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Technical Assistance Consultant’s Report

Project Number: 39321 June 2008

PRC: Preparing the - Mountains Integrated Ecosystem Management Project (Cofinanced by the Global Environment Facility)

Prepared by:

ANZDEC Limited

Australia

For Shaanxi Province Development and Reform Commission

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. (For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design. FINAL REPORT

SHAANXI QINLING BIODIVERSITY CONSERVATION AND DEMONSTRATION PROJECT

PREPARED FOR Shaanxi Provincial Government

And the

Asian Development Bank

ANZDEC LIMITED

September 2007 CURRENCY EQUIVALENTS

(as at 1 June 2007) Currency Unit – Chinese {CNY}1.00 = US $0.1308 $1.00 = CNY 7.64

ABBREVIATIONS

ADB – Asian Development Bank BAP – Biodiversity Action Plan (of the PRC Government) CAS – Chinese Academy of Sciences CASS – Chinese Academy of Social Sciences CBD – Convention on Biological Diversity CBRC – Bank Regulatory Commission CDA - Conservation Demonstration Area CNY – Chinese Yuan CO – company CPF – country programming framework CTF – Conservation Trust Fund EA – Executing Agency EFCAs – Ecosystem Function Conservation Areas EIRR – economic internal rate of return EPB – Environmental Protection Bureau EU – European Union FIRR – financial internal rate of return FDI – Foreign Direct Investment FYP – Five-Year Plan FS – Feasibility Study FSR – Feasibility Study Report GDP – GEF – Global Environment Facility (of UNEP) GIS – Geographic Information System GMS – Greater IA – Implementing Agency IDA – International Development Association (part of the World Bank Group) IEM – Integrated Environmental Management IEE – Initial Environmental Examination IFAD – International Fund for Agricultural Development IFC – International Finance Corporation IPSA – Initial Poverty and Social Analysis IR – Inception Report IRR – internal rate of return LG – Leading Group LGFD – Louguanfudi Travel Development Company MDG – Millennium Development Goal MLR – Ministry of Land and Resources MOA – Ministry of Agriculture MOF – Ministry of Finance MOU – Memorandum of Understanding MTR – Mid-Term Report (of the PPTA Team) MWR – Ministry of Water Resources NDRC – National Development Reform Commission NGO – non-government organization NPO – non profit organization NPV – net present value NNR – national nature reserves (state level) NR – nature reserves NTFPs – non-timber products ODA – Overseas Development Assistance NTFP – non-timber forest products OECD – Organization for Economic Cooperation and Development OP – Operational Program (of GEF .g. OP12 on Integrated Ecosystem Management (IEM)) PA – Protected Area PDF – Project Design Fund (of GEF) PPCP – public-private-community partnerships PPP – public-private partnerships PRC – Peoples Republic of China PDRC – Provincial Development Reform Commission PES – “Payment for Environmental Services” PIT – principal, interest and taxes PMO – Project Management Office PPTA – Project Preparatory Technical Assistance PRA – Participatory Rural Appraisal PRO – Poverty Reduction Office PRC – People’s Republic of China QBQ – Qinling Botanicalal Garden QM – Qinling Mountains QMEFCA – Qinling Mountains Ecosystem Function Conservation Area RCC – Rural Credit Cooperative REA – Rapid Environmental Assessment SALT – Steepland agricultural technologies SARC – Shaanxi Rescue (Zoological) Center SQNBG - Shaanxi Qinling National Botanicalal Garden NDRC – State Development Planning Commission (now NDRC see above) SEIA – Summary Environmental Impact Assessment SEPA – State Environmental Protection Agency SFA – State Forestry Administration SIEE – Summary Initial Environmental Investigation SME – small and medium-sized enterprise SOE – state-owned enterprise SP – Shaanxi Province SPDRC – Shaanxi Provincial Development Reform Commission Spp – SRP – Summary Resettlement Plan SSA – Summary Social Assessment SQBG – Shaanxi Qinling Botanical Garden Office TA – Technical Assistance TNC – The Nature Conservancy TOR – Terms of Reference TVE – township and village enterprises WDS – Western Development Strategy (of the PRC) WACC – weighted average cost of capital WWF – World Wide Fund for Nature/World Wildlife Federation UNDP – United Nations Development Program UNEP – United Nations Environmental Program UNWTO – World Tourism Organization of the United Nations VDP – village development plan WLSMA – whole landscape system management WTO – World Trade Organization WEIGHTS AND MEASURES

15 mu = 1 hectare CONTENTS

Page I. THE PROPOSAL 14 II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES 15 A. Performance Indicators and Analysis 15 B. Analysis of Key Problems and Opportunities 17 III. THE PROPOSED PROJECT 27 A. Impact and Outcome 27 B. Outputs 28 C. GEF Financed Activities 35 D. Special Features 37 E. Project Investment Plan 38 F. Financing Plan 39 G. Implementation Arrangements 40 IV. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS 46 A. Financial and Economic Analysis 46 B. Social Dimensions 49 C. Environmental Impact 52 V. RECOMMENDED ASSURANCES AND CONDITIONS 53 A. Condition for Loan Negotiation 53 APPENDIXES (PRESENTED IN SEPARATE VOLUME)

1. Design and Monitoring Framework 2. List of Donor Projects 3. IPSA 4. Planning and Policy Priority Review 5. Biodiversity in the Qinling Mountains 6. Institutional Assessments – Mandates and Arrangements 7. Detailed Description of Components 8. Consulting Services 9.. Legal Reform Agenda 10. Project Costs 11. Project Implementation Schedule 12. Project Procurement Plan 13. Financial and Economic Analysis 14. Detailed Social Assessment 15. Initial Environmental Examination 16. Summary Resettlement Plan 17. GEF Submission Document 18. Problem Analysis SUPPLEMENTARY APPENDIXES (AVAILABLE ON REQUEST)

A. Sector Assessments and Review B. CDA - In-situ Strategy C. Legal Review D. Institutional Review E. Financial Management and Governance Assessment F. Ex-Situ Conservation Standards and Guidelines G. Endangered Species Recovery Management Plans H. Rural Livelihoods and Conservation I. Impact of Mini-Hydros and their proposed Removal J. Grain for Green Policy Assessment K. Tourism Marketing Guide L. Detailed Project Costs M. Detailed Financial and Economic Analysis iii

LOAN AND PROJECT SUMMARY

Borrower Peoples Republic of China

Classification Targeting classification: General intervention Sector: Agriculture and Natural Resources Subsector: Environment and Biodiversity Themes: Sustainable economic growth and Environmental sustainability

Environment Assessment Category B. An initial environmental examination was undertaken. The summary initial environmental examination assessment was circulated to the Board of Directors of the Asian Development Bank (ADB) and will be uploaded on the ADB website on **** 2007.

Project Description The Project Area comprises of 458 sq km on the northern toe slope of the Qinling Mountains in an area adjacent and surrounding the Louguantai township within . The Qinling Mountains is an internationally important biodiversity hotspot and represents some 70% of Chinas biodiversity including an estimated 200 . Ecologically the Qinling Mountains are central to and water management linked to both the and Yellow rivers and also the capital of Shaanxi . The Project Area is situated about 50km south west of Xian city and is currently under the management and control of the Louguantai Forest Farm and is identified as the home of the Daoist religion. The Project area is divided into a hill and mountainous area (in- situ zone) where the management objective is low impact development that supports the conservation of biodiversity and provides sustainable low impact livelihoods for the remaining 4,593 residents. The far smaller flat to the north is currently a mix of agriculture and residential development that will be used for far more intensive development for which project funds will be used to develop commercial biodiversity based enterprises that will generate funds for the management and enhancement of the CDA zone. The commercial enterprises will involve wildlife breeding and research, wildlife tourism, a Botanical garden and a geothermal hot spring development. Linked to these will be additional tourism attractions such as walkways, exhibitions, Daoist religious sites, These commercial enterprises will address a major weakness of the many past biodiversity projects that while achieving significant progress the benefits of investment generally ceased immediately on completion of the Projects due to non-sustainable institutions and financing arrangements.

Rationale The Project will diversify and further develop the economy of the Shaanxi Province by developing the tourism potential within an intensive use zone of the Project area including attractions linked to Daoist religious and temple sites, geothermal hot springs, an ex-situ wildlife management center that includes iconic species such as the giant Panda, Crested Ibis, Golden Monkey and , and a newly developed Botanical garden for the of the Qinling Mountains. The Project will develop the Qinling Botanical Garden, Shaanxi Animal Rescue Center, and the Shaanxi Forest Bureau Hot Springs Joint Venture as commercial operations that will reinvest part of the profits into the larger conservation protection zone to re-establish natural habitats, improve livelihoods and to demonstrate new technologies and approaches to conservation within the wider Qinling Mountains. iv

Impact and Outcome The Project Impact is to improve Rural wellbeing based on sustainable conservation and use of Qinling Mountains resources. The outcome of the Project is to introduce integrated landscape management to provide sustainable livelihoods for the population of the Project area demonstrated to wider Qinling Mountains.

Project Investment Plan The investment cost of the project is estimated at $129.2 million including taxes and duties of $6.0 million.

Financing Plan Source Total Percent A. Asian Development Bank 40.0 31 B. Global Environment Facility 4.27 3.3 C. Government 1. Shaanxi Provincial Government 4.2 3.3 2. Qinling Botanical Garden 44.2 34.2 3. Shaanxi Animal rescue Center 31.1 24.1 4. Shaanxi Forest Bureau JV 5.3 4.1 Subtotal (D) 84.8 65.7 Total 129.2 100.0

A loan of $40 million from the ordinary capital resources of the Asian Development Bank (ADB) will be provided under ADB’s London interbank offered rate (LIBOR)-based lending facility. The loan will have a 25-year term including a grace period of 5 years, an interest rate determined in accordance with ADB’s LIBOR-based lending facility, and a commitment charge of 0.35% per annum, and other such terms and conditions set forth in the draft loan agreement. The front-end fee will be waived, subject to the Board’s approval.

GEF grant co-financing of $4.27 million, which will be administered by ADB, has been proposed for the Project.

Allocation and Relending The PRC Government will relend the proceeds of the ADB loan to SPG Terms under the same terms and conditions as those of the original loan. The interest rate will be at the same LIBOR-based rate paid by the PRC and will be subject to the same terms and conditions as the PRC loan. SPG will on-lend to the participating implementing agencies under the same terms and conditions as the relending to SPG, including a 25-year loan with a 5-year grace period. The interest rate payable on the loan would be subject to the same LIBOR-based terms and conditions as the loan to the SPG.

Period of Utilization Until 31 November 2013

Estimated Project 31 March 2013 Completion Date v

Implementation The Shaanxi Qinling National Botanicalal Garden and the Louguantai Arrangements Fudi Tourism Company will be responsible for the implementation of the Project and for ensuring all enterprises cooperate. The QNBG a new enterprise will consolidate the Qinling Botanicalal Garden, Shaanxi Animal Rescue Center, and the Louguantai Forest Farm. SPG has formed a high level coordination committee to provide policy advice and conflict resolution and to approve work plans. The executing agency will be the SFD supported by a PMO operated through the PDRC and comprising of 11 full time staff from DOF, PDRC, SFD. The PMO will be responsible for the overall implementation and administration of the Project.

The implementation of the investments will be undertaken by the Qinling Botanical Garden, Shaanxi Animal Rescue Center, and the SFD Hot- springs Joint Venture.

Executing Agency Shaanxi Provincial Development Reform Committee

Procurement Goods and works for ADB-financed and GEF-financed contracts will be procured in accordance with ADB’s Procurement Guidelines (April 2006, as amended from time to time). Depending on the value, contracts for equipment and materials will be awarded through a combination of international competitive bidding, limited international bidding, national competitive bidding, direct contracting, and community participation. Foreign contractors may bid on contracts using national competitive bidding (NCB) procedures. A procurement plan covering goods, works and services, including the contract value, procurement method and the prequalification of bidders, was agreed with the Government at loan fact- finding.

Consulting Services The Project (including the standalone TA) will contract a total of 72 person months of technical assistance including 20 person months of International expertise. These will be procured in two packages. Package A includes 6 person months 6 person months and will be financed by loan funds with the consultants contracted by SARC. Package B comprising of 71 person months will be financed by GEF/Loan and will be contracted through a consulting company using QCBS with ADB doing the selection on behalf of the SPG. vi

Project Benefits and The Project benefits target the 20,356 people within the Project Area of Beneficiaries which some 4,593 reside within the CDA zone and a further 15,763 in the CDA zone. A further 23,405 residents within the immediate fringe of the Project Area especially those located close to the ex-situ zone will also benefit. Within the Project Area the poverty ratio is estimated to be 37% on a head count basis or close to 40% on a household basis. Within the Project area there are significant differences with the level of poverty in the CDA area being over 70% compared to 23% for the ex-situ zone. Poverty will be reduced dramatically through (i) significant employment opportunities during construction, (ii) approximately 1370 full time jobs, (iii) indirect economic benefits providing services and goods to the influx of workers and visitors, (iv) access to collective forest land for the 16 villages within the CDA zone, (v) development of Small and medium enterprises,(vi) development of 10 home stay community tourism enterprises, (vii) provision of improved mountain pathways and roads, and social infrastructure programs. For the CDA resident it is expected that over 90% will benefit directly from the Project.

In the medium term there is an estimated 1.2 million visitors per annum that add between ½ and 1 day to the average length of stay of tourists within Shaanxi and Xian in particular. The commercial benefits from tourism will enable USD $350,000 per annum to be reinvested into conservation and livelihood programs a figure that is predicted to increase to well over USD $ 1 million in the medium to longer term. These funds will add to the Project funded conservation demonstrations and will increasingly generate conservation benefits through the wider Qinling Mountains where over 5 million residents currently reside.

Risks and Assumptions Delays of extended construction periods will place significant pressure on flow for the QBG. The SPG has recognized this risk and has committed to underwrite the cashflow provided the business plan indicates financial viability.

The major risks relate to the capacity of QNBG as an new institution with little commercial management experience and an unproven management team. Within the QNBG there lack of past experience in the QBG to operate large commercial operations with the skill and acumen that will allow them to compete with other tourism attractions. Weak management and poor operation of the proposed investments will threaten the financial viability of the QBG which is currently assessed as adequate but not strong. The assumed visitation to the QBG site has been reduced to slightly over 50% of the original proposal but still represents a major determinant of the overall project success. It is also assumed that a share of surpluses will be reinvested into CDA conservation. This will require a legally defined and enforced contract with each enterprise. The Louguantai Forest Farm has no experience in the management of conservation forestry and little experience in natural forest management two of the functions assigned to them.

Risks relating to potential invasive species and poor animal welfare have been factored into the design of the project through the introduction of international expertise and the restriction on the Botanical garden to limit the species to those from the Qinling mountain.

Technical Assistance vii

Figure 1: Map 1 – The Project Area of 458 km² viii

Figure 2: Map 2 – Location of the Project Area in Relation to ’an ix

Figure 3: Map 3 – Google Image of the Project Area x

Figure 4: Map 4 – Project Area Land Uses xi

Figure 5: Map 5 – Natural Plant Habitats xii

Figure 6: Map 6 – The Qinling Mountains Ecosystem Function Conservation Area in Shaanxi 13

Figure 7: Map 7: Shaanxi Louguantai National Forest Park - Forest Sub-Divisions 14 Main Report

I. THE PROPOSAL

1. I submit for your approval the following report and recommendation on (i) a proposed loan to the Peoples Republic of China for the Shaanxi Qinling Mountain Integrated Ecological Management Project, and (ii) proposed technical assistance (TA) for Establishment of Shaanxi Qinling Biodiversity Promotions Limited. 15

II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES

A. Performance Indicators and Analysis

1. Shaanxi Province is part of . The rate of economic growth in western China has lagged that in the eastern provinces. Shaanxi grew at an average of 7.5% from 1990 to 2000 compared with a national average of 10 to 11%. When coupled with population growth, GDP/capita falls from 75% of the national average to less than 60%. Since 2000 Shaanxi has seen higher growth rates that are equal to or above the national average as a result of China’s western development strategy under the country’s Tenth Five-Tear Plan. From 2000 to 2005 Shaanxi’s GDP grew on average at 11.5% per annum, increasing the GDP/capita to 63% of the national average. Among the 31 provinces, autonomous and independent municipalities in China, Shaanxi currently ranks 16th in terms of population size, 22nd in terms of the size of the economy and production base (as measured by GDP and industrial production), and 26th with respect to GDP/capita1. Shaanxi is home to about 2.8% to the country’s population, contributes 1.8% to its GDP, and has a land area of 206,000 sq. km. (2.1% of the nation’s total).

2. Shaanxi’s economy is limited by (i) continued dependence on primary sector production, (ii) limited off-farm employment in rural areas, (iii) below average productivity, (iv) low levels of industrial production and limited private sector investment, (v) low savings rates to support future investment, (vi) limited local government revenue for service provision, (vii) markedly lower levels of urbanization than in other areas (40% compared with 60% in eastern provinces), and (viii) export trade amounting to only 7% of GDP (compared with 30% for PRC) and FDI inflow of 1.3% of GDP (compared with a national average of 4%). Economic development in Shaanxi has had inadequate investment, resulting in a rural dominated economy that lacks the capacity to generate sufficient output for export trade and an inability to generate paid employment.

3. The higher growth rates since 2000 result from tourism expansion due to rapid domestic tourism growth and increased infrastructure investment in Shaanxi, especially in the capital Xian. Xian city accounts for 21% of the population but produces over 40% of the province’s GDP. The poorer rural counties have GDP/capita less than 30% of the national average resulting in 55 of the 88 counties being classified as poverty counties. In 2004, the average annual income of Shaanxi urban residents was CNY5,928 ($730 equivalent) while per capita income of the rural population was CNY1,050 ($130 equivalent). Rural incomes are only 35% of the $1/day poverty criterion and approximately 50% of the average provincial income level. Low living standards and high levels of poverty are both a result of past natural resource degradation and also a cause for ongoing degradation as low incomes preclude returning cultivated land to forest, reducing and then reversing land degradation, and conserving biodiversity resources. Many countries that are classified as Poverty Counties are located in the Qinling Mountains including Zhouzhi County where the Project is located (at Louguantai).

4. Currently Shaanxi has a dual economy with strong economic growth limited to a narrow geographic location and very weak growth in the wider rural landscape,. Development occurs along the central transportation corridor that runs through , Xian, and prefectures and links Shaanxi with and provinces. The four prefectures that comprise the corridor account for about 63% of the Shaanxi population and nearly 75% of GDP. This corridor, which is dominated by Xian, has GDP per capita that is 19% above the provincial average but still 23% below the national average. Urban residents, however, have per capita income levels above the national average. This unbalanced economic and urban development structure is addressed in the Shaanxi 11th Five-Year Plan (see Appendix 4.

5. Tourism is an increasingly important contributor to the Shaanxi economy. China currently is the fourth largest tourism destination in the world and the largest destination for foreign visitors in . Visitation in China overall is growing at around 7% per annum with 124 million international tourists and 1.4 billion domestic tourists in 2006. In Shaanxi Province, visitation totaled 1.06 million international tourists and 70 million domestic tourists in 2006 and generated receipts of US $5.4

1 Which is used in this document as a proxy indicator for the standard of living and consumer purchasing power at the provincial and sub-provincial levels. 16 Main Report

billion, equivalent to 10% of Provincial GDP. On average, international visitors stay for 2.9 days spending $480 while domestic tourists stay for 4 days and spend $70.

6. Tourism in Shaanxi is mostly based on cultural and historic attraction linked mainly to the historical and cultural attractions of past dynasties. The centerpiece for visitation is the Terracotta Warriors, an international attraction that received 1.9 million tourists and generated revenues of $25 million in 2006- a figure that continues to grow 10% per annum.

7. The 11th Five Year Plan forecasts rapid growth for the tourist sector, projecting that by 2010 (the Project mid-term) 1.75 million international tourists and 110 million domestic tourists will visit the Province generating receipts of $10 billion. The Shaanxi Tourism Bureau strategy seeks to diversify the tourism product mix into three categories of attractions: (i) historical , (ii) Xian city, and (iii) ecotourism and natural resource based tourism. The strategy stresses the need to increase the value of each visitor as opposed to simply increasing the number of visitors and lists ten priority tourism developments including the Qinling Botanical Garden.

8. The ability to achieve this strategy depends heavily upon protecting the biological and natural assets from which tourism products and services can be developed. The main natural asset is the Qinling Mountain (QM) range which is located immediately to the south-west of Xian and runs east-west, straddling the southern part of Shaanxi. Over 90% of the range lies within the Shaanxi Province where it forms a north – south divide and is a major climatic influence on northern PRC, and the water resources of the Yellow and Yangtze Rivers. The southern slopes are a water source for the South to North Water Transfer Project, contributing over 50% of the water stored in the Danjiangkou Reservoir on the Yangtze River. The northern slopes supply water to the system, which flows to the dry northern parts of the country. The Qinling represents the most valuable environmental and biological resources for future tourism development in the Province.

9. People have lived in the Qinling forest and exploited other biodiversity resources for over 2,000 years. The administrative development of cities and counties began more than 2,000 years ago during the and periods. Currently the mountains support 5.1 million residents or about 14% of the Shaanxi population.

10. The Qinling Mountains is a temperate broadleaf and mixed forest and is a global biodiversity hotspot, supporting many endangered Chinese rare and/or endemic plant and animal species2. The endangered species include the giant Panda, the global icon of conservation. The Qinling also includes the only known wild population of one of the world’s rarest birds, the Crested Ibis (the national bird of Japan). The mountains are characterized by very high levels of endemic biodiversity, as well as a vertical spectrum of vegetation types. Seventy per cent of all vegetation types in the PRC are found in the Qinling3.

11. Significant deforestation has occurred since inhabitation. The deforestation process accelerated after the Great Cultural Revolution (1966-1976) with the formation of State Forest Farms. The farms faced the necessity of increased logging quotas to meet their dual objectives of (i) generating economic growth through forest exploitation and (ii) generating sufficient resources to

2 Eight animal species class I, 34 animal species class II, including Giant Panda, Golden Monkey, , Leopard, Crested Ibis, and Oriental White Stork. Considerable biodiversity: over 3,100 plant species, and over 600 animal species; and globally significant ecosystems. WWF Conservation Status: Ecoregion PA0434 critical/endangered. 3 Over 15 animal species have been listed in the national priority protection wildlife list, including the Giant Panda (Ailuropoda melanoleuca), Golden Takin (Budorcas taxicolor), Golden Snub-Nosed Monkey (Rhionopithecus roxellana), Brown–Eared Pheasant (Crossoptilon mantchuricum), Crested Ibis (Nipponia nippon),3 (Ailurus fulgens), Clouded Leopard (Neofelis nebulosa) and Giant (Andrias davidianus). The QM contains the highest Giant Panda population density in the PRC, being home to approximately 20% of PRC’s total wild panda population. Many important plant species are endemic (1,428 species), relic, rare or endangered, including the Ginkgo, one of the oldest tree species in the world. The Chinese Mountain Larch (Larix chinensis), Oneflower Kingdonia (Kingdonia uniflora), the important source- species of the cultivated Paeone (Paeonia suffruticosa), the Mao- (Acer miaotaiense) and the Chinese Fir (Cunninghamia lanceolata) are also highly endangered and therefore listed by the Chinese Government as protected species. 17

maintain ever-increasing staff levels. During this period logging was expanded into the increasingly steep and remoter parts of the Qinling Mountains resulting in significant environmental damage (including biodiversity loss) and off-site effects in the form of soil erosion and flooding events downstream.

12. The natural environment has been impacted by the historic influences mentioned above and current contemporary influences. The historic influences have left a legacy of habitat loss, soil and natural resource degradation that need to be remedied. Contemporary influences include loss of ecological and environmental integrity due to pollution, over use of natural resources, and the pervasive consumption of resources for recreation, rural-residential lifestyles, and industrialization based on natural resources. These pressures continue to cause ecological damage and are an outcome of the Provincial economy’s reliance upon agriculture. Agriculture has converted land onto steep areas some of more than 30 degrees slope and at elevations in excess of 1,500 m above sea level. Approximately 70% of the total Qinling Mountains (about 40,000 km² of the total range area of nearly 58,000 km²)4 is degraded.

13. The Project area comprises 458 km2 (less than 1% of the Qinling Mountains) including the Tianyu and Chiyu River catchments located on the northern slope of the Qinling Mountains adjacent to Louguantai Township. The Project Area is located in Zhouzhi County, 50km south and west of Xian one hour travel by road. The Project area includes: (i) the Tianyu River and the Chiyu River Valleys, (ii) the hill and plain area to the north of the Qinling Mountains, (iii) the existing Louguantai Historical and Cultural Area, (iv) a geothermal Hot Springs, (v) an existing collection of species, (vi) an animal rescue center with endangered including Giant Panda and Crested Ibis, (vii) the ancient temples regarded as the birthplace of the Daoist religion, and (viii) the Louguantai Forest Farm.

14. The registered population of the Project Area is 20,400, Of these, 14,000 to 15,000 live on the 6,000ha of flat land to the north (zoned as ex-situ conservation zone for the Project) and 4,600 in the 39,000 ha hill and mountain landscape (in-situ Conservation Demonstration Area (CDA) in a mostly scattered settlement pattern. Recent policy encouraged voluntary resettlement of residents from the CDA and also to convert people out of agricultural land use practices in the Grain for Green program. This policy had mixed results, and along with logging bans remaining local residents with extremely limited livelihood options. Consequently an estimated 70% of households in the CDA are extremely poor. This compares with poverty levels in the flat lands that are estimated to be 28% of households.

15. The Project Area is representative of the northern slopes of the Qinling Mountains and has an existing tourism sector generating revenues of about CNY17 million ($2.2 million) from 500,000 people each year. The area has a northern flat area facing intensive agriculture, residential, and tourism development. To the south of this flat area is a hill and mountain area that ranges from degraded agriculture and forestry land to near pristine natural forest. The majority of the Project Area is forest land either State Forest land managed by the Shaanxi Forest Department through the Louguantai Forest Farm or Collective Forest land administered by Zhouzhi County Forest Bureau and managed by village level collectives.

B. Analysis of Key Problems and Opportunities

16. The Project seeks to protect biodiversity and the ecological functions of the Project Area to reverse the negative trend on rural livelihoods and the effect of declining livelihoods on encouraging short run resource use decision making that is non-sustainable. Declining environmental trends have occurred as a consequence of past forestry, agriculture and other resource use activities and resulted in the logging ban in the 1990’s. Since the logging ban the Qinling Mountains face new pressures to use land and resources for recreation, urban development.

17. Biodiversity conservation and restoration and the loss of valuable bioresources, ecosystems and habitats must be understood within context in which they occur. Reversing these declines

4 The total Qinling Mountains covers an area of 76,500 km² when we include the smaller portions in Henan and Gansu provinces. See: Tsu- and David E. Bouffard “Phytogeography of the Qinling Mountains and a Comparison with the Flora and vegetation of Japan” (Available on the Internet). 18 Main Report

requires an understanding of the natural and human causes that result in degradation. The loss of bioresources, ecosystems and habitats for rare and endangered species is strongly correlated with habitat loss due to land degradation. Accordingly, biodiversity conservation and restoration in the Project Area and Qinling Mountains requires interventions that respond to land degradation and its underlying causes.

18. The PRC is a signatory to the United Nations Convention to Combat Desertification (UNCCD) which defines land degradation as the: “reduction or loss, in arid and semi-arid and dry sub- humid areas, of the biological or economic productivity and complexity of rainfed cropland, irrigated cropland, or range, pasture, forest and woodlands resulting from land uses or from a process or combination of processes, including processes arising from human activities and habitation patterns.” When land is degraded, its productivity is reduced and may continue to decline unless steps are taken to prevent this. Unchecked, land degradation may result in an almost total loss of the productive capacity of the land to the point where the land can no longer produce anything of value to humanity.

19. The risk is that some land including in the Project Area may reach the point where it is so degraded that it is uneconomic to invest in its rehabilitation. This occurs when the cost of rehabilitation exceeds the value of the land’s future productive capacity. In such situations the only cost effective options may be to either close the degraded area and allow it to recover over a prolonged period through purely natural processes or to simply accept lower productivity from a degraded resource. However in many other, less severely degraded areas, options exist for restoring, sustaining and enhancing the productive capacity of the land, through the adoption of the appropriate controls and improved land management measures.

20. Land degradation occurs through a combination of natural causes and human interventions that typically accelerate the natural processes of degradation. Because the loss of productive capacity is rarely due to just one land degradation process, successful responses require multi-sector approaches to understand and respond to land degradation. Currently, land degradation control programs promoted by sector agencies focus on single causes of land degradation (such as soil erosion, reduced water resources, wind erosion, and salinization) or specific institutional mandate, rather than addressing land degradation in a holistic and integrated way. For the implementation of successful biodiversity protection, land use and related environmental programs require a comprehensive understanding of the range of land degradation causes that affect the productive capacity of ecosystems and not just those few causes or issues targeted by individual agencies as part of their national and provincial level programs.

21. There are many root causes of land degradation in China. Many of these are identified in the problem analysis – Appendix 20. The fundamental or underlying causes of non-sustainable development to the Project Area, and to the Qinling Mountains more generally, include:

(i) rising population pressure within and on the fringe of ecologically sensitive areas; (ii) increasing incomes of urban residents that are placing additional recreation-related pressures on fragile ecosystems that are close to major centers (the Project Area is less than an hour’s drive from the prosperous urban districts of Xian); (iii) decreasing per capita land resources because of urbanization, industrialization and policies (such as the Grain for Green policy) to turn cultivated land into forest land in highly sloped areas; (iv) poverty and economic disadvantage; (v) lack of access to credit for poverty and near-poverty households; (vi) the high costs of and unfamiliarity with conservation technologies (particularly among disadvantaged households with limited education); (vii) increasing competition for and overuse of common resources (or resources where land and management rights are not clear); (viii) too much reliance on biomass to meet rural energy needs; (ix) replacement of traditional farming practices with “modern” intensive methods that are often poorly understood by villagers; (x) rural development policies and interventions that ignore land suitability; (xi) urban expansion with the movement of residential development onto the toe slope of the Qinling Mountains (xii) poorly implemented policy decisions; 19

(xiii) lack of national, regional, inter-provincial and intra-provincial coordination on natural resource, biodiversity conservation, and land use planning; (xiv) limited institutional advisory support services including agricultural extension services – particularly in meeting the more specific needs of poverty households living in hill, mountain and other more remote areas; (xv) conflicting mandates and contradictory policies and regulations amongst institutional support services and across agencies that develop and implement land use and related natural resource policies; (xvi) an inadequate regulatory environment for combating land degradation and the loss of biodiversity resources; (xvii) under pricing of water, pasture, forest products and other natural resources – leading to over use, inefficient use, inefficient allocations of scarce land resources, and little incentive to move land to higher value uses; (xviii) poor construction and maintenance standards of facilities; and (xix) donor, government and other land degradation and related projects that are not sustainable once project funding comes to an end – meaning that environmental, land use and livelihood benefits are also not sustained when funding ends.

22. General threats to biodiversity in the Qinling Mountains are: (i) loss of vegetation from past commercial or illegal timber harvesting; (ii) agricultural expansion and encroachment; (iii) illegal taking of natural resources; (iv) reduced potential for gene exchange due to fragmentation by construction of highways and infrastructure; and (v) unregulated development of tourism.

23. Commercial logging was addressed in 1998 by the Natural Forest Protection Program5, which banned logging in natural nationwide. While this stopped commercial logging (except in plantations), it does not regulate household use of timber for construction, cooking, and/or heating.

24. Agricultural encroachment began when people first settled Province. The flat lands with easy access to water were quickly settled while the remote and rugged terrain in the Qinling was ignored except as a source of natural resources. But in modern times, population pressure pushed farmers further into the mountains in search of arable lands. Farming on the steep slopes of the Qinling caused soil erosion that washed away valuable and choked waterways. Estimates are that 50% of sediment entering the Yellow River above Henan Province and 12% of the total sediment in the Yangtze River is from Shaanxi6.

25. To reverse this trend in land degradation, the PRC instituted the Sloping Land Conversion Program (or “Grain for Green” program) in 2000. The program provides grain, cash and saplings to farmers who convert their steeply sloping farmlands to grassland or woodland7. The program has been implemented on 600,000 to 800,000 ha in the Qinling as a whole, including a portion of the Project Area (the exact amount is unknown) 8 . The degradation of ecological function includes decreased forests and species, reduction of water conservation, acceleration of soil erosion, overuse of chemical fertilizers and pesticides, and more frequent flood and drought. The result is that the conditions for human survival are getting worse.9 Data on resource degradation in the Project Area from 1988 to 1998 indicates that the forest area decreased at 240 ha per year, and the area suffering water and soil loss increased at 18 ha per year (about 5% of the Project Area) per annum.

26. The strategies proposed in 1998 to protect the Qinling Mountains included:

5 Jintao, E. Katsigris and T. A. White. 2001. Implementing the Natural Forest Protection Program and the Sloping Land Conversion Program: Lessons and Policy Recommendations. CCICED Task Force on Forests and Grasslands. China Forestry Publishing House, , 98p. 6 Rui,, Zhongming,Wen, Fei,, , Wang, and Mingliang, Zhou. Case Study on Conversion of Farmland to Forest and Grassland in Ansai County, Shaanxi Province. Reprot prepared for the CCIECED Western China Grasslands Task Force June 2001. 7 Xu Jintao, E. Katsigris and T. A. White. 2001. Implementing the Natural Forest Protection Program and the Sloping Land Conversion Program: Lessons and Policy Recommendations. CCICED Task Force on Forests and Grasslands. China Forestry Publishing House, Beijing, 98p. 8 Data collected by the PPTA Team on the 16 administrative villages in the CDA zone indicated that between 67% and 93% (with an un-weighted average of 84% across the 16 administrative villages) of the village land area had been converted from agriculture (grain) to forestry (green). 9 “Shaanxi Qinling Ecosystem Protection Zone (May 2005) 20 Main Report

(i) establishing co-management to enhance relations with villagers living in and around Nature Reserves; (ii) establishing biological corridors to counter impacts of highways and railways; (iii) strengthening management of nature reserve along highways to counter illegal entry by villagers and livestock and blockage of wildlife movements by fences installed to protect natural forests; (iv) enhancing the administration and increase investment in nature reserves (particularly Zhouzhi Laoxiancheng National Nature Reserve); (v) improving management of tourism; and (vi) diversifying village commercial enterprises.

27. While deforestation and biodiversity loss have slowed in many parts of the Qinling Mountains, the damage has already been done. The success of the Project depends on changing the underlying causes of degradation which determine the trends in biodiversity conservation.

28. The PRC ratified the Convention on Biological Diversity (5 January 1993), and has implemented many of the required actions required by the convention to achieve ratification. The system of nature reserves in the Qinling Mountains has been expanded particularly in eastern areas, and the financing and management of the 27 national nature reserves in the Qinling Mountains have been significantly improved in the past few years10.

29. The PRC Government has given considerable attention to the problems and challenges of biodiversity conservation in the Qinling Mountains. The Qinling Mountains are listed as one of the eleven most critical regions for biodiversity conservation in the PRC11, and the State Environmental Protection Agency (SEPA) nominated the Qinling Mountains Ecosystem Function Conservation Area (QMEFCA) as a national pilot program in 2001 and the SEPB has submitted a Provincial Approval to adopt QMEFCA to SEPA for national ratification in March 2007.

30. The PRC Government has given particular attention to the Qinling Mountains’ biodiversity. The most prominent example is the Qinling Panda Focal Project which is led by the World Wildlife Federation (WWF). The Qinling Panda Focal Project emphasizes cooperation with non-traditional conservation forces such as national and regional government projects and economic development activities and represents an extended commitment by WWF to support the SFD to strengthen conservation in the Qinling Mountains.

31. Conservation of biodiversity has been successfully strengthened through the expansion of Protected Areas, which have effectively been doubled from less than 250,000ha in 1993 to more than 540,000ha in 2006. The majority of these areas however are Panda reserves. Non-panda reserves totaled less than 50,000ha in 1993, increasing to only 100,000ha in 2006. The creation of corridors linking reserves has added a further 70,000ha.

32. The creation of protected areas was achieved through the existing institutional arrangements for the targeted land. As such, the Protected Areas are not only scattered geographically but also across a range of sector and administrative agencies. In the short term the benefits of the creation of these Protected Areas has far outweighed the costs of this fragmentation. Many nature reserves introduced a wide range of new management techniques and approaches including the use of participatory management systems and collaborative management which continues to operate successfully. A major constraint, however, has been the ability of nature reserves to implement their full work plans due to funding shortages. Various estimates indicate that most Protected Areas only receive 30% of their required funding. In an attempt to fill the gap, many enter into commercial operations often at the expense of the conservation values they are responsible for conserving. This under funding has a negative impact on the public perception of Nature Reserve Staff, which in turn reduces the attractiveness of pursuing employment opportunities in conservation. A combination of

10 This is the current number based on the PPTA’s most recent consultations. This number covers 19 that are administered by the SFA and Forestry Departments and Bureaus at the provincial and local government levels, and 6 smaller nature reserves managed by other government agencies such as Water resources and the Environmental Protection Bureau, 11 China’s Biodiversity: a Country Study. 1998 State Environmental Protection Administration, Beijing. 476pp. 21

low salaries, poor benefits and inadequate budgets discourage students from pursuing professional careers in conservation.

33. The location of Nature Reserves was determined more by the opportunity cost of land than coverage of ecosystems. This favored higher altitude wilderness areas and the resultant Reserves do not represent the full spectrum of biodiversity and ecosystems that need to be conserved, especially habitats at lower altitudes. Different habitats in the Qinling Mountains occur at differing elevations and many species (including endangered species) move between these ecosystems during different seasons. Consequently, many species face declining numbers as while selected habitats are protected the range of required habitats throughout the year is no longer available. As a result, the IUCN World Conservation Union Red List of globally threatened species in China includes 804 species in total, 442 plants, and 362 animals. China’s own Red Data Book of threatened species includes a larger total.

34. The Agriculture Ministry reports that 30 percent of the Yellow River’s 150 fish species are extinct. The most recent documented extinction of a vertebrate in China was the Baiji or Yangzi River Dolphin in 2006. China’s Snub-nosed Monkeys have suffered local extinctions over the last 400 years, leaving the remaining four species in small, isolated populations which are vulnerable to extinction. China’s flagship species, the Giant Panda, was nearly lost before conservation efforts brought the global population back to about 1,600 animals. In spite of the extinctions and the long list of threatened species, the Chinese Academy of Sciences estimates that 80 percent of China’s plant and animal biodiversity stills remains undiscovered. Many of the extinctions of species in China’s woodlands and wetlands will never be documented because they occurred before scientists could name and describe the species that were lost. More importantly, it may not be possible to protect or recover species whose survival is threatened by human activities because of insufficient knowledge about these species.

35. In terms of biodiversity conservation, modern China presents a mosaic of contradictions. Unprecedented rates of extinction and rapidly escalating human-caused threats to wildlife are occurring at a time when China’s nature reserve system is growing rapidly toward a 2050 goal of 2,000 protected areas. China’s policy, legal, and regulatory framework for nature conservation is among the world’s strongest, and is continually improving.

36. Successful conservation needs higher representation of biodiversity outside protected areas or islands of high biological diversity. Outside nature reserves, although the strict enforcement of forestry non-use policies within forest land and the Grain for Green program has helped to reverse degradation, they have also created significant negative impacts on local residents. These policies reduced the income of local residents from forest and non-forest products due to bans and the conversion of farm land into forest cover. The outcome of the policy framework has negatively affected local residents and land users. By reducing incomes households are less able to adopt the land use practices necessary to achieve the desired policy goals of increased forest cover. In response to this policy failure new programs were introduced to encourage voluntary resettlement out of the mountainous regions and to remove all resource users. Recently this voluntary resettlement program has been rejected by many households due to the outcomes experienced by past resettlers. Up to 70% of recent voluntary migrants from the Project Area have been unable to re-establish a household or adequate income sources. The role of the Government is only providing facilitation for potential resettlers to identify receiving areas and under current arrangements offers no financial assistance to offset the costs of relocation.

37. The Shaanxi Province decision not to complete collective forest certification in 1978, in which collectives were awarding forest certificates for forest land, compounds the long-run challenge of finding sustainable outcomes. The allocation of certificates to collectives and then to individual households would have enabled the village administrations to reallocate the land of those households resettling out of the village to the remaining households. The extra land, along with secure tenure, would enable land users to move into forest based livelihoods based on conservation or analog 22 Main Report

forestry models. Such land use systems would achieve the permanent forest cover that the policy intended while enabling remaining households to achieve improved livelihoods12.

38. The income levels of the 16 villages of the CDA zone remain markedly below poverty thresholds, and their current income levels are further threatened by the unintended consequences of these recent policies. These uncertainties coupled with acute poverty encourage increasingly shorter term and exploitative decision making by the remaining households. Voluntary resettlement will continue in the short run; however, the limited education levels and lack of vocation training limit the ability of such households to compete for well paying jobs in the areas targeted for resettlement. Those that resettle often become economically vulnerable due to dependence on casual employment. The lack of off-farm jobs and the shortage of land will result in many future resettlers remaining poor in their new locations. Generating off-farm rural employment remains a priority for addressing many of the land degradation and economic development objectives of the Shaanxi Province.

39. Logging and forest thinning are banned in Natural Forest Protection Areas such as the Louguantai Forest Farm. This policy includes collective forest land. Non timber products utilization has also been restricted in many ways. When enforcement of the logging ban started, state owned forestry farms received financial support from the government and have now moved into tourism businesses. In contrast the communities whose forests are in the NFPP project area have lost the income from the forest resources but received no additional support from the Government except plantation subsidies. The Project CDA forests are inside NFPP areas and currently are included in the logging and NTFP bans. The Shaanxi Forest Department will exempt the Project Area from this ban to enable an assessment of community managed forest based livelihoods and the SFD to use the assessment to inform future policy reform.

40. While voluntary resettlement has provided some benefits, it reduces CDA population. This results in reduced government services (especially health and education). In addition, many that migrate are of working age, potentially eroding future village leadership. The outcome is effectively involuntary resettlement for families wishing to educate their children or to access health services. The 11th Five Year plan reports reduced budgets for future resettlement, and the Grain for Green program will further limit options and benefits for CDA households. The 11th Fiver Year Plan does strongly support the implementation of the socialist countryside policy that seeks to link urban to rural areas and to link industry to the rural poor as proposed by the Project.

41. The Socialist Countryside Policy plays a central role in the 11th Five Year Plan (FYP). The policy emphasizes increasing farm production from crops, apples and other economic , strengthening county level economies, expanding local industry based on local comparative advantage, strengthening the province’s system of agricultural service centers, improving water supply, electricity supply, social services and other public facilities at the village level, expanding local government revenues in counties, townships and villages, and enhancing democratic management and accountability at the local level.

42. Government policies and planning priorities (see Appendix 4) specify a movement towards far greater differentiation in Provincial Economic development planning with sub regional strategies that seek to build on comparative advantage. The Project Area is included within the Southern Regional Economic planning Strategy which places priority on sustainable economic development, conservation and protection of ecological resources and functions, the need to build local enterprises to address rural poverty through linking the rural poor to loal value adding industry and market chains. Tourism and more specifically ecotourism is identified as a key element of the economic development strategy for the Southern Region.

43. Tourism is recognized as one of the key economic drivers in the 11th FYP, with tourism receipts expected to expand from $4 billion to $10 billion in 2010 – contributing over 10% to the province’s gross domestic product. To strengthen tourism, the provincial plans for the next five years places more emphasis on intensive higher value-added tourism. The objective is to provide a balance between the quantity, quality, efficiency of the tourism activities and environmental protection. Xian will play a pivotal role in the province’s tourism sector; however, Xian’s tourism is a highly developed

12 For example agro-forestry land use systems in Province increase land user incomes from CNY 3,300 per annum to over CNY 10,000 per annum. 23

and mature product compared to other tourism opportunities in the province. These opportunities include ecotourism where higher growth is possible because of the recent and future planned improvements to the province’s transportation system. The result will be greater travel by urban residents to increasingly accessible tourism destinations in the province, particularly in the Qinling Mountains.

44. The Xian tourism sector is responding to the growth challenge through plans and strategies designed to diversity its tourism products. Product diversification includes expanding the range of historical and cultural products (including the Dao religion), developing eco-tourism and other resource-based tourism particularly in the QM, and establishing Xian as a major international city with unique local characteristics.

45. The problem of unbalanced development in Shaanxi is clearly recognized in the Shaanxi 11th FYP. In keeping with the Government’s policy on the socialization of the countryside discussed above, the 11th FYP includes interventions designed to bring achieve balanced and inclusive provincial economic growth. This includes investment to reduce inequalities in GDP, productivity, incomes, consumer purchasing power, access to basic services, and quality of life between, the less developed and rural northern and southern regions, and the more advanced central region linked to Xian and the transportation and tourism corridor from Henan through central Shaanxi to Gansu.

46. The proposed tourism strategy for the southern Shaanxi region outlined in the 11th Five Year Plan, includes the Qinling Mountain range, prioritizes green industry development in such areas as forestry, agriculture and agro-industry, hydro-power, the development of Chinese herbs for medicinal and other purposes, eco-tourism, and other forms of tourism including historical and cultural tourism based on the . The Project seeks to develop tourism prioritized by the Southern Shaanxi strategy by developing attractions linked to the Qinling Mountains strengthening the current Shaanxi tourism market. The tourism section of the Shaanxi Province 11th FYP identifies ten major tourism sites with one being the Botanicalal Garden. In addition, the Qinling Mountain Ecological Tourism Area is one of six tourism “brands” to be emphasized in the tourism strategy under the Shaanxi 11th FYP.

47. The tourism industry is divided between hotels/accommodation facilities, travel and tour agencies, and tourism attractions and tourist sites. The province’s tourism base and supporting infrastructure are well developed. There are currently about 300 starred hotels in Shaanxi (five star – 4 hotels, four stars – 24 hotels, three stars – 135, two stars or below – 137 hotels) supplying 60,000 beds. When the non-starred hotels are added, the province has well over 330,000 beds. Four and five star hotels are generally owned by the state and/or operated through foreign joint ventures. Most of the two and three star hotels are owned by the state with management contracted to domestic private sector enterprises with a few under private ownership.

48. Shaanxi has about 470 travel agencies. The 45 international travel agencies that can receive international tourists and organize outbound travel by Chinese individuals and groups are owned by the state through joint ventures (JVs) between SOEs and foreign and domestic enterprises. In contrast, the remaining 425 or so domestic travel agencies are mainly owned and operated by domestically owned private enterprises, with 2% owned by the government.

49. Shaanxi has developed 300 tourism sites. Cultural and historical sites cannot be sold to the private sector. Only one such site, a theme park in Xian, is owned by the private sector. The smaller tourism sites with lower or no ranking are owned by a mix of government and private interests. Compared to OECD countries, the government plays a larger role in product development, marketing and financing of tourism attractions and services in the PRC as a whole and in Shaanxi in particular. Private sector involvement in the Shaanxi tourism industry is too low, and the current government strategy seeks to expand private investment from both domestic and foreign sources in the Shaanxi Province tourism industry.

50. The Shaanxi Tourism Bureau provides the following functions and services: policy and planning, tourism development, quality of service regulation and handling of tourist complaints, a service center to assist tourism operators, and supervision of the tourism environment. The Xian Tourism Administration has a similar structure and provides similar services and has a division that 24 Main Report

monitors marketing trends. A further division provides tourism information, consulting assistance and assistance with tour guide management. The Xian Administration has in total about 60 employees.

51. The government previously carried out all tourism certification; however, certifications for hotels and restaurants are currently done by the Shaanxi Tourism Association. The Association operates at arm’s length from government, but its leaders are often from the Tourism Bureau. The Association membership includes hotels, travel and tour agencies, tourism sites and the larger standards that attract a large number of tourists. The Association includes three branches: (i) hotels and restaurants including hotel suppliers; (ii) travel and tour agencies, and (iii) tourism sites. The Association also has a training school that provides training for tourism managers, guides and other tourism services.

52. There are a number of reasons for the limited involvement of the private sector in Shaanxi tourism. First, the private sector generally plays a smaller role in investment and production in the Shaanxi Province economy than in the more highly developed PRC provinces on the east coast. Second, the private sector in Shaanxi and other parts of western China has more limited access to commercial financing at reasonable terms than the SOEs and other government entities. Third, high quality tourism attractions require significant capital investments that can be slow in generating major returns. (The private sector in China generally prefers investments in property that generate quick returns, have short pay-back periods and provide returns on investment in the area of 15% to 20% or more.) Fourth, as noted earlier, many tourism attractions in Shaanxi involve historical sites, cultural relics and ancient buildings that need to be managed and protected by government. The expectation is that eco-tourism and other resource-based tourism will provide greater opportunities for private sector ownership and management in the future.

53. While tourism is an important source of economic strength, jobs, investment and business development in Shaanxi, the Province’s (including Xian) tourism sector is losing ground to other PRC destinations in attracting and lengthening the duration of stay of the higher spending international tourist. Tourism officials recognize that the industry has been too dependent on a narrow range of products that are associated with the (especially with respect to the Terracotta Warriors). Product diversification and the development of more specialized higher value products that appeal to higher income market niches in both China and other countries is needed to attract greater numbers, increase the duration of stay, and increase the spending of each visitor to Shaanxi.

54. More specifically, Shaanxi needs to capitalize on its potential for tourism development that would be related to the unique collection of plants, animals and birds that live in and around the part of the Qinling range which is located within the Xian tourism region. There is an outstanding opportunity to promote conservation-based tourism linked to the growing domestic and international demand at sites such as the Terracotta Warriors, and to create employment and wealth in the Qinling Mountains for the future promotion of sustainable conservation. The Shaanxi Tourism Bureau is currently preparing a strategy to support eco-tourism and other resource-based and cultural tourism in the Qinling Mountains.

55. The switch to high value tourism requires not only appropriate product development and marketing but also to remove the threat of current land degradation and biodiversity losses that contradict the potential value of ecotourism in the Project Area and the Qinling Mountains. Further it will require the preparation and enforcement of appropriate tourism standards and the training of local people living within or near the Project Area to fully participate as workers in, suppliers to, and/or owners of the tourism facilities established in the ex-situ area and the much larger CDA part of the Project Area.

56. Over the past decade, Shaanxi has made major advances in improving the management and quality of its traditional tourism products. Major investments have been made in tourism facilities, the Shaanxi Tourism Group Company was formed in 1998, and in 1999 the commercial aspects of the Terracotta Warriors site was placed under the management of a state-owned tourism enterprise called the Qin Dynasty Terra-Cotta Tourism Corporation Limited (which is a subsidiary of the Shaanxi Tourism Group). However, more work is needed to further improve the quality of the Province’s tourism attractions and other products and to attract new enterprise investments (including from the private sector) as well as new skills, ideas, energy, and market and product development expertise 25

into the Province’s tourism industry13. These and other enhancements will be needed for the Shaanxi Province and the city of Xian to achieve the major increases in tourist numbers and revenues from both domestic and international sources called for in the Shaanxi 11th FYP.

57. With government policy changes from exploitation of natural resources to the protection of the environment and conservation based on “non-use”, many existing institutions have yet to restructure or reorganize to deliver these new mandates. For example, the Louguantai Forest Farm has moved from relying on logging revenues to pay for staff costs to being dependent on the Government budget, and the Shaanxi Forest Department formed new units such as the Shaanxi Animal Rescue Center which support its increasing role in conservation. These new enterprises all suffer from weak management standards, budget shortfall requiring them to adopt cost recovery or revenue generation activities.

58. The historical manner for PRC to address these issues was to create accountability through assigning one manager to each business or enterprise. While achieving accountability for specific functions this approach has, over-time, created a proliferation of new enterprises often with overlapping jurisdictions and mandates. A similar organizational fragmentation exists within the nature reserves that fall under national, provincial and county bureaus which are often linked to differing National Ministries. These agencies, while providing similar functions, compete for their share of revenues and resources often to the cost of wider conservation objectives. Interventions that successfully address resource degradation require a multi-stakeholder integrated landscape approach to address the underlying causes of degradation. The prevailing organizational and institutional framework is however multi-agency based with little coordination or cooperation while the individual agencies compete for market share.

59. The ambiguity created by current organizational arrangements for the Project Area has been further compounded by the agreement to assign the Project to the Qinling Botanical Garden government unit effectively duplicating existing organizational and legal mandates of the Louguantai Forest Farm, Shaanxi animal Rescue Center and the 16 collectives and their land. Organizational consolidation that unifies these interests into a unitary institutional model is a critical success factor to achieving long term commercial sustainability and better resource use outcomes and has been agreed in principle by the SPG.

60. A significant constraint to achieving sustainable natural resource management outcomes is the government safeguards for changing land use and accessing water resources. These safeguards seek to protect food security by ensuring that there is no net loss of basic cultivated land within a county or province. However, this precludes the movement of land into higher value and perhaps more sustainable land uses such as the proposed development of large scale commercial tourism attractions.

61. The Project seeks to support the Shaanxi 11th FYP implementation and its expected impact, outcome and outputs for the Project Area and wider Qinling Mountains will provide a significant contribution to the 11th FYP goals. In addition, the tourism facilities and other commercial activities proposed for financing under the Project will benefit significantly from: (i) the transportation investments, (ii) the overall tourism development strategy, (iii) the further development of Xian as a major Asian and international city, (iv) the improvements to rural family incomes, (v) the more balanced, diversified and dynamic economic structure, and (vi) the higher levels of science development, innovation, and urban prosperity that will result from the Shaanxi Provincial Government’s 11th FYP as well as broader trends in the provincial, national and international economies over the longer term.

13 The requirement and trend for to emphasize higher quality and high value added over quantity-based tourism were discussed in a recent article in the China Business Review. In particular, this article discussed the new demand for luxury among US baby boomers and tourists from other OECD countries. This is creating a broader market of travel purchasers who are willing to pay premium prices for an up-scale travel experience to China. These tours often have a starting price of $500 per day and their duration on average is 14 days. This kind of luxury tourism will have a small but growing market in China as the country’s upper income and upper middle class continues to expand. See Chase Poffenberger and David Parry, “Travel and Tourism: The New Face of Tourism in China” China Business Review, January-February 2007. 26 Main Report

62. The proposed Southern Shaanxi Regional Strategy (11th Five Year Plan For Shaanxi Province 2006) proposes to protect natural resources in order to develop nature and ecotourism, alternative livelihoods and off-farm employment opportunities. The Project seeks to develop commercially successful businesses that will invest in conserving the resources throughout the Project Area in the first instance and then increasingly within the Qinling Mountains. As such the concept of ex-situ tourism development is simply a means for generating a more sustaining flow of investment for the conservation of biodiversity. Similarly the Project will invest into the CDA to improve livelihoods of local residents. The local residents will increasingly derive income from forest or forest based products either directly or through adding value to forest and local products such as essential oils, medicinal plants and the production of handicrafts.

63. ADB’s Country Partnership Strategy (2008–2010) provides support for poverty reduction and investment that improves the quality of life for those on low incomes and assist the protection of its natural resources and environmental assets especially those that have regional or even international significance. ADB’s operations will support the 11th FYP implementation with a focus on improving equity and environmental sustainability. The ADB partnership program seeks to achieve this through improving resource use efficiency, fostering sustainable cities and urban development, enhance rural development through linking producers to markets and industry, and enabling private sector development. The proposed Project supports ADB’s partnership strategy though support for sustainable rural development based on linking rural livelihoods to sustainable natural resource management and biodiversity conservation within a wider landscape model. The approach to tourism will assist in the development of high value tourism that is pro-poor through linking each enterprise to rural communities for goods and service opportunities and through the provision of a levy into an eco- fund for the financing of CDA conservation and conservation based livelihood development. Through these linkages poor and often vulnerable rural residents will increase income levels and increasingly derive income from either or both paid employment and forest resources.

64. External Assistance. Biodiversity has been well supported within the Qinling Mountains since 1995 when the first World Bank - GEF protected area and nature reserves program was implemented (see Appendix 2). The program sought to strengthen nature reserve management capacity and to introduce new approaches to conservation management built on collaborative management styles. This donor work was further developed through the continued support and involvement of WWF in the Qinling Mountains where programs for strengthening nature reserves, panda conservation and rural livelihood improvement and monitoring continue successfully.

65. Land degradation, especially through human activities that destroy natural habitats such as land conversions, industrialization, poor management of water resources and deforestation, severely endangers the PRC’s rich biodiversity. ADB’s Capacity Building to Combat Land Degradation Project 14 , the first project under the PRC-GEF Partnership on Land degradation in Dryland Ecosystems, is ongoing in six provinces/autonomous regions: Gansu, , , , Shaanxi, and . In Ningxia, a multi-agency task force has prepared a provincial level strategy and action plan for land degradation control through an Integrated Ecological Management (IEM) approach.

66. The PRC has given particular attention to the Qinling Mountains rare and endangered species. The most prominent example is the Qinling Panda Focal Project which is led by the World Wildlife Federation (WWF). WWF has supported species management for Giant Panda, habitat protection and restoration, capacity building programs, rural livelihood and ecotourism programs in the Qinling Mountains with considerable success and influence. The Qinling Panda Focal Project emphasizes cooperation with non-traditional conservation forces such as national and regional government projects and economic development activities.

67. More specifically, the PRC has implemented a number of related initiatives over the past decade with ADB and other international partners. Related programs and projects that will offer valuable links and potential collaboration with this Project include the ongoing PRC-GEF Partnership

14 ADB. 2004. Technical Assistance to the People’s Republic of China for the Capacity Building to Combat Land Degradation Project. Manila. Approved on 29 June 2004 for $13.8 million, of which $7.7 million was provided by GEF as a grant. Supported by ADB. 2004. Technical Assistance to the People’s Republic of China for the Support Implementation of Capacity Building to Combat Land Degradation Project. Manila, for $1.2 million. 27

on Land Degradation in Dryland Ecosystems, and the GEF/ADB-financed Capacity Building to Combat Land Degradation Project.

68. Within the rural development and land use sectors the World Bank has successfully implemented 14 projects, IFAD and ADB one each, Japan has also implemented one afforestation project in Shaanxi. The total value of these projects exceeds $1 billion (see Appendix 2).

69. Lessons Learned. Resource degradation requires interventions that address a wide range of the underlying causes. Sector approaches have proven to be ineffective and expensive in PRC, often resulting in significant negative offsite impacts on local residents. Fragmented Institutional arrangements continue to maintain inappropriate responses and perverse incentives for continued land degradation.

70. Rural poverty reduction initiatives that do not link producers to the market chain and support producers to exploit these linkages rarely enable beneficiaries to exit poverty. Success derives from interventions that link the poor to economic growth opportunities, commercial value chains, and the opportunity to compete for off-farm employment15.

71. The Project will adopt a commercial approach to the diversification of local economic development in the Project Area by supporting three significant commercial enterprises to grow and thereby provide job opportunities for local rural residents. The further linkage of these enterprises through a sustainable financing mechanism that funds conservation programs in the CDA is unique in China. The financing mechanism seeks to transfers funds from the commercial enterprises in the ex- situ zone to the CDA for the management and protection of Qinling Mountain Biodiversity. Funds will also be used to assist develop more sustainable and benign livelihoods for the remaining rural residents. The agreement to form a consolidated management of the Project area through the amalgamation of three enterprises under one management structure provides the basis for overcoming the institutional weaknesses in implementing successful multi-sector programs. However to be successful competent management needs to be established and supported with staff that have skills and motivation for implementing sustainable programs.

72. Lessons from similar ADB projects are: (i) provincial government should provide a project management office with adequate financial and staff resources to ensure strong ownership; (ii) a strong leading group is necessary to provide leadership and guidance; (iii) commercial projects should be supported only if an entity exists to financially and managerially back the project that is also committed to promoting rural development; (iv) commercial operations should adopt a flexible approach and be sensitive to changes in market demand and prices; and (v) consultants are required to support institutional building capacity of the stakeholders involved, including project management.

III. THE PROPOSED PROJECT

A. Impact and Outcome

73. The impact of the proposed Project will be to improve the wellbeing of rural communities in the Project Area based on the sustainable conservation and use of Qinling Mountain resources. There will be increased smallholder incomes and skills for livelihood diversification including the ability of the rural poor to access higher paid employment. Income diversification will be supported through the development of Small and Medium Enterprises (SME), the expansion of pro-poor tourism and ecotourism opportunities, and the reallocation of land and adoption of appropriate forest based land use activities. Biodiversity conservation will be enhanced through habitat protection and restoration programs linked to conservation forestry, strengthened management and ex-situ species management programs and extensive awareness and education programs.

74. The Project’s outcome is to introduce an integrated landscape management that provides sustainable livelihoods for the population of the Project area as a demonstration for the wider Qinling Mountains. The Project will address underlying causes and effects of both historical and contemporary resource degradation. The main targets and indicators will be (i) demonstration of an

15 ADB. 2006. Special Evaluation Study on Pathways Out of Rural Poverty and the Effectiveness of Poverty Targeting. Manila. 28 Main Report

integrated spatial plan for Louguan Township and surrounding forest farm; (ii) livelihood improvement for up to 12,000 farmers, (iii) up to 40 small enterprises established, (iv) environmental treatment of over 90% of all waste streams arising from mass tourism, (v) management plans prepared for at least 6 endangered species, (vi) measurable increases in the extent and quality of habitat within the Project area, (vii) increased tourism visitation from 300,00 to more than 1 million by 2020, and (viii) contribution to at least 2 managed conservation breeding programs.

75. The Project has three outputs: (i) successful tourism development that supports conservation, (ii) improved livelihoods from sustainable management and conservation of natural resources, (iii) project management and institutional arrangements for sustainable management of resources established and demonstrated.

B. Outputs

1. Component One: Tourism Development to Support Conservation

76. Component one will support two commercial enterprises to develop and expand their business models within the ex-situ zone. These enterprises include (i) QNBG (incorporating the Qinling Botanicalal Garden, SARC, Louguantai Forest Farm) and (iii) Louguantai Hot Springs Development. SPG has proposed a two-phased approach, with ADB and GEF helping to finance phase 1 during 2008–2013, and the Shaanxi government and enterprises entirely financing phase 2 during 2014–2018. The second phase will be about the same magnitude as the first phase but will allow for (i) expansion of the infrastructure for tourism in PA, (ii) preparation of plans for improving biodiversity conservation in the other nature and forest reserves in QM, and (iii) incorporation of lessons learned from phase 1. The Project in phase 1 will support two public-sector enterprises that will undertake significant construction of buildings including exhibition halls, offices, tourism accommodation and restaurants, animal exposition and display areas, animal enclosures, roads and infrastructure including drainage systems, lighting, water supply and irrigation investments, and Daoist temple and related building renovations.

77. Qinling National Botanicalal Garden (SQNBG) is a new business enterprise consisting of 269 ha of constructed gardens that represent the plants of Qinling. The gardens will be interlinked with walkways along which public education and awareness displays will inform the public on themes such as natural history, environment and biodiversity. The QBG will also construct a major exhibition hall to represent aspects of natural history and a service reception center including hospitality and restaurant functions. The gardens will be linked by walkways and a 1230m cable car to a series of Daoist temple sites that will be restored and protected16.

78. The 18 constructed gardens will amount to 57 ha interspersed amongst 25 ha of lawn. The display will be supported with a greenhouse for propagation and display purposes. The site will require utilities and infrastructure to minimize the visitation impact on the environment and the gardens themselves. Electric vehicles will be used to move people around the garden as needed. The enterprise has been allocated permission to use land; however, this land will require resettlement of some 143 households and a limited amount of land acquisition. The remaining land will require 3,780 affected persons to be compensated through a fixed payment to farmers and a profit share agreement based on share of capital in the QNBG. As the Revenues increase forecast profit share revenues increase. In total the QBG will employ over 250 people with the local residents and affected persons having the first right of refusal for any employment opportunity.

79. Revenues will be generated from day visitation and the use of entry tickets along with profits from attractions or services including the cable car, restaurants, rental cars, temples sites and exhibition hall. Visitor numbers are expected to rise from 350000 in 2011 to 478,000 on project completion to over 1.1 million in 2035. Revenue forecasts indicate a revenue stream increasing from

16 The restoration program will be jointly undertaken by the Qinling Botanical Garden and the Daoist Community with the Daoist community participating in the identification of “legitimate sites” and also in the specifications of design. The Daoist community will be required to provide their ratification of the final designs to the PMO prior to any ADB approval for the financing of these sites. This approval will include design, and operational parameters including the sharing of revenue if required. 29

CNY 37million to CNY 64million in 2015 and CNY 158 million in 2036. The enterprise as a negative net cash flow during the construction period until 2011. Employment will move from the current 40 staff to over 250 staff by Project completion and as visitor numbers grow the level of employment could reach 600.

Table 1: Forecast Financial Performance of QBG Year Visitor numbers Revenue (CNY million) NCF (CNY million) 2011 350,000 37 -5 2015 517,000 64 8.4 2020 725,776 90 31 2036 1,270,00 157 96

80. The Qinling Botanical Garden (QBG) will use 4039.5 mu (269.3 ha) of collective owned rural land from Dianzhen village for development under this project. While the QBG has received approval to prepare the Project Feasibility Study for the Project Area the QBG currently has no land use rights. Two approaches have been proposed to access land use rights. These include (i) land acquisition amounting to 293.63mu (19.64 ha), and (ii) land rental using a land shareholding agreement for 3,746 mu (249.66 ha) where current land use right holders will gain shares on the QNBG enterprise. Within the Project area, there is rural cropping land, other rural agricultural land, rural idle land, rural residential land and rural infrastructure construction land – the rights for all land types are held by Dianzhen village and its residents.

81. Currently the proposed use of a shareholding agreement is deemed by the PPTA to have no legal status being contra to local regulations17. The following section outlines these issues and recommends a series of actions to be undertaken before any processing of the QBG project loan.

82. Required Approvals:

 QBG will provide a land use pre-checking report from a land use management authority as required by the law to confirm: (i) basic farming land has been relocated to another location. (ii) land use application of QBG is consistent with the government land use plan and regulation, (iii) there is a change of agricultural land quotas for QBG.  QBG will acquire 293.63 mu (19.57 ha) of land. It will be required to get approval for acquisition of land after the project feasibility study is approved by SPG. Then the resettlement plan will be implemented

1. Land Rental

83. The draft contract of land shareholding provided by QBG indicates that the contract follows the requirement of the “Rural Land Contracting Act of PRC; The Contract Act of PRC; and The Forestry Act of PRC. However a recently introduced Shaanxi Land regulation states that contracted land management right (land user right) of collective members on the rural land may not be invested in an enterprise in a share arrangement. The “Implementation Methods of Shaanxi Province on Rural Land Contracting Act of PRC” has been in place since January 1st 2007 and as such the QBG proposals to put collective members’ land user rights into a shareholder arrangement is no longer legal..

84. The contract18 has proposed a financial return arrangement for the land which is put into a shareholder arrangement. The proposal envisages two parts to the financial consideration for land use being:

 Fixed Rental Revenue: Starting from the first year of the land share establishment. The land is classified into three categories for the purpose of the land rental prices. (i) first class (irrigated land) will be paid CNY 500 per mu., (ii) second class (dry land) will receive CNY 400

17 The PPTA has been advised that this constraint does not necessarily apply to the QBG and that an official document to this effect will be provided to ADB. 18 A more detailed list of outstanding issues regarding the acquisition of land use rights is provided in Appendix 6,10, and 11 30 Main Report

Yuan, and (iii) third class (sloping land) will receive CNY 300 in the first year. The fixed return will progressively increase by CNY 20 per year for all classes of land.  Shareholding Profit Share Revenue: From the first year that QBG receives ticketing income shareholders will receive their share of net revenue form the QNBG. The fixed return will stop increasing once a profit share is received, but will be retained as part of the return to the land share shareholders. The share value will be calculated on the basis of the price set up for the 50 years of the land user right. Sloping land will be valued at CNY 7,500/mu, dryland CNY 10,000/mu, and irrigation land CNY 12,500/mu. The value of the land use right from this contract will be calculated against the total capital of the QBG. The proportion of revenue from tickets will be shared on the share of land use right in the total capital of QBG. There is however no indication of how other equity will be valued in the total share capital.

85. The Shaanxi Animal Rescue Center (SARC) currently operates from an existing site of 141 ha within the Lougauntai Forest Farm. The main rescue center is a 6 ha area for animal pens. This area is open to the public. The current site is in poor repair with significant animal welfare issues. The center attracts 30,000 tourist visitors per year mostly to glimpse panda, golden monkey, crested ibis, and takin. The Project seeks to significantly expand and enhance the current facility to create it as a center of excellence in the management and display of threatened indigenous species. As such the center is intended to demonstrate to the rest of PRC the potential opportunities and benefits from establishing international standards in the care and welfare of the animals within this ex-situ conservation, education and research center.

86. The project will modernize the center to meet international standards by: (i) increasing the personnel and their capacity in wildlife conservation, (ii) achieving more efficient rescue of wild endangered animals and their rehabilitation, (ii) developing a high quality tourism site, (iv) increasing the quantity and quality of research into wildlife, and (v) creating an awareness and education program for visitors and local communities on wildlife and biodiversity. The Project will achieve this by increasing the area of the rescue, breeding, research and husbandry facilities from the current 141 ha to 1,112 ha. The enlargement will include the development of three satellite sites in more natural environments for giant panda, crested ibis and golden monkey within the wider Project Area.

87. The satellite proposed for the Panda station is now to be located at the Hu Bao valley on the periphery of the CDA about 2 miles south of the SARC existing site overcoming the concerns raised of its location within the high biodiversity valley originally proposed. The PPTA still considers the scale of the satellite for about 40 Pandas (with an additional 20 in the main center) to be a concern. Population modeling indicates that without further wild captives, a capacity of 15 to 20 is more than adequate in the medium term.

88. The current animal rescue and exposition site will complete a refurbishment and reconstruction program designed to ensure animal welfare and animal presentation is world class. The Project will provide an international design expert to prepare site layouts, design specification and detailed terms of reference for the SARC design institute to follow in the completion of a detailed engineering design. To avoid potential public and media ridicule, ADB should require the detailed engineering design be reviewed by both ADB and the international expert to ensure compliance with the TOR’s provided.

89. At Project completion the center will have 70% of the forage area developed and be able to support 80% of total planned numbers of iconic species. The center will undertake the science for controlled release of species from breeding centers as numbers and the science enables this to occur. It is proposed that the giant Panda Breeding Center be expanded to include 10 nursery rooms, 32 enclosures, and a research and feed growing areas. The Crested Ibis Center will include construction of a 140,000 sq m facility comprising an artificial wetland on which a large flight aviary will be constructed to enable nesting colonies to be established. The Golden Monkey site will involve 10ha of forested/treed land that will support 30 animals.

90. Being located one hour drive from Xian provides the SARC a major marketing advantage over competing panda attractions. It also has the added benefit of having access to other iconic Qinling Mountain species. The rapid expansion of Chinese tourism and the central role of Xian and the Terracotta Warriors in this growth offers a large accessible visitor population of both local and international tourists. A visitation management program will be introduced. 31

91. Revenue will be generated through the visitation program. Visitation is projected to increase to 430,000 by Project completion and then increase to over 1 million in 2030. Revenue levels will increase to CNY 33.3 million by Project completion, CNY 63 million by 2015, and CNY 130 million in 2036. SARC management will contract a commercial tourism operator to manage the commercial aspects of the site. Current staff levels of 28 full time and 12 part-time will increase to nearly 200 full time jobs.

Table 2: Forecast Financial Performance of SARC Column Heading Column Heading Column Heading Column Heading 2011 280,000 26.4 -1.5 2015 519,000 63 21.7 2020 829,000 100.6 50 2036 1,100,000 130 77 (Source: PPTA Estimates)

92. Hot Springs Development involves an existing development of the Shaanxi Louguantai Daoism Hot Spring adjacent to the Shaanxi Animal Rescue Center (SARC). The first stage of development was completed in late 2007 and involves an accommodation and bath area. The Development is being undertaken as a joint venture between the Forest Bureau (as represented by the Louguantai Forest Farm 49%) and the Shaanxi Tourism Group Corporation (51%). The Project will support the second phase of the development to improve leisure tourism in the Project Area, to promote tourism and the Project Area as a tourism attraction, to stimulate growth in local industry through providing goods and services to visitors, and importantly to promote greater understanding of Daoism as a religion.

93. The Project will support the construction of 18 multi-room villas with five bedrooms for two people each or a total capacity of 180 people per night. In addition the project will support development of a restaurant, bathing pool complex, internal utilities and site infrastructure, equipment and vehicles and staff training programs. Visitation is expected to derive from both over night stays and day visitors with the development providing the top end of available accommodation in or around Louguantai. Accommodation occupancy is expected to reach 70% by 2020. Day visitation would start from about 300,000 in 2011 and reach 500,000 in 2023 at which level it would reach operational capacity. Management of the operation will be undertaken through a commercial management contractor with substantial experience in the tourism sector. The Shaanxi Tourism enterprise needs to raise private sector funding for the completion of the hot springs development. Prior to ADB approval a Bank Guarantee or letter of credit should be provided to ensure that financing is available.

2. Component Two: improved livelihoods from sustainable management and conservation of natural resources

94. Component two will support the implementation of the proposed CDA zone management strategy (see Appendix 8) and result in improved conservation values through increasing forest cover and manipulating of existing forests to restore wildlife habitat. The CDA zone supports 4,593 residents that lost income sources due to policies removing access to forest products, livestock and agriculture on steep lands.

95. Financing of CDA programs will continue after Project completion through the three tourism enterprises contribution to a profit share and redistribution program. During the construction period of the Project the profits will be modest. After 2012 the amounts involved could increase substantially and be able to support CDA conservation and eventually beyond the Project Area. The existing institutional arrangements for land use and the provision of a financing mechanism are a major risk to the profit share arrangement. The QNBG will use an internal accounting method to transfer funds from the enterprises to the CDA. For the hotsprings the transfer is deemed to apply only to the Louguantai Forest Farm shareholding and is therefore set at 49% of the rate applied to both Qinling Botanical Garden and SACR. It is recommended that the management of QNBG set the fee based on an internal charge against assets (levy on land and capital assets) to create incentives for efficient use of land and to ensure funds are available to the CDA program. 32 Main Report

96. The final size of the transfer will depend ion the need of each enterprise and the CDA program. For the CDA program the scale of the final program is determined by the scope of work planned and this can be adjusted to accommodate the available resourcing. With the asset and capital structure of QNBG unknown the PPTA has applied a charge against net profit after tax. To achieve the expected minimum scale of program that currently costs $400,000 per annum a charge at 8% of net profit is necessary (see Table 3).

Table 3: Projected Financial transfers to the Eco-fund based on 8% of Net Cash Flow – CNY 0`000’s 2012 2013 2014 2015 2016 2017 2018 2019 2020 Qinling Botanical garden 148 186 152 195 238 280 323 366 409 SARC 120 120 120 120 120 120 120 120 120 Hotspring 32 32 32 32 32 32 32 32 32 Total CNY (0000) 300 338 304 347 390 432 475 518 561 Total USD (000) 400 451 405 462 519 576 633 690 747

97. The amount generated will increase in time as profits increase through visitation growth and fee increases. The amount raised even at an acceptable charge of 15% (equivalent to a commercial return on assets) is significantly higher and represents a very good opportunity for SFD to reinvest into conservation throughout the wider Qinling Mountains see Figure one. As such the Project could act as an incubator for future investment and commercial conservation programs.

Projected Revenue Transfer

1400

1200

1000

800

USD (000) 600

400

15% reallocation 200 10% reallocation 8% reallocation 5% reallocation 0 2012 2013 2014 2015 2016 2017 2018 2019 2020

5% reallocation 8% reallocation 10% reallocation 15% reallocation

98. The revenue available for CDA programs could be allocated to the following guidelines (i) Monitoring 25% ($100,000), (ii) habitat development 40% ($160,000), (iii) implementation of endangered species management plans 10% ($40,000), (iii) livelihood improvement ($100,000). As the amounts increase the funds allocated to wider livelihood and conservation programs can also increase including options such as scholarships for residents of the Qinling Mountains to work in conservation or livelihoods, livelihood enterprise grants etc.

99. ADB should seek an assurance for loan negotiations that this is supported by the Government and then require an official agreement with each of the enterprises to this effect before loan effectiveness. 33

100. Improved Village and Forest-based Livelihoods The Project will introduce technologies, infrastructure and business development resources to reduce poverty that currently afflicts 70% of households within the 16 administrative villages to 20% of households by Project completion. Livelihood improvement program will be limited to the estimated 8,500ha of collective forest land within the Project Area. The Project will demonstrate support forest based production systems to enable policy reforms and future replication of successful models. A total of 16 village development plans will be prepared including a forest and natural resource plan in a participatory planning process (see Appendix 7 and Supplementary Appendix 2 for detailed procedures and pro-forma formats). The plan will identify collective forest land that will be surveyed and demarcated, and the Shaanxi Forest Department will issue each collective with the necessary forest tenure certificates establishing rights to forest resources and the collective will assign these to individuals residing within the community. During the planning process village forestry associations will be formed through which the conservation forestry program will be implemented.

101. On completion of the planning process all village development plans will be approved by the collective, the QNBG as represented by Louguantai Forest Farm and then submitted to the PMO for approval. Once approved the plans will provide the agreed work plan for releasing project funds. It is envisaged that the plans would include at least the following needs: (i) forestry management, (ii) enterprise development, (iii) social infrastructure, and (iv) infrastructure access.

102. For forestry, local residents will receive support for the development of nurseries, planning costs and for the planting expenses. The labor input to planting will be financed through the Project. The program will be facilitated by trained planners (staff of Louguantai Forest Farm) and supervised by Louguantai Forest Farm staff. A total of 5,000 ha of analog conservation forestry is budgeted although this figure will need to change to represent the village planning outcomes. Mixed species forests that mature into forests that are analogous to natural forest will provide substantial wildlife benefits, reduced soil and water loss, and both forest and non-forest products for harvest. It is expected that up to 3.5 ha may be allocated to each household based on 100% involvement and 5ha based on approximately 70% involvement.

103. CDA communities will also access project funds for social infrastructure, small enterprise development and improved access through the VDP. The small enterprises will be linked to sustainable forest production systems or other benign activities such as bee keeping, essential oil production, medicinal plant production. To avert the risk to naturally growing plants households will also have access to plant materials and production grants to produce raw materials for local enterprises. For enterprises involving processing of plant materials these enterprises will be operated by the forest associations. The PMO and QNBG will administer the contracts on behalf of the associations. Opportunities and interest in such enterprises will be identified during the village planning process. These will be assessed through research studies into plant and plant extract for essential oils and medicinal plants. Support is provided for market research and market chain linkage studies to ensure viability and to maximize local producers into value chains.

104. A total of 8 Community based ecotourism home-stays for medium to high value clients will be developed to support the growing demand for overnight accommodation in wild or natural environments. It is proposed to differentiate these from existing home stays by providing a slightly higher quality of service and accommodation.

105. Community infrastructure including 17.5 km of roads along the Tianyu River and 109 km of mountain pathways will be upgraded to reduce travel times and ensure access during adverse weather. Grants will also be available for either villages or households to develop social infrastructure especially alternative energy sources (biogas and solar) and water supply schemes where these are identified during the village development planning program.

106. Demonstrating Conservation of Biodiversity The CDA will be used as a demonstration and training program for those working in other parts of the Qinling Mountain. In effect, it will operate as a field conservation training and demonstration area from which methods and skills are developed and then lessons learned disseminated. The project will prepare a detailed forest and habitat management plan for the CDA as a training program for agency staff in the Qinling Mountains. A total of 2,000ha of habitat restoration will be completed using ecological research, forest silviculture, under-storey planting, and canopy manipulation. The objective of habitat restoration is transform existing 34 Main Report

monoculture forest plantings into mixed species forest cover that approach the forest architecture of natural forests. Technical assistance will be supported by GEF for defining and implementing the Conservation Forestry Programs. Research into tree and species, ecological impacts and monitoring grad-sects, permanent sampling plots will assess the impact on floral characteristics, environmental parameters, and overall forest structure. The data sets will provide a strong basis on which to develop future policy and government interventions within the Qinling Mountains, especially within the corridors that link protected areas. Lessons learned should also be incorporated into the proposed landscape planning exercise, biodiversity monitoring and information services and project dissemination program (see Component 3). The conservation program will be implemented by the Louguantai Forest Farm based on the habitat management implementation plan and will offer employment to local CDA residents to provide the labor for all field activities.

107. The Project will address Qinling Mountains biodiversity and its status as a global biodiversity hotspot through developing endangered species management programs that will operate within and beyond nature reserve boundaries. Support will be provided to undertake the research and management planning for five endangered species and for initial implementation programs. The CDA endangered species management program will focus on using the Project Area as a field conservation research area from which monitoring and lessons can be disseminated throughout the conservation sector in the QM. In addition, the program will integrate the ex-situ species management program of the Shaanxi Animal Rescue Center (see Component one) with the CDA endangered species management programs through making significant operational and management changes to SARC and its facilities. The integration will be developed through shared research, joint planning exercises and sharing of data and experiences. In the medium term options for controlled release programs and supporting research will be included in species management plans. The program will be implemented by QNBG through the SARC division.

3. Component 3: Institutional arrangements to support market based approaches for biodiversity conservation

108. The Component will develop the institutional arrangements and mechanisms to introduce programs supported by market based approaches. The component will deliver (i) effective Project Management, (ii) legal reforms, and (iii) a conservation replication and dissemination program.

109. Project Management The Project will be implemented through a Project Management Office that will support the newly formed QNBG and Louguantai Fudi Hotsprings Development Ltd to coordinate implementation amongst the Implementing enterprises. The PMO will be supported with 11 staff supplied by the Shaanxi Department of Finance, PDRC, and Shaanxi Forest Department. The project will fund staff, office facilities and equipment, Project Impact Monitoring contracts in Project Years 1, 3 and 5, and resettlement monitoring for the first three years. The resettlement monitoring will report direct to both the PMO and ADB on resettlement outcomes. A total of 15 professional job exchanges for up to two months are allocated to QBG (5), SARC (5), and other non IA’s and EA staff(5). Procurement planning will be undertaken by each of the Implementing enterprises and will be administered by a local bidding company contracted by the PMO on a percentage fee basis.

110. Institutional Strengthening The Project will support essential institutional reforms for the purpose of enabling project implementation and long term feasibility and sustainability of the Project strategy. The Project will undertake legal reviews and develop recommendations for the Government on four policy issues relating to (i) reform of collective land tenure in Shaanxi Province, (ii) the establishment of community partnerships in natural forest management, (iii) the development of operational guidelines and standards for ecotourism in Shaanxi, (iv) an assessment of options for developing IEM sustainable management policy. The studies will be awarded as contracts to institutes and individuals with a strong knowledge in the subject matter.

111. The QNBG will be established before Loan Negotiations and all assets and business interests transferred into the new organization. Under the QNBG the sustainable financing mechanisms are more easily implemented. Under the consolidated organization the capital levy can be captured within the accounting system and transferred to a separate ledger account and even Bank account if necessary. These funds would become the revenue for the proposed CDA business group and made available through the Board of Directors based on a rolling three year work plan and an annual work 35

plan budget. Provision for this arrangement will need to be written into the constitution of the new organization.

112. Replication Program The Project will undertake a series of participatory programs involving biodiversity expertise from over the whole Qinling Mountains using the Project Area as a basis for developing and testing approaches to field conservation. Shaanxi Forest Department with support from WWF have cooperated to produce important gains in a landscape approaches to management of Nature reserves and the linking corridors and also the remaining forest farm lands. Support will be provided for a process of defining and testing landscape planning and conservation management models for the Qinling Mountains where the total Project Area shall be used to complete a landscape planning and management model. The model will be evaluated and then used to prepare landscape management guidelines for the Qinling Mountains. The approach seeks to develop consensus, understanding and skills, as well as identify existing data and approaches that could be applied to the Landscape plan. Participants will form a professional communication network for conservation workers that will be used for the dissemination program and seek to build a stronger professional cadre across geographically and institutionally scattered personnel. An integral part of the landscape plan will be a master tourism plan for the ex-situ zone and Louguantai in particular. The project will assist stakeholders to develop a tourism spatial plan that can guide the Louguantai Forest Park ongoing investment program.

113. A critical aspect of the replication program will be the capture and analysis of data and its subsequent dissemination. Support is provided for the development of a data collection system including field monitoring equipment such as camera traps, GPS etc., data collection costs for 4 years including the purchase and interpretation of imagery, training for existing LFF staff to form a field monitoring team. The Monitoring team will be supported and trained by WWF to develop monitoring capacity that is consistent with other parts of the Qinling Mountains conservation system. WWF is selected due to its existing extensive monitoring program in the Qinling Mountains and its close association with the Shaanxi Forest Department. The SFD GIS will form the basis of an information service provider for the Project and planning processes within the Project. These will include the range of research and planning contracts that will be undertaken in other components. The Project will develop a biodiversity monitoring framework for the Project Area based on work completed to data and similar initiatives being support by SFD. Technical assistance is provided for developing advanced field monitoring techniques. The baseline will be formed through a series of contracted field survey and research studies involving (i) vegetation studies, (ii) vertebrates, (iii) invertebrates, (iv) fish and aquatic biodiversity, (vii) amphibians, (viii) soil microbial organisms. While the ability to detect and quantify biodiversity impacts will be limited within the life of the Project data sets and analysis will be used in future evaluations and management decision making.

114. The dissemination program shall be contracted by the PMO to an NGO or institute with proven experience in awareness and communication in rural China and the Qinling Mountains. The program will develop a communication strategy for the project as a whole and will work closely with the SFD - GIS and information services unit. The Program will include the communication of data, analysis and lessons learned from the project to a wide set of stakeholders in conservation and government administrations within the Qinling Mountains. The program will also build training programs for the development of awareness and understanding of market based approaches to both high and field level staff.

C. GEF Financed Activities

115. GEF will provide US $5 million in funding to the Project. Of the total amount funds are deducted to recover the project preparation costs and a 10% management GEF Executing Agency fee for ADB to provide Project oversight. The total GEF investment funds are therefore $4.27 million.

116. The GEF will finance activities in all three components that directly related to strengthening the conservation of biodiversity in the Project area and the Qinling mountain range. GEF funds target the global benefits from globally threatened species and the GEF priority biodiversity conservation themes related to biodiversity conservation outside of nature reserves in the wider landscape and the sustainable financing of biodiversity. The approach to the use of GEF funds emphasizes the development of communication and shared information and lessons through wider participation in conservation planning and decision making, the demonstration of new management systems related 36 Main Report

to landscape wide planning, the development of species management plans over the total Qinling Mountain, new technologies including monitoring and information systems, the use of analog forestry models and ecologically defined habitat restoration programs.

117. In output 1, GEF financing of US $174,000 is used to support the SARC ex-situ species recovery and management technical expertise for Giant Panda, Crested Ibis, and Golden Monkey. In addition ex-situ conservation facility design expertise will be provided to advise the detailed design process. The expertise will ensure that a world class ex-situ breeding program is undertaken and that these programs are consistent with national priorities and plans.

118. In output 2, GEF will provide US $ 1.2 million of funding into the demonstration of conservation of biodiversity (subcomponent 2). Specifically the funding will be used to support (i) the preparation of a habitat and natural forest management plan ($99,600), (ii) ecological research grants ($318,700) to develop the data sets and to test silvi0culture systems for habitat restoration, (iii) conservation forestry technical assistance to support the habitat restoration programs. Additional support is provided for the development of capacity and programs for endangered species recovery including (i) field survey contracts ($ 378,600), (ii) species recovery management plans ($151,100) and (iii) initial implementation of recovery implementation programs ($160,900).

119. In output 3, GEF funding of $ 2.9 million will support (i) 4 legal reform studies and drafting programs, (ii) Landscape conservation planning ($749,700), (iii) field conservation monitoring including monitoring contracts ($151,100),WWF technical support and training contract ($44,000), monitoring equipment ($35,000) and monitoring training ($42,100), (iv) Technical assistance for species and monitoring expertise, (v) monitoring baseline research contracts ($576,200), (vi) support 15 job exchange opportunities for technical conservation staff, and (vii) a replication and awareness program ($291,800). These programs involve an on-going planning process that seeks to develop a communication process between conservation stakeholders, define how to do biodiversity conservation planning within the Qinling Mountains landscape and actually demonstrate this within the Project Area. This process will not adopt a nature reserve focus but will focus on key species and their management within the Qinling Mountain Range and how the scattered management units and their staff can jointly contribute to the overall goal.

120. Replication systems rely heavily on shared data and through the process of joint planning and discussions, the ongoing piloting of ideas and technologies in the Project Area, ecological and species research programs. These activities will generate substantial data, information and lessons that will captured within the Qinling Mountains GIS held by SFD and supported by WWF. A WWF contract will be awarded for year one and two to provide technical monitoring training to QNBG. 37

Table 4: Project Use of GEF Funds Component Item Amount (USD ‘000’s) Sub-component Component One Technical assistance for 174 captive breeding Component Two 2.2 - CDA conservation of - Habitat Plan 99.6 biodiversity - Ecological research 319 - Conservation Forestry Expert 72.4 - Endangered species program 690.6 – (5 plans, research contracts and initial implementation grants) Component Three 3.2 - Institutional Strengthening Legal Reforms 330 3.3 - Replication Programs Qinling Mountains Landscape 750 Planning Monitoring and information - SFD monitoring costs 151.1 - WWF training 44 - Training in monitoring 42.1 - Monitoring equipment 35 (SQNBG) - TA 517.7 - Research Monitoring 576.2 Contracts Job exchange 176.6 Dissemination programs 291 Total GEF Investment 4,270

D. Special Features

121. The Project has a number of new innovations and approaches for China. The central innovation is based on support for commercial enterprises within a small intensive use zone to generate revenue for the management of biodiversity in the larger low impact or non-use area. The commercial enterprises being built are currently small government units that have responded to customer demand for rare animal experiences, or recently formed Public enterprises working in Joint Ventures to exploit the market potential of natural attractions such as hot springs, the home of Daoist religion, and a remarkable landscape. The Qinling Botanical Garden is responding to the belief that the current and future visitation offers a captured market that it can gain benefit from as well as generate its own visitor profile. The agreed transfer of financial resources from these three ex-situ enterprises to the CDA conservation program will provide a sustainable financing mechanism that is not reliant upon continued donor or Government support.

122. The Qinling Botanicalal Garden does require land ownership rights and land use rights over the 269ha required for its development. This will require resettlement and compensatory mechanisms to enable households to re-establish their lifestyle and incomes. Land to be used for construction will be acquired at market rates. The land use rights for the area to be planted will be rented from existing farmers who will receive compensation through a fixed payment per mu and a share of profit or revenue of the enterprise. All employment generated by the Project will in the first instance be offered to affected persons and thereafter to people living within the Project Area.

123. The development of the Shaanxi Animal Rescue center offers world class and highly demanded tourism opportunities linked to globally iconic species including (i) Giant Panda, (ii) Crested 38 Main Report

Ibis, (iii) Golden Monkey. The iconic nature of these species and their use in ex-situ conservation and commercial exploitation needs to be world class. International scrutiny can be expected in relation to the care and welfare of animals and the possibility of creating incentives for further wild harvesting of animals for commercial benefit. Both the ADB and the Government need to fully recognize the extent of scrutiny that can be expected and to jointly ensure best practices are followed. The proximity to Xian and the mass tourism market driven mostly by the Terra Cotta Soldiers provides an exciting opportunity to link the Project Area its enterprises and its inhabitants to the Shaanxi tourism market chain. The potential benefits from tourism and nature tourism are such that significant reductions in the levels of household poverty in mountainous villages of the Project Area are envisaged.

124. An important feature of the Project is the use of a smaller manageable Project area as a field conservation demonstration area and the linkage of this to the wider Qinling mountains. The nature of this linkage being through the participation envisaged in the preparation and review of Qinling conservation priorities and plans, the demonstration of new technologies and practices and the sharing of information and opportunities for research, monitoring etc. The proposed Project Area institutional and organization reforms mirror the major challenge facing improved management in the wider Qinling Mountains. Here the vast array of scattered and often overlapping organizational interests has resulted in competitive behavior, lack of cooperation, wastage of resources, and the dilution of skills in shortage. The consolidation of enterprises into one singular management, entity would be a significant achievement that has benefit throughout China and natural resource management.

125. The use of GEF funds has purposively been kept at a distance from existing Implementing agencies. The EA, Shaanxi PDRC wished to allocate these resources often competitively to institutes and NGOs that can match the grant funds with their own resources. As such the EA seeks to lever additional resources into the Project and ensure the most cost effective use of GEF resources.

E. Project Investment Plan

126. The project investment cost is estimated at $ 129.2 million, including taxes and duties of $6.0 million. 39

Table 5: Project Investment Plan ($ million) Item Amountsa A. Base Costb 1. Component A Commercial Ex-Situ Business 93.6 2. Component B CDA Livelihoods and Conservation 15.1 3. Component C Institutional Arrangements 5.9 Subtotal (A) 112.6

B. Contingenciesc 10.6 C. Financing Charges During Implementationd 5.9 D. Commitment charge 0.1 Total (A+B+C+D) 129.25 a Includes taxes and duties of $6.0 million. b In mid 2007 prices. c Physical contingencies computed at 5% for civil works; and 5% for field research and development, training, surveys and studies. Price contingencies computed at 1.9% on foreign exchange costs and 2.2% in 2008 and 3% thereafter on local currency costs; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate. d Includes interest, commitment charges and front end fees. Interest during construction has been computed at the five-year forward London interbank offered rate plus a spread of 0.4% after waiver. Source: PPTA estimate 30 August 2007

F. Financing Plan

127. The Government of Peoples Republic of China has requested a loan of US $40 million from ADB’s ordinary capital resources to help finance the Project. The loan will have a 25 year term, including a grace period of 6 years, an interest rate determined in accordance with ADB’s London interbank offered rate 5.4% -based lending facility, a commitment charge of 0.75% per annum,19.and such other terms and conditions set forth in the draft loan and project agreements. The Government has provided ADB with (i) the reasons for its decision to borrow under ADB’s LIBOR-based lending facility on the basis of these terms and conditions. ADB loan funds will contribute 31% of the total cost of financing. GEF will finance $4,27 million or approximately 3.3% of the total project cost. The remaining US $ 84.93 million (66%) will be contributed by the Shaanxi Provincial Government as counterpart funds or from enterprise revenues.

128. The Government of PRC shall on end the loan funds to each Implementing Agency on the same terms and conditions of the loan. Counterpart funding will be managed by each of the Implementing agencies from their own resources or those guaranteed from other Government Agencies. Counterpart funds will be provided for the Qinling Botanical Garden Enterprise on a 1 to 1 ratio between loan and counterpart funds. The counterpart funds for the Qinling Botanical Gardens will be provided by State Forest Administration (SFA), Chinese Academy for the Advancement of Sciences (CAAS), Shaanxi Provincial Government (SPG) at 28.5% per each while the remaining 14.25% will be provided by the Xian Municipality. For the Shaanxi Animal Rescue center counterpart funds will be provide by the Shaanxi Forest Bureau. The Hot springs counterpart funds will be provided by the management entity FUDI Tourism Development Co Ltd – which is a joint venture company representing Shaanxi Tourism Group Company (51%) and Louguantai Forest Farm (49%).

19 {Where commitment charges form part of interest during construction, show these as separate line items in the cost estimate table.} 40 Main Report

Table 6: Financing Plan ($ million) Source Total % Asian Development Bank 40.0 31 Global Environment Fund 4.27 3.3 Government 84.93 65.7 Total 129.2 100.00 Source: PPTA Estimate 13July 2007 (Government includes both counterpart funds and revenue from Implementing Agencies – see Appendix 13 for details)

G. Implementation Arrangements

1. Project Management

129. The Executing Agency (EA) responsible for the overall implementation of the Project is the Shaanxi Forest Department. The SFD will be supported by a PMO operated by PDRC with staff from SFD, and Shaanxi Department of Finance. The SFD will work closely with a high level Co-ordination Commission staffed by representatives of the QNBG and Louguantai Fudi Development. The PMO will be staffed with a total of 11 positions and will be the focal point for the Project administration and management.

130. The Implementing Agencies shall be the QNBG and the FUDI Tourism Development Company Ltd. Each Implementing Agencies will establish a Project Implementation Unit to administer implementation.

131. The PMO will support project administration through the contracting of a procurement agency to undertake the Project procurement program on a fee for service basis. The PMO has successfully used this approach for World Bank projects previously.

2. Implementation Period

132. The Project will be implemented over a 5 year period from March 2008 to March 2013. The Implementation schedule is presented as part of Appendix 11. 41

Figure 8: Project organization chart

ia Project Coordinating Committee

Shaanxi Provincial Government, through the Provincial Development and Reform Commission working with the Department of Finance and Shaanxi Forest Bureau (Executing Agency)

Project Management Office

Qinling National Louguantai Fudi Tourism Botanical Garden (Implementing Development Ltd. through Agency) Louguantai Hot Springs Development Division (Implementing Agency)

Qinling National Botanicalal Garden Enterprise

Shaanxi Animal Rescue Center

Louguantai Forest Farm

3. Procurement

133. Goods, related services and civil works financed partly or wholly by ADB and GEF will be procured in accordance with ADB’s Procurement Guidelines (as amended from time to time) and the Procurement Plan described in Appendix 12 which will be reviewed and updated on an annual basis. Contract packages for goods and related services exceeding $1,000,000 will be awarded on the basis of international competitive bidding or limited international bidding, while those costing between 42 Main Report

$100,000 and $1 million will be awarded through national competitive bidding. Contracts below $100,000 will be procured through shopping. For contracts below $100,000, direct contracting can be used. Civil works contracts costing more than $10.0 million will be procured using ICB, while those valued at the equivalent of $10.0 or less can be procured using the national competitive bidding procedures, in accordance with the PRC’s Tendering and Bidding Law (1999), subject to clarifications20 to the law that have been agreed with ADB for the purposes of ADB's Procurement Guidelines. For small-scale works, contracts in rural areas may be awarded using community participation procedures. The selection of suppliers/contractors and award of contracts will be subject to ADB’s approval. 21 The relevant sections of ADB’s Anticorruption Policy will be included in all procurement documents and contracts.

134. The PMO will monitor and report of the implementation of the Procurement Plan and will coordinate procurement activities through the use of a procurement agency under the Project. Measures to strengthen the capacity of the PMO and IA staff in undertaking procurement activities will be implemented including training on procurement and other aspects of project implementation. PMO staff will also be nominated to attend ADB-sponsored course and seminars on procurement and project implementation prior to Loan effectiveness.

4. Consulting Services

135. Project will finance two consulting packages. Package A, supports 6 experts both international (3pm) and domestic (3pm) to support the technical design and operation of the proposed SARC expansion. The experts will have experience in Panda, Ibis and Golden Monkey ex-situ conservation and will be recruited by SARC using QBCS rules based on a 80:20 technical financial assessment to ensure high quality technical expertise. Package B will support conservation and planning activities as well as capacity building of IA’s and includes a total of 71 person months being 17 months of International and 54 months of domestic. These positions will include technical support for village level development planning, design expertise of ex-situ conservation, tourism planning inputs, conservation forestry planning and technical support, GIS and in formation services technical and design inputs , biological surveying technical input for monitoring and biodiversity conservation expertise to analyze and use monitoring data. A summary of all consulting packages is included under Appendix 8. All recruitment will follow ADB’s Guidelines on the Use of Consultants (April 2006, as amended from time to time) by ADB and its Borrowers.

20 http://coso/documents/ellah/NCB_Amex_PRC.doc 21 ADB will require the PPMO to use ADB-approved standard bidding documents to ensure high quality and consistency of the documents, and to facilitate ADB’s review of the documents. This will be reflected in the Project Administration Memorandum to be prepared for the Project during appraisal. 43

Table 6 Summary of Consulting Services Total Person Project Yr Project Yr Project Yr Position Month One Two Three Package A:

Package A –SARC International Panda Expert 1 1 Ibis Expert 1 1 Golden Monkey 1 1 Expert Domestic Panda Expert 1 1 Ibis Expert 1 1 Golden Monkey 1 1 Expert Total Package A 6 6 (USD 0.123 million)

Package B International Species Recovery 5 0 5 Expert Biological Surveys 5 0 5 Biodiversity 5 0 5 Conservation Tourism Planner 10 3 7 Animal Exposition 1 1 Design expert Wildlife vet 1 1 Subtotal 17 4 13 0 International

National Village Planner 6 2 2 2 Tourism Planner 24 6 10 8 Conservation 9 3 3 3 Forestry GIS Expert 5 0 5 Species Recovery 5 0 5 and Surveys Species Recovery 5 0 5 Expert Subtotal National 54 11 30 13 Total Package B 71 15 43 13 (USD 1.197 million)

5. Anticorruption Policy

136. ADB’s Anticorruption Policy was explained to and discussed with NFD and the Implementing Agencies. Consistent with its commitment to good governance, accountability, and transparency, ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, 44 Main Report

collusive, or coercive practices relating to the Project. To support these efforts, relevant provisions of ADB’s Anticorruption Policy are included in the loan regulations and the bidding documents for the Project. In particular, all contracts financed by ADB and GEF in connection with the Project will include provisions specifying the right of ADB to audit and examine the records and accounts of NFD, the IAs and all contractors, suppliers, consultants and other service providers as they relate to the Project. The Project design and implementation arrangements provide for mitigating corruption risks. Risks associated with project management, including procurement and disbursement, will be mitigated by (i) engaging an international consultant and a national consultant to advise and assist in the procurement of goods and services, and the engagement of other consultants; (ii) introducing a dual signing system in which the civil works contractor awarded the contract will also sign an anticorruption contract with the employer; and (iii) periodical inspection by the PPMO of the contractor’s activities related to fund withdrawals and settlements.

