and Y 650 in housing and other subsidies provided by the farm. Thus, per capita incomes would be about Y 485 (US$275), 31% more than the average of Y 370 (US$210) on farming units now operating in the project area.

Cost Recovery

6.06 Cost recovery for the project would have two elements. Farms would pay annual agricultural taxes of Y 8.4 million on project lands at full development and would make payments to the Central Government, through the HGB, to cover debt service on the Loan/Credit, averaging Y 8 million annually over 30 years at the Y 2.8/$ internal settlement rate. These direct charges would represent 44% of project rents at full development. The Central Government would contribute Y 130 million of project expenditures, of which Y 55 million would be attributable to the provision of housing, schools, and clinics and Y 85 million to productive investment. Using a discount rate of 12%, the cost recovery index for total Central Government investment in the project plus the Loan/Credit would be 70%, and the rent recovery index would be 41% (Table 6.2). In addition, the Government would indirectly benefit from low-cost quota procurement of at least 43,000 tons of grain annually, worth Y 7.5 million (calculated as the difference between quota and above-quota prices). An analysis was made to assess the extent to which the proceeds of the project would meet the HGB's debt repayment obligation (Annex 3). This showed a positive net flow except in the first three years. Factors contributing to this initial cash deficit include taxes, and the front-end fee and commitment charges on the Loan/Credit. However, for 1983-86, the HGB and farms participating in the project have budgeted Y 135 million for project investment from reserves and retained earnings which more than covers the projected deficit. - 36 -

Table 6.2: RENT AND COST RECOVERY

4,000 ha pro- duction unit /a Total project (Y '000) (Y million)

At Full Project Development Gross value of product 3,931 Less: production costs /b 2,471

Equals: Net farm income /c 1,460 Less: Imputed capital recovery on 353 HGB/Farm financed works /d

Equals: Project rent 1,107

Project charges Agricultural taxes 168 Debt service 324

Subtotal 492

Project charges as % of project rent 44

During Project's Life /e Project rent 295 Project charges 120 Rent recovery index (%) 41 Project costs /f 171 Cost recovery index (%) 70

/a Estimates for a representative farming unit at full development derived from Annex 3 with adjustments as noted below; in constant 1982 value. /b Not including bonuses or transfer payments (such as price subsidies or housing), which may be viewed as a sharing of project rents with the labor force or as payments made by state farms in their quasi-government role. /c Excluding private plot income and other brigade income (income from sideline activities). /d Over 30 years at an interest rate of 12%. Farm working capital is provided by the Government. /e Present values discounted at 12% over 30-year project life. 7 Net of costs of housing and social facilities and of HGB/farm financed works. - 37 -

VII. BENEFITS, JUSTIFICATION AND RISKS

7.01 General. Wheat, soybean and maize grown on the 200,000 ha of land developed by the project would increase China's annual grain and legume production by 433,000 tons, 90% of which would be a marketable surplus. The project would contribute to the Government's objective of increasing the supply of commercial grain at a cost of less than US$1,400 per ha developed. At full development, about 15,000 new full-time jobs would be created, relieving the unemployment and underemployment within the state farms in Heilongjiang. The project would serve as a large-scale trial of techniques applicable to the development of an additional 470,000 ha of uncultivated land, and as a demonstration of up-to-date mechanized farming applicable to some 2 million ha now cultivated by state farms in Heilongjiang. The project's seed component would also contribute to a general increase in crop yields on existing farms.

7.02 Foreign Exchange. All tradeable components are valued directly in foreign exchange, converted to local currency at the official exchange rate at appraisal of Y 1.75 = US$1 and adjusted for local transport and handling. No detailed studies of foreign exchange conversion rates for non-traded commodities have been conducted. Therefore preliminary and tentative estimates of local conversion factors were made and used to convert all local input costs and project expenditures to economic prices. The factors used were 1.06 for construction materials, 1.04 for domestic farm machin- ery, 0.69 for road transport, 0.77 for agricultural chemicals, 0.25 for common farm labor, and 1.50 for management and technical labor.

7.03 Farm Labor. At full development, crop cultivation on the 200,000 ha of developed land would add 900,000 man-days annually to the labor requirements of project area state farms. To meet peak period labor requirements, some 9,000 additional farm workers would be employed, assuming 25 man-days/month per worker. Including management and support personnel the project would create 15,000 full time jobs. These would be filled by transfers from other farms and new entrants to the labor force. Given the underemployment on the state farms, the economic cost of labor is low. At present the average farm worker receives about Y 2.0/day in wages and bonuses from agriculture. This figure considerably exceeds the economic cost of common labor and for purposes of the economic analysis labor has been priced at Y 0.5/day. Since the project is not labor intensive, the economic rate of return is insensitive to the price of labor.

7.04 Investment Costs. As calculated for the economic analysis, the total initial investment cost is US$211 million which includes physical contingencies but excludes price contingencies. This amount excludes expenditures of US$33 million for construction of housing, schools and health facilities, which are regarded as self-justifying social expenditures. The cost stream includes expenditures of US$99 million over project years 16-19 for replacement of farm machinery. Local costs were - 38 -

converted at the official exchange rate of US$1 = Y 1.75. Operation and maintenance costs of project works and facilities, about US$8.6 annuallyR are borne by the farming units and the HGB and hence were treated as a production cost in determining project net benefits.

7.05 Development Phasing. Construction of project works and procurement of agricultural machinery would be phased over the period 1983-86. Benefits would begin as soon as drainage works are completed and newly developed land is brought into production. Full development yields are assumed to be reached five years after land is first placed in production. The project would reach full development in 1991.

7.06 Production and Benefits. Expected future yields, cropping intensities and production with the project are discussed in Chapter 5. The physical input requirements, unit prices and labor requirements are presented in Annex 3, and the cost and benefit streams in Annex 4. At f-ull development the project's annual net incremental value of production would be US$66.3 million.

7.07 Distribution of Benefits. The project's main objective is to produce a marketable surplus of grain, therefore, its direct effect on income distribution would therefore be limited. However, it would have two indirect distributive effects which could be significant but cannot be quantified. First, the marketable surplus would reduce procurement at quota prices elsewhere in China; this is likely to benefit marginal producers in poorer areas by allowing increased sales at market prices. Second, the improvements in farming practices and seed quality resulting from the project are likely to carry over to the farms operated by communes in Heilongjiang Province.

