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Document of The World Bank Public Disclosure Authorized FOR OFFICIAL USE ONLY Report No: 25703-CHA PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US66.27 MILLION Public Disclosure Authorized AND A GRANT FROM THE GLOBAL ENVIRONMENT FACILITY TRUST FUND IN THE AMOUNT OF US$10.5 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA Public Disclosure Authorized FOR A GANSU AND XINJIANG PASTORAL DEVELOPMENT PROJECT August 13,2003 Rural Development and Natural Resources Sector Unit East Asia and Pacific Region 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. Public Disclosure Authorized CURRENCY EQUIVALENTS (Exchange Rate Effective March 1, 2003) Currency Unit = Renminbi (RMB) Yuan (CNY) RMB 1 = US$0.12 US$1 = RMB8.3 FISCAL YEAR January 1 -- December 31 ABBREVIATIONS AND ACRONYMS ABC Agricultural Bank of China MOC Ministry of Commerce ACIAR Australian Center for Intemational Agricultural Research MOF Ministry of Finance ADB Asian Development Bank MOST Ministry of Science and Technology ADP Agricultural Development Project mu Chinese area measurement, 1 mu=0.07 ha. 1 ha=15 mu AI Artificial Insemination NBF Non-Bank Financing ARS Agricultural Research Services NCB National Competitive Bidding AusAid Australian Agency for International Development NDRC National Development and Reform Committee BD Bidding Documents NEAP National Environmental Action Plan BPM Beneficiaries Participation Manual NPV Net Present Value CAS Country Assistance Strategy NS National Shopping CBD Convention on Biological Diversity OD Operational Directive CCD Convention to Combat Desertification OP Operational Program CFAA Country Financial Accountability Assessment OPR Operational Procurement Review CIF Cost-Insurance-Freight PBC People's Bank of China CNAO China National Audit Office PHRD Policy and Human Resources Development COP Conference of the Parties PIM Project Implementation Manual CRAES Chinese Research Academy of Environmental Sciences PLG Project Leading Group DC Direct Contracting PMM Procurement Management Manual DDM Digestible Dry Matter PPMO Provincial Project Management Office DHI Dairy Herd Improvement PRA Participatory Rural Appraisal EIA Environment Impact Assessment PRC People's Republic of China EMP Environmental Management Plan RCC Rural Credit Cooperatives ERR Economic Rate of Retum RPMO Regional Project Management Office FA Force Account SA Social Assessment FCCC Framework Convention on Climate Change SAR Staff Appraisal Report FECC Foreign Economic Cooperation Center SCNPC Standing Committee of National People's Council FRR Financial Rate of Retum SEPA State Environmental Protection Agency GDP Gross Domestic Product STAP Scientific and Technical Advisory Panel GEF Global Environmental Facility sw Small Works GHG Greenhouse Gas Emissions TA Technical Assistance GOC Government of China TAG Technical Advisory Group GP General Practice TOR Terms of Reference ha hectare UN United Nations ICB Intemational Competitive Bidding UNDP United National Development Program MBD Model Bidding Documents USDA United States Department of Agriculture MEGDS Multi-Ethnic Group Development Strategy WBI World Bank Institute MER0 Machinery&Electric Prod. Import Review Office WTO World Trade Organization MIS Management Information System WWF World Wide Fund for Nature MOA Ministry of Agriculture Vice President: Jemal-ud-din Kassum, EAPVP Country Director: Yukon Huang, EACCF Sector Director: Mark D. Wilson, EASRD Task Team Leader: Sari Soderstrom , EASRD FOR OFFICIAL USE ONLY CHINA GANSU AND XINJIANG PASTORAL DEVELOPMENT PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 3 2. Global objective 3 3. Key performance indicators 3 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 4 2. Main sector issues and Government strategy 5 3. Sector issues to be addressed by the project and strategic choices 9 C. Project Description Summary 1. Project components 11 2. Key policy and institutional reforms supported by the project 17 3. Benefits and target population 17 4. Institutional and implementation arrangements 19 D. Project Rationale 1. Project alternatives considered and reasons for rejection 20 2. Major related projects financed by the Bank and/or other development agencies 22 3. Lessons learned and reflected in the project design 23 4. Indications of borrower and recipient commitment and ownership 24 5. Value added of Bank and Global support in this project 25 E. Summary Project Analysis 1. Economic 27 2. Financial 27 3. Technical 28 4. Institutional 29 5. Environmental 35 6. Social 38 7. Safeguard Policies 39 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. F. Sustainability