6. Disbursement Arrangements

137. The proceeds of the loan will be disbursed in accordance with ADB’s Loan Disbursement Handbook, as amended from time to time. 22 Because many of the payments will be made for large contracts, direct payment, reimbursement, and commitment procedures will be used to withdraw funds from the loan account. To expedite the flow of funds and simplify document processing, the Statement of Expenditure procedure may be used to reimburse eligible expenditures for any individual payment not exceeding $100,000. The payments exceeding Statement of Expenditure ceiling will be reimbursed based on full documentation process. Before disbursement, the PRC Government shall have certified to ADB that the onlending agreement, which shall include the terms and conditions required under the loan agreement, shall have been duly effective and binding upon the parties thereto in accordance with its terms. GEF grant funds will be channeled through ADB. To expedite the disbursement of the loan and the GEF grant proceeds, the Government through the Shaanxi Department of Finance will set up two imprest accounts, one for the loan proceeds and the other for the GEF grant, in a commercial bank acceptable to ADB.

138. Disbursements from the imprest accounts will be supported by an appropriate withdrawal application and related documentation. The initial amounts to be deposited in each imprest account shall not exceed the estimated expenditures for the next 6 months or 10%, respectively, of the loan amount and GEF grant, which ever is the lower. Each sub-borrower will open a second generation imprest account. It will be a condition of disbursement of the loan proceeds and the GEF grant that (i) the onlending agreement for the relevant activity has been entered into between the Government and the sub-borrowers, and (ii) such onlending agreements contain the same financial terms and conditions as required in the loan agreement.

139. The PMO required additional capacity and experience to efficiently deal with the operation and withdrawal procedures necessary for the operation of the imprest accounts. Accordingly, assistance and training will be provided so that PMO staff and the IA staff can expedite loan and GEF grant disbursements.

7. Accounting, Auditing, and Reporting

140. All agencies involved in project implementation will maintain records and accounts that identify goods and services from loan proceeds and the GEF grant, financing resources received, expenditures incurred and use of local funds. These accounts will be established and maintained in accordance with sound accounting principles and internationally accepted accounting standards. The PMO will review and consolidate these accounts and have them audited annually in accordance with sound accounting practices by the sovereign audit agency of the Government or other auditors acceptable to ADB. The audit report will include a statement verifying whether or not the funds disbursed by ADB were used for the purposes for which they were provided, as well as the auditor’s opinion on the use of the imprest account and statement of expenditures procedures. Copies of the audited accounts and auditor’s report will be submitted to ADB within 6 months after the end of each financial year. The PMO will prepare consolidated quarterly reports indicating progress made, problems encountered during the period, steps taken or proposed to remedy the problems, proposed program of activities, and progress expected for the next quarter. Both the loan and GEF grant will be

22 ADB. 2007. Loan Disbursement Handbook. January. Manila. 45

covered in these reports. Within 6 months of physical completion of the Project, PMO will submit to ADB a completion report that describes the achievements in relation to the Project’s expected impact, outcome and outputs. The Project is supporting the development and implementation of a Project Benefit Monitoring and Evaluation (BME) system. Implementation of the BME will be contracted to the third party by the PMO and will provide a statistical baseline, in Project Year one, an assessment of achievements in terms of inputs and output by mid Project year three and the overall outputs and outcomes of the Project in Project Year 5.

8. Project Performance Monitoring and Evaluation

141. To monitor the progress of the Project in achieving the planned outcome and outputs, the PMO will establish and maintain a project performance management system (PPMS), which will be designed to permit adequate flexibility to adopt remedial action regarding Project design, schedules, activities and development impacts. The PPMS will adopt the following agreed indicators (i) project progress, (ii) enabling framework improvements (policies legal/regulations harmonization and clear institutional mandates), (iii) results of capacity development, (iv)revenue and viability status of the three enterprises, (v) progress towards demonstration and pilot targets using participatory procedures, (vi) beneficiary impacts and (vi) related improvement to the sustainable financing of field conservation.

Figure 9: Flow of funds

Asian Development Bank Global Environment Facility

Loan: ADB LIBOR-based rate, Grant 25 years with 5-year grace period Government of the People’s Republic of China (Ministry of Finance)

Relending: ADB LIBOR-based rate, Grant 25 years with 5-year grace period Shaanxi Provincial Governmenta (Department of Finance)

Separate imprest accounts for ADB Loan and GEF Grant in US$ and CNY

Onlending: ADB LIBOR-based rate, Grant 25 years with 5-year grace period

Subborrowers

Qinling National Botanicalal Garden

Louquantai Fudi Tourism Development Ltd. 46 Main Report

142. At Project inception, the PMO, in consultation with each sub-borrowers and with the assistance of the consultants, will develop comprehensive PPMS procedures to systematically generate data on inputs and outputs of the project activities; and the socioeconomic, health, and environmental indicators to measure project impacts. This will include individual and consolidated work plans that once approved will form the basis for assessing progress and achievements,

143. The PMO will refine the PPMS framework, confirm achievable targets, firm up monitoring and recording arrangements, and establish systems and procedures no later than 6 months after Project Effectiveness. Baseline and progress data will be reported at the requisite time intervals by the IAs to the PMO, including resettlement monitoring results and reporting on any environmental management. The PMO will be responsible for analyzing and consolidating the reported data through its management information system, and for reporting the outcome to ADB through the quarterly progress reports.

9. Project Review

144. In addition to regular monitoring, the project performance will be reviewed at least twice per year for the first two years and once a year thereafter, jointly by ADB and the Government. The review will assess implementation performance and achievement of progress towards project outcomes and outputs, financial progress, identify issues and constraints affecting implementation, and work out a time-bound action plan for their resolution. ADB and the Government will undertake a midterm review prior to the end of Project year three to assess implementation status and take appropriate measures including modification of scope and implementation arrangement, and reallocation of loan and grant proceeds, as appropriate, to achieve the Project’s objectives.

IV. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS

A. Financial and Economic Analysis

1. Benefits and Impacts

145. In the Project area, the northern flat land will be zoned for high volume tourism based on three major enterprises and the existing Louguantai Daoist attractions. The major purpose of the zone is to develop commercial enterprises that generate resources that can be transferred for investment into the sustainable management of natural resources within the CDA. The commercial enterprises will provide significant employment opportunities for local residents in the ex-situ and CDA and the surrounding fringe areas. The marketing of the enterprises will seek to develop a strong cultural, ecotourism, nature tourism focus around the concept of a Louguantai experience. Tourism development will be planned with safeguards to ensure environmental pollution is managed including solid waste management, waste water, and noise and air pollution. The three enterprises will be integrated within a Louguantai spatial tourism plan that seeks to develop an additional tourism attraction that extends the current duration of stay in Xian by one half to one day per national and international visitor. Within the Ex-situ zone there will be 10,000 jobs created during the construction phase and a further 870 permanent jobs within the enterprises. These jobs will be awarded to local community members wherever possible. There will be substantial indirect employment providing services and selling goods to those who benefit from employment.

146. The CDA will be treated as a field conservation zone where new approaches and techniques are applied to achieve the dual objectives of (i) increasing the forest cover to protect soil and water resources, and (ii) to increase the quality of forest cover to mimic the architecture and structure of nature forest habitats to increase the value of forests as habitat and for biodiversity conservation. The Project seeks to achieve these objectives by reversing past policies of excluding local villagers by with-holding forest rights for collective forest lands, establishing an exemption to manipulate existing forest cover on both collective land and Louguantai Forest Farm land. The remaining 4,593 residents will be provided with rights to their land and will receive assistance to (i) establish analog forest systems on this land, (ii) grants to develop local value adding industries for forest derived products including essential oils and medicinal plants, (iii) assistance to establish a total of 10 home stays comprising of 4 rooms per home stay, (iv) access to resources for introducing alternate energy and 47

water supplies, (v) a program to improve access through upgrading the Tianyu River road and a network of mountain pathways.

147. In total 5,000ha of collective forest land will be transformed into analog /conservation forestry that supports increasing biodiversity and local livelihoods. A further 2,000ha of habitat restoration will be implemented on the State Forest land using a field based experimental approach to move from plantation orientated forest cover to more natural forest systems. In total an estimated 4010 full time equivalent jobs will be created within the CDA area over the final four years indicating employment benefits will be available for about 1 in 4 residents. In addition, a total of 100 permanent jobs for the home-stay businesses and an estimated 100 jobs for the small and medium sized businesses and a further 200 plus for maintaining the conservation forest program on State Land.

148. Beyond the Project funds will continue to be invested into the CDA zone through the sustainable financing mechanism. Current estimates indicate a transfer of approximately USD 400,000 from 2012 will be available. These funds will continue to invest in the Project Area, however as funds increase some resources will target biodiversity in the wider Qinling Mountains providing additional benefits to the conservation of biodiversity. The role of the Project in the CDA area is to engage villagers and land owners to introduce new techniques that can continue to be supported once the eco fund system reaches viability.

2. Financial Analysis

149. Financial analyses were carried out for the three commercial enterprises in Component one and for the Home stay tourism activities. The small and medium enterprises, and conservation forestry livelihood models were not financially assessed given (i) the uncertainty of the exact nature of the business and its scale, (ii) the long term nature of the forest investment and the very high proportion of public good benefits linked to habitat creation and improved ecological services.

150. The commercial enterprise display financial returns (FIRR) both pre and post tax that exceed the WACC - see Table 6. The QBG has a lack of liquidity during the construction period that the Government has acknowledged and indicated their commitment to underwrite this working capital requirement of the enterprise during this period. With this commitment the risk of failure is reduced however the QBG as currently proposed must be considered a risky investment.

151. The impact of the Qinling Botanical Garden shareholding distribution based on the 6% of NCF reduces the before tax FIRR from 9.5% to 9.1% while the post tax FIRR declines to 7.5%. Including the revenue transfer to the Louguantai Forest Farm are included the FIRR reduces to 8.5% and 6.8% respectively. The impact of visitation level is highlighted as the same models return FIRR of 12.8% after shareholder payout and revenue redistribution based on the Chinese Feasibility Study visitation of 600,000 in year one.

152. The FIRR for the home stay option is presented in Appendix 16 with a resultant FIRR of 19%. No FIRR was calculated for the total Project.

Table 7 Summary of Financial Analysis (before income redistribution) Parameter QBG SARC Hot Springs NPV (10%) -2105 18085 1916 FIRR (Pretax) 8.8% 15.96% 13.7% Costs plus10% 8.3% 14.8% 10.9% Revenue minus 10% 8% 13.9% 9.4% FIRR (Post Tax) 7.1% 13.5% 10.9% WACC 5.6% 5.6% 6.7% (source PPTA estimates)

153. The combined Qinling Botanicalarden and SARC provides an FIRR of 9.3% after tax, shareholder distribution, and revenue transfer to the Louguantai Forest Farm. However this does not 48 Main Report

represent the NQBG as it does not include the financial costs and revenues of either (i) Louguantai Forest Farm and (II) the NQBG management overheads.23

3. Economic Analysis

154. Economic analysis was undertaken for the three commercial enterprises and the project as whole. The quantified benefit stream for the commercial enterprises was limited to the visitation and revenue data for each enterprise and did not include the contribution to global species management, genetic collections for biodiversity, cultural and religious values, and scientific contribution to biodiversity conservation. No economic benefits were quantified for the impacts and benefits arising from the profit redistribution to the CDA program.

155. The EIRR’s range from 11% to 23% and indicate a economic feasible investment. The QBG enterprise is the least feasible investment however the base revenue assumptions are purposively conservative which results in an EIRR set to the hurdle rate see Table 7. The EIRR for Component One is 14.2%. The EIRR for the combined Qinling Botanical Garden and SARC is 13.7%. The EIRR for the home stay (10 enterprises) is estimated to be 23%.

156. No EIRR was calculated for Component Two and three due to the public good and uncertainty attached to the quantification of benefits. The benefits are substantial in terms of potential livelihood and environmental improvements in the CDA zone and the wider Qinling Mountains. The EIRR for the total Project is estimated to be 10.9%. Further details on economic analysis can be found in Appendix 16.

Table 8 Economic Assessment of Commercial Enterprises Parameter QBG SARC Hot Spring NPV(10%) 2,496 22,965 5,657 EIRR 11% 17.9% 23% EIRR (costs +10%) 10% 16% 20% EIRR (revenue -10%) 9.3% 15.4% 17.9%

4. Risks

157. The Project will introduce commercial enterprises into a small less ecologically sensitive part of Project area. The revenue and net profit generated will be reinvested in the larger CDA important for conservation purposes. Past models of conservation management have proven to be successful during the life of a project but have often failed on Project completion due to the lack of institutional arrangements and non-sustainable financing arrangements. The Project will address both of these issues directly. A major risk to the investment is the continuation of the layering of government units over the same land and forest resources resulting in competitive institutional behavior that is contradictory to the Project requirements and goals of sustainability.

158. The overall Project impact and outcomes will not be achieved unless there is a formal commitment to the transfer of a profit share to fund the CDA program. As a minimum this should be set as a charge against the business assets both land and capital invested once these values are known as part of the institutional reforms. For the intervening period the ADB and PRC need to formally agree that a minimum of USD 400,000 will transfer starting from 2012.

159. The QBG enterprise currently has little or no commercial experience and the existing capacity is assessed as being inadequate for the proposed Project in terms of financial management, commercial market orientation, and use of capital efficiently. The forecast cash flow and economic return is marginal and when combined with the current assessment of capacity creates a risk that needs to be addressed. While there is a proposal for an institutional strengthening TA grant from ADB this remains unconfirmed. Without the input to institutional strengthening the Project has a high chance of failure.

23 The NQBG was not agreed until Loan Fact Finding and the staffing needs and financial projections for both of these units have not been provided. 49

160. Other risks relate to (i) the impact of delays and cost over runs, (ii) potential issues relating to the possibility of invasive species being introduced by the QBG, (iii) the lack of land use rights and the possible uncertainty over the long term access to land for the QBG, (iv) animal welfare standards in SARC and the scale of the proposed development with respect to Panda breeding and research being far in excess of the numbers likely to be generated through the captive breeding programs.

161. The vulnerability and lack of acceptable livelihood options for CDA residents needs to be reflected in Project implementation. There is no rapid short term solution if residents do not want to resettle voluntarily and there needs to be an agreed medium term commitment to improve the quality of life and wellbeing of some of Shaanxi Province poorest households. This will require recognition of rights, assistance to develop improved livelihood systems and inclusion in the management of the CDA program. Without these inputs residents will behavior with respect to their environment, biodiversity and natural resources will negate many of the expected Project benefits simply by necessity.

5. Sustainability

162. The Project’s overall sustainability will be achieved through three commercial tourism operations and the proposed institutional arrangements including sustainable financing. The underlying premise of the Project is to develop a self sustaining and financing management and conservation program for the Project Area and increasingly for this to be extended into the Qinling Mountains. Financial projections indicate that in the medium term substantial resource transfers can be delivered to the goal of biodiversity conservation.

163. Post project the use of these transfers will have effectively reduced the demand on government resources to support the QBG, SARC and Louguantai Forest Farm and will create substantial tax revenues from these enterprises. The transfer of finance and its reinvestment into the CDA program will not be achieved without an appropriate governance and accountability structure that is managed through applying commercial best practice. The proposed formation of QNBG that consolidates the range of existing units and organizations seeks to introduce these functions.

B. Social Dimensions

1. Social Benefits and Poverty

164. The Project benefits target the 20,356 people within the Project Area of which some 4,593 reside within the CDA zone and a further 15,763 in the CDA zone – see Appendix 14, a further 23,405 residents within the immediate fringe of the Project Area especially those located close to the ex-situ zone will also benefit. Within the Project Area the poverty ratio is estimated to be 37% on a head count basis or close to 40% on a household basis. However there are significant differences with the level of poverty in the CDA being over 70% compared to 23% for the ex-situ zone. The poverty in the CDA is highlighted by the low grain availability per capita of 198kg compared to 422kg in the ex-situ zone population with the CDA income per capita being only 18% of the national average. The livelihood survey conducted found that the stakeholders had extremely limited human capital with poor education levels amongst adults. The scattered nature of habitation in the CDA (12 persons per km2 compared to 267/km2 in the ex-situ zone) has limited the development of social capital that is further eroded by migration out of the Project Area. Physical capital has improved with road upgrading along the Tianyu river but other infrastructure is virtually non-existant. Financial capital is limited and access to borrowed capital is difficult due to the lack of security, deposits and access to banks. The natural capital is extremely rich, however much of the land is degraded and the forest resources are no longer available to local residents. Up to 50% of residents would resettle if they could afford to do so but realize that to find a receiving village, to pay for the relocation and to re-establish a household is unlikely. These households recognize that many who have resettled in the past are significantly worse off. Many of these households are dependent upon subsidies payments from Programs such as the Grain for green program, however the snow fall of 2006 resulted in very low production from economic trees grown under the grain for green program. A key issue of this group is the lack of tenure or use rights over the collective forest land that has been withheld since 1978.

165. The ex-situ households are significantly better off with access to physical infrastructure especially roads, health and education services, more opportunity for off farm employment, access to 50 Main Report

productive land and markets for high value crops including , sand additional land for renting.

166. With increased employment developing in Xian males often migrate increasing the importance of the female in the households and the day to day input to food production. A gender action plan is included in Appendix 14.

167. Overall, up to an estimated 10,500 households are expected to benefit from the Project the vast majority of these will be in the ex-situ zone or the fringe areas around this. the estimated 1237 households in the CDA area will receive benefits from employment (500) , paid land conversion programs, opportunities to start small business, the assignment of forest use rights to the collective and then to the household with supporting conservation forest plantings, improved access, water supplies and access to alternative energy sources will also provide significant benefits. Within the ex- situ zone there will be direct employment for 870 full time employees, and an additional 15,000 jobs during project construction. Flow on benefits will arise from the additional opportunities that arise fro increased tourism and economic development. The movement into forest based livelihoods will provide long term benefits that are not quantified in the economic analysis. A detailed social assessment is presented in Appendix 18.

2. Land acquisition and resettlement

168. A short resettlement plan has been prepared – see Appendix 16. For the construction of the Qinling Botanical Garden a total of 293.63mu of land will be acquired with (i) 133mu of irrigated land, (ii) 42.2 mu of dry farmland, (iii) 29,.7mu of orchards, (iv) 42.9 mu of housing land, and (v) 88.7 mu of uncultivated land. The buildings of some 115 households or 504 people will be affected by this acquisition totaling 19,319 m2 and supporting infrastructure including walls (3.54km), power lines (0.96km), telecom lines (01.125km), Power poles (16), Power converters (1), Telecom poles (17), 1 well, 7,150 trees. Cropping losses include 390.8 mu of vegetables and 3,517.1 mu of other crops.

169. The QBG will manage this acquisition with affected people being relocated into the urban area of Dhaizhen village where they are eligible for the compensation of lost assets and lost income relocation expenses, and trees. Land compensation is managed by the village administration and is supposed to be used for ensuring income is available for those that resettle. .

170. The QBG requires the land use rights for a further 3,745.9 mu that affects a total of 19,320m2 of buildings used by 617 people from 143 households. The total number of affected persons including those with buildings is 3,780 in 948 households. Ownership of the land will remain with the village and the households with the QBG establishing a land rental agreement to establish the right for use. This agreement is based on a set fee that amounts to CNY500, CNY 400, CNY 300 per annum per mu for irrigated, dry land farmland, and hill or sloping land. The rental contract will be inflated at the CNY 20 per mu per annum across all types of land.

171. Once the QNBG reaches a profit the fixed land rental price will be fixed and replaced with a shareholders agreement where each household will receive equity to the value of CNY 12,500/mu for irrigated land, CNY 10,000/mu for dry land cropping, and CNY 7,500/mu for sloping land. As profits are generated dividends to equity will be paid based on the share of equity – however the real value of other equity holders is currently unknown. There is a need for a loan condition that the shareholders dividend will be paid at a level not to disadvantage the affected persons and that if there is insufficient profit the fixed rental price apply in all circumstances to guarantee this. Without knowledge of the final shareholding calculation of expected returns is not possible. The data in Table 8 is based on the data from the resettlement report prepared by the Qinling Botanical Garden with the addition of the PPTA financial estimates.

172. The reported existing income of CNY 319 per mu is lower than the figure estimated by the Poverty Reduction Office which reports an average household income for Dianzhen village to be CNY 965 per capita. As the Qinling Botanical Garden RP indicates land availability to be approximately 1 mu/capita the proposed existing income is only 33% of total per capita income. The PPTA surveys indicate that this figure should be close to 60%. The PPTA survey results also do not support the CNY319/mu figure. The survey found that mean agricultural income per household was CNY 8,211 which accounted for 61% of total household income. Based on the survey data, gross income per mu 51

was between CNY 900 and CNY 1156 per mu. At these income levels suggest a mean net income would be approximately CNY 540 to CNY 660 per mu not CNY 319. The PPTA survey income levels are consistent with the PRO estimates. Based on PPTA data the resettled households would not be receiving adequate compensation until between 2012 and 2015.

Table 9: Resettled Farmer Land Rental Compensation Forecasts Dian Zhen Land Origina Original Annual Total Shareholder Payment To Resettlers Village l Rental (mu) Net ᧤6᧡ of annual profit24 ) Net Payment Profit received Profit ᧤CNY 10,000᧥ (CNY/ (CNY (CNY 10,000) 10,000) mu) 2011 2015 2020 2025 Before 3,745.87 119.58 31925 becoming Shareholder Funds 3,745.87 0.00 149.83 189.65 251.62 341.97 439.40 transferred to resettlers PPTA Cash 3,745.87 0.00 149.83 0 149.52 313.20 477 Flow (400) (300) (800) (1200) (CNY/ mu) Shareholder 600 400 0 700 1100 1500 CNY per mu (PPTA figures)

173. The PPTA legal assessment is that in its current format the proposed land rental agreement contravenes the requirements of Shaanxi land regulations enacted on January 1 2007. Discussion with PDRC indicated that these regulations did not necessarily apply to the QBG proposal and that they would furnish to ADB at LFF an official document to that effect. There are major risks about the land use agreement especially for such a long term investment as the Botanical Garden in that the current use right holder may claim these back again and remove the plantings.

174. The acquisition of land involves the conversion of basic cropping land into the Botanical Garden, the conversion of public roads into private roads, the use of geothermal water for the greenhouse heating etc. Each of these requires approvals to be obtained prior to the feasibility study being approved. Based on the review of the Jixian Township Basic Farming Land Protection Plan, the Government agreed that:

 QBG will provide a land use pre-checking report from an appropriate level land use management authority as required by the law to confirm: (i) basic farming land has been relocated to another location. (ii) land use application of QBG is consistent with the government land use plan and regulation, (iii) there is a change of agricultural land quotas for QBG.  QBG will acquire 293.63 mu (19.57 ha) of land. It will be required to get approval for acquisition of land after the project feasibility study is approved by SPG. Then the resettlement plan will be implemented

175. The upgrading and expansion of the Shaanxi Animal Rescue Center will require land to be acquired permanently for the construction of the Ibis Center (2ha), Golden Monkey (3ha), and the animal rescue center (4ha). The land acquisition involves 30 households and a total of 125 people with 2.9ha of land being dry land agriculture, 5.5ha being slope land, and 0.6ha being irrigated. Compensation is budgeted at a higher unit cost than the QBG compensation program .

24 This is based on the Chinese Feasibility Forecasts. The PPTA has reduced the rate of visitation in year one from 600,000 to 350,000 effectively reducing the net cash flow and also the return to shareholding. 25. 52 Main Report

176. The Hot-Spring development does not involve any resettlement or land compensation issues.

C. Environmental Impact

177. The Project area does not include a nature reserve or protected area however it is classified as forest lands with the majority being natural and conservation forest classification. The recently completed and ADB financed Land Degradation Strategy for Shaanxi identified the North slopes of the Qinling Mountains as the highest priority ecological zones in the Province requiring significant protection. SEPA has also included the Qinling Mountains as a national priority for the Ecological Function Management Area recognizing the critical ecological functions provided in supporting biodiversity and the soil and water process that directly influence the wider Shaanxi province including the water supply of nearby Xian city.

178. The Project area has national and international cultural and religious values relating to the Daoist movement. The Louguantai area is acclaimed as the birth place of Daoism and there are a number of existing temples that have been restored and continue to be used. The Project proposes to intervene at a further 18 historical and religiously important temple sites that will require safeguard procedures to be followed.

179. The Qinling mountains is globally recognized as a biodiversity hot spot due to the high levels of biodiversity represented and the high levels of associated endemism in the range. There are 37 globally endangered species within the Qinling Mountains including major iconic species such as the giant Panda (the Qinling mountains has 20% of the PRC population), the Crested Ibis, Golden Monkey, Golden Takin, Chinese Giant Salamandar. Historical deforestation and loss of habitat has created system-wide threats too much of the biodiversity. In response donors and international community have provided substantial foreign investment in an attempt to reverse threat and to secure the future of existing biodiversity. A major gap in the protected area coverage has been the toe slopes on both the North and South side of the Qinling Mountains where the Project Area is located. The Biodiversity is also supported through the ex-situ activities of the Shaanxi animal rescue center and its management of “rescued animals” and their welfare comes under direct scrutiny both nationally and internationally.

180. The project investments will have a number of potentially positive impacts on the environment through support for the introduction of improved land use practices including forest cover and biodiversity within the CDA zone and the development of world class ex-situ collections. These activities will continue long after the project through financing provided from the enterprises being developed in the ex-situ zone of the Project. A significant threat is the added risk of the proposed QBG to introduce non-native non-Qinling plants into the Botanical garden and how these have the potential to become invasive species. Both the CBD and GEF have prioritized the management of risks arising from potentially invasive species and these have been discussed in full with the QBG, however they still propose to include such species without appropriate skills or systems in quarantine or control of plant materials. Equally important is the likely impact on iconic faunal species including Panda and Crested Ibis both in the wild and in captivity. For example, currently the SARC is only 2 breeding Pandas are from Wollong and not the Qinling sub-species. The proposed scale of the Panda breeding unit of 60 Panda’s suggests that significant numbers would need ot be wild harvested to use this capacity.

181. To achieve this the Project will support a number of commercial enterprises that will undertake significant construction of buildings including exhibition halls, offices, tourism accommodation and restaurants, animal exposition and display areas, animal enclosures, roads and infrastructure including drainage systems, lighting, water supply and irrigation investments, and into the Daoist temples. Of special concern is the level of impact from road investments that include bridges and supporting drainage systems, water supply systems for the QBG and Dian Zhen village, the damming of the river for the Crested Ibis artificial wetland, and the impact arising from massive increases in the number of visitors.

182. While the direct impact of these constructions and interventions will be significant they have been assessed to be sufficiently managed within the current set of concept designs provided –see Appendix 18 for the initial environmental assessment. 53

183. A major lesson from tourism related investments and initiatives are the potentially large impacts on the immediate environment and society. These impacts need to be assessed not only from the perspective of the predicted visitation rates but also from within a worse case scenario. Such scenarios could include the possibility of the current proposal having a significant under estimation of visitors numbers, or should reflect a high volume day visitation around the time of the major periods holiday and Daoist celebrations for PRC. The current impact assessment reflect the impacts that are likely to occur as visitation increases to the ex-situ site with the inevitable flow over to the CDA area. With total visitation is conservatively estimated to exceed 1.2 million visitors per annum with the associated impacts on transport, parking, water supply, waste streams.

184. The PPTA and Project site was visited by two different ADB environmental specialists during the PPTA both of whom after site visits have confirmed that ADB considers the project to be classified as a Category B project with a potential upgrade to Category B sensitive. The PPTA was therefore instructed to prepare an IEE which is presented as Appendix19.

V. RECOMMENDED ASSURANCES AND CONDITIONS

A. Condition for Loan Negotiation

(i) Institutional reforms  The creation of the QNBG before Loan Negotiations

(ii) QBG related issues  Land use approvals for the purchase of land that is classified as basic farm land  Provincial approval or ratification that QBG is legally allowed to offer resettlers an equity share in the QBG business as part of their resettlement compensation. A detailed equity and capital structure should be provided for the QNBG and Qinling Botanical Garden enterprise to clearly indicate where shares will be held. The current QNBG option as a Government Entity could not provide such a share holding.  A certified valuation of the current capital (equity and debt ) within the QNBG and any related enterprises to enable a full assessment of the potential returns to resettled shareholders  That all Daoist and temple sites will be jointly developed by the Qinling Botanical Garden and the relevant Daoist community. The Daoist community will be required to approve of final designs and management proposals before ADB approves expenditure (iii) SARC issues  Approvals from the LFF for the use of land as proposed  That the Panda breeding and research center be located in Hu-Bao valley adjacent to the CDA zone. (iv) CDA approvals required  That the Shaanxi Forest Department agree to issue Collective forest certificates to the 16 CDA villages  That Shaanxi Forest Department exempt the Project from the conditions of the natural forest utilization controls to enable conservation forestry to be applied to both the collective and Louguantai Forest Farm land. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 1

I. DESIGN AND MONITORING FRAMEWORK

Design Performance Targets Data Sources/Reporting Assumptions Summary Mechanism and Risks Impact Assumptions Rural wellbeing Area experiencing land Monitoring reports of the Project design implemented improving based on degradation and soil erosion Shaanxi Environmental effectively sustainable reduced by 15% by 2020 Protection and Qinling Move to outcome i.e. project conservation and use project area linked not long run of QM resources Critical habitats covered by Institutional arrangements to protected area -- e.g. growth in Monitoring reports of support commercial resorting protected area that successfully Shaanxi Forestry, Agriculture of sustainable development protects endangered and non- and other related Bureaus are fully in place priority species Annual reports for Poverty Risks Increased tourism revenues Reduction Bureau Urban growth, including from both mass and high value influx of migrants, exceeds tourism 11th and 12th 5yr plan forecasts and exerts more evaluations pressure on available Investment and business infrastructure and on eco- systems opportunities increased with 40 Govt. statistics on rural new businesses started and $1 incomes, employment, small Slower growth than million investment by 2015 businesses anticipated in PRC economy, urban incomes and tourism Increased rural smallholder from national and incomes with skills to complete international sources for off farm employment and self Weak and uncoordinated employment enforcement of environmental, land use and related laws and regulations

Outcome By 2013 integrated landscape Biodiversity species data – Assumptions Integrated landscape management is demonstrated baseline and annual Continued growth in demand management providing monitoring data of the for tourism for biodiversity sustainable livelihoods 7,000ha of forested land species in the in situ area -- and religious and historical for the population of the managed from Environmental sites Project area Protection and Forestry Infrastructure assets are 3 large scale commercial Bureaus and WWF demonstrated to wider enterprises providing 30% of properly constructed and QM. profits to the in-situ conservation maintained program Tourism numbers and Supporting institutional and revenue data from the regulatory mechanisms and Tourism Bureau In-situ poverty household incentives are put in place decline from 900 to 200 (20% of for implementing a total hh) by 2020 Shaanxi Statistical landscape management Yearbooks and yearbooks approach. data from county and Voluntary resettlement from Ex-situ poverty count (hh level) townships Qinling Mountains continues declines from 980 to 260 (from without major disputes 28% to 7% of total hh) Household surveys including ( there is a conflict between migration data this and the concept of At least 20 enterprises attracting more into the QM developed within villages have Visitation, occupancy, revenue, origin of tourists also here we need to limit to increased incomes from Project outcomes ) transition to higher value more (Shaanxi, other PRC sustainable rural industries. provinces, international), and other data from participating Risks tourists attractions (ex situ Improving the environment of Environmental protection from Botanic Garden, eco-lodges, Qinling Mountains is given mass tourism is treating over etc.) lower priority in the future not 90% of all waste streams Govt Statistics sure what you are saying Lack of government support 5 globally threatened species 2 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 1

Design Performance Targets Data Sources/Reporting Assumptions Summary Mechanism and Risks are protected through habitat Project reports and for community participation regeneration and management monitoring Insufficient enforcement and Endangered species of giant control systems panda, takin, golden monkey, Revenue is shared equitably crested ibis, giant salamander, and with the guidance of the red panda, clouded leopard, proposed landscape brown-eared pheasant, planning approach Manchurian trout, gingko tree, Chinese mountain larch, one kingdonia, mao-tai maple, Lack of commercial and Chinese fir are monitored management and with numbers increasing by inadequate investment into 2015 institutional strengthening of the QNBG Government Unit Tourism increases from current 300,000 per year to 800,000 by 2015 and 1.2 m. by 2020

Ex situ enterprise revenue increases from CNY 62 million to RMB 158 million by 2015 and RMB 415 million by 2035

500 jobs for in-situ community members

870 jobs for the ex situ community members

Approximately 15,000 full time job equivalents during construction

Outputs SQNBG operational by loan Site inspection and project Assumptions Component I: negotiations and generating implementation reports. SQBNG able to offer Tourism Development revenue for the Conservation shareholding to compensate to Support Demonstration Area by Year 4 Enterprise financial accounts for land acquisition Conservation DA Timely completion of 269 ha botanical garden infrastructure established with 18 formal Project monitoring and reporting via PMO EPB enforces environmental gardens and walkways and monitoring standards supporting public education facilities Procurement records Effective stakeholder participation and ownership 870 jobs created for community developed members in the ex-situ zone Wastewater and solid waste Strong support from the 143 households resettled system data (rate of capacity Shaanxi government utilization, influent and 18 Daoist sites restored Activities and construction of 1 cable car constructed effluent flow volumes). Water supply data, (rate of facilities will fully engage and utilization and flow volumes) respect the Daoist culture QBG revenue increasing from Appropriate portion of ex situ CNY 30 million to 65 million by revenues and profits are 2015 Water quality monitoring invested in the in situ area program data, including monitoring wells around Botanic garden investing 15% of Louguantai Profits will be distributed into its Project profits into the in-situ in-situ conservation Project Area ADB Review Missions Visitation profile will grow Animal rescue centre extended with Botanic garden products and refurbished with extensive Household Surveys and other Louguantai TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 3 Final Report Appendix 1

Design Performance Targets Data Sources/Reporting Assumptions Summary Mechanism and Risks enclosures with satellite areas tourism products for Ibis, Panda, and golden Annual Reports of the EA to monkey ADB The mass tourism is managed within the ex-situ Upgraded exhibit area and Satellite imagery for changes enterprises support service for SARC in land use, forest cover etc. Risks The QNBG investing $400,000 Land use rights not into conservation by 2012 established for QNBG

Phase II of hot springs Invasive species introduced development/Daoist cultural to QM center completed and operating Animal rescue center and Tourism visitation increases botanic garden create non- from current 300,000 per year to sustainable demands for 800,000 by 2015 and 1.2 million indigenous biodiversity by 2020 Disease and pandemic risks to captive species

Institutional incentives result in profit capture

Loss of well being for rural residents Component II – 16 Village development plans Project monitoring reports Assumptions Improved livelihoods prepared including conservation from the sustainable forest and nature resources Govt statistics and poverty Improved livelihoods will management and plans reduction office data result in more conservation conservation of and protection of natural natural resources 5000ha of collective forests with resources and biodiversity A: Improved village SQNBG records and certificates awarded to individual financing transfers to and Forest-based households planted and Livelihoods conservation Communities engage in maintained as conservation commercial enterprises forests Enterprise accounts linked to tourism, and natural B: Demonstration of 40 business development grants resource processing Biodiversity awarded Conservation Tourism and visitor numbers, 10 homestay tourism enterprises Project Area is perceived as started gate ticket sales and revenues being representative for wider QM demonstration 17.5km of roads Field surveys and gradsects 109km of mountain pathways Support from Government upgraded for habitat and wildlife monitoring Agencies and programs

100 alternative energy (biogas) Project benefit monitoring Risks 100 household water supplies and evaluations Tourism benefits leak LFF habitat restoration plan beyond Project Area prepared 2000ha of habitat management Local community business implemented successful leading to non- Endangered spp management sustainable use of resources plans for 5 species prepared endangered species research Lack of management and contracts competed and quality control reported Endangered species monitoring 4 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 1

Design Performance Targets Data Sources/Reporting Assumptions Summary Mechanism and Risks and reporting systems in place No linkages to markets, promotions, and support services

Conservation program is not implemented successfully

Ex-situ businesses and mass tourism erode the “high value” tourism experience Component III: Assumptions Institutional Project Management Office QM management forum arrangements for formed and operating with 11 full minutes and plan Ex-situ business benefit from sustainable time staff wider conservation programs management systems Project disbursement ratio of QM natural Habitat restoration and targets achieved 85% of the management plan for QM QM program considers resources time demonstrated and Project Area as replicated Project monitoring data and representative and relevant Annual work planning and WWF monitoring data sets evaluation achievements A: Effective Project and reports Replication of institutional Management and models is linked to eco-fund Monitoring 4 Legal reform studies PMO records on project programs completed and proposed activities and evaluations reforms submitted to the Risks B: Institutional Reform Provincial Peoples Committee and Capacity Building Project records and outreach Weak coordination of the IAs Program programs by the EA SQNBG staffed by Loan Resistance by some Effectiveness and strengthened stakeholders by PY 3 Project Area plans C: Conservation Ex-situ tourism facilities not Monitoring and fully commercialized and Sustainable financing program Eco-fund records and Replication audited accounts therefore not able to repay operating by the end of Yr 2 with loan and generate surplus to $400,000 reinvested into support in-situ biodiversity conservation in 2012 and Business records conservation and livelihoods thereafter Training program evaluation records Integrated Landscape habitat management plan for the Project Area completed within a action planning and capacity building approach by Yr 4.

Tourism master plan completed as part of the Landscape Habitat Management Plan

Conservation Monitoring unit established and equipped by mid PY 2

Monitoring program designed and agreed with training provided to all stakeholders by PY 2

Research contracts awarded and completed by PYr 3

Data Collated for PA, remote TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 5 Final Report Appendix 1

Design Performance Targets Data Sources/Reporting Assumptions Summary Mechanism and Risks sensing analysis completed and stored with operational database accessible to staff by PY 4

Public education and awareness program implemented

15 professional job exchanges

Activities with Milestones Inputs: Component I: Commercial businesses investing in the management of the Project Total Project $129.16 ___ Area million ADB Loan Inputs $40.0__ 1.1 Construction of the botanical garden, exhibition and research buildings, nursery, million temple restoration, access roads, and cable car GEF input $4.27 million Activity (1) Establish specialized gardens by end of 2010 Counterpart funds $ 85.9__ Activity (2) Complete the greenhouse development, paleontology museum, Daoist million temples and historic buildings, and other civil works and infrastructure by end 2009 Activity (3) Complete the cableway by end of 2010 Civil Works $63.5 Activity (4) Procurement of office and vehicles by end of 2010 Equipment $9.9 Activity (5) Initial resettlement process to be completed by end of 2008 with process Vehicles $0.6 completed by end of 2012 Materials $5.0 Activity (6) Training programs to be concluded by end of 2010 Training $1.3 Activity (7) Design input to be completed by end of 2008, marketing and education to be Surveys $5.1 completed by end of 2012 Specialist Services $1.24 Resettlement $5.5 1.2 Hot Springs Development Design and Supervision $3.7 Activity (8) Villa construction, restaurant and swimming pool complex, site infrastructure Total Investment cost $96.4 and design and supervision to be completed by end of 2009

Total Recurrent $16.2 1.3 Shaanxi Animal Rescue Center Activity (9) Crested Ibis breeding base to be completed by 2009, Panda breeding base and Animal Rescue Center to be completed by 2010, and Golden Monkey base to be Total Project Cost $123.2 concluded by 2011 Interest costs $5.9 Activity (10) Animal exposition area upgraded to international standards Fees $0.1 Activity (11) Design and management contract to be concluded by end 2008, and training to completed by end of 2009 Total cost to be financed $ 129.2 million Component II: Improved livelihoods fro sustainable management of in-situ natural resources

2.1 Village development planning Activity (12) Complete 16 VDPs by 2010 Activity (13) Conservation Forestry planting and conservation agriculture by 2012 Activity (14) Small Business development grant awarded by 2012 Activity (15) Home stay tourism operators selected and operational by 2012 Activity (16) Road improvement programs and pathway upgraded by 2012 Activity (17) Grants awarded for social infrastructure by 2012

2.2 In-situ Conservation of Biodiversity Activity (18) Habitat restoration on LFF land completed for 2000ha by 2012 Activity (19) Endangered Species Management Plan for 5 species by 2012 based on field research contracts

Component III: Institutions for sustainable management of Qinling Mountain natural 6 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 1

Design Performance Targets Data Sources/Reporting Assumptions Summary Mechanism and Risks resources demonstrated, replicated and supported through effective project management

3.1 Project Management Operational Activity (20) Establish and staff PMO by end of first six months of Project; before Loan effectiveness with work plans, procurement plans and training plans agreed Activity (21) Professional Job Exchanges (13) Activity (22) Contracting of Project BME by 2008, 2010, 2012 Activity (23) Contracting of resettlement monitoring by end of 2020; before loan effectiveness

3.2 Institutional Strengthening Activity (24) Complete Legal review studies by 2011

3.3 Conservation replication Activity (25) Complete the preparation of a Project Area Master plan by developing and applying a landscape planning model by 2011 Activity (26) Establish a Conservation monitoring center for the Project Area with SFB by 2008, and design, implement and evaluate a conservation monitoring program as part of a QM wide capacity building and awareness program by 2010 Activity (27) Develop and implement a Communication and awareness program for disseminating the Projects lessons by 2009 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 2

I. LIST OF DONOR PROJECTS

Currency unit: USD '000 Total Amount No. Project Name Major Agency Start Date IFI / Country Financial Sponsor Project Status Budget Disbursed I International Finance Institution Loans Provincial Finance 1 Water Rebuilding in Villages 7 county governments 1985.5.9 World Bank 18,220 24,410 Finished Department Forest Project and Nature Provincial Finance 2 Provincial Forestry Dept. 1985.9.5 World Bank 2,000 2,000 Finished Reserves Management Project Department Shaanxi Agriculture Provincial Agriculture Dvpt Provincial Finance 3 1989.9.14 World Bank 106,000 106,000 Finished Development Project Project Office Department Provincial Agriculture Provincial Finance 4 Agriculture Service 1993.6.23 World Bank 6,713 6,713 Finished Department Department Plateau Soil and Water Provincial Soil & Water Provincial Finance 5 1994.9.19 World Bank 37,000 37,000 Finished Conservation I Conservation Dept. Department Qinba Mountains Area Poverty Provincial Poverty Alleviation Provincial Finance 6 1997.12.12 World Bank 72,000 52,670 On-going Alleviation Office Department Irrigated Provincial Water Provincial Finance 7 1999.9.2 World Bank 100,000 64,700 On-going Agricultural Area Rebuilding Conservancy Dept. Department Soil and Water Provincial Soil & Water Provincial Finance 8 1999.12.15 World Bank 41,000 31,280 On-going Conservation II Conservation Dept. Department Yangling Sustainable Yangling Demonstration Provincial Finance 9 2000.4.30 World Bank 300 0 On-going Development Project Zone Mgmt Committee Department Qinling Mountain Area DOA IFAD Project Provincial Finance 10 2000.2.16 IFAD 18,148 5,000 On-going Integrated Agriculture Dvpt. Management Office Department Provincial Environment Provincial Environment Provincial Finance 11 1993.7.16 World Bank 393 393 Finished Technology Assistance Protection Info Centre Department Xi’an Environment Technology Xi’an Environmental Provincial Finance 12 1993.3.20 World Bank 216 218 Finished Assistance Protection Research Institute Department Shaanxi Environmental Provincial Finance 13 Provincial ADB Office 1997.12.5 ADB 156,000 70,700 Finished Protection Project Department Provincial Agriculture and Agricultural Bank of 14 The Fourth Agriculture Loan 1990.12.10 World Bank 30,000 30,000 Finished Animal Department China China Sustainable Forestry SFA and Provincial Forestry World Bank On-going to 15 2002.4.16 242,340 Forestry Department Development Department and GEF Aug 31, 2009 Forest Resource Development SFA and Provincial Forestry On-going to 16 1994.6.7 World Bank 200,000 Forestry Department NA and Protection Department Dec 31, 2007 2 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 2

Total Amount No. Project Name Major Agency Start Date IFI / Country Financial Sponsor Project Status Budget Disbursed Total IFI 1,030,330 II Bilateral Assistance Purify Water Factory Dam, River Water Diversion Xi’an Construction 17 water transport dyke and 1989.1.14 France 1,686 4,000 Finished Project 1 Committee water pop net Xi’an Construction 18 N/A N/A 1989.5.19 France 2,314 0 Finished Committee Purify Water Factory Dam, Xi’an Planning Heihe River Water Diversion 19 water transport dyke and 1993.8.25 Japan 37,910 Commission, 37,910 Finished Project 2 water pop net Financial Dept. Purify Water Factory Dam, Xi’an Planning 20 N/A water transport dyke and 1995.11.2 Japan 23,630 Commission, 23,630 Finished water pop net Financial Dept. Provincial Finance 21 Shaanxi Afforestation 2001.3.30 Japan 35,000 25,000 Finished Department Shaanxi Forest 22 Combating Land Degradation SFA GEF 13,800 n/a Ongoing Department Capacity Building to Combat Shaanxi Forest 23 SFA 2004 ADB 1,200 n/a Ongoing Land Degradation Department TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 3

I. INITIAL POVERTY AND SOCIAL ASSESSMENT

A. Linkages to the Country Poverty Analysis

Is the sector identified as a national priority in Yes Is the sector identified as a national priority Yes country poverty analysis in country poverty partnership agreement? No No

Contribution of the sector or subsector to reduce poverty in PRC: The People’s Republic of China is entering a new era with the 11th Five-Year Program 2006-2010. This builds on a gradual shift since 2003 toward policies aimed at balanced, equitable and sustainable development. Social indicators have continued improving in the PRC and in the aggregate poverty has moved downward. Although the PRC is one of the leading industrial engines of the global economy, its GDP per capita in 2005 was still a modest $1,730. In 2005, the PRC had an absolutely poor population of 26.1 million and a low income population of 49.8 million. PRC’s 11th FYP has a stronger emphasis on rural development with a pledge to increase farmers’ incomes and enhance public services in the countryside. The ADB 2007-2008 Country Strategy and Program for the PRC is updated to provide an initial response to the PRC’s new policy, social and economic environment. This update highlighted ADB’s priorities which are in line with the Eleventh FYP and stresses its continuous efforts to support the Government to (i) sharpen its fight against poverty; and (ii) achieve the Millennium Development Goals (MDGs), including policy work in such areas as social protection, strengthening the role of NGOs in reducing poverty and cooperating with the World Bank and other development partners to advance policy dialogue on the changing nature of poverty in the PRC. Nationally, the majority of the poor live in the central and western provinces, which lag behind the eastern provinces in achieving the Millennium Development Goals. In these regions poverty is rural and strongly correlated to access to land and the incidence of land degradation. Growth has outpaced environmental sustainability in many of these areas, and the environment is a major constraint to sustained economic development. Environmental protection, ecosystem restoration, and biodiversity conservation are playing a major role in the western development strategy. The majority of ADB’s lending, to the interior provinces seeks to create a climate for pro-poor economic growth. Ongoing ADB-financed policy work is addressing poverty-related issues in health, education, social protection, nutrition, land degradation, access to clean drinking water, and sanitation in rural areas. The poverty partnership agreement, signed by the Government and ADB in September 2003, sets out strategies and interventions for poverty reduction. The PRC and ADB will continue to cooperate on a broad range of activities related to policy and regulatory reform and capacity building in the environmental sector, and support projects to address environmental problems. Projects will be designed so that the poor capture some of the environmental benefits. To sharpen the poverty focus of its environmental work, the PRC and ADB are addressing land degradation by supporting the implementation of the 10-year PRC-Global Environment Facility (GEF) Partnership for Degradation in Dryland Ecosystems to address policy, institutional, technical, and financing issues related to combating land degradation. It aims to reduce poverty, arrest land degradation, and restore dryland ecosystems in the western region, to be accomplished through the GEF Operational Program (OP) 12 by introducing integrated ecosystem management and removing institutional barriers.

This project directly contributes to these objectives by introducing integrated landscape management models which promotes market-driven biodiversity conservation, and provides sustainable livelihoods for the population of the Project Area that can be demonstrated for, and replicated in, the wider Qinling Mountains. The Project promotes the participation and empowerment of rural communities and sustainable livelihood improvement by means of: (i) improved agricultural and other technology; (ii) value addition; and (iii) non-extractive use of natural resources using commercial enterprises in such areas as eco-tourism, Chinese herbal medicines, non-timber forest products, biodiversity conservation services and innovation in public-private-community partnerships.

The Project Area is within the Qinling Mountain range, and is a highly complex area of different geographic features, settlement patterns and densities, multiple land uses, and multiple, overlapping land use and related management rights among forestry and other government agencies, Zhouzhi County, and various townships, villages and households in the Project Area. The total registered population in the Project Area is about 20,400, including 3 townships and 30 administrative villages. No ethnic minorities are living in the project area. Poverty is widespread both in the Qinling mountains and the project area based on the national poverty benchmark, with small-scale agriculture on steep slopes, very limited infrastructure throughout the rugged and isolated valleys, and few links to the modern economy. Zhouzhi County, which is the only project county, is directly under Xi’an City. Its total area is 2,974 km2, including 2,200 km2 of mountain area in the Qinling Mountains that takes up 74% of the total land area; cultivated land covers 60,000 mu and forestland 196,600 mu. GDP/capita in Zhouzhi is estimated to be only 50% of the provincial average, 30% of the average for the total country and only 20% of the average for the Xi’an urban districts. Zhouzhi is well below the provincial and national averages in virtually all of the main socioeconomic indicators – retail sales per capita, gross fixed investment, household savings, and fiscal capacity. Net farmer per capita income in Zhouzhi was only CNY1,317 in 2005, which was only 40% of the national average and 64% of the provincial average in that year. Despite its low household incomes and levels of development, Zhouzhi has never been designated as a national or provincial poverty county under national or provincial programs. However, about 17% of the Zhouzhi population reportedly is below the poverty line, and 103 out of 379 administrative villages in the county are considered to be poverty villages. Poverty levels are particularly high in the 2 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 3 mountain areas where 60% of the population is below the poverty threshold. Mountain areas account for about 74% of the County’s land area, 60% of its poverty population, but only 10% or 60,000 of the County’s total population.

The project preparatory (PPTA) will design and invest a project for loan and grant financing to improve rural well-being through a sustainable land conservation and use of QM resources which will include: (i) commercial ex-situ businesses investing in the management of the Project Area and the (ii) Improved livelihoods from sustainable management and conservation of in-situ natural resources and (iii) institutional arrangement for a sustainable IEM of QM resources demonstration and replications; C: ecosystems through IEM approach to sustainable use of biodiversity, agriculture, and natural resources by means of (i) effective project management, (ii) institutional strengthening through legal reform and organizational restructuring, and (iii) replication and dissemination of biodiversity conservation

B. Poverty Analysis Targeting Classification: General intervention

What type of poverty analysis is needed? The total registered population in the Project Area is about 20,355 including 3 townships and 30 administrative villages. Poverty in the project area remains significant by world benchmarks. Using the poverty line of Shaanxi province of CNY865 per capita per year results in 21 villages out of 30 being poor. A survey done in 2005 by the Poverty Reduction Office shows that a total of 7,586 people in both ex-situ and in-situ are counted as poverty population covering 1,889 households. Further splitting the poverty populations into ex-situ and in-situ, high poverty incidence occurs in the in-situ, accounting for 73%, about 3,208 people, while in ex-situ the poverty incidence is 27%, about 5,155 people. The poverty ratio in the project area therefore is considered as 37%. The project poverty classification fits the “general intervention” as less than 50% of the population are the poor among project beneficiaries.

Poverty analysis was undertaken using formal field surveys and participatory key informant discussions both in the in-situ and ex-situ areas. Institutional consultation was undertaken regarding the ongoing efforts and experiences in poverty reduction in the province. The design of interventions on improving rural livelihoods and poverty reduction will result in improvements through increased incomes while conservation of the environment, a strong and growing tourism sector through construction of a international standard Botanic Garden, an expansion of the Animal Rescue Centre, the Hot Springs Development/ Daoist Cultural Centre, as well as associated alternative livelihood opportunities such as Chinese medicinal herbs production etc and training components all provide instruments for more sustainable livelihoods through higher incomes, job creation, and small enterprise opportunities, and economic diversification.

A social and poverty assessment was carried out for each of the subprojects in compliance with ADB’s Guidelines on Incorporation of Social Dimensions in Bank Operations. The assessment included a rural livelihood assessment which confirmed disparate growth rates between sectors resulting in large income inequities between rural and urban residents and between different rural areas. Causes of poverty in the PA are complex, but are very much associated with land degradation and the harsh human living environment. In summary, the following causes were identified during the household survey and the PRA exercises: (i) pervasive small-scale agriculture on steep slopes, threatened by wild animals; (ii) limited infrastructure; (ii) limited alternatives for other livelihood activities; (iv) unsustainable land conversion program — no alternative job and income opportunities for surplus labor; (v) poor access to social services such as education, health care with few links to the modern economy; (vi) traditional agricultural practices are used as the main exit from poverty, which leads to limited solutions for high poverty levels and can further degrade the environment.

The social analysis confirmed the poverty status of people in the in-situ area where China’s current Poverty Reduction program is still being implemented, such as the Voluntary Resettlement Plan. Specific alternative livelihood activities as well as the improvements to infrastructure such as road, water supply etc will directly benefit these communities which will reduce their reliance on low-productive sloped land farming and provide increased access to income generation activities. C. Participation Process

Is there a stakeholder analysis? Yes No

Is there a participation strategy? Yes No

Consultation with stakeholders, beneficiaries and directly affected people has been undertaken and will continue during design and implementation of the subprojects. Detailed discussion with Xi’an City government, the line agencies, representatives of the Botanic Garden and other investors, cultural and ecotourism operations and a small group of rural residents were held. The Executing Agency for the PPTA, the Foreign Loan Support Management Office of the Shaanxi Provincial Development and Reform Commission (PDRC), was established. The Leading group is chaired by the governor, and will coordinate and enlist the support of involved and concerned agencies to ensure smooth implementation. The group will also play its role as a steering committee. A standing office is set up under the leading group headed by the director general of the PDRC. The PMO is engaging 11 staff and links closely to the existing group of the Qinling Botanical Garden. An expert panel with six experts in different disciplines provides technical guidance to the PMO and the consultant team. In TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 3 Final Report Appendix 3 addition, the arrangement in Shaanxi province for implementing the ongoing PRC-GEF Partnership on Land Degradation will provide an opportunity to build capacity in project planning and implementation. The PMO has provided assistance in making local experts from different disciplines available to work with the consulting team during the PPTA phase.

A participatory and consultative methodology was adopted to undertake the social analysis and rural livelihood survey during the PPTA. It involved (i) a formal questionnaires survey with 200 households;(ii) discussions with project stakeholders; (iii) key informant interviews in rural communities; (iv) a series of stakeholder workshops; and (v) interviews with key government staff, non-government organizations; and (vi) interviews with women.

During project implementation, the participation of stakeholders will be further supported and deepened. An IEM institutional framework is included which will provide further opportunity for participation in both planning and implementation. The institutional capacity building will be undertaken early in the project design to facilitate successful operation of the IEM approach. The Resettlement Plans (RPs) include plans for consultation and participation during implementation. And Participatory Village Development Planning will further enhance the participation of beneficiaries.

Participation strategy required: Yes.

D. Gender and Development

Strategy to Maximize Impacts on Women Gender analysis: Gender roles are determined by a combination of cultural factors, occupations, environmental conditions, education levels, and employment opportunities. In the project area, income inequities create incentives for rural workers to migrate to urban labor markets. However, due to its close location to good roads and to both county town and township compounds, female laborers - particularly young women - share the opportunities with men for off-farm jobs. Only slight agricultural feminization in the ex-situ is observed, while in the in-situ area young people tend to be mobile and the group left behind is older and has high illiteracy, which reaches a rate of 95% among women in some in-situ villages.

Gender Plan Prepared Yes No In general, the project will benefit women significantly and will not have an adverse impact on women or children. They will benefit from tourism facilities that are provided, greater access to information and jobs and increased opportunities for starting small income generation activities. Women will gain employment during the construction of the Botanical Garden, Animal Rescue Center and Hot Springs. As part of the participation strategy, priority will be given to women for direct and indirect project benefits and for protection against social risk; special gender measures have been included in the RPs. Gender disaggregated indicators will be monitored in the project performance management system. The project will not have significant negative impacts on women, but a gender plan proposes systems to ensure equal participation of women on project activities and equal opportunities of women for access to social services, training, employment, land relocation and beneficiary agreements.

Has an output been prepared? No

E. Social Safeguards and other Social Risks

Safeguard Significant/Non Strategy to address issues Plan Required Significant/None Resettlement Significant With close consultation and careful A Full screening procedures, the land Resettlement acquisition and resettlement impacts are 1 Plan for Botanical Garden, a considered significant . Two subprojects Short Resettlement Plan for are defined with potential resettlement Animal Rescue Center, a Due impacts, namely the Animal Rescue Diligence report for Hot Center and Botanic Garden. Both sub- Spring components require permanent land acquisition and the latter requires relocation of houses and people. The Resettlement involves about 143 households for relocation, 115 households for land acquisition and 948 households for land use restriction for

1 ADB's policy on involuntary resettlement [ADB. 1995. Policy on Involuntary Resettlement. Manila,] defines resettlement as “significant” where 200 or more people experience major impacts. Major impacts are defined as involving affected people being physically displaced from housing and/or losing 10% or more of their productive, income generating assets. 4 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 3

the Botanic Garden; and 30 households for land acquisition for the Animal Rescue Center. In total, about 4000 people will be affected by different resettlement impacts. Total land acquisition will be 28.6 ha, while another 249.7 ha of small landholders’ will be put into the shareholding system due to the change of land use.

Resettlement plans have been formulated for the Botanical Garden and the Animal Rescue Center that will ensure adequate compensation for affected people. A Due Diligence report has been prepared for the Hot Springs. Indigenous None In the QM area there are , Man, No People2 Mongolian, and Korean minorities, with a total minority population of about 36,000 (less than 1% of the QM population) However, none of these indigenous people are inhabitants of the project area. Therefore, indigenous people will not play a significant role in project design.

Labor Not significant There will be some shifting of locations No related to new economic opportunities as well as because of the design and implementation of project activities such as the construction and operation of the Botanic Garden. Biodiversity conservation and eco-system restoration will require some restrictions on livelihood activities. The project is designed to minimize these negative impacts on rural communities; otherwise any such plans will incorporate mitigating measures through rural employment opportunities especially for seasonal employment for women and the rural landless. Affordability None Suitable pricing arrangements will be set No up including lease options/private investment options in conservation and tourism to ensure sustainable use of resources. The project work in this area will ensure the poor are not adversely affected. Other Risks / Not significant The project will require adjustment of No Vulnerabilities livelihood and land use to suit long-term and sustainable ecosystem management. The Government will need to build capacity to ensure smooth implementation of the Project. Current plans may include employment guarantees, fund provided for alternative livelihood, establishing a rural minimum living standard protection system etc.

2 Indigenous people are defined by ADB as “those with a social and cultural identity distinct from the dominant or mainstream society, which makes them vulnerable to being disadvantaged in the process of development.” TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 4

PLANNING AND POLICY PRIORITIES FOR QINLING MOUNTAINS

1. The PRC, the Shaanxi Provincial Government, ADB, GEF and other partners have developed and are implementing a multi-dimensional program to address biodiversity conservation and restoration, land degradation, and the loss of valuable eco-systems in the Qinling Mountains (QM).

2. The PRC has ratified several international conventions relevant to biodiversity conservation in the QM and has conducted many follow-up actions pursuant to ratification. The PRC ratified the Convention on Biological Diversity (CBD on 5 January 1993. Within the framework of the Convention, the PRC completed its Biodiversity Action Plan (BAP) in June 1994 that outlines a strategy and a set of strategic actions designed to conserve the country’s rich biodiversity. The PRC adopted the Convention to Combat Desertification (CCD) in December 1996 and has subsequently started to implement a number of activities including the preparation of the National Action Plan to Combat Desertification (NAPCD). The PRC signed the United Nations Framework Convention on Climate Change (UNFCCC) in 1992, which was subsequently ratified in 1994. It has also ratified the Protocol (30 August 2002).

3. Environmental protection, eco-system restoration, and biodiversity conservation play a major role in the western development strategy of the Government of China, which began under the 9th Five-Year Plan, was accelerated under the 10th Five-Year Plan, and continues under the 11th Five- year Plan. The priority given to the environment in the western development strategy are fully consistent with the increasing attention given to environmental protection and ecosystem restoration in the PRC’s last three Five-Year Plans.

4. The Ninth Five Year Plan approved in 1996 marked a turning point in China’s approach to environmental issues and gave sustainable development and environmental protection a higher priority. The Tenth-Five-Year Plan (approved by the ninth National People’s Congress in 2001) states that ecological improvement and environmental protection should be taken as an important part in economic development and in improving the living standards of the Chinese people. This Plan requires that ecological rehabilitation should be enhanced, ecological deterioration be restrained, environmental protection and treatment be strengthened and urban and rural environmental quality be improved.

5. This Plan further indicates that comprehensive eco-environmental rehabilitation and treatment programs are to be carried out in key regions. These notably include the natural forests protection programs in the upper reaches of the Yangtze River, upper and middle reaches of the Yellow River and Inner Mongolia in the Northeast; and the program to convert farmland to forests and grasslands. The Plan also sets out measures to enhance the management of nature reserves. Endangered and rare plant and animal resources and wetland resources are to be protected. Programs to protect wild animals and rehabilitate their habitats are to be implemented, in order to both recover ecological functions and to conserve biodiversity. These environmental themes have been carried over and further strengthened in the documents prepared by the national Shaanxi governments for the 11th Five-Year Plan approved in 2006. The parts of the Shaanxi 11th Five-Year Plan relevant to this Project are discussed in greater detail in a later section.

A. Conservation and Environment Priorities

6. The GEF in collaboration with the ADB, PRC governments and other national and international partners have been implementing since 1995 programs and projects in China designed to conserve and restore biodiversity resources and to reverse land degradation and related negative environmental trends1. The GEF’s current program in the PRC emphasizes biodiversity conservation.

1 The GEF Operational Strategy was established in 1995 and reflects international consensus that global efforts toward environmentally sustainable development should feature integrated management of natural resources— including energy—and enhancement of cooperation and synergies, with an emphasis on the regional level. OP12 (Operational Program 12, Integrated Ecosystem Management [IEM]) was initially conceived in 1999 as an operational program on carbon sequestration, but a year later was given its current title to reflect an integrated and multifocal approach to the management of natural systems GEF focal areas now correspond to the desired global environmental benefits (GEBs) of biological diversity, conservation and sustainable use, climate change mitigation and adaptation, protection of international waters, reduction of persistent organic pollutants, and 2 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 4

The overall goal of GEF’s biodiversity program is the conservation of biological diversity, the sustainable use of its components and the fair and equitable sharing of the benefits arising out of the utilization of genetic resources.

7. The program has four strategic objectives: (i) catalyzing sustainability of protected area systems at national levels; (ii) mainstreaming biodiversity in production landscapes/seascapes and sectors; (iii) capacity building for the implementation of the Cartagena Protocol on Biosafety; and (iv) generation, dissemination, and uptake of good2 practices for addressing current and emerging biodiversity issues.

8. The system of nature reserves in the Qinling Mountains has been expanded and extended particularly in the eastern areas, and the financing and management of the 25 national nature reserves and the provincial and county level reserves in the QM have been significantly improved in the past few years3. These improvements and investments were made to better protect the giant panda and other rare and endangered species and to protect important eco-systems. Recent improvements to the nature reserves at Taibai Mountain, Foping, Changqing, and Zhouzhi (which begins only a few km from the southern end of the PA), are particularly relevant to this project.

9. The PRC has given considerable attention to the problems and challenges of biodiversity conservation in the QM. The Qinling Mountains are listed as one of the eleven most critical regions for biodiversity conservation in the PRC4, and the State Environmental Protection Agency (SEPA) nominated the Qinling Mountains Ecosystem Function Conservation Area (QMEFCA) as a national pilot program in 2001. The SP Government in 2003 recognized the QM as a national-class ecological function protected zone, and approved the Shaanxi-QM ecological function protected zone plan. The QMEFCA comprises about 58,000 km² (similar to the QM range in Shaanxi Province), and contains 19 existing nature reserves (about 380,000 ha or 7.4% of the QMEFCA area, including both national level and provincial level reserves)5.

10. The EFCA concept is comparatively new to China and provides opportunities mainstream biodiversity conservation and sustainable natural resource management and to display how sustainable livelihoods and sustainable biodiversity conservation can be compatible, integrated and mutually supportive. While the QMEFCA has to date been inadequately financed, adequate management systems are not yet fully in place and this is not yet fully operational, the Project is being designed and will be implemented in a manner that will demonstrate potential ways to operationalize the EFCA concept. In Shaanxi, the local EPA has prepared a plan covering the QMEFCA (32 counties for a total area of 51,000 km²). Four ecological function zones were specified, with some overlapping of zones: (i) endangered species conservation (10,000 km²); (ii) water resources conservation (37,600 km2); (iii) protection/ecotourism (2,500 km²); and (iv) soil erosion control (10,000 km²).

11. Expanding on the above, SEPA, in cooperation with other agencies, is developing a Plan for the Conservation of National Ecological Function Conservation Areas (EFCAs) covering the period 2006-2020. The establishment of national EFCAs is a new measure in China to sustainably manage landscape-scale ecosystems by protecting primary ecological functions. Although EFCAs take economic growth into consideration, they can restrict development in the interest of conservation.

reversal of land degradation. OP12 projects are intended to be multifocal, dealing with two or more focal areas; and synergistic, where achievement of benefits in one focal area leads to increased benefits in another. See: Global Environmental Facility, Review of the GEF Operational Program 12: Integrated Ecosystem Management, Prepared by the GEF Office of Monitoring and Evaluation, GEF/ME/C.25/5, May 6, 2005, page 7. 2 The term “good practice” is used by GEF in preference to “best practice” because the quality of different practices of biodiversity conservation will be context-specific. Something that may be “best” in one situation may be bad, or “worst” in another. 3 This is the current number based on the PPTA’s most recent consultations. This number covers 19 that are administered by the SFA and Forestry Departments and Bureaus at the provincial and local government levels, and 6 smaller nature reserves managed by other government agencies such as Water resources and the Environmental Protection Bureau, 4 China’s Biodiversity: a Country Study. 1998 State Environmental Protection Administration, Beijing. 476pp. 5 See: “Project Development Facility; Request for Pipeline Entry and PDF-B Approval; Project Title – Shaanxi Qinling Mountains Integrated Ecosystem Development Project”, Prepared by David McCauley, IA/ExA Coordinator and Bruce Carrad, ADB, February 8, 2006. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 3 Final Report Appendix 4

Using EFCAs, SEPA plans to reduce the pressure of human activities on ecosystems and prevent degradation of ecological functions caused by inappropriate development and construction projects. The Shaanxi Environmental Protection Department (SEPD) prepared and approved its provincial plan for the Shaanxi Qinling National EFCA in 2005 (TA team has obtained this plan). The EFCA covers 57,900 km² or around 28% of the province area and 105% of the Qinling area in Shaanxi (55,000 km2). The EFCA includes all or part of 23 nature reserves whose total area is 4,300 km², or 7.4% of the EFCA area. The EFCA includes parts of six municipalities, 38 counties (all of 13 and parts of 25), and 483 townships. The plan was submitted to SEPA in November 2005 for review and approval as a national EFCA.

12. The Qinling EFCA covers all of the Qinling range in Shaanxi and some of the Daba range, which is located south of the Qinling. The proposed Project Area lies within the Qinling EFCA, as does all of Zhouzhi County south of provincial highway 107. Qinling EFCA is divided into two main function zones: Zone II is for forest and biodiversity conservation, and Zone III is for forest plantation and water conservation. The two main function zones are sub-divided into three sub-zones: Sub- Zone 1 is for high importance; Sub-zone 2 is for medium importance; and Sub-zone 3 is for areas only parts of which are of conservation importance. Zhouzhi County and the proposed Project Area are zoned as II-1, the highest priority for forest and biodiversity conservation.

13. The same zoning applies to all of the national nature reserves in the central Qinling. EFCAs are not administered under State Council regulation as are nature reserves. The Qinling EFCA is not yet approved by SEPA, thus it is a provincial designation at present. The greatest opportunity for EFCA contribution to nature conservation will lie outside but near nature reserves in situations similar to that at the proposed Project Area. EFCAs in such locations could provide meaningful buffer zones for nature reserves. Such buffer zones could be particularly important if nature reserve law were to be strictly enforced in future, which would mean that there would be substantial relocation of villagers from reserves and onto lands within EFCA boundaries.

14. In addition, the national importance of EFCAs is recognized in the national 11th Five-Year Plan. For example, the document “The Outline of the Eleventh Five-Year Plan For National Economic and Social Development of the People Republic of China” lists, on page 22, twenty-two selected development-restricted zones, including 15 ecological, forest and/or biodiversity function zones, 5 desertification combating zones, and 2 soil erosion combating zones. This listing is provided in the section on: "Promoting Balanced Development among Regions”, and thus is consistent with the emphasis placed on environmental protection, eco-system restoration and biodiversity conservation in the PRC’s western development strategy.

15. Further, in June 2003, the SP Government issued notification of special measures for the northern foot-slopes of the QM, which aimed to prosecute violators of the laws and regulations for eco-environmental protection. Many illegal mining sites have been closed, some existing tourist sites have been rejuvenated, cultivation on slopes exceeding 25° has been banned, the environmental impact assessment of proposed projects has been re-examined, polluters and illegal loggers have been fined, and some vegetation belts have been established.

16. The PRC has implemented a number of related initiatives over the past decade with ADB and other international partners. Related programs and projects that will offer valuable links and potential collaboration with this Project include the ongoing PRC-GEF Partnership on Land Degradation in Dryland Ecosystems, and the GEF/ADB-financed Capacity Building to Combat Land Degradation Project, that is ongoing in six western region provinces/autonomous regions including Shaanxi.

17. The Capacity Building project, which is supported by supported by GEF and ADB under the OP12 Partnership, is currently ongoing in Shaanxi Province and Ningxia Hui Autonomous Region as well as in Gansu Province, Xinjiang Uygur Autonomous Region, Inner Mongolia Autonomous Region and Qinghai Province.6 Implementation commenced in late 2004, and reportedly is making progress

6 TA 4358(G), Capacity Building to Combat Land Degradation Project, approved on 29 June 2004 for $13.8 million, of which $7.7 million was provided by GEF as a grant. It is supported by and ADB-financed TA4358 to Support Implementation of the Capacity Building To Combat Land Degradation Project, for $1.2 million. This is ADB’s first “hybrid” project, fully grant financed, but processed and administered as a loan to provide the 4 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 4 in creating the necessary pre-conditions for demonstration investments of the type proposed. Its initial focus is for each province to (i) prepare its own strategic plan for land degradation control, using an IEM approach; (ii) review the policy and legislative/regulatory conditions for land degradation control; (iii) strengthen national and provincial coordination and improve operational arrangements at provincial and county levels; (iv) support capacity for future IEM investment projects;7 (v) examine ways of improving and coordinating existing monitoring and evaluation systems for land degradation; and (vi) support project implementation.

18. The World Bank as well has undertaken previous conservation investments in the QM, and is implementing other projects in the PRC that promote sustainable land management and biodiversity conservation (e.g. the Gansu-Xinjiang Pastoral Development Project, $66.25 million loan and $10.5 million GEF grant). ADB’s 2006-2008 program includes six projects that are anticipated to involve a combination of loans and GEF grants for related efforts to promote sustainable natural resources management.

19. The PRC and its international partners have given particular attention to the QM’s rare and endangered species. The most prominent example perhaps is the Qinling Panda Focal Project which is led by the World Wildlife Federation (WWF) with funding from ADB, GEF and other national and international sources. The Qinling Panda Focal Project emphasizes cooperation with non-traditional conservation forces such as national and regional government projects and economic development activities of an area or of private enterprises.

20. The project was officially launched in March 2002 and includes three main activities: (i) the establishment of a ‘Qinling Panda Protection Network’ based on a Memorandum of Understanding between WWF and the Shaanxi Forestry Department, in order to facilitate the creation of twelve new panda reserves and five new ecological corridors in the Qinling Mountain Range; (ii) promoting cooperation between conservation and tourism development in the Southern Taibaishan region of Zhouzhi County in the Qinling mountain range; this activity addresses the need to coordinate the relationship between conservation and sustainable development in the region and mitigate further loss and fragmentation of panda habitats caused by random tourism development in the region; (iii) engage the local community in conservation activities by working with different stakeholders (such as local government, conservation, agricultural and poverty alleviation institutions as well as businesses), to seek win-win solutions and to obtain better conservation results in the form of “social co-management” – in order to encourage long-term sustainable development.

B. Poverty Reduction Priorities

21. Poverty reduction projects have often been financed and implemented with the help of foreign partners including the ADB and the World Bank. One example, that is particularly relevant to this Project, is the Qinling Mountain Area Poverty Alleviation Project of the International Fund for Agricultural Development (IFAD). This IFAD Project started in 1999 and its total project cost was $106.3 million. This included an IFAD Loan for $29.0 million, co-financing of $10.4 million from the World Food Program, contributions from the borrower of $62.6 million, and contributions from the beneficiaries of $4.1 million. The Executing Agency is the Ministry of Agriculture and the Ministry of Finance in Beijing. The goal of the project is to enable food and income security for vulnerable rural households living in an environment with degraded natural resources, while the objective is to achieve sustainable advances in productive capacity, both on and off farm, and to provide increased access to economic and social resources, including education, health, sanitation and social networks.

Government with the to responsibility and flexibility required for such a complex set of capacity building reforms. 7 Specifically, in each province/region, this includes (i) documenting past (post 1985) and on-going IEM/land degradation control related projects and programs; (ii) learning the lessons from past successes and failures by assessing the impact of past land degradation investments; (iii) building a cadre of provincial planners with the skills required to design land degradation control investment projects (through training); (iv) identifying investment project ideas, preparing expanded project concept notes, and undertaking feasibility studies of selected priority IEM/ control project investments eligible for possible ADB, GEF, or other development agency financing under the PRC-GEF Partnership. A study of co-financing options will be undertaken to identify one or more modalities for combining loan financing, GEF grants, other concessional resources, and government support. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 5 Final Report Appendix 4

22. The provision of farm credit is seen as the major instrument to stimulate on and off farm production and income. However, for credit to achieve its full potential, it is necessary to increase the intrinsic productivity of agricultural land through irrigation and dryland improvements, and to strengthen key support mechanisms, in particular agricultural, livestock and tree crop input supply and extension services. The IFAD project: (a) directly invests in rural production infrastructure, such as irrigation and terracing, to create the basis for economic production; and in socio-economic infrastructure, such as roads, drinking water, electricity and health facilities, to improve productive capacity and raise living conditions; (b) facilitates access to financial services and especially credit, thus allowing farmers to obtain the necessary capital inputs for productive activities; and (c) reinforces human resource development through grass-roots organizations to help farmers and especially women enter the market economy and use credit more effectively.

23. For over 15 years, PRC governments have designed and implemented poverty reduction strategies in many parts of the Qinling Mountains, including prefecture, county and township level strategies in the Project Area. A major purpose of these strategies was to provide alternative and more sustainable livelihoods in order to reduce pressures on valuable biodiversity, ecosystems and other natural resources particularly in the QM and other part of western China.

24. The decline in rural poverty in China is generally recognized as one of the major accomplishments of the PRC’s market opening and reform program that began in 1978. Over the period from 1978 to 2001, the number of (mainly rural) people living in extreme poverty in China has reportedly fallen by over 90% from 260 million in 1978 to less than 25 million people in the later year, and the current number is likely even lower. This decline is the result of the GOC’s poverty reduction program, more recently the western development strategy, and perhaps most importantly the strong and nearly continuous economic growth enjoyed by the PRC economy over this extended period (see IFAD Website, “Rural Poverty in China”, 17 January 2007).

25. Most of the remaining rural poor live in remote hill and mountain areas that have limited productive cropland, low yields particularly from farming on higher slopes, few non-farm jobs, and limited access to markets and basic services. The hill and mountain (in-situ) areas in the PA and QM have many of these same characteristics; but, compared with other poverty regions in western China, are fairly close to a large and quite prosperous metropolitan market, Xi’an. This should mean that the opportunities for eco-tourism and other resource based tourism, other non-farm businesses and sustainable livelihood opportunities, and non-farm employment should be much greater for the PA and wider QM.

26. Poverty reduction and related rural development strategies will continue under the Socialist Livelihood Policy that is emphasized in the GOC and SPG 11th Five-Year Plan documents. This Project provides an opportunity to design, test and implement the concepts put forward in the SPG’s Socialist Livelihood Policy in order to demonstrate, particularly in the QBCDA area, how well designed, managed and coordinated poverty reduction, rural development, tourism promotion, biodiversity conservation, and related environmental improvement programs can work together to provide both sustainable biodiversity conservation and sustainable livelihoods for QBCDA residents and other members of the target population.

27. One example of a poverty reduction strategy in the Project Area that has received favorable attention is the development strategy of Jiufeng Township in Zhouzhi County. This strategy has employed a variety of instruments to reduce poverty, promote sustainable livelihoods, and reduce pressure on the PA’s biodiversity resources. These include: road construction to improve access to markets and basic services; technical support and training to assist local villagers to establish 30 home tourism facilities as well as three farm tourism spots in four villages, including one QBCDA village Gengyu; promotion of eco-tourism, adventure tourism, and other forms of adventure tourism; promoting fruit tree production and other economic trees in order to convert land from farms to forests in a manner that improves livelihoods over the longer term; increased cultivation of medicinal herbs; use of biogas and other alternative energies that promote biodiversity conservation; and, resettlement of people from the mountain areas to the flatlands and areas with gentle slopes. Consultation indicated that similar alternative livelihood strategies are being (or have been) implemented in many of the QM’s nature reserves, including in Foping Zhouzhi and Taibai Shan. 6 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 4

28. In the first years of the current decade, quite a large number of people have been resettled from hill and mountain areas to the flatter and generally more productive and prosperous areas of the QM – as well as to locations outside the QM. Data collected by the PPTA Team from township officials indicate that the number resettled in the PA mainly from 2002 to 2004 totaled about 4,400 people, (constituting about one-fifth of the PA’s total population), distributed as follows by township: Jixian – 2,000; Louguan – 1,800; and Jiufeng – 600. Turning to the wider QM, it is expected that, over the longer term, voluntary resettlement through individual household decisions supported by the PRC’s resettlement program will result in a significant decline in the total QM population from its current level to perhaps only 3 million – with even sharper declines in the more remote hill and mountain areas within the QM system.

29. Biodiversity conservation and restoration in the PA and wider QM have benefited from the program for converting highly sloped farmland above 25° of slope into forest. The land conversion program, which was launched in 2001, is expected to be completed in 2010. Farmers who converted their land are entitled to receive 200 kg of grain per mu and CNY130 subsidy per household per year for an eight year period. This program has become the main sources of livelihood for the poor both in the PA and elsewhere in the QM and other northern parts of China.

30. Consultations with senior PDRC officials indicated that the land conversion program is to be reduced under the 11th Five Year Plan because of concerns that the program is having a negative impact on food production and security8. The PPTA consultations with village leaders in the QBCDA area identified other problems with the land conversion program that are specific to that area: (i) part of the land was converted into economic trees; this is very much welcomed by the rural people but it takes a few years to obtain economic benefits from these trees; and (ii) land conversion has greatly increased the numbers of all wild animals including of wild bore/hogs which eat everything growing in the farmland and thus greatly reduce agricultural production on the remaining more limited farmland on the flatlands and gentler slopes.

31. The expectation is that the PA in particular will receive lower priority under the smaller land conversion program compared with other areas of Shaanxi Province. This means that alternative strategies must be found to generate sustainable livelihoods while conserving and restoring bioresources in the PA and the wider QM.

32. Many of the approaches to be applied in the PA and under the QMEFCA are consistent with the whole landscape system management approach (WLSMA) noted in the text.

C. Landscape Management Approach and its Application in the Context of the Qinling Mountains.

33. The Landscape System Management Approach (LSMA) approach has arisen largely in response to the ‘Sustainable Development’ concept and the need to mainstream biodiversity into production landscapes. This requires that a more integrated approach to environmental and conservation planning be embraced which recognizes the trans-boundary nature of environmental processes and the trans-sectoral nature of environmental policy making. The LSMA approach supports the Ecological Function Conservation Area approach developed by State Environmental Protection Agency (SEPA), this is a new measure in China to sustainably manage landscape-scale ecosystems by protecting primary ecological functions, the program covers the period 2006-2020.

34. ‘Mainstreaming biodiversity’ was defined by participants at the Global Environment Facility (GEF) workshop on biodiversity held in Cape Town, South , in September 2004. The objective of mainstreaming biodiversity is:

To internalize the goals of biodiversity conservation and the sustainable use of biological resources into economic sectors and development models, policies and programs, and therefore into all human behavior.

8 Other reasons could be the high and continuing cost of the program and concerns that the program could result in the establishment of a large group of rural people that will become totally dependent on government subsidies for their livelihood and survival. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 7 Final Report Appendix 4

35. Within the Qinling Mountain system, environmental protection and conservation are linked to the agriculture, forestry, energy, water resources, livelihoods and other policy areas on a local, regional and national level. To begin to address the complex challenge of meeting a wide range of sustainable land use objectives and integrating biological resource management, the adoption of a strategic approach is required. Thus, the LSMA approach provides a holistic planning framework for the management of large ‘landscape’ units within the “Living Landscape”.

36. Successful LSMA requires and contributes to greater transparency and accountability and better governance practices. Experience elsewhere is showing that LSMA helps to promote forest and agricultural governance arrangements that improve livelihoods and promote sustainable forest and land management. In so doing, complementary initiatives that address forest law enforcement and governance are encouraged.

37. An important aspect of adopting a LSMA for this project is that it would address wide ranging issues which support the restoration of the Qinling Botanical Garden Conservation and Demonstration Area (QBCDA) landscape and its corresponding habitats as outlined in the Qinling Botanic Gardens Feasibility Study rather than concentrating on the conservation of single species flora and fauna with its associated inherent difficulties.

38. The term ‘landscape’ is both a collective and descriptive word. Without precise definition, its meaning remains ambiguous, both in general usage, between academic fields and within individual disciplines. As a concept it is elusive in everyday use encompassing natural values, cultural and symbolic values and sensory experiences. The ‘landscape’ concept by definition; implies the integration of economic, environmental and socio-cultural qualities in a physical setting. These qualities are driven by wide ranging factors which are ever changing and as they do so, the landscape changes in response. The changes may be either positive or negative for the environment depending on the policy objectives pursued.

39. The so called ‘driving changes’ which have occurred in the Qinling Mountain system have been both biophysical and socio-economic in nature. Landscape change is a normal process since it is a physical reflection of changes in land use which may be both anthropogenic and / or natural influences9. However, when changes occur rapidly this can dramatically affect the qualities and internal coherence of the ‘landscape’.

40. Landscape change has occurred in the Qinling Mountains over extended periods of time. The recorded history of the area goes back over two thousand years, but occupation by humans and their influence on the landscape probably extends back many more millennia. Increasing levels of technological advancement and mechanization linked to aggressive and non-sustainable policies within the recent past – 50 years or so – have been the greatest destructive influences. The extractive industries such as forestry, power generation and mining have been able to exploit the areas natural resources to the full.

41. Over a short period, as a result, the forest structure has simplified. Many of the ‘climax’ forest species have been decimated and the natural forest structure destroyed. Along the river systems, the riparian habitats have been severely damaged and road building programs have fragmented landscape units and habitats. This has resulted in a major reduction of habitat and associated biodiversity and also the essential connectivity between habitats. Additionally, farming activities have led to the clearance of vegetation cover and poor cultivation practices on steep slopes. This has eventually led to extensive soil erosion problems in hill and mountain areas.

42. The Chinese Government responded to the environmental issues created by aggressive forestry management and over harvesting within the Qinling mountain forest landscapes and the problems of erosion and deforestation created by agricultural activities via the introduction of two major environmental land based programs:

9 Natural influences may include, global warming, natural forest fires, disease and pest etc. 8 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 4

43. Natural Forest Protection Program (NFPP) launched in 1998. At the core of this program is a logging ban on 30.38 million ha of natural forest area. This program, which demands a complete moratorium on logging and timber cutting, is applied to the whole of the forest area of the Qinling Mountains. This amounts to approximately 50,500 km² of which 13,635 km² is high forest.

44. Sloping Land Conversion Program (SLCP) (“Grain for Green”) initiated in 1999. This is applied in the Qinling Mountains to sloping land of 25° and above. As a consequence, an area corresponding to between 30–40% (6,170–8,266 km2) is subject to this program in the Qinling Mountains.

45. Within the Qinling Botanic Garden project area, these two programs have been applied. This has resulted in positive and negative consequences both for the environment and for the communities living in the area, and consequential implications for long term conservation based land management.

46. Although the Natural Forest Protection Program has focused on natural regeneration, such restoration does not necessarily restore the naturally occurring climax habitats that have been lost. This is due to the fact that in many areas the climatic (overstorey) trees have been progressively removed and are no longer present to regenerate. Unfortunately this would mean that the restored forest would consist only of natural understorey species. Under these circumstances the biodiversity representative of the natural habitat will not be restored without forest management such as felling of secondary species in order to allow the replanting of the climatic forest species. Under the current regulations this cannot be achieved as no interventions are permitted.

47. For the community, the “Grain for Green” program creates implications for livelihood opportunities. Whilst compensation payments are made to farming families participating in the scheme for the first eight years, the ability of some farmers to meet the loss of income through other farming or tertiary activities may not be feasible. Secondly, income from the land subject to “Grain for Green” which has been revegetated or attempted to be revegetated may not be able to support the farmer when the compensation period expires. Developing alternative production systems based on maintaining permanent vegetation cover should be addressed and opportunities such as agri-forestry, medicinal plants, coppicing systems etc. should be investigated.

48. To meet the challenge of applying the LSMA approach to the project area an opportunity arises to devise and demonstrate systems that strike a balance between improving ecological integrity, restoration of the naturally occurring habitats, and enhancing peoples’ livelihoods, these experiences and recommendations of ‘good practice’ can then be replicated to other locations within the Qinling Mountains.

49. Prospective pilot area LSMA projects for Qinling Botanic Garden QBCDA area with potential for replication and wider adoption within the Qinling Mountain System:

(i) Monitoring and adaptive management to determine the ecological or socio-economic effectiveness of the NFPP and SLCP programs within the project area. Establish monitoring plots to assess the effectiveness and medium / long term environmental and biological implications of the programs. Undertake socio-economic analysis to assess livelihood implications current and long term. Support and develop capacity at the systemic level in order to make necessary adjustments to NFPP and SLCP programs (policy, legislation) and provide best practice guidelines.

(ii) Development of management systems for mountain forest habitat restoration that encompass technical and silvicultural requirements and the institutional change necessary to relax the NFPP in order to allow pilot projects to commence. Establish monitoring systems for pilot areas. Investigate the economic potential of linking some selective forest restoration areas to livelihood development (creating symbiotic relationships) through adoption of sustainable silvicultural systems such as irregular shelterwood systems that can encourage habitat improvements, and increase potential for NTFPs and small round wood craft products.

(iii) Development of management systems for riparian habitat restoration that encompass technical and river management requirements. Establish monitoring systems for the TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 9 Final Report Appendix 4

riparian habitats in the QBCDA area. Investigate the economic potential of linking riparian management to livelihood development by creating small fishpond / wetlands for small-scale production of species endemic to the QBCDA river system10 (e.g. Manchurian Trout) to increase and improve current riparian habitat conditions and aid species recovery.

(iv) Investigations on permanent cover cropping systems for land removed from agriculture in the “Grain for Green” program to improve long term conservation measures whilst supporting livelihoods, e.g. investigations into production systems for endemic shrub and tree species for the production of medicinal herbs and oils, ‘coppice with standard systems’ for the production of craft based materials, permanent cover agro-forestry systems etc.

(v) Habit restoration and management of controlled release areas as a halfway step for the wild release of Giant Panda, Crested Ibis etc. Monitoring and scientific research focused on information requirements for designing a controlled or wild release program (habitat restoration and management, animal behavior patterns etc)

10 This project could be linked to the river system water management improvements and management of the hydro electric stations in the QBCDA area TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 5

BIODIVERSITY OF THE QINLING MOUNTAINS

A. Introduction

1. Increasing population pressures, cultural traditions, and economic development have degraded China's biological resources. The combination of a large population (over 1.3 billion people with an annual growth rate of 0.59 percent or nearly 8 million people) and limited land and water resources (only ten percent of the land area is arable and freshwater per capita is one fourth the world average) has caused extensive loss of habitats for housing, infrastructure, farming, logging, fuelwood collection, and livestock grazing. As a result, the IUCN World Conservation Union Red List of globally threatened species in China includes 804 species in total, 442 plants, and 362 animals. China’s own Red Data Book of threatened species includes a larger total.

2. The Agriculture Ministry reports that 30 percent of the Yellow River’s 150 fish species are extinct. The most recent documented extinction of a vertebrate in China was the Baiji or Yangzi River Dolphin in 2006. No verified sighting of a free-ranging has been reported since the early 1990s: Some scientists believe the sub-species is extinct outside of zoos. China’s Snub-nosed Monkeys have suffered local extinctions over the last 400 years, leaving the remaining four species in small, isolated populations and vulnerable to extinction. China’s ultimate flagship species, Giant Panda, was nearly lost before conservation efforts brought the global population back to over 1,500 animals.

3. In spite of the extinctions and the long lists of threatened species, Chinese Academy of Sciences estimates that 80 percent of China’s plant and animal biodiversity remains unknown. Many of the extinctions of fish species in China’s woodlands and wetlands will never be documented because they occurred before scientists could name and describe the species that were lost. More important, it is not possible to protect or recover many species whose survival is threatened by human activities because we have not yet learned that these species exist, where and how they live, and how they are threatened.

4. In terms of biodiversity conservation, modern China presents a mosaic of apparent contradictions. Unprecedented rates of extinction and rapidly escalating human-caused threats to wildlife are occurring at a time when China’s nature reserve systems is growing rapidly toward a 2050 goal of 2,000 protected areas. China’s policy, legal, and regulatory framework for nature conservation is among the world’s strongest, and is continually improving (Annex 1). There is little question that China’s growing network of protected areas combined with its policy and legal framework could reverse most of the deteriorating trends in biodiversity if management, implementation and enforcement were carried out as written, and supported by updates to adapt to changing situations (such as the new nature reserve law now being drafted). In support of this contention, several key components of the biodiversity conservation policy and legal framework are listed in the paragraphs below.

5. The Forest Law (revised in 1986), specifies goals of maintaining an average of 30 percent forest cover over the entire country, including 40 percent in mountainous areas, and prohibits logging in protected areas. It also imposes strong penalties for illegal felling of trees and attempts to establish closer links between harvesting and reforestation. The Environmental Protection Law of 1989 promotes rational use of natural resources and facilitates the development of a comprehensive system of nature reserves. The Wildlife Conservation Law of 1989 includes categories of protection for endangered and threatened wildlife.

6. China is increasingly active in international nature conservation efforts. China participates in the UNESCO Man and the Biosphere Program, and ratified the Ramsar Convention in 1992 and the Biodiversity Convention in 1993. China acceded to CITES, the Convention on International Trade in Endangered Species of Flora and Fauna, in 1994.

7. National environmental strategies and actions plans have also been prepared as required by China’s accedence to international conventions. A national nature conservation strategy was produced in 1987 that provided a general overview of conservation status and trends. A Biodiversity Conservation Action Plan was completed in 1993 with assistance from the Global Environment Facility (GEF) and IDA, and was approved by the State Council, which establishes national priorities in biodiversity. A National Environment Conservation Action Plan was approved by the State Council. 2 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

China’s National Agricultural Conservation Action Plan was approved in 1999, and a National Wetland Conservation Action Plan was approved in 2000.

8. In spite of the rapid growth in the protected area network and China’s impressive policy and legal framework, nationwide there are few situations where species and/or habitat conservation crises have been resolved with positive outcomes. The Qinling Mountains represent one location where this is happening. The coverage of protected areas is increasing, a range of stakeholders participates in natural resource management, sustainable use is not an abstract concept but a working goal, and the areas of many important habitats and wildlife populations that rely on them are either maintaining current levels or are recovering. This section of the Mid-Term Report describes the current situation in the Qinling with respect to biodiversity and the protected area network that supports it.

1. Data Sources

9. Field research in China has historically focused on identification of biota in specified geographic locations. Thus there are often abundant and reliable records of the distribution of species but less abundant and less reliable reports of the abundance, population trend, and/or ecology of species. Species records for , birds, reptiles, amphibians and higher plants are based on current field surveys (in the previous ten years) and, in most cases, are generally representative of the situation in the field. Species records for fish and invertebrates are probably less representative because field surveys for these groups have been less intensive than for the plants and vertebrate fauna. Where species records are considered to be outdated or inaccurate, adjustments have been made in the following tables. An example is South China Tiger Panthera tigris amoyensis, which is often reported as a resident of the Qinling but for which there are no reliable records since June 1964.

2. Common and Scientific Names

10. Common names for all wild animals are capitalized except when hyphenated (e.g. Yellow- throated Martin). Scientific names are italicized and the name is capitalized while the species name is not.

3. Physiography

11. Shaanxi Province is in midwestern China and covers a total area of 205,600 km2. Southern Shaanxi is the transition region from the southern humid subtropical evergreen forest zone to the dry desert zone in north. Altitudes range from 300-3,700 m.

12. The Qinling Mountains, a major watershed of the He (Yellow) and Chang Jiang (Yangzi) rivers, The Qinling range covers 50,500 km2 in Shaanxi Province1 and 76,500 km2 in total2. The Qinling range is an important geographical divide between north and south China and between the Yellow and Yangzi River watersheds. The highest peak, Taibai Shan, is 3,767 m above sea level. The western part of the range reaches elevations from 2-3,000 m, while most of the eastern part is below 2,000 m. Five major soil types have been described from the Qinling: (1) ochric castanozom below 1,000 m; (2) brown forest soil at 1,000-1,500 m; (3) podzolic brown earth from 1,500-2,800 m; (4) podzolic soil from 2,800-3,000 m; and (5) alpine meadow soil above 3,000 m.

13. The vertical climatic zones from lowest to highest elevation on the Qinling have been classified as northern subtropical, warm temperate, middle temperate, cooler temperate and subcold temperate. There are important differences in the temperature and on the south and north slopes of the Qinling. On the south slope, average annual temperature is 2°C higher than on the north slope, average winter temperature is 4-5°C higher, relative humidity is 10% higher and average precipitation is 200-400 mm greater. These differences have important implications for spatial distribution of biodiversity. For example, the preferred habitats of the Giant Panda Ailuopoda melanoleuca are on the south slopes of the Qinling where bamboo, the Giant Panda’s main food, is more abundant due to the milder and wetter microclimate.

1 Anon. 2006. Cities in Shaanxi Strive to Balance Environment, Development. 18 May 2006. China Daily. 2 Tsun-shen Ying and David E. Boufford. 1998. Phytogeography of the Qinling Mountains and a Comparison with the Flora and Vegetation of Japan. In: Sino-Japanese Flora, its Characteristics and Diversification, Boufford, D. E. and H. Ohba (eds), 1998, The University Museum, The University of Tokyo, Bulletin No. 37, Tokyo. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 3 Final Report Appendix 5

4. Biogeography

14. Chinese life forms occur in two main biogeographic realms, the Palaearctic and Indo- Malayan. Southern Shaanxi marks the northern extent of the sub-tropical zone of the Indo-Malayan Realm, the well-known refuge for animals and plants of the tertiary period (65-1.8 million years BP). represents the colder temperate climes of the Palearctic Realm. The Indo-Malayan Realm includes a belt across southern China where tropical and sub-tropical broadleaved evergreen forests are dominated by plant taxa such as Dipterocarpaceae (dipterocarps), Moraceae (mulberries) and Lauraceae (laurels). Moving northward the shift to the Palearctic Realm is marked by transition to forests dominated by and coniferous taxa including the () and Pinaceae (pines). Shaanxi Province lies in the Palearctic Realm and is characterized by biota adapted to northern climes with cold winters.

15. Xie et al.3 assessed the biogeography of China on the basis of plant and distributions. At the broadest scale the Qinling was assigned to the area (Area I). At the next lower level the Qinling was placed in one Sub-area, Central China (Sub-area IIa). At the next lower level the Qinling was assigned to one region, Qinling and mixed forest (Region 9). At the lowest level of classification the Qinling is sufficiently important in biogeographic terms to occupy a single unit of its own, Unit 46, Qinling Mountains.

B. Qinling Biodiversity

16. The region was free of ice during the most recent glacial period from 10,000-13,000 years BP and as a result provided refuge for a wide variety of biota that did not survive glaciation in areas only slightly further north. The Qinling supports a rich wildlife resource in spite of environmental degradation over recent centuries (Table 1).

17. The Qinling is well forested: It represents 0.6 percent of China’s land area but 1.1 percent of China’s forests (Table 2). On only 1.1 percent of China’s forested area, the Qinling supports nearly 14 percent of China’s biodiversity and over 17 percent of China’s vertebrate fauna biodiversity.

18. Based on its high levels of biodiversity (and its importance as part of the Yellow and Yangzi River basins) the Qinling was identified by SEPA as one of 10 national pilot sites for establishment of ecological function protection areas (see Section 7.1.3). A second testament to the importance of the biodiversity of the Qinling is its designation as one of 16 biodiversity hotspots in China designated in the National Forestry Nature Reserve System Plan. The Daba range immediately south of the Qinling was also selected as one of the 16 hotspots. Together they account for one eighth of the biodiversity hotspots identified in the SFA plan4. These two areas are combined in SEPA’s ecological function conservation area in the Qinling.

19. Because of the rich biodiversity in the region, it is not feasible to address the conservation status and requirements of all 3769 vascular plants and 577 vertebrate animal species. For this reason this biodiversity assessment addresses species considered to be of regional, national, or global conservation concern. Only those species listed as threatened by IUCN-World Conservation Union (IUCN), listed in China’s Red Data Book (RDB), restricted in international trade by the Convention on International Trade in Endangered Species (CITES), or included in conservation treaties are addressed in this summary.

3 Yan Xie, J. MacKinnon and Dianmo Li. 2004. Study on biogeographical divisions of China. Biodiversity and Conservation 13: 1391–1417. 4 Li Diqiang, Yangling and Ouyang Zhiyun. 2003. Research on the National Forestry Nature Reserve System Plan. World Bank-GEF Forest Resources Development and Protection Project, Nature Reserves Management Project. China Land Press, Beijing, in Chinese and English. 4 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Table 1: Number of Wildlife Taxa in the Qinling

Numbers of Species Group Orders Families Genera Species Fern - 33 83 323 Gymnosperm - 10 23 45 Angiosperm - 188 984 3,401 Total vascular plants - 231 1,090 3,769 Fish 6 13 67 109 Amphibians 2 7 12 19 Reptiles 3 8 26 26 Birds 17 47 166 308 Mammals 7 29 81 115 Total vertebrates 35 104 352 577 Total vascular plants & vertebrates 35 335 1,552 4,346 Flora sources: Zhang Qin-. 2001. Studies on the Composition, Characteristics and Geographic Element of the Family of Seed Plant Flora in Qinling MT. Bulletin of Botanical Research, 21(4): 536-545 (in Chinese). Xu Hao et al. 2006. A Discussion in Exploitation and Utilization of Pteridophytic Resources in Qinling Mt. Journal of Northwest University (Natural Science Edition), 36(4): 603-606 (in Chinese). Fauna source: Xu Taoqing and Yonghan. 1996. Shaanxi Province Vertebrate Fauna List. Shaanxi Science and Technology Press, Xi’an, Shaanxi.

