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Document of The World Bank Report No: 25703-CHA GEF PROJECT DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$66.27 MILLION AND A GRANT FROM THE GLOBAL ENVIRONMENT FACILITY TRUST FUND IN THE AMOUNT OF US$10.5 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A GANSU AND XINJIANG PASTORAL DEVELOPMENT PROJECT July 17, 2003 Rural Development and Natural Resources East Asia and Pacific Region CURRENCY EQUIVALENTS (Exchange Rate Effective used for cost calculations) Currency Unit = Renminbi (RMB) Yuan (CNY) RMB 1 = US$ 0.12 US$ 1 = RMB 8.3 FISCAL YEAR January 1 -- December 31 ABBREVIATIONS AND ACRONYMS ABC Agricultural Bank of China MOC Ministry of Commerce ACIAR Australian Center for International Agricultural MOF Ministry of Finance Research MOST Ministry of Science and Technology ADB Asian Development Bank mu Chinese area measurement, 1 mu=0.07 ha. 1 ha=15 mu ADP Agricultural Development Project NBF Non-Bank Financing AI Artificial Insemination NCB National Competitive Bidding AusAid Australian Agency for International Development NEAP National Environmental Action Plan BD Bidding Documents NPV Net Present Value BPM Beneficiaries Participation Manual NDRC National Development and Reform Committee 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 PLG Project Leading Group Sciences PMM Procurement Management Manual DC Direct Contracting PPMO Provincial Project Management Office DDM Digestible Dry Matter PRA Participatory Rural Appraisal DHI Dairy Herd Improvement PRC People's Republic of China EIA Environment Impact Assessment RCC Rural Credit Cooperatives EMP Environmental Management Plan RPMO Regional Project Management Office ERR Economic Rate of Return SA Social Assessment FA Force Account SAR Staff Appraisal Report FCCC Framework Convention on Climate Change SCNPC Standing Committee of National People's Council FECC Foreign Economic Cooperation Center SEPA State Environmental Protection Agency FRR Financial Rate of Return STAP Scientific and Technical Advisory Panel GDP Gross Domestic Product SW Small Works GEF Global Environmental Facility TA Technical Assistance GHG Greenhouse Gas Emissions TAG Technical Advisory Group GOC Government of China TOR Terms of Reference GP General Practice UN United Nations ha hectare UNDP United National Development Program ICB International Competitive Bidding USDA- United States Department of Agriculture - MBD Model Bidding Documents ARS Agricultural Research Services MEGDS Multi-Ethnic Group Development Strategy WBI World Bank Institute MEIRO 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 Country Director: Yukon Huang Sector Director: Mark D. Wilson Task Team Leader: Sari Söderström 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 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, or Cost-Effectiveness Analysis Summary 73 Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 88 Annex 6: Procurement and Disbursement Arrangements 90 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: Incremental Cost Analysis 142 Annex 15: STAP Reviewer Comments and Task Team Responses 151 Annex 16: Project Monitoring and Evaluation 159 MAP(S) IBRD 32098, IBRD 32099, IBRD 32136, IBRD 32137 CHINA Gansu and Xinjiang Pastoral Development Project GEF Project Document East Asia and Pacific Region EASRD Date : October 21, 2002 Team Leader : Sari K. Soderstrom Sector Manager/Director : Mark D. Wilson Sector(s) : Animal production (50%), Agricultural Country Manager/Director : Yukon Huang marketing and trade (25%), Agricultural extension and Project ID : P065035 research (25%) Lending Instrument: Specific Investment Loan (SIL) Theme(s): Land management (P), Other environment and natural resources management (P), Rural markets (P) Global Supplemental ID: P077615 Team Leader: Sari K. Soderstrom Sector Manager/Director : 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) Project Financing Data [ X] Loan [ ] Credit [ X] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Amount (US$m): Loan 66.27, Grant 10.5 Borrower Rationale for Choice of Loan Terms Available on File: Yes Proposed Terms (IBRD): Variable-Spread Loan (VSL) Front end fee (FEF) on Bank loan: 1.00% Financing Plan (US$m): Source Local Foreign Total BORROWER/RECIPIENT 34.82 0.00 34.82 IBRD 45.52 20.75 66.27 GLOBAL ENVIRONMENT FACILITY 8.40 2.10 10.50 Total: 88.74 22.85 111.59 Borrower/Recipient: PRC People's Republic of China Responsible agency : GANSU PROVINCE, XINJIANG AUTONOMOUS REGION Ministry of Agriculture - 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] 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] P065035 Estimated Disbursements ( Bank FY/US$m): FY 2004 2005 2006 2007 2008 2009 2010 Annual 7.79 13.84 15.67 13.30 9.85 4.86 0.96 Cumulative 7.79 21.63 37.30 50.60 60.45 65.31 66.27 P077615 (GEF) Estimated Disbursements ( Bank FY/US$m): FY 2004 2005 2006 2007 2008 2009 2010 Annual 1.20 2.10 2.60 2.00 1.30 0.80 0.50 Cumulative 1.20 3.30 5.90 7.90 9.20 10.00 10.50 Project implementation period : 6 years Expected effectiveness date : 01/15/2004 Expected closing date : 06/30/2010 OPCS PAD Form: Rev. March, 2000 - 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 of herders 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 of farmers 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 of the country. The majority of these grasslands are located in Gansu, Inner Mongolia,