and Risks 1. Sustainability 40 2. Critical risks 42 3. Possible controversial aspects 44 G. Main Loan Conditions 1. Effectiveness Condition 45 2. Other 45 H. Readiness for Implementation 47 I.Compliance with Bank Policies 47 Annexes Annex 1: Project Design Summary 48 Annex 2: Detailed Project Description 52 Annex 3: Estimated Project Costs 71 Annex 4: Cost Benefit Analysis Summary 73 Annex 5: Financial Summary 88 Annex 6: Procurement and Disbursement Arrangementsand Arrangements for Financial 90 Management Annex 7: Project Processing Schedule 104 Annex 8: Documents in the Project File 106 Annex 9: Statement of Loans and Credits 108 Annex 10: Country at a Glance 112 Annex 11: Social Issues 114 Annex 12: Environmental Issues 120 Annex 13: GEF Justification and GEF Intervention Sites 124 Annex 14: GEF Incremental Cost Analysis 142 Annex 15: STAP Reviewer Comments and Task Team Responses 15 1 Annex 16: Project Monitoring and Evaluation 159 MAP(S) IBRD 32098, IBRD 32099, IBRD 32136, IBRD 32137 CHINA Gansu and Xinjiang Pastoral Development Project Project Appraisal Document East Asia and Pacific Region EASRD Date: August 13,2003 Team Leader: Sari K. Soderstrom Sector ManagedDirector: Mark D. Wilson Sector@): Animal production (50%), Agricultural Country ManagedDirector: Yukon Huang marketing and trade (25%), Agricultural extension and Project ID: PO65035 research (25%) Lending Instrument: Specific Investment Loan (SIL) Theme(s): Land management (PIl Other environment and natural resources management (P), Rural markets (P) Global Supplemental ID: PO77615 Team Leader: Sari K. Soderstrom Sector ManagedDirector: Mark D. Wilson Sector(s): General agriculture, fishing and forestry sector Lending Instrument: Specific Investment Loan (SIL) (60%), Agricultural extension and research (40%) Focal Area: G Theme(s): Other environment and natural resources Supplement Fully Blended? Yes management (P) , Biodiversity (P), Land management (P), Other rural development (P), Climate change (S) [XI Loan [ ] Credit [XI Grant [ ] Guarantee [ ] Other: For LoanslCreditslOthers: Amount (US$m): Loan 66.27, Grant 10.5 Borrower Rationale for Choice of Loan Terms Available on File: x Yes Proposed Terms (IBRD): Variable-Spread Loan (VSL) Front end fee (FEF) on Bank loan: 1.00% I IBRD I 45.52 I 20.75 I 66.27 GLOBAL ENVIRONMENT FACILITY 8.40 2.10 10.50 Total: 88.74 I 22.85-1 111.59 Borrower/Recipient: PRC People's Republic ofChina Responsible agency: GANSU PROVINCE, XINJIANG AUTONOMOUS REGION Ministry ofAgriculture - Foreign Economic Cooperation Center - Livestock and Fisheries Project Division Contact Person: Mr. Tang Zhishao Tel: + 86 10 650 032 73 Fax: + 86 10 641 945 78 Email: [email protected] Other Agency(ies): Agriculture and Animal Husbandry Department, Gansu Province Address: 1 Qing'an Lu, Lanzhou, China, 730030 Contact Person: Mr. Li Guolin Tel: + 86 931 845 2377 Fax: + 86 931 882 6287 Email: [email protected]. gs. cn Animal Husbandry Deparment, Xinjiang Uygur Autonomous Region Address: 23 Xinhua Nan Lu, Urumqi, China, 830001 Contact Person: Mr. Salajidin, Mr. Wang Wanlin Tel: + 86 991 856 8501 Fax: + 86 991 856 5120 Email: [email protected] .cninfo.net -2- A. Project Development Objective 1. Project development objective: (see Annex 1) Project Development Objective. The project development objective is to promote sustainable natural resource management by establishing improved livestock production and marketing systems that would increase the income ofherders and farmers in the project areas. The project would empower farmer and herder households in project areas to better manage their grassland resources and improve the forage and feed production on arable lands. More efficient and quality focused livestock production would increase the farmers and herders incomes and generate marketable surplus to improve living standards. Developing efficient livestock marketing systems in the project counties would also increase the efficiency of the whole livestock production system and contribute raising the living standards offarmers and herders. 2. Global objective: (see Annex 1) Background (see also Annex 13). Grasslands cover about 40% (400 million ha) of China’s land area, making China second only to Australia in the extent of its grassland resources. About 75% of China’s grasslands (300 million ha) are found in the semi-arid pastoral areas in the north and west ofthe country. The majority of these grasslands are located in Gansu, Inner Mongolia, Qinghai, Tibet, and Xinjiang. Grasslands in the project areas have three global environmental
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