Table 2: Land and Forest Area, and Species in the Project Area, Qinling and China

Project Project Qinling as Qinling Area as a Area China Total a percent Total percent of Total of China Qinling Land area (km²) 458 50,500 0.8 9,326,410 0.6 Forest area (km²) 242 13,635 1.8 1,286,300 1.1 Ferns (no. of species) 71 323 22.0 2,600 12.4 Gymnosperm (no. of species) 12 45 26.7 193 23.3 Angiosperm (no. of species) 1,219 3,401 35.8 24,357 14.0 Total: vascular plants 1,302 3,769 34.5 27,150 13.9 Fish (no. of species) 12 109 11.0 1,010 10.8 Amphibians (no. of species) 7 19 36.8 220 6.8 Reptiles (no. of species) 9 26 34.6 380 8.6 Birds (no. of species) 91 308 29.5 1,186 26.0 Mammals (no. of species) 35 115 30.4 509 22.6 Total: vertebrate fauna 154 577 26.7 3,305 17.5

1. Qinling Flora

20. This section is adapted largely from the work of Tsun-shen Ying and David E. Boufford5. Their report provides a useful foundation from which to interpret the importance of the Qinling flora and its relationship with the flora of the East Asia region, and with Japan in particular. In addition to this description, Appendices 5 and 6 list the conservation status of plants of conservation concern recorded in the Qinling (Appendix 5) and on the Project Area (Appendix 6).

5 Tsun-shen Ying and David E. Boufford. 1998. Phytogeography of the Qinling Mountains and a Comparison with the Flora and Vegetation of Japan. In: Sino-Japanese Flora, its Characteristics and Diversification, Boufford, D. E. and H. Ohba (eds), 1998, The University Museum, The University of Tokyo, Bulletin No. 37, Tokyo. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 5 Final Report Appendix 5

a. Overview

21. Shaanxi Province supports 210 families, 1,100 genera, and 4,100 species of vascular plants. Shaanxi has 37 species of plants listed as threatened in the Red Data Book of China and 11 species from the Qinling are listed as globally threatened in the IUCN World Conservation Union Red List of Threatened Species.

22. The Qinling ecosystem is dominated by temperate vegetation in deciduous broadleaf forests but is representative of both subtropical and temperate ecosystem types. Cold-tolerant plants derived from the sub-tropical zone to the south are represented in the Qinling but in fewer numbers than the temperate species from the north.

23. The flora of the Qinling comprises around 3,125 species of flowering plants in 892 genera, of which 39 genera are endemic to China. The 20 largest families together contain 65% of the total species. Endemic species and non-endemic species are nearly equally represented in the Qinling, and the vegetation is comprised of two main elements: an endemic Chinese element and a Sino- Japanese element.

24. Based on floristic composition, vertical distribution and slope aspect, Qinling plant communities can be classified as:

i. Northern Slope:

(i) Blume var. acutiserrata Maxim, forests (below 1,800 m); (ii) Quercus liaotungensis Koidzumi forests (1,800-2,200 m); (iii) Betula albo-sinensis Burkill forests (2,200-2,800 m); (iv) Pranchet forests (2,800-3,000 m); (v) Larix chinensis Beissn. forests (3,000-3,400 m); and (vi) subalpine scrub (above 3,400 m).

ii. Southern Slope:

(i) Quercus vari-abilis Blume forests (below 1,500 m); (ii) Quercus aliena var. acutiserrata forests (1,500-2,000 m); (iii) Betula utilis D. Don forests (2,000-2.500 m); (iv) Abies fargesii forests (2,500-3,000 m); (v) Larix chinensis forests (3,000-3,400 m); and (vi) subalpine scrub (above 3,400 m).

25. High endemism is a conspicuous feature of the Qinling flora. For example, Sargentodoxaceae, Eucommiaceae and Davidiaceae are endemic to China; Eupteieaceae, Helwingiaceae, Toricelliaceae are of Sino-Japan-Himalayan or Sino-Himalayan distribution. All of the dominant species except Betula utilis are endemic to China or to the Qinling (Larix chinensis, for example, is restricted to the Qinling). In addition the ranges of a number of more widespread species, frequently dominant in other parts of China, intersect in the Qinling area.

26. Of the 217 species within the Quercus aliena var. acutiserrata forests, 126 are endemic to China, including seven restricted to the Qinling. One hundred sixteen of the 184 species in the Quercus liaotwigensis communities are endemic to China and six occur only in the Qinling. The Betula albo-sinensis forests contain 152 species, of which 111 species are endemic to China, and five are endemic to the Qinling. The Abies fargesii forests contain 105 species, 72 of which are endemic to China, including seven restricted to the Qinling. The Larix chinensis forests contain 114 species, 76 of which are endemic to China, including 11 endemic to the Qinling.

27. Antiquity is another outstanding characteristic of the forests in the Qinling. Some species of the genera Carpinus and Quercus that are common or dominant today are morphologically similar to fossil species of the same genera6.

6 Tanai, T. 1972. Tertiary history of vegetation in Japan. pp. 235-255. In A. Graham, ed. Floristics and Paleofloristics of Asia and Eastern . Elsevier Publ. Amsterdam. 6 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

28. Temperate forest characteristics are another prominent feature of the vegetation of the Qinling. Except for Abies fargesii all other forest dominants are deciduous trees. There are no evergreen broadleaved forests, or even mixed evergreen-deciduous broadleaved forests. The forests are composed of about 526 species of 261 genera and 92 families. Except for Elaeagnus L. (2 species), Ilex L. (1 species), Daphne L., Rhododendron L. (3 species) and several species of conifers, almost all other species are deciduous. In addition, most of these genera and species are elements of the East Asiatic flora and indicate a very close relationship between the flora of the Qinling and the flora of Japan, especially that of central Japan.

b. Survey of the Largest Families of Angiosperms

29. The largest families of flowering plants in the Qinling are listed in Table 3. The are a major family in this region and are particularly characteristic of the flora and vegetation of temperate areas in China. The Asteraceae and Poaceae also exhibit an extraordinary frequency in the forests, and elsewhere in this region. There are seven families with more than 100 species. The and Cyperaceae are north temperate in nature and form the major part of the flora. The Lamiaceae and Apiaceae comprise an important element of the flora, and three genera of Lamiaceae endemic to China occur in the Qinling. While the Liliaceae and Orchidaceae are comparatively poorly represented, two genera and 50 species of Orchidaceae endemic to China occur here. Ten additional families have between 40 and 100 species (Table 3). Except for the and Rubiaceae, these families temperate in distribution. In addition, the Berberidaceae and Saxifragaceae contain 44 and 47 species respectively endemic to China, and have the highest proportion of endemic species of all of the larger families. The families mentioned above contain a combined total of 2,193 species, including 1,041 species endemic to China, or 65% of the total flora, and play an important role in shaping the characteristics of the flora and vegetation of the Qinling range.

TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 7 Final Report Appendix 5

Table 3: Ranking of the 20 Largest Families in the Flora of the Qinling based on Number of Species*

Family Number of Number of Number of Number of genera1 genera Species2 species endemic endemic to to China China Asteraceae 100/227 3 355/2323 163 Poaceae 92/228 219/1202 64 Rosaceae 37/48 199/855 116 Fabaceae 51/163 2 175/1252 78 Ranunculaceae 25/40 128/736 77 Cyperaceae 12/31 121/688 40 Lamiaceae 36/99 3 116/808 59 Apiaceae 37/95 110/525 58 Liliaceae 28/55 103/335 46 Orchidaceae 45/165 2 102/998 50 Caprifoliaceae 9/12 2 74/207 43 Saliaceae 2/3 73/266 45 Scrophulariaceae 22/60 66/634 33 Saxifragiaceae 12/26 65/440 47 Polygoneaceae 8/14 1 58/228 19 Brasicaceae 25/96 57/411 15 Oleaceae 9/12 47/176 23 Berberidaceae 7/11 44/280 37 Caryophyllaceae 15/31 41/372 11 Rubiaceae 11/75 1 41/477 17 Total 582/1,650 14 2,193/13,212 1,041 Percent 57.63 5.8 65.24 47.5 1 number of genera in the Qinling/number in China 2 number of species in the Qinling/number in China 3 percent of China genera in the Qinling 4 percent of China species in the Qinling *Source: Ying and Boufford 1998

c. Relationships of the Qinling Mountain Range Flora

i. Geographical Affinities of the Genera

30. Approximately 892 genera and 3,124 species occur in the Qinling. Among the native genera in the flora of the Qinling, 220 (27%) are tropical, 563 (69%) are temperate, and 39 (5%) are endemic to China. Of the 892 genera in this region, 653 (73%) are shared with Japan. Ying and Boufford7 classified the genera of flowering plants in the Qinling into 15 distribution types (Table 4).

7 Tsun-shen Ying and David E. Boufford. 1998. Phytogeography of the Qinling Mountains and a Comparison with the Flora and Vegetation of Japan. In: Sino-Japanese Flora, its Characteristics and Diversification, Boufford, D. E. and H. Ohba (eds), 1998, The University Museum, The University of Tokyo, Bulletin No. 37, Tokyo.

8 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Table 4: Distribution pattern of genera of seed plants in the Qinling1

Distribution type Number Percent of Number Percent Number of Percent of of all genera of species of all species in all genera genera in region in region species China with in China in region in region this pattern with this pattern Cosmopolitan 70 7.8 443 14.2 104 67.3 Pantropic 106 11.9 333 10.7 362 29.3 & Tropical 10 1.1 21 0.7 62 16.1 America Tropic 26 2.9 54 1.7 177 14.6 Tropical Asia & Tropical 17 1.9 31 1.0 148 11.5 Tropical Asia & Tropical 22 2.5 45 1.4 164 13.4 Africa Tropical Asia 39 4.4 73 2.3 611 6.4 North temperate 229 25.7 1,286 41.2 302 75.8 East Asia & North 66 7.4 160 5.1 124 53.2 America Old World temperate 91 10.2 258 8.3 164 55.5 Temperate Asia 24 2.7 71 2.3 55 43.6 Mediterranean, West Asia 23 2.6 42 1.3 171 13.5 & Central Asia 11 1.2 13 0.4 116 9.5 East Asia 119 13.3 243 7.8 299 39.8 China endemic 39 4.4 51 1.6 257 15.2 Total 892 100 3,124 100 3,116 31.0 1Source: Ying and Boufford 1998

(i) Cosmopolitan genera: Seventy genera, mainly aquatics and mesophytes, are cosmopolitan. These represent 36 of the 158 native families in the Qinling and include 443 species. They comprise about 14% of the flora of the Qinling, and 23% of the total families. Many mesophytes such as Carex L., Polygonum L., Ranunculus L., Viola L., Gentiana L., and Cyperus L. are either the dominant or common species of the herbaceous layer in forests and in montane grasslands. (ii) Pantropical genera: In the Qinling, 106 genera, or 12% of all genera, are pantropical (found in all three tropical regions, the , Africa-Madagascar, Asia- Australasia). They contain 333 species, or 11%, of all species in the Qinling. Although these genera are mainly found in the tropics, some, such as Ilex L., Cynanchum L., Impatiens L., Buddleja L., Ficus L., Cuscuta L. and Pilea Lindley, extend to subtropical or even temperate latitudes. However, the distributions of many of these genera in the tropics are often in cool, moist, montane areas. (iii) Tropical America and tropical Asia: Only ten genera in nine families, representing 1.1 % of all genera, are included in this category. These are all woody genera and include 20 species, or only 0.6% of the total Qinling flora. These genera are usually at lower elevations in the Qinling, but a few occur in forests at higher elevations. In China, some of these genera, such as Meliosma Blume, Sagereia Brongn. and Picrasma Blume may extend north of the Qinling but most of them, such as Phoebe Nees. Sloanea L., Eurya Thunb. and Sapindus L. are distributed only to the south. (iv) Old World tropics: This distribution type is difficult to distinguish from the subtropical and sometimes even temperate pattern. One example is the genus Melia L. which has about 15 species in the Old World tropics but only two species in China, one of which extends as far north as the northern slope of the Qinling. In the Qinling, 26 genera, or approximately 3% of all genera, are Old World tropical. These contain about 54 species, or 1.7% of all species in the Qinling. Among them, Elatostema Gaudichaud, Cayratia Juss. and Asparagus L. are found in the herb layer of the broadleaved deciduous forests, while the shrub Alangium Lam. is rather common along streams or at the edges of forests. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 9 Final Report Appendix 5

(v) Tropical Asia and tropical Australia: The western extremity of this distribution type extends to Madagascar. Seventeen genera (2% of all genera) and 31 species (1% of all species) can be placed in this category. Most are woody species that occur predominantly in southern China and extend northward to the southern slope of the Qinling. Only a few, such as Leptopus, Cudrania, and Gastrodia, reach the northern slope. The genus Nothopanax has a disjunctive distribution in and New Zealand. Some genera, such as Wikstroemia, Leptopus and Nothopanax are constituents of the forests, but are not common. (vi) Tropical Asia and tropical Africa: Genera are distributed from tropical Africa to the Indo-Malaysian region. In the Qinling, 22 genera (2.5% of all genera) are of this distribution type. These genera contain 45 species (1.4% of the total species). Except for Miscanthus and Microstegium, these genera are uncommon in this region. (vii) Tropical Asia: The Indo-Malesian region has one of the richest floras in the world. The eastern portion of the Indian region and the northwestern portion of the Malesian region, through the Malay and Indo-Chinese peninsulas, are very closely linked floristically with the mountains of south-central China. Thus, a fairly large number of "typical" Indo-Malesian genera occur in south China. For example, this category forms the nucleus of the flora of Province. In the Qinling, however, this distribution type is represented by only 39 genera, or 4.4% of all genera, and about 73 species, or only 2.3% of all species. (viii) North temperate: Included here are all the widely distributed genera restricted to the temperate regions of and America. Their distributional areas sometimes extend southward to the more mountainous regions of the tropics. The genera of this category total 229, or 26% of the total genera, and represent the highest proportion of distribution types in the flora of the Qinling. These genera contain about 1,286 species, or over 41% of all species in this region and form the nucleus of the flora of the Qinling. Among the especially prominent and significant genera in terms of their dominance in the vegetation of this region are Abies (fir), Larix (larch), Betula (), Quercus (), Salix (willow), Rhododendron, Spiraea, Thalictrum, Polygonatum, Pyrola, and Alliu. Most of these genera contain only deciduous trees and , and all of them are typical North Temperate genera. (ix) Eastern Asia and North America: This pattern is one of the best known and has attracted the greatest interest of biogeographers. In the Qinling mountains, 66 genera or 7.4% of all genera belong to this type. They contain 160 species, or 5.1% of all species in the region. These 66 genera also make up about 60% of the disjunctive genera with distributions restricted to eastern Asia and temperate North American. Although genera with this distribution pattern are concentrated in eastern Asia and North America, some extend into central Asia (Veronicastrum), or rarely to Australia (Lespedeza) in the Old World, and occasionally even into tropical regions in the (Muhlenbergia). (x) Old World temperate: This category includes 91 genera, or 10% of all genera, and 258 species, or over 8% of all species. Most of these genera are herbaceous and are the main constituents of montane grasslands or of the herb layer in forests. (xi) Temperate Asia: These genera are distributed mainly in temperate Asia, but sometimes extend southward to the higher subtropical elevations. In the Qinling, this distribution type is represented by 24 genera, or nearly 3% of all genera, which together contain about 71 species, or 2.3% of all species. Excepting Caragana, Campylotropis, Exochorda and Armeniaca, all of these genera are herbaceous. (xii) Mediterranean, to central Asia: Only 23 Qinling genera, or 2.6% of all genera, belong to this distribution type, which includes 42 species, or about 1.3% of the total. These genera usually display a disjunctive distribution pattern. Except for Gypsophila and Erodium all genera are uncommon in this region. (xiii) Central Asia: This distribution type is represented by only 11 genera, or 1.2% of all genera, and 13 species or only 0.4% of all species. All are herbaceous. Except for Notholirion hyacinthinum, which is the main constituent in the herb layer in forests of Abies fargesii, none is a significant constituent in the forests of this region. (xiv) Eastern Asia: This category includes all genera restricted essentially to China and Japan. This category is large with 119 genera or over 13% of all genera in the Qinling, including 243 species, or nearly 8% of the total. These genera sometimes extend southward into Burma, India, , and/or the . (xv) Endemic genera: For the Qinling as a whole, 39 of the 892 native genera (4.4%) are endemic to China, but all of them are shared with other provinces (Table X3). Twenty 10 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

of these genera are monotypic and 16 are oligotypic; the three remaining genera have multiple species. Among the 39 are 17 arborescent genera, of which 15 are deciduous and two are evergreen. Eighteen genera are herbaceous, of which four are annual and fourteen are perennials. The four remaining genera are lianoid. Kingdonia is one of the main constituents of the herb layer in the Abies fargesii forests.

31. Among the native genera in the flora of the Qinling, 220 (27%) are tropical, 563 (69%) are temperate, and 39 (5%) are genera restricted to China (Appendix 5). Temperate genera are the dominant elements in the flora and vegetation of the Qinling. Of the 892 genera in this region, 653 (73%) are shared with Japan.

ii. Analysis of the Endemic Species

32. Of the approximately 3,124 native species in the flora of the Qinling Mountains about 1,620 (51.9%) are endemic to China. Of the 192 species restricted solely to the Qinling, 60 are woody, 128 are herbaceous, and four are lianoid. The woody species, except for Jasminum humile L. forma kansuense (Kobuski) Miao, are all deciduous. Among the 128 herbaceous species only four species (1.6%) are annual. The proportion of annual endemic species is low in this region. Among these endemic species, 40 are restricted to the western Qinling, 12 to the eastern part, and 136 to the central part, of which 29 extend westward to the western part and ten extend to the eastern part. Only four endemic species have a widespread distribution across the Qinling. Most of these endemic species occur between 800 and 2,000 m elevation. In addition to the species that are strictly endemic to the Qinling, about 1,428 species in the flora of the Qinling Mountains are endemic to China. Among these, 1,181 are dicots, 219 are monocots and 28 are gymnosperms.

2. Composition of the Vegetation

a. Composition of the Broadleaved Deciduous Forests

33. A Quercus aliena var. aculiserrata forest (oak) covering an area of 6,800 m2 had a flora composed of 217 species of 134 genera in 57 families, of which 126 species, or 58% of the total species, are endemic and 91 species are non-endemic.

34. A Quercus liaotungensis forest (oak) covering 4,000 m2 included 188 species in 118 genera and 53 families. 116 species, or 62% of the total, are endemic and 72 species are non-endemic.

35. A forest of Betula albosinensis (birch) covered 4,000 m2 and included 152 species, of which 111 or 73% were endemic. Of the 41 non-endemics, 26 are restricted to eastern Asia.

36. A Betula utilis forest (birch), occupying an area of 6,400 m2 was composed of 173 species, of which 119, or 69%, were endemic and 54 were non-endemic.

i. Subalpine Coniferous Forests

37. An Abies fargesii forest (fir) covering 8,400 m2 included 105 species of 75 genera and 36 families. Among these, 72 species, or 69%, were endemics, including seven endemic to the Qinling.

38. Larix chinensis forests (larch) occur only in the Qinling Mountains. One such forest covering 6,400 m2 had 114 species, of which 76 species, or 67%, were endemic and 38 species were non- endemic.

39. Ying and Boufford concluded that the Qinling vegetation can be thought of as comprising two main elements: an endemic or native element and a Sino-Japanese element derived from the Tertiary Geoflora. The remaining few species are from miscellaneous sources. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 11 Final Report Appendix 5

3. Qinling Fauna

a. Overview

40. The Qinling ecosystem is sufficiently biodiverse and distinct from other ecosystems that it is assigned its own biogeographic unit, the Qinling Mountains. Similar to the case for flora, the fauna of the Qinling reflects the meeting of temperate and sub-tropical faunas. Fauna species totals for the Qinling are listed in Table 5.

Table 5: Numbers of Vertebrate Species in the Qinling by Taxonomic Order

Order Family Genus Species Fish 6 13 67 109 Amphibians 2 7 12 19 Reptiles 3 8 26 26 Birds 17 49 166 308 Mammals 7 27 81 115 Total 35 104 462 577

41. The fauna of the Qinling, similar to the flora, is distinguished by its diversity in general, and by its mammalian diversity in particular. Birds and mammals are the most thoroughly studied, whereas the invertebrate fauna is relatively unknown but promises to be rich as well. In an eight-year study of the butterfly fauna of the south slope of the Qinling 191 species were recorded, three of which were new to China and 44 were new to Shaanxi8. One new genus and three species of eriophyid mites were discovered in the Qinling in 20069. Also in 2006 nine new Qinling species of linyphiid spiders were assigned to an existing genus while five more new species were assigned to a new genus10. Increased scientific attention to the Qinling invertebrate fauna would probably lead to additional discoveries of new taxa.

42. The Qinling is renowned nationally and globally as a site supporting China’s “big four” species of watchable wildlife: Giant Panda, Golden Snub-nosed Monkey, Crested Ibis, and Golden Takin. Several nature reserves in the Qinling support the three mammals, while the Project Area supports Golden Snub-nosed Monkeys and Golden Takin in the wild and a formerly wild but now captive population of Crested Ibis (numbering over 220 birds in 2006). The Project Area also has a captive population of around 12 Giant Pandas at the Louguantai breeding center. Descriptions of the status of the “big four” Qinling species are given below.

b. Giant Panda (Ailuopoda melanoleuca)

i. Conservation History of Giant Panda

43. Giant Pandas are endemic to China and the northernmost areas of Vietnam and that border south China11. They now survive in five mountain ranges of , Gansu, and Shaanxi Provinces. The entire Qinling lies within the former range of Giant Panda. After 30 years of conservation effort, China's national wild panda population was estimated at 1,596 in the national census in 2003-4, a substantial increase from the several hundred thought to survive when the first research project began in the early 1980s. In 2005, around 183 pandas were held in captivity worldwide, mostly at the captive breeding center at Wolong, (over 100 pandas in 2006) but also in the breeding center on the proposed Project Area (12 pandas), and in zoological gardens around the

8 Zhou, X, L. Sun, W. S. , Z. , Y. Ni. 2002. The Faunal Study on the Butterflies of the South Slope of Qinling Mountains. Peking Univ. Vol.37 No.4 pp.454-469. 9 , X.F., Z. W. Song and X. Y. Hong. 2006. A new genus and three new species of Phyllocoptini (Acari: Eriophyidae: Phyllocoptinae) from the Qinling Mountains, Shaanxi Province, northwestern China. Zootaxa1275:31-41. 10 Tanasevitch, A. V. 2006. On some Linyphiidae of China, mainly from Taibai Shan, Qinling Mountains, Shaanxi Province (Arachnida: Araneae). Zootaxa 1325:277-311. 11 Hu, J. C. and F. W. Wei. 2004. Comparative ecology of Giant Pandas in the five mountain ranges of their distribution in China. Pages 137-148 in Lindburg, D. and K. Baragona (eds), Giant Pandas Biology and Conservation. Univ. California Press, Berkeley. 12 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5 world. By year-end 2006 the captive population had increased to 212. For zoos around the world the annual “lease” fee for a pair of Giant Pandas is around $2.6 million. At this rate the 12 captive pandas at the Louguantai breeding center could return nearly $16 million per year (assuming a 1:1 sex ratio).

44. Giant pandas were first recorded by scientists in the Qinling in 1964, a century after the discovery of Giant Pandas in Sichuan. A research group headed by Professor Fang Shengguo of University in studied differences between pandas from Sichuan and those in the Qinling and concluded that two species of pandas have been separated geographically for 10-12,000 years. The local or Qinling subspecies has been confirmed as a new sub-species of Giant Pandas.

ii. Conservation Planning and Management

45. China has drafted and begun implementing a 15-year plan (2006-2020) to restore the habitat and increase the artificially-bred population of the Giant Pandas unique to the Qinling Mountains. By 2020 when all the projects of the plan are completed, the population of the Qinling pandas is planned to reach 400 and their habitat will be expanded to 500,000 hectares from the current total of more than 340,000 hectares.

46. According to the plan, Shaanxi was to enlarge the area of the state-level nature reserves for Giant Pandas in the province from the current 171,900 hectares to 370,000 hectares before June 2006. This was accomplished by establishing (or planning) five news nature reserves at Huangbaiyuan, Pingheliang, Niangniangshan, Panlong, and Banqiao12. This action will result in nature reserve protection for more than 80 percent of the habitat of Qinling pandas. The remaining 20 percent of panda habitat is found in small, isolated patches, most of which will be protected by the existing nature reserves or corridors in the Shaanxi portion of the Qinling. Shaanxi Province will also improve its Giant Panda protection and management system, and build a panda information management and patrol inspection and monitoring system by the end of 2010.

47. The plan also includes evacuating local residents from panda habitats and planting corridors of bamboo between the habitats of different panda groups in Qinling, which have been isolated after fragmentation by highways, farmlands, and human residential areas. Four such corridors have been established at Houzhenzi, Jiuchihe, Erlangba, Caiziping, and Dashuping.

48. Shaanxi Forestry Department manages the captive Qinling sub-species by operating a Giant Panda research and breeding center named Shaanxi Rescue and Breeding Research Center for Endangered Wild Animals and located in the proposed Project Area in Zhouzhi County. The center holds a captive population of 12 Giant Pandas which are held for display and bred to increase population numbers.

49. Shaanxi provincial government has implemented measures to improve nature conservation, in particular the Grain to Green Project and Natural Forest Protection Project, which bans logging for natural forests for a decade and restore previously-logged forests. The province has established 14 nature reserves for Giant Pandas, including four state-level reserves, and five panda corridors since 1978, which effectively protected the habitat of the Qinling pandas.

iii. Research at Changqing Nature Reserve

50. The seminal work on Giant Panda in the Qinling was published in the Chinese by Professor Pan Wenshi and colleagues in 200113. In 2004, a selected proceeding of Panda 2000, a conference attended by specialists, was published and included summaries of research completed by Pan and other workers in the Qinling14. The following paragraphs summarize information presented in the latter book.

12 Correspondence and meetings with Shaanxi Province Forestry Department, Administrative Office of Nature Reserves and Wildlife. 13 Pan, W. Z., X. Lu, D. Wang, H. Wang, Y. Long, D. Fu and X. Zhou. 2001. A chance for lasting survival. (In Chinese.) Beijing: Press. 14 Pan, W. S., Y. Long, D. J. Wang, H. Wang, Z. Lu and X. J. Zhu. 2004. Future survival of Giant Pandas in the Qinling mountains of China. Pages 81-87 in Lindburg, D. and K. Baragona (eds) Giant Pandas: Biology and Conservation. University of California Press. Berkeley and Los Angeles, CA. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 13 Final Report Appendix 5

51. Pan and his colleagues studied Giant Panda in Changqing Forestry of the Qinling from 1986-1999. Twenty-one Giant Pandas were radio-instrumented during the project, enabling study of habitat use, spatial distribution, and reproductive biology. In summary, the following points are considered most critical to management of the species across the Qinling:

(i) the Qinling population is concentrated in the upper reaches of three valleys drained by the Xushui, Youshui, and Jinshui Rivers; (ii) Giant Pandas occupy habitats ranging in elevation from 1,300-3,000 m: farming and associated villages limit Panda movements below 1,300 m; (iii) south-facing slopes were preferred; (iv) Giant Pandas occurred in four populations: three were close enough to permit panda movements between them (Xinglongling, Niuweihe, and Taibaishan) and the fourth was isolated (Tianhuashan); (v) the three connected areas were estimated to support 167-331 Giant Pandas; (vi) the sex ratio of the population was 1:1 and females produced one offspring every two years; (vii) Giant Pandas attained sexual maturity at the age of 4.5 years; (viii) the population growth rate was estimated at 4.1% annually; and (ix) genetic diversity of the population had not been degraded by inbreeding.

52. Pan and colleagues concluded that:

(i) the reproductive potential, population structure, and genetic diversity of the Qinling population favor its long-term survival; (ii) human-caused is the greatest threat to the Qinling population and extinction can only be prevented by protecting Giant Panda habitats; (iii) population management measures should focus on the boundary between the farmlands at lower elevations and the lower forest habitats; (iv) Giant Panda will probably survive in the Qinling if management is based on good science and loving concern for the species.

iv. Research at Foping National Nature Reserve

53. ’s Center for Research on Endangered Species (CRES) initiated in 2006 a program through its Panda Unit to conduct a long-term intensive research on the conservation behavior and ecology of Giant Pandas at Foping Nature Reserve. Research addresses specific conservation issues of wild Pandas to yield results of conservation value for wild Pandas. Research topics include: mating behavior and dispersal of young and impacts of these factors on genetics; denning ecology with respect to logging of old-growth trees that formerly provided den sites, and prospects for installation of man-made dens. The Panda Unit also plays a supportive role in continuing financial and scientific capacity-building of Chinese conservation biologists and managers working with giant pandas. This acknowledges emerging scientific talent in China and the need for conservation initiatives to be largely run by Chinese nationals, as this ensures maximum long-term sustainability.

v. Census of Giant Panda

54. The global Giant Panda population was estimated in three counts in 1974-77, 1985-88 and 200415. Totals were 2,459, 1,112, and 1,596, respectively (Figure 1). Counts for the Qinling from the same three periods were 237, 109, and 273, respectively. The Qinling population was estimated at 300 after the 2004 census in which 273 pandas were counted. Foping NNR in the Qinling supports the highest density of pandas in China.

55. The decline in Panda numbers from the first to second counts (Figure 1, Table 6) resulted mainly from the reduced area of survey from nearly 30,000 km2 in the first count to nearly 14,000 km2 in the second count. However, Panda habitats were degraded in Sichuan Province during the 12 years between counts and Panda numbers declined sharply as well. Habitat degradation was

15 SFA. 2006. The 3rd National Survey Report on Giant Pandas in China. Science Press, Beijing. 355p + maps, in Chinese. 14 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5 attributed to commercial logging in and around Panda nature reserves and increasing numbers of people living in Panda nature reserves and collecting fuelwood for cooking and heating.

4000 3500

3000 Census area (10 km2) 2500 All pandas 2000 Qinling pandas (x10) 1500 Habitat (km2) 1000 Potential Habitat (km2) 500 0 1977 1989 2004 Year of Census

Figure 1: Panda population and habitat estimates during three national counts

56. The 44 percent increase in all Panda numbers from the second to the third census was related in part to the increase in survey area (increase from nearly 14,000 to over 23,000 km2 or 66 percent). One interesting result of the third census was the 150 percent increase in Qinling Panda numbers compared to the 44 percent increase in total Panda numbers (in Sichuan, Gansu, and Qinling). This suggests the 4.1 percent growth rate documented at Changqing NNR is representative of the Panda population throughout the Qinling.

57. The sustained increase in habitat area occupied by Pandas is due to three factors: (i) increase in the detail and accuracy of the counts from year to year; (ii) increase in the count area between years 2 and 3; and (iii) sightings of Pandas in years 2 and 3 in areas where they were not previously seen.

Table 6: Percent Change in Giant Panda Census Results during the First Three Years of Census

From Year 1 From Year 2 to Year 2 to Year 3 Change in survey area -53% 66% Change in total Panda numbers -55% 44% Change in Qinling Panda numbers -54% 150% Change in habitat area 56% 236%

58. Potential habitat includes areas considered by specialists to be inhabitable by Pandas but in which no Pandas have been seen. The increase in potential habitat reflects human judgment, whereas the increase in Panda-occupied habitat reflects recorded evidence of Panda use.

vi. Release of Captive Pandas

59. SFA is developing a release program and experimentally released one Panda at Wolong in 2005. The animal was injured by another Panda and later recaptured and return to the breeding center.

60. The Reintroduction Specialist Group of the IUCN Species Survival Commission recognizes two reasons for reintroduction of endangered species: (i) to augment the species population in the wild; and/or (ii) to increase genetic diversity in the wild. The Specialist Group policy is that reintroduction is not an appropriate strategy for reducing a surplus of animals in captivity. Review of TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 15 Final Report Appendix 5 the release criteria of the Reintroduction Specialist Group in 2002 led to the conclusion that release of captive pandas was not recommended, pending the outcome of the third census in 200416.

61. The third census (Figure 1, Table 6) showed a 44 percent increase in total Panda numbers and a 150 percent increase in the Qinling population as compared to the second (1989) census. These results indicate that the wild populations are recovering naturally from the very low numbers of the late 1980s and that the first reason for reintroduction (augment numbers of Pandas in the wild) is no longer valid.

62. After 17 years of study of Giant Pandas in the Qinling, Pan Wenshi and colleagues concluded in 2002 that the genetic diversity of the Qinling population had not been degraded by inbreeding17. This result indicates that the second reason for reintroduction of captive Pandas (increase genetic diversity in the wild) is not applicable to the population in the Qinling.

63. The 66 percent increase in area occupied by Pandas from the second to the third census indicates that Pandas are naturally dispersing to habitats that are suitable but previously unoccupied. This is further evidence that the population is recovering naturally and that the risk and expense of reintroduction are not warranted.

c. Sichuan Golden Monkey (Rhinopithecus roxellana)

64. Four species of Golden Monkeys live in mountainous habitats in northern Vietnam and southwest China18 (Table 8). The Sichuan golden monkey occurs in Shaanxi Province and on the proposed Project Area where it lives in deciduous broadleaf and conifer forests at 1,200-3,000 m. The three China Golden Monkeys occupy forests with distinct seasons and snow in winter. This adaptation to subtropical and temperate forests distinguishes the Chinese species from other primates, most of which are adapted to tropical habitats.

65. Golden monkeys live at low total population numbers and densities. Individual groups range over large areas to forage for a high-quality diet of , seeds, leaves and shoots (Table 7). Golden monkeys mature at seven years of age and adults make up around 50% of wild populations. The interbirth interval is estimated at three years.

66. All four species of golden monkey are globally threatened but the Sichuan Golden Monkey is least vulnerable to extinction, with an IUCN classification of Vulnerable (Table 7). With reference to the Endangered Golden Monkey, Conservation International noted that “even in the absence of any external threats, populations smaller than 200 monkeys can not be considered viable”13. This is due largely to disease risks among small populations. The total Qinling population is thought to exceed 4,000. However, it occurs as many small and sometimes isolated populations in fragmented habitats. Continuous (unfragmented) stands of dense forest habitat are needed to maximize genetic exchange between Golden Monkey sub-populations and thereby increase population viability.

16 Mainka, S., W. S. Pan, D. Kleiman and Z. Lu. 2004. Reintroduction of Giant Pandas: An update. Pages 246- 249 in Lindburg, D. and K. Baragona (eds) Giant Pandas: Biology and Conservation. University of California Press, Berkeley. 308 p. 17 Pan, W. S., Y. Long, D. J. Wang, H. Wang, Z. Lu and X. J. Zhu. 2004. Future survival of Giant Pandas in the Qinling mountains of China. Pages 81-87 in Lindburg, D. and K. Baragona (eds) Giant Pandas: Biology and Conservation. University of California Press. Berkeley and Los Angeles, CA. 18 Conservation International. 1999. Guizhou Snub-nosed Monkey: Conservation and PHVA Workshop. Fanjingshan National Nature Reserve. 25-29 October 1999. 16 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Table 7: Ecological Notes on Four Golden Monkey Species

Sichuan golden Tonkin golden Guizhou golden monkey golden monkey monkey (Min & Qionglai monkey Mts.) Location: Vietnam Guizhou Sichuan, Gansu, Yunnan Shaanxi Altitude (m) < 1,082 1,500 to 2,100 2,000 to 3,300 3,000 to 4,400 Temperature 22.2 5.0 – 17.0 6.3 4.7 (annual, °C) Main habitat Tropical limestone Semi-deciduous Conifer and Subalpine conifer forest broadleaf forest deciduous forest broadleaf forest Main foods Fruits, seeds, Leaves, buds, Leaves, leaf buds, Lichens, leaves leaves fruit/seed fruit/seed, green winter stems, lichens Population density 6 (n = 2) 14 (n = 2) 12 (n = 1) 7 (n = 3) (monkeys /km²) IUCN Threat Status Critically Endangered Vulnerable Endangered Endangered Sources: Kirkpatrick, R.C. 1998. Ecology and behavior of the snub-nosed and douc langurs. In The natural history of the doucs and snub- nosed langurs, N.G. Jablonski (ed.), pp. 155- 190. World Scientific, Singapore. Conservation International. 1999. Guizhou Snub-nosed Monkey: Conservation and PHVA Workshop. Fanjingshan National Nature Reserve. 25-29 October 1999. IUCN [International Union for the Conservation of Nature and Natural Resources]. 1994. IUCN red list categories. IUCN Species Survival Commission, Gland.

67. Similar to the other two China golden monkeys, conservation of the Sichuan Golden Monkey is hampered by gaps in scientific knowledge. The size and structure of all golden monkey populations are poorly documented in part because of the difficulty of field study. Thus it is not possible to accurately determine if populations are increasing or decreasing in size and how groups or populations respond to human activities (conservation and development). Patterns of habitat use have been studied using radio-telemetry19. Seasonal shifts in habitat use were related to the phenology of forage plants.

68. Sichuan Golden Monkey is found throughout the broadleaf deciduous forest of the Qinling and in the core and buffer zones of the proposed Project Area. The Project Area population size has not been estimated and systematic population census is needed. The NFPP logging ban in protected areas and the reductions in commercial logging outside protected areas should have positively affected the Qinling Golden Monkeys by improving the quality of their habitats. The SLCP should also have helped to restore habitats but this has not been monitored. Human activities remain a threat as three Golden Monkeys were poached at the western edge of the proposed Project Area in 2006.

d. Golden Takin Budorcas (taxicolor bedfordi)

69. Four sub-species of Takin occupy the Himalayan range through India, Bhutan, and Myanmar to China. The subspecies B. t. bedfordi is endemic to the Qinling mountains and is referred to as the Golden Takin. However, Takin seen in Qingmuchuan Nature Reserve (formerly Majiashan NR) at the western end of the Qinling range were thought to be of the B. t. tibetana subspecies20, so there is probably overlap of subspecies ranges near the Sichuan-Gansu-Shaanxi boundary. All four subspecies of Takin are listed in the IUCN World Conservation Union Red List of globally threatened species as Vulnerable.

19 Li, B. G., C. , W. H. and B. P. Rao. 2000. Seasonal home range changes of the Sichuan Snub-nosed Monkey (Rhinopithecus roxellana) in the Qinling Mountains of China. Folia Primatologica 71(6):375-386. 20 , Z. G., H. S. Gong, Y. L. Song, T. Miao and S. R. Ma. 2005. A new distribution record of Budorcas taxicolor tibetana in Qinling Mountains in Shaanxi, China. Acta Zoologica Sinica 51(4):743-747. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 17 Final Report Appendix 5

70. Golden Takin is a member of the or family and the goat or subfamily. Golden Takin in the Qinling are seasonal migrants, living at lower elevations in winter and returning to higher elevations in spring through autumn. The habitat of Golden Takin is deciduous broadleaf forest and forest edge. Takin do not forage mainly on grasses as do many bovids, but rather eat leaves, buds, and shoots that typically provide a higher diet.

71. Golden Takin occupy all nature reserves and corridors in the Qinling and are found in the core and buffer zones of the proposed Project Area. Carrying capacity of Golden Takin in Foping NNR was estimated at 1,000 animals in 200321, or a density of 3.4 per km2. This compares to the 1996 population estimate of 435-527 (about 1.7 per km2)22. An estimate for the population in Qingmuchuan NR in 2005 was around 60 animals, for a density of about 0.6 per km2.

72. Field studies of Golden Takin have not yet addressed the need for information that would lead to more effective conservation management. In some reserves (Zhouzhi and Taibaishan), the populations of Golden Takin are thought to be increasing. This needs to be investigated systematically and quantified spatially and seasonally. Reasons for changes in population numbers should be determined in an effort to remove remaining threats to species survival. Lessons from the Qinling might be applicable to Takin populations at other locations in China.

73. Threats to Golden Takin are mainly human disturbance and habitat degradation. It is reported that there is government authorized trophy hunting for Takin in the Qinling and this needs further investigation. Villagers in the Qinling comment that the flesh of Golden Takin is not good to eat and the Takin has little or no role in traditional medicine. Some villagers report being attacked by solitary male Takin which occasionally descend to lower elevations near villages and farms. The primary predator of adult Golden Takin was probably Tiger, which is regionally extinct. Leopard is extant in the Qinling and might prey on immature Golden Takin.

e. Crested Ibis (Nipponia Nippon)

74. The following discussion was adapted mainly from Threatened Birds of Asia: The Birdlife International Red Data Book23. Notes related to Zhouzhi County are added. Crested Ibis formerly inhabited wetlands from Russia south through the to Japan and over most of east China. In the early to mid 1900s, Crested Ibis was common along the and in the Qinling. Its decline to near extinction began in the 1950s, probably related to increased use of toxic agricultural chemicals, loss of lowland woodland nesting and roosting habitats, and hunting pressure. By early 1981 the known global population consisted of five birds in Japan that were taken into captivity for breeding. The last of the Japan population died in 1995 without having produced young. Seven wild birds were discovered at County on the south slope of the Qinling in 1981. Measures were immediately taken by PRC to protect this nesting population (no hunting, no use of agricultural chemicals, and no felling of trees) and numbers increased as a result.

75. A Protection and Rearing Centre was established in in 1990, and 25 weak or injured chicks (of which 12 survived) were taken into captivity and used to breed 23 birds (of which 20 survived), and by 1997 there were 32 Crested Ibises at the centre. By the end of 1998, there were 52 captive birds at the centre, and the captive conditions there were considered to be overcrowded. Six young birds were sent to Beijing Zoo between 1981 and 1988 to establish a breeding centre, and two chicks were born there in 1989, the first successful captive breeding of the species. In 1997, there were 22 birds at Beijing Zoo, and in 2000 there were 105 captive birds in Yang County Protection and Rearing Centre (one of which was sent to Japan), 23 in Beijing Zoo and seven in Japan. In May 2002, the Louguantai Breeding and Rescue Center in Zhouzhi County on the north slope of the Qinling was given 60 Crested Ibis from Yang County to begin captive breeding. That facility is within the proposed Project Area and now holds over 220 captive Crested Ibis.

21 Song, Y. L., G. D. Dang, J. S. Li, X. J. Wang, Z. G. Zeng, T. J. Wang, L. G. . 2003. Estimating the carrying capacity of the golden takin at Foping National Nature Reserve, Shaanxi, China. Acta Zoologica Sinica 49(4):445-450 (in Chinese). 22 Zeng, Z. G., W. Q. Zhong, Y. L. Song, J. S. Li and F. Guo. 2002. Group size, composition and stability of golden tnkin in Shaanxi Foping Nature Reserve, China. Folia Zoologica 51(4):289-298 (in Chinese). 23 BirdLife International. 2001. Threatened birds of Asia: the BirdLife International Red Data Book. Cambridge, UK: BirdLife International.

18 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

i. Re-introduction to Former Range

76. Re-introduction to the wild is now being considered in Russia and Japan. In China, birds from Shaanxi could be dispersed to other parts of the former range of Crested Ibis in China, as the wild population is currently vulnerable to extinction through a chance catastrophe within its limited range. Some researchers suggest the captive birds are not well adapted for re-introduction into the wild and there is a risk of introducing diseases that are often present in captive birds into the wild population. The IUCN Species Survival Commission suggests that it may be best to release captive birds in areas that are remote from any wild birds to eliminate the possibility of disease transmission. An alternative strategy could be to translocate surplus young birds from the wild population into new areas, as this would reduce potential problems with disease, and these birds are likely to be much better able to survive in the wild than the captive birds. It will be necessary to determine whether the prospective release sites have sufficient areas of suitable habitats to support a self-sustaining population. It will also be necessary to determine whether the threats which caused the Crested Ibis to disappear from most of its former range have now been removed from the release sites. The IUCN Species Survival Commission drafted guidance on re-introduction in 1998 and the guidelines were being updated in early 2007.

ii. Research

77. Field surveys should be conducted in parts of the former range in China to identify suitable release sites for wild-caught or captive birds. Studies should include assessments of prey populations because the shortage of prey in winter was considered to be a threat to wild birds.

iii. Management of Captive Populations

78. Some of the captive birds at the Yang Xian Protection and Rearing Centre have shown signs of abnormality probably due to inbreeding. Extreme care should be exercised in mating any of these captive birds (that show inbreeding abnormalities) with wild birds because of the danger of the transmission of disease from captive birds to the wild population. Urgent attention should be paid to reducing the captive populations through release in carefully selected locations where disease risk to wild populations can be minimized. Continued expenditure of funds on captive populations should be discouraged in favor of funding conservation of free-ranging birds in the wild.

4. Qinling Species of Conservation Concern

79. Species of conservation concern are those listed in China’s Red Data Book, protected nationally (throughout China) or in Shaanxi Province, listed as globally threatened in the Red List of IUCN World Conservation Union, or restricted in international trade by the Convention on International Trade in Endangered Species of Flora and Fauna (CITES). The Global Environment Facility (GEF) prioritizes those species listed by IUCN World Conservation Union as globally threatened. The IUCN categories are shown in Figure 2. Species listed in the shaded categories are considered globally threatened.

TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 19 Final Report Appendix 5

Figure 2: IUCN World Conservation Union RedList Categories of Global Threat to Flora and Fauna

SELECT A SPECIES

Evaluate Global Population

Data Deficient (no Data Adequate action pending To Assess Global further study) Status

Globally Globally Extinct Globally in the Wild Lower Risk Threatened Extinct (survivors all in captivity)

Endangered Vulnerable Near Critically Endangered Conservation *declined 50% in last 10 yrs. *declined 20% in last 20 yrs. Threatened Least Concern *declined 80% in last 10 yrs. Dependent *<2,500 individuals *<10,000 individuals *<250 individuals *20% chance of extinction in *10% chance of extinction in *50% chance of 10 yrs. 100 yrs. extinction in 10 Yrs

80. The Project area and the Qinling support 106 nationally and provincially protected plants and animals (Table 8). The IUCN Red List of Threatened Species recognizes 37 species from the Qinling that are globally threatened (Table 9).

Table 8: Numbers of Nationally and Provincially Protected Species in the Project Area and Qinling

Protection Level National National Shaanxi Taxon Level I Level II Province PA* QM* PA QM PA QM Vascular plants 5 6 20 40 22 54 Fish 0 0 2 2 14 14 Amphibians 0 0 1 2 0 7 Reptiles 0 0 0 0 2 6 Birds 0 5 10 33 4 17 Mammals 6 6 8 8 4 8 Species Total 11 17 41 85 46 106 *PA = Project Area; QM = Qinling Mountains

Table 9: Thirty Seven Globally Threatened Species in the Qinling

Critically Endangered Vulnerable Total Endangered Plants 1 6 4 11 Fish 0 0 0 0 Amphibians 1 2 1 4 Reptiles 0 1 1 2 Birds 0 3 4 7 Mammals 0 5 8 13 Total 2 17 18 37 Designations per 2006 IUCN Red List of Threatened Species 20 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

81. The Project Area supports a variety of wildlife species of national, regional and global conservation concern (Table 10). GEF prioritizes those species listed in the left-hand column of Table 10, namely those 37 species that are globally threatened. These are listed by name in Table 11 and summary accounts of some globally threatened species are shown in Appendix 10 of this report. The other categories of protection or conservation concern are also important but these address international trade (CITES), national concerns (Red Data Book and China national protection), or regional concerns (migratory bird treaties, Shaanxi Province protection). China is a signatory to two bilateral migratory bird treaties, one each with Japan and Australia.

Table 10: Plants and Vertebrate Animals in the Qinling of Conservation Concern

Shaanxi IUCN 2 China Red Data Province 1 CITES 3 China Protection Red List Book protected species CR 2 App I 10 animal CR 4 Class I 11 52 animal 9 plant EN 17 App II EN 15 Class II 45 54 plant 9 animal VU 18 App III none VU 42 NT 8 Totals 37 69 56 106 1 CR = Critically Endangered; EN = Endangered; VU = Vulnerable 2 App = Appendix 3 CR = Critically endangered; En = Endangered; Ra = Rare; Vu = Vulnerable; Un = Undetermined

82. Of the 37 globally threatened species 33 are permanent residents of the Qinling. The other four are migratory birds that do not breed here but occur during autumn, winter and/or spring (Baikal Teal, Vulnerable; Imperial Eagle, Vulnerable; Saker Falcon, Endangered; and Great Bustard, Vulnerable).

83. Of the 11 globally threatened plants in the Qinling, the one Critically Endangered plant is an orchid that is taken from the wild for markets. Nine of the eleven globally threatened plants are found in the Project Area.

Table 11: Globally Threatened Species1 Recorded on the Project Area and/or the Qinling

Location of Species IUCN Occurrence Threat 2 Project Scientific Name Common Name Category Qinling Area Acer miaotaiense Miaotai Maple VU yes yes Corylus chinensis China Tree EN yes yes Cypripedium calcicolum Brown Mocassin Flower CR yes yes Eleutherococcus brachypus 䩼㩓℣┯ EN yes yes Eleutherococcus stenophyllus ⮹䤌⼀℣┯ EN yes Gingko biloba Gingko EN yes yes yes Holopogon smithianus ♘➖㡯⠨⏿ EN yes Picea brachytyla Maidiao Spruce VU yes yes Picea neoveitchii Big-fruit Spruce EN yes yes yes Pterostyrax psilophyllis 䤌截㪠 VU yes yes Tapiscia sinensis 䣎㮡㪠 VU Andrias davidianus Chinese Giant Salamander CR yes yes Batrachuperus pinchonii Stream Salamander VU yes Paa boulengeri Boulenger’s Frog EN yes Scutiger ninghsanensis Ningshan Frog EN yes TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 21 Final Report Appendix 5

Chinemys reevesii Chinese Pond Turtle EN yes Pelodiscus sinensis Chinese Softshell VU yes yes Anas formosa Baikal Teal VU yes Aquila heliaca Imperial Eagle VU yes Falco cherrug Saker Falcon EN yes Ketupa blakistoni Blakiston’s Fish-owl EN yes Nipponia nippon Crested Ibis EN yes Otis tarda Great Bustard EN yes Syrmaticus reevesii Reeves’s Pheasant VU yes Ailuropoda melanoleuca Giant Panda EN yes Ailurus fulgens Red Panda EN yes Budorcas taxicolor Golden Takin VU yes yes Capricornis sumatraensis Serow VU yes yes Cuon alpinus Asiatic Wild Dog EN yes yes Hystrix brachyura Malayan Porcupine VU yes yes Neofelis nebulosa Clouded Leopard VU yes Rhinopithecus roxellana Golden Snub-nosed Monkey VU yes yes Sorex sinalis Chinese Shrew VU yes Trogopterus xanthipes Complex-toothed Flying Squirrel EN yes Uropsilus soricipes Chinese Shrew Mole EN yes yes Ursus thibetanus Asiatic Black Bear VU yes yes Vernaya fulva Red Climbing Mouse VU yes CR = 2 Total EN = 18 18 37 VU = 17 1 Per IUCN World Conservation Union Red List 2 CR = Critically endangered; EN = Endangered; VU = Vulnerable

84. The four globally threatened amphibians are two and two frogs. Chinese Giant Salamander is the world’s largest amphibian, a flagship species for wetland conservation in mountainous regions of China, and it has been recorded on the Project Area. Its populations have been depleted by capture for use as a food item, destruction and degradation of wetland habitats, and pollution of water. The other three species do not inhabit the Project Area but they face these same threats. Chinese Giant Salamander is reared in large numbers on the south slope of the Qinling for sale to food markets.

85. The two globally threatened reptiles, Chinese Softshell (Pelodiscus sinensis) and Reeve’s Terrapin, are terrapins that inhabit rivers and associated wetlands. Their wild populations are threatened by capture for sale as food items. Chinese Softshell is reared commercially for food markets, and the wild population is threatened by capture of animals for captive breeding. Chinese Softshell has been recorded on the Project Area in Tianyu stream.

86. None of the globally threatened birds, but six of the mammals inhabit the Project Area. All of these are forest dwellers except for the , which inhabits open landscapes and the forest edge. These species would be expected to occur on the west side of the project area near the proposed core and buffer zones.

87. The four migratory species listed in Table 11 are one water bird and three upland birds. Baikal Teal occupies the area in autumn and spring during its two annual migrations. The other three species remain in southern Shaanxi during winter and return to northeast China, Russia, and Mongolia during the summer breeding season. Threats to these species in the Qinling are mainly habitat loss, hunting, and disturbance. 22 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

5. Data Gaps and Unresolved Issues

a. Detailed Summary of Qinling Biodiversity

88. The Qinling mountain ecosystem has been recognized for decades by many authorities and government at all levels as an extraordinary natural resource. Volumes have been written about the importance of the ecosystem and hundreds of scientific and popular manuscripts have been published, mainly in the Chinese, on various discrete issues. Only for Giant Panda have long-term research programs been undertaken and summary results published in formats relevant to conservation management. For other species and groups of species the research efforts and literature are fragmented, probably due to the scarcity of funding for applied long-term field research. Thus there is often detailed knowledge of the biology or ecology of a given species (e.g. the group sizes of Sichuan Golden Monkeys or Golden Takin and their seasonal distributions), but there is seldom adequate synthesis. This also results in part from the lack of funding for synthesis of past efforts and lessons learned. Two examples of the need for consolidation and interpretation of scientific information are: (i) summary of the three Giant Panda censuses and interpretation with respect to conservation of all recorded fauna besides Giant Panda; and (ii) summary of the semi- annual transect surveys carried out by WWF and SFD in terms of implications for species management and recovery, and overall conservation biology of the Qinling. A third pressing need is for a consolidation of all Qinling research projects and publications related to biota and presentation of the results by species, community, vegetation type and other relevant categories. These efforts should look critically at past research projects to learn lessons that can guide future research.

b. Crested Ibis

89. Detailed studies have been completed mainly for the Giant Panda, Golden Takin, Sichuan Golden Monkey, and Crested Ibis. Of these four species, the one most urgently in need of conservation action is Crested Ibis. While the wild population on the south slope of the Qinling is increasing in size, it is the only wild population known in China. The two reasons listed by the Species Survival Commission of IUCN for reintroduction of captive animals to the wild are to augment the wild population and to increase genetic diversity of the wild population. The first of these reasons is applicable throughout virtually all of the former range of Crested Ibis where the species is extinct. The second reason might be applicable as well, although at least one researcher has reported abnormalities in the Yang County population that suggest inbreeding depression. The captive populations are self sustaining and reintroduction is under consideration in China and Japan. Reintroduction planning should focus on the captive population at Zhouzhi County to re-establish wild populations on the north slope of the Qinling and at select wetland nature reserves throughout the species former range.

c. Non-charismatic and Globally Threatened Species

90. Table 11 lists 37 species from the Qinling that are globally threatened, nine of which have been recorded on the Project Area. Of the nine, Chinese Giant Salamander is Critically Endangered. It has not been adequately addressed by research or by species management or recovery plans. Chinese Giant Salamander is farmed in the Qinling for food markets but its conservation in the wild remains ineffective due to habitat destruction (clear, clean mountain rivers) and hunting pressure.

91. Two endangered species have been reported on the Project Area, Asiatic Wild Dog and Chinese Shrew Mole. Neither has been researched in the Qinling and no conservation management or species recovery plans address these species.

92. Six globally vulnerable species have been recorded on the Project Area, two of which are members of the “big four” and have been adequately researched and addressed by conservation plans. The remaining four species (Chinese Softshell, Serow, Malaysian Porcupine, and Asiatic Black Bear) have not been adequately researched in the wild. Wild populations of Chinese Softshell and Asiatic Black Bear are under severe pressure from hunting/collecting for food markets. Chinese Softshell is farmed and wild terrapins are captured to supplement farm populations.

93. In addition to the nine globally threatened species on the Project Area, 26 of the remaining 28 globally threatened species in the Qinling are not among the “big four” and have not been adequately researched or addressed by conservation or recovery plans. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 23 Final Report Appendix 5

C. Biodiversity Conservation

1. Government Conservation Initiatives

a. Protected Area System

94. The protected area system in China includes nature reserves, forest parks, wetland parks, scenic landscapes, heritage sites and ecological function conservation areas. All types of protected areas in China include provision for human recreational use but visitor access is most restricted by nature reserves. Nature reserves are established at local (county or prefecture), province, or national levels, and can be promoted from provincial to national level according to a process administered by the State Forest Administration (SFA). Nature reserves are typically established to protect ecosystems (e.g. forests, grassland, wetlands or others), species groups (e.g. endangered species or water birds), or species (e.g. Giant Panda, Chinese Giant Salamander, or Golden Snub-nosed Monkey). Nature reserves are administered by various sectors but mainly by forestry, environment, and water resources. Overall national coordination of the nature reserve system is the responsibility of SEPA and its provincial departments.

95. Three types of protected areas are found in the Qinling and the project area, 27 nature reserves (NRs), one ecological function conservation area (EFCA), and a number of forest parks. These are discussed in the following paragraphs.

96. The Government of China (PRC) promulgated the National Biodiversity Conservation Action Plan in 1994. One result has been a rapid increase in the total protected area in China. PRC has designated 2,349 nature reserves covering 1.5 million km2 or over 15% of China’s land area (Figure 3).

18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 1956 1978 1985 1989 1991 1995 2001 2005

Figure 3: China’s nature reserve area by year as a percent of total land area

i. Institutions, Administration, and Management

97. Throughout China the Forestry Departments at province or region level are generally responsible for the administration of nature reserves. Departments in charge of water and land resources, agriculture and animal husbandry collaborate with the Forestry, Agriculture Reclamation and Environmental Protection Departments to implement nature conservation.

The administrative authority for wildlife conservation in Shaanxi Province is the Shaanxi Forestry Department (SFD). The Administrative Office of Nature Reserves and Wildlife of SFD carries out this mandate. On what are commonly known as state forest farms, SFD is responsible for wildlife conservation but the focus of these farms is commercial forestry rather than conservation.

98. The Environmental Protection Department of Shaanxi Province (SEPD) is responsible for implementation of the Convention on Biodiversity in Shaanxi. In that capacity SEPD is charged with meeting the obligations of Shaanxi with respect to the Convention on Biodiversity (CBD) of 1992. The CBD resulted from the United Nations Conference on Environment and Development held in Rio de Janeiro in 1992 (see www.biodiv.org). The Standing Committee of the People's Congress approved 24 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

China’s accedence to the CBD in June 1993. The CBD obliged China to draft a national biodiversity conservation strategy and China was one of the first countries in the world to do so. China's Biodiversity Conservation Action Plan (BCAP) was promulgated on 13 June 1994. SEPD is responsible for implementing the BCAP in Shaanxi.

99. Beneath the regional level of authority lies the city or prefecture level, which is represented in the Project Area by the Government of Xi’an City.

ii. Legislation, Conventions, Treaties

100. A list of policies, laws, regulations, plans, and guidelines used to administer and manage nature reserves and wetlands in China is shown in Appendix 1. China’s legal system is generally adequate as a framework for protection of biological resources. However, as noted in China’s biodiversity program for GEF, governance of biodiversity conservation has not been adequate to halt losses of habitats and biodiversity. In addition to the legal framework within China there are numerous international conventions, treaties and agreements to which China is a signatory and which are also relevant to conservation (Appendix 1).

iii. Protected Areas in Shaanxi Province

101. Shaanxi Province has gazetted a total of 51 nature reserves (Figure 4, Appendix 2). The total land area protected in these 51 reserves is 10,076 km2, or around 5% of the land area of Shaanxi Province (195,800 km2). Almost 90% of the protected land area is administered by the forest sector (Figure 5) as are 38 of the 51 nature reserves (75%).

102. Two of Shaanxi’s seven national nature reserves (NNRs), Taibai Mountain and Foping, are listed as international biosphere reserves by the UNESCO Man & the Biosphere Program. In 2003, when Shaanxi had only five NNRs, coverage of the important biodiversity sites was considered inadequate24.

24 Li Diqiang, Song Yangling and Ouyang Zhiyun. 2003. Research on the National Forestry Nature Reserve System Plan. World Bank-GEF Forest Resources Development and Protection Project, Nature Reserves Management Project. China Land Press, Beijing, in Chinese and English. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 25 Final Report Appendix 5

Figure 4: Shaanxi Forestry Department Nature Reserves and Project Area Boundary in Zhouzhi County 26 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Forest Other 87% 3% Agr i cul t ur e 1% Wat e r 1%

Land 0% Environment 8%

Figure 5: Shaanxi nature reserve administration expressed as land area by agency

iv. Protected Areas in the Project Area and Qinling Mountains

103. The three types of protected areas that relate to the Project Area and the Qinling are nature reserves (NRs), forest parks (FPs), and ecological function conservation areas (EFCAs). The Qinling Mountains support 27 nature reserves and one EFCA. All but two of the nature reserves are administered by the forest sector and 98% of the protected land area is administered by Forestry. Water Resources Bureaus manage the remaining two nature reserves that account for 2% of the protected land area.

104. Qinling nature reserves cover 557,298 ha or nearly 10% of the 5.05 million ha total area of the Qinling mountain area in Shaanxi Province (Table 12). New reserves have been designated in the Qinling since 1965 (Figure 6). The declining trend in gazettal of new reserve area reflects the increasing difficulty of establishing reserves in a human-dominated landscape. The cumulative total area has progressively increased as new reserves have been designated (Figure 7).

200,000 180,000 160,000 140,000 a 120,000 100,000 80,000 Area (h 60,000 40,000 20,000 0 1965-93 2001-2 2006-10 Year interval

Panda Non-panda

Figure 6: New protected area in the Qinling mountains since 1965 by reserve type* * Panda reserves are established to protect many species, but Giant Panda is a top priority. Non-panda reserves are established in other ecosystems for other species such as wetland habitats for the Chinese Giant Salamander.

TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 27 Final Report Appendix 5

500,000 450,000 400,000 350,000 a 300,000 250,000 200,000 Area (h 150,000 100,000 50,000 0 1965-93 2001-2 2006-10 Year interval

Panda Non-panda

Figure 7: Cumulative Total Protected Area in the Qinling Mountains by Reserve Type* *Panda reserves are established to protect many species, but Giant Panda is a top priority. Non-panda reserves are established in other ecosystems for other species such as in wetland habitats for the Chinese Giant Salamander

Table 12: Gazetted and Planned Nature Reserves in the Qinling (shaded reserves are not gazetted by year-end 2006)

Area Year No. Name Level Agency Location County (ha) Gazetted 1 Taibaishan Nat 56,325 1965 Forestry Taibai, Zhouzhi, Hou 2 Foping Nat 29,240 1978 Forestry Foping 3 Zhouzhi Nat 56,393 1986 Forestry Zhouzhi 4 Changqing Nat 29,906 1994 Forestry Yang 5 Zhouzhi Laoxiancheng Prov 12,611 1993 Forestry Zhouzhi 6 Ningshaan Pref 26,732 2001 Forestry Ningshaan 7 Guanyinshan Prov 13,500 2002 Forestry Foping 8 Tianhuashan Prov 25,485 2002 Forestry Ningshaan 9 Sangyuan Prov 13,800 2002 Forestry Liuba 10 Wuliangshan Prov 13,700 2002 Forestry Feng 11 Motianling Prov 11,700 2002 Forestry Mian 12 Niuweihe Prov 13,087 2002 Forestry Taibai 13 Yingzhuishi Prov 10,732 2002 Forestry Zhen’an 14 Qingmuchuan Prov 10,200 2002 Forestry Ningqiang 15 Huangboyuan Prov 25,409 2006 Forestry Taibai 16 Pingheliang Prov 17,275 2006 Forestry Ningshaan 17 Niangniangshan Prov 17,000 2008 Forestry Foping 18 Panlong Prov 18,844 2008 Forestry Chenggu 19 Banqiao Prov 36,130 2008 Forestry Yang 20 Baofengshan Prov 29,500 2002 Forestry Lueyang 21 Dani Prov 5,740 2006 Water Lueyang 22 Niubeiliang Nat 16,418 1986 Forestry Chang’an, Ningshaan, Xushui 23 Zhuhuan Prov 37,550 1983 Forestry Yang 24 Xushui Pref 5,740 2000 Water Taibai 25 Lingkou Dani Pref 5,715 2006 Water Luonan 26 Long Xian Pref 6,559 2005 Water Long 27 Huashan Pref 12,007 2004 Province Huaying TOTAL 557,298 28 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

105. Nature reserves in the heart of the Qinling cover nearly all of the important habitats for the Giant Panda (Figure 8). The reserve network was planned and established by SFD with support from WWF. It includes five long-established national nature reserves, nine recently established reserves, five corridors, and five planned reserves. The network was fragmented by highway 108 but the impact on Panda movements was mitigated by construction of two highway tunnels spanning around 1.9 km and two bridges spanning about 2.1 km. This provided a total of about 4 km of corridors through which Pandas can cross the highway alignment.

v. Gaps in Coverage of Qinling Protected Areas

106. While the protected area system in the Qinling is excellent in its coverage of the upper elevations, there is little protection for the lower slopes that support forests and provide winter habitats for many species including Giant Panda and Golden Takin25. Conservation implications of this elevation gap were considered most serious at Niubeiliang and Taibaishan NNRs. The difficulty in protecting the lower slopes is that they have been settled and farmed for centuries. The proposed ADB-GEF project site addresses the need to protect lower elevation habitats on the Qinling.

107. The size of the Crested Ibis Nature Reserve in Yang County was considered in 2003 to be too small to cover the habitat needed by the wild population of Crested Ibis (ibid.). The reserve area has since been increased from 2,584 ha to 37,549 ha to fill this gap.

108. With the exception of protecting low-elevation slopes, all other gaps identified in the National Forestry Nature Reserve System Plan have been filled by establishment of new nature reserves and protected corridors at the higher elevations.

vi. Consolidation of Qinling Protected Areas

109. The collaborative efforts SFD and WWF have yielded the ultimate benefit for the Qinling protected area system, which is nearly complete coverage of critical habitats for key species, mainly the Giant Panda. This is a noteworthy achievement. The 16 nature reserves that form the large block of protected area cover about 385,185 ha. The five corridors that fill the gaps between nature reserves cover 65,369 ha. The total area covered by this single block of protected areas is about 450,554 ha. Of the 21 protected areas (16 NRs + 5 corridors), the five corridors and three nature reserves have not yet developed formal management bureaus. To avoiding further administrative fragmentation of the protected area system, it might be advisable to combine these three planned NRs and five corridors with one another or consolidate them into the existing system. This could avoid duplication of expenditures for establishment of new NRs while solidifying the management regimes for the corridors. The following examples have not been discussed with SFD and are only listed here to illustrate the concept:

 Changqing NNR + Jiuchihe corridor + the portion of Banqiao NR adjacent to the southwest boundary of Changqing NNR = the new Changqing NNR;  Panlong NR + the balance of Banqiao NR + Motianling NR = a new un-named NR;  Foping NNR + Niangniangshan NR = the new Foping NNR; and  Tianhuashan NR + Caiziping corridor + un-named NR + Ningshan NR + Pingheliang NR + Yingzuishi NR = a new un-named NR.

25 Li Diqiang, Song Yangling and Ouyang Zhiyun. 2003. Research on the National Forestry Nature Reserve System Plan. World Bank-GEF Forest Resources Development and Protection Project, Nature Reserves Management Project. China Land Press, Beijing, in Chinese and English. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 29 Final Report Appendix 5

Figure 8: Giant Panda Conservation Network in the Qinling (WWF-China, used with permission)

110. Consolidation of NRs has been accomplished at other locations in China. One notable example is the Naoli-Qixing River basin in Province. Here a riverine corridor was protected by a number of established and planned wetland nature reserves under Forestry and Agriculture Bureau authority. These reserves were combined into a single large wetland nature reserve under Forestry administration with support from Agriculture Bureau. While consolidation into a single nature reserve on the Qinling might not be achievable or even desirable, at least some consolidation of the many reserves and corridors on the Qinling could yield benefits including streamlined administration, cost savings, and enhanced management effectiveness. This approach would fit the priorities recommended by the World Bank Nature Reserves Management Project in 200326.

vii. Forest Parks and Forest Farms in the Qinling

111. Forest parks number 42 and cover 1,736 km2 in the Qinling, or over 3 percent of the 50,500 km2 of total Qinling area in Shaanxi (Appendix 11). At year-end 2006 China had established 1928 forest parks covering a total area of over 151,300 km2. Of these, 17 are listed as Natural Cultural Heritage sites by the United Nations, and 10 are listed as World Geoparks. China’s forest parks received over 200 million tourists in 2006, an increase of 20% over 2005. Total forest park income was $10 billion in 2006 and the forest park network created more than 3 million jobs in 2006. Forest parks are established, administered, and managed by SFA to protect natural resources and ecosystems. Forest parks contribute to rural economies by creating jobs and stimulating markets for local products. Forest parks in the Qinling account for 2 percent of China’s forest parks by number and just over 1 percent by area.

26 Li Diqiang, Song Yangling and Ouyang Zhiyun. 2003. Research on the National Forestry Nature Reserve System Plan. World Bank-GEF Forest Resources Development and Protection Project, Nature Reserves Management Project. China Land Press, Beijing, in Chinese and English, see page 172 in English. 30 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

112. Forest farms number 103 and cover 13,164 km2 in the Qinling, or 26 percent of the 50,500 km2 of the total Qinling area in Shaanxi Province (Appendix 12). Forest farms are commercial organizations administered by SFA and provincial forestry departments, and by collectives. Forest farms produce timber in commercial plantations, and many have diversified into related industries such as wood products and non-timber forest products. Reorganization of the forest farms was necessary following imposition of the ban on felling of trees in natural forests under the Natural Forest Protection Program of 1998. This had a severe impact on the forest farm network by reducing the area of forest under commercial management and, as a consequence, the need for forestry personnel.

b. Implementing the Biodiversity Convention in China

i. Multilateral Cooperation27

113. The World Bank-GEF China Nature Reserve Management Project (funded by GEF) began in the second half of 1995 and finished in 2000. The domestic executing institutions were the State Forestry Administration; provincial forestry departments in Yunan, , , Shaanxi and ; nature reserves of Xishuangbanna in Yunnan, Poyang Lake in Jiangxi, Wuyi Mountain in Fujian, Shengnongjia in Hubei; nature reserves of Foping, Zhouzhi, Niubeiliang, Taibaishan and Changqing in Qinling, Shaanxi; Wuyishan Nature Reserve in Jiangxi, and Changqing Forestry Bureau in Shaanxi.

ii. Non-Governmental Cooperation

In 1996, China joined IUCN as a country member. The two sides jointly convened the First Forum on Biological Diversity in Asia. In April 2000, China joined Wetland International. China also conducted a joint project with WWF for protection of Giant Panda and its habitats.

iii. Action Plan for Conservation of Biological Diversity

114. With financial support from UNDP-GEF, China compiled its China Biodiversity Conservation Action Plan (BCAP) in 1994 in which the priorities for ecosystems, and species protection were set. China’s BCAP clarified the objectives for seven initiatives and raised 26 priority action programs and 18 priority projects for immediate implementation. PRC also compiled and promulgated China’s Agenda 21 – White Paper on China’s Population, Environment and Development in the 21st Century. Chapter 15 “Conservation of Biological Diversity” of the White Paper defines the policies, targets, priority areas and projects for biodiversity conservation. At year-end 1997, the State Council approved "China's Biodiversity: A Country Study", which set out the objectives of national capacity building for conservation and sustainable use of biodiversity in China for the ensuing fifteen years (1996-2010). It addressed legislation, institutional construction, human resources, policy framework, protection facilities, science and technology, education and public participation, and international cooperation.

115. PRC approved a Trans-Century Green Engineering Plan, a National Ecological Environment Construction Plan, and a Compendium of National Ecological Conservation. The PRC Government set up its Compendium of Development Plan for Nature Reserves in China (1996-2010), specifying the targets and specific programs for nature reserve planning nationwide. China also formulated a Biodiversity Conservation Action Plan for Forestry, a Biodiversity Conservation Action Plan for Agriculture, a National Wetlands Conservation Action Plan, and an Action Plan for Ex situ Protection of Giant Panda.

iv. Monitoring

116. PRC has established monitoring networks for major ecosystems and key groups of species and substantial information has been produced. PRC set up monitoring systems for forest resources and for wild fauna and flora, among others, and a monitoring center for fisheries environments. China has also set up a general environmental monitoring station and over 2,000 local environmental monitoring stations. Sixty-four ecological positioning study stations have been established and a

27 China's Second National Report on Implementation of the Convention on Biological Diversity by State Environmental Protection Administration of China, China Environmental Science Press, September 2001. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 31 Final Report Appendix 5 network for ecosystem study has been operational for many years studying the structure, function, and evolution of ecosystems.

117. PRC conducts inventories of forest resource status and trend at the national level every five years. Provinces and municipalities can also arrange investigations to provide scientific information for compilation of forestry programs and management of forest resources at local levels. The fifth national investigation on forest resources has been completed.

118. PRC started a national investigation of terrestrial wild fauna in 1995 and a national investigation of key protected wild flora in 1996 to provide a scientific basis for the protection of rare and endangered species. All provinces, autonomous regions and municipalities have completed their field investigations, data processing and analyses.

119. Beginning in 2000, China conducted an annual statistical survey of nature reserves to collect information on numbers, areas, categories, classes, target species as well as regional distribution and sectoral distribution of nature reserves. Some nature reserves monitored natural resources and biodiversity, and established monitoring networks for rare and endangered species including Giant Panda.

120. Although China has achieved progress in research and monitoring of biodiversity, there remain gaps according to the requirements of the CBD. Application of rapid assessment and remote sensing technology remains limited. The indicators and methodologies for investigation and monitoring need to be standardized and normalized, and the approaches to monitoring are not advanced. Data sharing between sectors and with the public has not been achieved. The institutional capacity for monitoring is weak, and the expertise of monitoring personnel needs improvement. The purpose for monitoring also needs attention to ensure that resulting data will lead to useful management information.

v. Protection of Rare and Threatened Species

121. From 1997 to 1998, China published the China Red Data Book on Endangered Fauna. In 1999, China promulgated the first batch of National Key Wild Flora under Protection, which includes 246 flora species in eight categories. Thirty-three nature reserves for Giant Pandas have been established, covering 165,000 ha of panda habitats and 643,000 ha of protected area. From 1991 to 2000, China Research Center for Protection of Giant Panda, at Wolong, Sichuan Province, bred 37 Giant Pandas that survived. The numbers of Crested Ibis Nipponia nippon have increased from 7 when it was first rediscovered in 1981 to more than 920 in 2006.

vi. Status of Scientific Research on Ex-situ Conservation in China

122. Studies on the introduction of plants and the mechanism by which rare plants become endangered have been extensively conducted in introduction and propagation centers across the country.

123. Captive breeding has been conducted for species including Giant Panda, Crested Ibis Nipponia nippon, Golden Monkey Rhinopithecus spp., and South China Tiger Panthera tigris amoyensis in zoos and wild animal breeding centers. In some cases, progress has been achieved, and captive populations have increased. Few if any captive breeding programs have led to reintroductions of captive animals for conservation.

vii. International Cooperation on Ex-situ Conservation

124. China and the US have cooperated on the research on Giant Panda breeding and germplasm resources. The study of Giant Panda breeding was also conducted with Japan. Studies of nutrition, management, and veterinary care of Giant Pandas and tigers were conducted with IUCN. 32 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

c. Environmental Protection Department

125. Shaanxi Government has taken action to curb the ecological deterioration in the Qinling28. Many heavy polluters in Shaanxi have been shut down; tourism activities that adversely affected natural environments have in some cases been stopped; and real estate development is banned at the foot of the mountains.

126. However, with the economic development and intensified human activities in the past decades, the Qinling has suffered ecological degradation. The rate of forest coverage declined from 64 percent 50 years ago to 46 percent in 2002. While nature tourism is developing, restaurants and hostels lack facilities for waste treatment and this degrades the natural environment. Waste water and solid waste discharged from enterprises and residences have polluted the Feng, and Hei Rivers and their 17 tributaries in the Qinling mountains. The Hei River is located at the west boundary of the proposed Project Area.

127. In March 2001, the State Environmental Protection Administration (SEPA) designated the Qinling one of the 10 national pilot Ecological Functional Conservation Areas (EFCAs). Under this program governments at various levels in the Qinling were required to restore degraded environments. Shaanxi provincial government started a special anti-pollution project along the north foot of the Qinling Mountains, where ecosystems are most seriously degraded and pollution is the most difficult to control. Shaanxi Environmental Protection Department notes that in Xi'an alone, 407 enterprises are targeted under the program.

128. Ecological rehabilitation of the Qinling is a long-term project. Total government investment is projected at CNY24.5 billion ($3 billion) by 2015. The goal is to restore landscapes and ecosystems of the Qinling. He Fali, Director of SEPD and chief of the Qinling ecological restoration project, notes that his department is determined to make Qinling clean again and leave future generations a "green heritage."

i. Ecological Function Zoning

129. SEPA is cooperating with various agencies to develop a program for National Ecological Function Zoning. The purposes are to define ecological functions of various regions based on natural or ecological science; identify key regions whose protection is needed to ensure biodiversity conservation in China; and guide rational development and conservation of resources. Seven types of ecological function areas have been classified based on their dominant ecological functions:

(i) water source protected area; (ii) soil conservation area; (iii) wind sheltering and sand fixing area; (iv) biodiversity conservation area; (v) flood control area; (vi) agriculture development area; and (vii) urban construction area.

ii. Ecological Function Conservation Areas

130. SEPA, in cooperation with other agencies, is developing a Plan for the Conservation of National Ecological Function Conservation Areas covering the period 2006-202029. The establishment of national EFCAs is a new measure in China to sustainably manage landscape-scale ecosystems by protecting the primary ecological functions. Although EFCAs take economic growth into consideration, they can restrict development in the interest of nature conservation. Using EFCAs, SEPA plans to reduce the pressure of human activities on ecosystems and prevent degradation of ecological functions caused by inappropriate development and construction projects. SEPA plans to achieve this

28 Zhang Tingting. 2004. Great Efforts Made to Restore Eco-environment of Qinling. The Consulate General of the People’s Republic of China in Canada, http://www.chinaembassycanada.org. 7 May 2004. 29 Chinaಬs Ecological Function Conservation Zones. China Science and Technology Newsletter 254. Ministry of Science and Technology, China, 30 March 2001. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 33 Final Report Appendix 5 by using management and other measures including proper development of unique regional industries. The establishment of EFCAs is also important for prevention or amelioration of natural disasters, sustainable economic and social development, and ensuring ecological sustainability.

131. SEPA guidance and regulations on EFCAs include the following:

(i) The Construction of Eco-Functional Zones in 2002 (2004-06-29); (ii) "Interim Regulations on Division of Eco-Functional Zones" Promulgated (2002-09-12) (iii) Provisions on the Report and Evaluation of Eco-Functional Zones at National Level (on trial) 2004-06-24 (iv) Organization and Operation System of Appraisal Committee for Eco-Functional Zones at National Level 2004-06-24 (v) Interim Regulations on Division of Eco-Functional Zones 2004-06-21 (vi) Outline of Planning the Eco-Functional Zone (on trial) 2004-03-29 (vii) Measures of Approval and Management of the Eco-Functional Zone 2004-03-29

132. The National Outline of Ecological Environment Conservation issued by the State Council in 2000 states that ecological functions will be protected and restored through the establishment of EFCAs. China’s National 10th Five-Year Plan for Environmental Protection stated that 15 national and 40 provincial EFCA’s would be established30. China’s 11th Five-Year Plan for National Economic and Social Development highlights the development of EFCAs as important for the building of a resource- saving and environment-friendly society. The State Council’s decision on the Implementation of the Outlook on Scientific Development and Strengthening of Environmental Protection designated EFCAs as one of the objectives of China in environmental protection.

133. Over recent years, SEPA, in cooperation with other agencies and local governments, promoted the development of EFCAs. First, it carried out trials at 10 national EFCAs in important ecological function areas including the Qinling:

(i) Yinshan Ke’erqin Sand Land National EFCA (Inner Mongolia); (ii) Sanjiang Plain National EFCA (Heilongjiang Province); (iii) Poyang Lake National EFCA (Jiangxi Province); (iv) Dongting Lake National EFCA ( Province); (v) ’ergai Maqu National EFCA (Sichuan and Gansu Provinces); (vi) Qinling Mountain National EFCA (Shaanxi Province); (vii) Hei River Valley National EFCA (Gansu and Inner Mongolia); (viii) Yangtze River Origin National EFCA (Qinghai Province); (ix) Yellow River Origin National EFCA (Qinghai Province); and (x) Talimu River National EFCA (Xinjiang).

134. Shaanxi Environmental Protection Department (SEPD) prepared and approved its provincial plan for the Shaanxi Qinling National Ecological Function Conservation Area in 2005 (Figure 9). The EFCA covers 57,900 km2 or around 28% of the province area and 105% of the Qinling area. The EFCA includes all or part of 23 nature reserves whose total area is 4,300 km2, or 7.4% of the EFCA area. The EFCA includes parts of six municipalities, 38 counties (all of 13 and parts of 25), and 483 townships. The plan was submitted to SEPA in November 2005 for review and approval as a national EFCA31. The Qinling EFCA covers all of the Qinling range in Shaanxi (but does not extend into neighboring provinces) and some of the Daba range, which is located south of the Qinling. The proposed Project Area lies within the Qinling EFCA, as does all of Zhouzhi County south of provincial highway 107.

30 The National Tenth Five-Year Plan for Environmental Protection. Approved by the State Council on 26 December 2001 and distributed by State Environmental Protection Administration, State Development and Planning Commission, State Economic and Trade Commission and Ministry of Finance. State Environmental Protection Administration, January 2002, Beijing. 31 Shaanxi People’s Government. 2005. Shaanxi Qinling National Ecological Function Conservation Area. 85p. (in Chinese). 34 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

135. Qinling EFCA is divided into two main function zones: Zone II is for forest and biodiversity conservation, and Zone III is for forest plantation and water conservation. The two main function zones are sub-divided into three zones: Sub-Zone 1 is for high importance; Sub-zone 2 is for medium importance; and Sub-zone 3 is for areas only parts of which are of conservation importance. Zhouzhi County and the proposed Project Area are zoned as II-1, the highest priority for forest and biodiversity conservation. The same zoning applies to all of the national nature reserves that are located in the central Qinling.

136. A UNEP-GEF project entitled Demonstration of Ecosystem Function Conservation Area Approach in the Qinling Mountain Area was planned in 2004. The estimated total funding is $35.7 million and the project is not yet approved. The goal of the project is to maintain and enhance ecosystem services provided by the Qinling Mountain Ecosystem Function Conservation Area (QMEFCA) to achieve sustainable development in coordination with the regional economy, society and environment. The objective of the project is to build a framework of policy, regulation, assessment and monitoring for implementing the QMEFCA through enhanced management capability of protected areas and ecosystem goods and services. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 35 Final Report Appendix 5

Figure 9: Shaanxi Province ecological function conservation area

36 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

iii. The Qinling EFCA and the ADB-GEF Project

137. The goal of the Project is recreation development that contributes to sustainable social development and sustainable nature conservation including recovery of lost or degraded ecosystem resources and functions. This objective is equivalent to that of the EFCA12. The only noteworthy difference is that the EFCA includes economic activities other than recreation (e.g. transport, manufacturing, mining, and farming). Thus the goals of the EFCA and those of the proposed Project are essentially identical. Indeed, the proposed Project represents the ideal type of development in the EFCA.

2. Poverty Alleviation

138. New anti-poverty measures are planned for southern Shaanxi farm communities32. The governments of , , and Hanzhong Prefectures (three southernmost prefectures in Shaanxi Province) were working in 2006 on green projects to improve economic development. These include production of more than 1,500 kinds of local products such as walnut, Chinese , persimmon and edible , to increase farmer incomes and enable forest conservation. Other industries targeted for development include Chinese medicines, , wine, food and tourism. This program targets protection of biodiversity and China's main water resource for the central line of the South-North Water Diversion Project. Due to environmental degradation over the past 50 years, around one fifth of the Shanglou Prefecture population (or 0.5 million of 2.5 million people) are considered to lack adequate food and clothing. The green development projects are intended to aid this sector of the community.

3. Non-Government Initiatives

a. World Wide Fund for Nature

139. In March 2002 the World Wide Fund for Nature (WWF) launched its Qinling Giant Panda Project33. The purpose of the project is to protect the Giant Panda and its habitats in the Qinling mountains. The Qinling panda population includes approximately 300 pandas that are geographically and genetically isolated from other panda populations in Sichuan and Gansu Provinces. Development pressure on panda habitats in the Qinling is expected to increase with implementation of the Western China Development Program. Thus the urgent need for enhanced protection.

140. Similar to the ADB-GEF Project, the WWF Panda Project seeks balance between conservation and development. WWF involves private sector investors to fund the development of new industries, activities and livelihoods for villagers in an effort to reduce or eliminate human-caused pressure on panda habitats. WWF’s Panda Project plans by 2012 to achieve a 10% increase in the Qinling giant panda population and a 20% increase in the area of protected panda habitats. These goals are to be met by “mobilizing non-conventional stakeholders to adopt and apply conservation and sustainable use approaches in their policies, decision-making, investments and consumption behavior”.

141. The WWF Panda Project has three modules:

(i) Habitat protection and creation of five ecological corridors for giant pandas in the Qinling (see below); (ii) Cooperative biodiversity conservation and tourism in the southern Taibaishan region of Zhouzhi County; and (iii) Sustainable community development within the entire giant panda range in the Qinling.

32 Anon. 2006. Cities in Shaanxi Strive to Balance Environment, Development. China Daily, 16 May 2006. 33 This section adapted from WWF website http://www.wwfchina.org/english/sub_loca.php?loca=27&sub=90 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 37 Final Report Appendix 5

142. In late 2002, the Shaanxi provincial government gazetted five new panda reserves and five panda corridors, increasing protected areas by 130,000 hectares. The five new giant panda reserves are Motianling Reserve (8,520 ha), Ningqiang Qingmu Chuan Reserve (10,200 ha), Guanyinshan Reserve (13,534 ha), Sangyuan Reserve (13,805.7 ha) and Ningshaan Reserve (26,732 ha).

143. WWF undertook community activities in Changqing Nature Reserve. These included raising as an alternative livelihood, installing fuel-efficient stoves, supporting village infirmaries and providing micro-credit. These activities increased public awareness of conservation and helped restructure local economies after logging was banned in 1998. The conservation focus also helped reduce illegal logging and poaching. WWF now aims to extend these activities to other areas of the Qinling.

144. The Houzhenzi Forest Plantation formally established a wildlife patrol in September 2002. Supported by WWF, the 30-member team protects and monitors 51,167 ha on the north slope of the Qinling, a natural habitat of giant panda.

145. To avoid ecological degradation caused by uncontrolled tourism, WWF, Xi'an Municipality and Zhouzhi County government are working to integrate biodiversity conservation and tourism in the southern Taibaishan area. A Memorandum of Understanding was signed in June 2002.

146. Janssen Pharmaceutical Ltd. and a Belgian zoo jointly invested $500,000 for captive panda conservation in Shaanxi. According to the Shaanxi Forestry Department, this is the largest non- governmental investment they have ever received for wildlife conservation.

147. The WWF Panda Project is funded mainly by WWF Netherlands and cooperators include: Shaanxi Forestry Department, Xi’an Tourism Administration, Xi’an University of Architecture and Technology, Zhouzhi County Government, Zhouzhi County Tourism Administration, Houzhenzi Township Government, Houzhenzi Forest Farm, Laocheng Reserve, Taibaishan National Nature Reserve, Foping National Nature Reserve, Changqing National Nature Reserve, Tourism Research Center, Chinese Academy of Social Sciences, The International Cooperation & Communication Center of Forestry Economics, and Beijing Forestry University.

i. Giant Panda Corridors

148. WWF and Shaanxi Forestry Department (SFD) cooperated to create panda corridors to reduce habitat fragmentation in the Qinling. This was achieved in conjunction with the Natural Forest Protection Program (NFPP), the 1998 program under which China banned logging in natural forests34. NFPP is implemented nationally by SFA and the forestry departments in each province.

149. Corridor locations were chosen to include 65,369 ha of otherwise unprotected giant panda habitat. Corridor locations were selected based on two surveys covering 120,000 ha: the Third National Survey Report on Giant Panda in China35, and a subsequent three-month survey organized by the NFPP office in Shaanxi. Five ecological corridors were selected at: Houzhenzi of Zhouzi County, Dashuping of Taibai Forest Bureau, Erlangba of , Jiuchihe of Yang County, and Caiziping of Ningxi Forest Bureau.

150. Establishment of corridors included demarcation, forest management and protection, reforestation, forest fire management, tunnel construction, community development, and research and monitoring. The work was planned to be completed in 2005. In each corridor, a core zone and a buffer zone were demarcated based on the geographic location of the corridor and the frequency of panda movements.

34 For detailed description see Xu Jintao, E. Katsigris and T. A. White. 2001. Implementing the Natural Forest Protection Program and the Sloping Land Conversion Program: Lessons and Policy Recommendations. CCICED Task Force on Forests and Grasslands. China Forestry Publishing House, Beijing, 98p. 35 SFA. 2006. Third National Survey Report on Giant Panda in China. Science Press, Beijing, 355p. 38 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

SFD considers the corridor project to be seminal because it involved non-traditional wildlife conservation partners and united separate government programs (NFPP and the Wildlife Protection and Nature Reserve Program) for protection of a species and its habitat. A suggestion was provided

ii. Research Initiatives

151. Researchers in China and abroad have investigated Giant Panda conservation issues in the Qinling. This section summarizes conclusions of a few recent research projects.

iii. Paying Villagers to Protect Giant Panda Habitats

152. In part of a large survey of tourism in China, non-Chinese OECD country residents were asked in group interviews if they would pay extra fees to ensure Giant Pandas survive in the wild as opposed to surviving in comparable numbers but in captivity. Results showed that people would pay on average around $10 per person in additional fees for this outcome. If this fee had been collected from an estimated 5 million foreign tourists (in 1997), the total amount paid as a conservation incentive to villagers would have increased their gains per hectare by 200 times (from $0.05 to $10/ha). This was concluded to be adequate incentive for villagers to reduce impacts to the forest habitats of pandas. However, this translates to $0.67 or around CNY5.40 per mu per year, an amount unlikely to change farmer behavior in 2007.

iv. Monitoring Conservation Effectiveness

153. During the first 22 years of the history of Wolong National Nature Reserve Panda habitats deteriorated faster inside the reserve than outside36. This contributed to the decline in numbers of wild Pandas from 145 in 1974 to 72 in 1986, and probably further declines after 1986. Studies of habitat deterioration have focused on Wolong National Nature Reserve but the technology could be extended to the Qinling where densities of Giant Pandas are higher and protected areas almost completely encompass the key panda distribution areas.

v. Humans and the Protected Area System

154. Research on human interactions with panda habitats has been carried out since the late 1990s at Wolong National Nature Reserve (Sichuan). A model for simulating impacts of demographic and socio-economic parameters on panda habitats was tested in 200037. Use of the model in the Qinling could help managers “understand the relationships among local economies, local cultural traditions, and habitat degradation”. This should lead to more scientific and efficient management of people in and near reserves.

155. Modeling was extended in 2003 to “detect…patterns of change in land cover and panda habitat, to understand the mechanisms behind these patterns, and to develop new policy scenarios and evaluate short- and long-term consequences of different scenarios”38. Field work showed that 22 new households were added to the reserve annually from 1975-98. Modeling showed that young villagers (17-25 year old) villagers are the key to protecting Panda habitats. If the young relocate outside the reserve for study, work, or marriage, the human population will fall and panda habitats will increase. In contrast, if nothing changes, villager populations’ increase and panda habitats decline sharply. Relocation of young people to enhance their social, educational, and occupational opportunities was found to be “socially acceptable, economically efficient, and ecologically sound”.

36 Liu Jianguo, M. Linderman, Ouyang Zhiyun, An Li, Yang Jiang and Zhang Hemin. 2001. Ecological degradation in protected areas: the case of Wolong Nature Reserve for Giant Pandas. Science 292:98-101. 37 An L., Liu J., Z. Ouyang, M. Linderman, S. Zhou and H. Zhang. 2001. Simulating demographic and socioeconomic processes on household level and implications for giant panda. Ecologcial Modelling 140:31- 49. 38 Liu J., L. An, S. S. Batie, R. E. Groop, Z. , M. A. Linderman, A. G. Mertig, Z. Ouyang and J. . 2003. Human impats on land cover and panda habitat in Wolong Nature Reserve: Liinking ecological, socioeconomic, demographic and behavioral data. Chapter 9 in People and the Enviornment: Approaches for linking household & community surveys to remote sensing & GIS (J. Fox, V. Mishra, R. Rindfoss and S. Walsh, eds.) Kluwer Acad. Pub. Boston, p 241-263. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 39 Final Report Appendix 5

156. Multi-disciplinary research continued at Wolong in 2002-200339 and predicted that human impacts would cause loss of Panda habitats. Roads were found to control the locations of village houses. Firewood collection was the main cause of forest degradation, with an average household using 15 m³ per year. Recommendations were to reduce firewood collection by providing alternative energy sources, and provide “viable means and incentives to encourage emigration”40.

157. A recent model helps managers predict the effects on Panda habitats of changes in demographic and socioeconomic factors of villagers41. Recommendations for conserving Panda habitat included provision of cheaper and more reliable electricity to reduce firewood collection, provision of off-site educational opportunities to encourage emigration, delaying age of marriage, and prolonging interbirth intervals to reduce birth rates. No change was recommended in the family planning policy that currently permits more than one child per family among the cultural minorities.

4. Development Lending Initiatives

a. World Bank National Afforestation Project

158. In 1990-1997 the World Bank Group (WBG) began implementation of the $300 million National Afforestation Project (NAP) in 14 provinces in China (Table 13). Although Shaanxi Province was not included, NAP developed technologies and approaches that led to the next WBG forestry project, which not only included Shaanxi Province, but also addressed nature conservation (see below).

b. World Bank Forest Resource Development and Protection Project

159. The WBG-funded Forest Resource Development and Protection (FRDP) Project of 1994- 2001 was implemented in the 14 provinces of NAP and also included Shaanxi, Shanxi, and Heilongjiang Provinces (Table 13). This $333 million project extended NAP technologies and included an important new component to address forest biodiversity conservation that ultimately became the associated Nature Reserves Management Project (NRMP) (see below).

c. World Bank Nature Reserves Management Project

160. NRMP supported conservation of nature reserves that are rich in biodiversity of global significance. It supported new approaches to organization, planning, skills development, information management, and the integration of local communities into conservation efforts.

161. NRMP was the first World Bank Group or GEF investment in biodiversity in China. It drew on project experience from other countries under the GEF Pilot Phase and from NGOs in China. The key lessons include: (a) the importance of a national strategic framework for biodiversity investments; (b) the need to build in financial sustainability and long-term commitment from the government; (c) the need to involve local people in design and implementation; and (d) the key role of macroeconomic and sector policies in establishing an appropriate incentive framework for resource conservation. It also draws on the implementation experience of the GEF PRIF in China over the past two years, particularly the importance of twinning domestic and international technical assistance to ensure effective transfer of new ideas and technologies. Similarly, the project draws on related lessons from the 1991 Board paper on forestry, the 1991 Operations Evaluation Department report on forestry, and the 1994 Board paper on forestry project implementation: (a) the importance of integrating the management of protected and unprotected natural forest areas into regional forest management plans; (b) the importance of developing restructuring programs for inefficient state forestry enterprises; and (c) the need to expand the protected area system and improve management technologies for forests with high biodiversity and environmental services values. Finally, the community participation

39 Linderman, M. A., A. Li, S. Bearer, G. He, Z. Ouyang and J. Liu. 2004. Modeling the spatio-temporal dynamics and interactions of households, landscapes and giant panda habitat. Ecologial Modelling (detail not available). 40 Liu, J., Z. Ouyang, Z. Yang, W. Taylor, R. Groop, Y. and H. Zhang. 1999. A framework for evaluating the effects of human factors on wildlife habitat: The case of giant pandas. Conservation Biol. 13(6):1360-1370. 41 An, L., G. He, Z. Liang and J. Liu. 2006. Impacts of demographic and socioeconomic factors on spatio- temporal dynamics of panda habitat. Biodiversity and Conservation 15:2343-2363. 40 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5 program supported under the project incorporates lessons learned from several on-going pilot activities in China managed by NGOs and the government, particularly (a) the importance of integrating local villagers into the assessment of community needs through participatory rural appraisal techniques; and (b) the need to establish clear, mutually agreed contracts that identify the respective rights and responsibilities of reserve staff and local communities in resource use within reserves. The Enterprise Restructuring Component (34 percent of total costs) would introduce a pilot program for resolving biodiversity land-use conflicts adjacent to the Qinling Reserve Group. Two state- owned forest farms under the Changqing Forestry Bureau have aggressively harvested timber outside the reserve boundaries over the past two decades, significantly reducing the forest cover and degrading a small but important corridor for the movement of Giant Pandas. The component would introduce more sustainable management by reducing harvesting and transferring workers to more environmentally sustainable employment. This program -- the first of its kind in China -- is expected to establish a model for sustainable land-use management and enterprise restructuring that would be disseminated to other protected areas in China.

d. World Bank China Sustainable Forestry Development Project

162. The Sustainable Forest Development Project (SFDP) was implemented from 2002 through 2009 (Table 13). It was implemented in three components: (i) Plantation Establishment (PE); (ii) Natural Forests Management (NFM); and (iii) Protected Area Management (PAM). Project funding totaled $242.34 million. The PAM and NFM components were co-financed by grants from GEF and Aid, respectively. The PE component was financed by a World Bank loan.

163. The SFDP was conceived based on lessons learned from the two previous World Bank projects42. Key issues for effective natural forest management were listed as follows:

(i) Forestry must be fully integrated into land use planning; (ii) Successful management is only possible with a defined and enforced permanent forest area; (iii) Accurate inventory of multiple forest resources is needed to guide forest planning; (iv) Management objectives need to be tailored to specific sites and the needs of local communities; (v) Linkages between conservation and development should be explicit; (vi) The interests of all stakeholders must be taken into account in decisions on forest management; (vii) All management options for forests -- even total protection -- incur financial and economic costs; the options selected must have long-term financial and economic sustainability; (viii) Commercial timber plantations and trees in farmlands must help secure sustainable management of natural forests and need to be planned and monitored to appropriate standards; and (ix) Institutions and agencies charged with forest management must raise technical standards and provide structures that are conducive to the outputs sought.

42 World Bank. 2001. China-Sustainable Forestry Development Project. Project Information Document, Report No. PID8659, East Asia and Pacific Region, Forestry Sector, Natural Resources Management, Project ID CNGE60029, 21 April 2001.

TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 41 Final Report Appendix 5

Table 13: World Bank Forestry and Nature Reserve Projects

National Nature Reserves Project Forest Resource Development & Sustainable Forestry Afforestation Project Management Project name Protection Project (FRDP) Development Project (SFDP) (NAP) (part of FRDP) Start 29 May 1990 June 1994 1996 April 2002 End 31 Dec 1997 Dec 2001 2002 August 2009 Status closed closed closed continues Total cost $300 million $333 million $23.6 million $230 million IA Forestry Forestry Forestry Forestry Location 14 provinces excluding Shaanxi 14 provinces of NAP plus Shaanxi, Shanxi, Xishuangbanna, Yunnan Province; Natural Forest Management in and Heilongjiang Poyang Lake, Jiangxi Province; Sichuan, , Hunan; Wuyishan, Fujian and Jiangxi Protected Areas Management in Provinces; Qinling of Shaanxi four adjacent provinces of Gansu, Province (Foping, Niubeiliang, Hubei, Yunnan and Guizhou Zhouzhi, and Taibaishan) and surrounding natural forests where giant pandas reside; and Shennongiia, Hubei Province Objectives 1) expand forest resources and reduce enhance productivity of forest resources, enhance biodiversity conservation ensure that viable, participatory, the gap between timber production and efficiency of resource use, and institutional through innovative approaches to and locally-managed system for consumption; 2) improve quality of capacity for sustainable management in the organization, planning, skills conservation, management, and forest plantations through use of three major forest types in China: commercial development, information sustainable use of forest superior planting stock; 3) introduce plantations, watershed protection forests, and management, and the integration of resources and associated financial and economic analysis for nature reserves. Expand the supply of local communities into reserve biodiversity are developed and forestry investment; 4) strengthen commercial timber and pulpwood through management; focus on developing adopted to promote sustainable research and extension programs that establishment of 620,000 ha of intensively skills, human resources, and systems development and management of support plantation forestry; 5) initiate an managed plantations; (b) develop improved for improving protection and forest resources and protect the accelerated tree breeding program that models for watershed management through management at the field level; Key natural environment. Provide increases productivity of planting stock establishment of 280,000 hectares of activities include: (a) preparation and models for wider replication under within 2 to 3 years; and 6) create the protection forests; (c) enhance biodiversity implementation of new management the government's Natural Forest organizational and managerial conservation through improved management plans; (b) strengthening of field-level Protection Program (NFPP). infrastructure to plan, appraise, finance, of nature reserves and natural forests; (d) protection through financing of guard The global objective is to foster implement, and evaluate plantation strengthen the operating efficiency of posts, new communications systems, improved conservation and programs. technical support services in the forestry field kits and other miscellaneous sustainable management of sector, particularly planting materials, equipment: and (c) expanding the role biodiversity in remaining natural research, and extension programs; and (e) of local communities in and adjacent forest areas by ensuring effective strengthen the capacity of forest sector to nature reserve sites in the planning in situ protection of threatened institutions in planning and management. and management of reserves. and globally important forest habitats and rare and endemic species. 42 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

164. The Nature Reserves Management component of the Sustainable Use of Forests project focused on three locations, two in Hainan Province and one on the Sichuan-Gansu boundary area. Hainan activities are not reviewed here. The Gansu-Sichuan project site was at Baishuijiang and Tangjiahe NNRs, an area of 2,537 km2. These are priority reserves for giant panda conservation and they support viable populations of Giant Panda and Sichuan Golden Monkey, Clouded Leopard, Golden Takin, Temminck's Tragopan and Blue-eared Pheasant. Main threats are hunting, NTFP harvesting, fuelwood collection and fire. Key interventions are (1) Participatory NR Planning and Management: Nature reserve management plan development, preparation of ecological baseline maps, improvement of field level management systems, provision of equipment and a small amount of civil works, and research; (2) Community-based nature conservation, including co-management, conservation education and public awareness, energy conservation, delivery of sustainable technologies, and demonstration of wildlife management systems to reduce crop depredation; (3) training and capacity building, including in-service training, building local capacity for training delivery and institutional capacity building; (4) management, monitoring and evaluation, including project management training, regular patrolling and periodic sampling as well as policy studies.