7.08 Economic Rate of Return. Using the foregoing assumptions and discounting the project's costs and benefits over a 30-year evaluation period, the project's economic rate of return would be 23%. At a discotnt rate of 12%, the estimated opportunity cost of capital in China, the net present value of the project is Y 276 million (US$158 million).

7.09 Sensitivity Analysis. Sensitivity of the rate of return was tested to cost overruns, delay in full development, and failure of yields to reach projected levels, and the results are shown below. Further testing to determine which variables would be most important to the success of the project employed two measures of sensitivity: the crossover value and the elasticity. The crossover value is the value of the variable tested at which net present value of project costs and benefits discounted at 12% is reduced to zero. The elasticity is the percent change in net present value due to a 1% change in the variable. The results are presented in Annex 4 and discussed below. - 39 -

Economic Net Present Rate of Return Value @ 12% Assumption % (Y, Millions)

A 20% increase in construction costs 21 255

A combination of a 20% increase in construction costs and a three-year delay in reaching target yields 17 180

Yields at full development fail to exceed present Heilongjiang state farms averages 16 75

7.10 No single assumption proved crucial to the estimated rate of return. Failure of crop yields to surpass the present average for the HGB would reduce the rate of return to 16%. Analysis of crossover values indicates that project returns are not very sensitive to assumed yields, crop prices, production cost, or construction cost. If either crop yields or crop prices at full development were to be 24% lower than anticipated, the rate of return would fall to 12%. However, this would entail yields at full development no greater than present averages on Heilongjiang state farms, despite technical assistance and far greater investment in farm inputs, or no major change in economic crop prices relative to end-1982 levels. Sensitivity to increases in crop production costs or construction costs is moderate, and there is little likelihood that the crossover values, respectively 47% and 209% above appraisal estimates, would occur.

7.11 Risks. The project faces no significant technical or administra- tive risks. The implementing agency has considerable experience in land development and management of mechanized farming. The innovative features of the project would be the introduction of larger and more modern types of farm machinery and construction equipment than presently used. The basic skills for efficient operation and maintenance of such equipment already exist and would be strengthened through further training. - 40 -

VIII. AGREEMENTS REACHED AND RECOMMENDATION

8.01 At negotiations, agreements were reached with the Government on the following points:

(a) by September 30 of each year a detailed work program and financing plan for the following year would be prepared for Bank review (para. 3.16);

(b) the Heilongjiang General Bureau would maintain a separate account for the project. This would be audited annually by the Ministry of Finance and the audit report would be sub- mitted to the Bank within six months of the close of each financial year (para. 3.21);

(c) the Government would ensure that the Foreign Investment Management Office would be maintained during implementation of the project and be adequately staffed with experienced and quali-- fied personnel (para. 4.11); and

(d) consultants for the project's technical assistance components would be employed in accordance with the Bank's Guidelines on Consultants (para. 4.20).

8.02 With the above assurances, the project would be suitable for an IDA Credit of SDR 41.3 million (equivalent to US$45 million) and a Bank Loan of US$35.3 million on standard country terms of 20 years and 5 years of grace. The Borrower would be the People-s Republic of China. - 41 - ANNE X I Table I

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Project Land Development

Project farm totals Units involved and areas to be development Cultiva- Waste- Planned New Existing ted area land development Subfarms Brigades Subfarms Brigades ------('000 ha )------(no.) ('000 ha) (no.) ('000 ha) (no.) (-000 ha) (no.) (-000 ha)

Total 982 758 200 5 40 12 30 13 69 45 61

Sanjiang Plain Region 893 687 182 5 40 9 25 13 69 36 48

Baoquanling SB 52 21 11 0 0 1 1 0 0 6 10 Puyang 22 11 4 ------2 4 Xiangyang 30 10 7 - - 1 1 - - 4 6

HongxinglonR SB 386 101 48 0 0 1 2 7 42 5 4 Youyi 10)6 22 13 - - - - 2 13 - - 8 52 74 9 7 - - - - 1 7 - - 8S53 54 19 8 - - - - 2 8 - - 597 46 15 10 - - - - 2 10 - - 291 42 7 4 - - - - 1 4 - - Beixing 25 9 2 ------3 2 HongqilinR 18 6 1 ------1 1 Raohe 21 14 3 - - 1 7 - - 1 1

Jiansanjiang SB 316 421 83 5 40 7 22 0 0 16 21 859 32 32 10 1 10 ------Shengli 33 22 3 ------3 3 Qianshao 16 104 7 - - 2 5 - - 1 2 Qixing 57 20 4 ------4 4 Qindeli 59 113 33 3 27 2 6 - - - - Qinglongshan 25 7 5 ------3 5 Chuangye 25 24 3 1 3 ------Qianfeng 15 45 7 - - 2 6 - - 1 1 Qianjin 30 34 8 - - 1 5 - - 2 3 Hongwei 24 20 3 ------2 3

Mudanjiang SB 139 144 40 0 0 0 0 6 27 9 13 854 40 41 13 - - - - 3 13 - - 856 33 34 7 - - - 1 2 3 5 858 22 15 7 - - - - 1 7 - - Qingfeng 26 12 8 ------6 8 Xingkaihu 18 41 9 - -1 5 - -

Lesser Xinganling Region 89 71 18 0 0 3 5 0 0 9 13

Beian SB 78 51 7 0 0 2 3 0 0 4 4 Xunke 33 l2 2 - - T T - - T T Jinhe 16 21 1 ------1 1 Longmen 12 14 2 - - 1 2 - - Jianshe 17 4 2 ------2 2

Ji,isan SB 11 20 11 0 0 1 2 0 0 5 9 - 42 - ANNEX 1 Table 2

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Details of Drainage Pumping Stations

Electric Total Drainage Catchment No. of motor/die- Pumping Unit pumping flow Total Subbureau and name of station area pumps sel engine head flow capacity rate rating (ha) (m) - (cu m/sec) - (1/sec/ha) (kW)

Baoquanling Puyang S.F., Puyang River Bridge, South Station 3,120 4 Electric 3.0 1.30 5.2 1.7 100 Puyang S.F., Brigade No. 11 2,415 3 3.0 1.30 3.9 1.6 75 Station

Hongxinglong Youyi S.F. Eastern Outlet Station No. 4 3,880 9 Diesel 4.4 0.66 5.9 1.5 400 Youyi S.F. Eastern Outlet Station No. 5 3,915 8 4.2 0.68 5.4 1.4 360 Youyi S.F. Eastern Outlet Station No. 6 3,600 9 4.6 0.62 5.6 1.5 400 Youyi S.F. Piaodai Station No. 4 4,200 10 6.2 0.60 6.0 1.4 450 Youyi S.F. Piaodai Station No. 2 4,630 10 6.1 0.65 6.5 1.4 450 Youyi S.F. Piaodai Station No. 3 4,140 11 4.3 0.55 6.0 1.5 490 Youyi S.F. Eastern Outlet Station No. 2 4,460 11 4.9 0.62 6.8 1.5 490 Youyi S.F. Eastern Outlet Station No. 3 4,460 11 5.0 0.62 6.8 1.5 490 852 S.F. Xiao Raoli River Outlet Station No. 1 1,505 3 Electric 3.8 0.87 2.6 1.7 365 852 S.F. Xiao Raoli River Outlet Station No. 2 5,195 8 4.2 1.00 8.0 1.5 1,240 852 S.F. Xiao Fusan Main Drain Station 1,935 3 4.0 1.13 3.4 1.7 465 Beixing S.F. Brigade No. 11 Pumping Station 665 5 6.0 0.22 1.1 1.6 140 Beixing S.F. Brigade No. 14 Pumping Station 665 4 10.0 0.25 1.0 1.5 160 Hongqiling S.F. Xiao Lian Ze Pumping Station 4,340 4 7.0 1.56 6.2 1.4 620 Hongqiling S.F. Main Pumping Station 2,900 4 7.0 1.03 4.1 1.4 620 853 S.F. Subfarm No. 6 Pumping Station 10,520 8 6.0 2.07 16.6 1.6 1,240 597 S.F. Main Drain No. 3 Pumping Station 13,220 10 6.0 1.92 19.2 1.4 1,550

Mudanjiang 858 S.F. Song Drain No. 3 Pumping Station 2,665 4 3.0 1.00 4.0 1.5 300 858 S.F. Song Drain No. 6 Pumping Station 2,665 4 3.0 1.00 4.0 1.5 300 Xingkaihu S.F. Pumping Station No. 4 4,000 5 Diesel 5.3 1.25 6.2 1.0 205 Xingkaihu S.F. Pumping Station No. 5 1,335 2 5.3 1.25 2.5 1.9 80 Xingkaihu S.F. Pumping Station No. 6 1,335 2 5.3 1.25 2.5 1.9 80

Total 91,785 152 139.8 1.5 11,070 (average) - 43 - ANNEX 2 Table 1

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Project Cost Summary

Cost Y million US$ million

Drainage and Land Clearing Dikes 8.6 4.9 Main drains 10.7 6.1 Branch drains 9.1 5.2 Lateral drains 7.7 4.4 Sublateral drains 5.2 3.0 Pumping stations 3.0 I./ Bridges and culverts 10.7 b.1 Land clearing 19.9 11.4 Subtotal 74.9 42.8 Roads Rural roads 27.4 15.6 Field roads 4.4 2.5 Bridges and culverts 3.8 2.2 Subtotal 35.6 20.3 Buildings Housing 41.8 23.9 Schools, etc. 12.8 /.3 Grain storage 9.4 5.4 Workshops 16.8 9.6 Electrification 5.5 3.1 Telephone 1.8 1.0 Subtotal 88.1 50.4 Drying Floors 6.3 3.6

Machinery and Equipment Agricultural machinery 155.9 89.1 Construction machinery 20.3 11.6 Seed processing equipment 3.9 2.2 Subtotal 180.1 102.9 Other Technical assistance 3.0 1.7 Administration 3.8 Z.2 Subtotal 6.8 3.9 Total Base Cost 391.8 223.9

Physical contingencies 26.1 14.9 Expected price increase 55.8 31.9 Total 473.7 270.7 Front-end fee 0.5 0.3 Total Project Cost 474.2 271.0 - 44 - ANNEX 2 Table 2

CHINA HEILONGJIANG LAND RECLAMATION PROJECT

Schedule of Expenditures (US$ million)

1983 1984 1985 1986 Total

Drainage and Land Clearing Dikes 0.9 2.5 1.1 0.4 4.9 Main drains - 1.7 2.6 1.8 6.1 Branch drains - 1.7 2.0 1.5 5.2 Lateral drains 1.0 1.1 1.1 1.2 4.4 Sublateral drains 0.8 0.7 0.7 0.8 3.0 Pumping stations 0.4 0.4 0.3 0.6 1.7 Bridges and culverts 1.0 1.7 2.1 1.4 6.1 Land clearing 2.1 3.2 3.2 2.9 11.4 Subtotal 6.2 13.0 13.0 10.6 42.8 Roads Rural roads 1.3 3.6 6.2 4.5 15.6 Field roads 0.4 0.1 1.0 1.0 2.5 Bridges and culverts 0.5 0.3 0.7 0.7 2.2 Subtotal 2.2 4.0 7.9 6.2 20.3 Buildings Housing 4.3 7.1 6.6 5.9 23.9 Schools, etc. 0.9 2.1 2.1 2.3 7.3 Grain storage 1.0 1.5 1.8 1.0 5.4 Workshops 2.4 2.4 2.4 2.4 9.6 Electrification 0.6 1.5 0.8 0.2 3.1 Telephone 0.3 0.5 0.2 0.1 1.1 Subtotal 9.5 15.1 13.9 11.9 50.4 Drying floors 0.5 1.3 1.2 0.6 3.6 Machinery and Equipment Agricultural machinery 24.2 30.5 22.2 12.2 89.1 Construction machinery 7.2 4.4 - - 11.6 Seed processing equipment 1.3 0.9 - - 2.2 Subtotal 32.7 35.8 22.2 12.2 102.9 Other Technical assistance 0.6 0.5 0.3 0.3 1.7 Administration 0.5 0.7 0.6 0.4 2.2 Subtotal 1.1 1.3 0.9 0.7 3.9 Total Base Cost 52.2 70.4 59.1 42.2 223.9 Physical contingencies 2.3 4.2 4.6 3.8 14.9 Expected price increase 2.1 8.2 10.8 10.8 31.9 Total 56.6 82.8 74.5 56.8 270.7

Front-end fee 0.3 - - - 0.3

Total Project Cost 56.9 82.8 74.5 56.8 271.0 - 45 - ANNEX 2 Table 3

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Expected Price Increases (US$ million)