165. Key recommendations for World Bank-financed natural forest management projects were listed as:

(i) Support modernization and implementation of more appropriate legislation, regulation, and resource rights; (ii) Support alternative resource control systems, such as deconcentration, decentralization, and co-management with government agencies, local communities, the private sector, NGOs, and others; (iii) Closely coordinate technical training with the timing and needs of institutional change and development for locally responsible resource management agencies; (iv) Give priority to effective policy analysis and development, since policy and market failures have been more serious than technical problems of forest management, silviculture, and conservation; (v) Support investments in boundary demarcation, resource assessment and inventories and growth and yield studies; and (vi) Strengthen systems for monitoring resource management and audit of institutional performance.

166. Two key WBG recommendations for the biodiversity portion of the China forestry program were to: (i) continue to support commercial plantation development to reduce pressure on natural forests and expand domestic wood supply while generating environmental benefits; and (ii) expand the GEF program because China's global biodiversity resources warrant a larger share of international support than is presently received.

D. Threats analysis

167. General threats to biodiversity in the Qinling were identified in 1998 as43: (i) intensive commercial timber harvesting near the nature reserves; (ii) agricultural encroachment; (iii) illegal taking of natural resources; (iv) fragmentation by construction of national highways and reduced potential for gene exchange; (v) unregulated development of tourism.

168. Commercial logging (threat number 1), was addressed in 1998 by the Natural Forest Protection Program44, which banned logging in natural forests nationwide. While this stopped commercial logging (except in plantations), it did not regulate household use of timber for construction, cooking, and/or heating. Household use of timber remains a threat to NRs nationwide because villagers live either within or near all reserves. Household timber harvest threatens habitats at

43 Zhang Jingliang, Li Huanfang , Zhang Mingxia , Hou Lingyu. 1998. Some of the main problems of the Qingling Nature Reserves and managing strategies. Chinese Biodiversity 6(4):312-315. 44 Xu Jintao, E. Katsigris and T. A. White. 2001. Implementing the Natural Forest Protection Program and the Sloping Land Conversion Program: Lessons and Policy Recommendations. CCICED Task Force on Forests and Grasslands. China Forestry Publishing House, Beijing, 98p. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 43 Final Report Appendix 5

Wolong45, the most famous and largest of panda reserves, and certainly does so in NRs in the Qinling as well even though some reserves have no villagers within their boundaries.

169. Agricultural encroachment onto wildlands (threat number 2) began when people first settled southern Shaanxi Province at least 6,000 years ago. While the flat lands with easy access to water were quickly settled, the remote and rugged terrain in the Qinling was ignored except as a source of natural resources. But in modern times, population pressures pushed farmers further into the mountains in search of arable lands. Farming on the steep slopes of the Qinling caused soil erosion that washed away valuable soils and choked waterways. In an effort to reverse this trend PRC instituted the Sloping Land Conversion Program (or “grain for green” program) beginning in 2000. The program provides grain, cash and saplings to farmers who convert their steeply sloping farmlands to grassland or woodland46. The program has been implemented on 600,000 to 800,000 ha in the Qinling as a whole, and on an undetermined portion of the Project Area.

170. Strategies were proposed in 1998 to counter threats number three through five:

(i) establish co-management to enhance relations with villagers living in and around NRs; (ii) establish biological corridors to counter impacts of highways and railways; (iii) strengthen management of nature reserve along highways to counter illegal entry by villagers and livestock and blockage of wildlife movements by fences installed to protect natural forests; (iv) enhance the administration and increase investment in nature reserves (particularly Zhouzhi Laoxiancheng NNR); (v) improve management of tourism; and (vi) diversify villager commercial enterprises.

171. To some extent these recommendations by national specialists have been implemented. Co-management (recommendation 1) is now standard operating procedure in Taibaishan and Foping NNRs, and seems to be working well. The manager of Taibaishan NNR noted that villagers are now the first to detect and report violations of nature reserve regulations. He attributed this to the innovative policies implemented through co-management that required: (i) all NNR visitors to hire locals as guides and porters; and (ii) all construction projects in the NNR to be implemented using local labor and management personnel. The impact of these co-management policies has been that the villagers now consider protection of the nature reserve and its natural resources as not only their right and responsibility, but also their most reliable means of achieving increased standards of living.

172. Biological corridors (recommendation 2) have been established in part by an aggressive campaign by government and WWF to establish new nature reserves (see above section on Protected Areas). Two significant issues appear to remain outstanding with respect to linkages between critical habitats. These are re-forestation projects of the 1950s and 1960s that involved two non-native species of larch (Japanese Larch Larix kampfera and Larch Larix princi), which have grown in mono-species stands that block natural colonization by other species. The result is large expanses of forest that lack understory vegetation and have little floristic diversity. These are referred to as “green deserts” by ecologists because from a distance they appear as beautiful natural forests but on closer inspection, they are ecologically barren. The inability of bamboo and other plants to colonize these plantations precludes their use by pandas and many other species. The forests cannot be logged because national law prohibits felling of trees in nature reserves. The exotic trees were planted to compensate for prior excesses in timber exploitation but now stand in the way of effective nature conservation. Selective logging and planting of bamboo and other indigenous species of known forage or other value to wild animals would yield a long-term conservation gain and a short- term economic gain as well. WWF is attempting to plant bamboo beneath the exotic larch canopy. The project is in its early stages, so the effectiveness of this effort is not yet known.

45 Liu Jiangluo, M. Linderman, Ouyang Zhiyun, An Li, Yang Jian and Zhang Hemin. 2001. Ecological degradation in Protected Areas: The case of Wolong Nature Reserve for giant pandas. Science 292:98-101. 46 Xu Jintao, E. Katsigris and T. A. White. 2001. Implementing the Natural Forest Protection Program and the Sloping Land Conversion Program: Lessons and Policy Recommendations. CCICED Task Force on Forests and Grasslands. China Forestry Publishing House, Beijing, 98p. 44 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

173. The second outstanding issue related to linkage of habitats is the growing number of highways and railways through the Qinling. While roads and rails themselves do not absolutely preclude movements of wild animals, some of the associated infrastructure does. For example, chain- link fences have been erected along highways adjacent to NRs to prevent access to the NR by livestock and people. The fences are effective in their intended role but also cause the unintended impact of preventing wildlife movement (especially mammals) across roads and railways. Thus the fence is more damaging than the road itself in terms of habitat fragmentation and this is especially true for mammals such as giant panda, other threatened carnivores such as leopard and clouded leopard, and Golden Takin. Resolution of this issue might require a combination of: (i) modification of the fences; (ii) construction of wildlife under-passes or over-passes; and (iii) stronger management of those NR areas lying alongside rail and road corridors (recommendation 3).

174. Management of NRs is improving and investment in NRs is increasing (recommendation 4) due to a number of PRC and international initiatives. With respect to administration, it is widely acknowledged that the existing institutional arrangement is not optimum. 47,48 SEPA is responsible for coordinating nature reserve issues but SFA manages most nature reserves. SFA is the wildlife conservation authority while SEPA is the biodiversity authority. One proposal for change in nature reserve administration calls for establishment of an “environmental protection commission”, possibly on the model of the seven river basin commissions, to enhance coordination for planning and administration of the nature reserve system49. A more ambitious proposal calls for centralized management and coordination under the State Council, through establishment of a new “State Administration for Nature Reserves”, and support for the new administration in the form of increased authority, funding and a new National Nature Reserve Law50.

175. With respect to investment, PRC is spending more to establish NRs in the Qinling (and in other regions of Shaanxi as well). Second, international development lending has greatly increased investment in and improved the quality of management at some Qinling NRs, particularly those involved in the World Bank-GEF FRDP project and the WWF Giant Panda projects. Although these short-term projects (up to 5 years) are a bonus for underfunded reserves, they typically do little to solve the long-term shortage of funding for reserve operations.

176. As documented by 22 Chinese Academy of Sciences professionals in 2002, the nature reserve system in China remains under-funded51. Virtually all stakeholders in conservation in China note that funding is seldom adequate, even in national-level reserves, for anything more than paying salaries. China’s national nature reserves receive around one eighth of the world average budget allocation per unit area ($113 vs. $893/km2), and even less than the average allocation for reserves in developing countries ($157/km2). Provincial and local reserves receive even less ($57/km2). In general, nature reserves in China receive government funding adequate to meet about one third of their spending requirements: The balance must be met by entrepreneurial efforts that are often antagonistic to the conservation mandate of the reserves.

177. Under-funding causes an additional problem that is seldom discussed but very important, which is its impact on public perception of nature conservation as a career. It should be no surprise that students in conservation curricula are numerous and keen in countries where conservation provides attractive career prospects. Aspiring conservation biologists in many countries eagerly anticipate the opportunity to work in remote, challenging, outdoor environments because salaries, benefits, and budgets for equipment and materials are adequate to support a high standard of living. This is not true in China where low salaries, poor benefits and inadequate budgets discourage

47 Xie Yan et al. 2004. China’s Protected Areas. Press, Beijing. 604p (in Chinese and English). 48 Liu Jianguo, Ouyang Zhiyun, S. L. Pimm, P. H. Raven, Wang Xiaoke, Miao Hong and Han Nianyong. 2003. Protecting China’s Biodiversity. Science 300(5673):1240-1241. 49 Xie Yan et al. 2004. China’s Protected Areas. Tsinghua University Press, Beijing. 604p (in Chinese and English). 50 Liu Jianguo, Ouyang Zhiyun, S. L. Pimm, P. H. Raven, Wang Xiaoke, Miao Hong and Han Nianyong. 2003. Protecting China’s Biodiversity. Science 300(5673):1240-1241. 51 Anon. 2002. Starving Nature Reserves. Science and Technology Daily, 27 June 2002 (in Chinese). Reviewed in: Beijing Environment, Science and Technology Update. American Embassy In China. Environment, Science and Technology Section. 18 October 2002. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 45 Final Report Appendix 5 students from pursuing careers in conservation other than in academia or government posts in large urban areas.

178. Tourism in China is growing at rates seldom seen in other parts of the world. Nature tourism is often seen as a “golden goose” that can fill the funding gap caused by under-funding of NRs by governments. Regulation of tourism is needed to ensure that natural resources are not further degraded in the interest of economic gain (recommendation 5). This issue has not been fully addressed in the Qinling but is increasingly urgent because of the increased mobility of people in large cities such as Xi’an, which are located within comfortable driving distances of Qinling protected areas.

179. Recommendation 6 has been partially addressed by the WWF “homestay” program in which farmers near NRs use micro-credit to convert rooms of their homes to tourist lodges. The first of the homestay operators in Taibaishan NNR realized a 500% increase in household income after adopting the homestay model. The homestay market at Houzhenzhi Station of Taibaishan was quickly flooded by 56 additional entrants hoping to repeat the commercial success of the founder. Today’s market is based on the “golden week” holidays at First of May and First of October, and the six months of late spring, summer and early autumn between these dates. Facilities at homestays are good (clean rooms, locally grown food, solar hot water, and satellite TV) and there should be room for growth in the industry if it focuses on “watchable wildlife” as is the case in major nature tour destinations worldwide. The increasing abundance of wild boar, Golden Takin, giant panda and golden snub- nosed monkey should provide wildlife watching opportunities for tourists, especially in winter when these species migrate to lower elevations.

180. Poverty of villagers is a cause of many conservation problems. WWF has begun to address poverty through alternative livelihoods including honey production, animal husbandry and tourism homestays.

181. Over-exploitation of natural resources was most severe in the years before the 1998 logging ban in natural forests. In the late 1990s excessive logging at the periphery of nature reserves was degrading ecosystems in the Qinling. While logging has been regulated, use of timber for firewood continues to degrade forests. The severity of this problem in Wolong was highlighted by research that pointed out several socially and culturally acceptable remedies.

1. China Government Plans

a. New Nature Reserves

182. Shaanxi Provincial Forestry Department announced in June 2006 its plans to build five new nature reserves (Table 14) to protect habitats for the Giant Panda52. The new nature reserves would enlarge the area of protected panda habitat by 114,658 ha from the 323,411 ha coverage in 2001 (35% increase) to a total of 438,069 ha by 2010. Coverage would then include an estimated 72% percent of panda habitat in the Qinling range. The remaining 28 percent of panda habitat is found in small, isolated patches located outside the 19 panda reserves. Shaanxi Province will also improve and complete construction of its Giant Panda protection and management system, and build a panda information management and patrol inspection and monitoring system by the end of 2010.

52 China Daily, 23 June 2006 46 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Table 14: Forestry Department of Shaanxi Plans for New Nature Reserves by Year-End 2010

Location No. Name Level* Year* Area (ha) (county) 1 Huanboyuan Province 2006 Taibai 25,409 2 Pingheliang Province 2006 Ningshaan 17,275 3 Niangniangshan N/D N/D Foping 17,000 4 Panglong N/D N/D Chenggu 18,844 5 Banqiao N/D N/D Yang 36,130 Total 114,658 N/D = not decided

b. Sloping Land Conversion Program (Grain for Green)

183. The Sloping Land Conversion Program (SLCP; also known as Grain for Green program) was implemented in 1999 by PRC as a cropland set-aside program to increase forest cover and prevent soil erosion on sloped croplands. Farmers discontinue farming on all or part of their steeply sloping croplands and instead plant seedlings to grow trees. In return, government compensates participating farmers with in-kind grain allocations, cash payments, and free seedlings. 53,54 The program covers 25 provinces and over 2,000 counties, and continues in 2007. The steepness criterion in southwest China targets croplands on slopes of 25 degrees or more and in the target is croplands on slopes of 15 degrees or more. The total SLCP budget exceeds $40 billion and the goal is to set aside or rehabilitate 146,700 km2 of farmland to forest by 201055. This would affect 40-60 million rural households. A second goal is to convert an equivalent area of degraded or “wasteland” to forest by 2010.

184. By 2003, the program had converted a cumulative 7.19 million ha of cropland and farmers had afforested 4.92 million ha of barren land. In general, farm incomes did not fall due to intensification of farmer effort on non-SLCP plots. Farmers use better seed, switch from single to multi-cropping, and/or increasing livestock production on non-SLCP plots.

185. SLCP was found by Xu et al. (2005) to account for less than 10% of the decline in national grain production in 1999-2003 and less than 1% of the subsequent rise in grain prices during that period. SLCP impacts on grain production and grain prices are considered too small to merit consideration when evaluating whether to continue the set-aside program. Early reports concluded that environmental benefits of SLCP on a national scale (improved water quality, reduced siltation, carbon sequestration in planted trees) vastly exceed any national economic costs due to slight rises in grain prices56. Later reports (Bennet and Xu 2006) concluded that SLCP suffers many fundamental problems and that if it is not restructured and extended beyond the initial eight year duration, the planned environmental benefits will not be realized.

53 Xu, J., E. Katsigris and T. A. White (eds.). 2002. Implementing the natural forest protection program and the sloping land conversion program: Lessons and policy implications. CCICED-WCFGTF. Beijing: China Forestry Publishing House. 54 Xu Zhigang, Xu Jintao, , Huang Jikun, E. Uchida and S. Rozelle. 2005. Grain for Green versus Grain: Conflict between Food Security and Conservation Set-Aside in China. World Development 34(1):130- 148. 55 Bennett, M. T. and J. T. Xu. 2006. China’s Sloping Land Conversion Program: Institutional innovation or business as usual? Workshop on “Payments for Environmental Services (PES) – Methods and Design in Developing and Developed Countries”, Chinese Center for Agricultural Policy, Chinese Academy of Sciences, Beijing 56 Xu, J., E. Katsigris and T. A. White (eds.). 2002. Implementing the natural forest protection program and the sloping land conversion program: Lessons and policy implications. CCICED-WCFGTF. Beijing: China Forestry Publishing House. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 47 Final Report Appendix 5

2. Giant Panda Conservation Lessons Learned

186. Researchers have used methods including systematic interviews, remote sensing, and computer modeling to assess approaches to and results of conservation of China’s preeminent flagship species, the Giant Panda. Key conclusions of recent research projects are described below.

a. Paying for Conservation

187. Securing funding for nature reserves and conservation is problematic world-wide. But for charismatic and flagship species such as the Giant Panda people are willing to pay more to fund conservation providing that conservation objectives are met and that the living conditions of wild animals are improved57. Some people are willing to pay three times more for conservation of Giant Panda in its natural habitats than in captivity. The biodiversity conservation concept of “flagship species” applies to Giant Panda because it is globally associated with the bamboo and broadleaf deciduous forests of Sichuan, Gansu, and Shaanxi. Because Giant Panda is charismatic, globally recognized, and a flagship species, it plays an important role in conservation of the Qinling ecosystem. In contrast to some flagship species whose ranges do not include biodiversity hotspots (areas unusually rich in biodiversity), Giant Pandas in Shaanxi occupy one of the most biodiverse ecosystems in China. Thus effective conservation of panda habitats in the Qinling leads directly to conservation of many other species, some of which are also globally threatened and charismatic Examples are the Golden Takin (Endangered), Red Panda (Vulnerable) , Golden Snub-nosed Monkey (Vulnerable), Asiatic Black Bear (Vulnerable) and Clouded Leopard (Vulnerable). “Willingness-to-pay” for conservation has been investigated among foreigners (ibid.) and this research could well be extended to include Chinese tourists who account for 98% of tourist arrivals in Xi’an. There appears to be a large but untapped reservoir of potential funding for Giant Panda conservation. If successfully exploited, this could lead to removal of some of the most pressing threats to survival of some Qinling species.

b. Monitoring Conservation Effectiveness

188. Panda habitats should be better protected in nature reserves than outside nature reserves. However, at least in the first 22 years of the history of Wolong National Nature Reserve, this was not true58: The best panda habitats declined in coverage as they were converted by human activities into unsuitable habitats. This is a surprising outcome that at least in part caused a decline in numbers of wild pandas from 145 in 1974 to 72 in 1986, and probably further declines after 1986. This assessment of change in habitat conditions over time was made possible in part by the availability and quality of analytic tools used to interpret land cover from satellite imagery. As the range of Giant Pandas is increasingly included within the boundaries of new or enlarged nature reserves, this type of analysis is extremely important to understand the impacts of nature reserve operations on panda habitats. The Liu et al. (2001) study focused on Wolong National Nature Reserve. The technology could profitably be extended to the Qinling where densities of Giant Pandas are high, the total population is estimated at over 273, and the coverage of the protected area network has almost completely encompassed the key panda distribution areas.

189. A second and potentially important application of remote sensing technology to conservation management in the Qinling is evaluation of the effectiveness of the National Forest Protection Program (NFPP) and the Sloping Land Conversion Program (SLCP). In 1998, NFPP banned timber harvest in natural forests and closed plantations to commercial uses in the upper Changjiang and upper to middle Yellow River. Degraded lands were to be restored by planting of grasses and trees. In 1999, SLCP began to provide grain, cash, and tree seedlings to farmers in exchange for discontinuance of farming on slopes steeper than 25 degrees. NFPP was implemented throughout the 50,500 km2 of the Qinling, 13,635 km2 (27 percent) of which is mature closed-canopy forest. SLCP was implemented on 2,056,747 ha in Shaanxi Province, of which about 30-40 percent applied to the Qinling (617,000 to 823,000 ha). To date there has been no systematic monitoring of the

57 Kontoleon, A. and T. Swanson. 2003. The willingness to pay for property rights fo the Giant Panda: Can a charismatic species be an instrument for nature conservation? Land Economics 79(4):483-499. 58 Liu Jianguo, M. Linderman, Ouyang Zhiyun, An Li, Yang Jiang and Zhang Hemin. 2001. Ecological degradation in protected areas: the case of Wolong Nature Reserve for Giant Pandas. Science 292:98-101. 48 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5 outcome of NFPP of SLCP in the Qinling. Use of remote sensing in combination with ground-truthing and sampling of revegetated plots would enable assessment of the effectiveness of these two projects, and could lead to modifications that would be beneficial for conservation and for the participating farmers.

c. Humans and the Protected Area System

190. Research on human interactions with panda habitats has been carried out since 2000 with leadership by Michigan State University in USA. Research focused on demography and socio- economics of villages (4,320 people in 942 households in 1998) in and near Wolong National Nature Reserve, the largest panda reserve in China (2,000 km2). A model for simulating impacts of demographic and socio-economic parameters on panda habitats was tested in 200059. Use of the model in the field could help reserve managers to “understand the relationships among local economy, local cultural traditions, and habitat degradation”. This knowledge should lead to more scientific and efficient management of people in and near reserves.

191. The above work was extended in 2003 to “detect…patterns of change in land cover and panda habitat, to understand the mechanisms behind these patterns, and to develop new policy scenarios and evaluate short- and long-term consequences of different scenarios”60. Several important conclusions were drawn from the combination of field interviews, remote sensing, and computer modeling. Field work showed that 22 new households were added to the reserve annually from 1975-98.

192. Modeling predicted that if 22% of 17-25 year old villagers relocated outside the reserve (e.g. for study, work, marriage), the human population of the reserve would fall from 4,300 in 1997 to 700 in 2047, and panda habitats would then increase by 7%. In contrast, if nothing changes, the human population would increase to 6,000 (40%) and about 40% of panda habitats would be reduced by 2047. Most importantly, relocation of young people was found to be “socially acceptable, economically efficient, and ecologically sound”: By providing access to opportunities outside the nature reserve this type of voluntary relocation rapidly reduces the adult child-bearing population of the future. It is this segment of the population that has the most severe adverse impact on panda habitat.

193. A final and surprising conclusion was a reiteration of a finding from the 2001 report discussed above: “high-quality panda habitat in the reserve had been lost and had become fragmented more rapidly after the reserve was established”.

194. Under leadership of the same researchers as above, multi-disciplinary research continued at Wolong in 2002-361. Human impacts were predicted to result in loss of up to 16% of remaining panda habitat in Wolong Nature Reserve by 2034. Not surprisingly, in the rugged terrain of Wolong, accessibility largely controlled the spatial distribution of village houses. This supports the contention that roads accelerate and intensify human impacts on landscapes. Firewood collection was the primary agent of forest degradation: the average household used 15 m3 of firewood per year. Firewood collection was predicted to further reduce forest cover unless efforts are made to reduce firewood collection, provide alternative energy sources for existing households, and provide “viable means and incentives to encourage emigration” as reported in 199962.

59 An L., Liu J., Z. Ouyang, M. Linderman, S. Zhou and H. Zhang. 2001. Simulating demographic and socio- economic processes on household level and implications for giant panda. Ecologcial Modeling 140:31-49. 60 Liu J., L. An, S. S. Batie, R. E. Groop, Z. Liang, M. A. Linderman, A. G. Mertig, Z. Ouyang and J. Qi. 2003. Human impats on land cover and panda habitat in Wolong Nature Reserve: Liinking ecological, socioeconomic, demographic and behavioral data. Chapter 9 in People and the Enviornment: Approaches for linking household & community surveys to remote sensing & GIS (J. Fox, V. Mishra, R. Rindfoss and S. Walsh, eds.) Kluwer Acad. Pub. Boston, p 241-263. 61 Linderman, M. A., A. Li, S. Bearer, G. He, Z. Ouyang and J. Liu. 2004. Modeling the spatio-temporal dynamics and interactions of households, landscapes and giant panda habitat. Ecologial Modelling (detail not available). 62 Liu, J., Z. Ouyang, Z. Yang, W. Taylor, R. Groop, Y. Tan and H. Zhang. 1999. A framework for evaluating the effects of human factors on wildlife habitat: The case of giant pandas. Conservation Biol. 13(6):1360-1370. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 49 Final Report Appendix 5

195. The most recent publication under the same leadership (Dr. Jianguo Liu, Michigan State University) provided a model that enables prediction of the effects on panda habitats of changes in demographic and socioeconomic factors of villagers in Wolong Nature Reserve63. Habitats preferred by pandas were often the same as those used by people for firewood collection, thus the impacts to pandas from firewood collection threatened panda survival. Recommended strategies for conservation of panda habitat included provision of cheaper and more reliable electricity to reduce firewood collection, provision of off-site educational opportunities to encourage emigration of young people (17-25 year age group), delaying age of marriage, and prolonging interbirth intervals to reduce birth rates. Significantly, no change was recommended in the family planning policy that currently permits more than one child per family among the cultural minorities.

3. Unresolved Conservation Issues

a. Institutions

i. Communication – Qinling Stakeholder Association

196. The Qinling protected area system is outstanding in terms of its coverage of critically important habitats for Giant Panda and many other, often globally threatened, species. This represents many years of difficult and painstaking yet innovative work by many stakeholders to plan and establish various types of protected areas in one ecosystem. SFD and WWF have led this effort and deserve recognition for their successes.

197. One detractor from the effectiveness of the protected area system is the limited frequency of interaction between the many stakeholders. WWF has worked hard to involve more stakeholders in management of the Qinling and these efforts have achieved positive results. However, there is a need for more communication among stakeholders to improve management of the system as a whole and there is a need for a more formal venue for interaction of individuals, groups, and agencies.

198. For example, professional managers and scientists at nature reserves do not have adequate interaction with colleagues at other Qinling nature reserves. Similarly, researchers often interact with a single nature reserve to carry out a given project, but seldom extend their results to other nature reserves. Tourism, land management, and water resource agencies are stakeholders in Qinling resource management but there is no formal venue for exchange and discussion of their contributions. Village, township, and county leaders have limited opportunities to interact with resource managers in the Qinling.

199. A new association of Qinling stakeholders could help to facilitate communication and resolve resource management problems by overcoming institutional barriers. The goal of the association would be to achieve sustainable management of Qinling natural resources. Membership would include all the stakeholders listed above and others. The association would convene an annual meeting and produce an annual report. Working groups would be formed to address issues such as tourism development and regulation, habitat management, wildlife management, research and others.

ii. Reforestation – Exotic Species Management

200. Two species of exotic larch were planted in mono-cultures in the Qinling beginning in the 1950s and accelerating in the 1980s. In addition to introducing exotic species that are ecologically inappropriate to the Qinling, these plantations have also formed dense stands of trees with little or no understory vegetation. WWF has begun a program to plant indigenous bamboo species beneath the larch canopies for restoration of foraging habitat of the Giant Panda. This program is hampered by the institutional restriction against felling of trees on the Qinling (NFPP) and in protected areas (State Council regulation on activities permitted in nature reserves). This institutional barrier blocks removal of unwanted, inappropriate trees that were planted during an era when introduction of exotics was not viewed as an ecological threat. Retaining such trees precludes efficient planting of indigenous

63 An, L., G. He, Z. Liang and J. Liu. 2006. Impacts of demographic and socioeconomic factors on spatio- temporal dynamics of panda habitat. Biodiversity and Conservation 15:2343-2363. 50 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5 that are preferred by the Qinling flagship species, Giant Panda, and would contribute directly to continued recovery of Panda populations in the Qinling.

b. Monitoring and Adaptive Management – NFPP and SLCP

201. NFPP and SLCP have not been adequately monitored to determine their ecological or socio- economic effectiveness. Natural forests have not been studied after the logging ban of NFPP in 1998 to assess recovery rates or ecological aspects of forest and vegetation recovery. Use of timber by villages in and around protected areas has not been assessed. Comparative analyses of remote sensing data have not been undertaken to assess NFPP impacts on total forest cover.

202. SLCP was applied to 6,000-8,000 km2 of the Qinling and the program continues through 2007. No monitoring has been undertaken to quantify effectiveness in terms of vegetation cover, tree survival, or outcomes in terms of farm economics.

203. Monitoring of both programs would be useful to achieve the following:

(i) determine the extent of forest recovery following the NFPP logging ban of 1998; (ii) identify sites of continued forest degradation and determine causal factors; (iii) initiate remedial actions as needed to improve the ecological and socio-economic performance of NFPP; (iv) detailed monitoring of SLCP plots in the proposed Project Area to determine plot condition, the species of trees planted, survival rates, and growth rates; (v) detailed assessment of outcomes of SCLP in the Project Area for local farmers; and (vi) initiate remedial actions as needed to improve the ecological and socio-economic performance of SCLP.

c. Species Recovery

i. Crested Ibis

204. The captive populations of Crested Ibis have grown to unmanageable levels at the Yang County (over 200 birds) and Zhouzhi County (over 220 birds) breeding centers. Maintenance of such large numbers of captive birds of any species is ill advised, particularly in the era of SARS and avian influenza. China’s increasing network of wetland nature reserves provides a wealth of potentially suitable release sites for some of the captive birds. PRC is planning a release program as is IUCN- SSC through its Stork, Ibis and Spoonbill Specialist Group. Japan is also developing a release program at Sado Island based on recent successes in natural reproduction of captive birds (young fledged from nests built and tended by captive adult birds). Nature reserves in Russia and the Koreas have expressed interest to participate in a release program.

205. The technical gap appears to be assessment of the suitability of habitats for release of Crested Ibis. Field work is needed to assess the suitability of habitats near the Zhouzhi facility for release of captive Crested Ibis. The results should be contributions to a release program that could be extended beyond the Project Area to the north slope of the Qinling as a whole.

ii. Non-“Big Four” Globally Threatened Species

206. Biodiversity inventories of Qinling protected areas are generally thorough except for invertebrate taxa. Of the 38 globally threatened species in the Qinling, 34 species are non-migratory. Four of these receive the most research and conservation attention: Giant Panda, Golden Takin, Sichuan Golden Monkey, and Crested Ibis. The remaining 30 species have been little studied and are seldom the target of conservation programs. These include 11 species of indigenous plants, six species of wetland vertebrates (four amphibians and two reptiles), one upland bird and one wetland bird, and eleven mammals.

207. Study of the 11 indigenous plants should be a priority for simultaneous species recovery and ecosystem restoration. One plant species (Brown Moccasin Flower) is Critically Endangered, the most threatened of IUCN Red List categories. The globally threatened amphibians include Chinese Giant Salamander (Critically Endangered), a flagship species for mountain wetlands in China. While TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 51 Final Report Appendix 5 restoration of forests will indirectly benefit Qinling wetland habitats of Chinese Giant Salamander, more direct intervention is needed because of the pressure on Qinling rivers for gold mining and abstraction for transfer to other basins. Great investments have been made in commercial rearing of Chinese Giant Salamander, but these have not been matched by investments in field conservation. The 11 mammals include two species that will not directly benefit from habitat protection for Giant Panda: Desert Cat (Vulnerable) and Asian Wild Dog (Endangered). These species have different habitat needs and these will require dedicated study and management projects.

iii. Captive Propagation

208. Conservation biology increasingly focuses on science-based management of people, habitats, and ecosystems. The most successful conservation project in Shaanxi Province is probably the collaborative effort of SFD and WWF to conserve the Giant Panda by protecting and restoring its forest habitats and movement corridors in the Qinling mountain ecosystem. There is, however, a tendency to approach conservation of wildlife in China from the perspective of captive propagation. Examples are Giant Panda, Crested Ibis, species of sturgeon and other fishes, and two sub-species of tiger. While successes have been achieved in captive breeding of some of these species, none of these programs has yet led to significant conservation gains for wild populations. Giant Panda and Crested Ibis numbers are increasing in the Qinling because of successful habitat management---not because of release of captive bred animals. Fisheries biologists world-wide have concluded that release of captive-bred fish from hatcheries can cause more problems than it solves. Russia has shown that habitat protection is the key to tiger conservation and all efforts are made to avoid taking Siberian Tigers into captivity. The captive rearing approach is taken world-wide only as a “last chance” strategy when numbers of a species have declined to a level where extinction in the wild is certain. The Qinling ecoregion does not need more captive rearing and breeding programs to save threatened wildlife. Rather, as in the case of the Giant Panda, habitat protection and restoration is needed, and it must be based on scientific knowledge of the requirements of the species targeted for conservation. This applies to terrestrial, aquatic, and amphibious species as well. 52 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

E. Potential Priority Investments

1. Communication, Education and Public Awareness

a. Pilot Schools

209. GEF support to broader Public Awareness Campaign – including a Communication, Education and Public Awareness Center (location to be determined) directed to: (i) increased public knowledge of QM ecosystem, habitat, and wildlife ecology through on-site display and interpretation; (ii) conducting educational outreach programs based on delivery of training programs and materials to selected teachers and administrators in Shaanxi primary, secondary, and tertiary schools. To include preparation and distribution of Education and Training Modules on biodiversity conservation and the history, culture and eco-systems of the PA and QM – for use in primary and middle schools and relevant adult education and vocational training in the project’s target population area of nearly 44,000 (including the fringe) and later after modification to other QM areas.

b. Qinling Stakeholder Association

210. Funding is needed in the Project Area for establishment of an association of Qinling stakeholders. A new association of Qinling stakeholders would help to facilitate communication and resolve resource management problems by overcoming institutional barriers. The goal of the association would be to achieve sustainable management of Qinling natural resources. Membership would include professional managers and scientists at nature reserves, researchers, tourism, land management, and water resource agencies, village, township, and county leaders. The association would convene an annual meeting and produce an annual report. Working groups would be formed to address issues such as tourism development and regulation, habitat management, wildlife management, research and others.

2. Wildlife Management

a. Recover Wild Populations of Crested Ibis

211. Document the status and trend of captive and/or wild populations in Yang County and Zhouzhi County, Shaanxi, and in Japan; (ii) Develop (or update) in concert with SFA and Shaanxi Forest Department (SFD) a national and international recovery plan for wild populations through release of captive birds to minimize risk of catastrophic loss to disease; (iii) Further research and then implement release into the wild (building on and coordinated with the more general research in 2); (iv) Within the context of the international species recovery plan, design and implement research on the conditions (ecosystems and habitats; protected areas; technical and institutional capacities) needed to support release into the wild in former range states Russia, Koreas, and Japan; (v) Liaise with SFA/SFD, research institutes, the IUCN Species Survival Commission, Stork, Ibis & Spoonbill Specialist Group, the Sado Island Breeding Center and Yamashina Institute of Ornithology in Japan, and International Crane Foundation in USA to initiate interventions to realize the conditions needed for national and international species recovery through release of captive birds; and (vi) Implement the release program in cooperation with the Yang County captive breeding facility and in concert with the IUCN SSC Stork, Ibis & Spoonbill Specialist Group plan for Crested Ibis re-introduction (in preparation in early 2007).

b. Develop Technology for Release of Giant Panda

212. The captive population of Giant Panda at the Zhouzhi breeding center numbers around 12 animals and the long-term target is 40. There is no conservation justification for keeping such large numbers of Pandas in captivity other than economic return from display or lease to other facilities. The wild populations in the Qinling and in Gansu and Sichuan are increasing through natural recruitment and release is not necessary either to augment the wild populations or improve their genetic fitness. Indeed, it is not known whether release of Pandas would actually benefit wild populations and the known risks are substantial (from disease in particular). The IUCN Species Survival Commission concludes that there is not adequate justification for releasing captive Pandas to the wild. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 53 Final Report Appendix 5

213. Because evidence from field studies shows that release of captive Pandas is not necessary and specialists conclude that release carries greater risk than potential return, there is reason to question the justification for striving for an even larger captive population. However, given the extremely high economic returns from lease of Pandas ($1.6 million per individual per year at current world market prices); it is unlikely that China would discontinue captive breeding. Current Panda conservation plans call for increasing funding for captive facilities and continued development of captive breeding programs. Based on the assumption that this is the most likely outcome, investment is proposed to develop technologies appropriate for “soft-release” of Giant Pandas in the proposed Project Area.

214. The objectives would be to prepare habitats suitable for Giant Pandas by planting of suitable bamboo and other plant species. These habitats would then be enclosed by fence and Pandas would be released into the large enclosures. Investments would fund the required studies of Panda adaptation to these enclosures and management to adapt the program as needed. The resulting technologies would be suitable for extension to the Qinling as a whole should SFD determine at some time in future that release of captive-bred Pandas to the wild in the Qinling is a priority. The one notable advantage of developing this technology at the Project Area is that it is geographically isolated from known Panda distribution. Geographic isolation minimizes the risk of transmission of disease from the captive to the wild populations.

c. Golden Takin and Wild Boar

215. Management of Wild Boar and Golden Takin: (i) Quantify status and trend in populations of Wild Boar and Golden Takin, and document daily and seasonal movements through long-term systematic sampling programs; (ii) Quantify boar and Takin damage to crops through interviews with farmers and photographic and quantitative monitoring of reported damage -- quantify seasonal and spatial trends in crop damage; (iii) Design and implement deterrent measures with input from affected farmers; (iv) Investigate trends in Wild Boar and Golden Takin populations throughout the QM by interview with NR personnel and through these interviews, identify QM regional strategies for management of populations of Wild Boar and Golden Takin; and (v) Implement non-destructive deterrent measures for Golden Takin; Implement deterrent measures for Wild Boar, possibly to include sustainable harvest for use in ecotourism lodges; Integrate development with SFA/SFD policies, in particular, any policies or operating procedures related to sport hunting of Golden Takin.

3. Habitat Management

a. Adaptive Management of NFPP and SLCP

216. Document vegetation and habitat recovery using three approaches: (i) analyses of remote sensing data to track changes in Qinling vegetation over the last 50 years and into the future; (ii) establishment of one permanent, long-term, large-scale, forest vegetation monitoring station to track changes in the Qinling deciduous broadleaf forest as part of a national program on forest vegetation monitoring; (iii) systematic, small-scale, quadrat sampling of SLCP plots combined with socio- economic and demographic sampling of participating households to assess SLCP performance and contribute to adaptive management of SLCP in future. Make recommendations for program modification based on research outcomes. Address issues including extension of the program, planting of bamboo for Panda habitat restoration, inter-cropping with species of economic value particularly as Chinese traditional medicines.

b. Protected Corridors

i. Zhouzhi NNR to Project Area

217. Shaanxi Academy of Science has begun investigation of the feasibility of connecting Zhouzhi NNR to the Project Area by establishing a corridor measuring approximately 8 x 16 km = 128 km2. The corridor would link the core zone of the propose Project Area with the core and experimental zones of Zhouzhi NNR. Issues to be addressed include villagers who live in the proposed corridor area, roads that cross the proposed corridor, and habitat restoration that is needed to recovery habitat value. The proposed investment would be to increase the biodiversity component of the feasibility study and to integrate the feasibility study with issues including transport planning and tourism. 54 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

ii. Niubeiliang NNR to Project Area

218. The Nature Reserves Management component of the World Bank FRDP project recommended that Niubeiliang NNR be connected by corridor with Zhouzhi NNR:

“The project will also finance the demarcation and revegetation of a 60 km wildlife corridor between the Zhouzi and Niubeiliang Reserves. The corridor is presently uninhabited as a result of the harsh and hilly terrain. For most of its length, a width of 2 kilometers will be adequate to allow animal movements and exchange between the two reserves, but the width of the corridor will be widened at each end where it is crossed by major highways and where habitat continuity is weakest. The exact method of establishment - whether through natural regeneration or reforestation -- will be determined during the preparation of nature reserve management plan.”

219. This proposal was not fully implemented, possibly due to the length of the proposed corridor. However, the corridor proposed to connect Zhouzhi NNR to the Project Area would shorten the proposed World Bank corridor from 60 km to around 45 km because the proposed botanical garden Project Area lies between the two NNRs and would serve as a link connecting the two protected areas.

220. The investment would support updating and/or completing the feasibility study and developing a proposal for review by SFD and SFA to link the reserves.

c. Vegetation Restoration

221. In cooperation with QM nature reserves identify tracts where plantations of exotic larch (or other exotic species) have degraded habitat quality for Giant Panda and other globally threatened herbivores; (ii) In cooperation with SFD and QM nature reserves develop a habitat management plan to restore such sites to native vegetation using indigenous species known to provide forage for globally threatened herbivores including Giant Panda and Golden Takin; (iii) Among such indigenous plant species prioritize for planting those that are threatened and/or endemic trees and shrubs ; prioritize by species, location, and micro-habitat (e.g. slope, slope aspect, elevation); (iv) Identify and map sites for planting of bamboo species preferred by Giant Panda; (v) Develop plant nurseries in the Ex-situ area to supply seedlings of threatened endemic trees, shrubs, and bamboos for contract planting and maintenance by residents in the In-Situ area; (vi) Develop funding mechanisms based on earnings from Ex-situ tourism – see Eco-fund and other sustainable livelihood proposals below; (vii) Design and implement a monitoring program to track plant survival, growth, and reproduction.

4. Biodiversity Survey

222. Design and implement (a) a biodiversity inventory of the Project Area and the unprotected gap between the Project Area and Zhouzhi NNR (about 8 x 16 km = 128 km2 = 12,800 ha) to be carried out by local and regional specialists, mainly those from QM nature reserves; (b) Include interviews with villagers to (i) determine their knowledge of local biota; and (ii) train them in some survey methods such as systematic sampling for key species such as Golden Takin and other threatened species, and Wild Boar. Surveys should include synchronized counts and camera-trapping using digital auto-trigger traps; (c) develop proposals on how this survey method can be tailored and extended to and applied in other parts of the QM.

5. Protected Area Management

223. Longer-term science, research and demonstration on biodiversity, land degradation and rehabilitation, and eco-system trends (single species and communities of plants and animals), water resource management trends and issues (management of riparian systems), recreating lost habitats and representative QM ecosystems to support sustainable livelihoods, and related environmental and sustainable livelihood issues important to the Design and Monitoring Framework for this PA and Project and for subsequent QM projects – applying the Ecological Function Conservation Area (EFCA) approach (see above Section 7.1.3).

TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 55 Final Report Appendix 5

ANNEXES

ANNEX 1: REGULATORY FRAMEWORK FOR BIODIVERSITY AND FOREST CONSERVATION

Biodiversity Provisions of the National Constitution Two articles of China's National Constitution address biodiversity conservation:

 Article 9 requires that the "State ensure rational utilization of the natural resources, protect rare animals and plants, and prohibit any forms of encroachment and damage of the natural resources by any groups or individuals". This article provides a useful foundation for promulgation of regulations on use of natural resources.  Article 26 dictates that "the State shall protect and improve the people's living environment and ecological environment and control pollution and other public nuisance; organize and encourage afforestation and protection of trees." This article provides for protection and restoration of forests.

China Laws Relevant to Biodiversity Protection The laws listed below are relevant to biodiversity protection in China.

 Environmental Protection Law (1989)  Environmental Quality Standard for Surface Water (SEPA 1988)  Fishery Law (1986)  Flood Control Law (1984, amended 1996)  Forest Law (1984)  Grasslands Law (1985)  Plan for National Ecological Environment Construction  Standard for Fisheries Water Quality  Standard for Field Irrigation Water Quality  Supplementary Rules about Punishing Crimes for Hunting Rare and Endangered Wild Animals of National Priority Protection  Water and Soil Conservation Law (1991)  Wild Animals Protection Law (1988)

China Administrative Regulations The administrative regulations listed below are relevant to biodiversity protection in China.

 River Course Management Regulations  Implementing Regulation of Aquatic Wild Animal Protection  Regulations about Aquatic Resources Conservation (1979)  The State Council's General Order Strictly Protecting Rare Wild Animals (1983)  Temporary Regulations on Management of Scenic Spots (1985)  Regulations for the Implementation of the Forest Law (1986)  Regulations of the Implementation of the Fishery Law (1987)  Regulations about Protection and Administration of Wild Medicinal Material Resources (1987)  Regulations about Control of Forest Fires (1988)  Regulations about Control of Forest Pests (1989)  The State Council's Decision on Further Strengthening Environmental Protection (1990)  Regulations Regarding the Protection of Terrestrial Wild Animals (1992)  Regulations Regarding the Protection of Aquatic Wild Animals (1993)  Regulation Concerning Nature Reserves (State Council, Sep. 1994)  Regulations Concerning Protection of Wild Plants (State Council, Sep. 1996)  The State Council's Decision on Several Environmental Protection Issues (1996)

Rules from State Environmental Protection Administration  Notice on Strengthening Ecological Management of Natural Resource Exploitation Activities (1994)  Notice on Strengthening Wetland Conservation (1994) 56 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

 Method of Land Management for Nature Reserves (SEPA & State Land Administration, 1995)  Notice on Strengthening Management of Nature Reserves (August 1997)

Rules from State Forestry Administration The State Forestry Administration (SFA) responsibility for nature reserves in Shaanxi Province is administered through Shaanxi Forestry Department, the provincial nature reserve and wildlife conservation authority. SFA is the national authority for flora and fauna conservation and is the CITES authority and Ramsar authority in China. SFA shares responsibility for nature reserves with SEPA and other agencies. Some of the rules promulgated by SFA are listed below.

 Methods for Management of Forests and Wildlife Reserves (1985)  Regulation Concerning Protection of Terrestrial Wild Animals (1992)  Provisional Regulation Concerning Management of Forest Land (Aug. 1993)  Regulations about Some Issues Concerning Strengthening Management of Forest Resources  Rules for the Implementation of the Plant Quarantine Regulations (June 1994)  List of Wild Animals of National Priority Protection (with Ministry of Agriculture)

Rules from the Ministry of Foreign Trade and Economic Cooperation  Circular about Ceasing Purchasing and Exporting Rare Wild Animals

Rules from the Supreme People's Court  Circular Regarding Cracking Down on Crimes of Illegal Hunting, Purchasing and Selling Wild Animals (with Supreme People's Procuratorate, SFA, Ministry of Public Security and the State Administration for Industry and Commerce)  Regulations on nature reserves Although the pace of nature reserve establishment in China has been rapid, the effectiveness of protection of natural resources both within and outside the reserves has been limited. This is due to a number of factors, most important of which are: (i) conflicting land-use and/or resource-use priorities that lead to continued degradation of nature reserves; (ii) low levels of funding provided for nature reserve operations (especially compensation of personnel) and resulting poor career prospects; (iii) lack of professional qualifications among nature reserve personnel; (iv) and poor relationships between nature reserves and local communities.

PRC recognizes this problem and responded in 2006 by requesting the National People's Congress (NPC) Committee for Environment and Resource Protection to draft a law covering the country's nature reserves. This legislation was pending at the time of this writing.

Nature reserves are currently administered according to the Nature Reserves Regulations promulgated by the State Council in September 1994. One important provision of these regulations is the legal definition of the core, buffer and experimental zones of China’s nature reserves. Definitions of the three zones are listed in the “Environment and Natural Resource Protection Legal Handbook” (ISBN7-80056-439-8/D 511; 1998) as follows:

 Core Area: Designated for intact and natural ecosystems, or where rare or endangered plant species are concentrated. Any entry of a unit or person into a core area is prohibited. Apart from scientific research approved by the nature reserve authority, any other scientific activity in a core area is prohibited. Entrance to the core area of a national level nature reserve must be approved by the relevant state authority.  Buffer Area: The buffer area encircles the core area. Only scientific research is allowed within the buffer area.  Experimental Area: The experimental area is the outer portion of the nature reserve surrounding the buffer zone. Permitted activities include scientific research, education, field trips, tourism, and cultivation of rare or endangered plants or rearing of such animals.

These definitions do not permit farming, grazing, and taking of wild plants and animals within any zone of any nature reserve in China. One important provision with respect to the proposed Project is that tourism is permitted in the Experimental Zone of nature reserves in China but not in the core or buffer zones. This provision enables integration of strict nature protection (in the core and buffer zones) with TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 57 Final Report Appendix 5 low-impact nature tourism in the experimental zone. To this system of zoning some Qinling nature reserves have added a Tourism Zone (see Foping NNR), a part of the experimental zone dedicated to nature tourism.

China's National Plans and Policy Papers China's Biodiversity Conservation Action Plan was approved in 1994 (SEPA 1994). It lists and describes priority projects for biodiversity conservation. Project 18 is “Establishment of Integrated Nature Reserve [Network] in the Sanjiang Plain, Heilongjiang Province. This has been accomplished in part by establishment of the HNNR and SNNR. Other natural wetlands are progressively being added to the protected area network at Bachadao, Qindeli, , and others. Increasing the protected area at HNNR will contribute to achievement of this national priority project.

China's National Wetland Conservation Action Plan (NWCAP) was published in September 2000 (SFA 2000). It complements China's Biodiversity Conservation Action Plan, and is the key guidance document on conservation, use, management, and exploitation of wetlands in China.

The Priority Programme for China's Agenda 21 was adopted in response to the United Nations Conference on Environment and Development held in Rio de Janeiro in 1992. It called for development of a National programme for sustainable development. In response, China produced the White Paper described below.

The Agenda 21 White Paper on China's Population, Environment, and Development in the 21st Century presented policies for sustainable development and conservation of natural resources. Those policies require, among other issues, holistic treatment of drainage basins, which is fundamental to wetland management. Specific goals of the White Paper are listed below with reference to their identifying section numbers.

Section 2.3: A target of 7% of the national land area is to be devoted to nature conservation, or 100 million hectares. This compares with the current level of XX% in ______Province. Section 2.16: Fees are to be levied for the use of natural resources Section 2.18: Protect and utilize natural resources in a rational manner, and encourage the use of renewable resources Section 3.15-3.26: Strengthen enforcement of legislation through community education, better training of enforcement staff, better administrative procedures, improved monitoring, increased international cooperation, and other measures Section 4.22: Improve agricultural production not through expansion of farmed area, but through technology and financial inputs to raise yields and broaden the scope of products Section 4.44: Integrate environment into the economic accounting system, and include at least one supplementary accounting system for natural resources Section 6.21: Educate about natural resources, ecology, the environment and sustainable development throughout the whole educational system. Section 6.25: Use mass media for conservation education on sustainable development Section 6.51: Establish information networks to disseminate information on sustainable development Section 7.5: Family planning and environmental protection are basic national policies Section 8.12: Guide and help farmers to take advantage of local resources and develop high value-added products and contaminant-free green food to meet market demands Section 10.27: Use solar energy and new energy-saving stoves in rural areas to reduce reliance on timber and reeds as fuels Section 10.72: Improve thermal conditions of rural housing through demonstration and experimental projects Section 11.11: Develop a legal-policy system to integrate agriculture and the ecological environment 58 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Section 11.39: Enhance the system of protective forests to improve degraded farmlands and rural energy supplies, and to increase the capacity to deal with disasters Section 11.41: Continue to establish the northeast protective forest belt by growing trees and grass Section 11.46: Develop renewable energy sources including wind and solar to increase rural energy supplies Section 11.48: Develop a pricing system for natural resources to curtail waste Section 11.49: Control abuse of fertilizers and pesticides to improve the agricultural- ecological environment and increase production Section 11.50: Protect farmlands, forests, grasslands, wetlands, water resources, and domestic and wild animals by 2000 Section 13.30: Expand rural electrification, spread technology for use of energy-saving stoves, solar, wind power. Section 13.57: Develop solar energy and wind power to include large-scale generating stations Section 14.48: Survey land resources; develop databases; release and share information; involve women in these tasks Section 14.49: Prevent careless cultivation of wetlands; enforce protective legislation; draft laws where needed; incorporate wetland protection into land use planning; eliminate dykes that conflict with wetland biodiversity conservation; engage in research to classify, delineate, utilize wetlands, and to develop management plans Section 14.57a: Prevent forest destruction and deterioration; enhance management; educate the public; plant mixed forests; implement felling quotas; draft and enforce laws; use "family contracting responsibility system" in rural areas Section 14.57b: Develop a forest management surveying center in Northeast; create and maintain databases; implement pricing; abolish subsidies Section 14.57c: Reinforce the Northeast shelterbelt; develop alternative and renewable energy sources Section 14.58: Integrate wildlife protection into forest management; establish natural forest reserves for rare and endangered biota; advocate protection of natural forests Section 14.88: Reverse the trend of degrading grasslands Section 14.89: Develop wind and solar energy in rural areas Section 15.22: Develop tourism to nature reserves, enhance conservation education, combine natural resource use with conservation by limiting harvest quotas Section 15.24: Enhance nature reserve management by increasing the proportion of scientists and technicians to not less than 60% of the staff; establish a national biodiversity monitoring center and database. Section 15.25: Develop conservation education using mass media, schools, exhibits, holidays, training programs

International Biodiversity Conservation Treaties In addition to the legal framework within China there are numerous international conventions, treaties and agreements to which China is a signatory and which are also relevant to conservation. These are described in detail below.

The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES, China acceded in 1981, see www.cites.org) bans or restricts trade in listed wild animals and plants. Species listed under CITES Appendix 1 may not be traded under any circumstances. Species listed under Appendix 2 may be traded only under authority of permits issued by government.

The Ramsar Convention and the Wise Use Guidelines of the Ramsar Convention require preparation of detailed management plans for each of the listed wetlands in China (see www.ramsar.org). The Wise Use Guidelines oblige China to practice wise use of wetlands as defined in publications of the Ramsar Convention authority. The Convention requires parties to conserve and make wise use of wetland areas, particularly those supporting waterfowl populations (Article 3.1). "Wise use" of TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 59 Final Report Appendix 5 wetlands is defined as "their sustainable utilization for the benefit of mankind in a way compatible with the maintenance of the natural properties of the ecosystem". The primary concern of the Convention is the welfare of wetlands and the waterfowl dependent on them. Article 1 of the Convention defines wetlands as 'areas of marsh, fen, peatland or water, whether natural or artificial, permanent or temporary, with water that is static or flowing, fresh, brackish or salt, including areas of marine water the depth of which at low tide does not exceed six meters'. All river, stream, pond, marsh, sandflat and mudflat habitats upstream of, within and downstream of the study area, whether natural or artificial, qualify as wetlands under this definition.

The Convention on Biological Diversity (CBD) resulted from the United Nations Conference on Environment and Development held in Rio de Janeiro in 1992 (see www.biodiv.org). The Convention called for drafting of a national biodiversity conservation strategy. The Standing Committee of the People's Congress approved the Convention in June 1993, and China's Biodiversity Conservation Action Plan (BCAP) was promulgated on 13 June 1994. BCAP listed priority projects for immediate action, one of which was development of a nature reserve in the Sanjiang Plain.

Multi-lateral Agreements Numerous agreements have been reached between China and other countries to protect and manage biodiversity. The list below includes some of those agreements.

 Sino-Japanese Agreement on the Protection of Migratory Birds (1981) protects birds from sale, over harvest, and habitat destruction;  Protocol on Exchange and Cooperation in Nature Conservation between SFA and US Department of Internal Affairs (1986);  Sino-Australian Agreement for the Protection of Migratory Birds and their Environment (1 September 1988) protects birds from sale, over harvest, and habitat destruction;

60 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

ANNEX 2: PROTECTED AREAS IN SHAANXI PROVINCE

Location Gazettal Area Count English name Agency (county) year (ha) 1 Jingweishidi Gaoshan 2001 Forest 6,353 2 Zhouzhi Zhouzhi 1984 Forest 56,393 3 Zhouzhi Laocheng Zhouzhi 1994 Forest 12,611 4 Xiangshan 2004 Forest 37,823 5 Tai'an Yijun 2004 Forest 25,872 6 Yehe 2004 Forest 10,996 7 Xiaoqinglingyuangujiepomian 2004 Water 6,559 8 Wuliangshan Feng 2002 Forest 13,684 9 Taibaishan Taibai, Hu, Zhouzhi 1965 Forest 56,325 10 Taibaixushuihe Taibai 2001 Water 5,740 11 Niuweihe Taibai 2004 Forest 13,492 12 Cuipingshan 2003 other 19,200 13 Shimenshan Xunyi 2001 Forest 33,000 14 Chunhuayetaishan Chunhua other 15 Dalishayuan Dali 2000 Environment 5,000 16 Heyangshidi Heyang 1996 Environment 57,348 17 Ziwuling Fu Xian 1982 Forest 40,621 18 Chaisong Fu Xian 2004 Forest 17,640 19 Huanglongshan Hemaji Huanglong, , 1998 Forest 60,439 20 Huanglongshan Huanglong 2004 Forest 35,563 21 Changqing Yang 1994 Forest 29,906 22 Hanzhongzhuhuan Yang 2001 Forest 37,549 23 Longchi Xixiang 2002 Forest 34,192 24 Qingmuchuan Ningchang 2002 Forest 10,200 25 Baofengshan Lueyang 2002 Forest 29,500 26 Motianling Mianxian 2002 Forest 8,520 27 Sangyuan Liuba 2002 Forest 13,806 28 Foping Foping 1978 Forest 29,240 29 Guanyinshan Foping 2002 Forest 13,534 30 Yuyang Choubai Yuling Prefecture 2000 Forest 25,966 31 Hongjianzuo 1996 Environment 21,700 32 Shenmuchoubai Shenmu 1986 Forest 7,902 33 Fugudusong Fugu 1985 Forest 6,368 34 Yinghushidi Ankang 2002 Forest 19,800 35 Tianhuashan Ningshaan 2002 Forest 25,485 36 Hualongshan Pingli, Zhengping 1982 Forest 28,103 Huanglongpu- 37 Shimendizhipoumian Luonanj, Lantian 1987 Land 100 38 Luonan Da'e 1999 other 5,715 39 Xinkailing Shangnan 2004 Forest 14,963 40 Tianzhushan Shanyang 2004 Forest 21,685 41 Zhenanyingzuishi Zhen’an 2004 Forest 11,462 42 Niubeiliang Zhashui, Chang’an, Ningshaan 1980 Forest 16,418 43 Dongqinglingnipengxiyangpo Zhashui, Zhen’an 1990 other 25 44 Weinansanheshidi Weinan 1996 Forest 39,000 45 Xiaoqinlingluonandizhi Luonan, Huanglong 1987 other 0 46 NingshanDaxiongmao Ningshaan 2001 Forest 12,372 47 Huangshuihedani Taibai 1986 Agriculture 5,740 48 Nanzhengmihou Nanzheng Bibaqu 1982 Forest 1,000 49 Qianhu Wetland Qianyang Forest 7,156 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 61 Final Report Appendix 5

50 Pingheliang Ningshaan Forest 15,578 51 Lintonglishan Total area (ha) 1,007,644

62 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

ANNEX 3: FLORA ENDEMIC TO THE QINLING MOUNTAINS1

No. Genus Species2 Distribution 1 Beesia 1/2 Gansu, , Guizhou, Hubei, Hunan, Sichuan, Xizang, Yunnan, (Ranunculaceae) (northern Burma) 2 Biondia 3/6 Gansu, Guangxi, Guizhou, Henan, , Shaanxi, Shandong, (Asclepiandaceae) Sichuan, Yunnan, Zhejiang 3 Bolbostemma 1/2 Gansu, Guizhou, , Henan, Hubei, Hunan, Shaanxi, Shandong, (Cucurbitaceae) Shanxi, Sichuan, Yunnan, 4 Chimonanthus 1/3 , Fujian, Guangxi, Henan, Hubei, Hunan, Jiangsu, Jiangxi, Shaanxi, (Calycanthaceae Shandong, Sichuan, Yunnan 5 Clematoclethra 1/1 Gansu, Guangxi, Guizhou, Hubei, Hunan, Shaanxi, Yunnan () 6 Cunninghamia 1/2 South of Qinling range and Dabashan (Taxodiaceae) 7 Cyclocarya 1/1 Anhui, Fujian, Guangxi, Guizhou, Hubei, Hunan, Jiangxi, Shaanxi, (Juglandaceae) Sichuan, Yunnan, Zhejiang 8 Emmenopterys 1/1 east to south China (northeast India) (Rubiaceae) 9 Eucommia 1/1 Anhui, Fujian, Guangxi, Guizhou, Hubei, Hunan, Jiangxi, Shaanxi, (Eucommiaceae) Sichuan, Zhejiang 10 Dipelta 3/3 Gansu, Guizhou, Hubei, Hunan, Shaanxi, Sichuan, Yunnan (Caprifoliaceae) 11 Dipteronia 1/2 Anhui, Gansu, Guangxi, Henan, Hubei, Hunan, Shaanxi, Sichuan, (Aceraceae) Yunnan, Zhejiang 12 Fargesia (Poaceae) 1/1 Shaanxi, Sichuan, Yunnan, 13 Fortunearia 1/1 Anhui, Henan, Hubei, Jiangsu, Shaanxi, Zhejiang (Hamamelidaceae) 14 Ginkgo 1/1 Cultivated, probably extinct in the wild (Ginkgoaceae) 15 Heserolamium 1/1 Henan, Hubei, Hunan, Shaanxi, Sichuan, Yunnan (Lamiaceae) 16 Ischoogyne 1/1 Guizhou, Shaanxi, Sichuan (Orchidaceae) 17 Isometrum 1/13 Gansu, Guangxi, Hubei, Shaanxi, Sichuan (Gesneriaceae) 18 Kingdonia 1/1 Gansu, Shaanxi, Sichuan, Yunnan (Ranunculaceae) 19 Kinostemon 1/2 Guangxi, Guizhou, Sichuan (Lamiaceae) 20 Kolkwitzia 1/1 Anhui, Gansu, Henan, Hubei, Shaanxi, Shanxi (Caprifoliaceae) 21 Loxocalyx 1/2 Gansu, Guizhou, Henan, Hubei, Hunan, Shaanxi, Sichuan, Yunnan (Lamiaceae) 22 Myripools 1/1 Hebei, Henan, Nei Mongol, Shaanxi, Shanxi (Asteraceae) 23 Nannoglottis 1/8 Gansu, Guizhou, Qinghai, Shaanxi, Sichuan, Xizang (Asteraceae) 24 Notopteryglum 2/3 Anhui, Gansu, Guizhou, Henan, Jiangxi, Nei Mongol, Qinghai, Shaanxi, (Apiaceae) Shanxi, Sichuan, Xizang 25 Ploiothyrgis 1/1 Guangdong, Guizhou, Henan, Hubei, Hunan, Jiangsu, Shaanxi, Sichuan, (Flacourtiaceae) Zhejiang 26 Poncirus (Rutaceae) 1/1 Anhui, Fujian, Guangdong, Guangxi, Guizhou, Henan, Hubei, Hunan, Jiangsu, Jiangxi, Shaanxi, Sichuan, Yunan, Zhejiang 27 Pterpoeltis 1/1 Anhui, Fujian, Guangdong, Guangxi, Guizhou, Hubei, Hunan, Jiangsu, (Ulmaceae) Jiangxi, Shaanxi, Shandong, Sichuan, Zhejiang 28 Pteroxygonum 1/1 Gansu, Hebei, Henan, Hubei, Nei Mongol, Shaanxi, Shanxi, Sichuan TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 63 Final Report Appendix 5

No. Genus Species2 Distribution (Polygonaceae) 29 Rostrinucula 1/2 Guangxi, Guizhou, Hubei, Hunan, Shaanxi, Sichuan, Yunnan (Lamiaceae) 30 Sargentodoxa 1/2 Anhui, Fujian, Guangdong, Guangxi, Guizhou, Hubei, Hunan, Jiangxi, (Sargentodoxaceae) Shaanxi, Sichuan, Yunnan, Zhejiang 31 Sacuma 1/1 Guizhou, Henan, Hubei, Jiangxi, Shaanxi, Sichuan (Aristolochiaceae) 32 Sheareria 1/1 Anhui, Guizhou, Hubei, Hunan, Jiangsu, Jiangxi, Yunan, Zhejiang (Asteraceae) 33 Sinnuculix 2/4 Gansu, Hebei, Hubei, Ningxia, Qinghai, Shaanxi, Shanxi, Sichuan, (Asteraceae) Xizang, Yunnan 34 Sinojohnstonia 1/3 Gansu, Henan, Hebei, Ningxia, Shaanxi, Shanxi, Sichuan, Yunnan, (Boraginaceae) Zhejiang 35 Sinofranchetia 1/1 Gansu, Hubei, Jiangxi, Shaanxi, Sichuan, Yunnan (Laroizabalaceae) 36 Sinowilsonia 1/1 Gansu, Henan, Hubei, Shaanxi, Shanxi, Sichuan (Hamamelidaceae) 37 2/2 Gansu, Guangdong, Guangxi, Guizhou, Hebei, Henan, Hubei, Hunan, ( Jiangsu, Jiangxi, , , Nei Mongol, Shaanxi, Shandong, Sichuan, Yunnan 38 Tetrapanax 1/2 Guangdong, Guizhou, Henan, Hubei, Hunan, Shaanxi, Sichuan, Xizang, (Araliaceae) Yunnan 39 Thyrocarpus 2/2 Guangdong, Guangxi, Guizhou, Henan, Hubei, Hunan, Jiangsu, Jiangxi, (Boraginaceae) Shaanxi, Sichuan, Yunnan, Zhejiang 1 Source: Tsun-shen Ying and David E. Boufford. 1998. Phytogeography of the Qinling Mountains and a Comparison with the Flora and Vegetation of Japan. In: Sino-Japanese Flora, its Characteristics and Diversification, Boufford, D. E. and H. Ohba (eds), 1998, The University Museum, The University of Tokyo, Bulletin No. 37, Tokyo. 2 Species: number of species endemic to Qinling / number endemic to China 64 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

ANNEX 4: QINLING MOUNTAINS SEED PLANTS OF CONSERVATION CONCERN

The following list contains all plant species of conservation concern recorded in Qinling Mountains in Shaanxi Province. The sources of this information are: China Species Red List: Vol.1 Red list (Wang Sung & Xie Yan, 2004); Shaanxi Nature Reserves (Zhang -liang et al. 2004); Synthesis Science Research Report of Changqing National Nature Reserve in Shaanxi (Li Zhan-gang et al. 2006); Biodiversity Research and Protection of Foping National Nature Reserve in Shaanxi (-feng et al. 2003); Biodiversity, Conservation and Management of Taibaishan Nature Reserve (Ren Yi et al. 2006); An Analysis of The Flora of Qinling Mountain Range: Its Nature, Characteristics and Origins (Ying Tsun-shen 1994); and The Rare and Endangered Plants of Seed Plant Flora at Qinling Mountain (Zhang Qin-wei 2002).

The list presented here gives an overview of the status of the rare and endangered plant species occurring in Qinling Mountain. Literature on the flora of the Qinling Mountain, including many Chinese publications, has not yet been reviewed. Nor has there been correspondence with botanist and ecologist to discuss records in detail.

The composition of seed plant flora in the Qinling is very rich. There are 198 families, 1,007 genera and 3,446 species. There are 16 large and major families in the Qinling, they account for 50 percent of all genera and 57 percent of all species. The large and major families are the foundation of the flora of the Qinling, and most are characteristic of temperate climates. The dominant families of flora composition of the vegetation are Pinaceae, Fagaceae, Betulaceae, , Rosaceae, Ericaceae, Gramineae and Cyperaceae. The phytogeography of the represented families are global or sub-global, tropical, temperate, discontinuous distribution, East Asia distribution and China endemic distribution, and the origin of the flora is clearly ancient.

In total 127 species or sub-species, one genus (Ranunculaceae family, Coptis genus) and one family (Paeoniaceae or ) of plants recorded in the Qinling were found to be globally threatened or near threatened, protected at province or national level, and/or listed in China’s Red Data Book as species of conservation concern.

Fifty-four species are protected in Shaanxi Province. Sixty-seven species are listed as globally threatened in the China Red Data Book and by IUCN World Conservation Union (listed as Critically Endangered, Endangered, or Vulnerable). Six additional species are listed in the China Red Data Book and by IUCN as globally Near Threatened and the status of one species cannot be determined because data are insufficient. Six species are listed as China National Class I protected species, 40 species are China National Class II protected species, and nine species are protected at China National Class III.

Of the 67 species listed by China’s Red Data Book and IUCN World Conservation Union as globally threatened (listed as Critically Endangered, Endangered, or Vulnerable), 35 species are not protected in China at any national level. Of these, five are listed as globally Critically Endangered, eight are globally Endangered, and the remaining 22 species are globally Vulnerable.

Of the 67 species listed by China’s Red Data Book and IUCN World Conservation Union as globally threatened (listed as Critically Endangered, Endangered, or Vulnerable), one of seven Critically Endangered species is protected in Shaanxi Province, two of 14 Endangered species are protected in Shaanxi Province, and three of 46 Vulnerable species are protected in Shaanxi Province.

Of the 54 species protected in Shaanxi Province, 32 are not protected in China at the national level or considered globally threatened or near threatened by IUCN World Conservation Union.

None of the plant species of conservation concern is protected from international trade by listing in CITES. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 65 Final Report Appendix 5

Key to columns (left to right)

Column 1: Vernacular names. The follows Cronquist (James L. Reveal, 1998)

Column 2: Scientific name. The taxonomy follows Cronquist (Reveal 1998)

Column 3: Species protected in Shaanxi Province

Column 4: Global threat status adapted from IUCN (2004). G = Globally threatened CR=Critically Endangered EN=Endangered; VU=Vulnerable NT=Near Threatened LC=Least Concern; and DD=Data Deficient.

Column 5: RDB: China Red Data Book / Gymnospermae and Angiospermae (WANG SUNG et al. 2004). Note that the China Red Data Book was updated to match IUCN World Conservation listing standards in 2004.

Column 6: China: Class of national protection in China (List of the wildlife under special state protection, approved by the State Council on 10 December 1988, announced to the public by the Ministry of Forestry [now SFA] and the Ministry of Agriculture on 14 January 1989; Zhang Lei & Wang Hong Xiang 2001).

Family Scientific Name Shaanxi IUCN RDB China CITES English Common Name (Chinese) Gymnospermae Ginkgoaceae Ginkgo tree EN EN Pinaceae Qinling Fir Abies chensiensis VU Bashan Fir Abies fargesii var. fargesii VU Taibaishan Larch Larix chinensis EN Big-fruit Spruce Picea neoveitchii EN Maidiao Spruce Picea brachytyla  VU VU ൗ Cupressaceae Frank-leaf Juniper Juniperus pingii var. carinata NT Fork Juniper Juniperus sabina VU Taxaceae Yew Taxsus chinensis VU ൕ II Southward Yew Taxsus chinensis var. mairei ൕ ゃ⼀㰶㪠 Torreya fargesii ൖ Angiospermae Salicaceae Alp hair Willow Salix permollis CR Alp Willow Salix pseudotangii VU Juglandaceae Green Money Willow Cycloearya paliurus  Wild Walnut Juglans regia EN 66 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Family Scientific Name Shaanxi IUCN RDB China CITES English Common Name (Chinese) Long Fringe Walnut Juglans mandshurica ൖ Betulaceae China Nut-tree Corylus chinensis EN VU ൗ 棤導烔勂㨴 Carpinus shensiensis  Ulmaceae Blue Sandal Wood Pteroceltis tatarinowii NT ൗ Stick Hemiptelea davidi  㰘㪠 Zlcova schneideriana ൖ Olacaceae 槡䤽㪠 Schoepfia jasminodora  Aristolochiaceae 㦷抩泻⏫杒 Aristolochina manshuriensis VU ൖ Caryophyllaceae 䱵⼼㡯㉒噫 Arenaria giraldii VU Taibaishan Arenaria Arenaria taibaishanensis VU ◝▦☆勂 Cerastium limprichtii EN Huashan Stone Flower Gypsophila huashanensis VU Tetracentraceae 㻃槡㪠 Tetracentron sinensis ൖ Cercidiphyllaceae 扭氨㪠 Cercidophyllum japonium ൖ Ranunculaceae Single Leaf Grass Kingdonia uniflora VU ൕ Star Leaf Grass Circaeaster agrestis  NT ൖ Pistache Coptis chinensis VU ൖ All Pistache Coptis spp. ൖ Big Flower Thalictrum Thalictrum grandiflorum VU Qinling Aconitum Aconitum lioui  Shaanxi Aconitum Aconitum shensiensis  Taibaishan Aconitum Aconitum taipaiensis  Cakyces Reverse Anemone Anemone reflexa  Paeoniaceae All Paeonia sect. moutan spp ൖ Taibaishan Purple Speck Peony Paeonia rockii ssp. taibaishanica EN ൖ Lardizabalaceae ⃁㨫塳 Sinofranchetia chinensis  Berberidaceae 㫒⏎ₒ Sinopodophyllum hexandrum VU ൖ Magnoliaceae Polyanthus Magnolia Magnolia multiflora  CR Schisandraceae Chinese Schisandra Schisandra chinensis ൖ Papaveraceae 噂嚬⚅侺⪖ Corydalis anethifolia EN TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 67 Final Report Appendix 5

Family Scientific Name Shaanxi IUCN RDB China CITES English Common Name (Chinese) ⏘㨫℣厘冎兡坎 Meconopsis quintuplinervia  Saxifragaceae Qinling Rock Cabbage Bergenia scopulosa  VU 棤䞧摠叿 Chrysosplenium qinlingense EN ⮹䤌摠叿 Chrysosplenium taibaishanense CR ₫▦嗅塷⷟ Ribes mandschuricum ൖ Hamamelidaceae ⼀䤌㪠 Sinowilsonia henryi  VU ൖ 䓪燊㪢 Fortunearia sinensis  Eucommiaceae 㧫ↁ Eucommia ulmoides VU ൖ Rosaceae 炰煊 Rhodotypos scandena  Qinling Rosebush  Qinling Mountain Ash Sorbus tsinlingensis  Leguminosae 䱵⼼煓唹 Astragalis henryi  Astragalis membranaceus  ൗ Astragalis taipaishanensis  Wild sojia  ൖ 爎剔⼸煓唹 Hedysarum dentate-alatum  VU Hedysarun taipeicum  Huashan Saddle Tree Maackia hwashanensis  VU Taibaishan Vetch Vicia taipaica VU Rutaceae 㧄㮡 Zanthoxylum molle  ぬ煓㴦 Phellodendron chinensis ൖ Staphyleaceae 䣎㮡㪠 Tapiscia sinensis VU NT Tapisceae sinensia  Aceraceae Yellow Hair Maple Acer fulvescens VU Miaotai Maple Acer miaotaiense  VU VU ൗ Qinling Maple Acer tsinglingense VU Coin Maple Dipteronia sinensis NT ൗ Taibaishan Coin Maple Dipteronia sinensis var. taipeiensis ൗ Tiliaceae Long Round Leaf Tilia Tilia oblongifolia  Actinidiaceae Chinese Gooseberry chinensis ൖ Red Flesh Chinese Gooseberry Actinidia chinensis var. rufopulpa ൖ Theaceae Stewartia shensiensis  EN Elaeagnaceae 68 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Family Scientific Name Shaanxi IUCN RDB China CITES English Common Name (Chinese) Elaeagnus mollis EN ൖ Nyssaceae Davidia involucrata VU ൕ Araliaceae Eleutherococcus brachypus EN EN Eleutherococcus senticosus VU ൖ Eleutherococcus stenophyllus EN EN Umbelliferae Notopterygium incisum VU Ferula licentiana  Ericaceae Rhododendron dekatanum DD Rhododendron purdomii VU Rhododendron tsinlingensis  Sryracaceae Pterostyrax psilophyllis  VU Primulaceae Primula filchnerae  EW Primula giraldiana VU Primula tupestris  Oleaceae Fraxinus hupehensis VU ൖ Leatherleaf Clove Syringa pinnatifolia  VU ൗ Emmenopterys heenryi ൖ Genitanaceae Taibaishan Gentian Gentiana apiata VU Asclepiadaceae Cynanchum biondioides VU Boraginaceae Trigonotis giraldii VU Solanaceae Huashan Panax ( ) Physonchlaina infundibularis  Scrophulariaceae Pedicularis latirostris CR Gesneriaceae Petrocosmea qinlingensis CR ൖ Caprifoliaceae Kolkwitzia amabilis  Symphoricarpos sinensis  Cucurbitaceae Gynostemma pentaphyllus ൖ Camapanulaceae Echinocodon lobophyllus EN ൖ Adenophora petiolata  Codonopsis tsinlingensis  Theligonaceae TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 69 Final Report Appendix 5

Family Scientific Name Shaanxi IUCN RDB China CITES English Common Name (Chinese) Theligonum macranthum  Compositae Qinling Edelweiss Leontopodium giraldii VU Fleuret Edelweiss Leontopodum micranthum VU Saussurea acrophila VU Gramineae Psathyosachys huashanica CR ൕ Trisetum hainanense VU Araceae Arisaema brevipes VU Liliaceae Diuranthera chinglingensis VU Paris wenxianensis CR Taibaishan Fritillaria Fritillaria taipaiensis  Notholorion bulbuliferum  Trillium tschonoskii  ൗ Dioscoreaceae Dioscorea niponica ൖ Shield Leaf Yam Dioscorea zingiberensis ൖ Orchidaceae Androcorys ophioglossoides  VU ൖ II Brown Moccasin Flower Cypripedium calcicolum  CR VU ൖ II Habenaria glaucifolia  NT ൖ II Holopogon smithianus  EN EN ൖ II Neottianthe pseudo-diphylax  VU ൖ II Platanthera minutiflora  VU ൖ II Tipularia szechuanica  VU ൖ II Vexillabium yakushimense  VU ൖ II

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ANNEX 5: PROJECT AREA SEED PLANTS OF CONSERVATION CONCERN

[Source for species in Project Area: Shen, M. C. and S. S. Zhang. 2003. General Plan on Qinling Botanical Garden of Shaanxi (Qinling Ecological Demonstration Garden).]

Family English Common Name Scientific Name Shaanxi IUCN RDB China CITES (Chinese) Gymnospermae Ginkgoaceae Ginkgo tree Ginkgo biloba EN EN Pinaceae Qinling Fir Abies chensiensis VU Taibaishan Larch Larix chinensis EN Taxaceae Yew Taxsus chinensis VU ൕ II Southward Yew Taxsus chinensis var. mairei ൕ Bashan Yew Torreya fargesii ൖ Angiospermae Salicaceae Alp Willow Salix pseudotangii VU Juglandaceae Wild Walnut Juglans regia EN Betulaceae China Nut-tree Corylus chinensis EN VU ൗ 棤導烔勂㨴 Carpinus shensiensis  Ulmaceae Blue Sandal Wood Pteroceltis tatarinowii NT ൗ Stick Elm Hemiptelea davidi  Olacaceae 槡䤽㪠 Schoepfia jasminodora  Aristolochiaceae 㦷抩泻⏫杒 Aristolochina manshuriensis VU ൖ Caryophyllaceae 䱵⼼㡯㉒噫 Arenaria giraldii VU Tetracentraceae 㻃槡㪠 Tetracentron sinensis ൖ Cercidiphyllaceae 扭氨㪠 Cercidophyllum japonium ൖ Ranunculaceae Single Leaf Grass Kingdonia uniflora VU ൕ Star Leaf Grass Circaeaster agrestis  NT ൖ Shaanxi Aconitum Aconitum shensiensis  Taibaishan Aconitum Aconitum taipaiensis  Paeoniaceae All Peony Paeonia sect. moutan spp ൖ Paeonia rockii ssp. Taibaishan Purple Speck Peony EN ൖ taibaishanica Lardizabalaceae TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 71 Final Report Appendix 5

Family English Common Name Scientific Name Shaanxi IUCN RDB China CITES (Chinese) ⃁㨫塳 Sinofranchetia chinensis  Berberidaceae 㫒⏎ₒ Sinopodophyllum hexandrum VU ൖ Schisandraceae Chinese Schisandra Schisandra chinensis ൖ Papaveraceae ⏘㨫℣厘冎兡坎 Meconopsis quintuplinervia  Saxifragaceae Qinling Rock Cabbage Bergenia scopulosa  VU ₫▦嗅塷⷟ Ribes mandschuricum ൖ Hamamelidaceae ⼀䤌㪠 Sinowilsonia henryi  VU ൖ Eucommiaceae 㧫ↁ Eucommia ulmoides VU ൖ Rosaceae Shaanxi Rosebush Rosa giraldii  Leguminosae 䱵⼼煓唹 Astragalis henryi  Astragalis membranaceus  ൗ Astragalis taipaishanensis  Wild Soybean Glycine sojia  ൖ Hedysarun taipeicum  Aceraceae Qinling Maple Acer tsinglingense VU Coin Maple Dipteronia sinensis NT ൗ Actinidiaceae Chinese Gooseberry Actinidia chinensis ൖ Theaceae Stewartia shensiensis  EN Elaeagnaceae Elaeagnus mollis EN ൖ Nyssaceae Davidia involucrata VU ൕ Umbelliferae Notopterygium incisum VU Ericaceae Rhododendron purdomii VU Cucurbitaceae Gynostemma pentaphyllus ൖ Camapanulaceae Adenophora petiolata  Compositae Qinling Edelweiss Leontopodium giraldii VU Saussurea acrophila VU 72 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Family English Common Name Scientific Name Shaanxi IUCN RDB China CITES (Chinese) Liliaceae Taibaishan Fritillaria Fritillaria taipaiensis  Notholorion bulbuliferum  Trillium Trillium tschonoskii  ൗ Dioscoreaceae Dioscorea niponica ൖ Orchidaceae Calanthe fimbriata Cephalanthera erecta Cremasta mitrata Coeloglossum virilde II Cypripedium franchetti II Epipactis mairei II Gastrodia elata II Gymnadenia conopsea II Herminium monorchis II Linaris japonica Microstylis monophyllus Neottia acuminata Neottianthe cucullata II Orchis chusua II Platanthera minutiflora Platanthera minutiflora  VU ൖ II Spiranthes sinensis Tulotis ussuriensis II EN 6 VU I 5 I 0 Totals 22 EN 2 18 II 20 II 11 NT 3

TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 73 Final Report Appendix 5

ANNEX 6: QINLING MOUNTAINS VERTEBRATE FAUNA OF CONSERVATION CONCERN

1. Mammals of Conservation Concern Recorded in the Qinling

Key to columns (left to right) Column 1 Family name, , Scientific name and English name. The taxonomy follows (Liu Mingyu, Xie Yuhao, Ji Daming, Press, 2000). Column 2 CITES: Convention on the Trade of Endangered Species. Appendices I and II as adopted (valid from 14 June 2006). Column 3 CSRL: China Species Red List----Vol.1 Red List (Wang Sung and Xie Yan, Higher Education Press, 2004). CR( ):Critically Endangered, EN( ):Endangered, VU( ):Vulnerable, NT( ):Near Threatened, LC( ):Least Concern, NE( ):Not Evaluated. Column 4 China: Class of Protection in China (List of the wildlife under special state protection, approved by the State Council on 10 December 1988, announced to the public by the Ministry of Forestry [now SFA] and the Ministry of Agriculture on 14 January 1989; Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000). Column 5 Shaanxi: Class of Protection in Shaanxi Province, China (Protection List of the Wildlife in Shaanxi Province; Xu Taoqing, Cao Yonghan, Shaanxi Science and Technology Press, 1996; Zhang Youming, Liu Xinglian, Sun Changming, Xi’an Map Press, 2006; Xi’an Evening Newspaper, December 12, 2001)

Family / Chinese / English Scientific Name CITES CSRL China Shaanxi IUCN Name Erinaceidae Forest Hedgehog Hemiechinus hugh VU Talpidae Long Nosed Mole Talpa (Euroscaptor) VU longirostri Chinese Eared Shrew-mole Uropsilus soricipes VU EN Gansu Mole Scapanulus owen VU Soricidae Dusky Shrew Sorex sinalis VU VU Tiny Musk Shrew Crocidura suaveolens VU Horsfild’s Shrew Crocidura horsfildi VU Horsfild’s Shrew Crocidura vorax VU Salenski’s Shrew Soriculus salenskii EN CR Vespertilionidae Eastern Barbastella Barbastella leucomlas VU Painted Bat Kerivoula picta VU Cercopithecidae Golden Monkey Rhinopithecus roxellana VU I VU Canidae Wolf Canis lupus II VU ღ

Red Fox Vulpes vulpes hoole NT ღ

Raccoon-dog Nyctereutes procyonoides VU ღ Dhole (Asian Wild Dog) Cuon alpinus II EN II VU Ursidae Asiatic Black Bear Ursus thibetanus I VU II VU Ailuridae Red Panda Ailurus fulgens I VU II EN Ailuropodidae Giant Panda Ailuropoda melanoleuca I EN I EN Mustelidae 74 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Family / Chinese / English Scientific Name CITES CSRL China Shaanxi IUCN Name

Hog Badger Arctonyx collaris VU ღ Common Otter Lutra lutra I EN II Masked Palm Civet Paguma larvata NT ღ Felidae Lynx Lynx lynx EN II Prionailurus bengalensis II VU ღ Asia Golden Cat Profelis temminckii I CR II Clouded Leopard Neofelis nebulosa I EN I VU Leopard Panthera pardus I CR I Cervidae Forest Musk Moschus berezovskii EN I Cervidae Chinese Muntjac Muntiacus reevesi reevesi VU ღ

Tufted Deer Elaphodus cephalophus VU ღ Bovidae Takin Budorcas taxicolor VU II EN I bedfordi Serow Capricornis sumatraensis NE II VU Goral Naemorhedus goral I EN II Petauristidae Complex-toothed Fly Squirrel Trogopterus xanthipes EN VU xanthipes Muridae Vernay’s Climbing Mouse Vernaya fulva EN VU Hystricidae Short-tailed Porcupine Hystrix hodgsoni VU VU subcristata 3CR 1 CR 8 I 9EN 6 I 4 EN Total 35 8 4 II 21VU 8 II 9 VU 2NT

TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 75 Final Report Appendix 5

2. Birds of Conservation Concern Recorded in the Qinling

Key to columns (left to right) Column 1 Family name, Chinese name and Scientific name. The taxonomy follows (Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000). Column 2 English name: The name Follows < China Vertebrate Atlas >(Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000 > and < China Species Red List----Vol.1 Red List, Wang Sung and Xie Yan, Higher Education Press, 2004> . Column 3 CITES: Convention on the Trade of Endangered Species. Appendices I and II as adopted (valid from 14 June 2006). Column 4 CSRL: China Species Red List----Vol.1 Red List (Wang Sung and Xie Yan, Higher Education Press, 2004). CR( ):Critically Endangered, EN( ):Endangered, VU( ):Vulnerable, NT( ):Near Threatened, LC( ):Least Concern, NE( ):Not Evaluated. Column 5 China: Class of Protection in China (List of the wildlife under special state protection, approved by the State Council on 10 December 1988, announced to the public by the Ministry of Forestry [now SFA] and the Ministry of Agriculture on 14 January 1989; Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000). Column 6 Shaanxi: Class of Protection in Shaanxi Province, China (Protection List of the Wildlife in Shaanxi Province; Xu Taoqing, Cao Yonghan, Shaanxi Science and Technology Press, 1996; Zhang Youming, Liu Xinglian, Sun Changming, Xi’an Map Press, 2006; Xi’an Evening Newspaper, December 12, 2001)

Table 3 Threatened and/or Protected Birds of Qinling Mountains Family /Chinese/Scientific Common Name CITES CSRL China Shaanxi IUCN Name 烼䱠 Ardeidae

啜烼 Ardea cinerea Grey Heron LC ღ

嗘烼 Ardea purpurea Purple Heron LC ღ

⮶䤌烼 Egretta alba Large Egret LC ღ

⮫烼 Nycticorax nycticorax Night Heron LC ღ

焂䱠 Cicoiidae

煠焂 Ciconia nigra Black Stork II LC I

烽䱠 Threskiornithidae

㧀烽 Nipponia nippon Crested Ibis I CR I EN

䤌䛄烼 Platalea leucorodia Spoonbill II II

炼䱠 Anatidae

廕楐 Anser fabalis Bean Goose LC ღ

㠠⯃楐 Anser indicus Bar-headed Goose LC ღ

⮶⮸烔 Cygnus cygnus Whooper Swan NT II

忳煊炼 Tadorna ferruginea Ruddy Shelduck LC ღ

啀叇炼 Anas falcata Baikal Teal VU VU

冎⯃炼 Anas platyrhynchos Mallard LC ღ

㠠⣃炼 Spot-billed duck LC ღ Anas poecilorhyncha 烂炾 Aix galericulata Mandarin Duck NT II

烿䱠 Accipitridae 76 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Family /Chinese/Scientific Common Name CITES CSRL China Shaanxi IUCN Name 炱 Milvus korschum Black Kite NE II

忳合烿 Accipiter soloensis Chinese Goshawk LC II

楏烿 Accipiter nisus Eurasian Sparrowhawk LC II

㨍楏烿Accipiter virgatus Besra LC II

㣽抩䕑Buteo buteo Common Buzzard LC II

㹪厩䕑Buteo lagopus Rough-legged Buzzard LC II Grey-faced Buzzard Butastur indicus LC II 䋿叇䕑烿 Eagle 摠楤 Aquila chrysaetos LC I

䤌匸楤 Aquila heliaca Imperial Eagle I VU I VU

䱒烺Aegypius monachus Eurasian Griffon LC II

䤌⻍热Circus cyaneus Northern Harrier LC II

楋䱠Falconidae

䖝楋Falco cherrug Saker Falcon LC II EN

䑤楋Falco subbuteo Eurasian Hobby LC II

儱厩楋Falco vespertinus Red-footed Falcon LC II

䋿卛楋Falco columbarius Merlin LC II

儱楋Falco tinnunculus Common Kestrel LC II

楘䱠Phasianidae

嫏楘Ithaginis cruentus Blood Pheasent II LC II

儱合屡楘Tragopan temminckii Chinese Tragopan NT II White-crowned Long- Syrmaticus reevesii VU II VU 䤌␯栎⻍楘 tailed Pheasant 儱合枵炰Chrysolophus pictus Golden Pheasant LC II

烳䱠Gruidae

䋿烳Grus grus Common Crane LC II

炷䱠Otidae

⮶炷Otis tarda Great Bustard VU I VU

㧫烒䱠Cuculidae

儱剔⑳⯃烒Clamator Chestnut-winged LC ღ coromandus Cuckoo 炯烌䱠Columbidae White-bellied Green Treron sieboldii LC II 儱剔冎炯 Pigeon 烀炽䱠Strigidae

儱屡炽 Otus scops Scops Owl LC II

欕屡炽 Otus bakkamoena Collared Scops Owl LC II

㣽抩楤炽 Bubo bubo Eagle Owl LC II TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 77 Final Report Appendix 5

Family /Chinese/Scientific Common Name CITES CSRL China Shaanxi IUCN Name 㹪厩漋炽 Ketupa blakistoni Blakiston’s Fish Owl EN II EN

欕烉烯 Glaucidium brodiei Collard Pigmy Owlet LC II

㠠⯃烉烯 Glaucidium Barred Owlet LC II cuculoides 烿炽 Ninox scutulata Brown Hawk Owl LC II

兄先合⺞炽 Athene noctua Little Owl LC II

䋿㨦炽 Strix aluco Tawny Wood Owl LC II

栎勂炽 Asio otus Long-eared Owl LC II 剐䱠Muscicapidae ₘ恍炵楏 Paradoxornis Three-toed Parrotbill NT ღ paradoxus 䟊䦘 Garrulax canorus Hwamei II LC ღ 儱⣃䦇㊬炮 Leiothrix lutea Red-billed Leiothrix II NT ღ 䑤楏䱠Fringillidae 握儱㧀楏 Carpodacus vinaceus Vinaceous Rosefinch LC ღ 忳厇䋿楏 Pyrrhula erythaca Beavan’s Bullfinch NE ღ 煓⠘烘 Emberiza elegans Yellow-throated Bunting LC ღ 坬烘 Emberiza siemsseni Slaty Bunting LC ღ 2 I 1CR, 1EN, 5 I 3 EN Total 56 17 ⚗帰 5 II 4VU,4NT 33 II 4 VU

78 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

3. Amphibians of Conservation Concern Recorded in the Qinling

Key to columns (left to right) Column 1 Family name, Chinese name, English name. The taxonomy follows (Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000). Column 2 Scientific name; Taxonomy follows (Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000). Column 3 CSRL: China Species Red List----Vol.1 Red List (Wang Sung and Xie Yan, Higher Education Press, 2004). CR( ):Critically Endangered, EN( ):Endangered, VU( ):Vulnerable, NT( ):Near Threatened, LC( ):Least Concern, NE( ):Not Evaluated. Column 4 China: Class of Protection in China (List of the wildlife under special state protection, approved by the State Council on 10 December 1988, announced to the public by the Ministry of Forestry [now SFA] and the Ministry of Agriculture on 14 January 1989; Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000). Column 5 Shaanxi: Class of Protection in Shaanxi Province, China (Protection List of the Wildlife in Shaanxi Province; Xu Taoqing, Cao Yonghan, Shaanxi Science and Technology Press, 1996; Zhang Youming, Liu Xinglian, Sun Changming, Xi’an Map Press, 2006; Xi’an Evening Newspaper, December 12, 2001)

Class/Family/Chinese/English Name Scientific Name CSRL China Shaanxi IUCN Amphibia Hynobiidae Stream Salamander Batrachuperus pinchonii VU VU Taibai Stream Salamander Batrachuperus taibaiensis NE Pseudohynobius Qinba Salamander VU (Ranodon) tsinpaensis Cryptobranchidae Chinese Giant Salamander Andrias davidianus CR II CR 枓恂媍䱠Pelobatidae

⺞屡媍 Lesser Megophrys Megophrys minor LC ღ

⸬␃爎媍 Baoxing Toothed Toad Oreolalax popei LC ღ

⸐棤爎䴐媍 Ningshan Alpine Toad Scutiger ningshanensis EN ღ EN

奨䱠Ranidae

㭧合奨 Ventral-spined Frog Paa boulengeri VU II EN

₼⦌㨦奨 Chinese Forest Frog Rana chensinensis LC ღ 1 CR 1 EN CR 1 Total 3 VU 2 II 7 EN 2 3 LC VU 1 1 NE

TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 79 Final Report Appendix 5

4. Reptiles of Conservation Concern Recorded in the Qinling

Key to columns (left to right) Column 1 Family name, Chinese name, English name. The taxonomy follows (Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000). Column 2 Scientific name; Taxonomy follows (Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000). Column 3 CSRL: China Species Red List----Vol.1 Red List (Wang Sung and Xie Yan, Higher Education Press, 2004). CR( ):Critically Endangered, EN( ):Endangered, VU( ):Vulnerable, NT( ):Near Threatened, LC( ):Least Concern, NE( ):Not Evaluated. Column 4 China: Class of Protection in China (List of the wildlife under special state protection, approved by the State Council on 10 December 1988, announced to the public by the Ministry of Forestry [now SFA] and the Ministry of Agriculture on 14 January 1989; Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000). Column 5 Shaanxi: Class of Protection in Shaanxi Province, China (Protection List of the Wildlife in Shaanxi Province; Xu Taoqing, Cao Yonghan, Shaanxi Science and Technology Press, 1996; Zhang Youming, Liu Xinglian, Sun Changming, Xi’an Map Press, 2006; Xi’an Evening Newspaper, December 12, 2001)

Class/Family/Chinese/English Name Scientific Name CSRL China Shaanxi IUCN Reptilia Emydidae Reeves Turtle Chinemys reevesii EN EN Trionychidae Chinese Soft-shelled Turtle Pelodiscus sinensis VU VU Gekkonidae Taibai Wall Gecko Gekko taibaiensis LC Colubridae Stink Snake Elaphe carinata VU Round-spot Beauty Snake Elaphe davidi VU -spot Beauty Snake Elaphe mandarina VU Black Long Worm Elaphe schrenckii VU Taiwan beauty Snake Elaphe taeniura VU Ningshan Small-head Snake Oligodon ningshanensis VU Big-eye Snake Zaocys dhumnades VU Viperidae Fea’s Viper Azemiops feae VU European Viper Vipera berus VU Single Pit Viper Agkistrodon brevicaudus VU Qinling Pit Viper Agkistrodon qinlingensis NE 0 CR 1 EN EN 1 Total 11 VU 0 6 VU 1 1 LC 1 NE

80 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

5. Fishes of Conservation Concern Recorded in the Qinling

Key to columns (left to right)

Column 1 Family name, Chinese name and Scientific name. The taxonomy follows (Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000). Column 2 English name: The name Follows < China Vertebrate Atlas >(Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000 > and < China Species Red List----Vol.1 Red List, Wang Sung and Xie Yan, Higher Education Press, 2004> . Few fishes English name haven’t been recorded. Column 3 CSRL: China Species Red List----Vol.1 Red List (Wang Sung and Xie Yan, Higher Education Press, 2004). CR( ):Critically Endangered, EN( ):Endangered, VU( ):Vulnerable, NT( ):Near Threatened, LC( ):Least Concern, NE( ):Not Evaluated. Column 4 China: Class of Protection in China (List of the wildlife under special state protection, approved by the State Council on 10 December 1988, announced to the public by the Ministry of Forestry [now SFA] and the Ministry of Agriculture on 14 January 1989; Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000). Column 5 Shaanxi: Class of Protection in Shaanxi Province, China (Protection List of the Wildlife in Shaanxi Province; Xu Taoqing, Cao Yonghan, Shaanxi Science and Technology Press, 1996; Zhang Youming, Liu Xinglian, Sun Changming, Xi’an Map Press, 2006)

Shaan Family / Chinese/Scientific Name Common Name CSRL China IUCN xi bleekeri Sichuan Taimen EN II Brachymystax lenok tsinlingensis Qinling Lenok VU II Cobitidae Leptobotia orientalis Oriental Spined Loach NE ღ Cyprinidae Luciobrama macrocephalus Duck-bill Carp VU ღ

Ochetobius elongates NE ღ

Elopichthys bambusa NE ღ

Xenocypris fangi Fangi Nase VU ღ

Erythroculter oxycephalus Sharp-head Culter NE ღ

Erythroculter ilishaeformis Top-mouth Culter NE ღ

Coreius septentrionalis Northern Bronze-gudgeon EN ღ

Spinibarbus sinensis NE ღ

Scaphesthes macrolepis NE ღ

Schizothorax prenanti Prenant’s Schizothoracin NE ღ Pachycheiln’s Gymnodiptychus pachycheilus weiheensis NE Schizothoracin ღ Pachycheilns Gymnodiptychus pachycheilus EN Schizothoracin Bagridae Pseudobagrus pratti Slendel-body Bagrid Fish NE ღ Serranidae Siniperca kneri Kner’s Mandarin Fish NE ღ 0CR 3EN Total 17 2 II 14 0 3VU 11 NE TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 81 Final Report Appendix 5

ANNEX 7: PROJECT AREA VERTEBRATE FAUNA OF CONSERVATION CONCERN

[Source for species in Protected Area: Shen, M. C. and S. S. Zhang. 2003. General Plan on Qinling Botanical Garden of Shaanxi (Qinling Ecological Demonstration Garden).]

1. Mammals of Conservation Concern on the the Project Area

Key to columns (left to right)

Column 1 Family name, Chinese name, Scientific name and English name. The taxonomy follows (Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000).

Column 2 CITES: Convention on the Trade of Endangered Species. Appendices I and II as adopted (valid from 14 June 2006).

Column 3 CSRL: China Species Red List----Vol.1 Red List (Wang Sung and Xie Yan, Higher Education Press, 2004). CR(㨐☀):Critically Endangered, EN(䉡☀):Endangered, VU(㢢☀):Vulnerable, NT(扠☀):Near Threatened, LC(㡯☀):Least Concern, NE(㦹℗幓↿):Not Evaluated.

Column 4 China: Class of Protection in China (List of the wildlife under special state protection, approved by the State Council on 10 December 1988, announced to the public by the Ministry of Forestry [now SFA] and the Ministry of Agriculture on 14 January 1989; Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000).

Column 5 Shaanxi: Class of Protection in Shaanxi Province, China (Protection List of the Wildlife in Shaanxi Province; Xu Taoqing, Cao Yonghan, Shaanxi Science and Technology Press, 1996; Zhang Youming, Liu Xinglian, Sun Changming, Xi’an Map Press, 2006; Xi’an Evening Newspaper, December 12, 2001)

Family / Chinese / English Scientific Name CITES CSRL China Shaanxi IUCN Name

燈䱠 Talpidae Chinese Eared Shrew-mole Uropsilus soricipes VU VU Salenski’s Shrew Soriculus salenskii EN CR 䗃䱠 Cercopithecidae

ぬ摠€䗃 Golden Monkey Rhinopithecus roxellana VU I VU

䔻䱠 Canidae

弉 Dhole (Asian Wild Dog) Cuon alpinus II EN II EN

䐙䱠 Ursidae

煠䐙 Asiatic Black Bear Ursus thibetanus I VU II VU Viverridae 㨫⷟䖇 Masked Palm Civet Paguma larvata NT ღ

䖺䱠 Felidae

弈䖺 Leopard Cat Prionailurus bengalensis II VU ღ

焬䱠 Cervidae

㨦焬 Forest Musk Deer Moschus berezovskii EN I

⺞焑 Chinese Muntjac Muntiacus reevesi reevesi VU ღ 82 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Family / Chinese / English Scientific Name CITES CSRL China Shaanxi IUCN Name 㹪␯焎 Tufted Deer Elaphodus cephalophus VU ღ 䓪䱠Bovidae 利䓪 Takin Budorcas taxicolor bedfordi II EN I VU 液利 Serow Capricornis sumatraensis NE II VU 廹䖹䱠Hystricidae 廹䖹 Short-tailed Porcupine Hystrix hodgsoni subcristata VU VU 0 CR 3 EN 1 CR 1 I 6 I Total 12 7 VU 4 1 EN ⚗帰 3 II 8 II 1 NT 6 VU 1 NE

2. Birds of Conservation Concern in the Project Area

Key to columns (left to right)

Column 1 Family name, Chinese name and Scientific name. The taxonomy follows (Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000).

Column 2 English name: The name Follows < China Vertebrate Atlas >(Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000 > and < China Species Red List----Vol.1 Red List, Wang Sung and Xie Yan, Higher Education Press, 2004> .

Column 3 CITES: Convention on the Trade of Endangered Species. Appendices I and II as adopted (valid from 14 June 2006).

Column 4 CSRL: China Species Red List----Vol.1 Red List (Wang Sung and Xie Yan, Higher Education Press, 2004): CR = Critically Endangered; EN = Endangered, VU = Vulnerable; NT = Near Threatened; LC = Least Concern, NE = Not Evaluated

Column 5 China: Class of Protection in China (List of the wildlife under special state protection, approved by the State Council on 10 December 1988, announced to the public by the Ministry of Forestry [now SFA] and the Ministry of Agriculture on 14 January 1989; Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000)

Column 6 Shaanxi: Class of Protection in Shaanxi Province, China (Protection List of the Wildlife in Shaanxi Province; Xu Taoqing, Cao Yonghan, Shaanxi Science and Technology Press, 1996; Zhang Youming, Liu Xinglian, Sun Changming, Xi’an Map Press, 2006; Xi’an Evening Newspaper, December 12, 2001) TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 83 Final Report Appendix 5

Family /Chinese/Scientific Name Common Name CITES CSRL China Shaanxi IUCN 烼䱠 Ardeidae 啜烼Ardea cinerea Grey Heron LC ღ ⮫烼 Nycticorax nycticorax Night Heron LC ღ 烿䱠 Accipitridae 炱 Milvus korschum Black Kite NE II 忳合烿 Accipiter soloensis Chinese Goshawk LC II 楏烿 Accipiter nisus Eurasian Sparrowhawk LC II 㨍楏烿 Accipiter virgatus Besra LC II 䤌⻍热 Circus cyaneus Northern Harrier LC II 楋䱠 Falconidae 儱楋 Falco tinnunculus Common Kestrel LC II 楘䱠 Phasianidae 儱合屡楘 Tragopan temminckii Chinese Tragopan NT II 儱合枵炰 Chrysolophus pictus Golden Pheasant LC II 烀炽䱠 Strigidae 儱屡炽 Otus scops Scops Owl LC II 㠠⯃烉烯 Glaucidium cuculoides Barred Owlet LC II 剐䱠 Muscicapidae 䟊䦘 Garrulax canorus Hwamei II LC ღ 䑤楏䱠Fringillidae 煓⠘烘 Emberiza elegans Yellow-throated Bunting LC ღ 0 CR 0 EN 0 CR 0 I 0 VU 0 I Total 14 4 0 EN ⚗帰 1 II 1 NT 10 II 0 VU 12 LC 1 NE

84 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

3. Amphibians of Conservation Concern on the Project Area

Key to columns (left to right)

Column 1 Family name, Chinese name, English name. The taxonomy follows (Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000).

Column 2 Scientific name; Taxonomy follows (Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000).

Column 3 CSRL: China Species Red List----Vol.1 Red List (Wang Sung and Xie Yan, Higher Education Press, 2004). CR(㨐☀):Critically Endangered, EN(䉡☀):Endangered, VU(㢢☀):Vulnerable, NT(扠☀):Near Threatened, LC(㡯☀):Least Concern, NE(㦹℗幓↿):Not Evaluated.

Column 4 China: Class of Protection in China (List of the wildlife under special state protection, approved by the State Council on 10 December 1988, announced to the public by the Ministry of Forestry [now SFA] and the Ministry of Agriculture on 14 January 1989; Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000).

Column 5 Shaanxi: Class of Protection in Shaanxi Province, China (Protection List of the Wildlife in Shaanxi Province; Xu Taoqing, Cao Yonghan, Shaanxi Science and Technology Press, 1996; Zhang Youming, Liu Xinglian, Sun Changming, Xi’an Map Press, 2006; Xi’an Evening Newspaper, December 12, 2001)

Class/Family/Chinese/English Scientific Name CSRL China Shaanxi IUCN Name 椟潒潄䱠Cryptobranchidae ₼⦌⮶潄 Chinese Giant Salamander Andrias davidianus CR II CR 1 CR 1 CR Total 1 0 EN 1 II 0 0 EN 0 VU 0 VU

TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 85 Final Report Appendix 5

4. Reptiles of Conservation Concern on the Project Area

Key to columns (left to right)

Column 1 Family name, Chinese name, English name. The taxonomy follows (Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000).

Column 2 Scientific name; Taxonomy follows (Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000).

Column 3 CSRL: China Species Red List----Vol.1 Red List (Wang Sung and Xie Yan, Higher Education Press, 2004). CR(㨐☀):Critically Endangered, EN(䉡☀):Endangered, VU(㢢☀):Vulnerable, NT(扠☀):Near Threatened, LC(㡯☀):Least Concern, NE(㦹℗幓↿):Not Evaluated.

Column 4 China: Class of Protection in China (List of the wildlife under special state protection, approved by the State Council on 10 December 1988, announced to the public by the Ministry of Forestry [now SFA] and the Ministry of Agriculture on 14 January 1989; Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000).

Column 5 Shaanxi: Class of Protection in Shaanxi Province, China (Protection List of the Wildlife in Shaanxi Province; Xu Taoqing, Cao Yonghan, Shaanxi Science and Technology Press, 1996; Zhang Youming, Liu Xinglian, Sun Changming, Xi’an Map Press, 2006; Xi’an Evening Newspaper, December 12, 2001)

Class/Family/Chinese/English Scientific Name CSRL China Shaanxi IUCN Name Testudinata

潥䱠Trionychidae

₼◝潥 Chinese Soft-shelled Turtle Pelodiscus sinensis VU ღ VU

Serpentiformes

䃇奖䱠Colubridae

䘚枵奖 Taiwan Stink Snake Elaphe carinata VU ღ

煠䦘枵奖 Taiwan Beauty Snake Elaphe taeniura VU

0 CR 0 CR ⚗帰Total 3 0 EN 0 2 0 EN 3 VU 1 VU

86 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

5. Fishes of Conservation Concern on the Project Area

Key to columns (left to right)

Column 1 Family name, Chinese name and Scientific name. The taxonomy follows (Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000).

Column 2 English name: The name Follows < China Vertebrate Atlas >(Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000 > and < China Species Red List----Vol.1 Red List, Wang Sung and Xie Yan, Higher Education Press, 2004> . Few fishes English name haven’t been recorded.

Column 3 CSRL: China Species Red List----Vol.1 Red List (Wang Sung and Xie Yan, Higher Education Press, 2004). CR(㨐☀):Critically Endangered, EN(䉡☀):Endangered, VU(㢢☀):Vulnerable, NT(扠☀):Near Threatened, LC(㡯☀):Least Concern, NE(㦹℗幓↿):Not Evaluated.

Column 4 China: Class of Protection in China (List of the wildlife under special state protection, approved by the State Council on 10 December 1988, announced to the public by the Ministry of Forestry [now SFA] and the Ministry of Agriculture on 14 January 1989; Liu Mingyu, Xie Yuhao, Ji Daming, Liaoning University Press, 2000).

Column 5 Shaanxi: Class of Protection in Shaanxi Province, China (Protection List of the Wildlife in Shaanxi Province; Xu Taoqing, Cao Yonghan, Shaanxi Science and Technology Press, 1996; Zhang Youming, Liu Xinglian, Sun Changming, Xi’an Map Press, 2006)

Common Name CSRL China Shaanxi IUCN 漠䱠 Salmonidae

Qinling Lenok 䱵⼼兕潭漠 Brachymystax lenok tsinlingensis VU II (Manchurian Trout)

漳䱠 Cyprinidae

⮩潭极欛漋 Scaphesthes macrolepis NE ღ

0 CR 0 CR 0 EN Total 2 1 II 1 0 EN ⚗帰 1 VU 0 VU 1 NE

TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 87 Final Report Appendix 5

ANNEX 9: ACCOUNTS OF 15 OF 37 GLOBALLY THREATENED SPECIES IN THE QINLING

(i) All globally threatened species on the Project Area are included. (ii) All records are adapted in part from the IUCN RedList of Threatened Species and the World Conservation Monitoring Center. (iii) Brown Moccasin Flower Cypripedium calcicolum (smithii) (iv) Chinese Giant Salamander: Andrias davidianus (v) Ningshan Toad: Scutiger ningshanensis (vi) Soft-shelled Turtle Pelodiscus sinensis (vii) Crested Ibis Nipponia nippon (viii) Chinese Eared Shrew-mole Uropsilus soricipes (ix) Salenski’s Shrew Soriculus salenskii (x) Short-tailed Porcupine Hystrix hodgsoni (xi) Golden Snub-nosed Monkey Rhinopithecus roxellana (xii) Giant Panda Ailuropoda melanoleuca (xiii) Red Panda Ailurus fulgens (xiv) Asiatic Black Bear Ursus thibetanus (xv) Serow Capricornis sumatrensis (xvi) Golden Takin Budorcas taxicolor (xvii) Dhole Cuon alpinus 88 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

BROWN MOCCASIN FLOWER -- CYPRIPEDIUM CALCICOLUM (SMITHII)

Global Range: China endemic

China Range: Qinling Mountains but not the project area

Habitat and ecology: an orchid; flowering in June; growing at 2,400-3,300 m asl in Sichuan

Biomes: terrestrial

Habitats: forest – tropical to temperate shrubland – temperate grassland – upland, mountainous Conservation Status:

Global status: Critically Endangered64

CITES: II

China Red Data Book:

National protection:

Shaanxi protection:

Threats & constraints:

Research, survey and management recommendations

Conservation: Prepare and implement a Conservation Plan for

Research & monitoring: Assess the status of Cypripedium calcicolum in the Qinling and the Project Area;

Protection: Encourage actions to ensure that the species receives the fullest possible national and Shaanxi Province legislative protection.

Capacity building: Develop capacity to identify the species in the field and use GPS to record locations

64 adapted from IUCN World Conservation Union Species Survival Commission Red List of Threatened Species TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 89 Final Report Appendix 5

CHINESE GIANT SALAMANDER: ANDRIAS DAVIDIANUS

Geographic distribution

Global: Endemic to central, south and southwest China at elevations from 100 - 1,500m asl. China: found in scattered, fragmented habitats in large streams usually in forested areas; Qinling Mountains and the proposed Project Area

Habitat and Ecology: Largest of all amphibians (can exceed 1 m in length). Found in/near large streams in forest. Generation length 15 years; long-lived slowly increasing populations in the wild

Biomes: terrestrial, freshwater

Habitats: forest - temperate wetlands (inland) - permanent rivers/streams/creeks Conservation Status:

Red List Category: Critically Endangered (CR) Red List Criteria: A2ad Red List Rationale: Listed as Critically Endangered due to sharp population decline due to over-exploitation. Population size & trend: size unknown; wild population is decreasing rapidly; over 100,000 in captive breeding programs for market use

Protection Status

CITES: not listed

China Red Data Book: Critically Endangered (CR)

National protection: II

Shaanxi protection: n/a

Threats & constraints

Main threats are over-exploitation and wetland habitat degradation/destruction due to development and water quality degradation. Habitats are highly fragmented.

Research, survey and management recommendations

Research & monitoring: Population size and trend in the wild is not well studied. Monitoring programs are needed to track populations and habitat suitability. Where new PAs have protected riverine habitats and reforestation has been successful, feasibility of re-introduction should be investigated.

Conservation: Based on outcomes of above studies, consider options for expansion of the existing range of the species by experimental re-introduction of captive-bred animals.

Species survival develop and implement a species recovery plan for the Qinling

Capacity building Train personnel in habitat suitability assessment and species recovery planning and implementation; provide field protection, monitoring and research equipment as needed. 90 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Public awareness Carry out public awareness campaigns to alert the public to the conservation program and elicit public support for conservation of Chinese Giant Salamander and its habitats. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 91 Final Report Appendix 5

NINGSHAN TOAD: SCUTIGER NINGSHANENSIS

Geographic distribution

Global: Recorded only in Ningshaan County, southern Shaanxi Province, China at elevations from 1,970 - 2,550m asl. Only two specimens have ever been collected.

China: endemic to Ningshaan County, Shaanxi Province; known range lies just outside Niubeiliang National Nature Reserve

Habitat and Ecology: Found near streams among grasses in mixed forest. The breeding habitat is unknown, but it is presumably in streams by larval development.

Biomes: terrestrial, freshwater

Habitats: forest - temperate shrubland - temperate wetlands (inland) - permanent rivers/streams/creeks (includes waterfalls)

Conservation Status:

Red List Category: Endangered (EN)

Red List Criteria: B2ab(iii)

Red List Category Rationale: Listed as Endangered in view of its area of occupancy of less than 500 km2, with all individuals in only one location, and a continuing decline in the extent and quality of its habitat.

Population size & trend: size unknown; population is thought to be decreasing

Protection Status

CITES: not listed

China Red Data Book: Endangered (EN)

National protection:

Shaanxi protection: 

Threats & constraints

Main threats are a highly restricted range, human disturbance (including disturbance caused by human recreation, tourism, and possibly collecting). Key management constraints are lack of scientific knowledge of the ecology of the species, its distribution, habitat requirements and reasons for population decline.

Research, survey and management recommendations

Research & monitoring: Initiate field study to describe biology, ecology, and geographic distribution by season; prepare GIS databases and maps of locations; identify habitat preferences and delimit critical habitats with reference to the boundary of Niubeiliang NNR; quantify the trend of the wild population; identify and quantify threats to species survival. 92 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Conservation: Assess the extent of coverage of critical habitats by Niubeiliang NNR; make recommendations for extensions of Niubeiliang NNR to enhance protection; prepare a conservation action plan for implementation in and near Niubeiliang NNR; based on outcomes of studies of population numbers and distribution, consider options for expansion of the existing range of the species by translocation.

Species survival Urgently assess existing threats, focusing on agricultural and other land uses; plan and implement short- and long-term measures to reduce or eliminate threats; develop and implement a species recovery plan.

Capacity building Train Niubeiliang NNR personnel in habitat requirements of Ningshaan Toad and in the planned species protection and recovery methodologies; provide field protection, monitoring and research equipment as needed.

Public awareness Carry out public awareness campaigns to alert the public to the conservation program and elicit public support for conservation of Ningshaan Toad and its habitats.

Bibliography Fang, R.S. 1985. A new species of Scutiger from Shaanxi, China. Acta Herpetologica Sinica. 4(4):305-307.

Fei, L., Ye, C.-Y., Huang, Y.-A. and Liu, M.-Y. 1999. Atlas of Amphibians of China. Henan Science and Technical Press. .

MacKinnon, J., Meng, S., Cheung, C., Carey, G., Zhu, X. and Melville, D. 1996. A Biodiversity Review of China. World Wide Fund for Nature International. . TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 93 Final Report Appendix 5

CHINESE SOFTSHELL: PELODISCUS SINENSIS

Geographic distribution

Global: Native to China, Japan. Introduced in Hawaii and Guam

China: throughout eastern and central China from south to north

Habitat and Ecology: Found near shallow streams among riparian vegetation. Clutch size 3-28. Eggs hatch in 48-68 days. Up to 4 clutches annually. Sexually mature in 5-6 years; eats fish, crayfish, molluscs; benthic, burrows in stream banks

Biomes: terrestrial, freshwater

Habitats: wetlands (inland) - permanent rivers/streams/creeks

Conservation Status:

Red List Category: Vulnerable (VU)

Red List Criteria: A1d+2d ver 2.3 (1994)

Red List Category Rationale: Listed as Vulnerable based on pressures on the wild populations due to collection for food and to replenish captive populations

Population size & trend: population in the wild is unknown, thought to be decreasing; captive production is millions annually

Protection Status

CITES: not listed; Pelodiscus axenaria, Pelodiscus maackii, and Pelodiscus parviformis are all listed in Appendix III

China Red Data Book: Vulnerable (VU)

National protection:

Shaanxi protection: 

Threats & constraints

Main threats are collecting from the wild for captive propagation and sale in food markets, and destruction or degradation of riverine habitats.

Research, survey and management recommendations

Research & monitoring: quantify the trend of the wild population

Conservation: Assess the extent of coverage of critical habitats by the protected area system; increase coverage as needed; increase patrol and enforcement; restore freshwater habitats

Species survival plan and implement short- and long-term measures to reduce or eliminate threats; develop and implement a species recovery plan for the wild populations

Capacity building Train personnel to identify and protect critical habitats; provide field protection, monitoring and research equipment as needed. 94 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Public awareness Carry out public awareness campaigns to alert the public to the conservation program and elicit public support for conservation of Chinese Softshell and its habitats.

Bibliography see http://www.natureserve.org for description of species TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 95 Final Report Appendix 5

CRESTED IBIS NIPPONIA NIPPON

Global Range: Regional endemic re-discovered in May 1981 in Yang County, Shaanxi.

China Range: Wild population only in Yang County, Shaanxi on the south slope of the Qinling. Does not occur in the wild on the proposed Project Area but captive birds are held at the Wild Animal Breeding and Rescue Center on the Project area.

Habitat and Ecology: Feeds on fish and other aquatic organisms, worms, terrestrial invertebrates; nests in broadleaf deciduous trees near wetlands in Yang County of southwestern Shaanxi; foraging habitats include paddy, river shallows and reservoirs. Studies of nesting behavior and breeding success covered 24 breeding seasons65. Average clutch size was 2.84 ± 0.77; (n = 271) and varied probably due to variation in food abundance. Mean hatching success was 80.2% (range 35.7- 100%). Egg losses were caused by infertility or eggs being addled, predation, and human disturbance. Chick deaths were due to shortage of food, predation, and disturbance by villagers. Overall breeding success (65.6%) was high due in part to human conservation measures. Higher numbers of nest failures at altitudes between 500-900 m was caused by human activities, predation and lower stability of nest-trees.

Biomes: terrestrial, freshwater

Habitats: forest – temperate, broad-leaf deciduous wetlands (inland) - permanent rivers, streams, creeks, reservoirs, fishponds, paddies

Conservation Status:

Global status: Endangered (EN)

CITES: I

China Red Data Book: E

National protection: I

Shaanxi protection: 

Population size & trend: Known global population size has grown from seven in May 1981 to over 1,000 in 2006, over 920 in Shaanxi and 98 in Japan; first captively reared in 1981; first captive reproduction in 1989 at Beijing Zoo; Louguantai breeding center received 60 birds on 4 May 2002; population trend is positive, estimated at over 13% in the first 16 years of research66; population in Japan (98 birds in June 2006) included many natural-bred birds; wild population in China in 2006 was around 500 birds; captive population in China exceeded 420 birds in 2006; total population in China exceeded 920 birds in 2006.

65 Xiaoping Yu, Naifa Liu, Yongmei Xi, and Baozhong Lu. 2006. Bird Conservation International 16: 325-343 Cambridge University Press, published online 13 Dec 2006. 66 Lu Baozhong, Fu Wenkai, Zhai Tianqing, Zhang Yueming, Xi Yongmei and Huang Li. 1999. Study on population structure and population dynamics of Crested Ibis. In: Rare Bird---Crested Ibis, Proc. International Workshop on the Crested Ibis Conservation ’99. China Wildlfie Conservation Assoc., China Ornithological Soc., Shaanxi Wildlife Conservation Assoc. (eds). China Forestry Publishing House, Beijing. 96 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

The rapid population increase in recent years is due to protection, including legislation, management of population and habitat, and regular surveys and monitoring. A reintroduction programme has been started to protect the population from a chance catastrophe such as communicable diseases within its limited range5.

Threats & constraints: Main threats are habitat loss, human disturbance (including disturbance caused by human recreation, tourism, and hunting). The captive population at Louguantai Rescue & Breeding Center numbers over 220 and is at risk of high losses due to disease.

Research, survey and management recommendations

Update knowledge: Continue long-term field study to describe Crested Ibis biology, ecology, and regional distribution on seasonal and spatial bases; compile a database of all historic roost and nest records and locations. Prepare GIS databases and maps of locations and other records; identify habitat preferences and delimit critical habitats. Describe the status of the captive and wild populations.

Conservation: Prepare a review of protection actions, plans, methods and results. Prepare a National Crested Ibis Conservation Action Plan for implementation in the proposed Project area, in the Qinling nature reserves, and in other prospective re-introduction sites within the former range of the species; assess the extent of coverage of critical habitats (foraging, roosting, and nesting habitats) by the protected area system; make recommendations for extensions of protected areas to enhance protection

Species survival: The captive population of over 420 birds is excessive for breeding needs, increases disease risk, and calls for urgent implementation of a re-introduction program. Accelerate dialog with IUCN World Conservation Union, Species Survival Commission, Stork, Ibis & Spoonbill Specialist Group for release of captive birds: Cooperate with IUCN SSC to prepare national and international re-introduction plans. Target sites should be the best protected wetlands in northeast China and in former range states Russia and North and South .

Capacity building: Train reserve wardens and researchers to record and report nest and roost locations using GPS equipment, and to record locations and group sizes/compositions. Provide field study equipment as needed.

Public awareness: Carry out public awareness campaigns to alert the public to the conservation program and elicit public support for conservation of Crested Ibis and their habitats. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 97 Final Report Appendix 5

CHINESE EARED SHREW-MOLE UROPSILUS SORICIPES

Global Range: China endemic

China Range: species known only from a small area in Sichuan Province; records from the Project Area should be confirmed

Habitat and ecology: a shrew, foraging on invertebrate fauna in mature forests; ecology unknown

Biomes: terrestrial

Habitats: forest – sub-tropical to temperate

Conservation Status:

Global status: Endangered67; evaluated in 1996

CITES:

China Red Data Book: Vulnerable

National protection:

Shaanxi protection:

Threats & constraints: known only from one small area in Sichuan; threats presumed to be habitat destruction; constraint is lack of knowledge of the species;

Research, survey and management recommendations

Conservation: pending outcome of field studies

Research & monitoring: Determine status on Project Area through capture-mark-release field study; determine species range on the Project Area and in the Qinling

Protection: Encourage actions to ensure that the species receives the fullest possible national and Shaanxi Province legislative protection.

Capacity building: Work with CAS and SFD specialists on field study methods and research design

67 adapted from IUCN World Conservation Union Species Survival Commission Red List of Threatened Species 98 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

SALENSKI’S SHREW SORICULUS SALENSKII

Global Range: China endemic

China Range: species known only from the holotype in Sichuan Province; records from the Project Area might be incorrect

Habitat and ecology: a shrew, foraging on invertebrate fauna in mature forests; ecology unknown

Biomes: terrestrial

Habitats: forest – tropical to temperate

Conservation Status:

Global status: Critically Endangered68; evaluated in 2000

CITES:

China Red Data Book: Endangered

National protection:

Shaanxi protection:

Threats & constraints: known only from one small area in Sichuan; threats presumed to be habitat destruction; constraint is lack of knowledge of the species;

Research, survey and management recommendations

Conservation: pending outcome of field studies

Research & monitoring: Determine status on Project Area through capture-mark-release field study; determine species range on the Project Area and in the Qinling

Protection: Encourage actions to ensure that the species receives the fullest possible national and Shaanxi Province legislative protection.

Capacity building: Work with CAS and SFD specialists on field study methods and research design

68 adapted from IUCN World Conservation Union Species Survival Commission Red List of Threatened Species TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 99 Final Report Appendix 5

MALAYAN PORCUPINE HYSTRIX BRACHYURA

Global Range: Cambodia, China, India, Indonesia, Lao People's Democratic Republic, Malaysia, Myanmar, , Singapore, Thailand, Vietnam

China Range: throughout central and eastern China

Habitat and ecology: Nocturnal, remaining in underground burrows during the day; feeds on vegetation including tree bark

Biomes: terrestrial

Habitats: forest – tropical to temperate

Conservation Status:

Global status: Vulnerable (VU); A1d ver 2.3 (1994)

CITES:

China Red Data Book: Vulnerable (VU)

National protection:

Shaanxi protection:

Threats & constraints: loss of forest habitat; hunting for food and markets

Research, survey and management recommendations

Conservation: conserve forest habitat; reduce impacts of hunting through patrol and enforcement

Research & monitoring: determine status on Project Area through field study; determine species range on the Project Area and in the Qinling; determine population trend on Project Area and in Qinling

Protection: species is not protected at province or national level; ensure that species receives the fullest possible national and Shaanxi Province legislative protection.

Capacity building: Work with CAS and SFD specialists on field study methods and research design to estimate or index population numbers and trends 100 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

SICHUAN GOLDEN MONKEY RHINOPITHECUS ROXELLANA

Global Range: There are four species of golden monkey in the world, the Sichuan golden monkey, the Guizhou golden monkey, the Yunnan golden monkey and the Tonkin golden monkey. The former three species are endemic to China. The Sichuan golden monkey is considered to include three subspecies but these are now disputed pending more methodical geographic assessment of variation.

Chinese Range: endemic to Sichuan, Gansu, Shaanxi, and Hubei provinces. Except for the area in Hubei, they share habitat with giant pandas.

Habitat and ecology: forested mountains of the Qinling; mainly feed on wild fruits, leaves, and buds/sprouts of trees and shrubs; typically live in deciduous broadleaf forest and move to the mixed coniferous and deciduous broadleaf forest; seldom occupy coniferous forest; altitude range is limited to 1400-2500 m; 57 species of plants are eaten, including four deciduous broadleaf, three evergreen trees and shrubs; different parts and kinds of plants are eaten according to season based on the seasonal phenology of plants69.

Biomes: terrestrial

Habitats: forest – temperate, broad-leaf deciduous

Conservation Status:

IUCN Red List status: Vulnerable (VU)

CITES: not listed

China Red Data Book: E

National protection: I

Shaanxi protection: 

Population size & trend: In 1994 there were 39 troops and about 3800 individuals. Recent population is estimated at 4,000 in Zhouzhi, Ningshaan, Yangxian, Taibai, and Foping counties in Shaanxi Province, China; trend is thought to be stable.

Threats & constraints: Main threats are high market price for body parts, illegal hunting, habitat loss, human disturbance (including disturbance caused by human recreation and tourism); At least one troop in the Qinling was displaced from its home range by human disturbance70; constraints are lack of budget for patrol personnel, anti-poaching, and enforcement.

69 LI Baoguo and YANG Xingzhong. 1994. Recent Development in Studies of Sichuan Golden Monkey in Qinling Mountains. Chinese Primate Research and Conservation News Volume 3 (2). 70 Li Baoguo. 1999. Folia Primatologica 70:269-273. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 101 Final Report Appendix 5

Research, survey and management recommendations

Update knowledge: Continue long-term field study to describe biology, ecology, and regional distribution on seasonal and spatial bases; identify roosting and foraging sites and plot using GPS/GIS technology; identify habitat preferences and delimit critical habitats; prepare GIS databases and maps; plot boundaries of PAs in relation to critical habitats of wild populations.

Conservation: Prepare a review of protection actions, plans, methods and results; prepare a Golden Monkey Conservation Action Plan for implementation in the proposed Project Area, in the Qinling NRs, and in other prospective re-introduction sites within the former range of the species; make recommendations for extensions of protected areas to enhance protection of critical habitats.

Species survival: Assess status of captive populations; identify prospective sites for release of captive-bred monkeys considered surplus to needs for display in zoos; plan and implement a release program

Capacity building: Train reserve wardens to record and report monkey and roost locations and using GPS receivers, to record group sizes/compositions; provide field monitoring and research equipment as needed; train NR wardens in patrol and enforcement technologies.

Public awareness: Carry out public awareness campaigns to alert the public to conservation programs and elicit public support for conservation of Golden Monkeys and their habitats. 102 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

GIANT PANDA AILUROPODA MELANOLEUCA

Geographic distribution

Global: recorded only in Sichuan, Gansu and Shaanxi Provinces, China at elevations from 1,300 – 3,000 m asl

China: formerly endemic to a wide crescent of south, middle, and north China extending east-to-west from Sichuan to Zhejiang and south-to- north from Guangxi nearly to Beijing; currently restricted to nature reserves in Sichuan, Gansu, and Shaanxi Provinces

Habitat and Ecology: occupies mixed broadleaf and conifer forests with abundant bamboo; forages almost entirely on bamboo, consuming different species seasonally; migrates seasonally between higher elevation summer ranges and lower elevation winter ranges. Solitary except during brief mating season in late March-mid April and adult females with immature young; females produce one young every two years; populations increase naturally when habitats and animals are protected

Biomes: palearctic, indo-malayan

Habitats: forest – temperate/sub-tropical

shrubland – temperate/sub-tropical Conservation Status:

Red List Category: Endangered (EN)

Red List Category Rationale: continuing decline in the extent and quality of its habitat; isolated small populations

Population size & trend: 1,596 in the wild in 2004; 212 in captivity world-wide at year-end 2006 (up from 188 at year-end 2005); wild population is thought to be increasing after the second of three nation-wide censuses in 1977, 1989, and 2004

Protection Status

IUCN Red List: Endangered (EN)

CITES: Appendix I

China Red Data Book: Endangered (EN)

National protected species: I

Shaanxi Province protection: 

Threats & constraints: Primary threats are habitat loss/degradation due to farming, timber and other forest product harvest, infrastructure development, residential development, illegal hunting/trapping/snaring, accidental mortality, low population densities and fragmentation of populations by topography, roads, farms and other human activities. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 103 Final Report Appendix 5

Research, survey and management recommendations

Research & monitoring: Long-term field studies show that species survival in the Qinling is highly probable if critical habitats and Giant Pandas are protected. Further basic research is not as important as urgent action to implement conservation recommendations made by leading experts.

Conservation: China’s leading experts advise that population management measures should focus on the boundary between the farmlands at lower elevations and the lower forest habitats, or the zone of Giant Panda winter range. In this area it is important to assess the extent of coverage of critical habitats by existing nature reserves and extend reserve boundaries accordingly; Conservation action planning is needed at three scales71: Qinling reserves with Giant Pandas should develop species action plans as described below; Qinling nature reserves should also participate in preparation of a joint, landscape- scale conservation action plan for implementation in and around existing protected areas; finally, Qinling nature reserves should join reserves in Gansu and Sichuan to draft and implement an ecoregion conservation action plan for the Giant Panda.

Species survival Urgently assess threats to habitats on Giant Panda winter ranges, focusing on habitat degradation due to agricultural, forestry, and other land uses; plan and implement short- and long-term measures to reduce or eliminate threats; develop and implement winter habitat enhancement and recovery plans.

Capacity building Train NR personnel in habitat requirements of Giant Panda and in the planned species protection and recovery methodologies; train NR personnel and villagers in operation of homestay lodges and panda- friendly tourism practices.

Public awareness Carry out public awareness campaigns to alert the public to winter range conservation programs for Giant Panda and elicit public support for sustainable agriculture and forestry practices that reduce or eliminate impacts to panda winter habitats.

71 Dinerstein, E., C. Loucks and . 2004. Biological framework for evaluating future efforts in Giant Panda conservation. Pages 228-231 in Lindburg, D. and K. Baragona (eds.) 2004. Giant Pandas: Biology and Conservation. University of California Press. Berkeley and Los Angeles, CA.

104 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

RED PANDA AILURUS FULGENS

Geographic distribution

Global: occurs from Himalayan India through Nepal to Bhutan, Myanmar, China, and Lao People's Democratic Republic

China: from Yunnan northward through Sichuan to Gansu and Shaanxi Provinces

Habitat and Ecology: occupies mixed broadleaf and conifer forests with abundant bamboo; forages almost entirely on bamboo, consuming different species seasonally.

Biomes: Palearctic, Indo-malayan

Habitats: forest – temperate/sub-tropical

shrubland – temperate/sub-tropical

Conservation Status:

Red List Category: Endangered (EN)

Red List Category Rationale: continuing decline in the extent and quality of its habitat; isolated small populations

Population size & trend: population size unknown, trend presumed declining

Protection Status

IUCN Red List: Endangered (EN)

CITES: Appendix II

China Red Data Book: Endangered (EN)

National protected species: I

Shaanxi Province protection: 

Threats & constraints: Primary threats are habitat loss/degradation due to farming, timber and other forest product harvest, infrastructure development, residential development, illegal hunting/trapping/snaring, accidental mortality, low population densities and fragmentation of populations by topography, roads, farms and other human activities.

Research, survey and management recommendations

Research & monitoring: Long-term field studies have not been conducted in China; basic biology is not well known and population sizes and distribution are not TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 105 Final Report Appendix 5

studied; research projects are needed to establish basic biology and develop specific conservation plans.

Conservation: protection of Giant Panda winter and summer habitats would conserve habitats for Red Panda; until research information clarifies the ecology of Red Panda it is not appropriate to specify additional conservation measures.

Species survival Implement conservation action plans to remove threats to habitats of Giant Panda; plan and implement long-term studies of Red Panda to fill information gaps.

Capacity building Train NR personnel to identify and record locations of Red Panda; provide research funding together with equipment and materials for field study of Red Panda.

Public awareness Carry out public awareness campaigns to alert the public to winter range conservation programs for Giant Panda and elicit public support for sustainable agriculture and forestry practices that reduce or eliminate impacts to Giant Panda winter habitats: This will have spill-over benefits for Red Panda. 106 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

ASIATIC BLACK BEAR URSUS THIBETANUS

Global Range: , Bangladesh, Bhutan, Cambodia, China, India, (Islamic Republic of), Japan, Korea, Democratic People's Republic of, Korea, Republic of, Lao People's Democratic Republic, Malaysia?, Mongolia, Myanmar, Nepal, , Russian Federation, Taiwan, Province of China, Thailand, Viet Nam

China Range: throughout non-desert western China and central and eastern China

Habitat and ecology: tropical rainforest and oak forests are preferred habitats

Biomes: terrestrial

Habitats: forest – tropical to temperate

Conservation Status:

Global status: Vulnerable (VU); A1cd ver 2.3 (1994)

CITES: I

China Red Data Book: Vulnerable (VU)

National protection: II

Shaanxi protection:

Threats & constraints: Habitat loss due to logging, expansion of human settlements and roadway networks, and over-hunting for skins, paws and gall bladders are the main threats to the species.

Research, survey and management recommendations

Conservation: conserve forest habitat; reduce impacts of hunting through patrol and enforcement

Research & monitoring: determine status on Project Area through field study; determine species range on the Project Area and in the Qinling; determine population trend on Project Area and in Qinling

Protection: species is not protected at province level; ensure that species receives the fullest possible Shaanxi Province legislative protection.

Capacity building: Work with CAS and SFD specialists on field study methods and research design to estimate or index population numbers and trends TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 107 Final Report Appendix 5

GOLDEN TAKIN BUDORCAS TAXICOLOR

Global Range: Regional endemic with subspecies in Bhutan, China, India, and Myanmar; IUCN lists four subspecies, two of which occur in China, B. t. bedfordi and B. t. tibetana, the former in Qinling.

China Range: Qinling and Daba ranges southwestward through Sichuan to the mountains of eastern Yunnan and western (Xizang Autonomous Region); occupies the proposed Project Area and the greater Qinling region.

Habitat and ecology: an herbivore that occupies temperate shrublands and grasslands including edges of mountain forests; feeds mainly on wild fruits, leaves, and buds/sprouts of trees and shrubs; grazes on grass only to a limited extent

Biomes: terrestrial

Habitats: shrubland – temperate

grassland – upland, mountainous

Conservation Status:

Red List status: Endangered (EN)

CITES: II

China Red Data Book: ?

National protection: II

Shaanxi protection: 

Population size & trend: total population size is not known; population trend is undocumented but thought by local authorities (Forestry Department) and villagers to be increasing

Threats & constraints: Main threats are habitat loss and degradation caused by humans, illegal hunting, and disturbance caused by human recreation and tourism. Remaining wild predators are limited to wolf, leopard, and clouded leopard, the latter two only preying on young.

Research, survey and management recommendations

Update knowledge base: Information on Golden Takin was compiled by Jiayan72. Song Yanling et al.73 estimated winter Takin carrying capacity in Foping NNR at around 1,000 animals on 29,240 ha, or around 29 ha per head. Zeng Zhigao74 reported a new distribution record for the Sichuan Golden Takin in Majiashan NNR in far western Shaanxi.

72 Wu Jiayan. 1990. The Chinese takin. China Forestry Publishing House, Beijing, 192p. 73 Song Yanling, Dang Gaodi, Li Junsheng, Wang Xuejie, Zeng Zhigao, Wang Tiejun and Zhao Leigang. 2003. Estimating the carrying capacity of the Golden Takin at Foping National Nature resrve, Shaanxi, China. Acta Zoologica Sinica 49(4):445-450. 74 Zeng Zhigao, Gong Huisheng, song Yanling, Miao Tao and Ma Shunrong. 2005. A new distribution record of Sichuan takin Budorcas taxicolor tibetana in Qinling Mountains in Shaanxi, China. Acta Zoologica Sinica 51(4):743-747. 108 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Although the species is listed as Endangered, there have been few studies of its ecology in the wild. Populations in the Qinling are informally reported to be increasing but this might be due to increasing frequency of complaints from farmers about crop damage as farmland increasingly encroaches on Takin habitat. Long-term field study of Golden Takin is needed to describe biology, ecology, and regional distribution on seasonal and spatial bases and to estimate population sizes and trends; the status of the population on the proposed Project Area and in the greater Qinling needs to be quantified; assess the frequency and economic impacts of depredation on crops and/or orchards by Golden Takin. Prepare GIS databases and maps of Golden Takin distribution; identify habitat preferences and delimit critical habitats.

Conservation: Conduct review of protection actions, plans, methods and recommend improvements based on results of field studies; prepare and implement a Golden Takin Conservation Plan for implementation in the Project area and in the Qinling nature reserves; assess the extent of coverage of critical habitats by the protected area system; make recommendations for extensions of protected areas to enhance protection

Capacity Building: Train reserve wardens and researchers to report Golden Takin locations and use GPS equipment to record locations and group sizes/compositions. Provide field study equipment including camera- traps and radio-telemetry equipment for Golden Takin studies.

Public Awareness: Carry out public awareness campaigns to alert the public to the conservation program and elicit public support for conservation of Golden Takin and their habitats. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 109 Final Report Appendix 5

SEROW CAPRICORNIS SUMATRAENSIS

Global Range: Bangladesh, Bhutan, Cambodia, China, India, Indonesia, Lao People's Democratic Republic, Malaysia, Myanmar, Nepal, Thailand, Viet Nam (subspecies C. s. milneedwardsi found only in China)

China Range: dry forested regions of central and eastern China

Habitat and ecology: sub-tropical dry shrub forests

Biomes: terrestrial

Habitats: forest – sub-tropical to temperate

Conservation Status:

Global status: Vulnerable (VU); A2cd ver 2.3 (1994)

CITES:

China Red Data Book:

National protection: II

Shaanxi protection:

Threats & constraints: habitat loss/degradation, logging, hunting for food and medicinal use, regional international trade

Research, survey and management recommendations

Conservation: conserve dry forest habitat and forest edge; reduce impacts of hunting through patrol and enforcement

Research & monitoring: determine status on Project Area through field study; determine species range on the Project Area and in the Qinling; determine population trend on Project Area and in Qinling

Protection: species is not protected at province level; ensure that species receives the fullest possible Shaanxi Province legislative protection.

Capacity building: Work with CAS and SFD specialists on field study methods and research design to estimate or index population numbers and trends 110 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

DHOLE CUON ALPINUS

Global Range: to Indochina

China Range: A Dhole was recently reported captured in Jiangxi Province, south China. were once present in western China in the , but the species' current status in this area is unclear. Still found in Tibet, particularly in areas bordering the Ladakh region of India. Tibet Forestry Bureau has reported that dholes are still "common" in parts of south-east Tibet.

Habitat and ecology: habitats include primary, secondary and degraded forms of tropical dry and moist deciduous forest; evergreen and semi-evergreen forests; dry thorn forests; grassland-scrub-forest; and alpine steppe (above 3,000 m), but not desert regions; habitat selection influenced by availability of medium to large ungulate prey, water, presence of other large carnivores, human population levels and suitability of breeding sites (proximity to water, presence of suitable boulder structures and sufficient prey)75

Biomes: Palearctic, Indo-Malayan

Habitats: forest – tropical to temperate

shrubland – temperate

grassland – upland, mountainous

Conservation Status:

IUCN Red List status: Endangered

CITES: Appendix II

China Red Data Book: Vulnerable

National protected species: –

Shaanxi Province protection: n/a

Population size & trend: Fewer than 2,500 mature individuals remain in the wild and the declining population trend is expected to continue. Limited numbers throughout its range but poorly studied; population estimates not available.

Threats & constraints: Main threats include habitat loss, depletion of prey, interspecific competition, persecution and possibly disease transfer from domestic and feral dogs. There is no widespread exploitation for fur or other purposes, though medicinal use should be investigated in China.

Research, survey and management recommendations:

Research & monitoring: Compile a GIS database and plot maps of historic distribution; plan and implement a Dhole research program to describe ecology, biology, identify prey species, identify and locate dens and record locations of sightings or tracks; assess impacts on Dhole population of human activities.

75 adapted from IUCN World Conservation Union Species Survival Commission Red List of Threatened Species TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 111 Final Report Appendix 5

Conservation: Prepare and implement a Dhole Conservation Plan in the proposed Project Area and the Qinling based on results of the above research program.

Protection: Encourage actions to ensure that the species receives the fullest possible national and Shaanxi Province legislative protection.

Capacity building: Train reserve wardens and researchers to identify Dholes and use GPS equipment to record locations of sightings, dens, tracks, and scats. Provide field study equipment including camera-traps and radio- telemetry devices for Dhole studies. Carry out public awareness campaigns to alert the public to the conservation program and elicit public support for conservation.

Numbers of Species by Life Form in Qinling Nature Reserves

Total Total Vegetation Insect Fish Amphibians Reptiles Birds Mammals Vertebrate Fauna Fauna Taibaishan NNR 2,081 2,007 8 10 26 218 72 334 Foping NNR 1582 1,354 15 12 26 217 68 338 Zhouzhi NNR 800 (seed plant) 556 5 9 20 160 74 268 Changqing NNR 1,615 636 18 8 20 202 63 311 Zhouzhi Laoxiancheng 1,146 5 5 15 188 70 263 NNR Ningshan Daxiongmao 1,178 (seed plant) 13 20 168 72 273 PNR Guanyinshan 1,305 (seed plant) 15 12 26 217 68 338 PNR Tianhuashan 700 (seed plant) 13 20 155 72 260 PNR Sangyuan PNR 2,000 (seed plant) 12 59 30 101 Wuliangshan 1,300 (seed plant) 23 93 47 163 PNR Motianling PNR 1,800 (seed plant) 10 19 161 65 255 31 Niuweihe PNR 1,500 (seed plant) 7 families 14 families 270 sp. families Yingzuishi PNR 1,300 (seed plant) 15 32 74 69 190 Qingmuchuan (Majiashan) 406 (woody plant) 7 10 95 21 133 PNR Huangboyuan 1,375 (seed plant) 5 5 15 188 50 263 PNR Pingheliang 1,235 (seed plant) 479 6 16 171 49 252 PNR Niangniangshan 389 Panlong PNR (rare/endangered 8 12 139 32 191 plant) 36 Banqiao PNR 1,500 (seed plant) 12 families 23 families 248 sp. families Baofengshan 1,600 110 30 PNR Lueyang Dani 1,700 PNR Niubeiliang NNR 950 (seed plant) 7 20 123 60 210 Zhuhuan PNR 321 (woody plant) 18 8 20 205 63 314 Xushuihe PNR 1,500 100 Lingkou Dani 32 PNR Huashan PNR 2,500 (seed plant) 14 68 59 141 Longxian PNR 1,500 (seed plant) 40 200 *Three grey-shaded nature reserves are not yet gazetted TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 113 Final Report Appendix 5

ANNEX 11: FOREST PARKS IN THE QINLING MOUNTAINS

Management Area No. Name Level* Location* Forest Farm Name* Agency* (ha) 1 Louguantai N Zhouzhi County Shaanxi FD 27,487 Louguantai Experimental FF 2 Lishan N Lingtong District Xi'an Pref 2,359 Lishan FF 3 Taibaishan N Hu County Baoji Pref 2,949 Taibai Fengjin FF 4 Muwang N Zhen'an County Shangluo Pref 3,616 Muwang FF 5 Guiguling N Ankang Pref 5,135 Yunwushan FF 6 Wulongdong N Hanzhong Pref 5,800 Jinchiyuan FF 7 Tianhuashan N Forest Industry Dept Shaanxi FD 6,954 Ningxi FD 8 Taiping N Hu County Xi'an Pref 6,085 Taping FF 9 Tongtianhe N Matoutan Baoji Pref 5,235 Matoutan FD 10 Tiantaishan N Xingjiashan Baoji Pref 8,100 Xinjiashan FD 11 Jinsidaxiagu N Shangluo Pref 1,794 Sanjiaochi FF 12 HanzhongTiantai N Wentai District Hanzhong Pref 3,674 Wuxiang FF 13 Wangshunshan N Xi'an Pref 3,633 Wangshuanshan FF 14 Zhuque N Hu County Xi'an Pref 2,621 Louyu FF 15 Zhongnanshan N Chang'an District Xi'an Pref 4,799 Zhongnanshan FF 16 Ningdong Prov Ningdong Dept Shaanxi FD 3,000 Ningdong FD 17 Cuifengshan Prov Zhouzhi County Xi'an Pref 3,918 Yonghong FF 18 Yushan Prov Lantian County Xi'an Pref 1,393 Qingyu FF 19 Heihe N Zhouzhi County Xi'an Pref 4,941 Houzhenzi FF 20 Taixingshan Prov Chang'an District Xi'an Pref 6,016 Dayu FF 21 Hongqingshan N Xi'an Pref 678 Collective FF 22 Fengyu Prov Chang'an District Xi'an Pref 6,273 Fengyu FF 23 Honghegu Prov Hu County Baoji Pref 2,314 Yingtou FF 24 Huashan Prov Huaying Pref Weinan Pref 10,043 Huashan FF 25 Shigushan Prov Weinan Pref 1,420 Huayuan FF 26 Qiaoyu Prov County Weinan Pref 6,615 Collective FF 27 Shahuashan Prov Weinan Pref 4,022 Collective FF 28 Shangshan Prov Shangluo Pref 1,720 Shangshan FF 29 Canglongshan Prov Shangluo Pref 1,551 Hongqi FF 30 Tianzhushan Prov Shanyang County Shangluo Pref 71 Tianzhushan FF 31 Yuhuangshan Prov Shangnan County Shangluo Pref 7,490 Shuangshan FF 32 Yuxudong Prov Shangluo Pref 88 Shipo FF 33 Leigutai Prov County Ankang Pref 585 34 Lingyasi Prov Xunyang County Ankang Pref 101 Xunyang County Forestry Station 35 Shangbahe N Ningshaan County Ankang Pref 4,526 Shangbahe FF 36 Baohe Prov Hanzhong Pref 3,312 Baohe FF 37 Zibaishan Prov Liuba County Hanzhong Pref 4,662 Liuba County Forest Station 38 Xiangyu Pref Chang'an District Xi'an Pref 1,914 Collective FF 39 Queshandong Pref Baoji Pref 1,335 Panjiawan FF 40 Qingfengxia Pref Taibai County Baoji Pref 4,360 Jingkou FF 41 Taipingyu Pref Hua County Weinan Pref 560 Collective FF 42 Tianliushan Pref Lingwei District Weinan Pref 439 Collective FF Total 173,588 * Prov = province; Pref = Prefecture (or City); Dept = Department; FD = Forest Department FF = Forest Farm 114 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

ANNEX 12: FOREST FARMS IN THE QINLING MOUNTAINS

Area of industrial forest Personnel employed Forest (km2) Area (km2) Public Tech Total use Total Managers School forest Grads Total 39,694 37,064 28,856 21012 2833 5506 Xi'an Prefecture Zhouzhi County 528 512 433 227 39 19 Zhouzhi County 220 156 157 108 22 28 Hu County Taiping Forest Farm 121 119 81 171 58 17 Hu County 121 120 81 480 26 24 Lantian County Wangshunshan Fengjing Forest Farm 10 10 10 61 4 5 Lantian County Qingyu Forest Farm 13 11 19 39 7 4 Lantian County Zhongnan Forest Farm 62 47 47 80 13 9 Chang'an District Nanwutaifeng 89 69 63 80 18 30 Chang'an District 144 140 101 139 2 22 Chang'an District Da 92 83 75 32 10 9 Lingtong District Lishan Fengjing Forest Farm 24 18 20 241 30 61 Xi'an Prefecture Xiaowang 120 119 119 42 14 11 Baoji Prefecture Xinjiashan Forestry Department 256 256 189 288 40 53 Matoutan Forestry Department 347 347 256 188 21 106 Chencang District Panjiawan Forest Farm 303 299 90 54 7 18 Chencang District Balizhuang Forest Farm 114 108 69 62 5 5 Chencang District Pingtou Forest Farm 194 184 131 53 6 5 Chencang District Fengjiahe Forest Farm 184 163 118 58 7 12 Chencang District Fenggelin Forest Farm 148 148 99 54 4 13 Wuzhangyuan Forest Farm 48 48 33 98 4 23 Feng County Huangniupu Forest Farm 180 176 127 60 8 33 Feng County Hekou Forest Farm 169 163 129 56 4 34 Feng County Fengzhou Forest Farm 109 104 88 27 8 17 Feng County Liufengguan Forest Farm 171 167 136 54 8 32 Taibai County National Jingkou Forest Farm 51 51 35 80 3 12 Weibin District Guanyinshan Forest Farm 28 27 27 12 4 4 National Yingtou Forest Farm 77 76 57 96 14 32 Mei County National Taibaifengjing Forest Farm 193 191 174 215 116 Weinan Prefecture Lingwei District Huayuan Forest Farm 28 26 26 28 5 3 Hua County National Jindui Forest Farm 103 101 94 54 4 2 Huashan Forest Farm 108 108 107 30 17 Huayin Huayangchuan Forest Farm 37 37 29 40 3 13 Hanzhong Prefecture Wuxiang Forest Farm 51 42 30 125 15 11 Baohe Forest Farm 94 77 86 90 9 30 Dapan Forest Farm 99 96 71 41 8 6 Xiaohe Forest Farm 197 192 138 65 8 9 Zhongping Forest Farm 67 67 46 49 39 11 Qinglongsi Forest Farm 26 25 18 27 1 4 Xixiang Longchi Forest Farm 323 286 271 66 13 27 Madao Forest Farm 123 123 55 45 5 9 Huoshaodian Forest Farm 99 99 5 42 7 12 Miaotaizi Forest Farm 44 44 37 21 4 8 Zhakoushi Forest Farm 124 123 79 68 6 16 Sangyuan Forest Farm 125 125 115 50 7 43 Pingdu Forest Farm 56 56 54 82 7 9 Hanwangshan Forest Farm 52 52 51 109 5 3 Tiechangba Forest Farm 123 122 122 106 13 106 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 115 Final Report Appendix 5

Jinchiyuan Forest Farm 58 58 47 85 10 73 Sanchalin Forest Farm 52 52 42 67 9 48 Xihuaiba Forest Farm 30 30 26 21 6 19 Guanyinsi Forest Farm 27 27 27 19 6 15 Taposi Forest Farm 20 20 1 16 3 10 Zhangjiahe Forest Farm 69 69 45 58 6 46 Heitanzi Forest Farm 69 69 50 66 6 43 National Forest Farm 16 16 16 12 1 11 Ankang Prefecture Ningshaan County National Shangbahe Forest Farm 83 79 75 90 14 26 Xunyang County National Forest Farm 89 87 69 59 8 19 Fenghuangshan Forest Farm 96 89 60 24 5 7 Shichuan County Fenghuangshan Forest Farm 17 16 12 15 15 6 Shichuan County Yunwushan Forest Farm 32 32 22 18 4 8 Shangluo Prefecture Shangnan County Gucheng Forest Farm 88 81 58 96 31 Shangnan County Shipo Forest Farm 37 37 28 46 18 Shangnan County Shutangshan Forest Farm 31 31 23 51 23 Shangnan County Bao'an Forest Farm 68 60 46 38 13 Zhashui Yingpan Forest Farm 24 24 18 46 6 24 Zhashui Shizhen Forest Farm 33 33 26 21 4 4 Zhashui Fengzhen Forest Farm 160 160 113 20 5 4 Zhashui Jiujianfang Forest Farm 3 3 3 11 2 4 Shanyang County Hongqi Forest Farm 162 156 127 95 10 25 Shanyang County Tianzhushan Forest Farm 131 129 112 71 8 23 Shangnan County Sanjiaochi Forest Farm 103 90 34 61 11 10 Shangluo Erlongshan Forest Farm 93 93 63 52 5 10 Danfeng Shangshan Forest Farm 89 89 64 52 12 40 Danfeng Liuling Forest Farm 457 360 255 23 2 21 Zhen'an County Muwang Forest Farm 113 113 66 117 19 66 Zhen'an County Heiyaogou Forest Farm 39 39 27 179 13 47 Zhen'an County Tiechang Forest Farm 65 61 51 13 2 2 Shangnan County Shuangshan Forest Farm 52 52 33 137 7 11 Shaanxi Province Louguantai Experimental Forest Farm 682 580 298 237 71 55 Xibei Ag-Forestry Univ. Huoditang Teaching Exp. FF 20 20 20 14 4 2 Provincial Resource Department Gaoqiao Forest Farm 170 169 136 95 37 44 Shagou Forest Farm 153 150 125 101 42 40 Xunyang Forest Farm 155 151 139 111 47 56 Huoditang Forest Farm 158 158 152 105 46 46 Xinquang Forest Farm 201 200 175 102 37 32 Caiziping Forest Farm 355 352 268 336 44 109 Lianghe Forest Farm 304 302 230 353 48 95 Puhe Forest Farm 338 334 254 327 32 87 Huashuping Forest Farm 116 115 88 350 34 105 Zhongnan Forest Farm 129 127 71 188 35 63 Baiyun Forest Farm 133 133 80 154 30 47 Taochuan Forest Farm 458 455 339 158 28 46 Sujiagou Forest Farm 303 301 269 163 22 39 Huangbaiyuan Forest Farm 118 116 105 171 30 59 Erlangba Forest Farm 136 135 57 165 25 41 Taibaihe Forest Farm 104 103 96 168 24 43 Xiaonanping Forest Farm 91 89 77 106 15 38 Xiaogouhe Forest Farm 76 75 58 114 12 35 Donghetai Forest Farm 158 156 128 120 27 38 Miaoping Forest Farm 181 181 143 92 7 45 Xindianzi Forest Farm 119 118 94 76 4 36 Shangnanhe Forest Farm 105 101 64 83 5 37 13,164 12,590 9,499 9,861 1,450 3,038

116 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

ANNEX 13: STATUS OF FLORA IN THE QINLING MOUNTAINS

The research history of Flora in Qinling Mountains

The scholars of China and foreign countries have paid close attention to the abundant flora, long history of geological evolution and complicated natural environment in the Qinling Mountains. According to the most recent research data (Zhang Qin-Wei 2002), approximately 3446 species, 1007 genera and 198 families of seed plant occur in the Qinling mountain range. The characteristics of the native flora are outstanding. There are five endemic families, Ginkgoaceae, Sargentodoxaceae, Eucommiaceae, Staphyleaceae and Kingdoniaceae, and 44 genera in China. The geographic distributions of flora are complex and are related to other regions, and have evident temperate zone characteristics as well as strong transitional character.

For around 100 years, the flora of the Qinling region has been the subject of close attention by scholars in China and foreign countries. From the end of the 19th century to the early 20th century, many western scholars traveled to China to engage in various projects of science, culture and religion and these included plant resource investigation in China and Qinling region.

During the 149 years from 1800 to 1949, 232 persons of 14 western nations studied in 26 provinces, cities or municipalities of China, collecting plant specimens and investigating plant resources (Bi Lie- jue, 1983). Of these scientists, 19 persons visited Gansu Province, 14 traveled to Hubei Province, 10 persons visited Shaanxi Province and 3 persons visited Henan Province. Most of the scientists that visited Shaanxi Province for collection of specimens traveled to the Qinling region. The visiting scholars represented various disciplines, including botanist, zoologist, geologist and geographer, collector, doctor and priest. At the end of the 19th century, J. Giraldii, an Italian priest, regarded his missionary duties as secondary but collected a great number of plant specimens in the Qinling region. He went deep into the Guangtoushan area and indiscriminately collected plant specimens for 11 years from 1890 to 1990. The plant specimens were later taken to Italy and Germany. A majority of the vascular plant specimens were identified and published by a German named L. Didls. The specimens are now archived in many large botanical specimen museums in Europe, with the majority of specimens housed in Berlin (Fu Kun-jun, 1983). A Russian, T. H. , also collected plant specimens in the Qinling region on many occasions and the specimens are archived in Russia.

Since the 20th century, an American named F. N. Meyer was dispatched by the USA Department of Agriculture and he investigated agricultural plants in China from 1905 to 1908. He carefully researched soybean, and arrived Qinling region and many places in Shaanxi and Gansu Province. He came again later to Shaanxi Province and collected specimens in 1914. From 1914-1923 a Frenchman named E. Licent collected plant specimens in the Qinling region and many places in Gansu Province (Wang He-sheng 1997). These specimens were sent to every national specimen museum or collection where they were identified by western botanists. For this reason many Qinling plants were named by western botanists and much of the literature was first published overseas. This causes great difficulty in researching botanical taxonomy and the for Chinese scholars.

Before the 1930s research on flora of the Qinling was limited to accumulating general information. After this, additional research gradually began. A German named H. Handel Mazzetii (1931) first divided China into 8 regions, not including Xinjiang and Xizang, and deal with plant flora in Qinling region on the basis of plant species and genera.

Professor Hu Xian- (1933) divided Chinese plants into six parts in ಯWorld Plant Geographyರ, of which the China north region included Shaanxi Province. The primary tree species of representative upland is listed in the book, and compared with tree species in same latitude region of Eurasia, and indicated the cold climate is a limiting factor of plant communities in north China where growth the North Temperate Zone plant and plant communities is summer green broadleaf forest.

Prof Liu Shen-E made important contributions to plant flora research in north China. The Northwest Botany investigating place of state-run Peiping Academy was established at Shaanxi Wugong (now Yangling demonstration section) in first 30 years of the 20th century. Here Prof Liu Shen-E, Prof TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 117 Final Report Appendix 5

Rong, Prof Kong Xian-Wu, Prof Zhong Bu-Qiu and Prof Cui You-Wei worked early or late. They collected how many ten thousand plant specimens, and in succession published a series of papers or monographs about plant flora and vegetation in the Qinling Mountains. Prof Liu Shen-E (1934) published ಯPlant Geography Generality in North and West Chinaರ, in which phytogeography was categorized in north and west China into 5 sections, of which the southwest borderline of Chinese north section was aligned along the main ridge of the Qinling Mountains. He noted that the south slope of the Qinling was like a southern plant churchyard. The southeast border was aligned along the and Huaihe River. This viewpoint has become a fundamental concept of phytogeography in north and west China.

Prof Huang -Wei (1940, 1944) published “List of Plants of Huashan᧨Shensi, with Keys of Genera and Species”, in which the detailed research was made for species, morphology, habitat and distribution of plants in the Huashan Mountains.

In a word, early researches on phytogeography in Qinling are compared briefly, and researches on many basic problems are in their early stages. Phytogeography has been explored in the Qinling, and many researches on community composition, basic flora characteristics, plant species origin, and geographic components of flora have been carried out. These researches establish a solid foundation for later detailed research on plant flora geography in Qinling.

Since 1949, researches on botany have developed more quickly. To provide a facility for research development, Northwest Agriculture and Biology Research School, Chinese Academy of Sciences were re-established at the original Northwest Plant Research School in 1950. The Northwest Agriculture, Biology and Soil Research School was rebuilt in 1953, and included a Geo-botany Research Laboratory that began research on phytogeography. Since that time, Northwest Botany Research School and Northwest Water and Soil Research School, Chinese Academy of Sciences re- established and founded the Eco-geography Research Laboratory.

Beginning in 1952 botany researchers came from Chinese Academy of Sciences, Northwest University, University, Northwest Normal University, Northwest Botany Research School and Northwest Water and Soil Research School, Chinese Academy of Sciences, and penetrated deep into the Qinling region. They reviewed scientific research and carried out research, and disseminated information on botany, flora, and vegetation in the Qinling while producing a great lot of research results.

From the 1950s to 1970s, Qinling biological resource investigating group which compose with many experts collected tens of thousands of plant specimens early or late providing a basis for botany research in the Qinling, and creating conditions for development and use of resource plants in Qinling.

In this period, primary results included: “Research on Forest Vegetation on the North Slope of the Qinling” was published by the Forestry Office, Northwest Farming and Forestry Ministry (1958); Zheng Mian (1958) published his “Botany Survey in Shaanxi Province”; -Jie (1963) published “Research on Primary Forest Communities and Ecological Characteristics on Nanwutai Region in Qinling North Slope”; Zhang Zhen-Wan and Cui You-Wei (1963) raised “Draft of Vegetation Divisions in Qinling Region” and Qian Guo-Xi (1964) published “Analysis on Vertical Distribution of Forest Plant in Qinling”.

Besides the results, some special papers also were published which did not deal with phytogeography in the Qinling region, but stimulated further research on botany, flora, and vegetation. For example, “Viewpoint of Vegetation Division in China” was published by Nature Division Committee, Chinese Academy of Sciences (1960); Prof Wu Zheng-Yi (1965) published “Tropic Blood Relations of botany flora in China” which showed in-depth analyses of the origin and character of the botany of China and become required reading for students of Chinese botany. A series of research monographs was published in succession at one time, in which the “Handbook of Wildness and Available Plants in Chinese Northwest” was written by Northwest Biology and Soil Research Institute, Chinese Academy of Sciences (1954); “Geographical Researches in Hanjiang River Drainage Area” was written by Geography Research Institute, Chinese Academy of Sciences (1957); Prof Xue-Yu (1960) write “Chinese Vegetation”; “Geography Dictionary in Hanzhong, Shaanxi Province” was written by geographical Department, Shaanxi Normal University (1966); and Prof Cheng Rong (1962) write 118 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

“Forest Botany Geography in China”. These monographs analyzed and studied botany and flora in the Qinling region from different points of view.

It is especially worth noting that the “Botany Dictionary of Qinling”, published by the Science Publishing Company, was written by the Northwest Botany Research Institute in 1974-1985. The dictionary detailed records and narrates the botany resource in the Qinling region for the first time and three volumes have been published, of which first volume has 5 books. The dictionary detailed morphological characteristics, geographical distribution, and primary application of 1,000 genera and 3,000 species of seed plants and created the right conditions for encouraging further study of botany and flora. Based on these publications the research of the seed plant flora gradually tend towards completeness in the Qinling region.

At the beginning of the 1980s, “Chinese Vegetation” (1980) and “Chinese Natural Geography---- Botany Geography” (1983), by Prof Wu Zheng-Yi were published in succession. The botany and floras, and especially the basic character of seed plant flora, are profoundly discussed in the two monographs which represent the highest level of research on botanical geography in China. Since that time, research on phytogeography in the Qinling has come into a new era and voluminous research on botany flora and vegetation appeared and monographs on flora and vegetation were published. For example, “Drawing and Dictionary of Farmland Weed in Shaanxi” (1984) was written by Weinan Farming and Forestry Scientific Research Institute, Agropastoral Office, Shaanxi Province; “Forest in Shaanxi” was published by forest editor committee of Shaanxi (1989); “Comprehensive Survey of the Taibai Mountain Preserve” was published by Forestry Office, Shaanxi Province (1989); Prof Niu Chun-Shan (1990) compiled and published “Tree Dictionary in Shaanxi”; Wei-Zhong and Yu Zhao-Ying (1989) compiled “First Rare and Endangered Protected Plants in Shaanxi Province”.

At that time, many scholars reviewed and studied many aspects of botany and flora in different regions of the Qinling. For example, Ying Jun-Sheng and Zhang Zhi-Ying studied the Taibaishan Mountain region; Fu Sheng-Jun investigated the Guangtoushan Mountain region; Lei Ming-De, Tian Lian- and Zhang Qin-Wei investigate Shuihe river valley on the Qinling south slope; Kang -Yi studied the Xunhe river valley; Northwest University investigate in Nanwutai region; Shaanxi Normal University investigate in Xunyangba region; Northwest Forestry University investigate in Huodidang region. From these investigations and studies, many papers on botany and flora were published.

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ANNEX 14: STATUS OF VEGETATION IN THE QINLING MOUNTAINS AND PROJECT AREA

1 Area and Range of Qinling Mountains

Qinling Mountains can be viewed on two different scales, a broad scale and a narrow scale, as described below.

The broad scale Qinling Mountains lie across middle China, is east and west tend to towards great mountain chain, from Xiqing Mountain in Qinghai province and after south of Gansu province and mid of Shaanxi province to across Hubei province, Henan province and Anhui province. The Qinling Mountains span four provinces (Shaanxi province, Gansu province, Henan province and Hubei province) and 74 counties or cities (Table 1), and are located at 104°30᧩112°52 E and 32°50᧩34°45 N. The overall length of Qinling Mountains is 1,600 km; the breadth from south to north is from tens of kilometers to 200-300 km. The acreage of Qinling Mountains is over 50,500 km2, the vigor is boundless and pageantry is magnificent. The broad Qinling Mountains is a divide between the drainage areas of the Yangzi and Yellow Rivers. The south slope of the Qinling lies in the sub- tropic climate, where natural conditions are typical of southern latitudes. The North Slope lies in the warm temperate zone, where natural conditions are typical of northern latitudes. The characteristics of agriculture production have marked differences on the south and north slopes of the Qinling Mountains. Therefore in a period of time, people consider the Qinling Mountains as the geographic boundary of southward and northward in China.

Table 1: City and County in Broad Qinling Mountains

Area (City, County (City, District) all in County (City, District)part in Province State) Qinling Mt. Qinling Mt. Shangzhou Shangxian, Luonan, Shanyang, Danfeng, Zhenan, Zhashui and Hanzhong Shangnan Mianxian, Hanzhong, Chenggu, Lueyang, Liuba and Foping Yangxian, Xixiang and Ankang Ningqiang Baoji Ningshan Ankuang, Xunyang, Hanyin and Shaanxi Shiquan Weinan Fengxian and Taibai Weibin, Baoji, Meixian and Xi`an Qishan Linwei, Huaxian, Huayin and Tonggua Zhouzhi, Huxian, Changan, Lintong and Lantian Tanchang, Wudou, Wenxian, Kangxian, Chengxian, Lixian, Xihe, Liangdang and Huixian Gansu Gannan Zhouqu Diebu Tianshui Wushan Tianshui and Gangu Dingxi Zhangxian and Minxian Lingbao and Lushi Shaanxian, Yima and Yanchi Luoyang Luanchuan Luoning, Songxian, Wuyang, Yichuan and Yiyang Henan Lushan, Wuzhou and Baofeng Nanyang Xixia, Xichuan, Neixiang and Fangcheng and Zhenping Nanzhao Hubei Yunxi Yunxian Sum 15 34 40

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The narrow scale Qinling Mountains cover only the mid section of the Qinling Mountains, which lie in southern Shaanxi Province in the mountainous region between the Wei River and the . Its eastern boundary is Ba River and , and its western boundary is .

The Shaanxi Qinling Mountains make up most of the broad scale Qinling Mountains, and lie between the Guanzhong plateau and the Han River valley. The Shaanxi Qinling Mountains have four apices, one whose north point is south of seat, a south point at Xunyang County seat, an east point at Fushui of Shangnan County and the west point is Guojiaba of Lueyang County. The geographic coordinates are 32°40’–34°35’N and 105°30’–110°05’E. The acreage is 55,000 km2, account for about 25% of the total area of Shaanxi Province and including all of 13 counties and part of 22 counties in Shangzhou City, Hanzhong City, Ankuang City, Baoji City, Xianyang City, Weinan City and Xi`an City (Table 2). The population is about 5,000,000, accounting for 1/7 of the total population of Shaanxi Province.

Table 2: City and County in Shaanxi Qinling Mountains

Whole area of county Part area of county City in Shaanxi Qinling Mountains in Shaanxi Qinling Mountains Shangxian, Luonan, Shanyang, Danfeng, Shangzhou Zhenan, Zhashui and Shangnan Mianxian, Hanzhong, Chenggu, Yangxian, Hanzhong Lueyang, Liuba and Foping Xixiang and Ningqiang Ankuang Ningshan Ankuang, Xunyang, Hanyin and Shiquan Baoji Fengxian and Taibai Weibin, Baoji, Meixian and Qishan Zhouzhi, Huxian, Changan, Lintong and Xi’an Lantian Weinan Linwei, Huaxian, Huayin and Tonggua Sum 13 23

2 Vegetation in Qinling Mountains

The vegetation in the northern Qinling Mountains is deciduous-broadleaf forest in the warm temperate zone and the vegetation in the south is the northern sub-tropic type or evergreen broadleaf. Because the hypsography of Qinling Mountain is rising, there is evidence of peak distributions of forest vegetation.

The vegetation of Qinling Mountains has a unique character. For example, red birch forest can form a distinct forest zone, the species and genus of red birch are relatively complex and the peak altitude zone flora is relatively rich in the mountain region. Besides the character of the flora, the nature of vegetation transition is marked. For example, Pinus tabulaeformis, Quercus liaotungensis and Quercus aliena in Chinese north flora have a wider distribution, but many evergreen broadleaves, Pinus massoniana, Cunninghamia lanceolata, Vemicia fordii and Sapium sebiferum in subtropical latitudes are very abundant. Otherwise, there are vegetation component in southwest mountain region of China also.

There are many similar things in the peak distribution law of vegetation between the south and north slopes in the Qinling. But because of the influence of the warmer and wetter climate on the south slope, the breadth height of vegetation zone on south slope is lower than on the north slope, a discrepancy of about 100-150m. The basal zone is controlled by level distribution of climate vegetation. There is the deciduous-broadleaf forest and arborvitae forest at 500–800m on the north slope, but there is the deciduous-broadleaf forest with evergreen broadleaf at 500–800m on the south slope.

According to the vertical distribution of vegetation in Taibaishan, the vertical distribution law of vegetation in Qinling Mountain is as shown in Figure1. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 121 Final Report Appendix 5

3767 m

I

3500 m

H

3000 m

G

F 2700 m

2400 m E

2200 m

D

1500 m

C

B 800 m

A 500 m

South slope North slope Fig 1 Vegetation vertical distribution in Qinling Mountains

(a) A: Thin-broadleaved forest zone with evergreen broadleaf (b) B: Drought-enduring deciduous broadleaved and Platycladus orientalis forest zone (c) C: Quercus variabilis Bl. forest zone (d) D: Pine and deciduous broadleaf mixed forest zone (e) E: Red birch (Betula albo-sinensis) forest zone (f) F: Cowhide birch (Betula albo-sinensis var. septentrionalis) forest zone (g) G: Fir (Abies fargesii) forest zone (h) H: Taibaishan larch (Larix chinensis) forest zone (i) I: Alpine shrub meadow zone

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2.1 Alpine Shrub Meadow Zone

Above 3,400 m elevation in the Qinling, the shrub-meadow vegetation replaces forest. There is generally meadow vegetation above 3,500 m. There is a mosaic distribution of shrub and meadow at 3,400-3,500 m. There is obvious glacier relic vegetation above 3,400 m. Falling rock has caused a rubble surface in some areas and riprap sands are the main physiognomy feature of this zone. The soil is alpine meadow soil and annual precipitation is 750-800 mm. The height of shrubs is less than 50 cm and the shrubs display mainly prostrate growth forms. The most frequent species are Rhododendron fastlgiatum, Salix cupularis and Salix fructuosa; and the other species are Spiraea alpine and Rhododendron fortunei. The distribution of meadow vegetation is even and frequent species are Kobresia spp., Carex spp., Rhodiola spp., and so on. There are Stephanachne nigrescens, Deyeuxia langsdorffii, Poa spp. and Ranuanculaceae species distributed evenly throughout the region. Exclusion phanerogam, there are many lichen species that are used as medicinal plants including Cladoia vermiculata, Cladoia alpestris and others. The primary plant communities are Form. Rhododendron capitatum and Form. Salix cupularis. There is the distribution of Form. Spiraea mongolica at lower elevations. There is Form. Kobresia graminifolia and Form. Polygonum sphaerostuchyum in flat areas.

2.2 Taibaishan larch (Larix chinensis) forest zone

Taibaishan larch (Larix chinensis) forest is found mostly at 3000-3400 m. The soil is sub-alpine meadow-forest soil; the soil layer is barren and 20-30 cm. Annual precipitation is 800-900mm. The larch grow slowly, the height of plants of 150-200 years in age is only a few meters and the diameter at breast height is 10-18 cm. The plant growth is fine at the lower edge of the forest zone, the height of plants 140 years old is 10-12 m and the diameter at breast height is 20-25cm.

There are ten additional shrubs in the forest which have sprawl, mat-shape or upright growth forms but all plants are dwarf forms. The familiar shrubs are Spiraea mongolica, Lonicera webbiana, Lonicera hispida, Salix cupularis, Acanthopanax giraldii, Potentila arbuscula var. veitchii, Lonicera szeshuanica, Ribes glaciale, Rosa tsinglingensis, Salix wangiana, Sabina squamata var. wilsonii, Rhododendron capitatum, Berberis sp. and flosculosus. The familiar families are Compositae and Cyperaceae which account for 30% of all plant species. They are Carex capoliformis, C. schneideri, Kobresia graminifolia, Saussuria iodostegia, Anaphalis aureopunctata, Polygonum sphaerostachyum, , Pedicularis muscicola, Galium var. hoffmeisteri and Fragaria gracilis.

2.3 Fir (Abies fargesii) forest zone

The basic species is Bashan fir (Abies fargesii). The distribution of the fir forest is at elevations of 2,800-3,000 m on the north slope and 2,650-3,000m on the south slope. Because the landform is strongly wind-eroded and denuded by movement of sand and rock, the glacial physiognomy is not evident, and the soil is hilly ash-palm soil.

Fir forest occurs in a belt around the hillside and its distribution is wide. There are wildwoods in many places which are over-mature forests. Taibaishan larch forest is found above the fir forest and the distribution of both forests frequently overlap. There is red birch (Betula albo-sinensis), spruce (Picea sp.) and Huashan pine (Pinus armandii) in the lower limit of the fir forest zone.

The fir forests are nearly mono-specific, single-age forests with little variation in age and few other species. The numbers of species vary with altitude change. Arrow bamboo (Sinarundinaria nitida) only occurs below 2,800 m. The familiar shrub species are Rebis glaciale, Fraxinus mafeisii, Lonicera saccata, Rhododendron clementinae subsp. aureodorsale, Lonicera webbiana, Abelia dielsii and Lonicera trichantha in the highest elevation fir forests. The familiar shrub species are Sinarundinaria nitida, Malus teringoides, Prunus polytricha, Rosa xanthina, Sorbus koekneana, Spiraea capcscoeme var. myrtifolia in lower forest.

2.4 Cowhide birch (Betula albo-sinensis var. septentrionalis) forest zone

The cowhide birch forest zone occurs mostly at elevations of 2,400-3,100 m on south slope and is a type of deciduous broadleaf forest at the highest elevation for this type. The forest meets the fir (Abies fargesii) forest zone at upper elevations forest and the red birch (Betula albo-sinensis) at lower TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 123 Final Report Appendix 5 elevations. Glaciation reached areas near the Qinling and at such sites the morrain deposits of gravel and rock are evident.

Many birch forests are single-species stands, but mixed forests are formed with Bashan fir (Abies fargesii) and Taibaishan larch (Larix chinensis). There are 40 shrub species in the forest, which are Rhododendron clementinae subsp. aureodorsale, , Rhododendron purdomii, Sinarundinaria nitida, Sorbus koehneana, Acanthopanax giraldii, Ribes glaciale, , Lonicera szeshuanica and others.

There are more than 40 herbaceous plants which are mostly species of Ranunculaceae, Compositae and Cyperaceae. The dominant species have Carex capiliiformis var. major, Phlomis umbrosa var. stenocalyx, Saussurea oligantha var. parvifolia, Ajuga ciliate, Carex capiliiformis, Phlomis megalantha, Carex scabrirostris, Carex filamentosa, Cardamine macrophylla and others. Because mean temperatures are cool, the liane in the formation has about 10 species, which are mostly species of Ranunculaceae and Actinidiaceae. The evergreen lianes include Clematoclethra actinidioides, Clematis obscura, Clematis macropetala, and Rubus pileatus and others. Because of the wet environment in the forest, lichens develop well beneath the forest, generally covering 20-80% and the thickness is 2-15 cm.

2.5 Red birch (Betula albo-sinensis) forest zone

Qinling Mountain is the main distribution zone of red birch. The red birch zone is mainly at elevations of 2,200-2,700 m on the north slope and 1,900-2,600 m on the south slope. On the south slope, the upper elevation of the red birch zone meets the cowhide birch forest zone. The lower elevation meets the Quercus aliena var. acuteserrata forest zone below. On the north slope, the forest zone meets the Quercus liaotungensis forest zone below. Red birch forest is the transition vegetation type between temperate deciduous broadleaf forest zone and cold-temperate coniferous forest zone. Red birch forest is relatively stable and was originally a main component of the natural forest. The red birch forest is widespread in the Qinling.

The forests are pure forest or mixed forest with red birch as the dominant species. Canopy closure reaches 0.6-0.8. The canopy average height is about 16 m, average DBH (diameter at breast height) is 40 cm and canopy age is about 60-110 years. Red develop well. Companion species of the canopy layer number more than 20, including Pinus armandii, Abies fargesii, , Cowhide birch (Betula albo-sinensis var. septentrionalis), Quercus liaotungensis, Populus davidiana, Tilia laetevirens, Acer giraldii, Aver robustum, Sorbus tapashana, Sorbus discolor, Carpinus turczaninowii and others.

The dominant species is Sinarundinaria nitida. The familiar species include about 40 which are Rosa omeiensis, Philadelphus incanus, Viburnum betulifolium, Spiraea japonica var. acuminate, Berberis dielsiana and others. The lianes develop well in birch forest, and familiar species include about 10 which are Actinidia chinensis, Clematoclethra actinidioides, Clematis Montana, Schisandra sphenanthera.

The herbaceous layer is affected by the canopy and shrub layers. The sum coverage of the herbaceous layer is 30-60%. The familiar species are more than 50 including Carex capiliiformis, Carex schneideri, Thalictrum brevisericeum, Phlomis megalantha, Chamaenerion angustifolium, Cardamine macrophylla, Oxylis griffithii, Impatiens notolopha and others.

2.6 Pine and red birch forest zone

2.6.1 Pine and deciduous broadleaf forest sub-zone (1,500-2,200 m)

The distribution area of this sub-zone is widest and the breadth is greatest in the Qinling. The form members are complex. The physiognomies are characteristic of middle elevations with erosion in modern times. The relatively high difference is 500-700 m in this forest sub-zone. The soil is hill palm soil. There are more than 40 canopy species, various shrubs and herbs in the forest. Again there is distribution of climbing plants. The arbor species forming forest include Pinus armandii, Pinus tabulaeformis, Tsuga chinensis, Populus davidiana, Quercus aliena var. acuteserrata, Betula luminifera, Betula platyphylla, Quercus dentate, Populus cathayana. Again there are Quercus aliena, 124 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

Quercus variabilis, Quercus liaotungensis, Cyclobalanopsis glauca var. gracilis, Picea wilsonii, Salix kansuensis, Betula chinensis, Carpinus cordata, Carpinus cordata var. mollis, Carpinus fargesii, Tilia fictyoneura, Tilia chinensis, Acer davidii, Acer fulvesccns, Acer tinglingense, Cercidiphyllum japonicum, Kalopanax pictus. There is still a frequent green arbor Castanopsis sp. below the sub- zone. The floristics of the undergrowth, which includes about 200 species, are varied.

2.6.2 Quercus variabilis Bl. forest sub-zone (800-1,500m)

The physiognomy of this sub-zone, which relatively high difference is 200-300 m, and is largely open. Slopes are steeper and the soil is hilly yellow-palm soil on the south slope and hilly brown soil on the north slope.

The plant community is simpler than in the pine and deciduous broadleaf forest sub-zone. The basic species are the main canopy species including Qcuercus variabilis, besides there is still , Castanea seguinii, Quercus aliena. The remaining canopy trees are Populus davidiana, Quercus aliena var. acuteserrata, Liquidabar formosana, Sinowilsonia henryi, Aesculus chinensis, Fraxinus sogdiana, Quercus fabri, Pterocarya hupehensis, Cunninghamia lanceolata, Vemicia fordii, Platycladus orientalis, Pistacia chinensis, Cyclobalanopsis glauca, Quercus gilliana, Ligustrum lucidum, Magnolia denudate.

2.7 Thin-broadleaved forest zone with evergreen broadleaf on the south slope of Qinling Mountain (500-800m)

This forest zone occurs on low mountains as they change from hills to basins. The characteristics are that the hill shape is round, water erosion is very strong, the gradient between hill and river floodplain is large, and the height of the mountains is less than 200 m. The soil in forest zone is hill yellow brown soil.

There are various tree species in the forest zone, but the basic species are Quercus acutissima, Pinus massoniana and Platycladus orientalis. The distribution of Quercus acutissima forest, which is highly regarded for producing charcoal, is more abundant, but forests are cut repeatedly and are re-sprouting young trees at present. The distribution of Pinus massoniana forest at present is scattered about villages. Platycladus orientalis forest occurs mostly below elevation of 600 m and the forest area is large.

The scattering canopy trees are Cyclobalanopsis glauca, Quercus gilliana, Quercus acrodonta, Quercus soathulata, Lllicium henryi, Acer oblongum, biondii, Lindera megaphylla, Sapindus mukorossi, Paliurum hemsleyanus, Xylosma japonicum, Pterocarya stenoptera, Liquidabar formosana, Robinia pseudoacacia and Albizzia kalkora. Again there are common species from the sub-tropics and warm temperate zone, some of which are of economic value or rare canopy trees such as Sapium sebiferum, Eucommia ulmoides, Trachycarpus fortunei, Cunninghamia lanceolata, Eriobotrya japonica, Ziziphus jujuba, Hovenia dulcis, Diospyros kaki, and .

Because of the influence of human activities, the original composition of the forest vegetation has changed, the forest over 30 years old appears robust and the young forest is patchy. The forest has many patches with no vegetation.

2.8 Drought-tolerant deciduous broadleaf forest and Platycladus orientalis forest zone on the north slope of Qinling Mountain (500-800m)

Because of the influence of vegetation growth on flat topography, the forest vegetation and crop species are similarity with those on the low mountains of north China. The soil is hilly brown soil in the zone.

The small hill areas have been reclaimed for farmland where the landform is quite level and the soil quality is better. There are the live scattered canopy trees, including Qeurcus variabilis, Platycladus orientalis, Ailanthus altissima, Juglans regia, Pistacia chinensis and others, and shrubs include Ziziphus jujube var. spinosa and many Lespedeza spp. in the open country. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 125 Final Report Appendix 5

There are drought-tolerant canopy forests, Platycladus orientalis forest and mixed forest of canopy and other broadleaf species on steep hills with more stone. The canopy species are mainly Qeurcus variabilis, Qeurcus aliena, and Qeurcus baronii. The other broadleaf canopy species are Ulmus parvifolia, Celtis bungeana, Prunus davidiana. Because trees fall frequently, the forests have become sprouting sites and their compositions are very different; the common shrubs include Cotinus coggygria var. pubescens, Prunus tomentosa, Pistacia chinensis, Campylotropis sp., Cotoneaster multiflorus, Spiraea fritschiana, and Lespedeza spp.. Platycladus orientalis forests occur with a bit shape on steep slopes, the canopy height is about 5 m and closure is 0.4. Common shrubs include Euonymus schensianus, Cotoneaster multiflorus, Indigofera pseudotinctoria, Cotinus coggygria var. pubescens beneath the forest. The poplar (Populus spp.) and willow (Salix spp.) forests are found commonly on the river bottomland.

3 The General Situation of the Project Area

3.1 Limits of the Project Area

The area covered by the Project of Biodiversity Conservation in Qinling Mountains ranges from 108°13–108°29Eand 33°43'–34°04'N, and administratively belongs to Zhouzhi County under the administration of Xi’an municipality (by 2010, the county will have been transformed into an urban administrative district of Xi’an city to be called Zhouzhi District). The Project Area borders on the Provincial Mountain-perimeter Tourism Highway S107 to the north, on Qinlingliang (the summit of Qinling Ranges) to the south , on Hanyuhe river, a branch river of Heihe River, and Xishanji to the west and on the boundary between Zhouzhi and Huxian counties to the east, covering 458 square kilometers. According to its overall plan approved by the government of Shaanxi Province, the project area will be divided into the Central Zone, Gengyu River Nature Reserve, Jiuyu River Nature Reserve, Louguantai Zone of Historical Cultures, and the Ecological Holiday Zone (see the maps in the appendix). 70 km away from Xi’an, the project area has convenient communication conditions because Xi’an-Baoji Expressway and Southern Xi’an-Baoji Highway access to it and mountain- perimeter Provincial Tourism Highway S107 directly accesses its Central Zone.

3.2 Conditions of the Project Area

3.2.1 Climate

The project area has a climate that varies with elevation and its southern climate differs much from its northern climate. Flatland and hilly regions have a warm temperate climate while alpine regions have a cool temperate mountain climate. There are four clearly defined seasons with the flatland region sultry in summer and rarely seeing snow cover in winter, and with its mountainous region experiencing a short and cool summer and a long and cold winter. Annual rainfall gradually increases from north to south, averaging at 800-900 mm and amounting to 900-1000 mm in high precipitation years. Average annual temperature ranges from 8-10° in July, and average minimum and maximum temperatures are 12°-18° and 20°-28°, respectively. In January, minimum and maximum temperatures are -8°-12° and 0°-3°, respectively. The frost-free period ranges from 200-240 days and annual sunshine varies from 2000-2200 hours. Dominant wind direction is from the north.

3.2.2 Geology and Topography

The project area contains five geomorphic units: high mountain, middle mountain, low mountain, hill, and flatland. Its major mountain peaks are Shouyangshan, Nanshoushan, Jinfengshan, Sifangtai and Yinpingshan. Yinpingshan (Guangtoushan) is the highest peak with its elevation reaching 2,997 meters and the elevation of its flatland region standing at 480 meters, and as a result, its elevation difference is 2,417 meters. In terms of microtopography, diverse rock types and strong fluviation cause Tianyuhe River to have a high stream gradient which reaches 22‰ in the downstream and 56‰ in the upper stream. There are awful and majestic mountains and plentiful, grand waterfalls, deep gorges with sharp walls, and rocks and stones with various shapes and stances. All these provide conditions for constructing Qinling Botanical Garden as a scenic garden. 126 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

3.2.3 Water Systems

The project area is rich in water resources, as indicated by the ancient saying that “there are seventy two waterways to wade so that foot passengers rarely need to put on their own shoes while traveling across the streams”. There are 13 rivers flowing through the project area. Tianyuhe River, one of the thirteen rivers, has a catchments area of 262 square kilometers and flows 57.6 km. Runoff is 2.6 m3/sec and the flow is stable and its water is slightly alkaline, belonging to sodium bicarbonate type of water. The stream has no chemical pollution and water quality is good. Its rich water resources provide good conditions for constructing special gardens for hydrophytes and exploiting tourism.

3.2.4 Soils

The soils of the project area are mainly Luvic cinnamon soil, skeletal soil, brown soil, loess soil and mountain meadow soil. soil, mainly occurring in the zone of plant ex situ conservation, has such advantages as light texture and loose structure in its upper part and heavy texture and compact structure in its lower part, and high water- and fertilizer-retaining capacities and high drought-resistant and high waterlogging-tolerant capacities. In addition, because it has a thick soil layer, a flat topography and a high fertility, it is suitable for the plants in the zone of plant ex situ conservation to grow and develop.

3.3 Brief Biodiversity Description

Because of its unique geographic location, diverse climatic types and rich topographical types, the project area will provide suitable habitats and conditions for various biota to live, reproduce and survive. At the same time, it has diverse ecosystems typical of forest ecosystems, perfect natural, historical and topographical evidence of the Quaternary Period glaciers and very striking natural landscapes, so it is usually referred to as “the gene bank of living things” and “the biodiversity- enrichment zone”.

3.3.1 Diverse Ecosystems

The project area will mainly contain three parts, water ecosystems, forest ecosystem and meadows. Because it has rich water resources and fertile land, it is suitable for aquatic animals and plants, microorganisms and terrestrial plants to grow and reproduce. It contain rich forest ecosystems which distribute in the order of minor fruit tree forests and secondary shrubs, Platycladus orientalis forest, Quercus aliena var. acuteserrata forest, broadleaf and needleleaf mixed forest, Betula albo-sinensis forest, Abies fargesii forest, Larix chinensis forest and subalpine scrubs from its flat regions to its subalpine mountains with an elevation 3000 meters above sea level. Meadows mainly occur in the subalpine regions.

3.3.2 Diverse Species

Qinling Mountains has 3,100 species of seed plants, which belong to 892 genera and 158 families. The 3,100 species of seed plants include 192 seed plants endemic to the Qinling, 44 seed plants such as Larix chinensis and Kingdonia uniflora that are listed as precious, rare and endangered species of national priority conservation and 49 seed plants that are in severe danger of extinction. The Qinling has more than 600 kinds of wild animals of which there are precious giant panda, crested ibis, snub- nosed monkey and takin of national conservation. In addition, Qinling Mountains is rich in edible and medicinal fungi. The animals and plants listed above are found in the project area. The animals and plants show a clear vertical distribution and the details about their distribution are shown in the figure of the vertical variations of natural factors on the northern side of the Qinling.

3.4 Vegetation of the Project Area

The project area lies on the north slope of the Qinling Mountains at N 33°43’–34°04’ and E 108°13’– 108°29’. The landform is complex and ecological conditions vary greatly over the project area. Based on surveys that are incomplete, there are 1,230 seed plant belonging to 128 families, which account for about 42% of all seed plants of the Qinling Mountains. Many species are nationality protected rare plants. There are peak vegetation zones which have structures intact from the deciduous broadleaved forests of the warm temperate zone to the coniferous forests of the cold temperate zone. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 127 Final Report Appendix 5

3.4.1 Vegetation Type

Based on the color, species composition and structure of plant communities, and environmental characteristics, the vegetation is categorized into five types basically consistent with the vegetation type of North Slope in Qinling Mountains, (1) secondary growth shrubland, (2) deciduous broadleaved forest, (3) coniferous broadleaved mixed forest, (4) coniferous forest and (5) subalpine shrubland.

3.4.1.1 Second Growth Shrubbery

The vegetation type located at the foot of the mountains and on low hills at elevations below 700 m near the exit of Tianyu River. Because of frequent human activity, natural vegetation has disappeared and the existing vegetation, which is second growth shrubs and cultivated sundry fruit forests, developed after the original vegetation was destroyed. Main plants include Ziziphus jujuba var. spinosa, Deutzia discolor, Lonicera hispida, , Periploca sepium, Lespedeza floribunda, Salix caprea, Ulmus pumila, Broussonetia papyrifera, Neillia sinensis, Pyrus betulaefolia, Cephalotaxus sinensis. Main herbaceous plants are Phragmites communis, Poa annua, Bromus japonicus, Melica scabrosa, Alopecurus aequalis, Setatia viridis, Carex leucochlora, Carex giraldiana, Belamcanda chinensis, Polygonum aviculare, Chenopodum glaucum, Arenaria serpylifolia, Ranunculus japonicus, Macleaya microcarpa, Corydlis edulis, Descurainia Sophia, Capsella bursa- pastoris, Duchesnea indica, Potentilla chinensis, Agrimonia pilosa var. japonica.

3.4.1.2 Deciduous Broadleaved Forest

Quercus aliena var. acuteserrata forest This forest occurs at elevations from 1400-2000 m, where forest soil is hill brown soil, the soil layer is deeper and humidity is higher. The forest color is uniform; canopy cover is about 0.8; the basic species is Quercus aliena var. acuteserrata and the species composition is simpler. Sometimes mixed growth species are Castanea mollissima, Corylus siediana, Acer grosseri, Pinus armandii and Populus davidiana. There are Symplocos paniculata, Berberis dolichobotrys, Sorbaria arborea var. glabrata, Spiraea uratensis, Rosa giraldii and Viburnum betulifolium in the shrub layer. The species of the herbaceous layer are many and the most common are Aquilegia yabeana, Ranunculus japonicus, Thalictrum sp., Rheum palmatum, Polygonum multiflorum and other tens of species.

The life-type registers of Quercus aliena var. acuteserrata forest give priority to the phaenerophyte; the geophyte take second place and the proportion of hemicrytophyte is lower than geophyte which reflect climate character of warm, wet summers and long winter. The synusia of forest is basic homology with common deciduous broadleaved forest in temperate zone.

Betula albo-sinensis forest The forest type occurs mainly on Shouyang Mountain and Guangtou Mountain and at elevations from 2100–2500 m, near the mountain top. The soil is hill dark palm soil in forest communities.

The structure of plant communities is simple; color of the community is uniform and the canopy closure degree is about 0.6. The basic species are Betula albo-sinensis and Betula utilis, but Betula albo- sinensis is dominant and forms single-species stands. Betula utilis only grows in mixed communities or in pure stands in narrow belts at the upper elevation edge of the forest zone. Betula utilis forest is a connecting forest zone between the Betula albo-sinensis forest and the Abies fargesii forest.

All composing species are deciduous except Abies fargesii, Tsuga chinensis and Rhododendron purdomii. There are Lonicera serreana, Viburnum betulifolium, Lonicera webbiana and Rribes acuminatum in the shrub layer. The species of the herbaceous layer are many and the common are Carex kwangtoushanica, Arisaema consanfuineum, Smilax menispermoides, Aletris glabra, , Convallaria keiskei, obtusatus, Polygonatum verticillatum, Allium prattii, Iris goniocarpa, Perularia ussuriensis, Herminium monorchis, Liparis japonica, Asarum himalaicum, Rheum officonale, Cerastium arvense, , Aquilegia ecalcarata, Souliea vaginata, Delphinium henryi, Cardamine engleriana, Draba layginii, Rhodiola dumulosa and Saxifraga giraldiana.

The life-type registers of Betula albo-sinensis forest give priority to the phaenerophyte and the geophytes take second place. 128 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

3.4.1.3 Coniferous Broadleaved Mixed Forest

Coniferous broadleaved mixed forest is a special vegetation type with transitional character and unstable composition in which the invading of coniferous canopy species form after the deciduous broadleaf forest is destroyed. The vegetation type occurs at elevations from 900–2300 m. The dominant coniferous canopy species are Pinus armandii, Pinus taebulaeformis and Platycladus orientalis. The broadleaved canopy species are mainly Populus davidiana, Castanea mollissima, Quercus aliena var. acuteserrata, Litsea pungens, Toxicodendron vernicifluum, Juglansca thayensis, Sorbusa lnifolia and Quercus dentate. Quercus aliena var. acuteserrata is in the ascendant of the canopy, with abundant trees and young seedlings. The characteristic explanation is that the population of Quercus aliena var. acuteserrata is well adapted to seed dispersal and is a colonizing type. The second dominant species is Populus davidiana which is a pioneer species in succession course of plant community.

There are Spiraea fritsichiana, Rubus sp., Rosa sp., Euonymus alatus, Berberis sp., Smilax sp. and Viburnum betulifolium in the shrub layer. Because it colonizes after the original forest is damaged, Sinarundinaria nitida may affect the renewal of mostly tree.

3.4.1.4 Coniferous Forest

Platycladus orientalis forest This forest type occurs at elevations from 500–1100 m where the soil is typical brown soil and pH value is 7᧩8. The annual temperature is 7.6 and annual precipitation is 886 mm in the forest zone. Platycladus orientalis commonly form second natural pure forests which present patchy distribution, continuous or discontinuous strap shape and are commonly associate with farmland. Platycladus orientalis mixed growth with deciduous broadleaf on lightly degraded lands, but forms clumps of pure forest on severely degraded sites.

The forest cover is sparse; forest structure is simple and canopy closure is 0.35᧩0.50. The basic species is Platycladus orientalis growing to about 4 m. The companion tree species are Quercus variabilis, Quercus acrodonta, Hemiptelea davidii, Quercus baronii and Pteroceltis tatarinowii. There are Campylotropis macrocarpa, Acer grosseri, Cephalotaxus sinensis, Litsea pungens, Deutzia discolor, Pittosporum rehderianum, Euonymus venosus, Lespedeza bicolor, Rosa multiflora var. cathayensis, Rubus corchorifolius, Viburnum shensianum and Amorpha fruticosa in the shrub layer. The herbaceous species are richn and dominated by Arthraxon hispidus, Cyperus diformis, Allium senescens, Polygonum alatum, Gypsophila oldhamiana, Epimedium sagittatum, Sanquisorba officinalis, Anthriscus sylvestris, Trachelospermum jasminoides, Lithospermum zollingeri and Teucrium tsinlingense.

Abies fargesii forest (dark coniferous forest zone) Abies fargesii occurs at elevations from 2500–2900 m in Guangtou Mountain and Shouyang Mountain. The humidity is high; the humus layer is deeper and the soil is hill cineration dark palm. The superstratum canopy species are Abies fargesii and Betula utilis, but Abies fargesii is dominant and its color is dark green. Canopy closure is about 0.8. There are all levels big trees and young seedlings of Abies fargesii, which show the population of Abies fargesii is stabile. Because there are only large trees and no young seedling of Betula utilis, the population is declining. There are few shrubs in the forest including Rosa tsinglingensis, Spiraea alpine, Sinarundina rianitida.

The life-type registers of Abies fargesii forest give priority to the geophytes which number more than phaenerophytes and hemicrytophytes. This reflects that the environment is colder and wetter.

Larix chinensis forest Larix chinensis occurs at the peak of the north slope in Guangtoushan Mountain and at elevations of 2900 m and above. There are mostly rocks on the ground on these sites. The forest soil is hill dark palm soil and the community is single species. The forest is mostly found on shaded slopes and semi- shaded slopes. Generally some Larix chinensis trees have died in any stand. There are few shrubs. The herbaceous species are Androsace sp., Oxalis sp., Cardamina sp., Gentiana sp.. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 129 Final Report Appendix 5

3.4.1.5 Subalpine Shrub

Subalpine shrub mostly occurs on Guangtoushan Mountain where the hypsography is higher; the climate is cold; the weather is more varied; the wind is strong and solar radiation is intense. Shrubs in the alpine zone have special shapes because of the long-term adaptation to low temperature, strong winds and cold climate. The special shapes are low plant, prostrate stalk, cutin leaf and hair or squama adjunct. The dominant species are Spiraea alpine, P otentilla arbuscula var. veitchii, Salix paraplesia, Salix cupularis, Rhododendron capitatum, Rhododendron purdomii, Rosa tsinglingensis, Berberis circumserrata. In subalpine shrub, dominant species are Rhododendron capitatum, which is most abundant, and most widespread. The life-type registers of subalpine shrub gives priority to the hemicrytophyte; the geophyte is second; the low phaenerophyte and the annual account for very little. The character reflects that there is more long-time severe winter season in this environment.

3.4.2 Vertical Distribution of Vegetation

From the foot of mountain to the mountaintop and along with the elevation rise, temperatures decline, precipitation increases, wind speed increases solar radiation increases, soil conditions change and the growth season is shortens. Because of the combined action of these factors, the growth and distribution of vegetation changes and the vertical distribution of vegetation is formed.