1983 1984 1985 1986 Total

Local Equipment base costs plus physical contingencies 6.6 8.0 10.5 8.6 33.7 Expected price increases 0.0 0.0 0.0 0.0 0.0

Other base costs plus physical contingencies 19.0 33.5 35.7 29.2 117.4 Expected price increases 0.8 4.2 7.3 8.5 20.8

Foreign Base costs plus physical contingencies 28.9 33.1 17.5 8.2 87.7 Expected price increases 1.3 4.0 3.5 2.3 11.1

Totals Base costs plus physical contingencies 54.5 74.6 63.7 46.0 238.8 Expected price increases 2.1 8.2 10.8 10.8 31.9

Total 56.6 82.8 74.5 56.8 270.7

Annual Escalation Rates (%) Local equipment 0.0 0.0 0.0 0.0 Local other 8.0 7.5 7.0 6.0 Foreign 8.0 7.5 7.0 6.0

Multiplier Local equipment 0.00 0.00 0.00 0.00 Local other 0.04 0.12 0.20 0.28 Foreign 0.04 0.12 0.20 0.28 - 46 - ANNEX 2 Table 4

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Estimated Schedule of Disbursements

IBRD/IDA fiscal year Cumulative disbursements IBRD/IDA irrigation and and semester US$ million % drainage disburse- ment profile (%)

1983 2nd 0 0 0.7

1984 lst 29.0 2nd 41.3 51 6

1985 lst 56.9 2nd 63.7 79 16

1986 lst 73.8 2nd 78.1 97 30

1987 1st 79.6 2nd 80.3 100 47

1988 1st 2nd - - 63

1989 lst 2nd 77

1990 lst 2nd - - 89

1991 lst Znd - - 97 1992 lst 100 CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Cost Estimates - Construction

Baoquan- Hongxing- Jiansan- Mudan- Total Unit Total ling hong jiang jiang Beian Jiusan quantity cost cost (Y) (Y mln)

Land development Earthwork (000 cu m) Dikes 1,400 2,850 900 1,150 0 0 6,250 1.38/a 8.6 Main drains 300 900 2,550 1,400 0 0 5,150 2.067ai 10.6 Branch drains 700 2,000 4,650 1,950 150 0 9,450 0.96/a 9.1 Lateral and sublateral drains 1,300 6,250 11,500 2,300 300 150 21,800 0.60/a 13.0 Pumping stations (No.) 2 17 0 5 0 0 24 125,000 3.0 Land clearing/smoothing ('000 ha) 11 48 83 40 7 11 200 99.50/b 19.9

Roads Rural roads (km)- 110 360 500 410 40 80 1,500 18,300 27.4 Field roads (km) 150 240 840 750 110 110 2,200 2,000 4.4 Bridges (No.) 11 91 141 48 9 5 305 31,500 9.6 4- Culverts (No.) 234 585 974 652 113 97 2,655 1,900 5.0

Buildings and facilities ('000 m2 ) Housing 18 79 136 66 12 18 329 127/c 41.8 Office, schools, clinics, etc. 5 20 34 17 3 5 83 155/c 12.8 Equipment storage, repair shops, barns 8 36 62 30 5 8 149 11374 16.8 Grain storage 6 26 44 21 4 6 107 88/c 9.4 Drying floors 31 137 236 114 20 31 569 11n7 6.3

Utilities Transformer substations (No.) 1 1 3 2 0 0 7 190,000 1.3 Diesel generator stations (No.) 0 2 0 0 1 3 6 15,000 041 Power lines State farm grid (km) 0 0 112 64 11 40 227 10,000 213 National grid (km) 50 79 0 23 29 0 181 10,000 108 Telephone lines (km) 54 120 152 125 14 96 561 3,250 l.8

/a Cost per cu m.

,b Cost per ha. Th Cost per sq m. - 48 - ANNEX 2 Table 6

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Cost Estimates - Construction Machinery

Number Unit cost Total cost: of CIF Dalian Foreign Local Machinery type units (US$ 000) (US$ mln) (Y mln)

Backhoe excavator, 130-140 hp, amphibious 2 200 0.40 - Backhoe excavator, 130-140 hp, tracked 60 100 6.00 - Backhoe excavator, 85 hp, tracked 10 60 0.60 Self-loading scraper, 150 hp 8 100 0.80 - Motor grader, 120-130 hp 8 70 0.56 - Vibrating compactor, tamping foot 3 15 0.05 - Vibrating compactor, smooth roller 3 15 0.05 - 0 - Tractor and low-bed trailer, 3 ton 3 60 0.18 - Miscellaneous equipment LS 1.36

Subtotal 10.00 -

Spare parts, tools and fittings Imported (10%) 1.00 - Domestic (5%) - 0.5

Overland transport - 0.6

Total 11.00 1.1 - 49 - ANNEX 2 Table 7

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Cost Estimates - Agricultural Machinery

Imported Domestic Number Unit Total Unit Total of cost cost cost cost Machinery type units (US$) (US$ mln) (Y) (Y mln)

Tractor (125-140 pto hp, 2WD) 150 40,000 6.0 Tractor (125-140 pto hp, 4WD) 350 49,000 17.2 Subsoiler 76 3,000 0.2 Seed drill 510 9,000 4.6 Precision planter (12 r) 61 22,800 1.4 Cultivator with fert. att. 200 9,700 1.9 Rotary hoe 100 5,500 0.6 Combine harvester (150-170 hp) 200 69,000 13.8 Corn header (6 row) 61 15,500 0.9 Flexible header 200 11,000 2.2 Pick-up header 200 6,500 1.3 Experimental machinery - - 1.1 Field vehicles and minibuses - - 0.2

Subtotal A 51.4

Tractor (65 hp) 400 15,000 6.0 Plow (4 r) 300 4,000 1.2 Disc/harrow 7.4 m 300 7,000 2.1 Seed drill 90 11,000 1.0 Sprayer 300 8,000 2.4 Swather (mounted) 200 3,200 0.6 Swather (drawn) 250 3,600 0.9 Combine (120 hp) 350 55,000 19.2 Auger 200 2,000 0.4 Trailer (5T) 600 6,000 3.6 Straw chopper 100 2,500 0.3 Fuel tanker (3.5-5T) 16 25,000 0.4 Grain truck (5-8t) 300 35,000 10.5