In Tianyu River valley of the Project Area, the vegetation is second growth shrubland, Platycladus orientalis forest zone, Quercus aliena var. acuteserrata forest zone, birch (Betula spp.) forest zone, Abies fargesii forest zone, Larix chinensis forest zone and subalpine shrub zone from the foot of the mountain to the mountaintop (Fig. 2). The second growth shrubland is severely disrupted by human action, but Platycladus orientalis forests and birch (Betula spp.) forests are evident transitional types. The second growth shrubland is the result of cut Quercus aliena var. acuteserrata forest, but Platycladus orientalis forest and birch (Betula spp.) forest is the result of cutting of the coniferous forest. If forest destruction is stopped and the remaining stands are protected, renewal of natural vegetation is possible. 130 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

2996

G 2800 F 2700 E 2400

D

2000

C

1000 B 700 A

Fig.2 Vegetation vertical distribution in Tianyuhe river valley (a) A: Mixed fruit forest and Second growth shrubbery zone (b) B: Platycladus orientalis forest zone (c) C: Quercus aliena var. acuteserrata forest zone (d) D: Betula albo-sinensis forest zone (e) E: Abies fargesii forest zone (f) F: Larix chinensis forest zone (g) G: Subalpine shrubbery zone

The primary species are Actinidia chinensis, Prunus davidiana, Prunus armeniaca, Juglans regia, Castanea mollissima, Broussonetia papyrifera and Euonymus alatus in the mixed fruit forest and second growth shrub zone (A). The constructive species of Platycladus orientalis forest zone is Platycladus orientalis and the associated species are Cercis chinensis, Acer grosseri, Cephalotaxus sinensis, Quercus spathulata (B). The constructive species of Quercus aliena var. acuteserrata forest zone is Quercus aliena var. acuteserrata and the associated species are Castanea mollissima, Carpinus sieboldiana var. mandshurica, Toxicodendron vernicifluum, Pinus armandii and Abelia dielsii (C). The constructive species of Betula albo-sinensis forest zone are Betula albo-sinensis and Betula utilis, and there are primary Sinarundinaria nitida, Berberis cicumserrata, Viburnum betulifolium, Euonymus phellomanus and Lonicera webbiana below the forest (D). The constructive species of Abies fargesii forest zone is Abies fargesii and the shrub below forest are primary Rhododendron purdomii, Lonicera webbiana, Ribes glaciale and Spiraea alpine (E). There are fewer shrubs and the herbage species are Androsace sp., Oxalis sp., Cardamina sp., Gentiana sp. And so on in Larix chinensis forest zone (F). The dominant species of shrub layer are Rhododendron capitatum, Rhododendron clementinae subsp. aureodorsale, Spiraea alpine and Berberis cicumserrata, and the dominant species of herbage layer are Kobresia graminifolia, Carex spp., Gentiana apiata and Poa spp. in Subalpine shrub zone (G). TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 131 Final Report Appendix 5

If we take a broad view of the vegetation distribution, the community color and the species component, we can see that the vegetation in Tianyu River valley have the basic character of North Slope vegetation in Qinling Mountain.

132 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

ANNEX 15: ECOLOGICAL RESEARCH AND HABITAT RESTORATION AT SHAANXI QINLING BOTANICAL GARDEN

The overall Project plan, including design, performance targets, risks of design, and monitoring framework in the Shaanxi Qinling Botanical Garden, are reasonable and feasible. The following paragraphs describe proposals for long-term monitoring and recovery of forest vegetation in the in-situ and ex-situ areas of the Project Area. Some of the monitoring and recovery programs can be applied in the Qinling mountains to aid in restoration of lost or degraded forest cover there.

(i) A vegetation species and coverage survey is completed and a detailed vegetation map is drafted for the Project Area. The objective is to produce an accurate representation of the baseline situation at the outset of the Project. (ii) The status of globally threatened species, special and medicine plants is investigated in the Project Area. The objective is to describe the population biology, distribution patterns, population size, age structure, characteristics of propagation, and threats to species survival. This investigation will provide a practical basis for planning measures to remove threats. (iii) In the ex-situ area, samples of globally threatened species and special and medicinal plants will be collected and preserved as scientific specimens. The specimens will be archived at an on-site museum to provide a basis for study of vegetation in the Qinling Mountain region. The museum collection will be useful for scientific research, conservation education and public awareness, and species conservation. (iv) In the ex-situ area, the vegetation is restored using indigenous species and trees characteristic of the dominant canopy cover, and mixed forest is restored by planting conifer and broadleaf species. The mixed-species plantation promotes formation of complex habitats suitable for diverse communities of wildlife species. (v) In the in-situ area, previously dominant canopy species of the pre-logging natural forest are planted in degraded areas in multi-species stands. The natural secondary forests will be left intact to restore itself naturally and/or species composition will be modified in the interest of conservation of endemic and indigenous species by implementing a plan for patch planting and/or felling. (vi) Representative sites will be chosen in the in-situ area for long-term monitoring of forest succession in logged or otherwise degraded stands. Fixed sampling plots will be established on areas of 500 × 500 m (0.25 ha). The plots will be fenced as needed for protection against grazing of domestic livestock to enable and study of natural vegetation succession. The canopy tree species within the 0.25 ha plot will be sampled. All trees with diameter at breast height (DBH) greater than 1 cm, will be measured (DBH, height, crown spread), tagged for identification, and their locations will be recorded by serial number using GPS. Data will be recorded in a GIS database for mapping and comparison with results from future sampling. Every five years the fixed plot will be re-sampled and results will be compared with data collected earlier. Parameters to be analyzed will include: (i) survival; (ii) growth rate; (iii) recruitment; (iv) frequency; (v) density; (vii) standing timber volume and increment, among others. Results will be entered into the database of national Forest Research. Nationwide, there are four such long-term sampling programs in China: Dinghushan National Nature Reserve (sub-tropic evergreen broadleaf forest, 500 × 400 m = 0.2 ha); Changbaishan National Nature Reserve (cold temperate zone conifer forest, 500m×500m); Xishuangbanna National Nature Reserve (tropical rain forest, 500 × 500 m = 0.25 ha); and Gutianshan National Nature Reserve (sub-tropical evergreen broadleaf forest, 500 × 500 m = 0.25 ha). The Project Area would represent the first long-term forest succession study in the Qinling and the first at the boundary between temperate and sub-tropical deciduous broadleaf forest. Because of its location in a known biodiversity hotspot (see WWF Global 200 Ecoregions) this forest research project has great potential to contribute to understanding of forest succession and forest habitat recovery in relation to overall biodiversity. (vii) Although the differences in climate between the north and south slopes of the Qinling are known, there is no monitoring station on the north slope in the vicinity of the Project Area. The Project would install a weather monitoring station in the in-situ area. The tower would be constructed and outfitted to China national standards for weather TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 133 Final Report Appendix 5

and climate monitoring. Eight parameters (temperature, humidity, wind speed, illumination and precipitation) would be monitored at intervals to be set on installation. The weather data will be important to evaluate the influence of climate change on plant growth rates and distribution patterns. (viii) In the in-situ area, medicinal plants would be sustainably cropped in by farmers. The technology for identification and sustainable harvest of medicinal plants would be transferred to farmers by specialists who would work individually with each family. Researchers would assist farmers to engage in sales contracts with herbal medicine companies. This would increase incomes of farmers and result in increased standards of living. Increased incomes would encourage farmers to join the work of biodiversity conservation to protect future income streams. (ix) Taibaishan larch (Larix chinensis) is the only canopy species at the upper forest line within the Qinling Mountains. At hill tops and ridge lines it naturally occurs in a single- species forest. The role of larch forests is very important in stabilizing mountain slopes, replenishment of water resources by encouraging infiltration of rain and snowfall, reducing evaporative water loss, and minimizing soil erosion. But Taibaishan larch is an economically valuable species that has been cut over much of its former distribution in the Qinling. It is now found only at a few hill-top locations in the Qinling; natural colonization is slow and the species is now endangered. Research on the ecology and biology of Taibaishan larch is needed to develop methods to encourage recovery of the species. The research project would investigate the influence of climate change on the extent of the forest line; investigate the causal factors preventing natural recovery of the species; and aid protection and recovery Taibaishan larch. Protection and recovery of Taibaishan larch on the Project Area will promote biodiversity conservation in the Qinling botanical garden, and have important implications for habitat restoration in all nature reserves in the Qinling Mountains.

134 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

ANNEX 16: QINLING MOUNTAINS FAUNA ASSESSMENT REPORT

A. Part One The Qinling Mountains Fauna Biodiversity and Conservation

The Qinling Mountains are famous in our country and even in the world, and they are one of the very important biological resource places in our country. The Qinling Mountains are parts of the Yangtze and Yellow River system watershed in physical geography and Chinese south-north climate boundary. They also mark the biogeographic barrier between the Oriental and Palaearctic zones and are a transitional zone in zoogeography. The Qinling area has an abundant botanical resource and distinct elevational vegetation distribution. In its north slope most of the botany is the element of the North China botanical system, but in the south slope most of the botany is the element of the Central China and the South China botanical system. So the Qinling Mountains are the joint and transition belt of the south-north botanical system. The above characters determine the particularity and the exclusive of the Qinling Mountains in China, at the same time they also determine the Qinling area as one of the most abundant area of the Biodiversity in the global scope.

As the Qinling Mountains has a special geographical position, diverse vegetation environment and continental climate and wet condition, it supply fauna and wildlife a perfect place to inhabit and breed. There are unknown but abundant invertebrates and also many other wildlife resource in addition to the 557 species of vertebrate known at present, such as Qinling Panda (Ailuropoda melanoleuca), Takin (Budorcas taxicolor bedfordi), Golden Monkey (Rhinopithecus roxellana), Crested Ibis (Nipponia nippon), Chinese Giant Salamander (Andrias davidianus) and Qinling Lenok (Brachymystax lenok tsinlingensis )(Table 1).

Table 1: Number of Vertebrates in Qinling Mountains

Order Family Genus Species Fish 6 13 67 109 Amphibians 2 7 12 19 Reptiles 3 8 26 26 Birds 17 49 166 308 Mammals 7 27 81 115 Total 35 104 462 577

The 557 species of vertebrates known at present in the Qinling area represent 35 orders, 104 families and 462 genera. Among these, there are 109 species of fish in the Qinling area of 6 orders, 13 families, 67 genera, and accounting for 83% of the 132 species of fish in Shaanxi Province and 11% of the 1,010 species in the entire country. There are 19 species of amphibians, of 2 orders, 7 families, 12 genera, representing 73% of the 26 species of amphibians in Shaanxi Province and nearly 9% of the 220 species in the entire country. There are 26 species of reptiles of 3 orders, 8 families, 26 genera, accounting for 51% of the 51 species of reptiles in Shaanxi Province and nearly 7% of the 380 species in the entire country. There are 308 species of birds of 17 orders, 49 families, 166 genera, accounting for 84% of the 368 species of birds in Shaanxi Province and 26% of the 1,186 species in the entire country. Finally, there are 115 species of mammals of 7 orders, 27 families, 81 genera, accounting for 78% of the 147 species of mammals in Shaanxi Province and nearly 23% of the 509 species in the entire country (Tables 1, 2). From these totals it is clear that the Qinling area is a biodiversity hot-spot in Shaanxi Province and even at the national level it is one of the most biodiverse areas. As a result of this, the Chinese government has already listed the Qinling Mountains region as one of the 17 national biodiversity protection areas, which received resource priority in China. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 135 Final Report Appendix 5

Table 2: Fauna Species Numbers in Qinling Mountains as Proportions of Shaanxi and China Totals

Qinling Mt. Qinling Mt. Qinling Shaanxi China percent in percent in China Mountains Province Shaanxi (%) (%) Fish 109 132 1,010 82.6 10.8 Amphibians 19 26 220 73.1 8.6 Reptiles 26 51 380 51.0 6.8 Birds 308 368 1,186 83.7 26.0 Mammals 115 147 509 78.2 22.6 Total 577 724 3,305 79.7 17.5

In recent years, the Chinese population has increase steadily and the national western development strategy has begun implementation. Economic activity has intensified rapidly and progressively, causes the Qinling Mountains ecological environment to worsen, and the need for biodiversity protection to increase unceasingly. In order to strengthen to the ecological environment as well as biodiversity protection, government authorities at the national and Shaanxi Province levels increase the protection funds and enlarge protection dynamics unceasingly. In 1965, Shaanxi Province began conservation in the Qinling Mountains by establishing the first nature reserve----Taibaishan Nature Reserve, and have since established 51 nature reserves of each kind of type throughout the province. The nature reserve total area has reached 10,076.44 km2, covering 5.2% of the 195,800 km2 of Shaanxi Province's total area. The Qinling Mountains have 27 nature reserves covering 5,572 km2 or 11% of the total Qinling Mountain area in Shaanxi of 50,500 km2 and 2.9% of the 195,800 km2 of Shaanxi Province. Because establishment of nature reserves accelerates and the management level steadily improves, conservation effectiveness is increasing. Fauna which is rare and precious and endangered in the Qinling Mountains, such as Qinling Giant Panda, Takin, Golden Monkey, Crested Ibis, Chinese Giant Salamander and Qinling Lenok has begun to recover population numbers. Moreover, most Qinling Mountains nature reserves are now adjoining and have formed a nature reserve group. This enables gene exchange between the nature reserves to safeguard genetic diversity.

In the aspect of saving and protecting the wild animal which is rarely and preciously and endangered, the most typical example is Crested Ibis. Crested Ibis is the birds which is accepted as the most endangered in the entire world, once was widespread distributes in the northern area of our country, as well as Japan, North Korea, former USSR and so on in the beginning of the 20th century. As a result of the human large scale production and the life activity, the natural environment for Crested Ibis declines continuously, the population dropped sharply, and the Crested Ibis faced extinction. Once some people thought Crested Ibis had already become extinct in the open country. But, in May, 1985 the scholars of our country discovered 7 Crested Ibis (4 adult birds and 3 baby birds) in Yaojiagou of Yang county in the Qinling Mountains area, they were the only open country survival population in the global scope (at that time Japan has only then 5 Crested Ibis which is under artificial raising condition, moreover they have already lost reproduction ability, and die one after another afterwards). After Crested Ibis was discovered in China, all levels of government took saving and protection of Crested Ibis as a top priority. Simultaneously the Japanese, German government and other international organizations also cared very much about saving Crested Ibis. The Japanese environment department even endorsed "The Research Plan Certificate of Confirmation for China and Japan to Protect Crested Ibis Together" with the Chinese government, and the Chinese government has established ಯThe Shaanxi Crested Ibis National Nature Reserveರ in Yang county. Through more than 20 years’ laborious endeavors, the work of saving and protecting Crested Ibis obtains the achievement which attracted worldwide attention. Now Crested Ibis has developed to had more than 920, and forms the Qinling Mountains north and south two artificial cultivation populations (420) and a Qinling south slope wild population (approximately 500), from which the initially discovered wild population included only 7 birds. In addition, the Chinese country leaders has also presented 4 (2 male and 2 female) Crested Ibis to Japan as a country gift, to strengthen the people's friendship between the two countries and Japan uses these 4 Crested Ibis as parents to breed the number of Crested Ibis, and also formed one population which have 98 Crested Ibis at present. 136 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

B. Part 2: The Qinling Mountains Fauna Protecting Existent Problem

Although biodiversity protection in the Qinling Mountains has already achieved some success, which draws world attention, but for various reasons, biodiversity protection still faces some problems as discussed in the paragraphs below.

1᧪There are many endangered animal species and/or protected animal species in the Qinling Mountains in Shaanxi Province (see table 3), some of them received extensive concern from the public. Because of Qinling Mountains special geographic position, various vegetation environments and weather and humidity conditions, the fauna is very special, there are many species for which the Qinling Mountains are the northeast boundary of their distribution in the world (for example: Giant Panda , Taiwan Skink Snake (Elaphe carinata), Rice Frog (Rana limnocharis) and the Ningshan Toothlet Toad (Scutiger ningshanensis) or the southwest boundary (for example: Qinling Lenok, Crested Ibis), and the Qinling Mountains still have the endangered animals of “national treasure” like Qinling Giant Panda, Golden Takin, Sichuan Golden Monkey, and Crested Ibis. Protecting them and their habitats is the requirement of the Chinese environment construction; it is also an important part of the world natural sources and protection, so it has been the focus of public concern.

Table 3: Threatened and/or Protected Fauna Numbers of the Qinling Mountains

Numbers CITES1 CSRL2 China3 Shaanxi Fish 109 0 0CR, 2EN, 3VU 2ൖ 14 Amphibians 19 0 1CR, 1EN, 3VU 2ൖ 7 Reptiles 26 0 0CR, 1EN, 11VU 0 6 Birds 308 2ൕ, 5ൖ 1CR, 1EN, 4VU 5ൕ, 33ൖ 17 Mammals 115 8ൕ, 4ൖ 2CR, 10EN, 21VU 6ൕ, 8ൖ 8 Total 577 10ൕ, 9ൖ 2CR, 15EN, 42VU 11ൕ, 45ൖ 52 Note: 1. =CITES Appendix , ൖ= CITES Appendix ; 2. CR=Critically Endangered, EN=Endangered, VU=Vulnerable; 3. = Protection class in China, = Protection class in China.

2. The Qinling area supports 27 nature reserves whose total area covers 5,572 km2. But the protection capacity and development vary widely between reserves. Because of social concerns, the funding levels for species protection and recovery vary. High-profile species (“charismatic mega- fauna”) receive disproportionately large budgets. Examples include the endangered species of "national treasure" such as Qinling Giant Panda, Golden Takin, Sichuan Golden Monkey, Crested Ibis. While protection of these species and their habitats yields benefits to other endangered animal species, in some cases the benefits are not direct or adequate to bring about reversals in declining habitat area or quality, and declining population numbers. For example, although the Qinling Lenok is a special species in Qinling Mountains, which is the national two-class of keystone protection aquatic wild animal, its numbers have not been restored and its habitat (cold, clear rivers) has not been protected. Although the Long County Qinling Lenok Nature Reserve has already been established on paper for 3 years, funding has been inadequate, and only limited artificially raising facilities have been built in the Bada area. They haven't set up a protection station in the 6,559 ha nature reserve. When the GEF consultants visited the management bureau of the Long County Qinling Lenok Nature Reserve at Long County on February 8, 2007, they learned it is the area with the largest population of the Qinling Lenok in Qinling Mountains. But from 1960 to now more than 40 year the Qinling Lenok distribution scope has already retreated about 10 km, that is from originally lowest distributed altitude 1,000 m going up to 1,200 m. In addition, because of the shortage of the protection facilities, there are incidents of illegal poisoning and bombing fish inside the nature reserve. This degrades habitats, constricts the distribution of Qinling Lenok and causes population numbers to decline. To reverse this situation and recover the species it is urgent to increase the outlay to the Long County Qinling Lenok Nature Reserves.

3. Though we have already formed a nature reserve group in the Qinling Mountains, the Niubeiliang Nature Reserve in the east of Shaanxi Province hasn’t been linked with the other reserves. The absence of a connection restricts gene exchanges between the Niubeiliang Nature Reserve and other TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 137 Final Report Appendix 5 nature reserves of the west of Qinling Mountains. This can compromise fauna conservation in terms of genetic diversity in the Qinling Mountains.

4. Although the Qinling area has already established 27 nature reserves, every nature reserve lacks the monitoring data of fauna diversity and population numbers and the trends of populations of ecological indicator species over time. This is impedes objective evaluation of the conservation result of the nature reserve.

C. Part 3: Potential Role of the Project Area

The Qinling National Botanical Garden construction project will have a positive impact on biodiversity conservation, and will have the enormous potential effects in the entire Qinling Mountains.

1. The Qinling National Botanical Garden will occupy an area of 458 km², which between E108°13’– 108°29’. It will basically link the Zhouzhi Nature Reserve on its west (E108°19’) and the Niubeiliang Nature Reserve on its east (E108°45') together. Completion of the Qinling National Botanical Garden is propitious to fauna gene exchange between the two nature reserves; enable the Qinling Mountains fauna genetic diversity to be effectively protected.

2. The Chinese government has already listed the Qinling Mountains as one of the 17 biodiversity essential areas and it will be among the first to be protected in China. The implementation of the project will be advantageous to further promote the protection enterprise of the Qinling Mountains biodiversity.

3. The implementation of the project will be advantageous to the improvement of the inhabitants’ livelihood that live in the project area, and will reduce the pressure which the local resident will create to project area environment.

4. The implementation of the project will be advantageous to strengthen the scientific research about Qinling Mountains biodiversity and protection, and will be advantageous to the popularization of scientific knowledge on wild animals and plants, and also will enhance the Xi'an city inhabitants protection consciousness on the ecological environment.

5. The implementation of the project will be advantageous to establish the first monitoring station on the dynamic change of biodiversity and the population quantity development change of the ecological indication species in the Qinling Mountains, and later will bring the monitoring station into the National and/or Global Ecosystem Monitoring Program.

6. The implementation of the project will be advantageous to first explore the successful and unsuccessful experiences from the Qinling Mountains biodiversity conservation projects, and later will copy the succeed conservation experience to the entire Qinling Mountains and the Daba Mountains area even the whole world’s similar area.

D. Part 4 Qinling Mountains Priority Fauna for Future Conservation

In the past more than 50 years, Chinese all levels governments as well as the international non- government organization (e.g., IUCN, WWF, GEF), have already given enormous support and the attention to the biodiversity conservation in Qinling Mountains, especially in the aspect of the protection of “the national treasure level” species, such as Qinling panda, Golden Monkey, Crested Ibis, Takin and so on. Construction of nature reserve has made the achievement which focuses attention all over the world. However, the support and attention to the small and/or the unique and/or the endangered and/or ecological indicator species which live in the Qinling Mountains is still weak. Therefore, based on the present situation of the Qinling Mountains fauna protection, and for the sake of protecting the unique and/or the endangered wild animal in the Qinling Mountains more comprehensive in future, and finally achieving goals of protecting the Qinling Mountains biodiversity, suggested this project should first to protect these wild animal as follows.

1. Fish ぬ棤➁処漠᧤Hucho bleekeri᧥Sichuan Taimen 138 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 5

䱵⼼兕潭漠᧤Brachymystax lenok tsinlingensis᧥Qinling Lenok

2. Amphibians ⮶潄 (Andrias davidianus ) Chinese Giant Salamander ⮹䤌⼀䄹潄 (Batrachuperus taibaiensis) Taibai Mountain-brooked Salamander ⸐棤爎䴐媍 (Scutiger ningshanensis) Ningshan Toothlet Toad 㭧合奨᧤Paa boulengeri᧥Ventral-spined Frog 椕匪奨᧤Paa quadranus᧥Lump-anused Frog

3. Reptiles ⮹䤌⭐壝᧤Gekko Taibaiensis᧥Taibai Wall Gecko 䱵⼼䅠妴᧤Scincella tsinlingensis᧥Qinling Smooth Skink ⪿妢᧤Lygosoma indicum᧥Bronze Skink ⸐棤⺞⯃奖᧤Oligodon ningshanensis᧥Ningshan Small-head Snake 䩼⻍姽᧤Agkistrodon brevicaudus᧥Single Pit Viper 䱵⼼姽᧤Agkisriodon qinlingensis᧥Qinling Pit Viper

4. Birds 㧀烽᧤Nipponia nippon᧥Crested Ibis 儱合屡楘᧤Tragopan temminckii᧥Chinese Tragopan 儱合枵炰᧤Chrysolophus pictus᧥Golden Pheasant 㠠⯃烉烯᧤Glaucidium cuculoides᧥Barred Owlet 䟊䦘᧤Garrulax canorus᧥Hwamei 坬烏᧤Emberiza siemsseni᧥Slaty Bunting 5. ➉ℂ伊Mammals Rhinopithecus roxellana Golden Monkey 煠䐙᧤Selenarctos thibetanus᧥Asiatic Black Bear Ailurus fulgens Red Panda Ailuropoda melanoleuca Qinling Panda Neofelis nebulosa Clouded Leopard Moschus berezovskii Forest Musk Deer Budorcas taxicolor bedfordi Takin

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ANNEX 17: SUGGESTED FAUNA PROGRAM IN THE QINLING MOUNTAINS & PROJECT AREA

A. Part 1: Chinese Giant Salamander Population Re-establishment

Chinese Giant Salamander (Andrias davidianus) belongs to Amphibia, Caudata, Cryptobranchidae. It is the unique and the ancient and the biggest body and the longest living wild amphibian in the world. It is listed as a protected aquatic wild animal in China. Considering its threatened condition, Chinese Giant Salamander is listed as Critically Endangered in IUCN/SSC and . There are only three species of Cryptobranchidae in the world. Besides Chinese Giant Salamander, there are Japanese Giant Salamander (Andrias japonicus) in Japan and Hellbender (Cryptobranchus alleganiensis) in USA. Chinese Giant Salamander is a rare species existing in the Carboniferous period 350 million years ago and is a vertebrate transforming from an aquatic animal (gill respiration) to terrestrial animal (pulmonary respiration). Therefore, it is called “living fossil”, having epoch-making significance in the history of evolution and important value in scientific research.

Chinese Giant Salamander distributes in ravine streams in Yangtze River area and the middle and lower reaches of the Yellow River and in 17 provinces in China. Because the Qinling Mountains (including the Qinling National Botanical Garden ) in Shaanxi Province have a rich and diverse flora, suitable climate and moisture and other nature ecological conditions, the area became the major habitat of Chinese Giant Salamander in China. Before the 1970s’, Chinese Giant Salamander was widely distributed in the hidden rivers or springs and caves along the ravine streams in the limestone layers at elevations above 600 m. Because of its high edible and medical value as well as certain ornamental value, it is illegally captured. More important, in recent years, the habitat of Chinese Giant Salamander has been fragmented, destroyed, and degraded and the species ability to naturally repopulate habitats has been reduced. As a result, the population of Chinese Giant Salamander declines rapidly, its distribution area declines, and individual Salamanders are smaller. Chinese Giant Salamander is now extinct in many parts of its former range. The ecological environment of its breeding areas is destroyed and its habitats are highly fragmented. These factors have driven Chinese Giant Salamander to near extinction.

To save and conserve the resources of Chinese Giant Salamander, 13 provinces in China started captive breeding experiments in the late 1990s’ and made essential progress toward a project to protect and save Chinese Giant Salamander. Among them, Shaanxi Normal University has carried out a program----The Bionical Captive Breeding Chinese Giant Salamander Research. According to Chinese Giant Salamander biological habits and characteristics, this program first established a model that captive breeding and training Chinese Giant Salamander in a simulated natural ecological environment in China, and successes in breeding Chinese Giant Salamander for 3 years. Each of the program’s technical criteria is at the top of the same trade in China. On March 2, 2007 at the achievement appraising meeting organized by Science and Technique Department of Shaanxi Province, the program gained high praise. It is considered to be in the leading position among similar research in China. Carrying out this program is significant for protecting and recovering Chinese Giant Salamander as well as improving the consciousness of nature resources protecting and financial condition in countryside.

Basing on the fact of resources of Chinese Giant Salamander in China including Qinling Mountains and the recent technical achievements, Chinese Giant Salamander re-introduction and population re- establishment program should be developed in the Qinling National Botanical Garden (the Project Area). To complete this program, we suggest it be supervised and organized by Shaanxi Province Fishery Administration Department and the Qinling National Botanical Garden, participated by the project area farmers who are trained and directed by professional staff from Shaanxi Normal University. If the program gets the financial support from GEF, Chinese Giant Salamander population will resume to 5,000 in the Project Area in 3-5 years and copy to the whole Qinling area making Chinese Giant Salamander population in Qinling area resume to 100,000 or more in 5 years.

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B. Part 2: Fauna Monitoring Program in the Project Area and Qinling Mountains

The Qinling Mountains are one of 17 biodiversity key regions that are given priority conservation. They have the rare and endangered national treasure mega-fauna like the Qinling Giant Panda (Ailuropoda melanoleuca), Golden Monkey (Rhinopithecus roxellana), Takin (Budorcas taxicolor bedfordi), Crested Ibis (Nipponia nippon), Forest Musk (Moschus berezovskii), and Clouded Leopard (Neofelis nebulosa). There are also many lesser known but also unique and/or endangered wildlife such as Taibai Stream Salamander (Batrachuperus taibaiensis), Oinba Salamander (Pseudohynobius tsinpaensis), Ningshan Alpine Toad (Scutiger ningshanensis), Qinling Tree Toad (Hyla tsinlingensis), Lump-anused Frog (Chaparana quadranus), Taibai Wall Gecko (Gekko taibaiensis), Qinling Smooth Skink (Scincella sinlingensis), Ningshan Small-head Snake (Oligodon ningshanensis), Qinling Pit Viper (Agkistrodon qinlingensis), Qinling Lenok (Brachymystax lenok tsinlingensis) and others. For some species the Qinling Mountains represent the northern limits of their geographic distribution (e.g. Giant Panda, the Alpine Toad family). For other species the Qinling marks their southern boundary (for instance, Lenok). So the Qinling Mountains is an important natural barrier in the geographic distributions of many species. So we should select a few common representatives of these smaller and lesser known species from the Qinling Mountains to monitor their population numbers, changes and habitat changes for many years, and provide all the concerned authorities of Chinese governments and international biodiversity conservation organization with the protection monitoring data. It may be play an important role for the Qinling Mountains and the whole world biodiversity conservation.

The relationship is very close between vertebrate and the vegetation. People believe that the first environment factor is the vegetation which affects the vertebrate’s distribution and diversity. With the fact that the vegetation recovering and succession, vertebrate species diversity and distribution trend will change. Many studies indicate that vertebrate diversity varies in different plant communities. The forests in which vegetation succession has proceeded to climax communities that are mature and those that are interrupted the least by human activities are often the richest in terms of vertebrate species diversity. In contrast, in habitats that are degraded and highly disturbed, vertebrate species diversity is lower. Since vertebrates are sensitive to environment changes, they are often regarded as the indicator species of environment changes. For instance, in 1972 USA has ascertained that birds and amphibian were the indicating animal which have significance to the environment changes. That the vertebrate is used for environmental monitoring is mainly in two sides, one is to monitor environmental pollution, the other is to monitor habitat overall and minute changes.

Considering the practical difficulties existing in monitoring large-bodied rare wild birds and mammals, we suggest selecting larger populations of fish (Qinling Lenok Brachymystax lenok tsinlingensis), amphibians (Lump-anused Frog Chaparana quadranus or Chinese Forest Frog Rana chensisensis), reptiles (Bronze Skink Lygosoma indicum or Qinling Pit Viper Agkistrodon qinlingensi), birds (Plumbeous Water Redstart Rhyacornis fuliginosus or Slaty Bunting Emberiza siemsseni), and mammals (Field Mouse Apodemus peninsulae) in the Project Area (the Qinling National Botanical Garden) and the other region of Qinling Mountains at the same time. By monitoring their population quantity and the habitats environment changes (from water, land and air adding the vegetation monitoring data), our goal is to monitor the ecology environment of the Project Area, even the Qinling Mountains, in order to protect the Qinling Mountains biodiversity.

C. Part 3 Fauna Research Program in the Project Area or Qinling Mountains

Since the first nature reserve was established in the Qinling Mountains in 1965, with the help of efforts over 50 years, there have been 27 nature reserves of various kinds established in Qinling Mountains. And most of them are joined together in a contiguous nature reserve group. The establishing of these nature reserve not only gives an effective protection to the rare and endangered animals such as Qinling Giant Panda, Takin, Golden Monkey, Crested Ibis, Chinese Giant Salamander, Qinling Lenok and their habitats, but also helps a lot with the all-around research to Qinling Giant Panda, Takin, Golden Monkey, Crested Ibis, which are “national treasure level” rare and endangered wild animals, using the methods of Ecology, Morphology, Reproductive Biology, Genetics, Cytology, Taxonomy and Behavior Science. Many monographs on these 4 species have been published and distributed in public. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 141 Final Report Appendix 5

However, in biodiversity conservation position in Qinling Mountains, there are still some small-sized rare and endangered or unique wild animals which can not be protected effectively. And the research of them is almost blank. Take Qinling Lenok (Brachymystax lenok tsinlingensis) for example: it is a typical cold water fish kept in the stream of river end 棕⺐㊶⑆㻃漋伊, which is the national ൖ class protected wildlife as well as a unique species in Qinling Mountains. Qinling Mountains is the most southern part of Lenok (Brachymystax lenok) distribution area, spread narrowly and split to dots in the end of the tributary of Wei River which flows from Gansu Province to Shaanxi Province altitude 1,000- 2,300 m. But from 1960 to now more than 40 year the Qinling Lenok distribution scope has already retreated about 10 km, that is from originally lowest distributed altitude 1,000 m going up to 1,200 m in Shaanxi Province Longxian County. Although the Qinling Lenok nature reserve was founded in Longxian County, the Qinling Lenok are caught and killed crazily because of its large figure, delicious flesh, high nutritional and ornamental value as well as seriously lacking of funds for protection, making the Qinling Lenok population reduces rapidly. Except for the description of its outside shape and distribution in Qinling Mountains, we know almost nothing about the rare and endangered fish. If the power of the protection and scientific research were not strengthened, the Qinling Lenok would possibly extinct in the near future. Basing on above analysis and from biodiversity conservation view, we suggest GEF strengthen financial support power to protection and scientific research to the middle and small sized fauna which are rare and endangered or unique in Qinling Mountains.

(i) Establishing a program called “Chinese Giant Salamander reproductive biology research” in-situ area in the Qinling National Botanic Garden (the Project Area). Suggesting the research work be done on Chinese Giant Salamander in reproductive ecology, reproductive physiology, reproductive behavior and conservation biology and so on.

224. Establishing a programs called “the Qinling Lenok biology research” in-situ area in the Qinling National Botanic Garden and the Shaanxi Longxian Qinling Lenok Nature Reserve at the same time. Suggesting the research work is done in conservation biology (for example᧨the primary endangered factors), reproductive ecology, reproductive behavior (for example, breeding migration time) and population biology (for example᧨the population age structure relationship, relationship between number and environment) and so on.

D. Part 4 The Inhabitant Livelihood and the Nature Reserve Construction Program in the Project Area or Qinling Mountains

(i) The inhabitant livelihood is difficult at present in the Project Area (the Qinling National Botanical Garden). Their production and living action have great pressure on the environment. So improving the inhabitant livelihood is the main task for the Project Area biodiversity conservation. With the WWF financial and technical aid, the inhabitant livelihood in The Foping National Nature Reserve has been improved by breeding bee and horse. Suggesting GEF learn from WWF achievement, support the inhabitant breeding bee and Chinese Giant Salamander in order to improve their livelihood. (ii) The Shaanxi Longxian Qinling Lenok Nature Reserve is a place which has the Qinling Lenok the largest population and distribution the most concentrated. Because of serious lacking of funds for protection and management, now the most basic equipments for protection (for example, patrol equipment) and handle official business work appliance are lacked in the nature reserve.

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ANNEX 18: NATIONAL & PROVINCIAL WILDLIFE CONSERVATION & ENDANGERED SPECIES MANAGEMENT

A. Part I Outline of Current National Wildlife Conservation Program

1. National Forestry Nature Reserve Development Program

China is one of the richest biodiversity countries in the world. China’s land area is large, terrain complex, and the nation has diverse climatic and ecological environments that lead to development of rich species resources. The PRC seriously addresses biodiversity conservation, at present taking such two main measures as in-situ and ex- situ conservation. Among these, nature reserve is the most important measure for in-situ and biodiversity conservation. The PRC established the first nature reserve in 1956, with experience growing from and reserves growing from weak to strong in the developing process. By year-end 2004, the PRC already established nature reserves of many types numbering 2,194 and covering 14,822,300 km2 (not including Taiwan, Hong Kong and Macao), or approximately 14.4% of the national land area. In national nature reserve construction, the forestry department is the main organization. The State Forestry Administration (SFA) system has already established each kind of type and rank of nature reserve that number 1,674 and account for 76 percent of national nature reserves by number, and cover 11,869,500 km2, or 80 percent of national nature reserve area.

After 50 years of development, there are some big achievements in the national nature reserve construction and the management, but there are some problems at present. Among these, the nature reserves lack balance in development, not only is insufficiently in the macroscopic layout, but also lacks the system instruction and the standard, while some rare and precious wildlife and ecosystem existence protection are vacant. The identical biogeography unit or the ecosystem nature reserve construction which lack of the unification coordination and higher protection has not formed a whole protection function. For the purpose of solving the problem mentioned above and further more definition about the next national forestry nature reserve construction and the management goal duty, the work mentality and the work key, the SFA has established . The Program includes 6 chapters: Nature reserve present situation and appraisal; Nature reserve program guiding ideology, principle and goal; Nature reserve layout and construction key; Nature reserve facility and ability construction; Benefit analysis; Program implementation safeguard measure.

In third chapter “Nature reserve layout and construction key”, dividing the nature reserve system program in the region into 8 construction regions, they are the Northeast mountainous-plain region, the Mongolian and Xinjiang plateau wilderness area, the North-China plain-loess plateau area, the Qinghai-Tibet Plateau cold area, the Southwest mountain-canyon area, the South-China west mountain-hill area, the East-China and Central-China hill-plain region, the South-China mountain-hill area. Among them, the South-China west the mountain-hill area including the Qinling Mountains, the area as the subtropics to the tropics transition region, is the world evergreen forest central distribution area and the fauna is complex. The area is the main distribution area for the national unique ancient animal-----Panda, Golden Monkey, Takin, Crested Ibis, and Gibbon. At present the area has already established nature reserves numbering 275 and covering 413,500 km2, accounting for 3.5 percent of the national nature reserve area and 4.5 percent of the regional national territory area. The program brings the number of nature reserves to 450 and the national nature reserve number from 18 to 49. The total area of nature reserve area reached 550,000 km2, accounting for more than 6 percent of national territory area. The 175 new nature reserves will be gazetted as 45 reserves in 2005-2010, 86 in 2011-2020 and 44 in 2021-2030. One guideline will be to establish many small to medium sized nature reserves and to form groups of adjacent reserves and construct biological corridors. This will strengthen protection of national key wildlife and their habitats-- --Panda, Golden Monkey, Crested Ibis, national unique pheasant class, wild Sika Deer (Cervus nippon), Black-necked crane (Grus nigricollis), Cycad and Forest Musk (Moschus berezovskii).

In the fourth chapter “the nature reserve facility and ability construction”, it is mainly planned five construction contents-----the basic conservation facility construction, the talented person and management troop construction, the scientific research and monitoring system construction, the propaganda education system construction and the information platform construction and so on. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 143 Final Report Appendix 5

2. Biodiversity – Priority Areas Protected First

China is one of the richest global biodiversity countries as well as one country where there are the most serious threats to biodiversity. To protect the precious biological resources, in 5 to 10 years, China will contentiously increase biodiversity conservation abilities, and will take the special measure to protect Chinese 17 biodiversity key areas at first.

China will preferential protect 17 biodiversity key areas. The areas are Traverses Mountains southern region, Minshan Mountains-Traverses Mountains northern region, Plateau region of Xinjiang-Qinghai- Tibet province border, Yunnan Xishuangbanna region, Mountains region of Hunan-Guizhou–Sichuan- Hubei province border, Hainan Island south-central mountains region, Guizhou Southwestern limestone region, Zhejiang-Fujian-Jiangxi border mountains region, Qinling Mountains, Yili western section Tianshan Mountains; Changbaishan Mountains, Coastal shallow seas and tidelands wetland (including Lao River mouth sea area, Yellow River delta near sea area, Yancheng coast, Chongming island eastern beach), Northeastern Heilong River - three river plain region, Yangtze River downstream lake region, from mouth to southern Macao Island sea region, Bohai Sea channel and sea region, from Zhoushan to Nanji island sea region.

According to Ecology Department of the National Environmental Conservation Bureau leader introduced that the protective measures of the biodiversity key areas are: establishing the nature reserve, caring on the biodiversity and the environmental effect appraisal system to the items of basic construction, a ban on constructing polluting projects, strengthening biodiversity research, monitoring, and appraisal, having the choice to construct one batch of different types the state-level biodiversity protection demonstration base. The leader indicated that 17 biodiversity key areas which have not yet established nature reserves, should take the rescue measure to establish as soon as possible; the nature reserve having been established, should then strengthen the management and supervision, and as occasion requires, it might be advanced management rank, be promoted for national nature reserve, and be managed directly by the country.

B. Part II National and Shaanxi Province Endangered Species Management Initiatives

1. Qinling Giant Panda Conservation Program (source: China Network, 12 June 2006)

“Qinling Giant Panda conservation and development strategy seminar” have been held in Xi’an city in 2006, SFA and Shaanxi province government indicated that the Qinling Mountains will not only consolidate the Qinling Giant Panda nature reserve network in order to increase the national nature reserve area to 31,000 km2. Furthermore, China and Shaanxi province government also will establish the Qinling Giant Panda captive breeding centre and enhance Qinling Giant Panda monitoring station. The measures will protect Qinling Giant Panda more effectively.

The Qinling Mountains support around 300 Qinling Giant Pandas at the northernmost latitude for Pandas in China. SFA noted that, Qinling Giant Panda numbers are declining, distribution is narrowing, habitat area is not adequate, as well as the habitat does not provide adequate food, the conservation difficulty is one on top of another, the conservation duty is urgent and arduous. The conference has determined Qinling Giant Panda protection goal and program. In the near future, the goal will consummate Qinling Giant Panda nature reserve network system, increasing the national nature reserve area from 17,000 km2 to 31, 000km2. The strengthened Qinling Giant Panda habitat nature resume ability and the biological corridor belt construction, enable 95% Qinling Giant Panda habitat to obtain the protection and restoration of 90% latent habitat, and reduce habitat fragmentation. At the same time, Qinling area also will establish the Qinling Giant Panda captive breeding centre which will attack and resolve Qinling Giant Panda breeding difficulty and expand captive population quantity. Qinling Giant Panda will also be wild trained in order to supply wild population.

2. Shaanxi Rare Wild Animals Rescue and Breeding Center

Shaanxi Rare Wild Animals Rescuing and Raising Research Center (hereinafter called “center”) is the only national key protection center in Shaanxi Province. It mainly deals with “field rescue for wild animals of the first and second level, wild animals raising and breeding, science research, propagating and education and usage development”. The preparations for construction of the “center” started in

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1978, and it was set up in 1993 under the approval of Ministry of Forestry (now SFA). It was also built as an institution on the basis of county level approved by Shaanxi Editor Committee in 2001. “The Center” was belonged to and run by Shaanxi Forestry Department and managed by its agent Forestry Center of Louguan Temple.

Since the establishment of “the center”, it has rescued the animals more than 300 times in the field and saved the life of about 190 animals, cured and freed about 160 wild animals, captive bred 659 animals and among which are 32 first level protection rare animals. There are 557 wild animals in the corral and among which are 131 rare animals.

“The center” has kept cooperating with Northwest Farming and Forestry Science College, the Fourth Military and Medical Academy, Xi’an Jiaotong University, Northwest University, Shaanxi Normal University, Shaanxi Animal Research Institute, Sichuan Wolong Giant Panda Breeding Center, Giant Panda Breeding Base to effectively study on the field of animal rearing and breeding and disease prevention and curing. The research technology of Sichuan Golden Monkey captive breeding and the abandoned infant of Golden Takin manual raising have reached the highest technical level in China.

The experts from America, England, Germany, Australia and Belgium have been invited to visit the center. Besides, those professional technical personnel have been assigned abroad to more than 10 countries such as America, Germany, and Japan to study this international technology and make a research on this special field. The staff of “the center” has also kept business contacting and cooperating with more than 20 national zoos and wild animal zoos in the long time.

The propagating activities have been launched in “the center” such as “Animals and Human kinds coexist on earth” and “Protecting animal means protecting our human”. This thought was propagandized through different propagating media by sending workers abroad and inviting experts from outside. This has made great and active contribution on wild animal and ecological environment protection.

We have started to carry out the second construction project in the advantage situation of western China development. The original surface area of “the center” has been enlarged from 5.3 hm2 to 140.7 hm2 and divided into three different functional sections------the rescuing and breeding section, field feeding and domesticating section and feedstuff base. After this reconstructing, the condition of raising, arrangement, nursing and scientific research in “the center” will be better improved. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 6

IMPLEMENTING AGENCY - MANDATES AND ARRANGEMENTS

A. Background

1. The draft final report had included proposals for essential institutional reforms which the SPG had indicated could not be achieved prior to Project start up. Subsequent to this the SPG and ADB agreed to the institutional reforms to be completed before Loan Negotiations. The reforms are those suggested by the PPTA and involve the amalgamation of the Qinling Botanic Garden, SARC, and Louguantai Forest Farm into a single institution to be responsible for the Project Area. Within this organization the Qinling Botanic Garden, SARC, and the Louguantai Forest Farm will form divisions for the implementation of the Project. The following summarizes the existing mandates and institutional arrangements as proposed in the FS presented to the PPTA.

B. Qinling Botanic Garden (QBG)

1. Jurisdiction and Mandate

2. QBG is currently a government affairs unit set up by the Shaanxi provincial government in year 2001 and as such is a legal entity defined in ‘Civil Act of PRC’. QBG is registered as an independent legal entity to manage the establishment of Qinling Botanic Garden and is also referred to by the name Qinling Flora Research Institute. As a government unit, QGB is aligned to the Shaanxi Forestry Department.

a. Mandates of QBG

3. There is no government document to clearly define the mandate of QBG, but it has been acting as a management agency in the process of planning and implementing the establishment of the Botanic Garden.

4. The Qinling Botanic Garden legal entity registration certificate defines the mandate to include : “Conduct activities of research, protection and exhibition of biodiversity; maintain ecological balance and achieve sustainable development”. It can operate in the following areas: research and development of bio-materials, biodiversity conservation and exhibition, publicity of laws and regulations related to the protection of wildlife, flora and environment, scientific knowledge extension and education, training, eco-tourism, landscaping design and implementation. It has an initial capital of CNY2.36 million.

b. Function as a Government Affair Unit - Eligibility to obtain Loan and Commercial Operation

5. As a government affairs unit, the provincial government only meets part of Qinling Botanic Garden operating costs. QBG has to meet shortfalls in its operational cost by applying for funds from other government projects or commercial activities. The government allows this type of unit to set up a company or joint venture to conduct commercial activities, provided priori approval is obtained from the Department of Finance (DOF). QBG has this approval and can raise loans for its own establishment with the loan repayment being through revenue generated by QBG. For running a business, QBG must follow government regulation to get a relevant approval and license.

6. QBG has registered with the Shaanxi Provincial Business Administration Bureau in 2003 a company named as “Shaanxi Qinyuan Ecological Development Limited” (SQEDL). It is an independent legal entity. The registration certificate (license) states the scope of its commercial activities as research and development of biological material, implementation of biodiversity conservation project, landscape beautification project, landscaping project, scientific knowledge extension and education. The registered capital of the company is CNY120,000,000. Mr Shen is the representative of the legal entity. The company has not yet undertaken any business and while it legally exists it remains a non-revenue generating company.

7. Some business mandates within SQEDL’s scope also require special licenses from the government for eligibility, such as landscaping planning, and design. SQEDL hasn’t been licensed for these businesses yet. 2 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 6

8. The financial governance report of the PPTA indicates that the current accounting system of QBG does not have the capacity to handle an ABD loan. It suggests that QBG needs to be commercialized. There is the possibility for QGB to restructure the SQEDL to meet the commercialization requirement.

2. Implication with in Qinling Area

9. QBG is planned to cover 458 km2 as stated in SPG approval to the plan. It is located in the planned Qinling Ecological Function Management Zone. Shaanxi province Qinling National Ecological Function Zone Plan includes QBG as an ecological demonstration garden project. QBG as an institute is considered to be an implementing agency for the Qinling Ecological Function Management Zone.

10. Importantly QBG does not have the land user right in the Project Area. For the ex-situ land requirements it needs to gain the land user right through acquisition, renting or shareholder arrangement according to the Land Management Act of PRC. Most of the land is currently owned by the local community. County and township government will be very important stakeholders in terms of land acquisition, resettlement and other government supported natural resources and community development activities. For operating in the QBCDA and if QBG plans to do any development on land of Louguantai Forestry Farm which will now be approved by the management of the QNBG institution.

3. Conclusion

11. QBG is eligible as government unit to raise a loan for QBG construction. QBG is able to set up a company or restructure the current company to complete its commercialization to meet the loan management and repayment requirement. QBG is an implementing agency of the Project to borrow and repay the loan within the scope of the feasibility study agreed with the PPTA team.

12. QBG will only be responsible for construction and operation of the Qinling Botanic Garden itself. It will take responsibility of resettling villagers in Dianzhen village to meet government of PRC resettlement requirement. It is proposed that QBG contribute to the funding of the QBCDA through the revenue it earns to benefit Qinling Mountain Biodiversity conservation.

13. QBG will collect, plant and exhibit original flora from the Qinling Mountain. It will contribute to conservation through maintaining genetic source material and educating the public in the Qinling Mountain area. QBG will conduct research on the utilization and development of indigenous flora. It has the potential to support biodiversity through the wise usage of resources by the local community and the society. There should be a mechanism for QBG to exchange experience with the rest of the Qinling biodiversity conservation organizations. Establishment of an association of institutions of biodiversity conservation in broad Qinling area can be one such option.

4. Outstanding issues

(i) QBG has to be able to use the Capital Construction Accounting Guideline as stated in the Financial Governance Report. (ii) QBG is proposing shareholder arrangement with local community farmers to gain the land user right. QBG as a government affairs unit doesn’t have the legal right to have shareholder arrangement under the QBG legal entity. Only a company as a legal entity can set up shareholder arrangement following the ‘Company Act of PRC’. (iii) QBG can not be fully replaced by the commercial company because of its nature as a government affairs management institute unless the provincial government approves a full restructure of QBG to become an enterprises following government guideline.

5. Recommendation

14. The commercialization process of QBG should be undertaken before project start up. The options of commercialization should be agreed in a discussion between PDRC SPFB, and QBG and a timetable should be agreed with SPDRC on QBG’s commercialization. A critical issue remains the ability of the proposed reformed QNBG to provide a shareholding to those holding land use rights as noted in the DFR. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 3 Final Report Appendix 6

C. Shaanxi Treasured Wild Animal Rescue and Research Center (SARC)

1. Jurisdiction of SARC

15. In 2001 the Government of Shaanxi issued a Document to approve the establishment of the Shaanxi Treasured Wild Animal Rescue and Research Center (SARC). It has equal status as a county level government in managing the government affairs as defined in the legal document. It has an initial capital of CNY2.48 Million and can employ 28 staff with 3 managers. The government meets all of its operating costs.

16. It has registered with the Government Affairs Unit Registration Bureau of Shaanxi as an independent legal entity.

2. Mandates of SARC

17. The following mandates are assigned to the SARC:

(i) provide services for rescuing, raising, research and protection of treasured and endangered wild animals (ii) work within Shaanxi province (iii) rescue endangered wild animals on the national protection animal list. For raising and breeding wild animals on national protection animals list, a permit has to be given by the Forestry Bureau. SARC has this permit. (iv) raise, breed, research, and raise public awareness of these animals (v) conduct activities of using these animals for development purposes (vi) establish a joint venture or commercial company for development purposes

18. The animals in the center are open to the public with provision of extension information while SARC may collect entry tickets. It can borrow for establishment of facilities within its mandate. It has the right to repay the loan from the revenue generated through their commercial activities.

19. SARC shares an accounting office with the Louguantai Forestry Park and Louguantai Forestry Farm. But SARC uses a different accounting system for its revenue. According to the PPTA Financial Governance Report, the current accounting system of SARC is not sufficient to meet the requirement of ADB loan management. It is suggested that SARC needs to be able to use the Capital Construction Accounting Guidelines.

20. SARC shares the forestry land area of Louguantai Forestry Farm, and is entitled to use the land within in their mandates. It can use the forestry farm’s land to build a Giant Panda Base and Ibis Base. It is eligible to use the forestry farm’s land to establish an exhibition zoo and education center but requires approval to use the land for other construction from the Forestry Department and Land Management Department.

3. Link to the Qinling Mountain area

21. It is planned in the Qinling National Ecological Function Management Zone Plan that there will be five wildlife rescue centers established under the plan. SARC is the first one established in the province.

4. Conclusion

SARC will be eligible as a borrower of the ADB loan under the Project. It will implement ex-situ activities and some in-situ strategy activities. It will be one of the implementing agencies of the project. SARC will need to adopt the Capital Construction Accounting Guidelines to be able to handle the loan monitoring and repayment requirements.

22. SARC is proposing to contract a company to manage its tourism commercial activities. They will use the revenue generated from the tourism operation to repay the loan, and they will serve as an example of promoting conservation eco-tourism described in the design document of the project. 4 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 6

23. The animal breeding bases and extension and education center will serve as an important public awareness facility for wildlife protection. SARC will contribute its net revenue from tourism operation including eco-lodges to the eco-fund to benefit Qinling biodiversity conservation.

5. Recommendations

(i) Monitoring measures need to be in place to ensure that SARC will follow the principles of the PPTA team’s design when it conducts project activities. (ii) An association or a network of animal rescue centers or natural reserves needs to be in place, for exchanging information and sharing experience between these key field operators in the conservation field. (iii) SARC needs to adopt the enterprises accounting policy for the accounting of the project and tourism operation component to meet ADB loan management requirement. (iv) SARC can promote its experience through an association or a network whose members meet regularly.

D. Louguanfudi Tourism Development Limited (LTDL)

1. Jurisdiction of LTDL

24. Louguanfudi Tourism Development limited (LTDL) is a commercial legal entity set up following the ‘Company Act of PRC’. It is a joint venture between LFF and the Shaanxi Tourism Development Group Limited. LTDL was registered at the Shaanxi Commercial Administration Bureau in 2006 with indefinite business duration. It has an initial capital of CNY10 million.

2. Mandates of LTDL

25. LTDL has been registered to conduct business in the following fields: Tourism development, tourism project design and investment, property management, tourism souvenir production and trading.

26. LTDL has been managing the hot spring tourism development project after it was approved by SPDRC in year 2003. LTDL has the hot spring water abstraction permit from Water Affair Bureau of Zhouzi County, and has land use rights of the development through a renting arrangement with LFF. Shaanxi Tourism Development Group Limited has invested some funds for the hot spring development.

27. According to the PPTA team Financial Governance Report, LTDL is using the enterprises accounting rule and its accounting system meets ABD loan management and repayment requirement.

28. As a commercial legal entity, LTDL is able to borrow and repay loans from the revenue generated. It is able to take obligations independently in terms of operation within legal boundaries, getting revenue, borrowing and repaying, and taking legal action.

3. Conclusion

(i) LTDL is eligible to borrow loan funds from ADB and can repay the loan as an implementing agency of SQIEM project. (ii) LTDL will contribute a certain share of net revenue to the Eco-fund to benefit the broad Qinling Mountain in terms of biodiversity conservation.

E. Louguantai Forestry Farm (LFF)

1. Jurisdiction

29. Louguantai Forestry Farm is a government affairs unit approved by the Shaanxi Forestry Department. The most recent confirmation of its legal status is in 1986. It is a government affairs unit but the government meets only part of its operation costs. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 5 Final Report Appendix 6

30. LFF is an independent legal entity registered with Shaanxi Province Government Affair Unit Registration Administration which can manage forestry land under the ‘Forestry Act of PRC’. It has the use rights for the area stated in the forestry land certificate of 37,163 hectares.

2. Mandates

31. Its mandates include: management of the state owned forestry farm, management of the state owned forestry nursery, forging forestry development, rescuing wildlife, and the maintenance of ecological balance. LFF can plan supply and production of seedlings, and conduct forestry farm management and state owned forestry nursery management. They will manage tree seedlings supply, forests, forestry fire prevention and control, selection of quality genes and seeds, extension of new technique. LFF can conduct training on relevant techniques and management practices. They can provide services on forests related tourism. They can rescue, keep and raise sick and injured wild animals. They can conduct publicity and education on wild animal protection affairs. They can research on animal protection related issues. They can raise and bread wild animals. It has initial capital of CNY21,330,000.

32. Rescuing and breeding wildlife on the national protected animal list requires approval and permit. Louguantai has the relevant permits.

33. The regulation allows them to borrow money for LFF development and they will be responsible to repay the loan.

3. Relationship with SARC and Louguantai National Forestry Park

34. SARC and LFF are government affairs units sharing staff resources and forestry resources. The government provides different funds to different units for the affairs they are managing for the government. There are different deputy chief managers for different unit, but one chief manager for all of the three units.

4. LFF’s role in the Project Area

35. LFF holds the user rights for the forests of part of the project in-situ and ex-situ areas. The activities proposed in the in-situ strategy - such as restoration of wild animal habitats - will be on the forestry land managed by them. Management of the forests is in their mandates so the biodiversity conservation philosophy and integrated ecosystem management introduced by this project will benefit them. LFF should logically be one of the implementing agencies for the in-situ strategy.

5. LFF’s role in the Qinling Mountain area

36. Louguantai Culture and Ecology Tourism Area Development is one of projects planned under the Qinling National Ecological Function Zone Plan. The plan has listed 15 development projects under eco-tourism and ecological environment protection. If LFF develops a conservation sensitive tourism model, it will give impact to other development through an appropriate channel. It can organize an association with other forestry parks to disseminate the useful experiences.

F. Local Collectives

1. Background Information

37. The term “Local Collectives” hereafter refers to the administrative villages inside the in-situ and ex-situ areas of the project. There are 15 administrative villages in the in-situ area, three of them in the ex-situ area and 32 fringe villages (adjacent to, but not within, the Project Area).

2. Jurisdiction and Mandates of the Administrative Village

38. They are autonomous organizations regulated by ‘Villager Autonomous Governance Act of PRC’. The administrative village owns land and some water in the ponds built by them. It can also own forests on their land. It can have its own property and money. It can also set up joint adventure through investing the collective’s property, and is a legal entity by law. 6 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 6

39. The Village Committee is the collective’s representative appointed by election at a Village General Meeting or a general meeting of village representatives. The Village Committee manages village affairs and represents the collective to deal with village affairs in connection with outside organizations or individuals. The Party Secretary plays an important role in the collective’s affairs. For significant issues such as contracting land and trading the collective property, the decision must be made through a meeting of all villagers (Village General Meeting).

40. The Village cannot change its land use type without approval from the Land Management Authority. It cannot change its forestry land use type to another land use type without approval, and it cannot log trees without approval. However, it can trade their forests under the forestry regulation through legal processes. It can also trade their idle land or barren land to improve the land quality as agriculture land or forestry land. It can trade its cropping land user right, but can only sell their crop land to the state. By selling land to the state, landownership will be changed from collective to the state.

41. The ex-situ villages in the project area will participate in the QBG and SARC development project by contributing their land through acquisition. Some individual households will rent out land or put their land user rights in some other trading form to transfer land user right to QBG. The householders will become beneficiaries of QBG development through financial returns determined by the land use contracts signed in the future. The individual households will have opportunity to participate in QBG ‘s construction work and tourism service in future as stated in the QBG feasibility study Report and Resettlement Report.

42. The in-situ village will participate in conservation activities and community development activities designed in the project’s in-situ strategy. Therefore the village as a whole will be an important organization for implementing the project.

43. Individual households can organize a legal entity for cooperative production or trading purposes. There is the possibility to set up such organizations during the project implementation.

3. Conclusion

44. Ex-situ villages will be project stakeholders by participating in the QBG and SARC activities, but they will not be a project implementing agency since they will not be an independent organization to implement project activities.

45. In-situ villages are the communities who will directly implement project activities. It is proposed to work with village groups in the project in-situ strategy. It will be appropriate to work with the village community when setting up these groups. In-situ villages will be project implementing agencies in terms of implementing the in-situ strategy.

46. The in-situ villages well represent the typical community through out the Qinling Mountains. They have few resources to use, limited public infrastructures and services. Their attitude and activities will give direct impact on Qinling biodiversity conservation. Their livelihood is influenced by the government conservation program and needs help to improve. A lot of communities inside Qinling Mountain have traditional ties through marital or blood connection. Their experience of conservation will be easy to disseminate as a project achievement to the remainder of Qinling Mountain area, giving impact on other communities.

G. Daoism temple sites

47. There are two Daoism temple sites within the broad project area. One is the Louguantai Daoism Temple located inside the forestry farm. The other is the Daoism Temple ruins located on the proposed QBG site.

1. Louguantai Daoism Temple

48. Louguantai is recognized as the oldest Daoist temple in the world with several thousand years of history, and is the site of the origins of Daoism. The temple is registered with the Zhouzi Religions TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 7 Final Report Appendix 6

Affair Management Bureau with a license to conduct religious activities. All of the Daoshi (religious practitioners) are registered with the Zhouzi County Religious Affair Bureau.

49. The temple has the user rights to the land the temple is built on, and owns the buildings and other properties. Their activities are regulated by the ‘Regulations of Religious Affairs Management Act of PRC’. It allows the Daoist temple to conduct religious activities, collect entry tickets on tourism sites, and sell religious books, goods and souvenirs with the license. It also allows the temple to collect donations from believers and other legal sources. Louguantai Daoism Temple does not collect entry tickets directly, but gets a CNY5 share from the CNY30 paid for each entry ticket to the Louguantai Forestry Park.

50. According to the chief Dao Shi of the temple, the Louguantai Daoist Temple is historically the chief Temple on the north face of Qinling Mountain. It still maintains its chief position because the Zhouzi County Religious Affairs Management Bureau recognizes its position to make other Daoist Temples its subordinates. This requires Daoshi to be registered with Louguantai Daoism Temple and to obtain more practice before they are sent out to other subordinate temples to manage religious activities. To build or restore other Daoist sites around the northern slope of Qinling, the Louguantai Daoism temple needs to initiate the process through application to Zhouzi Religious Affairs Management Bureau. The rebuilding or building of a temple can start after the application is approved.

51. The Louguantai Daoist Temple plays a key role in leading a China Daoism and Conservation Workshop supported by ARC, EMF and WWF international. It resulted in a Qinling Statement to initiate a Daoist Temple Conservation Education Association and to announce the actions taken by the temples for conservation.

2. The Daoism Temple Ruins on the Planned QBG Site

a. Background Information

52. It is proposed in the feasibility study to rebuild temples, although it is not clear at this point whether there are any Daoshi who will conduct Daoism Religious activities. However the building of a religious temple should go through the application process required by ‘Methods of Approval and Registration of Setting Religious Sites’. If the temple is regarded as a subordinate of the Louguantai Daoism Temple, it does not need to have a separate unit registration, but it needs to be licensed to be able to conduct any religious function.

b. Mandates

53. It is not clear at this stage what mandate the Daoism Temple Ruin will have in the future. This depends on the approval and license it will have. But it is clear that, if it can get an approval and license, it will have same mandate as the Louguantai Daoism Temple - except for the degree of religious influence and religious power. QBG has stated that it will only restore the religious building and no religious activities will be conducted in the restored temple, and it will not collect a separate ticket for visiting the temple site. Therefore they do not need to ask for a separate license for running a religious site.

c. Conclusion

54. Louguantai Daoism Temple is a great cultural attraction to tourists and its principle of conservation will have great potential to add value to the project. It is an important stakeholder in the project.

55. Louguantai Daoism Temple has extensive religious influence within the Qinling Mountain area. There is potential for the project to cooperate with the Temple to disseminate conservation knowledge and principles promoted by the project. Restoration of the Daoism Temple Ruins will set up a new religious site if any religious activities are conducted, in which case it must be licensed. It is located within the tourism site, and the temple itself can charge an entry fee to the tourists, but not to believers. How or whether the QBG will get a share of the ticket price from the Daoism temple in this case, depends on the agreement of QBG with Daoist temple. 8 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 6

56. Under QBG’s Feasibility Study, it will not restore the temple as a religious site with religious activity, but a building for tourists to visit. It is recommended that QBG should discuss with Zhouzhi County Religious Affair Bureau to determine the legal status of the restored Daoism Temple Ruin. A written statement from Zhouzi Religious Affair Bureau is required to clarify the legal status. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 7

DETAILED PROJECT DESCRIPTION

A. Project Impact

1. The Project impact will improve rural wellbeing based on sustainable conservation and use of QM resources. The project seeks to address the inter-relationship between sustainable biodiversity conservation and livelihoods through introducing market-based approaches to biodiversity conservation. The key performance indicators include: reduction in land area experiencing land degradation and soil erosion; expansion of critical habitats within protected areas or landscapes with effective conservation plans, successful protection endangered and non-priority species; employment creation, increased rural incomes and poverty reduction; and increased tourism revenues and business opportunities in both high volume activities in the ex-situ zones, and high value/ low volume and impact activity in the QBCDA zone.

2. Poverty reduction over the longer term, especially in the QBCDA area, will be strongly related to the non-farm full-time employment opportunities and the extent that QBCDA residents can gain access and rights to use forested landscapes. Direct full time employment generated by the Project investments in the QBCDA area is estimated to reach 500 by 2020 – based on the home-stay facilities, small business generation and maintenance of conservation forests, the road and path improvements. Additional jobs could result from other investments identified through implementing the QBCDA strategy such as enterprise development, and the indirect employment from the Project financed sustainable livelihood activities and job opportunities within the ex-situ zone.

3. Direct and indirect employment creation in the QBCDA area is conservatively estimated to be 1,000 by the early 2020s. If the majority of these jobs are filled by QBCDA residents or QBCDA residents with land rights the potential exists that most poverty households will benefit from or be able to exit from poverty as a direct and indirect consequence of the Project.

4. Based on current estimates of number of poverty households in the QBCDA zone could fall from more than 900 or 74% of the registered resident population in 2005 to about 200 in the early 2020s which would represent a decline from 70% to 20% of the QBCDA households. In addition, the non-farm jobs provide substantial increases to existing income levels in the in-situ.

5. The Project’s long term impact on employment and poverty reduction in the ex-situ zone and the total PA would be less dramatic but still quite impressive – associated again with a small population, limited full-time non-farm employment and low net farmer incomes in the ex-situ zones and the total PA. Potential longer term benefits for the ex-situ zone, include direct employment estimated at 870 full-time jobs in the ex-situ tourism enterprises but this number could more than double to about 1,800 to the extent that planned follow on investments take place.

6. If 40% of these jobs target the poverty households in the ex-situ zone, the ex-situ poverty household count would fall from 980 to 260, with the result that the ex-situ poverty rate would decline from the 2005 rate of 28% to 7%. Combining the ex-situ and QBCDA estimates, the number of poverty households in the PA would fall from the 2005 number of 1,890 – or about 40% of the PA households – to 460 or 10% of the 2005 number as a consequence of the direct, indirect and demonstration impacts of the Project on employment.

B. Project Outcome

7. The Project outcome in 2013 will be an effective integrated landscape management system providing sustainable livelihoods for the population of the Project Area that can be demonstrated to the wider QM. The project outcome emphasizes how the Project will demonstrate medium term success in e.g. integrated landscape management, habitat protection, the protection of endangered species, increasing income from tourism as visitors increase from 300,000 to approximately 1.2 million, treatment of tourism waste streams, the number of farmer households and villages in the QBCDA and ex-situ areas participating in and benefiting from project activities, and tourism revenues sufficient to generate a surplus for transfer to QBCDA biodiversity conservation.

8. The investments provide the foundation for the replication of the Project models and approaches to the wider Qinling Mountains. The sustainable financing mechanisms will derive revenue from the commercial tourism enterprises that will finance selected investments in the PRoejct Area and in other parts of the Qinling. 2 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

C. Summary of Project Outputs

9. The project outputs are associated with three components. Component I has the following output statement: “Tourism to support biodiversity conservation”. The output from Component I emphasizes commercial and functional success for the ex-situ enterprises enabling the enterprise to transfer a profit share into biodiversity conservation, modified habitat restoration and sustainable livelihoods in the QBCDA zone. Three enterprises will be developed including:

(i) Qinling Botanical Garden – being the 269 ha botanic garden site only (ii) Shaanxi Animal Rescue Center (iii) Shaanxi Forest Bureau (Louguantai Forest Park) and Shaanxi Tourist Development Group Ltd Joint Venture Hot Springs Development

10. The second Component implements the agreed QBCDA strategy (see Supplementary Appendix 2). The output from Component II is improved livelihoods from sustainable management and conservation of QBCDA natural resources. As such, the output prioritizes the interactions between village empowerment, sustainable livelihoods and improved conservation habitats as follows:

(i) Improved Village and Forest-based Livelihoods (a) Establishing rights to forest land for conservation forestry (b) Introducing improved agricultural and other technology (c) Small business development for value addition (d) Community Based Tourism (e) Infrastructure Support – road, pathways, water supplies and renewable energy

(ii) Biodiversity Conservation Demonstrated (a) Habitat Restoration on Forest Land (b) Endangered Species Management Program

11. Component III will establish create the Institutional arrangements for sustainable management systems of QM natural resources and to replicate the lessons learned. The Component will support:

(i) Effective Project Management (ii) Strengthened institutional arrangements (a) Legal Reforms for biodiversity conservation (iii) Biodiversity conservation demonstrated and replicated (a) Landscape Planning – Conservation and tourism landscape management planning (b) Conservation monitoring (c) Conservation Awareness and Dissemination

D. Detailed Description – Component I: Commercially Successful Ex-Situ Enterprises

12. The project area covers 458 km2, with an QBCDA zone occupying 400 km2, and an ex situ zone of 58 km2. Land types in the ex-situ area include rural cropping and forestry land, rural residential land and rural idle land. Land tenure includes state owned forestry land and collective owned cropping land, forestry, residential, infrastructure constructive and idle land. The project implementing agencies will get access to land use right through different approaches within the legal framework of PRC.

1. Ex-situ Qinling Botanic Garden

a. Proposed Intervention

13. The Project will develop a new botanic garden to be known as the Qinling National Botanic Garden that will be 2.693 sq. km (269 ha) within the ex-situ portion of the Project Area about 50km or one hours drive from Xian1. The proposed Botanic Garden will utilize land that is currently under the

1 Here the term botanic garden refers to the physical site of the botanic garden of 269ha and should not be confused with the QBG government unit that has been officially approved by the SPG to prepare and design TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 3 Final Report Appendix 7 administrative villages of Dianzhen and Jinfeng in Jixian Township, Zhouzhi County. The site comprises three land types (i) the southern area of the site against the mountain is an upland forest vegetation cover zone, (ii) the northern area near the highway is flat cultivable land, and (iii) the middle area between the two is a hill zone, which lacks vegetation and has severe water and soil loss. The middle or hill area accounts for 176 ha or 65% of the site, while the flat cultivable land is only about 10-15% of the site area.

b. Outstanding Land Use Issues

14. Existing land use rights are held by the collectives and individual households and will need to be transferred to the Botanical Garden and the QNBG through acquisition of land use rights that incorporate the required compensation requirements. The Qinling Botanic Garden proposes two procedures for establishing land use rights depending on the proposed use of land. Land that is to be built on for structures and or infrastructure shall be purchased outright whilst land to be used for gardens and landscaping will be rented. Land rental will be priced using two payment systems, The first involves an annual rental payment (in advance) that will apply from Project effectiveness.with the value of the rental differing for three categories of land. The rent will increase by CNY 20 per mu per annum. The second payment system is based on offering existing land owners equity in the Botanic Garden and that the equity share would be remunerated through Profit distribution forecast to start in year three or four. The reason for the dual payment system is to reduce the cashflow requirement for the Qinling Botanic Garden enterprise especially during the initial construction period where under usual circumstances the existing right holder would require to be paid out in full.

15. The PPTA does not support an equity based profit share due to (i) the extreme risk to rural households given the projected initial cash flows, (ii) there remains uncertainty over the full equity structure of the botanic garden and the likely roles of individuals in these joint ventures enabling control over financial distribution, (iii) the proposal is illegal according to a recently imp[lamented Provincial regulation2 and also given the structure of the QNBG organization which is not fored under the Company Act to enable it provide a shareholding, and (iv) the ability of an enterprise to manipulate a net profit figure to meet its own objective and not the requirements of the rural household shareholders.

16. The botanic garden will be developed along with other exhibitions and attractions including several Daoist temples, cable car, food and beverage, science and education centers. These will provide an attraction to increase visitors in the interim stage while the garden is established and grows out.

II. INVESTMENT OUTCOME

17. The purpose of this subcomponent is to build a world-class botanic garden supporting a commercial tourism and education business. The target market for visitation includes both general visitors and specialized tourism groups with interests in botany, bio-resources, biodiversity conservation, culture, history and religions of the Qinling Mountains. The proposed Project investment represents Phase I of a proposed ongoing construction program and focuses on tourism, public education and biodiversity conservation aspects of the facility.

18. The Botanic Garden is being developed to:

 provide a world class tourism and educational experience for local residents and visitors;  provide an international standard science and research facility on the QM’s bio- resources and biodiversity management that will add to the education features of the tourism attraction and support biodiversity conservation and restoration in the rest of the PA and the wider QM;  build knowledge, appreciation and understanding of the Qinling experience and culture in particular the Daoist culture and religion which emphasizes harmony between people and nature;

the Project Feasibility for the whole Project Area. During the PPTA the project was restructured to include additional enterprises altering the singular role of QBG – the enterprise. 2 THE SPG has indicated that it feels the QBG is not affected by these regulations and will provide an official document to ADB that to this effect. 4 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

 generate a financial surplus, so that a portion is reinvested into the QBCDA development program to support habitat restoration, sustainable biodiversity conservation and sustainable livelihoods3;  expand and diversity the tourism base of Xi’an and Shaanxi through constructing and operating an international standard eco-tourism facility that increases visitor choice and extends the average stay within Shaanxi by ½ to 1 day of those visiting the site ; and  provide sustainable livelihoods to local people through employment at the BG, through the sale of goods and services by local firms to the tourism facility, and through the generation of indirect impacts including future tourism investments in (e.g.) home-stay restaurants and accommodation facilities and handicraft production workshops located in the Jixian Township villages near the site to the south and north of provincial highway South 107.

III. INVESTMENT OUTPUT

19. The Project shall result in:

 A commercially successful tourism enterprise that markets and operates the QBG project site  Designs and constructs a total of 57ha of constructed gardens for 18 different plant groups  Construct greenhouses for displays and propagation  Constructs a museum and exhibit hall for ancient Qinling Biodiversity  Restores 7 Daoist temples sites and 12 minor Daoist sites using historical and religious architectural styles  Install and operate a cableway linking the lowland gardens to the Daoist temple sites  Constructs a multipurpose hall including restaurant and reception center  Provides a comprehensive infrastructure program for the entire 269ha site  Purchases 293.63mu of land (19.64 ha)  Establishes land use rights for a further 3,746mu (249.66ha)  Completes a comprehensive resettlement program for a total of 143 households  Compensates a total of 3,780 affected persons4

I. Project Activities

20. The current Feasibility Study still represent a concept design and requires significant detailed design input including architectural design choices agreed during the PPTA. The current concept brings together and capitalizes on the linkages between:

(i) the constructed botanic garden whose appeal will expand through the years as the garden matures; (ii) the natural scenery, walking and Qinling biodiversity experience provided in the modestly sloped hills in the back of the flatland area – which allow the QM’s QBCDA biodiversity experience to be brought to the ex-situ area (and thus reduces tourism and recreation pressures on the QBCDA zone); (iii) the seven major Daoist temple sites restored and minor work at a further 12 sites; and (iv) the Qinling story, culture, religions, and history which will be told through interpretive signs, sculptures, pictures, and other means along the walkways from the Qinling biodiversity experience to the Daoist temples.

21. The vision for the QBG is much more than a botanical garden and will allow the QBG to be marketed as the “the first place to visit” in order to enjoy the Louguan Tai experience which will include the Shaanxi Animal Rescue Center, the Louguantai Forest Park, the Hot Springs Development, Daoist temples, and, for some tourists, the Qinling QBCDA biodiversity experience. A particularly important feature is the carvings, sculptures, stories, and other interpretation methods along the pathways that link the gardens with the restored Daoist temples on the hills at the back of the site.

3 Based on applying an operational model that combines ex-situ and QBCDA biodiversity conservation and management. 4 Note that as this exceeds the potential for employment in the QNBG operation full compensation is required TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 5 Final Report Appendix 7

22. The first is the steles and stone carvings along the paths to the Yuanshi Temple for displaying the culture and stories of Daoism. The second is the plates, sculptures and other information methods along the paths to the Liansheng Pavilion for illustrating the stories about the historic evolution of the terrain, physiognomy and animal and plant bioresources of the Qinling Mountains. The third is the plates and stone carvings along the pathways to the Mammon (Golden Fortune) Temple for displaying the stories of Golden Fortune/Mammon. The fourth is the plates, stone carvings and other information methods along the paths to the Kwan-Yin Temple and the Pudu for illustrating stories about Buddhist culture and its history in China. The fifth is the animal sculpture complex of the Qinling Mountains that will be established along the paths between the Golden Fortune Temple and the Liansheng Pavilion.

23. The following lists the major activities and their associated costs as described in the Botanic Garden’s revised FSR submitted in May 2007 see Table 1.

Table 1: Major activities for the QBG

Major QBG Activity 1. Specialized gardens and lawns/landscaping: 18 specialized gardens with a total area of 57 ha, comprised of plants that are endemic or at least representative of the QM and indigenous to China, and a lawn area of 25 ha 2. Greenhouse – 6400 sq. meters along with geothermal water use for heating 3. Paleontology (Ancient Qinling Biodiversity) Building – 8,000 sq. m.: brings the history and evolution of the QM’s biodiversity and culture to the QBG visitors (reportedly the only museum of its kind in the PRC) 4. Restoration of Temples and other Historical Sites and Buildings – 10,119 sq. m. over 19 sites – which include the following main restored structures - Liansheng Pavilion: 3,616 sq. m. - Kwan-Yin (Guanyin) Temple: 595 sq. m. - Yuqing Palace: 1,446 sq. m. - Daxiong Palace: 1,380 sq. m. - Sanqing Palace: 345 sq. m. - Cangjing Pavilion ( Temple): 345 sq. km. - Pudu Pagoda/Tower 5. Multi-function Building – 5,220 sq. m.: including offices, fast-food restaurant, and reception center (hotel and science research building to be built in phase 2 6. Road, Path and Related Infrastructure – including road network of 99,166 sq. m 7. Water Supply, Environmental Infrastructure and Drainage 8. Electric Power and Telecom 9. Parking Lot in Zone A – 18,000 sq. m. 10. Central Square, Gate, Fencing, Fire Control, Other Infrastructure 11. Cableway – 1,230 meters (see paragraph below for discussion of PPTA concerns with this estimate) 12. Electric Battery Powered Motor Vehicles for the Gardens – 10 at CNY 150,000 each 13. Resettlement Expropriation Fee – for permanently expropriated land of 293.63 mu; 143 households are to be resettled under the current proposed design, which means CNY 85,838 per household 14. Ground Attachment (Residence) Compensation Fee – for permanently expropriated land: 245.44 mu at 22,330 per mu 15. Ground Attachment (Residence) Compensation Fee – for rented land: 3823.09 mu at 1,770 per mu 16. Construction Administration (1.5% of Construction Engineering Cost) and Construction Supervision (0.8% of Construction Engineering Cost), for total of 2.3% of Construction Cost 17. Design Cost – 4.5% of Construction and Engineering Cost 18. Other Fees and Expenses 19. Training and Capacity Development – for 149 staff in total, including 114 horticulture staff (gardeners) – total staff for year one of operation is estimated at 219 20. Pre-Operation Marketing – although not included in the FS design the PPTA has assumed a similar investment as proposed by SARC for joint marketing of SARC, QBG and the Louguantai Forest Park 21. Office Furniture 6 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

1. Investment Issues

a. Cable car Proposal.

24. The PPTA is concerned about the current costing for the cable car. Cable car systems in China have cost between CNY40-100 million per system5 for existing often quite old cableway systems. The current budgeted base cost is CNY15.4 million. While costs can be reduced through the use of local materials and technology and the supporting infrastructure such as roads and other services are included in the cost of the wider botanic garden, and the shorter length of cableway could reduce capital costs the PPTA is concerned that the current cost is significantly cheaper than other systems. Further to this based on the survey capital and operating cost of existing systems financial viability requires 400,000 customers per year. The FS forecasts that 30% of visitors to the botanic garden will use the cable car suggesting that 1.2 million visitors to the botanic garden are necessary to achieve viability. While the reduced capital cost will reduce the 400,000 passenger requirement even if the requirement is 50% of this level it will be well beyond the end of the Project before sufficient demand to break even. A more astute approach may be to wait until there is a significant visitor base that enables financial viability to be achieved early in the life of the cable car.

25. ADB should insist that (i) the QBG’s low capital cost estimate should be validated within the detailed design process conducted by a design and engineering institute experienced in cableway construction, (ii) based on that new capital cost estimate, separate financial analysis linked to forecast visitation to the botanic garden should be completed to ensure that the cableway contributes in a positive manner to the QBG’s financial bottom line, and (iii) it si also recommended that the cableway be operated under a management contract agreement by an experienced cableway company in the PRC. If the QBG fails to meet any of these conditions or if the independent capital cost estimate and/or financial analysis indicates that the cableway investment involves considerable financial risk and poor returns in phase one, the QBG and PDRC should agree to move the cableway investment to phase two when the QBG attendance needed to support this investment is more likely to be available. The implications for financial performance from removing the cableway from the capital costs, revenues and operating costs are described in the financial analysis section.

b. Revenue Projections

26. A major determinant of viability is the forecasts of realistic visitation and pricing on which QBG revenue forecasts can be built. Botanic gardens in PRC, typically have high attendance built on low entry fees and total revenues per visitor. Many existing PRC botanic gardens are older facilities not operated on a commercial basis and having recovered the capital investment only require low entry fees and revenues to cover only operating costs. The current PRC botanic gardens surveyed by the PPTA have entry fees of CNY30 or less per visitor. For example, the small Xi’an Botanic Garden near the center of the city has an entry fee of CNY10, as does the Beijing Botanical Garden.

27. The sites of the horticultural exhibitions first at in 1999 and then in in 2006 were established and fully paid for as one-year world-expo events and currently charge small entry fees that cover operating costs. The Shenyang (Liaoning Province) International Horticultural Exposition of 2006, which operated for 184 days from 1 May-31 October 2006, had an entry fee of CNY50. One year after the Expo, the garden operates by charging an entry fee of CNY20. The Kunming Horticultural Landscape Botanical Garden in Yunnan also charges CNY20.

28. The extent that domestic and international tourists visiting Xi’an – and local residents in southern Shaanxi reflect the visitors to other Botanic garden would suggest they are willing to pay less than CNY50. A small willingness-to-pay survey for Xian residents and visitors supports a price of less than CNY 50 with additional revenues from add-on services in food and beverage, and exhibitions.

29. Very strong pre-opening marketing – conducted cooperatively with other ex-situ facilities -- is required by the Botanic Garden is needed to differentiate its tourism product from other PRC botanic gardens. Through promotion it is possible that potential visitors from its local resident, domestic market, and international market segments will know that the Qinling Botanic Garden offers a wider range of tourism experiences, which includes biodiversity education, natural scenery and Daoist culture and religion. This pre-operation marketing campaign should involve joint marketing with the SARC and the Louguantai Forest Park in order to encourage many international and domestic tourists.

5 See Supplementary Appendix 1 for a detailed analysis of existing cable car systems in China. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 7 Final Report Appendix 7

30. Another challenge is that Xi’an and Shaanxi offer a wide range of competing and very attractive tourism facilities. The local competition for tourists will be significant in the early years of the Project until awareness is developed. With the exception of the Terra Cotta Warriors, the Xi’an Wildlife Park and the Xi’an Aquarium, these competing facilities typically charge an entry fee of CNY40-50 and the revenues per visitor appear to be in the range of CNY100-120. A “willingness to pay” survey conducted by the PPTA Team confirmed that an entry fee of CNY50 and revenues per visitor of about CNY100 is appropriate for budgeting purposes.

31. A high entry fee forecast in the early years along with the add-revenues that result in total revenues per visitor being not competitive with alternative tourism facilities could result in very low attendance. This situation would place early financial performance and ADB loan repayment at risk.

32. Initially the QBG FS preferred an attendance/pricing scenario which involved lower attendance in the early years – recognizing the immaturity of the botanic garden and the need to build market interest and image over time – while charging high entry fees and other prices to enter the Park’s attractions. While the low early attendance was justifiable, the PPTA argued that the high entry fees and other charges were not competitive with alternative tourism facilities in Xi’an and would not be affordable for many potential visitors from domestic markets especially in the first critical years of QBG operation.6

33. The QBG Design revision adopts a new visitation and pricing strategy based on high early attendance, high entry fees and revenues per visitor from 2011– with relatively little growth in these parameters throughout the period of the cashflow7. The Design Team used the “analogy” method by assessing attendance and pricing at other tourism facilities, such as the Xishuangbanna Topical Botanical Garden which is 527 km from Kunming, the Shenyang Botanic Garden noted earlier which is 40 km away from the Shenyang City Center, and the Xi’an Qinling Wildlife Park which is also on the North Slope of the Qinling and is 40 km away from the city center. The attendance and pricing figures from these tourism facilities were used to justify a first year attendance of 600,000 and an entry fee of CNY70 for the Botanic Garden.

34. The PPTA critically analyzed this high attendance/pricing scenario and strategy and concluded that these attendance and pricing figures are based on facilities that are different from the QBG and appear to be overly optimistic. Achieving these attendance, entry fee, and revenue per visitor targets would depend significantly on a highly successful pre-opening marketing campaign that would build tourist and local resident interest and successfully differentiate the Qinling Botanic Garden from competing facilities in Xi’an and other botanic gardens in China. Placing this much faith in marketing to ensure a financially viable facility is questionable especially when it was not included in the proposal.

35. The visitor and revenue projections used in the PPTA are presented in Table 2.

6 The Proposal has not marketing expenditure included at any stage. 7 In fairness to the QBG Design Team, it should be stated that the financial analysis guidelines of both the PRC and ADB require that the financial analysis be conducted in terms of real monetary values (where the effects of price inflation are removed) and encourage analysts to use attendance, price and cost parameters that are fixed or at the very least change very little through the projection period. This static approach generally works well for traditional, slow-growth sectors such as agriculture/food processing, forestry and infrastructure. However, this static approach works less well in high-growth economies like China, and in dynamic sectors such as tourism, where the income elasticity of demand is high (meaning that tourism demand and revenues expand much faster than real per capita incomes) and where effective marketing campaigns and word-of- mouth advertising can move demand curves outward – allowing tourism facilities that are well run and differentiated from competing attractions to raise their prices through time without hurting attendance and revenues. The static approach applied by the QBG Design team leads to situations where attendance and prices appear much too high in the early years but are quite acceptable and even on the conservative side in the later years of the projection period when per capita incomes and tourism demand and revenues in China are higher and the tourism facility is well established within a region’s tourism network for guided and individual tourism. 8 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

Table 2: QBG Visitor Projection Assumptions

Entry Assumptions Fee(CNY) 1 BG Attendance at the first year 350000 50 Growth Rate(Average) 5.29% 2 Percentage of Total will visit Paleontology 85% 30 3 Percentage of Total will visit Temple 30% 30 4 Percentage of Total will take electric vehicle 50% 30 5 Percentage of Total will take cableway 30% 60 6 Percentage of Total will have fast food 30% 20 7 Every 50 tourists will park once 50 20

36. The following Table presents the projected visitation data for each of the proposed attractions detailed revenue and costs are presented in Appendix 16.

Table 3: Projected Visitor Numbers per QBG Attraction

Attendance 2011 2012 2013 2014 2015 2020 2035 Total Attendance 350,000 391,753 433,506 475,259 517,012 725,776 1,272,200 Growth Rate (annual) 11.93% 10.66% 9.63% 8.79% 6.10% 2.50% Paleontology 297,500 332,990 368,480 403,970 439,460 616,910 1,081,370 Temples 105,000 117,526 130,052 142,578 155,104 217,733 381,660 Electric Vehicle 175,000 195,876 216,753 237,629 258,506 362,888 636,100 Cableway 105,000 117,526 130,052 142,578 155,104 217,733 381,660 Fast Food 105,000 117,526 130,052 142,578 155,104 217,733 381,660 Parking (times) 7,000 7,835 8,670 9,505 10,340 14,516 25,444

b. Financial Analysis

37. The financial analysis uses construction cash flows based on the total investment base costs, physical contingencies and recurrent costs for the construction period from 2008 to the early months of 2011 before opening. The capital cost figures used in the financial analysis are as follows.

Table 4: QBG Investment Costs – (CNY ‘0,000’s)

Item 2008 2009 2010 2011 2012

A: Financial Costs Fixed Asset 599.7 24582.0 160.0 1710.0 Civil Works 321.7 21762.0 682.0 Equipments 278.0 2820.0 160.0 1030.6 Intangible Asset 8289.3 97.0 379.0 14.0 Total investment 8889.0 24679.0 539.0 1724.0

38. The projected revenues and costs are detailed in Supplementary Appendix 2. The summary revenue and cost for the construction period through to 2015 is presented in Table 5 below. Based on the project models and the costs provided by the Enterprise the before tax FIRR is estimated to be 9.5% and the after tax FIRR 8%. Both rates of return are above the WACC and are considered to be viable. The inclusion of the shareholders annual payout for land use based on 6% (See Appendix 16 Table 10) of NCF reduces the FIRR to 9.07% and 7.5% respectively. The deduction of the revenue transfer at 8% of NCF reduces the FIRR to 8.5% and 6.8%.The major challenge for the QBG will be cash flow during the construction period – something that the PDRC / PPTA EA has confirmed the Government will underwrite cash flow short falls. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 9 Final Report Appendix 7

Table 5: Forecast Financial Cash Flows 2008 to 2015

Item 2008 2009 2010 2011 2012 2013 2014 2015 Cash in 0.0 0.0 0.0 3502.6 4586.9 5075.7 5564.6 6053.5 Revenue 0.0 0.0 0.0 3706.5 4853.8 5371.1 5888.5 6405.8 Sales Tax (5.5%) 0.0 0.0 0.0 203.9 267.0 295.4 323.9 352.3 Residual Value Cash out 9813.2 26738.8 3062.2 4417.2 2693.2 2693.2 3618.7 3561.2 Investment 8889.0 24679.0 539.0 1724.0 Operating cost 831.3 2059.8 2523.2 2693.2 2693.2 2693.2 3618.7 3561.2 Working capital 92.9 Net Cash Flow Before Income Tax -9813.2 -26738.8 -3062.2 -914.5 1893.7 2382.5 1945.9 2492.2 FIRR Before Income Tax 9.52% FNPV Before Income Tax at 10% -2105.2 Income Tax 0.0 0.0 0.0 0.0 0.0 238.0 0.0 265.4 Net Cash Flow After Income Tax -9813.2 -26738.8 -3062.2 -914.5 1893.7 2144.5 1945.9 2226.8 FIRR After Income Tax 8.00% FNPV After Income Tax at 10% -8028.5

39. The financial rates of returns were tested for shifts in both revenue and costs – see Table 5 – and found to be close to hurdle rates, however sensitivity analysis suggests that a further critical review of costs should be undertaken to increase the viability and reduce the risk associated with the investment.

Table 6: FIRR Sensitivity Analysis

Sensitive Analysis Before Income Tax After Income Tax FIRR NPV FIRR NPV Operating Cost (10% up) 8.73% -5,775.9 7.23% -11,393.5 Operating Cost (10% down) 9.86% -633.1 8.26% -7,038.4 Operating Cost (20% down) 10.44% 1,938.2 8.79% -4,860.9

Revenue (10% down) 8.04% -8,507.9 6.60% -13,395.9 Revenue (10% up) 10.45% 2,098.9 8.80% -5,036.0 Revenue (20% up) 11.54% 7,402.3 9.80% -856.1

40. Using data provided by the QBG Design Team, the PPTA calculated the after income tax FIRRs and compared these with the weighted average cost of capital (WACC), which for the QBG is estimated at 5.6%. The after income FIRR was above the WACC for every scenario and sensitivity test, with the exception of the PPTA Team Scenario with 50% higher capital costs which was just below the WACC at 5.4%.

41. The application of a financial charge amounting to 8% of the net cashflow to finance biodiversity conservation in the QBCDA reduces the FIRR after tax to 7.4% from 8% and will contribute $198,000 in 2012. While the FIRR is above the WACC the financial viability of the Qinling Botanic Garden is marginal and risky. The potential impact on existing land users is severe with the risk that the return to shareholding does not eventuate which will either disadvantage the rural land users or will result in their resuming control over the land planted.

42. One major concern is that, under the PPTA Team’s more conservative scenario and the sensitivity tests where the FIRRs are below 10%, the QBG would face difficulties repaying its ADB and other loans in the early years of operation up to about year six depending on the scenario and test being employed and the assumed debt-to-equity ratio. In those years, loan repayment may need to be supported at least in part from the SPG’s general revenues. PDRC has already made a 10 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7 commitment to the PPTA Team in this regard – and this commitment will need to be part of the Loan Assurances.

43.

44. In completing detailed design, the QBG should explore other avenues to add to the revenues generated by projected attendance numbers. Three revenue sources not in the current design, that could generate additional revenues at minimal capital cost, are: (i) establishing a small gift shop in the reception center that sells books, handicrafts and other gifts that are strongly associated with the Qinling; (ii) renting audio devices to visitors (similar to the Forbidden City) that can be used by visitors while walking around the site, including to the restored Daoist temples; and (iii) guided tours of the biodiversity areas in the hill zone and of the walks to the restored temples. If attendance is lower in the early years, small additions to revenues in the areas of 10-20% could mean the difference between financial viability/loan repayment and financial difficulties in the first years after start-up.

45. Sales of audio devices and guided tours – as well as repeat visitation and higher visitation from domestic and international tourists with a strong interest in the Qinling -- would be promoted by an international standard, state-of-the-art information and interpretation center in the reception center in the multi-functional building. There is a strong educational mandate for the QBG in the current FSR document, but the capital and operating costs of delivering on such a mandate through a world-class interpretation center are not evident in the project cost estimates provided to the PPTA Team.

46. Finally, the QBG and its Design Team assumes that the QBG will operate and therefore generate revenues only 240 days a year, likely for the eight month period from the middle of March to the middle of November. In contrast, the three tourism facilities in Louguantai Zone B will be essentially year round operations for 360 days in a year. The QBG likely needs a longer period of time for maintenance and taking care of the gardens for the next tourist season, but should still explore whether additional days could be added to their schedule perhaps particularly around the time of Spring Festival through the first half of March. This could add 30-40 days to the QBG’s operating period.

47. With greater emphasis on the natural scenery, interpretation, education and QM culture and history, the QBG could be able to operate profitability for this 30-40 day period with reduced staff and perhaps reduced entry fees and other prices. Joint marketing with the other ex-situ tourism enterprises that emphasize the lower off-season prices for the QBG and the special characteristics of the QM and the sites in the late winter and early spring period through to mid- to late-March could generate quite substantial attendance from local residents and early tourists to Xi’an who are attempting to miss the crowds of the later Spring months.

c. Implementation Arrangements

48. The investment will be implemented by the Qinling Botanic Garden division of the newly formed QNBG. QBG is currently a government affairs unit set up by the Shaanxi Provincial Government in 2001 and a legal entity defined within the scope the Civil Act of PRC. QBG is registered as an independent legal entity to manage the establishment of the botanic garden and is also referred to the Qinling Flora Research Institute. As a government unit, QGB operates under the supervision of the Provincial Forestry Bureau.

49. The existing mandate is not clearly defined as there is no government document that clearly defines the mandate of QBG. The legal entity registration certificate defines the following mandates: “Conduct activities of research, protection and exhibition of biodiversity, maintain ecology balance and achieve sustainable development”. It can operate in: research and development of bio materials, biodiversity conservation and exhibition, publicity of laws and regulations related to protection of wild life, flora and environment, scientific knowledge extension and education, training, eco-tourism, landscaping design and implementation, entrust service. It has an initial capital of RMB 2.36 million.

As a government affairs unit, the provincial government only meets part of its operational cost. Therefore QBG has to cover shortfalls in its’ operational cost by applying for funds from other government projects or commercial activities. The government allows this type of unit to set up a company or joint-venture to conduct commercial activities, but it has to get approval from DOF. QBG can also raise loans for its own establishment and repay the loan using their own revenue generated. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 11 Final Report Appendix 7

For running a business, QBG must follow government regulation to get a relevant approval and the required license.

50. Current documentation and approvals enable the QBG to employ only 40 staff - a figure that will need to increase to over 250 during Project implementation. An assessment of current capacity has been difficult as the PPTA had little access to the whole organization at any one time. Based on the PPTA interactions and experiences with the QBG enterprise the only conclusion can be that there is a strong project champion within a unit that possesses little technical or commercial capacity to operate a botanical garden successfully. The PPTA proposes that should the Project proceed that ADB prioritse the application of funds for the strengthening of the unit as part of the QNBG reforms. In the opinion of the PPTA without this strengthening the Project will not succeed.

51. Currently the QBG legal entity consists of two institutions: (i) the Shaanxi Provincial Botanic Gardens, a SPG institution, and (ii) Shaanxi Qinling Ecological Department, a Registered Company owned jointly by Shaanxi Innovation Center, which has 78.3% shareholding, valued at CNY 78.3 million, and Shaanxi Provincial Botanic Gardens, holding the remaining 21.7% shares valued at CNY 21.67 million. A past attempt to manage QBG through the Shaanxi Qinling Ecological Department was not successful and provide a clear warning for the currnet project proposal.

52. The Director of both institutions has a dual reporting relationship to both the SPG and to the State Forest Administration. QBG as a whole is variously reported to employ 36– 40 people, including 16 scientists and 20 staff funded by SPG, 20 of whom are funded by SPG. Staff numbers are heavily skewed to management and administration, with over 50% of staff in these categories despite none possessing any commercial experience. A breakdown of current staff is as follows:

Table 7: QBG Current Staffing Categories

Category Number Management 10 Scientist / Research 10 Clerical 7 Finance 4 Engineer 4 Gardeners 3 Other Support 1 Technician 1 Total 40 Source: QBG

53. Two substantially different sets of projected staffing numbers have been provided by QBG, based on responsibility for operating a self sustaining tourism business. QBG projections range from 219 up to 1,7178, to provide input to the QBCDA area. The number of staff allocated to science and research is actually lower than the present number stated to be engaged in this activity. Neither estimate includes functions such as Finance and Accounting, Marketing and Promotions, and Human Resource Development. Other functional groups such as Temple Site management have no support staff.

54. An analysis of the tables below indicates that the staffing levels appear low given the number of projected visitors, (600,000 in the first full operation year using QBG estimates). For instance, staff numbers for ticket sales total 4 staff for a 7 days per week operation with a number of possible separate locations where entry charges apply. This requires 150,000 tickets per person to be issued based on a one ticket system which simply can not be achieved. Even based on the PPTA visitation numbers of 350,000 visitors 4 people will not suffice. Despite regular discussions on staffing the PPTA has been unable to resolve the issue.

55. QBG estimate that substantial additional revenue will follow from post–gate sales, but again there are no staff allocations to recognize associated costs. Even if this is to occur from concessions to third parties to operate such facilities as refreshments and gift or souvenir shops within the grounds,

8 This includes 500 – 1,050 temporary workers to be employed on planting in the QBCDA area. 12 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

some staffing requirements will exist to administer such concessions. If the full potential revenue is to be retained in house (with the commensurate business risks) this staffing level will be even higher.

56.

57. In contrast to the QBG estimate of 219 employees, the current proposal estimates that 270 staff will be required in the initial period of operations for the ex situ area only, rising to 400 – 600 as visitor numbers increase. The current proposal also estimates that visitor numbers will be substantially lower during initial operations, but will increase from this lower base at a faster rate than that projected by QBG.

58. The Qinling Botanic Garden and the QNBG will offer all employment opportunities to affected persons prior to other candidates after which remaining positions, if any, will be offered to residents of the QBCDA.

Table 8: Ex Situ Staffing Projections Provided by QBG

Special Biological Tram Greenhouse Temple Other Total Parks Institute Rail Number Number Number Number Number Number Number Management 6 5 12 2 25 Science and Research 6 6 Casual 114 114 Rail Car 10 10 Repairs 4 2 6 Repairs/Security 8 8 Safety Examiner 4 4 Dustman 4 10 14 Gardener 4 4 Driver 6 6 Ticket Seller 4 8 12 Parking Attendants 4 4 Parking Management 6 6 Total 126 27 6 12 20 28 219 Source: QBG

59. QBG have provided the following table showing estimated staff requirements, including the QBCDA area.

Table 9: Total Staff Projections Provided by QBG

Number Duty 1 Management 22 Office staff 5 Finance Department 4 Responsible for the all financial records and cash Construction department 5 Planning and construction work Human resource department 4 International cooperation department 4 Collection, research communications 2 Ex-situ area 219 Maintenance and manage daily affaires Staff 105 Part time worker 114 3 QBCDA area 40 Maintenance and manage daily affaires9 Forest safeguarded 20 Road maintenance 20

9 There are still other staff decided by what kinds of project to be active TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 13 Final Report Appendix 7

Number Duty 4 Other 550 Plant recovery Season worker for floral recovery 500 Part time worker for assistance plant 50 management 5 Research 6010 Research on botany, ecology, environment, etc Total 1722 Source: QBG

60. QBG is not at present involved in any sales activities to the general public and therefore, requires substantial change to the current culture to achieve a successful tourism based business. This lack of experience is reflected in the significant differences between the estimates made by QBG and the consultant of entry prices and visitor numbers. QBG anticipate 600,000 visitors in the first year of operation, and average per capita revenue of CNY143.9. The consultant’s research estimates visitor numbers at 300,000 to 350,000 and an average per capita income of CNY105.8.