Subtotal B 48.6

Spare parts, tools and fittings Imported (10% of subtotal A) 5.1 Domestic (5% of subtotals A & B) 6.9

Overland transport 1.6

Total 56.5 57.1 - 50 - ANNEX 2 Table 8

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Cost Estimates - Seed Processing Equipment

Imported Domestic Number Unit Total Unit Total of cost cost cost cost Equipment type units (US$) (US$ mln) (Y) (Y mln)

Seed dryer (5 t/hr continuous flow) 16 20,000 0.32 Seed grader with indents 16 14,000 0.22 Precision grader 16 11,500 0.18 Screen machine with aspirator 16 20,000 0.32 Gravity machine 8 12,000 0.10 Soybean spiral 16 1,200 0.02 Elevators and augers 16 sets 5,000 0.08 Bagging machine, scale 16 4,000 0.06 Seed treatment machine 8 10,000 0.08

Subtotal A 1.38

Receiving and surge bins 16 sets 25,000 0.40 Storage bins (70,000 ton capacity) - - 0.24

Subtotal B 0.64

Spare parts, tools and fittings Imported (20% of subtotal A) 0.28 Domestic (5% of subtotal A) 0.07

Overland transport 0.08

Total 1.66 0.79 - 51 - ANNEX 2 Table 9

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Cost Estimates - Training and Technical Assistance

Total Cost Foreign Local ('000 US$) ('000 Y)

Training Support Consulting services (24 man-months) 300 40 Materials and equipment 0 50

Overseas Study Tours (30 man-months) Seed system /a 50 0 Agronomy 50 0 Project planning and management 50 0

Technical Assistance Seed System Development Consulting services (24 man-months) /a 300 40 Overseas training (80 man-months) Ia 120 20 Materials 100 0

Equipment Maintenance Consulting services (12 man-months) 150 20 Overseas training (6 man-months) 10 5

Management and Planning Consulting services (6 man-months) 75 10 Overseas training (12 man-months) 20 10 Micro-computers 100 0 Two-way radios 150 0

Construction Operations Consulting services (12 man-months) 150 20

Total 1,575 215

/a The Government in negotiating with the Canadian International Develop- ment Agency to finance these components. If financed by CIDA, these amounts would be reallocated to equipment. - 52 - ANNEX 3 Table 1 Page 1

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Estimates of Farmgate Prices for Major Crops and Inputs (Constant 1982 values)

Price/cost per ton Wheat Soy Maize Urea TSP Diesel

1982 Prices Import price, CIF Dalian ($) /a 222 312 158 227 202 331 (Y) 381 546 277 397 354 579 Plus: Port charges 25 25 25 25 25 25 Transport: port- wholesalers /b 6 6 6 13 13 1.3 Minus: Transport: farm- wholesalers /b -23 -23 -23 13 13 1L3 Equals: Economic price (Y) 397 554 285 448 405 604 Domestic price (Y) /c 501 586 300 930 480 460

1985 Prices Import price, CIF Dalian ($)/a 230 371 184 241 223 3:31 (Y) 403 649 322 422 390 579 Plus: Port charges 25 25 25 25 25 25 Transport: port- wholesalers /b 6 6 6 13 13 13 Minus: Transport: farm- wholesalers /b -23 -23 -23 13 13 13 Equals: Economic price (Y) 411 657 330 473 441 604 Domestic price (Y) /c 501 586 300 930 480 460

1990 Prices Import price, CIF Dalian ($) /a 240 422 190 264 245 383 (Y) 420 739 333 462 429 670 Plus: Port charges 25 25 25 25 25 25 Transport: port- wholesalers /b 6 6 6 13 13 13 Minus: Transport: farm- wholesalers /b -23 -23 -23 13 13 13 Equals: Economic price (Y) 428 747 341 513 480 695 Domestic price (Y) /c 465 586 288 930 480 460 - 53 - ANNEX 3 Table I Page 2

/a Import price estimates are based on export prices with the specifications listed below, adjusted for ocean freight charges of US$42/ton (average freight rate of wheat, Gulf-Japan, 1981/82 estimate).

Wheat: Canadian No. 1 Western Red Spring (CWRS), in store Thunder Bay.

Soy: US, FOB Gulfports.

Maize: US No. 2 Yellow, FOB Gulf ports.

Urea: Bagged, FOB Northwestern Europe. Domestic price is for nutrient equivalent in local product.

Triple Superphosphate: FOB US Gulf. Domestic price is for nutrient equiva- lent in local product.

Diesel: The diesel import price is based on the c.i.f. Hong Kong price. No ocean freight differences between Hong Kong and Dalian are assumed.

/b Based on rail freight charge from Dalian to wholesale point (Shenyang for agricultural product and Jiamusi for inputs) and wholesale point to distri- bution or storage point (on average 150 km from Jiamusi); plus truck freight charge from/to farm (average 40 km), computed at freight rates of Y 0.20/ ton-klm for agricultural products, Y 0.28/ton-km for inputs, and Y 0.50/ton surcharge for trips over 25 km.

/c Domestic prices for wheat and maize are weighted averages of quota and above-quota prices, the weights reflecting a quota of 0.45 tons/ha from which newly reclaimed land is exempt for a period of five years. The price of soy is a weighted average of prices for planned (20%) and above-plan (80%) procurement. Retained grain is priced at above-quota prices, and the difference from quota prices included in crop production costs as part of subsidies to labor. Domestic real prices are projected to remain constant at 1982 levels. - 54 - ANYT ) .3

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Physical Inputs and Unit Costs

At full development Unit Soy- costs /a. Wheat beans Maize (Y/kg)

Agricultural Inputs (kg/ha) Seed Wheat 255 - - 0.60 Soybeans - 90 - 0.70 Maize - - 25 0.36 Fertilizer N 55 35 110 1.88

P2 05 70 70 60 C0.92 Herbicide Wheat 2.3 - - 3.00 Soybeans - 3.8 - 6.57 Maize - - 11.8 5.09 Insecticide 2.2 0.8 1.5 3.45 Fuel /b 103 102 118 0.39

Labor Inputs (labor days/ha) Land preparation 0.40 0.25 0.25 Sowing/planting, fertilizing 0.10 0.10 0.10 Herbicide/pesticide application 0.05 0.10 0.05 Cultivation, fertilizer 0.10 0.15 0.20 Harvesting 0.15 0.10 0.15 Transport 0.10 0.10 0.15 Drying 3.50 1.50 4.00 Other 0.50 0.50 0.50

Total 4.90 2.80 5.65

/a Projected financial costs in 1990 prices expressed in 1982 constant values.