61. There are a number of concerns regarding QBG intentions. Many of these relate to the capacity of the organization, and, given its limited scale at present, its ability to achieve this vision. Points of particular concern are that:

(i) Unlike the Hot Springs development, and to some extent SARC, QBG lacks any commercial or tourism expertise. This is reflected in the scale of the initial feasibility study presented, and in some of the subsequent projections on visitor numbers etc. (ii) Not all objectives match the skill sets that one expects to see in staff of a botanical garden institute. For instance, research on the Giant Salamander and other animals will not be undertaken by the Qinling Botanic Garden but by the SARC research team or a proven research institution. (iii) There appears to be a risk that some QBG plans, such as introduction of other species into the Botanic Garden itself, and the use of over 1000 casual staff for planting in the QBCDA area run the risks of a departure from achieving GEF goals (iv) From discussions between other consultants and QBG, it is difficult to see a strong alignment of QBG research plans and those published by other Chinese Research Institutions. The Director has a close relationship with the Chinese Academy of Advancement of Science. (v) Mixing non commercial science and research objectives (possibly funded as a public good) with commercial objectives funded from public entry fees requires particular governance skills that are not currently in place. (vi) Some plans are likely to reduce, rather than promote, livelihood opportunities (vii) The proposed staffing levels described are inconsistent across a number of functions (viii) Apart from the broad principle of contracting commercial operations, little thought has been given to the details necessary to make this a financial success, or how ancillary operations, such as food stalls and refreshments or gift and souvenir operations will be operated and managed. Contracting out commercial operations does mean abdicating from responsibility for ultimate financial performance, including loan repayments, and leaving this to the contracted tourism operator.

62. The underpinning design principle for the project area is to use commercialization to fund biodiversity, conservation and livelihood developments, through the transfer of revenue from Qinling Botanic Garden and SARC. If this is to be achieved then further thought must be given to safeguarding the revenue streams to make this possible, and to achieve an adequate return on the SPG contribution to the project. The financial governance report of the PPTA indicates that the current accounting system of QBG does not have the capacity to handle an ABD loan. It suggests that QBG needs to be commercialized.

10 (including existing 16) 14 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

d. Qinling Botanic Garden Proposal – Land Access Issues

63. QBG has no land user rights in the Project Area other than an approval to proceed with the Project and project area. . For the ex-situ land requirements QBG needs to gain the land user rights either through acquisition, renting or shareholder arrangement according to the Land Management Act of PRC. Most of the land is currently owned by the local community. County and Township government will be important stakeholders in terms of land acquisition, resettlement and other government supported natural resources and community development activities. For operating in the QBCDA zone any QBG plans involving Louguantai Forestry Farm land requires their mutual agreement.

64. QBG is eligible as a government unit to raise a loan for botanic garden construction. QBG is able to set up a company or restructure the current company to complete its commercialization to meet the loan management and repayment requirements. QBG will be responsible for construction and operation of the Qinling Botanic Garden itself and will take responsibility of resettling villagers in Dianzhen village to meet government of PRC resettlement requirements.

65. The Qinling Botanic Garden (QBG) will use 4039.5 mu (269.3 ha) of collective owned rural land from Dianzhen village for development under this project. Two approaches have been proposed to access land use rights. These include (i) land acquisition amounting to 293.63mu (19.64 ha), and (ii) a land shareholding agreement for 3,746 mu (249.66 ha) where current land use right holders while gain shares on the QBG enterprise.

66. Within the Project area, there is rural cropping land, other rural agricultural land, rural idle land, rural residential land and rural infrastructure construction land – the rights for all land types are held by Dianzhen village. Currently the proposed use of land has no legal status and is contra to local regulations11. The following section outlines these issues and recommends a series of actions to be undertaken before any processing of the QBG project loan.

I. Land Acquisition (293.63 mu)

67. A total of 293.63 mu of land will be acquired and used for the purpose of constructing buildings or infrastructure. There are two principal regulations that govern changing land use types under the PRC legislation system. “Land Management Law of PRC” -- promulgated by the Standing Committee of the People’s Congress in year 1982, and amended in the year 2004. “Implementation Rules of Land Management Law of the PRC” -- promulgated in 1998 by the State Council. Apart from these two regulations, there are other detailed rules and instructions issued by the Land Ministry and State Council to enforce the regulations. Provincial People’s Congress in Shaanxi has promulgated local regulations to enforce the law. The relevant regulations are summarized in Methods of Implementing the Land Management Act of PRC in Shaanxi Province dated January 2007.

68. The Qinling Botanic Garden will need to change land use on existing agricultural land for construction purposes under their land acquisition. The Jixian Township Basic Farming Land Protection Plan Map indicates that QBG will acquire about 1,500 mu (100 hectares) of basic farming land for construction and other purposes. It will also acquire current rural residential land and other agricultural land.

Next steps and Approvals

 QBG will provide a land use pre-checking report from a land use management authority as required by the law to confirm: (i) basic farming land has been relocated to another location. (ii) land use application of QBG is consistent with the government land use plan and regulation, (iii) there is a change of agricultural land quotas for QBG.  QBG will acquire 293.63 mu (19.57 ha) of land. It will be required to get approval for acquisition of land after the project feasibility study is approved by SPG. Then the resettlement plan will be implemented

11 The PPTA has been advised that this constraint does not necessarily apply to the QBG and that an official document to this effect will be provided to ADB. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 15 Final Report Appendix 7

II. Land Rental (3,746 mu)

69. The draft contract of land shareholding provided by QBG indicates that the contract follows the requirement of the “Rural Land Contracting Act of PRC; The Contract Act of PRC; and The Forestry Act of PRC. However a recently introduced Shaanxi Land regulation states that contracted land management right (land user right) of collective members on the rural land may not be invested in an enterprise in a share arrangement. The “Implementation Methods of Shaanxi Province on Rural Land Contracting Act of PRC” has been in place since January 1st 2007 and as such the QBG proposals to put collective members’ land user rights into a shareholder arrangement is no longer legal.The Zhouzhi Land and Resources Bureau approval does not have the authroty to over-rule a Provincial statute and as such the shareholding agreement whilst very risky for the rural land use right holder is considered to be illegal,

70. The contract has proposed a financial return arrangement for the land which is put into a shareholder arrangement. The proposal envisages two parts to the financial consideration for land use being:

(i) Annual rental payment Starting from the first year of the land share establishment. The land is classified into three categories for the purpose of the land rental prices. (i) first class (irrigated land) will be paid CNY500 per mu., (ii) second class (dry land) will receive CNY400 Yuan, and (iii) third class (sloping land) will receive CNY300 in the first year. The fixed return will progressively increase by CNY20 per year for all classes of land.

(ii) Shareholders Dividend : Due to the cashflow demands for a full companesion and or rental program the Qinling Botanic Garden is proposing to offer a capital shareholding to existing land users in return for their land use rights. To the existing right holder this will provide a dividend to their share of the capital held. From the first year that QBG receives ticketing income, the shareholder of land share will share in the revenue from the tickets. The fixed return will stop increasing, but the fixed amount will still be part of the return to the land share shareholders. The share value will be calculated on the basis of the price set up for the 50 years of the land user right. Sloping land will be valued at CNY7,500/mu, dryland CNY10,000/mu, irrigation land CNY12,500/mu. The value of the land use right from this contract will be calculated as the equivalent of the total dividend to be distributed by the proportion of capital held by any one shareholder.

III. Land Use Change Provisions

71. The Qinling Botanic Garden will need to change land use types of agricultural land for construction purposes under their land acquisition. The Jixian Township Basic Farming Land Protection Plan Map indicates that that QBG will acquire about 1,500 mu (100 hectares) of basic farming land for construction and other purpose. It will also acquire current rural residential land and other agricultural land. The QBG has been classified as a significant infrastructure project by the provincial government (SPDRC has the authority to do this, but has to follow the state level guideline), Enabling Zhouzhi County to revise its current land use plan to allow QBG to use the quota for changes of agricultural land use type. This allows reallocation of basic farming land to another location as long as it balances the total basic farming land amount. If this is the case, the Botanic Garden will not, in the meaning of the law, conduct any construction on basic farming land. No national level approval is needed for acquisition of the land. However, there is some conflict within the legal system to assure it.

72. Based on the Jixian Township Basic Farming Land Protection Plan, the team discussed with SPDRC to agree that :

 QBG will provide a land use pre-checking report from an appropriate level land use management authority as required by the law to confirm: (i) basic farming land has been relocated to another location. (ii) land use application of QBG is consistent with the government land use plan and regulation, (iii) there is a change of agricultural land quotas for QBG.  QBG will acquire 293.63 mu (19.57 ha) of land. It will be required to get approval for acquisition of land after the project feasibility study is approved by SPG. 16 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

IV. Resettlement Issues

73. The county or city level government will prepare a compensation plan and submit to the appropriate level land management authority for approval when the land acquisition application is handed in. A process of public information on the compensation plan will be held before the compensation plan is submitted for approval. Clear information should be given out to the affected public. A hearing process should be held if any request is raised by the public.

74. QBG resettlement plan has been reviewed against the law and regulations. A discussion has been held with the QBG. Some revision has been proposed. The resettlement plan is basically consistent with the law and regulations with the exception of the shareholding issues discussed above. Discussion has been held with QBG on revision and additional information. The following recommendations require to be addressed:

 Separate land compensation and livelihood compensation in the resettlement report. Adjust the orchard land compensation to a higher standard to reflect its real value. Adjust idle land compensation to the standard described in the justification.  A qualified land and building evaluation institute should provide a review on the compensation standard proposed in the resettlement report. Alternatively full explanation should be made to justifications the standard in the resettlement report according to the regulations.  Have a methodology developed for the training of the Village Committee to develop a livelihood rehabilitation plan during the project implementation, before the land acquisition is approved. The livelihood rehabilitation plan has to be approved by a village meeting before it can be implemented. The rehabilitation plan should indicate in detail how the farmers that lose their land will be arranged or assisted to recover their livelihood. Nominate the responsible body for rehabilitation activities listed in the resettlement report. Rehabilitation plan implementation should be included in the monitoring system.  There must be a commitment from QBG on providing employment opportunities for local people on its tourism operations after completion of the physical construction in the resettlement plan.  There should be a clear indication in the resettlement plan about the time for public information of the compensation plan. It should be organized before submission of the application for approval of land acquisition. The resettlement plan should indicate that the farmers who will be affected will have the right to ask for a hearing after the land acquisition plan is published.  A qualified organization on building evaluation should be requested o provide an opinion comparing the evaluation of building compensation provided by QBG. Alternatively all of the buildings that will be demolished should be compensated at the current commonly used rural residential building structure standard such as brick concrete or brick and wood.  The compensation standard for rural residential land will not be enough to meet the cost of purchasing a new piece of residential land. The standard should be raised to meet the full cost of new residential land.

V. Proposed Land Rental/Share Contracts

75. The draft contract of land shareholding provided by QBG has been reviewed and is filed in the project office for reference. Detailed analysis on legal framework of rural land management is provided in Supplementary Appendix 3.

76. The content of the contract follows the requirement of the (i) Rural Land Contracting Act of PRC , (ii) Contract Act of PRC, and (iii) Forestry Act of PRC. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 17 Final Report Appendix 7

77. The following issues have been identified

 The shareholder arrangement proposed by QBG is illegal in Shaanxi province.  It is not clear from the contract who is the legal entity from Dianzhen village who will sign the contract. It is implied in the contract that the administrative village will be the contractor. After the cropping land /forestry land that comes under the land conversion program has been contracted to the individual household, the administrative village does not have the legal authority to contract the land use right to anybody else. The individual household is the one holding the legal right to contract the user right of their land to the third party voluntarily. It is also not clear who will be the legal entity to sign the contract from QBG side. QBG is not a legal entity which can have a shareholder arrangement under the current situation. The sample contract provided uses the name of both QBG and Shaanxi Qinyuan Ecological Development Limited inconsistently.  The contract indicates a land area including the whole of the QBG land area. It is required by law to indicate the boundary of the land for which the user right has been put into share. It also confuses the whole picture by including land acquisition land under this contract land area.  The contract indicates that the land under the contract will be used for forestry, agriculture, research, science extension, protection and tourism. But the Rural Land Contracting Act of PRC requires that contracting of user rights for any farming land can not involve changes to the land use type. Approval is required from the Forestry Authority for any Forestry Land under Land Conversion Program to change to other land use type and change the vegetation.  Term of the contract is expressed as 50 years from the day of signing the contract. It is not consistent with the Rural Land Contracting Act of PRC which requires the transfer of land use right with in the term of the Land Use Contracting Term stated on the Land User Right Certificate. In case of Dianzhen village, it is from 1998-2027. For forestry land coming under Land Conversion Program, it is from 2003-2053.  The contract does not include a clause for compensation in the event of permanent damage made to the land.  The price for 50 year land use right proposed in the contract is low based on current government compensation for land acquisition. The justification for the proposed price is not clear. It is not clear if the villagers have been all consulted.  The Village Committee has been proposed to be the representative of the households to classify the land, determine the amount share from the fixed return and revenue return per mu, and distribute returns to the householders. This arrangement is not consistent with the Rural Land Contracting Act of PRC which requires the voluntary transfer of land use right from the households. The Village Committee does not have the authority to do this. QBG has to negotiate individually with the contracted households who hold the land use right. Alternatively, all households who voluntarily transfer their land use right to QBG through this contract have to authorize the Village Committee to negotiate on their behalf.  The contract states that arbitration will be submitted to Zhouzhi County Arbitration Commission and any legal suit to a Zhouzhi court to resolve any arguments of this contract. This is not consistent with the Act of Civil Law Suit Sue; one of the two approaches has to be chosen.  The contract does not mention the requirement of approval from forestry authority above the county level on transferring user right of collective forestry land and a logging permit for logging resulting from the transfer, which is required by Forests Management Rules of Shaanxi Province.

Risks

 Use of forestry land and farming land under this contract could be changed to other land use type without proper approval.  Village Committee could be the entity to sign the contract. This could result in some involuntary transferring of land use right and an increase in the need for resettlement compensation.  The capital of Shaanxi Qinyuan Ecological Development Limited should be properly valued and the land use right should to be properly valued for the shareholder arrangement, otherwise inequality between two parties could result. 18 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

 Basic farming land under this contract could be used for a purpose which is not consistent with the regulation.

Recommendations

78. The contract reviewed is a draft and changes will be made to it in the progress of negotiation. It is recommended that:

 The contract should be revised to use a legal form of arrangement to access user right of contracted rural land, specified both in national legislation and provincial level legislations. The entity to sign the contract should be identified and the contract revised accordingly.  If the Village Committee is to be used as a representative of land user right holders, a written agreement signed by all of the households involved in the future contract arrangement should be attached to this contract.  Legal assistance should be arranged for households from Dianzhen village to help negotiate the contract.  The capital of Shaanxi Qinyuan Ecological Development Limited should be properly valued and the land use right needs to be properly valued for the shareholder arrangement independently. There is a system and some institutions in Shaanxi qualified to conduct property and equity evaluation.  The agreed land use arrangement from the future signed contract should be included in the constitution of the company. It will clearly state the land use right arrangement and the return arrangement to give the land use contract arrangement legal status. It needs to indicate that the land user right value should be re-evaluated from time to time to reflect the land value changes.  Forestry land, basic farming land or cropping land should be clearly identified in the contract in terms of land area and location. It must be clearly stated that the land under the contract will not be used for any other purpose rather than agricultural or forestry as required by the laws and regulations.  SPDRC will take the responsibility to check and monitor the future signed contract to make sure it is consistent with the legal requirement.

e. Benefits and Beneficiaries

79. Assuming that it is well designed, well constructed and operated to a high international standard, the ex-situ Botanic Garden is expected to: (i) significantly strengthen and diversify the Shaanxi and Xi’an tourism bases, (ii) attract new tourists to the province and city and further expand tourism revenues through extending the length of stay of some current and projected tourists, (iii) help to promote habitat restoration and improved biodiversity management and conservation in the PA and the wider QM through direct investments in science, research, demonstration and outreach and through the education of visitors on the importance of protecting the QM’s valuable bioresources and ecosystems, and (iv) generate sustainable livelihoods for the PA and target populations through: job creation at the ex-situ site and investments in the QBCDA area; purchasing goods and services from PA and target area residents, business enterprises and village groups, and demonstrating how improved biodiversity management can lead to higher and more sustainable livelihoods for PA and wider QM households and villages.

80. The number of direct jobs at the ex-situ BG site during the Phase I construction period could be a total of 6,000 person years, or an average of about 1,500 per year from 2008 to 2011. After startup, the Botanic Garden will directly employ about 270 people and this number will increase with the advances in attendance. The proportion of local resident employed could be as high as 1.5% at the end of the projection period, while perhaps about 6% of the target area households could benefit from employment at this site. However, policies and programs are needed to ensure that these potential local employment benefits, as well as benefits for local businesses and suppliers, are realized.

81. The economic analysis of the QBG estimated the EIRR to be 10.6%. Again whilst above the hurdle rate for the PRC it is marginally viable for ADB purposes highlighting the need for the previously recommended review of costs. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 19 Final Report Appendix 7

f. Issues to be Addressed

82. The QBG Design Team completed a conceptual design in less than one month that was sufficient to meet the requirements of both PRC and ADB. However, because of the limited time available and the mix of skills, the design, which is based on the conceptual design provided by the PPTA Team in late April, is still at a conceptual design stage. It does provide a broadscale design of the Botanic Garden but it is very clear that much more detailed work is now required to develop the plans into a feasible and workable QBG project.

83. The following Outstanding institutional issues need to be resolved.

 QBG has to be able to use the Capital Construction Accounting Guideline as stated in the Financial Governance Report.  QBG’s access to land use rights  The [proposed term of contract is 50 years from the day of signing the contract. It is not consistent with the Rural Land Contracting Act of PRC which requires the transfer of land use right with in the term of the Land Use Contracting Term stated on the Land User Right Certificate. In case of Dianzhen village, it is from 1998-2027. For forestry land coming under Land Conversion Program, it is from 2003-2053.  QBG is proposing shareholder arrangement with local community farmers to gain the land user right. QBG as a government affairs unit doesn’t have the legal right to have shareholder arrangement under the QBG legal entity. Only a company as a legal entity can set up shareholder arrangement following the Company Act of PRC.  QBG can not be fully replaced by the commercial company because of it’s nature as a government affairs management institute unless the provincial government approves a full restructure of QBG to become an enterprises following government guideline.  The commercialization process of QBG should be undertaken before project start up. The options of commercialization should be agreed in a discussion between PDRC SPFB, and QBG and a timetable should be agreed with SPDRC on QBG’s commercialization.  The equity structure of the QBG needs to be independently assessed and agreed including the equity of the QBG and its shareholders  The institutional capacity for managing a commercial operation

84. The detailed design to be completed after the ADB Loan is approved will require a wide range of skills, including: tourism design and layout, ancient , Chinese botanic gardens, landscape architecture with specialized skills in ecological design of botanic gardens (and knowledge of GEF requirements), interpretation/visitor education specialist, marketing and promotion, business development and financial management expertise (at a minimum). Because of the major design work still to be conducted, the basis for estimating the design cost was increased from 2.5% to 4.5% of construction and engineering costs to enable contracting of expertise on a short term basis.

85. Some of the design issues raised by the QBG FSR and to be addressed in detailed design include the following.

i. Sections 3.1-3.5 of the FSR: The Gardens:

86. Despite concerns raised by the PPTA Team in the Inception and Mid-Term reports, the use of plant materials in the specialist gardens still reflects the use of plants which are not native or endemic to the Qinling Mountains (e.g. the ginko garden and the international gardens). This is a serious concern. The QBG Team was informed at the Project’s Inception Meeting and many times since including the briefing meetings with the Design Team (also included in the design brief provided by the consultant team), that introducing and using alien plants to the north slopes of the Qinling Mountains was a potential threat to biodiversity and was contrary to the Convention on Biological Diversity (CBD).

87. The Qinling Mountains rank third in plant biodiversity out of 34 other Biodiversity Hotspots worldwide. Therefore, care over and above normal expectations should be made to protect this resource. The Botanic Garden project is linked to the GEF project. The basis of GEF lies within the 20 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

CBD12. Continued resistance by the QBG IA to remove these alien species from the design may jeopardize the GEF grant being provided to the Shaanxi Government.

88. The introduction of plants in the glasshouse should be reasonable providing safety measures are built into the system to prevent escape of possible alien materials (seed etc).

ii. Section 3.5 of the FSR:

89. The need for an irrigation system for the whole of the garden area is questionable, especially in the hill zone where forest type planting will be used. It is not normal practice to irrigate plants which naturally grow in the area in which they are being planted (i.e. Qinling plants in the Qinling). Providing an irrigation system for the ‘hill zone areas’ should be revisited as there are two main issues: (i) sustainability – unnecessary use of water resources, especially given the increasing problems associated with water supply in Shaanxi Province (and China as a whole); (ii) cost – the cost of the irrigation system adds to the overall garden and capital cost. Any reasonable measures to reduce capital cost should be pursued in order to enhance financial viability and lower financial risk.

iii. Section 7.1.Ecological Capacity

90. The number for ecological capacity appears to be an arbitrary figure, and the purpose of this statement is not clear. If a carrying capacity study is to be undertaken, it requires three sub- studies: (i) environmental capacity -- ability of resources to support numbers; (ii) psychological capacity – study of visitor crowding; and (iii) physical capacity -- ability of infrastructure to support the numbers.

iv. Section 3.7 – 3.11 Building Design:

91. The preliminary designs of these elements should be provided with the FSR as requested by the consultants.

v. Boundary treatment

92. The decision on boundary form is not yet decided - QBG plans to build a wall or fence around the site. The capital costs include funding for only a fence. The boundary treatment is important as it will have a visual impact on the landscape. Barrier planting could be used for the hill area as this would be acceptable and unobtrusive in the landscape, it would support conservation, be maintenance free and would be more effective in preventing trespass than a wall.

vi. Outstanding design standards

93. The three broad design elements which require specific attention are: (i) use of plant materials; (ii) hard landscape elements; and (iii) building design.

94. Plant Material. The current design within the Feasibility Study (May 2007) indicates the use of plant material which is not native or endemic to the Qinling Mountains (Ginko Garden, International Garden etc). The Botanic Garden is to be constructed within an internationally important ecologically diverse area. The planned introduction of species not native to the Qinling in a Botanic Garden whose stated objective is the conservation of Qinling plant biodiversity is contrary to a wide range of international guidelines13 and is likely to be condemned as an irresponsible action by both the international conservation and botanic gardens community.

12 A requirement of GEF grant being given is that the recipient country has signed and abides by the convention. 13 The Convention on Biological Diversity (CBD) 1992; Cartagena Protocol on Bio-safety 2000; Global Strategy for Plant Conservation; Gran Canaria Declaration on Climate Change and Plant Conservation 2006; International Agenda for Botanic Gardens in Conservation 2000: TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 21 Final Report Appendix 7

95. The Secretariat of the Convention on Biological Diversity states that the greatest threat to biodiversity is the introduction of Alien Species and Article 8(h) of the Convention on Biological Diversity (CBD) calls on Parties to "prevent the introduction of, control or eradicate those alien species which threaten eco-systems, habitats, or species". Recommendation for a loan condition - All plant material to be used within the Qinling Botanic Garden must be endemic to – or at the very least representative of -- the Qinling Mountains.

96. To ensure that the risk of an alien species introduction is managed the Qinling Botanic Garden will submit its detailed plans to the biosafety protocol of SEPA prior to any field construction. This should include a risk management protocol that outlines what species are being propagated, or planted and the expected risk that these pose to the Qinling Mountains. Where data is not available plant material will be introduced.

97. Hard Landscape Elements. The Qinling Botanic Garden will serve as a large botanic and open space facility. Its design requires a diversity of hard landscape elements to implement many of the planned site management strategies. These landscape elements have both vehicular and pedestrian functions and include signage, lighting, paths and roads, and various types of outdoor furniture. The landscape elements also serve an important functional role in the garden, acting as reference and signal points for visitor orientation and circulation, as well as contributing to the gardens overall appearance, character, identity and attractiveness.

98. The hard landscape elements must positively contribute to the character and identity of the garden. Custom designed structures should be developed, with the design emphasis on the use of natural materials. The use of concrete structures is not considered appropriate within the Botanic Garden setting as these are more appropriate to urban street scenes.

99. In designing the hard landscape elements the designers should:

(a) Initiate product development, and act as industry pioneers in the development and use of recycled materials in hard landscape elements. (b) Investigate alternate energy sources for areas of new lighting etc. (c) Utilize environmentally sensitive design materials wherever appropriate, such as permeable materials for large areas of hard surfaces including paving areas and car parks. (d) Ensure consistency of design and character, materials selection and application of elements across the site. (e) Ensure the Garden’s commitment to design excellence is reflected in the selection of landscape elements. Promote quality in design and materials as well as quality through environmentally sustainable design principles. (f) Ensure landscape elements are designed, installed and maintained to promote safety for Garden staff and all Garden visitors.

100. In addition, the hard landscape design elements should respond to different areas of the Garden, reflecting a diversity of settings ranging from the developed formal garden and display areas of the site through to natural settings of the “Qinling Experience” whilst simultaneously still being able to be recognized as elements which are inherently part of the overall Garden’s character.

101. There are a number of considerations that will determine the use of landscape elements in different areas of the Garden, which can be depicted by landscape elements to differentiate: (i) scale - the physical size of the elements; (ii) siting - the way in which the element is located in the landscape, in either a dominant or subtle manner; (iii) materiality - the materials used to build the landscape elements, and (iv) intensity of use - the frequency with which the elements are used across the site, denoting areas of high visitation and access, through to low visitation and restricted access.

102. Building Design. The Feasibility Study of May 2007 builds on the area’s strong Daoist influences and features the restoration of a number of buildings of traditional design. The Daoist / Chinese traditional style should be carried through all of the structures to be constructed on site thereby providing harmony. Any religious site or temple restoration will require the approvals of the Daoist community and this shall be provided to ADB to enable disbursement.

103. The quality of the “Garden Experience” is greatly dependent on its future design and management. Poor design and poor management will lead to an inferior experience and detract from 22 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7 the other tourist facilities located in the area – leading to problems with financial performance and loan repayment for all three proposed ex-situ tourism investments.

104. The QBG has the opportunity to develop itself as the ‘window’ to the Qinling and should be marketed as the first stop on the ‘Louguan Tai Experience Visitor Circuit’. It is important that the QBG is designed and managed as a complementary experience to SARC, the Hot Springs and the Louguantai Forest Park which together provide a wider range of experiences with which the QBG cannot compete. Therefore, the design and operation of the QBG must be a high quality development, visually and educationally stimulating and price competitive.

105. Southeastern Boundary. A major issue for the PPTA is the southeastern boundary for the ex-situ BG. The conceptual design proposed by the PPTA followed the contour of the slopes. The boundary proposed by the QBG Design Team, and recommended by PDRC, went further to the east along the Tianyu River. This raises two serious issues. The boundary change increased the number of households to be resettled from 69 to 143. This is because the current design requires the removal of two settlements which form satellite communities to Dian Zhen located in the west of the site. In design terms, there appears to be no justification for the removal of the largest of these settlements. Mostly the area will be converted to a lake, the proposed glasshouse is also located within this area; however there is space elsewhere for this facility.

106. The current design proposal effectively “privatizes” the access road into the QBCDA area bringing it into the control of the botanic garden. The road is used as access by local people to property etc and will require them to pass through the BG. The access road into the QBG needs to be kept separate from the activities of the QBG as this is most likely to lead to conflict between tourist activities and everyday activities of local people (including mixing regular vehicular movement with pedestrian tourists). There is the potential for a growth in corruption against people moving both in and out if the road is controlled by the QBG by the collection of illegal fees and taxes.. The road is also the access point for the Giant Panda breeding centre / ecolodge facilities etc, and for access to the hydro power stations which will all generate regular movement. A separate access road to the QBCDA area is not possible under current designs. The proposed boundary changes are indicated on the QBG Design Team plans.

107. The Botanic Garden design and construction raises serious issues regarding (i) conversion of land from basic cultivated land to a new land use; (ii) approvals from the Water Resources Bureau to use groundwater for drinking and other uses, water from the Tianyu for irrigation (when water from the stream is available), and geothermal water for the glasshouse/greenhouse; (iii) resettlement of households and compensation for affected households; and (iv) job and sustainable livelihood opportunities for local people. Despite prolonged discussion these issues have not been resolved to the satisfaction of all parties.

108. There appears to be growing recognition from PDRC that the SPG and QBG will require approval from the state government in Beijing in order to convert basic cultivated land for botanic garden use. The necessary approvals for water use based on the new design had not yet been received as of late June. After the revised Resettlement Plan by the QBG was deemed to be inadequate by the PPTA, the QBG hired a local resettlement specialist to revise and finalize its new report – and to resolve the many issues regarding the number of households to be resettled, the form and amount of compensation, land rental, and how a shareholding system would benefit affected farmers, in a manner that meets PRC laws and regulations, ADB requirements and the wishes and needs of resettled and otherwise affected farmers.

109. Linked to resettlement and compensation issues, farmers in both the ex-situ and QBCDA zones have been made promises about future jobs and incomes from construction and operation of the BG, but no real information has been provided e.g. on what the phased approach adopted in May 2007 means for local job creation, and no programs are in place to ensure local employment and income benefits. The SPG hopes to begin full construction of the QBG soon after the loan is approved. Programs must be in place well before then. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 23 Final Report Appendix 7

110. The legal, financial and religious status of the rebuilt Daoist Temples on the QBG site needs to be clarified through consultations with the Daoist community. One issue is whether the arrangements now in place between the Louguantai Forest Park and the Daoist community will be applied to the whole Project Area and the QBG. A second is whether the Daoist community approves of the restoration program as this will require a license. The third question is whether the QBG rebuilt temple sites will be subordinate to the Louguantai Daoism Temple at the Forest Park, or whether the QBG will need to go through the application process required for the approval and registration of establishing religious sites, under the “Regulations for Religious Affairs Management” of the Zhouzhi County Religious Affairs Management Bureau. This approval allows a Daoist temple to conduct religious activities, collect entry fees, and sell religious books and tourism souvenirs under a license. It also allows the temple to collect donations from believers and other legal sources.

111. The final question is whether in fact the QBG can charge for entry to the temple sites or whether agreement is first needed with the Daoist community that e.g. could involve the sharing of these fees between the QBG and the Daoist community, as is currently in place between the Louguantai Forest Park and the Daoist Temple.14

2. Proposal for Expanding the Shaanxi Animal Rescue (Zoological) Center (SARC) 15

a. Introduction

112. The proposal is to expand and significantly modernize the Shaanxi Animal Rescue Center (SARC) located in the villages of Louguan Township, Zhouzhi County. The Shaanxi Animal Rescue Center (SARC) was founded in 1987 with approval from the State Forestry Administration, is owned and regulated by the Shaanxi Provincial Forestry Department, and is currently managed by the Shaanxi Louguantai Forest Farm.

113. In 2001, the Government of Shaanxi issued a Document to approve the establishment of Shaanxi Treasured Wild Animal Rescue and Research Center (SARC). It has the status equal to a county level administration in managing the government affairs as defined in the legal document. At establishment it held initial capital of CNY 2.48 million with approval to employ 28 staff with three managers. The center is funded partly by Government, partly by commercial revenues and programs. SARC is a legal entity within the auspices of the Louguantai Forest Farm with whom it shares staff and land

114. The Center is open to visitors. With no single focal point for promotion and marketing, visitor numbers are low, as is the entry fee, at CNY 30 per adult.

115. The Center is managed by two Vice Directors, responsible for Science Research and Operations. Staff are based in five organizational groups: (i) Breeding Management Division (primarily panda); (ii) Ibis Management Division; (iii) Endemic Disease Division; (iv) Research and Dissemination; and (v) Secretarial. Present staff numbers total 40 people, including 18 professional staff. However, this understates the effective staff numbers since many functions, including accounting, human resources, construction, police, communist party affairs and labor association, are all shared with the Forest Farm. Relative time allocations between the two Divisions have not been assessed.

116. The staff numbers originally proposed by SARC for future operations increased the number of professional staff from 18 to 39. Senior SARC staff feel that research workers should represent about 33% - 50% of total staff. The PPTA suggests that the real determinant should be the rescue, breeding and research targets themselves, while for other operations the cost driver will be the number of animals (which will also determine fodder production requirements) and visitor projections.

14 Under this arrangement, the Daoist Temple receives CNY5 out of the entry fee of CNY30 to enter the Louguantai Forest Park. 15 This and the next proposal on the hot springs development involve expansions and/or first or second phases of existing facilities. The project cost and financial analysis for these two investments have emphasized identifying and separating new from previous capital costs, current operating costs and current revenues to ensure e.g. that the Project is not being asked to finance investment costs that have already been incurred and that the capital costs, operating costs and revenues actually apply to the phase being considered for an ADB Loan. Similar approaches are applied to other proposals. 24 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

Initial proposals for the proposed venture omitted all reference to marketing and promotion; visitor services etc, on the basis that this would be sub-contracted with financial costs included for this. A revised staffing estimate developed by key SARC staff, and which still requires further refinement and additions, is given below:

Table 10: Revised Staff Estimate

Initial Plan Revised Number Designation Number Comments 44 Keepers 12 Researchers 8 15 Rescue, Disease and Animal Hospital 12 Currently 4 in animal hospital Includes Chief Executive; Director Research and Breeding; Director 9 Secretary / Management 4 Marketing and Director Operations and Administration. 12 Safeguard managers 12 7 Visitor Welcome and Education 6 29 Other Panda staff 5016 Currently 12 for 11 Panda Ibis 10 For 300 Ibis – as at present Golden Monkey 10 40 Monkey Tarkin 8 Other animals 10 128 Sub total 38 (Compare 44 in original plan) Other Functions Not considered. Likely to be Animal Food production ? purchased from Forest Farm, who will operate these facilities Maintenance ? Entry Gates 16 Parking - Self Regulating or contracted Gardeners ? Services to be provided by Shaanxi Marketing Liaison 117 Province Tourism Catering and ancillary services ? Contract? Monitoring 2 To be part of Research Finance, Administration and Payroll ? Human Resources ? Management Information Systems ? Purchasing and Stores ? Secretarial ? Construction Oversight 2 Temporary positions 128 151 + ? Source: SARC discussions 25 June 2007

117. SARC is registered with the Government Affair Unit Registration Bureau of Shaanxi as an independent legal entity. The following mandates are assigned to the SARC:

 provide service for rescuing, raising, research and protection of treasured and endangered wild animals.  work within Shaanxi province.

16 Based on 60 panda 17 Senior SARC staff have queried whether this position is necessary. In the opinion of the consultant it is vital that at least one representative of SARC with responsibility for a commercial focus. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 25 Final Report Appendix 7

 rescue endangered wild animals on the national protection animal list. For raising and breeding wild animals on national protection animals list, a permit has to be given by the Forestry Bureau. SARC has this permit.  raise, breed, research, and raise public awareness of these animals.  conduct activities of using these animals for development purpose.  establish a joint venture or establish a commercial company for development purposes.

118. SARC currently has an animal hospital and laboratory and has on the current 140ha site 440 animals of 29 species, of which 349 are class one state protected animals, including: 12 panda (including the 2 currently off-site), 257 crested ibis, 19 golden monkey, and 24 takin. There are also 60 state protected animals of class two and 31 other kinds of animals. SARC reports that the Center has already saved 2,300 animals, including 35 Giant Panda and that is has established cooperative relationships with wild animal protection agencies in America, Japan, Germany, Australia and Belgium.

119. The animals in the center are open to public viewing with provision of extension information while SARC may collect entry tickets. SARC is empowered to borrow for establishment of facilities within its mandate. It has the right to repay the loan from the revenue generated through their commercial activities.

120. SARC shares an accounting office with Louguantai Forestry Park and Louguantai Forestry Farm, however SARC accounting system to manage its revenue is not the same. The PPTA Financial Governance assessment concluded the current accounting system of SARC is not adequate to meet the requirement of ADB loan management. It is suggested that SARC needs to be able to use the Capital Construction Accounting Guideline.

121. SARC uses forestry land area of Louguantai Forestry Farm provided its use is consistent with the stated mandate. This is the case for the proposed satellite areas where this involves Louguantai Forest Farm land such as the Ibis center. It is eligible to use the forestry farm’s land to establish an exhibition zoo and education center but requires approval to use the land for other construction from the Forestry Department and Land Management Department.

122. The current site involves approximately 140.7 ha, with a core area containing the animal pens covering 6 hectares that are open to the public. However, the site has not been actively marketed and current paid attendance is only 30,000 in a typical year with less than CNY10 million based revenue based on an entry fee of CNY30.

123. SARC will have several activities under the project. The Giant Panda Breeding Center, Ibis Breeding Center and Animal Rescue Center will be constructed in the project using ADB loan funds. The exhibition and education center and other breeding centers will be started during the ADB Project to ensure they are brought up to international standards. SARC will need to obtain the land user rights for construction by land acquisition and change forestry land they have user right on to forestry production construction land.

124. Louguantai Forestry Farm has a forestry right certificate issued by Zhouzhi Land Bureau to confirm the land area of 37,163 hectare which is owned by the state and LFF has user rights. SARC shares the whole land area with LFF. The land used for the construction of SARC is 971 ha in phase one, out of which the center has the user right over 962 ha. It will need to acquire 9 hectares of collective land which is currently contracted to 30 households and 125 individual farmers – a full set of resettlement costs and compensation is included in the FS and costings. No basic farming land is involved . A pre-checking report from provincial level land authority is required to confirm the land quota availability when submitting the feasibility study for approval.

125. The resettlement report prepared by SARC has been reviewed. It is fully consistent with the law and regulation. The compensation standard is at the high end of the legal allowance and local practice. The remaining project activities will be constructed on forestry land where SARC has existing land use rights. After the plan for giant panda breeding center and Ibis breeding center is approved, SARC will need an approval from Shaanxi Forestry Department to using forestry land for construction.

126. The SARC investment analysis focuses on phase one through to 2012 involving ADB loan financing. 26 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

c. Investment Outcome

127. The expansion, modernization and enhancement of SARC to international standards is intended to: (i) significantly increase the personnel and material investments made in wildlife protection in Shaanxi to improve animal welfare and the survival rate of rescued animals; (ii) rescue endangered animals more efficiently and provide a better natural environment for the animals that are raised on site; (iii) develop a high-quality site for eco-tourism that meets the needs of the modern, well informed and highly demanding tourist and increases public awareness and support for the rescue, breeding, science, research and public awareness functions of the SARC; (iv) conduct scientific research on wild animal conservation and expand cooperation, information exchanges and partnerships with similar agencies in China and abroad; and (v) distribute information and knowledge on wildlife conservation to promote greater harmony between animals and people.

128. The investment targets a number of existing problems with the SARC facility including inadequate rescue equipment, atrocious levels of animal welfare due to the small size and poor layout of the current animal exhibition area, animal pens that are overcrowded and well below international standards, shortage of research equipment, and weaknesses in technical capabilities.

b. Conservation Objectives

129. It is widely accepted that ex-situ facilities working with wild animals, especially those in range states, can and do play a significant role in animal conservation. This is supported by the Convention on Biological Diversity (Article 9) through the national biodiversity strategies and action plans, and by the IUCN in the Technical Guidelines for the Management of Ex Situ Populations. It is recognized that each of the four Missions for SARC has a conservation outcome. Rescue and rehabilitation, conservation (captive) breeding, scientific research and education all contribute to the conservation of endangered and threatened species as well as many other species.

I. Reintroduction

130. Reintroduction is often seen as an extension of conservation breeding however it is essential that the true role of reintroduction in animal conservation is understood for this programme. Species at risk of extinction have undergone, or are experiencing, a dramatic decline in population size which is driven by a number of factors influencing those wild populations. Often the complexities of the factors driving the species towards extinction are not fully understood so establishing a secure population of the species in a captive environment is crucial. Even if an ex-situ population thrives reintroduction is not necessarily recommended or required. Surplus animals do not justify reintroduction. The key conservation activity is to remove the threat to the wild population and allow it to recover naturally. If an extinction (local or global) has occurred and there are specimens available in captivity then reintroduction may be feasible if, again, the threat has been removed.

131. The two 2 “flagship” species in the Qinling Mountains, the giant panda and the crested ibis the crucial activity at the centers is to ensure a secure a genetically viable population of each species is held in the centers. If and when it is considered necessary to reintroduce either species to the north slopes of the mountains, specimens are available for the programs.

132. A crucial role for SARC for these species will be to use the exceptional facilities at both the satellite centers and at the main center to investigate the science of reintroductions and to contribute to the understanding of the biology and behavior of the species. This will allow detailed plans for potential reintroductions to be developed if required. Using the new facilities it may be possible to develop a model for reintroductions which can be tested in a semi free-ranging situation.

133. Although reintroductions of the crested ibis are underway it is considered unlikely that it would be possible to release ibis at or near the satellite center because of the nature of the land conditions in the area and the type of agriculture practiced. However it might be possible to find a suitable location and the center staff should take the lead in this investigation.

134. SARC can also investigate the status of other species in the project area or the mountains and determine the conservation actions required for each species deemed to be at risk (see Conservation Priority List). For some species establishing an ex-situ population could be seen as appropriate either as a safety net or to enable the species to be studied in a suitable environment. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 27 Final Report Appendix 7

Developing a program of conservation breeding for a number of model species could be worth considering in the future.

135. IUCN is widely recognized as the leading non-governmental conservation organization in the world which, as such, produces policies and strategies to encourage and guide conservation activities. It is recommended that any release program developed in the project area adhere to the IUCN Reintroduction Guidelines available on the IUCN website.

c. Investment Output

136. To improve and strengthen the rescue and breeding work of rare wildlife, the SARC investment will: (i) enlarge and enhance the rescue, breeding, research and other necessary facilities, (ii) establishing satellite sites for breeding of endangered species in different parts of the Project Area, (iii) actively adopt new approaches and technologies, and (iv) construct a high quality modern, ecological institution that represents best practice in China and meets international standards for ex- situ conservation, endangered species management and develops systems for potential controlled release.

137. The SARC expansion and modernization is intended to capitalize on the significant growth in tourism particularly in niche eco-tourism market segments. Visitation will also be encouraged from urban residents of Xian and southern Shaanxi to financially and technically support SARCS main objectives and functions. By focusing on the Qinling Mountains rare and globally important animal species and providing facilities of international standard that meets GEF and ADB requirements, SARC will offer a more attractive option for general tourists and for biodiversity enthusiasts compared with the Xian Wildlife Park which operates successfully since it opened in 200418.

138. The investment will greatly enrich the “Louguan Experience”. The linkage of Louguantai as the birthplace of Daoism with the SARC provides the opportunity to view two of the world’s most iconic fauna, the giant Panda and Crested Ibis along with Daoist experiences provides a unique opportunity especially for international clientele. The interest in the giant Panda is worldwide, and holidays specifically to view the panda can now be arranged from most European countries and North America. Because of the rarity value of the animal, these holidays are sold at premium rates. International tourists are increasingly being offered mixed cultural and wildlife tours but none that specifically target Xian.

139. These options allow tourist companies to offer holidays which meet a wide variety of tastes. Many tourist offers currently available link a visit to Xi’an with Giant Panda experiences at either Wolong or Foping19. At present, SARC does not feature as a place to visit. The close location of SARC to Xi’an, gives a strong advantage to the Louguan site. Unlike Wolong (breeding centre) or Foping (wild viewing), access to the SARC is easy – an hour’s drive from Xi’an -- thereby allowing visitors to view the Giant Panda at the SARC within one day with minimal time spent traveling. Longer Giant Panda experiences will be available through the QBCDA area “Wild Experience” through the eco- lodges and through longer half-day experiences by day visitors to the QBCDA Giant Panda breeding center.

d. Project Activities

140. SARC will expand from the current 140.7 ha to 1,112 ha, through the development of areas adjacent to the existing site and to three satellite areas within the Louguantai Forest Farm. The Project will add 6,545 sq m to the existing 6,842 sq m of building. The current utilities and telecoms have sufficient capacity to support future expansion.

18 In 2006, the Xi’an Wildlife Park had attendance of 1.5 million with an entry fee of CNY 80. While the Park is apparently a major commercial success, visits to the Park by PPTA Team members raised serious concerns regarding the care of the animals and the maintenance of constructed facilities at the Park. The Wildlife Park opened in 2004, its capital cost was CNY 390 Million, and has a land area of more than 130 ha. It is owned and operated by one of the seven subsidiary companies under the Xi’an Tourism Group Company, which is an SOE of the Xi’an Municipal Government. The SARC proposal is intended to set new standards in Xi’an, Shaanxi and the western PRC for animal welfare, maintenance of facilities and providing a quality tourism experience. 19 See Annex 1 28 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

141. At Project completion, the number of giant Panda, Crested Ibis and Golden Monkey are expected to 80% of the planned numbers, while the forage production area will be more than 70% developed, rescue work in the field should service 80% of the total province and the survival rate should be more than 60%.

142. Satellite Area 1 - The Giant Panda Breeding Center has been relocated to be two miles of the current SARC site in Hu-Bao valley.: This is a complex of animal enclosures and associated facilities within the project QBCDA area with the eventual capacity for up to 40 giant pandas which will be open to visitors. The pandas will be maintained in high quality landscaped and planted environments to encourage natural breeding in controlled conditions under observation. The additional space will enable the pandas to improve their levels of fitness.

143. The work at the center will greatly enhance the knowledge and understanding of pandas in an ex-situ environment and enable scientific research to be undertaken in good quality facilities which will benefit the animals and staff in the future.

144. The center will play an important role in the public awareness and education program for both the local communities and for domestic and international visitors, using giant pandas as the flagship species for the Qinling Mountains. Due to the nature of the site and the limited number of visitors to it, the education program will be supported by the main center in Louguantai.

145. The center has the potential to act as a preparation site for pandas that need rehabilitation after a long period under care and to study the process of preparation of giant pandas bred at the center for reintroduction, utilizing the potential space availability and the natural landscape in the area.

146. Some non-breeding and young pandas will be held at the main center in Louguantai in large naturalistic enclosures. The proposed site will need a full survey to assess the challenges for the construction of all the required facilities with minimal impact on the site. The detailed design should have the flexibility to consider the survey results and provide the required number of appropriate facilities. Minimum disturbance to the site is required so a landscape and plant expert may be advisable for the team.

147. The detailed design should be guided by information gained from visits to other panda breeding centers e.g. Wolong, and from their experiences. Consideration needs to be given to the facilities available at the main center in Louguantai to avoid unnecessary duplication of buildings and equipment. It will be beneficial if the construction program can be developed to match the needs of the panda center population as it grows over the years.

148. The proposal raises some concerns including:

 The high number of pandas proposed for the location  Origins of current founder population and Qinling sub-species issues  Natural reproduction in captive pandas  Sourcing new founders to reach target  Need for a provincial conservation program for giant pandas considering ex-situ roles  The need to ensure giant pandas are on view to the visitors through good management program  The scale and number of the facilities needed to support the center which could damage the site  Will the individual enclosures be large enough to prevent complete destruction of the plant base?  Are there any poisonous plants in the enclosures that could present a risk to the pandas?  The impact on the river through the construction work or the development of small dams and potential damage to the river system in the valley if dams are built  The expertise of staff to manage pandas in these new facilities  Relatively remote location for staffing  Management in winter and adverse weather conditions  Visitor access and security  Are there risks from wild animals in the area that might enter the site and the panda enclosures? TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 29 Final Report Appendix 7

149. The following recommendations are provided for the design process:

 Develop a model for the captive population of pandas for optimistic and pessimistic scenarios (already in preparation by SARC staff)  Assess the role of the center for the conservation of giant pandas in the QM  Prepare husbandry guidelines for giant pandas in the centers  Develop research proposals for giant pandas including investigation into natural breeding  Undertake a vegetation survey of the site  Critically assess management policy for center for the year  Consider phased construction to match the model

150. Providing captive bred and rescued wild giant pandas with high quality environments in the QBCDA area is an excellent objective of this project however it is difficult to justify the high costs involved for the infrastructure, the management, the potential impact on the environment and the number of pandas to be held in captivity without a full understanding of the role of this project within a wider conservation program for the giant panda and the Qinling Mountain sub-species.

151. With a small number of pandas breeding currently at the center it is not possible to meet the target population without taking giant pandas from the wild either as rescued animals or captured specifically for the breeding program. Without a full conservation action plan making this recommendation, bringing wild pandas into captivity cannot be sanctioned unless it directly relates to the individual wellbeing of any single panda. This plan will consider the concerns about fragmented populations, the current relatively low wild population, the sub-species issues and the need for a secure population in captivity which is genetically strong.

152. The center can become an excellent site for:

 rehabilitation of young and rescued pandas  research into the behavioral aspects of reintroduction  continued research into panda nutrition  research into other fauna and flora or the QBCDA area e.g. giant salamander

153. The Project will develop 99 internal holding pens; 10 Panda nursery facilities; Panda feeding areas, 32 enclosures; a research facility; food store and processing room; and all support facilities for staff and effective management of the centre. The centre is currently proposed to be located in the QBCDA area will be a breeding and research centre and will use facilities and staff at the main centre. It is designed to provide the pandas with an excellent environment almost replicating wild conditions both in weather and habitat, presumably with the associated benefits to the health and breeding of pandas at the centre. The center will require investment into roading that will include a tunnel and includes a water supply and irrigation system based on damming the adjacent river.

154. Satellite Area Two - Crested Ibis: The center will focus on wetland species with the crested ibis as the flagship for this threatened habitat. The facility will be centered on a breeding colony of crested ibis in one of the largest free-flight aviaries of its kind in the world. This will not only provide a spectacular environment for the birds and visitors but it will also be an invaluable tool in the reintroduction program for the ibis in the Qinling Mountains and elsewhere in China. The ibis will be able to develop their flying and feeding skills, developing an increased level of fitness as a result. They will breed naturally in the woodland area and forage in the artificial pools and paddy fields developed at the center.

155. A wetlands education center will inform visitors of the importance of these special habitats and the impact of the loss or damage of areas through drainage, pollution and climate change. The artificial wetland will have the capability to attract wild species as well as exhibit other aquatic animals and plants from the region.

156. The new center has the potential to set new standards of care and exhibition of crested ibis, providing a unique opportunity to learn more about the breeding and feeding behavior of this internationally important species, contributing invaluable information to their future survival across their former range. 30 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

157. Initially the wetland area will be established and allowed to establish before the center and bird facilities are constructed in a phased approach after the completion of the current Project. This will ensure the system is working and the water quality and quantity is good at the time of construction. Crested ibis will be held in standard breeding facilities and in a large aviary in the main center in Louguantai.

158. The key to the success of the project is the large free-flight aviary. This has been reduced in area from the original concept but it will still be a major element of the center, perhaps covering up to 1.5 ha. Information must be gathered from other projects using such aviaries to ensure the best materials and design approach are incorporated. Visits to one or two models will be required plus visits to the ibis centers at Yangxian and Ningshan.

159. Because of the risk from avian influenza which could be brought into the aviaries by visitors it is recommended that an alternative route for visitors is designed to enable them to view the ibis without entering the aviary.

160. Other species to be exhibited in the center need to be identified early in the design process and the scale and requirements for the visitor center must be clarified, meeting the level of visitor numbers anticipated.

161. As the center will be reliant on water a study has to be carried out very early to ensure there will be a reliable source of water for the center in the future. Management systems for this water have to be considered both for the quantity and quality. The use of grey water can be explored.

162. The development area is raised above the river which may be unstable once the area is flooded or the ground may not be able to support the superstructure for the net. This needs geotechnical investigation early in the design process and action taken to find a solution within the designs. The planting scheme and program for the wetland area is as important as the animals that will be featured. It is the planting and other landscape features that will set the scene for the ibis and attract wild species to the site.

163.

164. The current proposals raise the following issues that need to addressed during the detailed design:

 Water availability and the impact of the center for the communities  Water quality  Water quantity required  Is it possible to source the best materials for the construction?  Maintenance of the aviary as well as the water-based buildings – funding and expertise  The acquisition of food for the ibis in the long term  Satisfactory management of the ibis in the flight area  The over-production of ibis and the financial impact of holding too many birds  Maintaining good data on the breeding program on SPARKS  The impact of the presence of other wildlife in the flight area  Biosecurity issues from wild birds and visitors

165. The following actions are recommended:

 A full survey of the site is needed to ensure it is suitable for the plans  A risk assessment should be undertaken for avian influenza or other diseases that might be an issue  A conservation action plan for crested ibis needs to be prepared identifying the role of the new center in collaboration with the IUCN SSC SIS Specialist Group  Center staff to work in Yangxian to develop management techniques for large aviaries  Husbandry guidelines for crested ibis at the new center need to be developed  Liaise with other ibis centers to analyze all breeding data (on PM2000) and make future breeding recommendations TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 31 Final Report Appendix 7

166. Potential risks are identified as being:

 The ibis have difficulty is adapting to the new environment initially  Water availability not sufficient to meet the needs of the project  Avian influenza  The appeal of this center to visitors being insufficient to meet targets  High maintenance costs  High food costs

167. The proposed investment is considered to be excellent with considerable benefits to both the crested ibis program and the protection of wetlands in the Qinling Mountains. The scale of the project is now such that it is feasible if issues of materials, the location and water availability are addressed. The primary concern relates to the on-going management and maintenance costs of the site both of the ibis and other species and of the physical structures. To ensure these can be met a reliable and large visitor base is required.

168. It is essential that the three main breeding sites in the Qinling Mountains use this project as a catalyst to work more closely, especially with a coordinated breeding program. This will maximize the space available for ibis, ensure the strongest possible genetic make-up of the population and minimize any negative effects of inbreeding. It will also ensure the best use of the resources available for the provision of crested ibis elsewhere in China and in other countries.

169. Satellite 3 – Golden Monkey Breeding and Raising Base. The Golden Monkey Center will provide a centre of excellence for the husbandry of golden monkeys in an ex-situ facility. Natural groupings of golden monkeys will have a large natural environment in which to live year round providing the center’s research team with the opportunity to study group dynamics and other behaviors in a relatively accessible facility.

170. Although the center is part of the wider conservation program for all biodiversity in the area the focus will not be on breeding but more to demonstrate best practice in the care of these primates. The center will inform visitors about the forest ecosystems in the mountains and the role of some of the key species in that environment. Primates are very popular with visitors mainly due to their complex social organization and the golden monkey is an excellent species to demonstrate some of the behaviors that maintain social structures.

171. The scale of the facility will enable researchers to study the behaviors of the golden monkeys, providing information that could be useful in ensuring their future in the wild. This research can link to the study of wild populations in the project area. There are a number of very effective ways to contain large primates in semi free-ranging environments which need to be understood to assist in the final design utilized in this project. The use of electric fencing can be economical but local climatic conditions may create problems, especially with snow fall.

172. It is proposed to construct 10 separate units but this number needs to be evaluated before final design taking into consideration the number of golden monkeys to be held at the center and the role of these animals in the future. A phased development may be considered.

173. Smaller units may be designed with a complete cover of wire netting to provide a convenient and very suitable 3 dimensional space for the primates with a relatively small footprint. A prototype for this design can be trialed at the main center.

174. All the areas must have access to inside facilities both for general management and for security. These areas will not be on view to visitors although viewing into one inside area could be considered within the design for maximum flexibility. Such facilities will include animal handling devices. The design and location of such equipment must be agreed by the husbandry team.

175. The current design and animal husbandry issues include:

 Sex ratio imbalance for the establishment of compatible groups i.e. too many males  Breeding management  Determining a suitable sized enclosure to avoid destruction of the habitat  The potential to provide golden monkeys to zoos nationally and internationally  The role of the center in the conservation of the species 32 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

176. It is recommended that SARC should

 Investigate options for containing large arboreal primates through an international expert and site visits.  To develop husbandry guidelines for golden monkeys at the new center  To develop a protocol for the rescue and rehabilitation of golden monkeys  To investigate the potential to establish an all male group

177. This facility provides the potential for a long term study into the social behavior of a little known species with the benefits to the management of the natural environment for the golden monkey in the Qinling Mountains.

178. Rare and Wild Animal Rescue District. The Wildlife Rescue Center will be one of the key facilities in the main center at Louguantai fulfilling one of the major roles for SARC through the provision of high quality care for rescued wildlife and animals at the main center and in the satellite centers.

179. The rescue center will comprise of a veterinary hospital, quarantine facilities, recovery and treatment areas, a research section and staff facilities. Equipment will be provided to ensure quick, safe and effective procedures can be implemented during rescue operations in the field and the transfer of animals to the center. This will reduce the complications experienced in the past and increase the survival rate of rescued animals.

180. The research capacity of the center will enable the staff to gain more knowledge about the species held in SARC and wildlife brought into the center. This could be critical in the future care of these species and will provide more information on the causes of the problems encountered by wildlife in Shaanxi and in the Qinling Mountains in particular. A better understanding of the biology of the endangered species in the center will be invaluable in improving their husbandry and welfare.

181. The rescue center has the potential to become a center of excellence in this work providing training opportunities for other wildlife professionals, both national and international.

182. Appropriate staff from SARC should visit wildlife veterinary centers which have good experience in the field to acquire the latest advice on the design of wildlife hospitals and quarantine facilities. It is essential to identify the equipment needed to meet all the requirements of the center to ensure the designs enable there installation and effective use.

183. The animal holding areas must be in a convenient but quiet location, they will need to be designed with a degree of flexibility in mind to accommodate a range of species and numbers of animals that might be handled at any one time.

184. There will be the need to understand biosecurity systems and how to design and install suitable systems within and between the complex of facilities.

185. Good vehicle access is needed that will enable animals transport to be easily transferred into and out of the center. Good power and water supplies are important and there will be a need for a separate drainage system for the quarantine areas. Good quality lighting and ventilation systems are essential in the hospital and research areas.

186. The designs for the research facilities, where needed, will be driven by the research program and the needs of the staff to enable them to undertake the programs determined for the center.

187. The following issues need to be addressed:

 Staff expertise to maximize the use of the rescue center and to operate the equipment  Informing nature reserve of increased capacity to rescue wildlife  The center can become an important center of learning for students  Consideration should be given to incorporating an electronic library and developing access to this through a web-site

188. The following recommendations are made for the animal rescue center: TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 33 Final Report Appendix 7

 Develop training plan for key senior staff at the rescue center  Develop a protocol for the rescue and rehabilitation of wild animals  Develop a research program for the center

189. This project will provide an excellent opportunity for SARC to develop a facility of international standards in the veterinary care of wildlife which will also support the important work of the rescue and rehabilitation of wild animals. Knowledge and information gained through formal and informal research undertaken at the center will be invaluable in developing techniques and skills in the husbandry of the endangered and other species at the center. With the addition of the experiences working with critically endangered species in the satellite centers, SARC will become one of the leading organizations in this field of wildlife conservation.

190. The rescue center also has the potential to become a training center for wildlife vets and other professionals in the skills needed to rescue, capture and manage wild animals for conservation.

191. Animal Exposition and Display Area: The senior management team at SARC recognizes the need to bring the center up to international standards and it is through this element of the program that this will be achieved. The center will become the major attraction for Chinese wildlife with the giant panda as the flagship species, however the many other species that will be on display at the center will add significant value to the site. Visitors will be able to observe Qinling Mountain species in natural habitats as examples of the tremendous biodiversity of this beautiful area. Most of the animals exhibited will have been rescued but in the future there will be some new species brought into the center as part of a conservation program that require ex-situ breeding or research on aspects of their biology.

192. Ultimately all the animal and support facilities will either be replaced or upgraded over a relatively short period to ensure international standards for animal housing are achieved as quickly as possible. For all species improvements will be made, where required, in the husbandry and care of those species which will also be to international standards. Some of these objectives will be achieved by developing the skills within the staff but for some species major improvements will be necessary in both the facilities and the husbandry.

193. Although satellite centers will be constructed for giant pandas and crested ibis, these species will also be displayed in the center because of their popularity and to inform visitors of the specialist centers in operation. Visitors will have access to the golden monkeys and takin exhibits from the center.

194. Landscaping and planting will be a key element of the site development providing a pleasant and relaxing environment for visitors with the benefit also to staff and the animals.

195. The senior SARC staff will develop an institutional collection plan that will identify all the species to be kept long term at the center. This plan will then drive the master planning process and then the detailed design. Other major buildings and support facilities (Education Center, Rescue Center, administration, etc) will be then be incorporated into the master plan.

196. Husbandry guidelines produced by center staff will identify the key elements required for each species which will assist the design team in the process of formulating the master plan and placing the species in the best locations. Consideration will be given to the movement of visitors around the site and service access to all buildings.

197. It may be necessary to consider organized tour groups as well as standard day visitors within the master plan as groups may have a different requirement for and use of the site due to time constraints. Clustering the key species closer to the visitor center and developing a guided tour program may be worth considering.

198. Within the planning process it is necessary to include the construction of the satellite areas where necessary (giant pandas) as this may influence the timing of the work and the capacity needed for that species on the site in the short and long term.

199. The following issues are identified:

 This is a large task, are funds sufficient to achieve the aims 34 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

 On-going investment and maintenance of the center will be necessary  Not everything can be done at once  Will funding be available to introduce new husbandry techniques at the outset?  There is a need to increase the staff capacity early in the process to achieve international standards

200. During the detailed design the following steps are recommended:

 Survey undertaken of the site  SARC staff to develop Institutional Collection Plan  Support facilities identified  International design experts identified  A business plan developed for the center that considers commercial opportunities and maintenance costs

201. The scale of the new center will put considerable strain on resources during planning, construction and site preparation and management which could put at risk the successful completion of the project. The senior staff at SARC have done a great job to pull together a very exciting and ambitious plan for the center which can only compliment the plans for the satellite centers. Bringing forward the development of the animal exposition will enable the center to meet international standards early in the program, giving reassurance of success for the longer term program.

202. The center has the potential to become one of the most important sites for biodiversity conservation in the province and nationally. The combination of wildlife rescue, conservation breeding, research and education on one site provides an unusual resource for visitors and wildlife professionals. It will support the National Conservation Strategy and Action Plan of the Convention of Biological Diversity.

203. A center of this standard has the potential to attract international partners which could enable an exciting future for the center in their efforts for wildlife conservation.

204. The following table summarizes the major activities based on the Chinese FS (May 2007).

Table 11: SARC Description of Interest

Major Activities 1. Giant Panda breeding and raising base – to be located adjacent to the proposed Takin Satellite Area will have an area of 500 mu (33 ha) with slopes up to 20-35 degrees. Area offers a good natural environment, good vegetation, abundant water supply, a temperate climate and adequate space for breading and research – and fits the physical living conditions of Giant Panda in terms of landform, slope and so on. Being close to the road, the site as well has good access to transportation, communication and power supply systems. Officially listed as a key investment project in the National Government’s 11th FYP 2. Crested Ibis breeding and raising base – to be located near Xilou Village, Louguan Township to the west of the current SARC site in the ex-situ Zone B on the west bank of the Jiyu River. Phase on is to be built on an area of 300 mu (20 ha), which is a well-forested area on a 35 degree slope with 4 ha of flatland under the slope which can be rebuilt into wetland with irrigation facilities from the Jiyu River for feeding – and with little human activity and with convenient transportation. Already approved by the State Forestry Administration. 3. Golden monkey breeding and raising base – to be located in the Dongguayu Valley to the south of the center; this area is a small valley of 15-25 degrees slope, with an area of 150 mu (10 ha), of which 90 mu are Chinese pine forest in the valley bottom and sides. The site is capable of raising 30 golden monkeys. 4. Rare wild animal rescue district – where the saved and accepted animals are rescued, treated, quarantined, and cared for; district consists of the animal hospital and the rescue and quarantine center; the animal hospital is located in the northeast corner of the current center while the rescue and quarantine center is located in the northwest corner. 5. Animal Exposition Area – where a limited number of non-breeding animals will be housed for public education and display purposes. The exposition area will be upgraded and enhanced to be the leading animal display site in China and will play an important role in providing a substantially higher income base for the QBNBG 6. Phase one upgrade of existing animal exhibition area of 6ha to meet international standards 7. Resettlement 8. Environmental Protection 9. Food/Forage Base – comprised of a plantation area for food for vegetarian animals like giant panda and golden monkey, and a feeding garden where food animals for Crested Ibis are raised. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 35 Final Report Appendix 7

10. Equipment and Instruments 11. Vehicles 12. Marketing and Public Education 13. Staff Costs (Recurrent) – about 1.3% of base costs 14. Technical Training 15. Technical Consultancy 16. Design and Surveying at about 2% of Construction and Engineering Costs 17. Administration 18. Detailed Design Costs

Notes to Table 11: 1. Recurrent costs are included in the SARC construction costs as staff costs. After 2010, based on the SARC financial projections, operating costs, including maintenance and overheads, will be covered by SARC revenues.

d. Revenue Projections and Financial Analysis

205. The projected attendance figures are based upon the assumptions in Table 12 and include a 10% factor for nonpaying or official visitors due to the iconic nature of giant Panda and the Crested Ibis.

Table 12: Assumptions for Visitor and Revenue Projections

The attendance for the three attraction in 2011 is 280,000.

In the first 5 year period from 2011 to 2016, the annual growth rate peaks and decreases gradually.

The attendance of Crested Ibis in 2010 is 266,000.

10 % of tourists will be free guests Panda Entry Fee 55 CNY Crested Ibis Entry Fee 50 CNY Golden Monkey Entry Fee 30 CNY

206. The SARC Design Team projects attendance to start at a fairly low level and then to grow quite rapidly through the early years of the projection period. Therefore, this attendance forecast is used for the analysis. However the SARC prices were adjusted downward to be consistent with market studies to be consistent with market research and to provide a conservative base to the overall assessment. The SARC strategy envisages that all visitors to the SARC Animal Exhibition Center/Zoo would also visit the breeding centers for the three species and the animal exposition center. Visitation numbers are presented in Table 13.

Table 13: ARC Visitor and Revenue Projection

2010 2011 2012 2013 2014 2015 Attendance Attendance 280,000.0 336,000.0 403,200.0 463,680.0 519,321.6 Growth Rate Yearly 20% 20% 15% 12% Panda 280,000.0 336,000.0 403,200.0 463,680.0 519,321.6 Crested Ibis 266,000.0 280,000.0 336,000.0 403,200.0 463,680.0 519,321.6 Golden Monkey 336,000.0 403,200.0 463,680.0 519,321.6 Revenue (‘0,000) Panda (CNY50/ person) 1,386.0 1,663.2 1,995.8 2,295.2 2,570.6

Crested Ibis᧤CNY50 /person᧥ 1,197.0 1,260.0 1,512.0 1,814.4 2,086.6 2,336.9

Golden Monkey (CNY30/person᧥ 0.0 907.2 1,088.6 1,251.9 1,402.2 Total 1,197.0 2,646.0 4,082.4 4,898.9 5,633.7 6,309.8 36 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

207. The investment into SARC is presented in Table 14 and total CNY215 million (USD28.3 million) over a four year period with nearly 84% being civil works.

Table 14: ARC Investment Costs (CNY ‘0,000’s)

Item 2008 2009 2010 2011 2012 A: Financial Costs Fixed Asset 1207.9 7236.9 10843.4 589.9 Civil Works 1199.7 6425.4 10549.3 555.9 Equipments 8.2 811.5 294.1 34.0 Intangible Asset 1266.1 131.1 551.6 0.0 Total investment 2474.0 7368.0 11395.0 589.9

208. The forecast financial cashflow before and after tax is presented in Table 15 with the FIRR before tax estimated to be 15.9% and the after tax FIRR 13.5% both of which are well above the enterprise WACC of capital.

Table 15: SARC Forecast Cashflow and FIRR (CNY ‘0,000)

Item 2008 2009 2010 2011 2012 2013 2014 2015

0 0 1131 2500 3858 4629 5324 5963 Revenue 0.0 0.0 1197.0 2646.0 4082.4 4898.9 5633.7 6309.8 Sales Tax(5.5%) 0.0 0.0 65.8 145.5 224.5 269.4 309.9 347.0 Residual Value Cash out 3496.7 8959.2 13249.2 2524.4 2015.0 2015.0 2373.1 2351.2 Investment 2474.0 7368.0 11395.0 589.9 Operating cost 1022.7 1591.2 1854.2 1934.5 2015.0 2015.0 2373.1 2351.2 Working capital Net Cash Flow Before Income Tax -3496.7 -8959.2 -12118.0 -23.9 1842.9 2614.5 2950.8 3611.5 Cash in without project 218.9 218.9 218.9 218.9 218.9 218.9 218.9 218.9 Cash out without project 185.7 185.7 185.7 185.7 185.7 185.7 185.7 185.7 Net Cash Flow without project 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 Net Cash Flow Before Income Tax with project -3529.9 -8992.4 -12151.2 -57.2 1809.7 2581.3 2917.5 3578.3 FIRR Before Income Tax 15.96% FNPV Before Income Tax at 10% 18085.0 Income Tax 0.0 0.0 0.0 0.0 278.8 471.6 555.7 720.9 Net Cash Flow After Income Tax with project -3530 -8992 -12151 -57 1531 2110 2362 2857 FIRR After Income Tax 13.51% FNPV After Income Tax at 10% with project 9605

209. The Financial viability was tested for movement in cost and revenues - see Table 16 - and found to be robust under scenarios involving 20% movement of current projections. The proposed use of commercial management will reduce the risks attached to the commercial operation of the SARC.

210. The incorporation of a 8% revenue charge for the conservation of biodiversity in the QBCDA reduces the after tax FIRR from to 13.5% to 12.8% and will generate $160,000 in year 2012.

Table 16: Financial Analysis Sensitivity

Sensitive Analysis Before Income Tax After Income Tax FIRR NPV FIRR NPV Operating Cost (10% up) 14.81% 15,621.1 12.56% 7,474 Operating Cost (20% up) 14.20% 13,781.5 12.03% 5,970 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 37 Final Report Appendix 7

Operating Cost (30% up) 13.61% 11,941.8 11.50% 4,466

Revenue (10% down) 13.90% 12,076.8 11.75% 4,875 Revenue (20% down) 12.26% 6,692.7 10.29% 773 Revenue (30% down) 10.46% 1,308.6 8.70% -3,329

211. The expansion and modernization of SARC to international standards with completion of Phase I and Phase II will further strengthen and diversify the Shaanxi and Xi’an tourism base and will provide a high quality tourism experience that, together with the Botanic Garden, the Louguantai Forest Park and other ex-situ facilities, will encourage visitors to the Project Area to spend the whole day there or to come back for a second day to the ex-situ sites. This will lengthen their stay and/or increase their spending in the city and province.

212. Construction employment during the three-year construction period is estimated to be about 3,800 person years or nearly 1,300 construction jobs on a full time equivalent basis each year. The expanded SARC site will as well increase the number of operating jobs provided to local people from the current number of about 40 (including casual employees) to over 200 positions after construction of both phases. This number will increase as the number of visitors and the SARC’s gross revenues expand through the projection period. Based on data earlier provided by SARC on its personnel and operating costs, the Team estimates that under the PPTA Team’s base case scenario, employment at SARC after construction of both phases, including staff servicing tourists, employees caring for animals and administrative staff, would likely be about 250 at start-up in 2011, and this number would likely increase to over 400 by 2020 and to about 500 in 2030. The expanded and modernized SARC facility will as well generate quite significant indirect or spin-off benefits through providing service and supply contracts to local companies and other suppliers of goods and services.

213. Other benefits noted in the SARC FSR include: better care of and more healthy animals based on the breeding bases, animal hospital, rescuing and quarantine facilities, and the expanded research facilities and food/forage bases – leading through time to expansions in the population of rare Qinling wildlife. Better animal care, training and research to promote controlled release to the wild or semi-wild (to be funded perhaps in part under the GEF program) could further add to the benefits from the animal conservation work of SARC. This could be particularly important to Crested Ibis. The genetic resources associated with these rare animals will be better protected and utilized at project completion.

214. Over the longer term, strong national and international interest in iconic Qinling animals such as giant Panda, Crested Ibis and Golden Monkey and SARC’s growing reputation for the rescue, care, breeding and release of these animals and for operating a well-known Animal Exhibition Area and Rescue Center to international standards. This reputation will generate significant funds from international NGOs and other donors (corporations, foundations etc.) to support the animal rescue center’s future activities and development. The project will provide technical support for the design process to ensure that the skills and experience within SARC and the international community are brought to bear on the detailed design.

215. The economic cash flow for the period through to 2015 is presented in Table 13 which results in an EIRR of 17% based on the net cash flow for the with and without project. In reality the current center would be unlikely to survive past the short term given the low standards of animal welfare and the increasing public rejection of these standards.

e. Implementation Arrangements

216. The subcomponent will be implemented by the existing SARC government unit with equal status to a county level government for powers in its mandate. The government currently meets all of its operating costs. It has registered with Government Affair Unit Registration Bureau of Shaanxi as an independent legal entity. SARC will form a construction supervision team for the construction period of the Project. The commercial enterprise will be managed by an experienced tourism operation.

217. SARC shares one accounting office with the Louguantai Forestry Park and Louguantai Forestry Farm. But SARC uses a different accounting system for its revenue. According to the PPTA Financial Governance Report, the current accounting system of SARC is not sufficient to meet the 38 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7 requirement of ADB loan management. It is suggested that SARC needs to be able to use the Capital Construction Accounting Guideline.

218. SARC shares the forestry land area of Louguantai Forestry Farm that holds the land use rights. It is entitled to use the land within in their mandates. It can use the forestry farm’s land to build a Giant Panda Base and Ibis Base. It is also eligible to use the forestry farm’s land to establish an exhibition and education center but requires approval to use the land for other construction from the Forestry Department and Land Management Department.

219. It is planned in the Qinling National Ecological Function Zone Plan that there will be 5 wildlife rescue centers established under the plan. SARC is the first one established in the province and is considered part of the Ecological Function program. SARC is eligible to be a borrower of the ADB loan under the Project. It will implement ex situ activities some of which may be located in the some QBCDA zone.

220. SARC will need to adopt the Capital Construction Accounting Guideline to be able to handle the loan monitoring and repayment requirement. SARC proposes to contract a company to manage its tourism commercial activities including eco-lodges20 – see Component two. The revenue generated from the tourism operation will be used to repay the loan. The animal breeding bases and extension and education center will serve as an important public awareness facility for wildlife protection. SARC will contribute its net revenue from tourism operation including eco-lodges to the eco-fund.

e. Benefits and Beneficiaries

221. The expansion and modernization of SARC to international standards with completion of Phase I will further strengthen and diversify the Shaanxi and Xi’an tourism base and will provide a high quality tourism experience that, together with the Botanic Garden, the Louguantai Forest Park and other ex-situ facilities, will encourage visitors to the Project Area to spend the whole day there or to come back for a second day to the ex-situ sites. This will lengthen their stay and/or increase their spending in the city and province.

222. Construction employment during the three-year construction period is estimated to be about 3,800 person years or nearly 1,300 construction jobs on a full time equivalent basis each year. The expanded SARC site will increase the number of operating jobs provided to local people from the current number of about 40 (including casual employees) to over 200 positions after construction of both phases. This number will increase as the number of visitors and the SARC’s gross revenues expand.

223. SARC data on personnel and operating costs the estimates of employment at SARC after construction of both phases, including staff servicing tourists, employees caring for animals and administrative staff, is estimated to be 250 at start-up in 2011, and increasing to over 400 by 2020 and to about 500 in 2030. The expanded and modernized SARC facility will generate quite significant indirect or spin-off benefits through providing service and supply contracts to local companies and other suppliers of goods and services.

224. Other benefits noted in the SARC FSR include: better care of and more healthy animals based on the breeding bases, animal hospital, rescuing and quarantine facilities, and the expanded research facilities and food/forage bases – leading through time to expansions in the population of rare Qinling wildlife. Better animal care, training and research to promote controlled release to the wild or semi-wild (to be funded perhaps in part under the GEF program) could further add to the benefits from the animal conservation work of SARC. This could be particularly important to Crested Ibis. The genetic resources associated with these rare animals will be better protected and utilized, and the project after completion of phase one will add 1,500 ha of forest and greenland to the Project Area –improving the microclimate, reducing soil erosion and water loss, and promoting biodiversity conservation.

225. Over the longer term, strong national and international interest in the iconic Qinling animals such as the Giant Panda, Crested Ibis and Golden Monkey -- and the SARC’s growing reputation for the rescue, care, breeding and release of these animals and for operating a well-known Animal

20 PDRC have requested that the eco-lodges be removed from the Project financing as they can be funded through a private sector joint venture option. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 39 Final Report Appendix 7

Exhibition Area and Rescue Center in a manner that fully meets international standards -- would generate significant funds from international NGOs and other donors (corporations, foundations etc.) to support the animal rescue center’s future activities and expansions.

226. Significant staff training is needed to ensure that these potential benefits are realized. Training funds in Phase I are modest and may need to be increased in detailed design. As well, training and capacity building should be expanded in Phase II to improve existing skills and bring in new skills – with some of the Phase II training brought forward to support phase one development. Phase II design should as well address staffing and recruitment to ensure that all of the SARC’s long term personnel needs in management, long-term corporate development, tourism services, animal care, education, public awareness, communication and fund raising, are fully met. Many models for staffing, recruitment and training are available from existing zoos in many parts of the world. Some international travel to these sites should be included for key staff in the Phase II design and costing. Training requirements are further explored in the next sub-section.

227. As would be expected from the financial analysis, the economic analysis provided favorable economic results. The economic internal rate of return (EIRR) for the PPTA team’s base case is 14.5%, which is well above the benchmark EIRRs of 10% and 12% used in the economic analysis.

3. Proposal for Phase II of the Hot Springs Development Center in Louguantai

a. Overview

228. The Hot Springs proposal finances Phase II of its construction program for the development of the hot springs site within the Forest Park and adjacent to the existing Animal Rescue Center in Louguantai. The hot spring development – which is called the Shaanxi Louguan Daoism Hot Spring by its owners -- covers an area of 160 mu, and is adjacent to the entrance to the Forest Park. The first phase of construction began approximately one year ago and is scheduled for completion in October 2007. The first phase involves development of the hot springs plus a 200 room hotel facility.

229. The second phase, which is the subject of this proposal, will add villas and bungalows for high income tourists as well as an eco-restaurant for use by both hotel and villa visitors as well as day visitors. Facilities at the development are being designed based on the Daoist architectural tradition. The project proposal was submitted by the Shaanxi Louguanfudi Travel Development Company (LGFD). LGFD is a joint venture of the Shaanxi Tourism Group Corporation (51%) and Shaanxi Louguantai Experimental Forest Farm (49%). For this development the Tourism Group provides the financial capital and the Forest Farm provides the land.

b. Investment Outcome

230. The proposed investment is designed to: (i) improve leisure tourism services in the Louguantai area; (ii) promote the development of the tourism industry in the Project Area; (iii) stimulate the growth and development of related industries in the Project Area and Zhouzhi County; (iv) provide a multi-purpose tourism facility that appeals to various tourism groups at different levels of income; and (v) promote understanding of the Daoist culture and religion. Based on this hotsprings project in Louguantai, LGFD is committed to integrate the tourism resources of Louguantai National Forest Park, expand its attraction to a larger number of tourism groups, and construct a new Culture Tourism District that relies largely on the market provided by the metropolitan Xi’an area.

231. The Hot Springs development is a complementary attraction for the “Louguan Tai Experience” as firstly it will provide accommodation services for longer stay visits to the area. It provides its own specialized niche market (health tourism), and it provides an add-on service within the Phase II development by providing day access to the swimming facilities. A full one day ‘package’ can be offered which provides a wildlife-culture-recreation experience. Consultation with the Shaanxi Daoist Association indicated as well a potential linkage between the Hot Springs and the Daoist sites. The Association had discussed with the Shaanxi Forestry Bureau the potential to use the hot springs in Louguan to develop a bathing facility that would allow Daoists to bath and cleanse themselves before going to the Louguantai religious sites. This is an important part of the Daoist religion. 40 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

c. Project Activities

232. Phase II of the Hot Springs Development encompasses the construction of 18 multi-room villas of various sizes and villa rates for tourists –all geared to the high-end market, the construction of an eco-restaurant for both Hot Springs guests and day visitors and supporting infrastructure, including a parking lot. The construction period in their FSR is 2007-2008 but in the project costing and financial analysis, the Team has assumed 2008-2009 for construction with operation beginning in 2010.

233. The detailed activities are presented in Table 17 below.

Table 17: Hot Spring Development Project Costs

Activity Villa A: 8 villas, each are 310.29 sq. m. in size, total cost per villa – including fittings, furniture, electrical appliances, and utensils – of CNY 1,090,775 (USD 143,523) Villa B: 6 Villas, each are 308.25 sq. m., total cost per villa is CNY 1,095,083 (USD 144,090) Villa C: 4 villas, each are 379.06 sq. m., total cost per villa is CNY 1,195, 050 (USD 157,243) Eco-Restaurant Bathing Pool External Pipe Network Infrastructure – Boiler Room, Cooling and Heating, Air Conditioning, Power Supply, External Lighting, Communications, Security System Landscaping Within Site Roads Parking Lot of 12,000 sq. m. Vehicles Staff Training Other Fees Design – about 5% of Construction and Engineering Costs Supervision – about 2.0% of Construction and Engineering Costs Management Fee – about 3% of Construction and Engineering Costs Notes to Table 17:

d. Revenue Projections and Financial Analysis

234. The Hot Springs Feasibility Study provides detailed attendance, pricing and financial analysis for Phase II of the development to be partly financed by the Project. The Design team’s financial analysis used a discount rate of 12% as its benchmark FIRR, reflecting their commercial requirements. The construction period was assumed to be 2007-2008 and the operating period was assumed to be 15 years from 2009-2023. The PPTA Team altered these periods to 2008-2009 for construction and 2010-2035 for construction to be consistent with the Project.

235. The operating income is generated from the 18 villas, based on 70% occupancy in each year and different daily rates for the villas as follows: Villa A – CNY5,800 per day ($763); Villa B – CNY4,800 per day ($632); and Villa C – CNY3,800 per day ($500). The daily rates are based on the villa and not the number of people. There will be five bedrooms per villa, and the number of people staying over night will normally be 5-10, with a maximum of 12 overnight visitors. Therefore, when ten people are staying over night – two people per bedroom, the daily rate per visitor would be between CNY380-580. However, even if only two rent the villa for the night, the daily rate will be the same.

236. Additional revenues are generated from the eco-restaurant and from parking. Eco- restaurant revenues are generated from over-night visitors to the villas and hotel (constructed in phase one) and from day visitors for bathing (50% of visitors at CNY30 per day visitor) and sightseeing (20% of visitors at CNY20 per head). The cost of sales ratios employed by the Hot Springs Design team for lodging, the restaurant and parking are for the most part very consistent with the ratios identified in the independent research by the PPTA Team. The HS Design Team analysis assumed the same revenues and costs for every year of operation. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 41 Final Report Appendix 7

Table 18: Assumptions Used for Revenue Projections

Unit Occupancy Daily Price Capacity Item Rate Daily guests (CNY) Hot Spring Residential Villa-A 5800 8 70% 5 Villa-B 4800 6 70% 4 Villa-C 3800 4 70% 3 Catering Tourist guest 20 2000 20% 400 Bathing guest 30 600 50% 300 Parking Car 5 200 50% 100 Bus 10 100 50% 50

237. As the investment is building on the existing development the capital construction and investment is expected to be complete within a construction period of one year and that the occupancy and therefore revenue forecasts be achieved one year following. Based on these projections the total revenue per year is approximately CNY30 million ($4 million). The investment costs for the proposal are estimated at CNY65 million – see Table 19. The mix of costs differs from the other two enterprises with far greater investment into the equipment budget line to outfit the villas, pool and restaurant.

Table 19: Hot Springs Investment Costs (CNY ‘0,000’s)

Item 2008 2009 2010 2011 2012 A: Financial Costs Fixed Asset 5,525.9 0.0 0.0 0.0 Civil Works 3,202.0 Equipments 2,323.9 Intangible Asset 643.5 Total investment 6,477.9 B: Economic Costs Fixed Asset 4,184.9 0.0 0.0 0.0 Civil Works 2,954.8 Equipments 1,230.1 Intangible Asset 643.5 Total investment 5,016.9

238. The financial forecasts are presented in Table 20 which highlights the strong cash-flow forecast which results in a FIRR before tax of 13.7% and after tax of 10.9% both above the WACC however the after tax operation is lower than the commercial hurdle of 12%. The enterprise has accepted this rate of return however that will require the construction timetable to be fully met.

239. The incorporation of the revenue sharing agreement based on the Louguantai Forest Farm capital share of 49% of the percentage applied to the Qinling Botanic Garden. Based on a 8% NCF transfer will provide an annual transfer of $42,000. Including this in the post tax NCF reduced the FIRR from 10.9% to 10.4%.

Table 20: Hot Springs Financial Cash Flow Forecast

Item 2008 2009 2010 2011 2012 2013 2014 2015 Cash in 0 2,640 2,640 2,640 2,640 2,640 2,640 2,640 Revenue 0 2,794 2,794 2,794 2,794 2,794 2,794 2,794 Sales Tax(5.5%) 0 154 154 154 154 154 154 154 42 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

Residual Value Cash out 6,766 1,663 1,644 1,644 1,644 1,644 1,787 1,778 Investment 6,478 0 0 0 Operating cost 288 1,663 1,644 1,644 1,644 1,644 1,787 1,778 Net Cash Flow Before Income Tax -6,766 977 996 996 996 996 853 861 FIRR Before Income Tax 13.67% FNPV Before Income Tax at 10% 1,916 Income Tax 0 157 162 162 162 162 126 128 Net Cash Flow After Income Tax -6,766 820 834 834 834 834 727 734 FIRR After Income Tax 10.90% FNPV After Income Tax at 10% 450

240. The FIRR is however quite sensitive to changes in costs or incomes suggesting that the Project needs to be closely assessed in terms of the assumptions that are applied. Central to these are (i) the construction period and the need to avoid delays, (ii) the occupancy early in the project life, (iii) demand for the day visitation services.

Table 21: Hot Spring Financial Analysis Sensitivity

Sensitive Analysis Before Income Tax After Income Tax FIRR NPV FIRR NPV Operating Cost (10% up) 10.89% 460 8.67% -649 Operating Cost (20% up) 8.03% -997 6.34% -1,748 Operating Cost (30% up) 5.00% -2,453 3.83% -2,846

Revenue (10% down) 9.37% -317 7.44% -1,225 Revenue (20% down) 4.68% -2,551 3.57% -2,900 Revenue (30% down) -1.06% -4,784 -1.24% -4,575

241. The Economic analysis is however somewhat stronger with a EIRR of 23.33 % suggesting a very good investment. Economically the investment is relatively insensitive to changes in revenues and costs.

e. Implementation Arrangements

242. The subcomponent will be implemented by the existing Joint venture between LFF and Shaanxi Tourism Department. Through its 51% ownership of the JV, the Hot Springs proposal brings considerable tourism development and management experience of the Shaanxi Tourism Group Corporation. The Shaanxi Tourism Group Corporation STCG is the largest single tourism state- owned enterprise in Shaanxi21. In 2000, the Shaanxi Province Branch of the Bank of China signed a deal with the Group to finance CNY1.8 billion ($218 million) of the Group’s major tourism investments over the next five years through to 2005. This Group was founded in 1998 as a state owned company with a registered capital of CNY3 billion ($36.14 million).

243. The Group is an investment and capital management company authorized by the provincial government to engage in management and development of cultural and scenic tourism sites, travel services, star-class hotels, bus companies and other tourism products. In conducting these functions, the Group places an emphasis on servicing the tourism industry of Shaanxi Province – although the Group has as well invested in other provinces and cities such as Beijing.

244. The Group and its subsidiary companies have engaged in a variety of tourism services including dining, accommodation, travel agencies, transportation, entertainment, and the management

21 Information taken from: “Business Plan of Beijing Shaanxi Mansion Company Ltd. & Days Hotel & Suites Beijing & Regal Place Theatre Restaurant House”, February 1, 2005 (Available on the Internet). TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 43 Final Report Appendix 7 of tourist sites. In fact, the STCG operates, has developed and/or manages the facilities of some of China’s most famous historical sites, in particular the Terracotta Warriors site in suburbs of Xi’an, and its subsidiary companies include some of the most profitable tourism enterprises in the province. The SPG Tourism Bureau provides the Group with policy advice and guidance but there are no financial and staff relationships between the Bureau and the Group. The Group’s funds are raised from commercial markets, with the exception of some smaller subsides from the SPG for specific purposes.

245. As of 2005, the company employed more than 6,300 staff, 14 subsidiary companies, and had total assets valued at over CNY3.2 billion ($385.54 million). Company investments include the following: hotels -- Xi’an Hotel, Tang Cheng Hotel, Xi’an Oriental Hotel, Days Hotel & Suites (Beijing), and the Xi’an Hyatt Regency. (J/V project with a 35% interest); entertainment and dining -- Tang Dynasty Xi’an, Regal Palace Theatre Restaurant, and Chinese Cuisine House (Beijing); tourist sites and attractions -- Terracotta Warriors Museum, Hua Shan Mountain, Guan Shan Grassland, Hua Qing Palace, and the Fa Men Si Museum; and services -- travel services companies, tour bus company, and tourist souvenirs.

f. Benefits and Beneficiaries

246. A number of benefits are identified. The first beneficiary of this project is certainly the LGFD, which would achieve a significant profit through capitalizing on Louguantai’s tourism potential and Daoism culture resources.

247. The local community would be the second beneficiary. The Hotspring project itself would provide considerable employment opportunities for local people. The employment during construction is expected to total about 1,060 jobs or 530 per year. The operating employment generated after Phase II start-up is estimated at about 230 by the Design Team, while employment for all three phases combined would be in the range of 550-600 in the early years – with further growth as day visitation expands to approach 1,000 by the end of the projection period in 2035. And it would further promote related industries in the Project Area to develop, via many different industrial linkages, providing more opportunities to be employed and/or self-employed for local community residents in the project and target areas.

248. Both domestic and international tourists would also be able to benefit from this project. Apart from the traditional sightseeing tourism based on natural scenery and the Daoist culture, leisure and hospitality services would be offered to all kinds of high-end tourists who want a high quality leisure tourism experience and are prepared to pay for it. For middle class and low-end tourists, they would have more choices to relax, recreate and travel, especially for those from the metropolitan Xi’an area.

249. The Qinling Botanical Garden and Animal Rescue Center would also be beneficiaries. The successful operation of the Hotspring project in the commercial sense would produce a strong positive externality for the tourism businesses at the ex-situ Botanic Garden and the Louguantai Rescue Center. The latter two institutions, which have less business experience than the LGFD, would benefit not only from sharing tourist flows with the Hotspring project, but because the Hotsprings facilities are complementary to other two attractions.

250. Chinese Daoism Culture will benefit from repairing and/or rebuilding traditional Daoism temples and related construction and leisure activities that are part of this project. In addition, this project would also provide quite a good location and platform for all kinds of communication, education and related activity regarding the Daoist religion, study and culture at excellent facilities.

251. Related industries in the Project Area and the metropolitan Xi’an area would become the beneficiary. The anticipated rapid growth of the Hotspring project would offer considerable space and opportunity for the development of local related industries, such as transportation, retail, restaurant, and manufacturing of tourism souvenirs and handicrafts. Based on the above industrial linkage effect, more people would be involved in the development process of Louguantai natural tourism and Daoism culture resources.

252. As would be expected from the financial analysis, the economic analysis provided favorable economic results. The economic internal rate of return (EIRR) for the Hot Springs base case is 18.1%, which is well above the benchmark EIRRs of 10% and 12% used in the economic analysis. 44 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

g. Outstanding Issues

253. To the extent that the Hot Springs development is a commercial success some portion of its net income should be allocated to conservation in QBCDA. The Hot Springs will be an important beneficiary from the bioresources and biodiversity conservation in the Qinling. In particular, many of its visitors are likely to be high income Japanese tourists attracted to Louguantai for the hot springs, the Daoist culture and especially the Crested Ibis. Failure to protect the biodiversity and cultural resources of the PA and Qinling will negatively impact the financial performance of the Hot Springs over the longer term.

254. The Hot Springs Group will need to explore with the other ex-situ tourism facilities how best to contribute to the cooperative marketing of the “Louguan Tai Experience” in a manner that will benefit all of the proposed tourism facilities including the eco-lodges. The Shaanxi Tourism Group Corporation has much greater tourism marketing experience that the other facilities and therefore has much to contribute to the future marketing and commercial success of the Project’s tourism investments. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 45 Final Report Appendix 7

B. Detailed Description – Component 2: Improved livelihoods for the sustainable management and conservation of natural resources

255. A detailed QBCDA strategy and supporting conservation and Livelihoods Report was produced – see Supplementary Appendix 2.

256. The QBCDA investment program comprises two subcomponents being that target the QBCDA land area of approximately 40,000ha. The first subcomponent seeks to develop village livelihoods through forest based resources and small and medium enterprises from collective forest land estimated to be between 5,000 and 8,000ha. The second subcomponent seeks to improve the extent and quality of forest cover on the 32,000ha to 35,000 ha of State Forest Land managed by the Louguantai Forest Farm. The subcomponent structure is::

(i) Improved Village and Forest-based Livelihoods (a) Village Planning (b) Conservation Forestry Livelihoods (c) Small businesses to add value (d) Homestay Community Tourism (e) Infrastructure – Roads, water supply and energy

(ii) Demonstration of Biodiversity Conservation (a) Forestry management for biodiversity habitat (b) Endangered species management planning for 10 species based on field research data

1. Village and Forest-based Livelihoods

257. Policy reforms in 1998-99 reflected in the land conversion and forest conservation programs effectively terminated many of the livelihood opportunities of the communities living in the Qinling Mountains. These opportunities were founded on forestry, non-timber forest products (NTFPs) and agriculture. The policies aim to recreate a forested or treed landscape and precluded use leaving many people without direct sources of income and increasingly reliant on ‘handouts’ from the State as compensation for converting land. For many the only option is to resettle voluntarily with associated costs that are often beyond the means of poor rural households.

258. For many people living in the mountains, access to resources is limited. Unlike most other Provinces in China, Shaanxi did not allocate collective forest land to the communities. Furthermore, forest farms such as Louguantai Forest Farm are strictly policing the removal of products such as medical herbs from the area, further reducing traditional income generating activities.

259. Balancing the needs of the communities with the overriding objectives of forest restoration and biodiversity conservation is the central theme to this sub component. The current management policy of excluding the community from natural resources cannot be regarded as sustainable policy, or in the best interests of wider conservation interests. National and international experience shows that working with local communities and encouraging the equitable use of resources can result in major environmental and conservation benefits.

260. The objective of the sub component is the restoration of forest cover and natural forest habitats to support biodiversity conservation whilst enabling sustainable livelihoods to emerge.

261. The investment will result in both biological and livelihoods outcomes. These are:

(i) Biological  Habitat restoration to create a balanced forest structure based on the natural ecological systems and habitats of the project area. All age classes of tree are represented and in the medium / long term the forest will be allowed to revert to the natural process without human interventions (wild forest)  Explore the ecological consequences of past woodland management on habitats and to investigate the natural succession of trees and broader habitats;  Explore ecological effects of management for habitat improvement, including removal of inappropriate species and use various forest systems such as those of analog 46 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

forestry systems, silvicultural systems suitable for habitat restoration, low and middle forest systems for small timber production and conservation.  To understand and monitor the ecological processes and long-term dynamics of the forest system in the project area, the consequences of habitat restoration, the impacts of the various introduced silvicultural systems to the project area;  To replicate habitat restoration techniques and projects to the wider Qinling mountains based on lessons learnt.

(ii) Community Livelihood  To create community managed forest areas based on continuous cover silvicultural management systems to meet timber and firewood needs of (in situ) local people, ecologically balanced forest habitats created where all age classes of tree are represented;  To introduce the concept of Analog or ‘forest gardens’ to extend range of NTFPs available for use by community members (medical herbs etc);  To introduce small timber systems to meet local needs such as firewood, and for limited sale such as wood crafts, bean poles etc, for example, production based on coppice / coppice with standards systems will be explored.  To replicate community livelihood forest management approaches to the wider Qinling Mountains based on lessons learnt.

262. The subcomponent will target the Community Forest Land within the 16 QBCDA villages and private land converted under the Land Conversion Program (Grain for Green). The area to be managed totals 5,000ha.

263. Forest restoration is a long-term operation. Achieving the natural equilibrium within the forest where the natural processes sustain a multi level forest without human intervention will take many years to accomplish. The Project will set the foundations for recreating natural forest lost through intensive logging, agricultural activities and other anthropogenic influences and put in place a system which will be able to continue through sustained investment.

264. The success of the restoration process is dependent on the long term commitment of the Government of Shaanxi and its various agencies, most notably the Shaanxi Forestry Bureau, Louguantai Forest Farm and the 16 local communities. The creation and management of forests requires continued interventions especially in maintenance to ensure new planting survives and continues to grow. Abandonment of these operations at the end of the GEF funded component of the project will result in achieving very limited results towards the reconstruction of the forest habitats and therefore limited value from the GEF investment within the project area.

265. Support for capacity building within the implementing agencies and local communities to ensure that the forest management process is understood and developed during the project life and beyond will be an essential element of this sub component, as will a commitment of the ‘lead’ implementing agency to ensure that the capacity building process continues and that the ‘lessons learned’ are communicated to the wider forestry, conservation and local communities in order that the process can be replicated both in the Qinling Mountains and elsewhere.

266. It is proposed that the Implementing Agency be the proposed Biodiversity and Livelihoods division of QNBG (i.e., the existing Louguantai Forest Farm ). The Louguantai Forest Farm will be responsible for field and village level activities including working with SFD to provide scientific support and monitoring.

a. Village Development Planning:

267. The Village Forest sub component will integrate with the QBCDA strategy. Central to the strategy is village development planning and the community implementation of Village Development Plans (VDP). The village plans will identify community based forestry objectives with the development of livelihood activities and other social requirements. Under the VDP process22, there will be a social awareness and mobilisation process contracted to a NGO to develop the understanding of the

22 See Supplementary Appendix 2 for a detailed description of the VDP and the steps for implementation along with proforma planning worksheets TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 47 Final Report Appendix 7 purpose of the Project activities. This will be followed by a process of developing a village development [plan using the 12 planning facilitators trained in the first year of the Project by the conservation forestry expert and with support a the NGO training contracts. The Plan will be completed over a 3 to 4 planning session at the village level and will include village and resource mapping, goals and objective identification, and the preparation of a forest management plan. The forest management plan will be developed by the Louguantai Forest Farm staff who will develop a conservation and forest livelihood plan. The first stage of this process will be for the NGO’s and planning facilitators to create a village forest committee that will over time be strengthened into a village forest co-operative. The committee will represent those interested in the forest management activities and will use the planning processes described in Supplementary Appendix 2 to develop a long term forest management plan. Contracts are available to fill data gaps or create surveys of land boundaries. Additional funds are provided for participation costs and the plan production costs. These funds will be channeled through the PMO and the Louguantai Forest Farm division based on the agreement reached between the planning facilitators and the village.

268. There are three types of forests associated with Collective Forest Land – these are:

 Community Collective Forest areas belonging to the village;  Firewood collection areas – 5 – 10 mu / household  Private land converted to forest under the Grain for Green Land Conversion Program.

269. Each of the sixteen villages have areas of ‘Community Collective Forest’ however, to date, the Land Bureau has not issued a collective land certificate to confirm land ownership and certificates of ownership of community forests have not been awarded by the Zhouzhi County Forestry Bureau. This is the case for all villages within Shaanxi Province. The location of community forest are tentatively known by each village, but as they have no direct ownership for them and as villagers are not allowed to cut and make use of the timber, there is a disinterest in their future. Determining the areas of community forest and establishing official ownership is a precursor to the implementation of the QBCDA sub component. The SPG needs to clarify this before appraisal.