/b Fuel costs are for a mix of 90% light diesel oil, 4% lubricant and 6% gaso- line. - 55 - ANNEX 3 Table 3

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Financial Crop Production Costs At full Development (Y/ha)

Wheat Soybeans Maize

Nonlabor Costs Seed 153 63 9 Fertilizer 184 144 285 Herbicide 7 25 60 Insecticide 8 3 J Fuel 47 47 54 O&M /a /0 10 10 Depreciation /b 82 82 82 Transport 13 11 18 Other direct /c 30 26 41 Overhead /d 41 41 41

Subtotal 635 512 665

Labor Costs Wages z2 22 zz Salaries 2 2 2 Bonuses 23 23 23 Transfers /e 26 26 26

Subtotal 73 73 73

Total Production Costs 708 585 738

/a Repairs of farm machinery at 4% and project works and productive facilities at 2% of original costs plus Y 5/ha operation costs for drainage pumping stations.

/b Machinery and equipment at 6.6%, agricultural buildings and facilities at 3.3%.

/c Miscellaneous, including purchase and repair of tools and sales expense.

/d Materials expenses of farm, subfarm and brigade management.

/e Price subsidies and depreciation and repair of housing, at the farm-s expense. -56 - ANNEX 3 Table 4

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Production Unit Budget At Full Development /a

Typical brigade Wheat Soybeans Maize Total

Crop area (ha) 1,960 1,480 560 4,000

Yield (tons/ha) 2.1 1.6 3.9 - Production (tons) 4,116 2,368 2,184 8:,668

Income (Y-000) Gross value of product 1,914 1,388 629 3,931 Production costs (excluding labor) 1,245 758 372 2,375 Farm labor costs 144 108 40 292

Net Crop Income 525 522 217 1,264 (Net Crop Income Per Ha) (268) (353) (388) (316)

Other income /b - - - 84

Net Income Before Taxes 525 522 217 1,348

Agricultural tax 82 62 24 168

Net Income 443 460 193 1,180

/a Using 1990 financial prices.

/b Net income from collective forestry, fishery, animal husbandry, and side industry activities of the production unit, based on present levels per cultivated hectare. - 57 - ANNEX 3 Table 5

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Buildup of Crop Areas, Yields and Production

1983 1984 1985 1986 1987 1988 1989 1990 1991- 2013

Area (-000 ha) Wheat 13 25 51 80 117 112 107 102 98 Soybeans 10 19 45 64 74 74 74 74 74 Maize 0 0 0 4 9 14 19 24 28

Yield (tons/ha) Wheat 1.5 1.5 1.6 1.7 1.8 1.9 2.0 2.0 2.1 Soybeans 1.2 1.2 1.2 1.3 1.3 1.4 1.5 1.5 1.6 Maize - - - 2.5 2.7 3.0 3.2 3.6 3.9

Production (-000 tons) Wheat 20 40 82 136 211 213 214 204 206 Soybeans 12 23 54 83 96 104 111 111 118 Maize 0 0 ,0 10 24 42 61 86 109 - 58 - ANNEX 3 Table 5

CHINA

HEILONGJIANG LAND RECLAMATIONPROJECT

Project Cash Flow /a (Y million, constant 1982 values)

Averages 1993- 2003- 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 2002 2012

'ash Inflow Benefits Agricultural products 16.8 32.1 72.5 118.9 166.0 175.0 183.8 184.8 196.5 i96.5 196.5 196.5 Other income 0.5 0.9 2.0 3.1 4.2 4.2 4.2 4.2 4.2 4.2 4.2 4.2 Bank loan 50.8 48.8 29.6 10.2 1.2 ------Working capital fund 17.6 20.8 20.8 20.8 ------Sovernment grant 20.0 40.0 40.0 40.0 ------

Total Cash Inflow 105.7 142.6 164.9 193.0 171.4 179.2 188.0 189.0 200.7 200.7 200.7 200.7

'ash Outflow Investment costs Budgeted costs 95.4 130.6 111.5 80.5 ------Import duties /b 15.0 16.2 6.7 2.1 - -

Subtotal 110.4 146.8 118.2 82.6 - -

Operating costs Productton costs 12.1 24.0 53.5 85.2 119.7 122.8 126.2 129.6 133.3 133.3 133.3 133.3 Agricultural taxes - - - - - 1.0 1.8 4.0 6.2 8.4 8.4 8.4

Subtotal 12.1 24.0 53.5 85.2 119.7 123.8 128.0 133.6 139.5 141.7 1.41.7 141.7

Debt service /c 1.2 5.3 9.4 11.4 12.1 12.8 19.3 17.7 16.2 15.1 9.8 1.9

Total Cash Outflow 123.7 176.1 181.1 179.2 131.8 136.6 147.3 151.3 155.7 156.8 151.5 143.6

Net Cash Flow -18.0 -33.5 -16.2 13.8 39.6 42.6 40.7 37.7 45.0 43.9 49.2 57.1

a Changes tn cash flows to the Ileilongjiang State Farm System (HGB and the state farms) due to the project. Negattve cash flows would be financed from HGB and farm reserves. , Duties on imported machinery at 20% of c.i.f. cost converted to yuan at Y 2.8/US$1. Debt service costs estimated using standard Bank/IDA repayment terms without capitalizing interest due during the grace periods, and assuming an 10.937 interest rate on the loan. Debt service costs are deflated to con- stant 1982 value assuming annual inflation rates of 4.5% for domestic investment, and converted to yuan at the internal settlement rate of Y 2.8/US$l. - 59 -

ANNEX 4 Table 1

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Economic Costs of Production - 1982, 1985 and 1990 /a (Y/ha)

/b Seed Fertilizer Herbicide Insecticide Fuel Other Total

1982

Wheat 122 115 4 5 62 166 474

Soybeans 59 96 16 2 61 160 394

Maize 8 160 40 3 71 181 463

1985

Wheat 125 124 5 5 62 166 487

Soybeans 71 103 18 2 61 160 415

Maize 10 171 42 4 71 181 479

1990

Wheat 130 135 5 b 72 166 511

Soybeans 81 112 19 2 71 160 442

Maize 10 185 46 4 83 181 506

/a Derived from Annex 3, Tables 1 and 2. Conversion factors listed in para. 7 were applied as appropriate.

/b Includes O&M, transport, miscellaneous direct costs, overhead, wages and salaries. See footnotes to Annex 3, Table 3. - 60 -

ANNEX 4 Table 2

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Derivation of Incremental Economic Benefits (Y million)

Gross value Production Project of production /a cost /b benefits

1983 15.0 10.2 4.8

1984 30.5 19.9 10.6

1985 69.2 43.5 25.7

1986 115.6 68.2 47.4

1987 162.7 94.2 68.4

1988 177.8 95.3 82.5

1989 192.6 96.6 96.0

1990 199.5 97.5 102.9

1991-2012 213.5 97.5 116.0

/a Annex 3, Table 5.

/b Derived from Annex 3, Table 5 and Annex 4, Table 1. Labor costs are included. - 61 - ANNEX 4 Table 3

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Economic Costs and Benefits (Y million)

Year Costs /a Net benefits

1 1983 87.5 4.8

2 1984 116.3 10.6

3 1985 98.5 25.7

4 1986 67.6 47.4

5 1987 0 68.4

6 1988 0 82.5

7 1989 0 96.0

8 1990 0 102.0

9 1991 0 116.0

10-15 1992-97 0 116.0

16 1998 47.1 116.0

17 1999 59.4 116.0

18 2000 42.7 116.0

19 2001 24.2 116.0 20-30 2002-2012 0 116.0

Economic rate of return = 23% NPV (1983) discounted at 12% = Y 276 million

/a Includes only investment costs: operations and maintenance are included in production costs used in estimating net project benefits. - 62 - ANNEX 4 Table 4

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Sensitivity Analysis

Appraisal Crossover Change Elasti- value value /a (%) city /b

Yield at full devel- opment (ton/ha) /c 2.1/1.6/3.9 1.6/1.2/3.0 -24 4.2

Economic crop prices (Y/ton) /d 428/747/341 325/568/259 -24 4.2

Crop production cost (Y/ha) /e 485 713 +47 -2.0

Construction cost (Y million) 181 559 +209 -0.5

Total investment cost /f (Y million) 543 1,038 +91 -1.1

/a Value of variable tested at which net present value of project costs and benefits (discounted at 12%) is reduced to zero.

/b Percent change in net present value (discounted at 12%) due to a 1% change in the variable.

/c Average yields of wheat, soybeans and maize respectively at full develop- ment.

/d 1990 border prices for wheat, soybeans and maize adjusted to farm-gate equi- valency, respectively.

/e Weighted average of cost for wheat, soybeans and maize at full development.

If Including cost of replacing agricultural machinery in years 16-19. - 63 -

ANNEX 5

CHINA

HEILONGJIANG LAND RECLAMATION PROJECT

Related Documents and Data Available in the Project File

A. General Reports and Studies on the Agricultural Sector

A.1 IBRD, "China" Socialist Economic Development," The Main Report and Annex C: Agricultural Development, Report No. 3391-CHA, June 1, 1981.

A.2 Harvard Business School, "China's State Farms, Report 4-581-110, 1981.

B. General Reports and Studies Related to the Project

B.1 MAAF, "Materials Provided to the World Bank Economic Delegation," no date (report on the development and current status of state farms).

B.2 HGB, "Application for World Bank Loan for Reclamation of Three Million Mu of Wasteland: Project Specifications," July 25, 1981.

B.3 HGB "Tentative Plan for a World Bank-Financed Reclamation Project," January 1982.

B.4 HGB, "The Seed Situation in Heilongjiang Province," no date.

B.5 CGB, "Some Observations on the Shadow Wage Rate in Heilongjiang Province," no date.

C. Material Related to the Project

C.1 Report on Agricultural Mechanization by L.C. Clarke

C.2 Report on Agricultural Mechanization by D.A.N. Hopkins

C.3 Report on Drainage Systems by W.R. Johnston

C.4 Report on Drainage Systems by L.S. Tay

C.5 Report on Organization and Management by A. Schumacher

C.6 Report on Agronomy and Seeds by R.C. McGinnis

C.7 Ministry of Communications, Highway Engineering Technical Standards - 64 -

CHINA HEILONGJIANG LAND RECLAMATION PROJECT Figure 3.1 Implementation Schedule

1982 1983 1984 19B5 1986

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

A. Detailed Design B. Construction of Drainage System Baoquanling Dikes Coliecto, Drains Field Drains

Pumping Stations _ Hongxinglong Dikes Collector Drains Field Drains Pumping Stations Jiansanjiang Dikes Coliector Drains Field Drains Madanjiang Dikes Collector Drains Field Drains Pumping Stations Beian Collector Drains Field Drains Jiusan Field Drains

C. Other Construction Roads Buildings Power/Telephone Lines Grain Storage Drying Floors D- Procurement (ICB) ad b C de

Construction Machinery _ _ - Agricultural Machinery a b c d e Tractomsand Planting/Cultivation Machinery (1) a b d e Tractors and Planting/Cultivation Machinery (2) _ a t e _ Combines e- SeedProcessing Equipment _ a bt d E. Training and Technical Assistance Foreign Training Tours Machinery Seeds Agronomy/Mechanization Management SeedsTechnical Assistance(TA) _-_ PartsCentralization TA Management/PlanningTA Machine Operator Tnaining (TA)

Short Term Training Consultants - - ……--

Notes on procurement: a = prequalification; b = receipt of bids; c = contract award, d begin delivery, e = finish delivery

World Bank-24104 CHINA HEILONGJIANG LAND RECLAMATION PROJECT Organizational Structure -Ministry of Agriculture, Animal Husbandry and Fisheries

| Minister l

Deputy Ministers

Chinese AcademYIntegrated l l||General Bureau ||||General Bureau |ohies Agrcultuem | Agr.Ind.-Comm. General Bureau I | f Anima I eeal Bureau of Commne | |Plc Rsac

| China Agric./ L | Export-Import || Science and _ |Farm Mech. Press |l Company lTechnology Bureau_

. . as~~~~~~~~~~~~~~0 Cadre _ _ Industrial Education Ln School _ _ Company B ureau _

Desnigngand Materials Supply Material Supply _ Plansingt Company Bureau

State Farm _ Development Statistical |_ Planning _ Company DiiinBra

Shenzhen ll Foreign L l Company ll Affairs l

L Shanghai | Administrative L Company ll Office

L Marketing lD _ Company 0 ~~~~~~~~~~~~~~~~~~~WorldBank-24106 - 66 -

CHINA Figure 4.2 HEILONGJIANG LAND RECLAMATION PROJECT GeneralBureau of State FarmsOrganizational Structure

General Integrated A;C Bureau Company

State Farm Economic Administration Managers Marketing Association Research office Office Company Unit China State Forest Division Business Export-Import Farm Editorial Ofc opn Department Tropical Crops Aconig Development Design Office Company Institute C I ndustry -LWvestock Company Cadre . School InutyMaterial Supplies Industry ~~~~Company

Machinery Shenzhen Company

Planning and Shanghai Capital Company Construction

|Statistics

Finance

Materials

Science and Technology

Media

Education and Health

Personnel

Reti red Personnel

Salaries

Social Serv'ices

World Bank-24103 -67 -

CHINA HEILONGJIANG LAND RECLAMATION PROJECT Figure 4.3 Organizational Structure - General Bureauat Jiamusi, Heilongjiang Province

DIRECTOR GENERAL BUREAU

DEPUTY DIRECTORS 16)

College of Geneal Commercial eand Office Bureau Bureau

School of Political Foreign Trade Material Supplies Economics Office Bureau Station

| Cadre Traini | Planning Foodgrains fresher courses) Division Bureau

Cadre Training School (secon- Finance Educaition dary level) Division Division

Engineering Meteorological Agricultural Health seasrevention Design Institute Station Division Division taon

General V Anina Transport Hospi tai tto 'sadyDvso

Academy Construction Forestry Seed of Science Matery Bureau Company

| Machine | | [ Agricultural Personnel Machinery Department Division

Factory Maaement Ofin StOtlo

CertlientPetro- Civil,ucience IfokFrinIvsmtand Collective | chemicals | Technology E-conom Factory Division DsOffnce

| Cement Lg | Civil Work L Foreign Investment| Factory Division l ManagementOffice

I Harvesting Water | | Machine Conservation 4 4 Security

| Factory | Division Division

Meat ~~~~~~~~Community Processing Materials Liasion | Factory l l Bureau Division

1/ For young people having difficulties finding permanent jobs.

World Bank-24105 CHINA HEILONGJIANG LAND RECLAMATION PROJECT A Typical State Farm Organization Chart

VariousDepartments Material Stores Materials Schools Hospitals Education and Health Personnel(Wages and Salaries) Farm Const. Materials Factory Construction Brigade Civil Works Manager Water ConservancyBrigade Planning and Finance Deputy Managers Trade Responsibilities: Agriculture Shops Commerce Agriculture Machinery Food Finance Sci. and Tech. ResearchStation Scienceand Technology Industry and Transportation Vehicle Brigade Civil Works Building Food ProcessingFactory Industry and Transport Roads and Water Conservancy Machinery Repair and Prod. - Agricultural Machinery Animal Husbandry Veterinary Station Animal Husbandry Forestry Nursery Forestry SeedProd. Station Met. Station - Agronomy 2 co Sci. and Tech. ResearchStation 1 Admin. Office of Manager Sub-FarmV Ma nager Deputy Managers Production Section Responsibilities:Agriculture Finance Section Agriculture Machinery Social Services Animal Husbandry Administration Civil Works

Brigade Agronomist (alsoDeputy Head) Headof Brigade = Agriculture Machinery Engineer(also Deptity Head) Deputy Heads - LivestockSpecialist (also Deputy Head) Responsibilities:Agriculture S-Accountant Agricultural Machinery - Cashier Animal Husbandry stker Logistics = Administrator (Social Services)

World Bank-2415B - 69 -

CHINA Figure 5.1 HEI LONGJIANG LAND RECLAMATION PROJECT ProposedCropping Calendar

Mar Apr May Jun Jul Aug Sep Oct Nov Dec

WHEAT

Harrowing and sowing Harvest Plowing

SOYBEAN

Harrowing Sowing Harvest Harrowing

MAIZE Bk4 -iZ z

World Bank-24107

IBRD 16545R 1150 1200 1250 130° 135D

CHINA

U.S.S.R. \ HEILONGJIANG LAND RECLAMATIONPROJECT

A STATEFARMS IN PROJECT I ® ~~~~GENERALBUREAUHEADQUARTERS 0 SUB-BUREAU HEADQUARTERS iw.- SUB-BUREAUBOUNDARIES ROADS ------~RIVERSRAILROADS f-- PROVINCIAL BOUNDARIES 550 ->-*INTERNATIONAL BOUNDARIES

KILOMETERS°, 4 0 820 160

7 t ;<: MILES o0 55SD ldoI15509

INNER MONGOLIA)

MONGOLIA i 18~~ ~ ~ ~~ 5. 853ang5

USSR. 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~2.Shengyan N 2,3. 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~2yQuiaha / (N 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4.Qix5n -•y-- (P> 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~5.8inel

1> 17~~~~~~~~~~~.Cehxangy D n ang ong ~~~~18.Qianfen45

MONGOLIA 19~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.Qixning I ____ ~~~~~~~~~~~~~~~~~~"'r~~~~~~~~~~-/ 20~~~~~~~~~~~1.Higongsanc

-' . p. 01., 450 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~21.854 ,..\ -F ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~22.856 > Jf4 t &--.--.Areaof/14a (..... 5 .p DongianghonglbEh 11.dakeysdremnaetacolh859 / -' >/B'M? ~ ~ ~ ~ ~ ~ so~~~~~'45 23. 888 -F '~~~~~~~~~~-F0 ~~~~~~~~~ Mudanjian 24. Qingfeng~~~~~~~~~~~~~~~~~~~~4.Qigfn PEORERO ia. 2. Xi ngkk,aihu ,BSii\tta~~~~~~~~~~~~~~~~~~~~~4 ~~~~~~~ I-- ~~~~~~~~~27. Jinhe -7 01I S~~~~~~U8Iuiforene L., 28. Longmen

I) ~~~~f-.~~~~z'~ Y,/-F ro&Q~REA6 Th.map h-s b-oxpropa-oxhy no World Bok' xlp .S . ~ 30t Jiabian

~~.? ~~~~~ / haraado~~~~~prf005 Thx WocotmotB.rh- sthra,o fTeWO ndE texIoa ~~~r~~~~.~~~~¾msJc' V. ~~~~~~~~~~~~~~~1215' / 19