270. The community forest may be managed either through the community as a whole, or as a co-operative. Under the first method, benefits from the forest are shared by the community as profits and invested in village based public goods. However, benefits are controlled by the village committees and not all community members may benefit since there is no direct ownership / responsibility for the forest by individuals. The second option is to provide direct benefits to householders in the village communities. The community forest can be distributed through sub division and user rights given to households to maintain and receive individual benefit from the areas they individually manage. Under this system the individual householders would be required to form a “village community forest co- operative” under the “Rural Specialized Industry Co-operative Act of PRC and prepare a “Community Forest and Resource Management Plan” to be jointly implemented. The Project proposes to distribute responsibility from the community to individual households in the QBCDA project area.

271. In preparing the “Community Forest and Resource Management Plan” the following objectives will be included:

 The plans will link directly with the QBCDA strategy plan objectives and individual “Village Development Plans”.  Community forest management will support the overall aims of reconstruction of the natural forests habitats;  Silvicultural management systems adopted will be based on ‘continuous cover system’.  The management plan will include development opportunities for production and development of alternative forest related products and NTFPs such as medicinal herbs, forest mushrooms etc.

272. The VDP/forest planning process will be implemented in two stages. The first stage during years one and two will comprise of implementing the planning program within the village communities. The lessons learned from the villages will be used to update planning processes for future programs undertaken by the SFD. It is suggested that 1-2 villages be used to pilot procedures and approaches as part of the training of facilitators. 48 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

273. The VDP will be implemented in the following stages:Stage One – The village livelihoods plan that defines economic and social objectives and opportunities and will specify a program of social infrastructure needs and economic livelihood development options. One livelihood option will relate to the use of forest land and resources which will be developed through the forest resource management planning process. This process involves:

(i) Step 1 Area / location of community forest is determined between communities, Louguantai Forest Farm and County Forestry Bureau. During this process the area of community forest will be surveyed and permanently marked (concrete marker posts) – by Louguantai Forest Farm planning facilitators and community mapping. (ii) Step 2 On completion of surveys and agreement with parties the County Forestry Bureau grants (under the direction of SFD) a certificate of ownership to the village. (iii) Step 3 Village grants user rights contract to individual households (iv) Step 4 Individual households jointly form a “village community forest co-operative” under the “Rural Specialized Industry Co-operative Act of PRC. (v) Step 5 The village community forest co-operative prepare “community forest and resource management plan” with technical assistance provided by GEF (vi) Step 6 Each member of the co-operative implements the management plan with technical assistance provided by Louguantai Forest Farm

274. The area of community forest allocated to each household will vary depending on the amount available and the level of interest from households. It is probable that multiple objectives will be defined to meet householder needs (firewood, small timber, herbs etc), silvicultural management systems may need to be integrated to meet these requirements (for example an Analog System with Coppice with standards23), the optimum size of forest plot which can realistically be managed per household, whilst meeting household needs and providing an income will need to be initially defined during the development of the management plan. Project development (management plans and implementation) will be undertaken jointly by experts sourced through the SFDF using a competitive tender contract, this contract should be executed over a five year period, and results of the project disseminated to the wider national and international audience as a contract requirement.

275. Central to the implementation of the community forest projects will be a training program. This will not only focus on members of the community, but also on building capacity within the Forestry sector to implement the program to the wider area. The training programs delivered by SFB and LFF will center on the following areas:

 Legal framework for community forests (responsibilities of County Forestry Bureau, Forest Farm, Community, individuals);  Developing community forest and resource management plans, forest management, identifying and developing potential NTFPs, wildlife conservation and management;  Household economics and developing forest based enterprises.

276. The Project will support:

 Training of planners (12 people for 30 days)  Field surveys and data collection  Species and ecology research -  Survey of forest collective land  Printing of plans –  Planning process costs

b. Collective Forest Land rehabilitation

277. Participating forest co-operatives and committees will have access to funding through the PMO and Louguantai Forest Farm division for the implementation of agreed Village Forest Resource Management plans. The funding would be approved based on the Forest Resource Management plan being completed and ratified by the (i) the Forest Users Cooperative, (ii) the SFD/SQNBG as represented by Louguantai Forest Farm, and (iii) the PMO. Additional funds beyond the life of the Project will be provided through the revenue sharing from the tourism enterprises within QNBG.

23 See Supplementary Appendix 2 for a detailed description TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 49 Final Report Appendix 7

278. Funds will be used to demarcate boundaries, develop nurseries, and training in forest resource management. The level of investment is relatively small once boundaries are demarcated and nurseries seedlings are established s the remainder is mostly local labor that will be remunerated through the Project as identified within the Forest Resource Management Plan. The remuneration is provided as an incentive to participate and in recognition of the limited livelihoods beneficiaries currently have. The payments during the project and the QNBG revenue transfer will provide short to medium term income sources until forest revenues are generated.

279. No forest models are provided and the PPTA notes that the integrity and value of the program will be determined by the process of planning and the extent that programs are defined for the needs of the local environment, social context and the current land use cover. This represents a major shift in thinking for forestry programs which have in the past relied on centrally defined planting models that suit industrial forestry but fail to recognize the needs and potential for mixed forest systems that fulfill social needs.

280. The Project costing is based on data provided by the Provincial Forestry Design and Survey Institute of SFD to provide a budget figure for the program and is only indicative of the likely costs. The costing includes planting costs (CNY 5,875/ha) while maintenance costs of CNY 800/ha will be provided through by both the beneficiary and the revenue transfer mechanism.. The payment for planting costs is a direct payment to the farmer for his labor and represents an incremental increase in income. The break out of the cost is:

 Land preparation 50 pdays  Transportation of tree and temporary planting 15 pdays  Planting 15 pdays  Replacement planting 5 pdays  Annual establishment and maintenance 15 pdays  Total labor per ha is 100 days per ha @ CNY30 per day for a total cost of CNY3,000/ha  Pest controls CNY75 per ha  Seedlings (i) 3,330 conifer @ CNY0.5 each, (ii) broadleaf 2,250 @ CNY0.4 each, (iii) shrubs 5,000 @ CNY0.05 each.

c. Sloping Agricultural Land Technologies (SALT) and Conservation Agriculture

281. The Government Land Conversion Program is well advanced in the QBCDA project area, with approximately 70 – 80 % of the agricultural land located on slopes over 25 degrees already converted out of agriculture. Most land conversion took place between 1999 and 2003. Under the scheme, commercial trees have been planted however these will not provide income for a number of years. The most common trees / shrubs planted are Walnut (Juglans spp) Sweet Chestnut (Castanea spp), Chinese Toon (Toona sinensis) and Chinese Prickly Ash / (Zanthoxylum).

282. The land is classed as ‘ecological forest’, compensation is paid for a period of eight years. The trees cannot be removed after this period. User right certificates are given to owners who have converted land for 70 years. Farmers converting to ‘ecological forest’ are paid additional compensation payments for their ecological contribution.

283. With the removal of agricultural land, many householders have seen their incomes drop considerably. Many households are unable to grow enough for their own needs. In response some households rent additional land however many can not afford this option. Animal rearing has declined reducing protein intakes.

284. Increasing diversity of crops is one objective of the forest rehabilitation program (see above). Households currently depend on one or two tree based products often grown on the converted land, and therefore subject to price fluctuations and variations in yearly harvest yields. Diversifying the range of products and focusing on production of higher value crops with the possibility of adding value by simple processing procedures (drying medical herbs, producing essential oils ) will provide livelihood benefits and enable appropriate land use practices to be adopted. 50 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

285. The second objective of the sub component is to examine systems of production which compliment the crops currently produced on land subject to the land conversion policy and to develop more intensive systems of production which contribute to the aims of reducing land erosion and soil degradation, while providing productive outputs for farmers

286. Under existing regulations, once land has been converted it is not possible to re-cultivate the land unless it complies with the agreement. The structure of the agreement precludes systems such as under-planting with high value shrubby crops on existing converted land.

287. The scope of the sub component is small at between 100 – 200 ha being available for trial and demonstrations however the opportunity to develop these systems for future replication is seen as an important contribution to developing agricultural systems on degraded land.

288. The Project will:

 Select four pilot villages with steep land that is not yet converted  Work with Village Implementation groups and Farmers to establish 4 SALT trials on existing farmer plots within each of the villages  The plots will be used as both demonstration plots and training plots for other land users  The Project will provide funds for the trials including a payment for the farmer’s time. In total there will be 16 plots of 0.5 ha to cover planting costs and site works and payment to the farmer for demonstration inputs based on 150 days per year at CNY50 per day totaling CNY7,500 per year (CNY30,000 per plot).  LFF staff will trained in SALT technologies along with farmer training costing CNY50,000 per plot.

d. Small Enterprise and Business Development– (Medicinal Herbs and Essential Oil Production)

289. The Project will support QBCDA communities to develop appropriate technology small businesses especially those linked for forest and forest land uses. Support will be provided for planning, business development costs and grants for establishment. The following section describes two possible enterprises that are considered indicative of the type of business that may develop on demand through the planning process.

290. The development of a sustainable management production system for medicinal herbs and essential oil producing plants together with the realization of their commercial potential through locally owned and operated micro-enterprises will serve to engage local communities in the QBCDA conservation program. The production of such plants and then processing these for high value products is fully consistent with the concept of analog or conservation forestry described above.

291. The project would support:

 On-site management including zoning of key areas and detailed socio-economic and biological surveys to assess the status of medicinal and essential oil producing plant species availability, their distribution, use, status and volumes harvested;  Identify and implement appropriate management options including preparation of guidelines for sustainable harvesting of medicinal and essential oil plants and medicinal and essential oil plant seed;  Monitoring and evaluation to assess impact of harvesting guidelines and management interventions;  Initiate pilot, farmer-based cultivation trials for selected threatened and high value species, focusing on community forest Analog forestry and sloping land agricultural technology approaches (SALT); The Project will provide grants for producing oil crops and will provide grant funds for up to 10 growers per community, i.e.: 160 in total. The grants will be set at CNY3,000 per mu with each producer growing 1 mu for a total cost of CNY480,000. The purpose of the grants will be to enrich new forest planting with productive medical and oil producing species as a future ‘wild’ resource;  Dissemination for GAP (Good Agriculture Production) standard for selected species cultivation by training local community. The training will involve 3 days training over TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 51 Final Report Appendix 7

three training inputs that is 9 training days per community or 151 training days in total each year for two years. The training will be completed by a contracted NGO and linked to the Social mobilization and awareness raising program for a budgeted cost of CNY500,000;  Initiate community based pilot activities for essential oil extraction and refining. Develop methods of adding value to products such as extraction of essential oils and processing commodities (such as soap and creams) for direct sale. The Project will provide business development grants of CNY300,000 per start up for oil production. A total of 15 start ups are budgeted for.  Provide support for ex situ based activities with regard to cultivation and conservation of threatened medicinal and essential oil producing plant species through the Qinling Botanic Garden division;  Public education and awareness raising activities using an NGO – the PPTa suggests that this also be linked to the VDP social mobilization program to avoid too many different agencies operating in the Project Area .

292. Initial technical expertise of the medical herb component should be provided through an established Medical Herb Institution such as IMPLAD who have the available capacity, knowledge and experience to establish the project based on their extensive past experience. The QBG will maintain the database of medicinal and essential oil producing plants within the project area and Qinling Mountains as a whole by drawing together information from oral, traditional, modern literature and herbarium collections. This database will provide systematic documentation of the threat, rarity and demand of each species. A contract for CNY550,000 is budgeted for training requirements for staff working the Project Area and throughout the wider QM will include:

 Identification of essential oil and medical herb plants and their potential markets;  Medical Plant Conservation Areas (MCPAs) identification and sustainable management;  Growing and harvesting systems for essential oil and medical herb plants;  “Train the Trainer” programs.

293. At the community level, the Village Implementation Group/Village Committee established within the QBCDA Strategy will undertake project planning. Each village group will be responsible for collecting local data pertaining to wild collection of herbs, identification of potential Medical Plant Conservation Areas (MPCAs). The identification of prospective farmers / available land will be undertaken and management of community plant nurseries and demonstration areas. The Village Implementation Group/Village Committee will play a major role in the essential oil component of the project by establishing, with project assistance, a co-operative type system for the distillation of the raw materials to essential oil. . A research contract will be awarded competitively for the purposes of surveying the Project Area for plants with oil or medicinal properties. The contract will identify target species and assess the extent of wild populations and provide recommendations on the sustainability of potential collection of plant materials or the potential for production from within the Conservation forestry program. The cost of the contract/contracts is budgeted at CNY 5,000,000 spread over the first three years.

294. At community level, training will be provided through the NGO contract and will include the following areas:

 Identification of essential oil and medical herb plants and their potential markets;  Medical Plant Conservation Areas (MPCAs) identification and sustainable management;  Growing and harvesting systems for essential oil and medical herb plants;  Processing of essential oils;  Small business management and negotiation skills;  “Train the Trainer” programs.

295. The project will support studies to assess the current levels of usage of medicinal plants within the project area and will include market and field surveys to assess the pressures on the wild plant populations and habitats at selected sites and better understand the local communities and national dependence on medicinal and essential oil producing plants. This information will provide input to project and national databases and will set the priority for QBCDA conservation activities. The project will also support studies to identify methods of propagation and cultivation practices for a 52 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7 number of the threatened and economically higher value species. Market study contracts totaling CNY 500,000 are budgeted

296. Essential oils are not currently produced in the project area. Studies will be undertaken to assess the availability and variety of species suitable for essential oil production. Plant material for the production of oils will be collected from wild populations and through farm production on ‘grain to green’ land.

297. The following systems for the production of ‘raw’ medical herbs are proposed to be tested and developed within the QBCDA zone. Four production systems will developed and tried. These are:

 Sustainable “Wild” Harvesting  Conservation Forestry / Forest Enrichment  Analog Forestry System  SALT

298. Sustainable “Wild” Harvesting – the focus of this system will be in developing Medical Plan Conservation Areas within existing plant collection areas (forest and open land). The main areas commonly used for the collection of wild herbs will be identified and, in conjunction with the community, a sustainable harvesting system will be developed whereby the herbs are able to naturally regenerate.

299. Conservation Forestry / Forest Enrichment – conservation forestry to restore habitats is a primary goal of the QBCDA strategy. During the implementation of this forest restoration work attention will be paid to the enrichment of both woody and herbaceous species of medical herbs to be used as future collection areas under a Medical Plant Conservation Area system.

300. Because of the national regulations governing the production and refinement of medicinal herbs, opportunities for processing on site are limited. However, basic processing is permissible in some circumstances such as drying and grinding. This provides some limited added value to the crop for the collector / farmer. The farm producers will be assisted with technical support to aid with the allowable processing of herb crops.

301. The links between processor and farm producer / collector in the medical herb industry are very close, with the farm producer / collector selling the raw and / or dried herbs directly to the processing company. Producers / collectors can benefit from attaining increased value of the herb material sold to the company based on the larger amount sold and added value such as basic drying and grinding of the herbs. Through the village groups, the farmers / collectors will be organized into producer groups or associations. This will enable the producer group to negotiate a higher value for the herbs, thereby benefiting each member. Furthermore, farmers / collectors will be provided with training to enable them to prepare the herb materials to a high quality for the producers (drying, grinding etc.) thereby giving added value.

302. Currently no essential oil processing is undertaken in the area. The processing of essential oils uses ‘low technology’ distillation / extraction units which are available in China and can be installed easily. The number of extraction units is dependent on the type and volume of oils to be produced and the volume of the raw resource for treatment. It is unlikely that the equipment can be justified by one farmer alone, therefore, the number of units required and their mode of operation will be determined at the project planning stage through the Village Implementation Group/Village Committee. On the job training will be provided by the equipment supplier at the time of purchase. The SME grant program will be implemented by the Louguantai Forest Farm division based on the Village development plans produced and approved.

e. Homestay Tourism

303. The Qinling Mountains is already developing a quite large home-stay industry at e.g. Taibaishan. Jiufeng Township in Zhouzhi County is promoting home-stay tourism facilities in three villages in the PA: Gengxi and Yongfeng in ex-situ Zone D (East) and Gengyu, which is the only Jiufeng administrative village in the QBCDA zone of the PA. Gengyu already has about 18 home-stay operations and has established a number of larger tourism resort and other visitor facilities for both the general tourist and institutional markets. Some of these only serve government agency markets. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 53 Final Report Appendix 7

304. Under these programs the Township supports the training of home-stay operators through training provided by township staff, as well as in some cases visits to existing successful home-stay operations in other parts of the province. The Township as well is providing subsidies that cover one- half of the capital cost of biogas installation estimated at between CNY3,000-4,000 per biogas unit in an attempt to limit environment impact of fuel wood collection.

305. The project will develop home-stay operations in the Project Area with a focus on tourism and business training completed as a follow on to the VDP process. Each village will also have opportunity to access funds for essential social infrastructure such as alternative energy, water supply and sanitation/environmental protection services. Phased growth in the home-stay sector should be encouraged to protect the investments and incomes of existing home-stay facilities.

306. Project support will be limited to 10 operations throughout the QBCDA zone during the Project. It is proposed that the home-stay accommodation investment be limited during the Project implementation period to Jixian and Louguan townships. The Project will not adopt the Jiufeng home- stay model which is based on a high volume, low value tourism strategy. Rather, the Project will develop: (i) the home-stay accommodation facilities that are village rather than family based, (ii) involve higher capital costs and a higher value tourism product compared with the Jiufeng home-stay operations, (iii) village-based home-stay type accommodation operations be tightly regulated in terms of both number of facilities and quality, and (iv) therefore these QBCDA facilities position themselves strategically between the smaller home-stay facilities appropriate to the ex-situ and fringe areas of the PA and the very high value and high priced eco-lodges proposed for the QBCDA are see below.

307. Community based ecotourism home-stays for medium to high value clients will be developed to support the growing demand for overnight accommodation in wild or natural environments. It is proposed to differentiate these from existing home stays by providing a slightly higher quality of service and accommodation. A total of 10 - 4 room home stays are include in the project. The forecast financial rates of return indicate that an FIRR of 19.1% for a 4 room home stay that will employ 8 to 10 people on a full time basis. The financial model assumes a 40% occupancy increasing to 50% after 10 years and stabilizing at that level with an average tariff per night of CNY150.

Table 22: Financial Projections for Four Room Homestay

Year 2009 2010 2011 2012 2013 2014 2015 P Year 0 1 2 3 4 5 6 Home Stay Compare With Below CNY Home Stay Tourism -- 360 day season 360 Occupancy Rate Starts at 0.50, Four Rooms, 0.4 0.4 0.41 0.42 0.43 0.44 0.45 Potential Visitor Nights Per Year 8 2,880 2,880 2,880 2,880 2,880 2,880 Actual Visitor Nights Per Year 1,152 1,181 1,210 1,238 1,267 1,296 Revenue Per Visitor Starts at RMB 150 (Ex. Sales Tax) 150 150 150 150 150 150 160 Gross Revenues 172,800 177,120 181,440 185,760 190,080 207,360 Cost of Sales @ 45% of Revenue 0.45 77,760 79,704 81,648 83,592 85,536 93,312 Net Income Before Overhead 95,040 97,416 99,792 102,168 104,544 114,048 Overheads Before PIT 14% of Total Capital 0.14 46,005 46,005 46,005 46,005 46,005 46,005 Net Income After Overheads 49,035 51,411 53,787 56,163 58,539 68,043 Total Capital Cost CNY 328,608 Net Cash Flow -328,608 49,035 51,411 53,787 56,163 58,539 68,043 IRR Based on Total Capital 19.094% NPV at 10% 304,452

308. The economic rate of return for a single home stay is 23.4%. 54 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

f. In-situ infrastructure

i. Road and Mountain Pathway Improvements

309. The project will provide road and mountain path-way improvements for improving access of QBCDA villages and households to markets, jobs and basic services – while limiting access for mass tourism and recreation and thus protecting QBCDA bioresources and fragile eco-systems.

310. The original FS on the QBG dated January 2006 included a major program of QBCDA road construction and improvements, with a total length of about 170 km. and a total capital budget of CNY189 million ($24.9 million). The proposed road building program included 88.45 km of main roads plus three smaller additional roads (1.5 m wide), which were not described in the FS.

311. Road access was planned to improve the central spine road running through the QBG Zone A site from Tianyukou (site entrance) to Jinniuping. The reconstruction of the existing core road which runs down the central valley would have widened this road to 6.5 m from the current width of about 2- 33 m. This reconstruction would have necessitated major earthworks. The construction of major QBCDA roads was justified in part by the proposed investment in an QBCDA cableway, which has since been dropped from the investment program because of its negative biodiversity and other environmental and social impacts.

312. The QBG revised its road construction proposals to include improvements to the central valley road from Tianyuku to Jinniuping, and improvements to mountain paths. The canyon road covers a total length of 17.5 km at a total cost of CNY27.9 million, while the mountain path improvements would involve a total length of 109 km at a total cost of CNY21.9 million. The seven mountain paths would have the following routes: Jinniuping – Shouyangshan – 13.2 km; Jinniuping – Dongniandao – 15.5 km; Jinniuping – Yeniuhe – 20.0 km; Xiagukou – Shangyangpo – 11.0; Tielucha – Liangding – 14.2 km; Guanyinyan – Laojigou – 17.0 km; and Liziping – Yeyanghe – 18.5 km. This total road building budget, including recurrent costs for maintenance during the implementation period, therefore is CNY58.3 million ($7.7 million), covering a total length of 127 km. When the QBG provided its information to the PPTA Team in March 2007, the QBG Team stressed that the canyon road would follow the current route, would have its current length and width, and thus would involve minimal earthwork and related construction and environmental effects. However, the capital cost for this road was the same in March 2007 submission as in the January 2006 FS and was reduced by the PPTA in the final costing however there remain questions as to the rationale for the road investment given the relocation of the Panda Breeding center out of the QBCDA during Loan Fact Finding. The design, cost and potential environmental impacts of this road need to be fully reviewed and if the proposed cost is correct the road program will require a full EIA moving the Project to Environmental Category A.

313. The design, location and costs of the proposed mountain path improvements need to be reviewed with reference to the final QBCDA strategy as well as the village development planning to be conducted. The VDP will define the need and demand for pathway improvements which will be available for all villages in the QBCDA area. The road contracts will be awarded by the Shaanxi Qinling Biodiversity Promotions Ltd and will be funded from loan funds.

314. The Project proposal is currently for a road improvement program totaling CNY 34 million.

a. Social Infrastructure

315. Social infrastructure for residents in the QBCDA zone in terms of water supplies and alternative energy – biogas grants would provide a significant benefit to the poorest households in the Project Area and reduce their demand for firewood. The extent of social infrastructure demanded will be identified during the VDP process and once a plan is completed the village can apply for an infrastructure grant from the Louguantai Forest Farm division in the QNBG through the PMO. The Project is budgeting CNY12.4 million for these grants.

316. The QBCDA community have very little infrastructure and field work indicated that essential infrastructure would provide a significant benefit to households and especially to women and children. Apart from access infrastructure the most requested types of infrastructure were (i) energy supplies and (ii) water supplies. The Project will identify these needs through the Village Development Planning program above. Once plans are complete villages may apply to the PMO through the proposed new TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 55 Final Report Appendix 7 institution to obtain infrastructure grants. The PMO will ensure that relevant authorities in Zhouzhi approve the designs and planned inputs –no costs are recommended for the County Administration for this approval. The cost per village is budgeted at CNY500,000 for energy and CNY500,000 for water supplies.

2. Demonstration of Conservation of Biodiversity

a. LFF Habitat Improvement Program

317. State Forest Land vested in Louguantai Forest Farm represents eighty percent of the forest area in the Project Area. Since the introduction of the ‘logging ban’ large sections of the ‘cut areas’ have been either replanted or subject to ‘forest closure’ with variable results. Each year a ‘plan of operations’ is provided to the forest farm by the Provincial Forest Planning and Design institute in Xi’an. The plan details the land to be planted only and there is no agreed long term management program. As such the approach seeks forest coverage improvement and has little or no impact on the forest quality attributes necessary to support conservation, ecological or habitat objectives Consequently there are no long-term management plans and actions to reconstruct the forest structure through continuous management and interventions are neither planned nor implemented.

318. Since the introduction of the ‘logging ban’ there has been a complete moratorium on felling of trees. For example, in other areas of the Qinling, the WWF are endeavoring to reconstruct bamboo forest under the dense canopy of plantation larch species. The limitations imposed by the ‘logging ban’ seriously undermine conservation forestry activities and WWF is limited to silviculture pruning but not extraction. Similar limitations will exist regarding the introduction of forest conservation schemes to the QBCDA area, therefore, a prerequisite of implementing the Project is approval that the “no felling” restriction be either lifter or put aside for the Project Area. The SPG has confirmed that these restrictions will not apply.

319. The Project will provide the Louguantai Forest Farm Division with support to complete a Forest Management Master Plan, a plan which focuses on forest restoration and biodiversity management in the QBCDA area will be developed during the first year of the program. The plan will also address possible current and future tourism opportunities issues relating to activities based on the future ecolodge development and control of activities undertaken by the existing ‘resorts’ already present in the periphery of the area.

320. The plan will provide a detailed work program for the first five years and the outline work program for the years six to twenty. A total of six supporting ecological research grants will be financed along with Technical assistance for conservation and restorative forestry. The Project will provide funds for planning CNY70,000, and CNY2900 per ha for 2,000 ha of forest and habitat restoration programs. Labor for these programs will be supplied by Louguantai Forest Farm Division staff and local residents only.

321. Forest restoration activities will be centered on the adoption of silvicultural systems which are based on continuous cover systems. These enable a forest of mixed age classes to be developed and favor development of a balanced forest structure which closely resembles the original natural structure. Where required, additional planting can supplement natural regeneration. A number of systems are available which can be adapted and tried. The Project will support the Louguantai Forest Farm Division to grow and plant seedlings. Seedlings are budgeted at CNY8 and a total of 1,200 seedlings per ha 2.4 million are budgeted. Louguantai Forest Farm will contract local residents to develop community nurseries.

322. Training will be undertaken with the Forest Farm staff, Zhouzhi County Forestry Bureau and Shaanxi Forestry Bureau. The training program will be ongoing and will be undertaken in conjunction with both the development of the Forest Management Plan and its implementation. The training will provide foresters with an understanding of natural forest reconstruction and its links both to nature conservation and livelihood development. One objective is to change attitudes from the current “no interventions and policing” as a means of forest conservation towards a more holistic approach to conservation based on setting objectives and developing management interventions to achieve them.

323. The monitoring program will examine the impacts of the forest restoration process on forest eco-systems over a long time scale. Monitoring plots will be established both in the existing ‘old 56 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7 growth’ forests in order that comparisons can be studied and techniques further developed to emulate the natural forest eco-systems. Monitoring costs are included in Component monitoring costs.

b. Endangered Species Recovery Management

324. Conservation in the Qinling has been greatly influence by past programs with encouraging success amongst those nature reserves that have been strengthened with wide spread adoption of various collaborative management models and increased protection and science. However the current reserve system is spread across many institutions and administrations and as such each is managed independently of each other and of the surrounding forest land. Cooperation across these management units is critical for endangered species management.

325. The key consideration in recovery planning is participation of stakeholders. Successful implementation of recovery plans depends on cooperation of a range of partners, some of which might be partially responsible for declines of target species populations. Recovery plans seek to remove threats to wildlife and habitats, and this can only be achieved by cooperative effort among all parties that contribute to the threat. A preliminary list of stakeholders in QM recovery planning includes:

 all Qinling nature reserves;  QM and its client, SRDC;  national and international NGOs;  communities within and adjacent to the six focal nature reserves, including: (a) villagers that exploit wildlife for household or market use (b) farmers that use agricultural chemicals that threaten wildlife and habitats, and (c) fishermen whose livelihoods depends on fish stocks in and around NRs  other provincial agencies including: (a) Shaanxi Environmental Protection Department (SEPD) (b) Shaanxi Water Resources Department (SWRD) (c) Shaanxi Tourism Department (STD)  county, city, prefecture governments and agencies at these levels; and  academic institutions including universities and research institutes.

326. Four to five recovery plans will be drafted by QM personnel in cooperation with the above list of stakeholders (and any additions to the list). The steps in drafting plans are shown in Figure 1. Globally threatened species would be grouped in two categories to be addressed by recovery on the QM project area: (i) those species that are already the focus of recovery planning; and (ii) species not yet addressed by recovery planning. Plans for the former group would be drafted with the objective of ultimately appending them to the national or international recovery plans already in implementation or preparation. Drafting would be carried out in consultation with the agencies responsible for implementing any existing plans. Plans for the latter group (those species not yet addressed by recovery plans) will be drafted as stand-alone documents.

327. Recovery plans that could be used as templates for the QM Project were approved and implemented by USFWS (see http://ecos.fws.gov/tess_public/). From the list of 1143 USFWS recovery plans, we selected those that are the closest taxonomic and ecological matches for globally threatened species recorded on the QM Project Area (Appendix 3). The USFWS model plans were reviewed in detail and the formats were either followed or adapted as needed to conditions in the Project Area and Qinling range. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 57 Final Report Appendix 7

Figure 1: Steps in Development of QM Recovery Plans

Select Species Draft Implement From List of Not in New Recovery New Recovery 37 Threatened Recovery Plan Plans Plans Species Update list of Select Species Globally for Crested Ibis: Threatened Recovery Release, Species Species Planning Release Already Integrate in Activities Recovery Plans Giant Panda: Census, Monitoring, Reporting

328. Where data is not available or unknown but considered critical research contracts will be awarded by the PMO and financed by GEF. A total of 6 grants are included in the Project design. The planning process is supported by GEF such it can be used both as a training program and also used to demonstrate how future species management can be implemented. A total of CNY250,000 is budgeted for project years 2 to 5.

329. Recovery plans drafted and approved by QM and stakeholders would be submitted for approval by the provincial and national wildlife conservation authority (SFD and SFA) and, if required, by the provincial and national biodiversity conservation authorities (Shaanxi Environmental Protection Department or SEPD and State Environmental Protection Administration or SEPA). Recovery plans will often need approval by additional sector authorities such as water, agriculture, and transport, because these agencies will be responsible for some actions to be undertaken during implementation of the plans. Examples include changes in water allocations, farm practices, or road designs.

330. Recovery plans would be implemented by a range of stakeholders under the leadership of the national and provincial wildlife conservation authorities (SFA and SFD, respectively). SFD is also the wetland conservation authority in Shaanxi Province, thus there is a beneficial overlap of institutional responsibility for conservation of wetland ecosystems and wildlife as related to Crested Ibis foraging habitat. Recovery planning is intended to achieve one of two objectives:

1. “delisting” (removal of the target species from the endangered species list); or 2. “downlisting” (progressively lowering the level of threat from, for example, endangered to threatened).

331. China maintains an endangered species` list in its Red Data Books and uses IUCN criteria to evaluate threats and assign status. China also maintains lists of nationally and provincially protected species. IUCN World Conservation Union maintains an internationally recognized Red List of globally threatened species. While China’s national and provincial lists are based to some extent on population size and trend, other factors are involved (such as commercial harvest). The IUCN Red List, in contrast, is based on global population numbers, trends, and probabilities of extinction. The Red List is therefore well suited to the concepts of delisting and downlisting used in the USFWS recovery plans.

332. A species population is considered “endangered” by IUCN if it has declined by more than 50% in the last 10 years, is comprised of less than 2,500 individuals, and has more than a 20% probability of extinction in the coming 10 years. Downlisting from endangered to “vulnerable’ would be justified if the population could be shown to have declined by 20-50% over the most recent 20 years, was comprised of 2,500-10,000 individuals, and had a 10-20% chance of extinction in the coming 100 years. Delisting from “endangered” to “lower risk” (not globally threatened) would be justified if the population could be shown to have declined by less than 20% over the most recent 20 years, was comprised of over 10,000 individuals, and had less than 20% probability of extinction in the coming 100 years.

333. Objectives for species targeted for recovery planning in the QM could be delisting or downlisting by IUCN. If this objective were achieved, the target species might continue to receive national or provincial protection in China. An example of such a situation is seen in the global 58 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7 recovery of the European Otter population. The species was downlisted by IUCN’s Red List from Vulnerable to Near Threatened because of a sustained increase in the global population, yet the Class II national protection in China remains unchanged.

334. To the extent that the global population of any target species occurs outside the Project Area, the ability of QM programs to contribute to population recovery on a global scale will be affected. For example, the global population of Giant Panda is estimated at around 1,600 distributed over three provinces (Sichuan, Gansu, and Shaanxi) but not in the Project Area (Figure 3). A recovery program at the Project Area would affect that portion of the population in the Project Area (Figure 3) but could only have a global impact through linkage with other populations in neighboring provinces (Sichuan and Gansu).

C. Integration of QBCDA with Other Project Components

335. The proposed QBCDA Program will integrate with the following Project components:

(i) Animal rescue centre: The animal rescue centre will seek to reintroduce endangered species into the QBCDA zone albeit in the medium to long term. The community forest program seeks to build potential habitats for these reintroductions. In the short term controlled release programs will require habitat enhancement programs for which the QBG nursery will be used. (ii) Shaanxi QM Botanic Garden will provide initial monitoring services on which a baseline dataset will be created. In addition they will provide botanic scientific inputs and ecological science support for the vegetation and habitat restoration programs (iii) Shaanxi Forest Bureau – Conservation Forest / Louguantai State Forest Park will provide technical, silvicultural and nursery support programs as well as village development planning (VDP) support

336. The following exhibit illustrates the important linkages between the two components. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 59 Final Report Appendix 7

Figure 2: Linkages between the QBCDA and Ex-Situ Zones

Zones Stakeholder Planning IMPLEMENTATION

Project Area Project Area Annual Work Plans Reporting Master Plan Enterprise and/or Lessons Learned, Replication and (tourism, Management Mainstreaming Infrastructure, Institutional Strengthening – Committee Project and Beneficiary Monitoring and Evaluation Socio-economic) Proposed TA Grant

Village Plans Off-Farm Work Local Communities Training, Employment, Infrstructure (14) Small Business Development, Tourism Service Provision

Ex -Situ Hot Springs JV Co Site Plan Zone Upgrade Facilities Upgrade Science Animal Rescue Site Plan Centre

Plants Exclosure Habitat Development Controlled Release Program

Plant Nurseries Garden Collections Botanic Site Plan Garden Science

FUTURE REINTRODUCTIONS

Plants Pilot Habitat and Ecosystem Restoration Project Area Biodiversity Enterprise and/or Conservation Management Plan Committee TOURISM REVENUES

CNY CNY

ECO FUND OPTIONS Lessons

In Plant Materials SITU ZONE Appropriate Agriculture Technologies (SALT) Land HABITAT AND ECOSYSTEM RESTORATION

Village Local Communities Land Conversion Plans Land (grain for green, re-vegetation, tree crops)

IN SITU PLAN Community based small business development – Tourism, Essential Oils, Medicinal Plants, etc 60 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

B. Detailed Description – Component III: Institutional Strengthening for Conservation of Biodiversity

337. The Project will support three subcomponents in Component III. These include:

 Project Management and administration  Institutional Strengthening Programs  Conservation Replication

338. The outcome of Component III will be effective Project Management and implementation of the investment program using effective institutional arrangements that support the management strategy for the Project Area, and the dissemination and extension of lessons learned from the Project area through other QM programs.

1. Project Management Arrangements

339. The SPG will form a Coordination Commission for the Project under the chairmanship of the Governor of Shaanxi Provincial Government. The Committee will have vice chairs from each of the agencies providing counterpart funds and a general membership of representatives from (i) PDRC, (ii) two from SFB, (iii) Vice mayor of Xian Municipality, (iv) Director of Planning in Finance Department, (v) SFA, and (vi) CAAS. The commission will be supported by its own office headed by SFB with vice chairs from PDRC and SFB and will be responsible for high level decision making, policy decision and conflict resolution.

340. The Shaanxi Provincial Department of Finance will manage the financial transfers and Project Bank Accounts.

341. The executing agency will be the Shaanxi Forest Department who will be supported for implementation by PDRC that will form a Project Management Office for the work planning and administration functions. The PMO will comprise of staff seconded from the Shaanxi Department of Finance, Shaanxi Forest Bureau, and PDRC. In total the PMO staff levels will be 11 comprising the Project Director, 7 professionals in financial management, procurement, and engineering, one translator, and three support staff. The PMO will receive intensive training from ADB on its Project financial management systems. Each Implementing Agency will form a construction phase coordination office to oversee Project Administration. Members of these offices will also receive this training.

342. In addition, ADB PRCM will provide PMO and Implementing Agency staff Project Administration training programs especially in disbursement and procurement procedures. The PMO will contract procurement to an existing business specialized in bid preparation and evaluation to prepare and oversee the procurement procedures.

343. The responsibilities of the PMO will include the usual project management responsibilities in relation to Project coordination, procurement, financial management of foreign funds, and monitoring, evaluation and reporting, the PMO as well will coordinate the implementation of the QBCDA strategy including the management of the GEF grant funds, and will be responsible for overall coordination and management of the training, human resource development and capacity building plan for the Project.

344. The Project will provide support for office rent, office equipment, and vehicles.

345. Each Implementing Agency shall be responsible for preparing procurement and training plans. The QNBG requires significant training in the donor procedures relating to project administration, disbursement and monitoring. In addition to the in country training [provided by PRCM the Project will fund additional Project Administration training in Project Year one. AN additional Stand alone TA is proposed by the PPTA however this needs to be agreed with ADB.

2. Institutional Strengthening

346. The Project will support an institutional strengthening program that includes (i) legal reforms, (ii) training and capacity building. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 61 Final Report Appendix 7

a. Legal Reforms

347. The project shall support a series of legal and institutional studies to assess option and propose reforms for a set of specific legal issues. These are discussed in detail in Appendix K. The reforms include:

I. Recommendations on setting up a framework on collective forestry land tenure :

348. It is suggested that the project contract a study working together with SFD to explore:

 Approach to define the collective forests boundary and area  The appropriate collective (administrative or natural village) the forestry certificate should be issued to  Analysis of the possibility, advantage and disadvantage of contracting collective forests to individual households  Suggestion solutions including draft legal and regulatory changes  Propose a plan for action including a timetable to SFD.

349. The cost of the study will be CNY231,900 over a period of two months. The study should start at the beginning of project implementation.

II. Recommendations for Government and Community Partnership on Community Natural Forests Management in Shaanxi

(i) Shaanxi Forestry Department to issue an exemption to the project implementation unit to allow the project to conduct analog forests and other forest models testing in pilot villages inside the project area after asking necessary approval. (ii) Shaanxi Forestry Department will find a solution with Louguantai Forestry Farm on removing the restriction to taking of NTFP from collective forests out of the PA mountains. (iii) Shaanxi Forestry Department will lead a forest management partnership monitoring and studying group to conduct monitoring and consultation with local communities and the project implementation team. The study group should invite the Economic and Policy Researching Institute of SFA to participate in the study. (iv) The monitoring and studying group will focus on :  Learning the lessons from the project forests model tested.  Further explore the possibilities to develop the pilot models into a replicable government–community forests management partnership system. It must be based on respect of community ownership and use right to the collective forests. It should carefully review the proposed village forest management plan approach. It should carefully study the approach of positive partnership interactive between state-owned forests farm and the surrounding communities.  Explore the possibility of developing a monitoring system to monitor the quality of the forests including non timber resources in the forest. The system will include principles and indicators and measures for monitoring. It must be simple and easy to conduct together with the community.  Develop a proposal to SFA on collective owned natural forest management issues to allow the community to manage and use the forests in sustainable manner in Qinling National Ecology Function Zone.

350. The forests management partnership monitoring and studying group will be contracted by the project over four years with input of two months each year at a total cost of CNY618,400. The application for exemptions should be organized before the project starts after the project is approved, so that the exemptions will be in place when the project is ready for implementation. The study group should be formed at the end of the first year of the project implementation after the pilot villages are chosen. 62 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

III. Recommendations on reform Guidelines for Eco-tourism development in Qinling area:

351. The project will subcontract work with Shaanxi Forestry Department (SFD), Shaanxi Environmental Protection Bureau (SEPB) and Shaanxi Tourism Bureau to develop an eco-tourism guideline. The guideline should fit within the legal frame-work and be enforceable. The guideline should be simple to be easily monitored and understood.

352. The guideline will include:

(i) The definition of eco-tourism (ii) Implications of the application of principles of eco-tourism in Qinling Mountain (iii) Indicators for eco-tourism operation to meet the principles of eco-tourism. (iv) Monitoring system and enforcement measures. (v) The sub-contract should be in place in first year of project implementation, so the sub- contract team will be able to form the general approach and principle for the study together with the project TA team. The contract will continue for three years to explore the issues with three months inputs from each year. The proposed budget for the sub- contract will be CNY696,000

IV. Recommendations for appropriate jurisdiction for the Institution operating future Eco-fund In Shaanxi

353. The proposal for an independent ecofund will not be implement able in the initial period of the Project. It is proposed that an administrative funding system be used in the interim period while reforms are identified and enacted. This will also enable good practice to emerge and be used to define the needs of a future fund. The SPDRC should apply to the CBRC for an Exemption for Eco- fund to lend and charge interest to the purposes of the Project.

354. The project will set up a sub-contract to conduct monitoring of the Eco-fund operation from within the proposed restructured institutions that will manage the Project Area. The monitoring contract will be independent from the Eco-fund, supervised / organized by SPDRC. It will produce a report every year to the SPDRC on the assessment of the Eco-fund operation and in the final year provide a set of recommendations to form an independent financing mechanism.

355. The annual report will provide the fundamental information to support SPDRC to get the Eco- fund a legal status to operate in the Qinling area. It means the Eco-fund will be able to grant, lend, and make equity investments to activities meeting its biodiversity criteria and other policies. Before the end of the project, if the Eco-fund operation is successful, SPDRC will submit an application to the appropriate authority for approval to make the Eco-fund a permanent organization with full functions described above. It may be in the form that CBRC or SPG grants a long term license or permit to the Eco-fund to enable it to lend loans and charge interest within the regulatory limits as an experimental case.

356. The sub-contract should also study the fund raising system to be used by the Eco-fund. A system of replenishment of the Eco-fund should be recommended to SPDRC.

357. Outputs of the sub-contract will be:

 A report produced every year from year one to end of the project implementation which will: (a) assess the management structure of the eco-fund (b) assess enforcement of biodiversity criteria and lending / granting policies (c) assess the efficiency of lending facility and granting facility (d) assess the efficiency of social and other safe guard policy (e) assess achievement of the objective of the eco-fund (f) assess the contribution of eco-fund to achievement of the overall objective of the project (g) assess the sustainability of the Eco-fund. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 63 Final Report Appendix 7

 A report should be produced on year two to summarize results of the fund raising approach used by Public Benefit Funds inside China and other environmental funds world-wide.  A report should be produced on year four of the project to recommend the replenishment system used by the Eco-fund. The report should include :  Summary of the fund raising system recommended to maintain / increase the Eco- fund’s capital size to achieve its objectives in the broader Qinling area. A set of methods should be included such as annual appeal workshop inviting all the tourism operators in the Qinling area.  Legal status of the recommended fund raising activities  Operation procedure and guidelines

358. The term of sub-contract will be for three years from year one of the project implementation. Inputs in each year will be three month. Total budget will be CNY696,000.

b. Training and Capacity Building

359. The overall training program is incorporated within each Project subcomponent so that each Implementing Agency or enterprise is clear in what is proposed. In addition, to the proposed training the PPTA has proposed an institutional strengthening program be supported by ADB through additional technical assistance grant funding.

360. The TA will support the strengthening of the QNBG which will be newly formed prior to loan effectiveness. The strengthening program is described in Table 23 and seeks to develop the internal capacity of QNBG to operate in a commercially efficiency manner. A final plan will need to be prepared once final staffing and structural issues are agreed. At the Time of the PPTA Final Report the SPG was seeking to form QNBG in the first year of the Project while ADB had rejected the organizational proposal. During loan fact finding ADB changed its position to one of supporting the proposed institutional reforms and requested its inclusion. A final institutional strengthening program needs to be designed based on the staff included, the structural and management responsibilities and authorities created. These remain undecided.

361. The proposed Institutional strengthening approach is based on developing agreed responsibilities, job descriptions, operational procedures through corporate strategy and work planning development and then using a work planning model to implement these strategies. The Project will facilitate the necessary processes for deciding on these and then support through training the building of capacity for QNBG to undertake and implement the agreed plans. In this respect the majority of institutional strengthening is achieved through facilitated guidance and leadership development that can then use the training programs and planning systems within the Project design to build the implementation capacity. The institutional strengthening ADTA is therefore targeted at the Management of QNBG and the Divisional Directors. The TA will assist the SPG in providing the following outputs:

 SBP corporate manual and operational procedures  Governance structures  Financial systems and reporting capacity  Information systems and MIS  HRD development plan  Business Group Plans and annual work programs  Reporting and management information  Commercial procedures and quality controls

362. The overall training and institutional investment is summarized in Table 23 below. The inability to confirm additional TA grant funding is however a major weakness ion the Project Design as without the institutional strengthening program the PPTA considers the Project not to be feasible due to implementation capacity constraints. 64 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7 Table 23: Proposed Institutional Strengthening Program

Organization / Division Target Skill Gaps Indicative Training Inputs/outputs Shaanxi Qinling National Botanic Training Needs Assessment Needs Assessment agreed with Garden Unit consultant 2 person months PMO/SQNBG Training plan prepared for Project including QNBG and project partners and beneficiaries

Total = 14 Strategy Strategic planning ( 2 courses - 42 Manager courses A: Management  Director Investment and Business 14 personnel) 20 persons international  Deputy Director Management Team exposure tours  Commercial Manager and Corporate Plan building and communication (1 deputy Annual Work plans course 14personnel) Proposed ADTA of $0.526  Public Relations and deputy Investment appraisal (2 courses million that will include:  Unit Budget and financial Financial Manager and – 8 personnel) deputy Performance 1. Institutional strengthening Corporate planning and work ($55,000) including  Support staff 6 Human Resource Management Monitoring and Reporting planning ( 14 people specification and implementation of local regulations, and resource rights. 2. Training $245k  Management training $50,000  Technical Training $65,000  Study tours and exchange visits $50,000  Seminars/workshops etc $80,000 3. Essential equipment ($16,000)  PC’s – 5 ($8,000)  Printers – 3 ($2,500)  Photocopiers – 2 ($3000)  Email system – 1 ($ 1000)  Other ( $1500) 4. Consultants $2100K  International - Organizational and Strategic Planner Specialist 4 pmnths ($85,000) TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 65 Final Report Appendix 7

Organization / Division Target Skill Gaps Indicative Training Inputs/outputs  Domestic (30 pmnths) - Training HRD - Organizational systems - Financial management information systems - Horticulture expert - Visitor Management

B: Administration Total Staff = 22 Administration support for Unit Each Dept to receive 2 training Local level training – 14 admin  Finance Dept (4) Project Record keeping and courses per year for 3 years. courses  Admin Dept (5) reporting Total – 3 dept, 2 courses, 3  HR Dept (4) MIS systems years to be defined by staff skills Project admin included in  Office Staff (5) appointed Component 3  Project support (4)

C: Botanical Garden Division Total Staff = 219 Enterprise management Manager and Deputy’s Operational mangers and  Full time 105 Planting,  Planning professional staff training 93 local courses  Part Time 114 Maintenance, of gardens  Budgeting  MIS Repair and maintenance 114 workers trained in botanical  Promotion and marketing Education and awareness garden skills – identification of programs In house staff training plants, planting, maintenance Visitor Management  Guiding  Environmental education and awareness  Botanical garden management  Visitor management Job exchange for senior staff related to education and awareness and visitor management , and botanic garden management

D: Animal Rescue Center Total Staff = 120 Commercial Management and Commercial management and Included in Subcomponent 1.2 Division Management visitor programs visitor management will be including international exchange 1. Center Manager developed through contracting inputs and design inputs commercial services 2. Director Research and Endangered species recovery Breeding management 70 staff trained in local courses Endangered species training – or through Ta supported courses 3. Director Marketing work based programs with 66 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

Organization / Division Target Skill Gaps Indicative Training Inputs/outputs 4. Director Operation and Vet and wildlife recovery skills support from national and Administration international TA TA expertise for animal recovery  Admin – 5 Captive breeding technology and breeding programs for  Research and monitoring Panda, Ibis, Golden Monkey, Staff – 10 Takin  Rescue and animal hospital – 12 Operational management and  Compliance 12 admin included in ADTA  Keepers 50  Visitor management 6  Market (19 provided by contract b y tourism dept)

E: Field Conservation Division Existing Staff excluding 30 A: Planning – habitat and A: Planning processes and Included in component 2 and (Louguantai Forest Farm) SARC staff – approximately 270 conservation forestry, option developed in consultation Component three (GEF)  Manager Operations Landscape with wider conservation  Forest Park programs and staff Livelihood Program  Conservation Forestry Village planning and community  20 village planning Programs livelihoods Capacity building through facilitators  Community Forestry undertaking a planning program  Technical assistance Programs Collective /community forestry (domestic) 6 pmnths  Compliance and Protection programs Village development planning  Economic Plants and SME  Monitoring training of planning facilitators development training for  Species Recovery Biodiversity identification agency staff in Qinling Management Conservation and community Mountains by IMPLAD for 2 years Habitat restoration forestry based on analog and conservation forestry systems designed for social and local Conservation forestry conditions – Project courses Conservation Forestry  Habitat and forestry master plan (plan by doing) with 40 Field Patrolling Habitat restoration – Project and to 60 people trained other forestry experts to provide  Technical assistance to Monitoring and data training support training and management planning processes Plant identification course (9pmnths domestic) Endangered species  Endangered species management and recovery Field patrolling – Project office recovery training and staff planning for 4 years – 50 to 75 people trained

Biodiversity monitoring training Landscape Planning TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 67 Final Report Appendix 7

Organization / Division Target Skill Gaps Indicative Training Inputs/outputs  Planning process (100 Endangered species recovery trained by doing)  24 IA staff  250 agency and institute from Qinling Mountains  Planning working groups with support of TA

Tourism Planning

 Implementing Agencies agency and Qinling Mountains staff (50) - TA (international) – 10 pmnth - TA (domestic) – 24 pmnth - 12 local tourism planning facilitators

Conservation Monitoring  Monitoring contract (WWF technical support for training – 2 years)  Implementing Agencies and conservation staff in Qinling Mountains training 100 per year for 3 years  Technical assistance for Training and capacity development - International – 15 pmnth - National – 15 pmnth  International/regional job exchanges – 15 ( 3 for Qinling Botanic Garden, 6 SARC, 6 for non- Implementing Agencies staff)  4 year education and dissemination program in the Qinling Mountains

B: Project Management 68 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

Organization / Division Target Skill Gaps Indicative Training Inputs/outputs PMO (11) Project planning Procurement ADB procedures training – Training provided by ADB head Project procurement Disbursement and before effectiveness office and PRCM prior to loan Directors, Management, and Project administration replenishment procedures In-house training of effectiveness Administrative staff of QNBG Project disbursement Project BME and MIS Implementing Agencies staff (15) Project reporting Follow on training provided in Component 3

Project Beneficiaries Local Residents in in-situ area Village planning Group formation Course training facilitators Component 2 training Community forestry Spatial planning and Planning exercises for all  16 SALT demonstrations Small enterprise development prioritization agencies staff including staff  160 mu in 16 Forest Plant Home stay tourism Forest land allocation from agencies operating outside production demonstrations the Project  SALT Community forestry programs Small enterprise - tree and shrub planting demonstration (10 to 16)  Farmer training program (2 - tree shrub maintenance Forestry Group training days using TA input and SFB staff year NGO contract) - biodiversity awareness  Farmer and household - small business development education program for 3 Implementation planning and years Home stay tourism oversight through LFF - marketing and promotion  Homestay tourism training - hosting - 70 employees trained Enterprise training programs - 10 manager courses - cleanliness - cooking and food preparation SALT Demonstrations and - guiding and value adding farmer training SALT - agro-ecology - contour planting and management - agricultural technologies TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 69 Final Report Appendix 7 70 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

3. Biodiversity Capacity Building and Replication Programs

a. Landscape Planning

363. The Project shall introduce spatial planning at a landscape level as both a demonstration and planning process for the mainstreaming of biodiversity conservation within the wider landscape.

i. Project Area Master Landscape Plan

364. Within the Project area people from across the QM would develop a landscape planning model for the Project Area which would then implemented and evaluated over a two year period. The plan would seeks to identify options, test approaches and information systems including the planning for nature reserves, forest landscapes, agricultural land use and intensive commercial development including urban or residential land use.

365. The plan would adopt a highly participative approach and use this involvement as part of a wider capacity building and awareness raising opportunity for conservation and land use staff from across he wider QM. The process would focus on the project area but would also move around other sites that have adopted and proven techniques and or approaches that could be replicated. The planning process would involve:

 A major residential workshop for up to 120 staff for a period of 4 days to identify and collate existing experience and approaches. These would be databased and made available to all participants. The workshop would also identify a plan for implementing an action learning process for the preparation of landscapes for the Project area over a 30 month period.  A total of five working group meetings per year lasting four days for 50 people  Plan preparation and production costs

366. Implementation would be the responsibility of the SFB and the LFF reflecting the mandates of both to work in the Project Area and the wider QM and will be closely linked to the monitoring program –see below. The monitoring research programs and data collections will be used to inform the planning program and will also provide mapping and data analysis inputs.

367. The landscape management plan for the PA would provide a pilot planning process through which wider QM stakeholders could gain experience and develop consensus on how landscape planning could be implemented within the wider QM. As such all planning procedures included in the Project are integral to capacity building in QNBG and the wider set of stakeholders

ii. Louguantai Forest Park Tourism Management and Development Spatial Plan24

368. The Louguantai Forest Park located very close to both SARC and the Hot Springs Development in “Louguantai Village” is already well known and an attractive tourism site. The Forest Park is located between Louguantai village centre and the first foothills of the Qinling Mountains. Many of the Daoist sites are located within the Louguantai National Forest Park as is the existing Bamboo Garden. The tourism area in the Forest Park has been making small investments of about CNY1 million per year to improve tourism facilities based on a Forest Park management and tourism development plan completed in 1993. Development of the Louguantai Forest Park property will play a major role in Project success, as it is considered essential that the three principle visitor attractions located within the project area: the Qinling Botanic Garden, the Shaanxi Animal Rescue Centre and the Louguantai Forest Park are planned, promoted and marketed as linked attractions.

24 Capacity building, technical assistance and related activities in Components I and II are being kept separate from the main project investments under each component both because of their importance to Project success and because, based on past SPG projects that were financed in part by an ADB loan, these could be funded under a separate Project TA between the SPG and the ADB TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 71 Final Report Appendix 7

369. The Shaanxi Louguantai National Forest Park is operated by the Shaanxi Provincial Forestry Department and extends to 410,000 mu (approximately 27,333 ha) and is located between 501 meters and 2997 meters above sea level. The Park thereby provides a wide vertical distribution of vegetation zones which contribute to the varied landscape scene. The Park is divided into four main sub-divisions shown in the Map at the start of this document: (i) East Louguan; (ii) West Louguan; (iii) the Tianyu River; and (iv) the Shouyang Mountain.

370. The proposed plan focuses on the smaller tourism facility of the Forest Park25, which together with SARC and the Hot Springs is located within Louguantai Village, which is a small town that fulfils the role of ‘service centre’ for tourism and entrance to the “Louguan Experience” sites. The town is arranged around a single wide main street which leads to the entrance to the Forest Park and Hot Springs. The main street is lined with small shops and restaurants that provide services to visitors.

371. Along the main street is also located the impressive Daoist Zong Sheng Palace which is open to the public. With careful and sensitive management, there is potential to improve both the range and quality of services offered and also the ‘village quality.’ This could be achieved through improvements to the open space landscapes at the entrance to the village / main street, the circulation of traffic which is dangerous to pedestrian visitors during busy periods, and street cleanliness thereby improving visitor image.

372. Because of the strong potential of the Forest Park and Village, it is proposed that the Forest Park be provided with Project support to prepare a long-term tourism management and development plan for the Louguantai Forest Park that would be extended to include tourism management and development for the Louguantai Village. The purpose of the Plan would be to position the Park and Village to properly manage, capitalize on and benefit from PA tourism growth. The plan would be included within the wider landscape plan for the Project Area.

373. The Plan would encompass: (i) a longer-term investment plan (the Park is currently investing about CNY1 million per year largely on an adhoc basis); (ii) individual and joint marketing; (iii) interpretation in order to achieve thematic and related consistency with other ex-situ facilities in terms of quality and format; (iv) attendance and pricing strategies to generate net revenue for QBCDA biodiversity conservation through e.g. reforestation – the present revenue of CNY10 million based on CNY30 entry fee and 300,000 visitors per year could easily expand four times by 2015 to 40 million based on 600,000 visitors and CNY70 per visitor; (v) financial, cooperative, advisory and other arrangements with the Daoist community; including linking the Forest Park Daoist Temples with other Daoist sites in the ex-situ and near QBCDA area (the Lao Dzi Trail); and (v) spatial, environmental, infrastructure, social and business development planning for the Village so that businesses and families in the Louguantai Village can fully benefit from and add value to the Louguantai Experience. The Lougauntai Tourism master plan will form an integral part of the wider master landscape plan .

374. The vision for the Louguantai Forest Farm / Louguantai Forest Park, Louguantai Village and surrounding landscape and communities is to work together with the tourism industry in a harmonious partnership, adopting best planning, management and marketing practices to establish Louguantai as one of China’s leading ecological and cultural tourism destinations.

375. The objective is to prepare a Tourism Management Plan for the Louguantai Forest Park, Louguantai Village and surrounding landscape based on social and environmental constraints and ensure the sustainable long term development of the areas natural and cultural assets.

376. The planning process would be led by the Louguantai Forest Farm with support from the Shaanxi Tourism Department. Louguantai Forestry Farm is a government affairs unit approved by the Shaanxi Forestry Department. The most recent confirmation of its legal status is in 1986. It is a government affairs unit however government only covers part of its operation cost. LFF is an independent legal entity registered with Shaanxi Province Government Affair Unit Registration Administration which can manage forestry land following Forestry ACT of PRC. LFF has the use rights for the area stated in the forestry land certificate covering 37,163 hectares.

25 However, the larger Forest Park area, which reportedly covers 60% of the PA based on information provided by Forest Park officials will play a major role in the QBCDA strategy and overall Project impact and outcome. 72 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7

377. The LFF mandate includes: management of state owned forestry farm, management of state owned forestry nursery, forging forestry development, rescuing wildlife, maintaining of ecology balance. LFF can plan supply and production of seedlings. LFF can conduct forestry farm management and state owned forestry nursery management. They will manage tree seedlings supply, forests, forestry fire prevention and control, selection of quality genes and seeds, extension of new technique. LFF can conduct training on relevant techniques and management practices. They can provide services on forests related tourism. They can rescue, keep and raise sick and injured wild animals. They can conduct publicity and education on wild animal protection affairs. They can research on animal protection related issues. They can raise and bread wild animals. It has initial capital of CNY21,330,000.

378. Louguantai Culture and Ecology Tourism Area Development is one of projects planned under the Qinling National Ecological Function Zone Plan. The plan has listed 15 development projects under eco-tourism and ecological environment protection. If LFF develops a conservation sensitive tourism model, it will give impact to other development through an appropriate channel. It can organize an association with other forestry parks to disseminate the useful experiences.

iii. Job Exchanges

379. A total of 15 GEF financed job exchanges will be provided for technical staff to visit and work for a period of 2 months per input. The purpose of this activity is to expose senior technical staff to new ideas and approaches. The 15 positions are allocated to SARC, QBG and conservation staff not working for the Implementing Agencies and or EA of the Project.

iv. Conservation Monitoring

380. China is one of the world’s mega diversity countries, with over 30,000 vascular plant and 6300 vertebrate species. China’s mountains are especially important. County level data has been digitized and evaluated by country scientists, identifying ten biodiversity hot spots and providing county level information that should be useful to this project. All the identified hotspots for overall, endemic and endangered diversity for plants and animals for China are located in mountainous areas. The Qinling Mountain is one of the ten.

381. Ecological monitoring has and is being conducted by a number of Chinese Agencies. They include State Environmental protection Agency, Chinese Academy of Sciences, Ministry of Agriculture, State Forestry Administration, State Oceanic Administration and China Meteorological Administration operating research and monitoring stations in many parts of China.

382. Considerable data on flora and fauna has been collected and many reports have been written about the status of the area’s biodiversity and the threats to its survival. Important information on land use and social-economic conditions has also been prepared.

383. Understanding patterns of biodiversity is essential to conservation strategies and monitoring of conservation goals, but data constraints make surrogate indicators attractive to managers to show a change in environmental conditions. However studies on the use of indicator species have not been very supportive in their effectiveness. Nevertheless, indicator species can play an important role in biodiversity monitoring.

384. Although, the biological data is informative, it is not well coordinated, analyzed or in a form that that can be used for policy formulations, decision making and subsequent management. The information is often not comparable. Fundamental information is hard to come by and may be contradictory. Protection and management is impossible without basic land use and management information. In particular, the in-situ strategy requires a strong monitoring framework, supported by GIS and other information systems.

385. Some of the problems stem from an inherent desire not to share information, as information is often considered to be institutional power. This as an organizational, management, and technology problem that must be corrected. Fortunately, there have been some excellent advances in data collection and management that will be a great asset to this project. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 73 Final Report Appendix 7

386. Many kinds of information are required to conserve biodiversity effectively, including data on ecological relationships, species distribution, status and trends, human uses, and changes in land use. New technology makes data management more productive than before. For example the development and improvement of computerized Geographic Information Systems (GIS) has greatly enhanced the analysis and formulation of biodiversity conservation strategies and actions.

387. Effective biodiversity monitoring requires a hierarchical effort from local on the ground work to global monitoring, i.e. WCMC (World Conservation Monitoring Center).

388. Information needed for biodiversity conservation can be divided into 3 parts:

(i) biological information on individuals, populations, communities, and ecosystems for all kinds of animals, plants, fungi, and microorganisms (ii) environmental information on the natural environment such as geology, geomorphology, climate, water quality and quantity both surface flows and under ground, soils and air, water and land pollutant (iii) socio-economic information

389. Objectives of a biodiversity monitoring system should be clearly stated and understood. The objectives should include:

(i) information of changes in land use, soil conditions and ecosystem health (ii) accurate information on biota, population size and trends, especially threatened species (iii) water quality condition and trends (iv) Information on air quality, not only related to human effects, but the effects of air borne pollutants on biodiversity, including agriculture crops. (v) present the results in a form readily available and understandable to scientists, managers and the public (vi) data and information collected and analyzed by government institutions should be shared without fees to recipient, except for the direct cost of providing the material. (vii) monitor implementation of policies and projects

390. China made a step towards a national monitoring system when adopting the China Biodiversity Conservation Action Plan in 1994. The plan includes most of the above objectives plus components to accomplish these objectives.

391. Monitoring in the QM and project area should be compatible and consistent with National system, but also provide improved and advanced methods that can be used in the Project Area, and replicated in the greater QM, and elsewhere in China. This requires:

(i) developing effective information and monitoring system to conserve biodiversity in the Project area and the greater QM: (ii) improve sharing, coordination and use of information and monitoring net works

(iii) improve biological information, especially occurrence and distribution data for all monitoring of trends through use of advanced technologies such as remote sensing

(iv) strengthen field data collection and monitoring

(v) strengthen the use of monitoring in EIA preparation and in decision making

392. Biological and environmental data must be collected, stored and analyzed. Because of the skills required and expensive technical equipment, some centralization is necessary. However, results can be made rapidly available to a wide audience through modern information technology transfer. The Shaanxi Environmental Monitoring Center was established in 1978 as a unit of the Provisional Environmental Protection Bureau, and is a National Monitoring Station. Last year, the monitoring and research functions were separated. The Center has responsibilities for monitoring air, water, soil and water borne microorganisms. There are 10 local monitoring centers in Shaanxi Province, one in Xi’an, but none located in the QM. There are 6 automatic air monitoring stations, collecting standard air 74 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 7 borne pollutant data, in Xi’an, none in the project. Additionally, ten mobile stations are operated by the Shaanxi Center. The stations monitor the classic pollutants. There are ten automatic water monitoring stations with five more to be built. Classic measurements of pollutants and stream flow are taken, and on occasion testing for toxic chemicals. Ground and waste water are also monitored. Soil contamination is also monitored. Monitoring results are reported bimonthly, annually and every 5 years. Collected data is stored and analyzed using SQL server data based system and the internet to disperse information.

393. Monitoring for the QM must be coordinated with the Shaanxi and local monitoring Centers, with the likely need for air and water monitoring stations within the Project Area. Qinling Mountain Nature Reserves have good programs of biota monitoring in several units, which has been developed with WWF. Initiated by WWF, the monitoring program began in 1999 in Foping, Laoxiancheng and Niubeiliang Nature Reserves. This program monitored Giant Panda population and habitat, vegetation, Panda droppings and breeding places. In 2005, with the SFD, monitoring was expanded to 19 NRs and one Forest Farm. This monitoring work is collecting: Giant Panda breeding data from all QM breeding sites and also field monitoring data. Field monitoring occurs twice year, April to May and September to October. Socio-economic and Nature Reserve Management data is also collected and evaluated once a year. Vegetation is monitored on a 5 year schedule. Three hundred nineteen animal and eighty plant transects have been established and located precisely with GPS data system, which is directly transferred to Forest Bureau by internet. Standards have been established for the monitoring and are compiled in a useable hand book. Training is given to each of the approximately 200 monitors, who are Forest Bureau employees. Training hand books and field guides are made available to the monitors. Training needs analysis is done prior to the training in order to tailor the training to the needs, which vary according to the employee’s abilities and the level of the NR in which they will work. Written exams and skill tests are given to test competence and awards are given for good work, often a GPS. An expert team gives support to the monitors.

394. Data collection and monitoring is complemented by Patrols numbering more personnel than the monitors. They also are given special monitoring training. WWF has also established a Qinling Ambassador Program using volunteer students and others to work with communities educating villagers on values of biodiversity and conservation, and collecting specific socio-economic data for a 5 year period, which should provide very valuable information.

395. Funding for this work comes from several sources. At present 60% is from WWF for training and equipment, local partners (NRs) contribute staff and vehicles, and Shaanxi Forest Department and SFA cover other costs. WWF’s percentage is being reduced.

396. All the Panda Reserves have GEF standard management plans. In the planning, WWF adopted the GEF co-management concept. WWF role was to act as a facilitator, asking locals what they want to do and if the proposal is environmentally friendly, helping them proceed through micro credit or other means.

397. The Shaanxi WWF office is very willing to share all their information and work with this Project, but ask and believe it is necessary that a formal cooperative agreement be entered into between the Project and WWF’s Beijing office. Information sharing and other forms of cooperation would be highly beneficial to the Project and the PPTA strongly recommends that a cooperative agreement be formally arranged.

398. Forest Resource Management Division and the Shaanxi Forest Survey and Design Institute of the SFD report that forest land is re-surveyed every 5 years. In Shaanxi there are 6440 permanent 0.08 ha plots on which tree and soil type data are collected. The plots are laid out in a grid and located on remote sensing imagery, currently using Spot 5. The officials showed little interest in monitoring non tree species of plants, but the survey could provide the basis for systematic flora monitoring in the Qinling Mountains.

399. The Northwest Institute of Forest Inventory, Planning and Design, under the SFA also have a system of forest plots, more limited in number than the above described Provincial survey, which are examined every 5 years.

400. The PPTA recommends that a biota and land monitoring function be located within the QNBG and that this share all data with the SFD. The PPTA does not support the investment into new TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 75 Final Report Appendix 7

GIS capability as the SFD currently have significant GIS capacity. It is proposed that the Project would contract biodiversity monitoring to SFD and that the WWF would receive a two year training contract to work with the QNBG in building their capacity. In return for provision of data an demonstrating new monitoring technologies the QNBG will receive data support and access to Qinling Mountain data sets. If the sharing of data is not agreed in advance GEF should not be involved in the Project.

401. Each IA and enterprise will monitor and evaluate their developments and activities with technical assistance and oversight from the Monitoring Center. Monitoring performance, and impacts on biodiversity and the physical environment should be integrated into the proposed Ex-situ enterprises.

402. The project proposes to develop a strategy for the Government to introduce replication of the models and lessons learned, including habitat restoration, endangered species management and general management systems. Certainly much can and will be learned that will be applicable elsewhere. Ecological conditions, socio-economic situation and threats will be determining factors in the ability to replicate in other areas. Replication opportunities should be identified in the 4th year of the Project.

403. The objectives of the biodiversity monitoring system includes:

 information of changes in land use, soil conditions and ecosystem health  accurate information on biota, population size and trends, especially threatened species  water quality condition and trends  Information on air quality, not only related to human effects, but the effects of air borne pollutants on biodiversity, including agriculture crops.  present the results in a form readily available and understandable to scientists, managers and the public  data and information collected and analyzed by government institutions should be shared without fees to recipient, except for the direct cost of providing the material.  monitor implementation of policies and projects

404. The Project will contract SFD to provide the ecological monitoring for the GEF component and the wider project area as a whole. The contract will include WWF costs for training QNBG staff, monitoring equipment, data collection costs and training for all stakeholders involved in the monitoring scheme. WWF shall be sole sourced contracted due to their unique presence and role within the strengthening of biodiversity conservation in the Qinling Mountains. The Existing SFD and WWF data sets can be integrated with the Project data sets to provide a time series of data that will enable trends to be identified and increasingly understood. Data collections will include a time series of imagery for the Project area and its interpretation.

405. The Project will also provide Technical Assistance for training and definition of monitoring systems including data collection, data storage, data analysis and data use and interpretation. A total of 15pm of International experts and Domestic experts in remote sensing, survey techniques, and field conservation. Further there will be a total of 6 field survey and research contracts spanning two years that will be used to inform the landscape planning program. The contracts will be awarded for research into (i) vegetation monitoring and inventories, (ii) vertebrate research, (ii) Invertebrate research, (iv) Fish and Aquatic research, (v) Amphibians inventory and population studies, (vi) Soil microorganisms in natural forests, conservation forestry and SALT treatment areas. Monitoring performance, and impacts on biodiversity and the physical environment should be integrated into the proposed ex-situ projects, with supporting input by Center staff.

406. As a part of the landscape planning program the project will develop a strategy for the Government to introduce replication of the models and lessons learned, including habitat restoration, endangered species management and general management systems. Certainly much can and will be learned that will be applicable elsewhere. Ecological conditions, socio-economic situation and threats will be determining factors in the ability to replicate in other areas. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 8

CONSULTING SERVICES

1. The following appendix provides the description of technical services included within the Project, how these will be contracted and the detailed terms of reference for individual positions.

Table 1: Individual Positions by Procurement Package and Project Year

Total Person Project Yr Project Yr Project Yr Position Month One Two Three Package A:

Package A –SARC International Panda Expert 1 1 Ibis Expert 1 1 Golden Monkey 1 1 Expert Domestic Panda Expert 1 1 Ibis Expert 1 1 Golden Monkey 1 1 Expert Total Package A 6 6 (USD 0.123 million)

Package B International Species Recovery 5 0 5 Expert Biological Surveys 5 0 5 Biodiversity 5 0 5 Conservation Tourism Planner 10 3 7 Animal Exposition 1 1 Design expert Wildlife vet 1 1 Subtotal 17 4 13 0 International

National Village Planner 6 2 2 2 Tourism Planner 24 6 10 8 Conservation 9 3 3 3 Forestry GIS Expert 5 0 5 Species Recovery 5 0 5 and Surveys Species Recovery 5 0 5 Expert Subtotal National 54 11 30 13 Total Package B 71 15 43 13 (USD 1.197 million) 2 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 8

A. Package A – SARC Species Expert Team ( 6 positions, 1 person month each)

2. Package A will be contracted directly by SARC as individual consultants. A total 6 positions will be hired with a national and international expert for each of the giant Panda, Crested Ibis, and Golden Monkey. Each expert will have approximately one person input and they will be responsible for:

 Reviewing the current species management program at SARC  Complete a field inspection of the proposed satellite sites  Identify management safeguards for the movement of animals into the satellite sites  Recommend management techniques to ensure the majority of animal movement is successful  Review current record systems and update to ensure stud book details are kept and used by Management  Review the endangered species management planning process and include the role of the ex-situ program within that  Provide a set of satellite site recommendations for the improving animal welfare and animal husbandry programs  Review science an veterinary programs to ensure world best practice is applied  Work with the Design expert (see package three) and recommend design improvements for the animal exposition area.

B. Package B: Support for Biodiversity Conservation Program

3. Package B will provide technical support to the in-situ conservation program and the replication and outreach program for the wider Qinling Mountains. The Package is financed by GEF and will include a total of 71 person months of input. The identification of the consultants will be undertaken by ADB using QCBS on a 80:20 technical financial selection criterion to expedite the mobilization of consultants.

1. Detailed Terms of Reference – International Consultants

a. Species Recovery Management Expert

4. The candidate shall have experience in (i) threatened species survey, recovery planning, and recovery; (ii) threatened species habitat survey and threat analysis; (iii) donor and international projects in Asia; (iv) Familiarity with the IUCN World Conservation Union Species Survival Commission and Specialist Groups. The candidate shall be responsible for:

 Work with and supervise National Species Recovery Specialist and National Species Recovery & Survey Specialist;  Accompany the National Species Recovery Specialist and National Species Recovery & Survey Specialist on a one week field trip to the core and buffer zones of the Project Area;  Accompany the National Species Recovery Specialist and National Species Recovery & Survey Specialist on a four week field trip to the nature reserves and corridors of the Qinling;  Review species recovery priority rankings in PPTA documents and revise as needed;  Review national and provincial species recovery plans for priority species and liaise with stakeholders to determine the status of those plans (current, outdated, obsolete, in need of update, etc.);  Specify procedures for updating, revising, or re-drafting any available plans;  Carry out threats assessment for priority species;  Supervise drafting of species recovery plans for priority species based on threats analysis;  Work with National Species Recovery Specialist and government stakeholders including State Forestry Administration and Shaanxi Forestry Department to initiate the governmental approval process for recovery plans; TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 3 Final Report Appendix 8

 Encourage approval of the plan through government stakeholder networks;  Assist with initial implementation of recovery plans.

b. Biological Survey Expert

The candidate shall have an academic background in conservation and survey techniques with additional practical application of biological surveys and monitoring throughout a range of different ecosystems and terrains. The candidate shall have proven experience in the design of field monitoring programs and the in training local staff to implement these. The candidate shall be responsible for:

 Reviewing the current survey techniques used by SFB and WWF and assess their application and outputs  Working collaboratively with WWF and SFB – including the Louguantai Forest Farm staff – support a monitoring design team that will design a biodiversity, ecological and environmental monitoring program for the Project Area that is affordable to be maintained at project completion and prioritizes information that is needed for decision making  Specify the options for field surveys including detailed methodological inputs, their strengths and weaknesses, implementation requirements, data collected and analysis requirements  Present a review of technological options to support the field survey program including remote sensing, camera trapping, telemetry etc  Using the monitoring design team agree on which techniques to implement and specify field monitoring locations and program in the form of a work plan.  Train monitoring personnel and agency staff in the techniques required to implement, and manage the field survey programs  Assist WWF supervise the establishment of the field survey programs and address any issues that arise including the management and reporting of data  Train WWF and SFB ( and associated institutes) in field monitoring and survey techniques

c. Biodiversity Conservation Expert

5. The candidate will have an extensive knowledge of biodiversity conservation, GEF programs and current developments and innovations within the international conservation arena. The candidate should also have a detailed knowledge of biodiversity conservation in China with the majority of this experience being linked to field conservation programs outside of Beijing. Past work experience within the Qinling Mountains with an emphasis on species management would be a definite advantage. The consultant shall be responsible for:

 The design of the overall biodiversity conservation plan for the Project that will address the issues within the following points  The integration of biodiversity priorities and management techniques within the preparation of the In-situ Habitat Management plan ensuring that conservation objectives are maximized and used to prioritize silviculture interventions. As an integral part of this process the candidate shall assist the PMO prepare detailed TOR’s for any ecological or biodiversity related research contracts by developing a research priorities agenda that is developed as a part of the overall planning process and is demonstrably needs based.  The specialist will be responsible for defining the parameters through which biodiversity and conservation will be fully integrated within the proposed landscape planning program  Ensure that the biodiversity s fully integrated within the project and that the linkages between the in-situ and ex-situ programs – both financial and technical are reflected in designs planning and work programs. This could especially include the conservation forestry programs developed through the Village Development planning process.  Prepare guidelines for the inclusion of biodiversity within the dissemination programs 4 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 8

 Contribute to the design of field conservation programs that seek to demonstrate new technologies and approaches.  Provide training in biodiversity conservation including awareness raising for senior Project officials, technical training for field staff especially staff from Louguantai Forest Farm

d. Tourism Planner

6. The candidate shall have extensive experience in spatial planning with a tertiary level qualification in planning with specific job experience in tourism, conservation and residential planning. The candidate shall have at least 5 years work within developing countries some of which is to be linked to conservation and tourism. The candidate shall be responsible for:

(i) Reviewing current policy and plans for spatial planning in Shaanxi (ii) Forming a spatial planning task force to provide leadership in defining and then undertaking the spatial planning process (iii) Undertaking a series of meetings/workshops that identify (i) the scope of the proposed plan, (ii) identify the planning stakeholders, their perspectives and expectations, (iii) identify existing data sources and systems (iv) Work with the Project information service provider to develop appropriate data bases and maps for spatial planning exercises (v) Undertake training of planner facilitators (vi) Using a participatory process define the planning process, its objectives, principles, and decision making processes (vii) Assist the national planner to under take the planning exercise including the assembling of stakeholder preferences and options to address these preferences both spatially and temporally (viii) Hold planning work groups that define and decide on preferred conditions, planning outcomes and identify potential conflicts between stakeholder groups (ix) Identify mechanisms for addressing conflicting needs and implement these (x) Prepare planning scenarios and circulate these to each working group and all planning stakeholders for comment and input (xi) Prepare a draft plan and hold public consultations in the planning area and within the Project Area, Zhouzhi County Shaanxi Provincial Government (xii) Using the planning work groups develop implementation targets and programs with supporting budgets (xiii) Identify the need for regulation and legal reforms to provide the Plan with status in the SPG (xiv) Prepare final planning document and supporting spatial maps.

e. Animal Exposition Design Expert (1 person month)

7. The candidate shall have experience in the development of a master plan for a zoo or similar wildlife focused facility and in the detailed design for animal and other zoo facilities. It is likely that this expert could be a zoo professional with experience of working in a design team where architects or technical drawers produce the plans and design documents.

8. The candidate shall be responsible for

 Working with the SARC staff, the international zoo management expert and the local design team, to assist in the development of a master plan for SARC and site layouts for the 4 satellite centers   With the same group, to assist in the development of detailed designs for all of the facilities in SARC and at the satellite centers   To advise on materials and equipment for the center TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 5 Final Report Appendix 8

f. Veterinary Expert (1 person month)

9. The candidate shall be a senior vet in a major international zoo or similar animal and wildlife based facility with experience in advising on the design and equipping of, and managing, veterinary facilities.

10. The candidate shall be responsible for:

 To review and comment on the plans for the Wildlife Rescue Center  To assist the design team in developing the layout and the detailed design for the veterinary and associated facilities in the WRC at SARC  To assist the veterinary team at the WRC in the production of an equipment list for the center and for the wildlife rescue unit  To advise on the latest techniques and equipment for wildlife rescue and for the veterinary care of animals in a captive environment  To assist in the development of a training program for vets and technicians at the center  With the zoo expert, to advise on the development of husbandry guidelines (including the veterinary care) for the species held at the center and in the satellites centers

2. Detailed Terms of Reference – National Consultants

a. Village Development Planner ( 6 person months)

11. The candidate will have a social development background with experience in undertaking social assessment and village or community level planning. The candidate shall have raining and extensive training in PRA/RRA techniques and working with social survey data. A back ground in rural livelihoods and gender based development planning is required. The candidate will be responsible for the following tasks:

 Work with the Shaanxi Qinling Biodiversity Promotions Ltd to identify all 16 villages  Undertake a consultative rapid assessment of needs and awareness raising of the Project and the VDP process  Based on the findings of the rapid assessment develop a plan for the Village development planning process  Recruit VDP facilitators and train these in the planning process and the context of the Project  Implement the VDP and supervise the facilitators  Provide a written description of each VDP and have each village leadership sign off on the plan.  Prepare plan outputs according to the needs of the PMO , SFB and the Village itself  Assist with the formation of forest resource management associations  Prepare a program for the PMO to maintain and develop the communication network amongst the 1 villages to ensure improved opportunity for involvement in the Project

b. Tourism Spatial Planner ( 24 person months )

12. The candidate will have a minimum of 5 years experience of working in the tourism sector for both the public and private sector including commercial tourism planning, strategic planning, marketing and positioning studies. A proven involvement in ecotourism or nature tourism would be an advantage. The candidate shall be responsible for:

 Compiling local data sets for tourism planning in the planning area and the wider Qinling Mountains  Assisting the international tourism planner to design and define a spatial planning framework for tourism and the Project Area 6 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 8

 Responsible for developing training program for the tourism sector in spatial planning and the implementation of the training for agency, operators and potential investor stakeholders  Working with the international training expert take the lead role in implementing the planning process  Provide regular reports to the PMO on the status of the planning exercise and it achievements  Prepare draft planning scenarios and ensure that all Project activities are consistent or compliant with the planning objectives  Develop concept plans along with agreed quality standards for design, service delivery, product development and a coordinated marketing and promotion program  Work with local government official to create awareness of the spatial plan with the view of having the plan ratified.  Work with stakeholder groups to develop implementation plans for achieving the plan objectives

c. Conservation Forestry Expert ( 9 person months)

13. The candidate shall have a social and conservation forestry background preferably with an understanding of natural forest management and the Qinling Mountains. They will have experience in community based forestry and a demonstrated knowledge of analog forestry and its application in China. The Candidate will be responsible for the following:

 Reviewing the VDP and working with the VDP planner establish village level forest associations or groups  For each group develop a conservation forestry plan including the survey and demarcation of collective lands, species mixes to be planted and a planting schedule to be followed.  Work with early adopted to demonstrate how to transition from existing forest cover into conservation forestry systems  Develop a village level monitoring system for the establishment and monitoring of village level conservation forestry  Prepare a set of Conservation Forestry Guidelines for SFB and provide training to Louguantai forest staff  Facilitate the Louguantai staff to develop a forest habitat plan for the non-collective land that develops a number of treatments to enhance the conservation value of forest cover  Prepare a habitat enhancement plan for 2,000 ha of the Louguantai Forest Farm land and train staff in the silviculture required to complete this  Provide supervision and ongoing training to support staff in their development of conservation forestry.

d. GIS and Remote Sensing Application Specialist

14. The candidate will have advanced training in the application of image interpretation, remote sensing and GIS and will have previous experience n conservation or related sectors including the integration of data across natural resource, social and economic sectors. The candidate shall be responsible for:

 Working with the PMO to structure the conservation monitoring contract with WWF.  Work with the Project staff and WWF to develop a fully integrated monitoring data base and analytical framework  Provide training and assist in the interpretation of time series imagery for the Project area  Using the imagery analysis establish time series data bases and complete an analysis on the identifiable trends in the Qinling Mountains and the Project Area. Ground truth the interpretation results TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 7 Final Report Appendix 8

 Provide training to Louguantai Forest Farm and WWF staff in the use of image interpretation  Seeks means for integrating datasets between the image data, field observations and the intensive monitoring framework outputs  Prepare a detailed report and present to PDRC

e. Species Recovery – Field Surveys

15. The candidate will have the following experience and qualifications

 Experience in biological resource survey and management in Shaanxi Province and the Qinling mountains;  Knowledge of protected area management in the Qinling mountains;  Experience in survey and management of endangered species including plants and animals;  Knowledge of and familiarity with the institutions responsible for wildlife survey and management at both province and national levels;  Ability to read and write English;  Knowledge of the scientific literature relevant to globally threatened species of the Qinling mountains;  Contacts with academic institutions and NGOs that have expertise in recovery of China’s globally threatened species;  Working knowledge of the three Giant Panda censuses and their results;  Working knowledge of the methodology employed by Shaanxi Forestry Department and WWF China (Xi’an) to carry out bi-annual or tri-annual monitoring in the Qinling;

16. The candidate will be responsible for:

 Work with the International Species Recovery Specialist;  Accompany the International Species Recovery Specialist on a one week field trip to the core and buffer zones of the Project Area;  Accompany the International Species Recovery Specialist on a four week field trip to the nature reserves and corridors of the Qinling;  Assess the status of survey and monitoring data for all priority recovery species;  Compile and assist translation of all relevant national and provincial species monitoring, research, recovery, management plans and other documents;  Compile and assist translation of all relevant national and provincial habitat monitoring, recovery, and management plans to include the Natural Forest Protection Program and Sloping Land Conversion Program (Grain-for-Green);  Prepare an annotated bibliography of scientific literature relevant to plant and animal biology/ecology and species recovery in the Qinling;  Obtain a digital map covering the Qinling with layers showing all nature reserve boundaries, all county boundaries, highways (existing and planned), water bodies, topography, and other features relevant to recovery planning;  Obtain digital habitat and internal zoning maps for all Qinling nature reserves, planned nature reserves, and corridors;  Work with the Shaanxi Wildlife Rescue and Breeding Center to develop their field conservation programs for monitoring and survey of globally threatened species;  Assist in drafting of species recovery and monitoring plans, and integrate those plans with the monitoring programs of WWF-China (Xi’an) such that the existing program is strengthened;  Assist in implementation of monitoring plans, collection and analysis of data, and reporting;  Participate in the process of adapting past and/or current research, monitoring, and recovery methods to current situations and needs. 8 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 8

f. Species Recovery Management Expert

17. The candidate shall have (i) experience in biological resource management in Shaanxi Province and the Qinling mountains; (ii) knowledge of protected area management in the Qinling mountains; (iii) experience in management of endangered species including plants and animals; (iv) knowledge of and familiarity with the institutions responsible for wildlife management at both province and national levels; (v) ability to read and write English; (vi) Knowledge of the scientific literature relevant to globally threatened species of the Qinling mountains;(vii) Contacts with academic institutions and NGOs that have expertise in recovery of China’s globally threatened species.

18. The candidate shall be responsible for:

 Work with the International Species Recovery Specialist;  Accompany the International Species Recovery Specialist on a one week field trip to the core and buffer zones of the Project Area;  Accompany the International Species Recovery Specialist on a four week field trip to the nature reserves and corridors of the Qinling;  Review and revise as needed the species priority rankings made during the PPTA;  Compile and assist translation of all relevant national and provincial species recovery and management plans;  Compile and assist translation of all relevant national and provincial habitat recovery and management plans to include the Natural Forest Protection Program and Sloping Land Conversion Program (Grain-for-Green);  Prepare an annotated bibliography of scientific literature relevant to plant and animal biology/ecology and species recovery in the Qinling;  Obtain a digital map covering the Qinling with layers showing all nature reserve boundaries, all county boundaries, highways (existing and planned), water bodies, topography, and other features relevant to recovery planning;  Obtain digital habitat and internal zoning maps for all Qinling nature reserves, planned nature reserves, and corridors;  Work with the Shaanxi Wildlife Rescue and Breeding Center to develop their field conservation programs for globally threatened species;  Assist in drafting of species recovery plans. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 9

PROPOSED LEGAL AND INSTITUTIONAL REFORM AGENDA

1. The GEF team has reviewed the components and activities of the project. The following problems have been identified as significant obstacles for project implementation from the legal and institutional system. Recommendations have been made to resolve the issues. The recommended solutions have been discussed with SPDRC and agreement has been reached on the reform agenda proposed in the report.

A. Reform on Collective Land Tenure Management in Shaanxi

2. Currently there are no legal certificate and boundaries to define the legal right and area of community collective forests.

3. The project is promoting integrated management at landscape level. It requires all parties who own or manage the land to reach common understanding about sustainable management and practice in the same approach. The community collectively owned forests occupy a big proportion of the forests in the project area, and elsewhere in the Qinling Mountain. The project views it as a very important issue that the community can manage and use their natural recourse in sustainable manner. For effective management, legal rights to forest resources are required for the long term vision and benefit.

4. According to Zhouzi County Forestry Bureau, Zhouzi county did not complete community forests land definition work in year 1978. There is no clear boundary and accurate forest area defined for the village and they have never issued the forestry certificate to the administrative village or to individual farmer except on Land Conversion land.

5. Currently the communities know approximately their forest area, but they have no idea who is managing it. They do not have any use of the forests except on firewood forests after Natural Forests Protection Program. They know that it is forbidden to log and graze in the forests. In most of the villages, every household has been contracted to use a small area (around 5-10 mu) of forest to collect fire wood. They also collect some wild vegetables for household consumption.

6. Most communities have a large area of forests, but very limited management and benefit from it. The communities are poor. They have no incentive to look after and utilize the forest. Illegal logging still happens from time to time.

7. The outstanding land tenure issue will discourage the community from practicing effective forest management and obtaining benefit in sustainable way from it. The project is proposing to conduct forestry management activities with the community. If the forest boundary is not clear, it will be unable to operate. The forest ownership or user right is not clear, therefore certainty of future benefits from management will not be obvious and will deter farmers from trying to improve the quality of the forests.

8. To resolve this issue, the Shaanxi Forestry Department (SFD) needs to initiate a process for defining the administrative village or natural village forest area, issue a forest certificate to the administrative village or natural village to confirm the legal right of the collective. SFD should also explore the possibility to encourage collective forests to be contracted to households. That will give the households scope to manage and use the forests in a legal and sustainable manner. The projects will have the chance to work with the households groups to practice eco-system management.

1. Recommendations on setting up a framework on collective forestry land tenure:

9. It is suggested that the project sub-contract a study working together with SFD to explore:

(i) Approach to define the collective forests boundary and area (ii) The appropriate collective (administrative or natural village) the forestry certificate should be issued to (iii) Analysis of the possibility, advantage and disadvantage of contracting collective forests to individual households (iv) Suggestion solutions 2 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 9

(v) Propose a plan for action including a timetable to SFD.

10. Cost of the study will be $30,000 over a period of 2 months. The study should start at the beginning of project implementation.

B. Reform on Government and Community Partnership on Community Natural Forests Management in Shaanxi

11. Logging and forest thinning are banned in Natural Forests Protection Area including community forests. Non timber products utilization has been restricted in many ways.

12. A logging ban has been in place since the national Natural Forests Protection Program (NFPP) started in year 1999. After enforcement of the logging ban commenced, state owned forestry farms received support from the government financially and they can still run tourism business. In contrast the communities whose forests are in the NFPP project area have received no additional support except plantation subsidies, but they lost the income opportunity from the forest. The project En situ and Ex situ forests are both inside NFPP area so logging and grazing are banned.

13. The project PPTA team thinks there is great potential to develop sustainable forest utility models such as ANALOG forests, and to restore natural habitant in the en situ area. The project has proposed to include forestry management models in project en situ area as project activities. Therefore, SFA will need to provide an exemption to allow the project to test the models in the project area. If the project has successful experience in sustainable management of natural forests with the community, it will be a good model of partnership between government and community in forest management. It will be essential to expand the experience to the broader Qinling area such as inside the Qinling National Ecological Function Zone.

14. Very few non timber forest products (NTFP) from the collective forests are able to be taken out of the mountains according to the project social assessment report. Louguantai Forestry Farm Checking Points stop farmers from taking medicine herbs and other NTFP out of the mountains. Use of NTFP is a very important option for sustainable forests management. The PPTA team and GEF team recommend to further explore NTFP development under the project. NTFP development will be a very important part of the en situ strategy. If project NTFP development activities are successful, the experience can be replicated in other part of the Qinling Mountain.

15. NTFP development and forestry model testing will be included in a village forests management plan. The plan will be agreed with forestry authority designated by SFD, to be implemented during the project life. A solution is needed to remove the restrictions on taking NTFP out of the PA mountain area for smooth project implementation. A further study is desirable to explore the approach to develop community-government partnership in managing collective natural forests.

1. Recommendations for resolving the issue

(i) Shaanxi Forestry Department to issue an exemption to the project implementation unit to allow the project to conduct analog forests and other forest models testing in pilot villages inside the project area after asking necessary approval. (ii) Shaanxi Forestry Department will find a solution with Louguantai Forestry Farm on removing the restriction to taking of NTFP from collective forests out of the PA mountains. (iii) Shaanxi Forestry Department will lead a forest management partnership monitoring and studying group to conduct monitoring and consultation with local communities and the project implementation team. The study group should invite the Economic and Policy Researching Institute of SFA to participate in the study. The monitoring and studying group will focus on : (a) Learning the lessons from the project forests model tested. (b) Further explore the possibilities to develop the pilot models into a replicable government–community forests management partnership system. It must be based on respect of community ownership and use right to the collective forests. It should carefully review the proposed village forest management plan approach. It should carefully study the approach of positive partnership TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 3 Final Report Appendix 9

interactive between state-owned forests farm and the surrounding communities. (c) Explore the possibility of developing a monitoring system to monitor the quality of the forests including non timber resources in the forest. The system will include principles and indicators and measures for monitoring. It must be simple and easy to conduct together with the community. (d) Develop a proposal to SFA on collective owned natural forest management issues to allow the community to manage and use the forests in sustainable manner in Qinling National Ecology Function Zone.

16. The forests management partnership monitoring and studying group will be contracted by the project over four years with input of two months each year. Suggested budgeting for this group will be $80,000.

17. The application for exemptions should be organized before the project starts after the project is approved, so that the exemptions will be in place when the project is ready for implementation.

18. The study group should be formed at the end of the first year of the project implementation after the pilot villages are chosen.

C. Reform on Eco-tourism Management through developing an Eco-tourism Guideline in Shaanxi

19. There is no clear guideline in Qinling Mountains for eco-tourism development in terms of biodiversity conservation sensitivity.

20. The Qinling Mountains have become a significant tourism development area on both north slope and south slope. The Plan of Shaanxi Qinling National Ecological Function Protection Zone has indicated 15 tourism development areas in Qinling Mountain. There are under going extensive development in the name of eco-tourism.

21. There is no clear definition of eco-tourism in the Plan to guide eco-tourism development in principle. Considering most of Qinling mountain areas are fragile in terms of eco-system and have significant value of biodiversity in a global sense, it will be very important to make sure these eco- tourism developments are guided in biodiversity conservation sensitivities to prevent over exploitation and irreversible damage.

22. The PPTA team has explored world –wide eco-tourism experience and principles. The project will introduce eco-tourism operations in the project area to follow the biodiversity conservation sensitivity principle. It will be crucial for the project to work with related government agencies to develop simple, enforceable guidelines for eco-tourism operation to protect biodiversity at landscape or ecosystem level.

1. Recommendations on reform of guiding eco-tourism development in Qinling area:

23. The project will subcontract work with Shaanxi Forestry Department (SFD), Shaanxi Environmental Protection Bureau (SEPB) and Shaanxi Tourism Bureau to develop an eco-tourism guideline. The guideline should fit within the legal frame-work and be enforceable. The guideline should be simple to be easily monitored and understood.

The guideline will include:

(i) The definition of eco-tourism (ii) Implications of the application of principles of eco-tourism in Qinling Mountain (iii) Indicators for eco-tourism operation to meet the principles of eco-tourism. (iv) Monitoring system and enforcement measures. 4 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 9

24. The sub-contract should be in place in first year of project implementation, so the sub- contract team will be able to form the general approach and principle for the study together with the project TA team. The contract will continue for 3 years to explore the issues with 3 months inputs from each year. The proposed budget for the sub-contract will be $90,000. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 10

PROJECT COSTS

China Shaanxi Qinling Mountains Integrated Ecosystem Management Project Expenditure Accounts Project Cost Summary (Local Ten Thousand) (US$ '000) Local Foreign Total Local Foreign Total

I. Investment Costs A. Civil Works Construction 19,396.2 2,155.1 21,551.4 25,521.4 2,835.7 28,357.1 Planting 3,075.8 341.8 3,417.6 4,047.2 449.7 4,496.8 Infrastructure 12,665.5 1,407.3 14,072.8 16,665.1 1,851.7 18,516.8 Landscaping 8,324.3 924.9 9,249.2 10,953.0 1,217.0 12,170.0 Subtotal Civil Works 43,461.9 4,829.1 48,291.0 57,186.7 6,354.1 63,540.7 B. Equipment Equipment - Machinery 2,179.9 726.6 2,906.6 2,868.3 956.1 3,824.4 Equipment - Outfitting 428.2 142.7 570.9 563.4 187.8 751.2 Other Equipment 2,146.4 238.5 2,384.9 2,824.2 313.8 3,138.0 Office Equipment 1,311.0 145.7 1,456.7 1,725.0 191.7 1,916.7 Equipment-Furniture 256.0 - 256.0 336.8 - 336.8 Subtotal Equipment 6,321.4 1,253.5 7,575.0 8,317.7 1,649.4 9,967.0 C. Vehicles Cars & Trucks 364.0 121.3 485.3 478.9 159.6 638.6 D. Materials Planting Material & Supplies 3,427.8 - 3,427.8 4,510.3 - 4,510.3 Office Materials & Supplies 389.5 - 389.5 512.5 - 512.5 Subtotal Materials 3,817.3 - 3,817.3 5,022.8 - 5,022.8 E. Training Technical Training (AGENCIES) 49.9 - 49.9 65.7 - 65.7 Stakeholder Technical Training 158.0 - 158.0 207.9 - 207.9 Vocational Training 91.5 - 91.5 120.4 - 120.4 Community Training & Extension 200.0 - 200.0 263.2 - 263.2 Demonstrations 482.6 - 482.6 635.0 - 635.0 Subtotal Training 982.0 - 982.0 1,292.1 - 1,292.1 F. Surveys & Studies Planning 310.0 - 310.0 407.9 - 407.9 Monitoring & Evaluation 195.5 - 195.5 257.2 - 257.2 Field Technical Surveys & Trials 1,949.4 - 1,949.4 2,565.0 - 2,565.0 2 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 10

Socio-economic Surveys 1,413.7 - 1,413.7 1,860.2 - 1,860.2 Subtotal Surveys & Studies 3,868.6 - 3,868.6 5,090.3 - 5,090.3 G. Resettlement Compensation 4,175.9 - 4,175.9 5,494.6 - 5,494.6 H. Design & Supervision 2,829.4 - 2,829.4 3,722.8 - 3,722.8 I. Technical Assistance International Consultants - 586.5 586.5 - 772.4 772.4 National Consultants 355.9 - 355.9 468.3 - 468.3 Subtotal Technical Assistance 355.9 586.5 942.4 468.3 772.4 1,240.7 K. Staff Costs Staff 310.0 - 310.0 407.9 - 407.9 Total Investment Costs 66,486.3 6,790.4 73,276.8 87,482.0 8,935.5 96,417.5 II. Recurrent Costs A. Operation & Maintenance Staff costs 1,675.2 - 1,675.2 2,204.2 - 2,204.2 Rental 750.0 - 750.0 986.9 - 986.9 Vehicles 104.0 - 104.0 136.8 - 136.8 Maintenance_Garden infrastructure 3,566.8 - 3,566.8 4,693.1 - 4,693.1 Materials 2,116.4 - 2,116.4 2,784.7 - 2,784.7 Forage 2,740.0 - 2,740.0 3,605.3 - 3,605.3 Medical cure 625.0 - 625.0 822.4 - 822.4 Marketing 700.0 - 700.0 921.1 - 921.1 Total Recurrent Costs 12,277.4 - 12,277.4 16,154.4 - 16,154.4 Total BASELINE COSTS 78,763.7 6,790.4 85,554.1 103,636.4 8,935.5 112,571.9 Physical Contingencies 2,889.8 235.0 3,124.8 3,802.4 309.2 4,111.6 Price Contingencies 4,684.5 246.9 4,931.4 6,163.8 324.9 6,488.7 Total PROJECT COSTS 86,338.0 7,272.3 93,610.3 113,602.6 9,569.5 123,172.1 Interest During Implementation - 4,471.4 4,471.4 - 5,883.5 5,883.5 Commitment Charges - 77.3 77.3 - 101.7 101.7 Total Costs to be Financed 86,338.0 11,821.0 98,159.0 113,602.6 15,554.7 129,157.3 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 3 Final Report Appendix 10

China Shaanxi Qinling Mountains Integrated Ecosystem M (US$ '000) Local/Foreign/Taxes by Financiers Global Asian Development Environmental Hotspring Joint Qinling Botanic Qinling Botanic Bank Facility VEnture Garden (Revenue) Garden(Counterpart) Amount % Amount % Amount % Amount % Amount % I. Foreign 8,888.3 92.9 521.4 5.4 0.9 - - - 137.6 1.4 II. Local (Excl. Taxes) 24,489.8 22.8 3,725.2 3.5 4,732.0 4.4 7,682.4 7.1 33,532.2 31.2 III. Taxes 636.7 10.5 24.1 0.4 573.4 9.5 - - 2,865.2 47.4 Total Project 34,014.8 27.6 4,270.8 3.5 5,306.4 4.3 7,682.4 6.2 36,535.0 29.7 Interest During Implementation 5,883.5 100.0 ------Commitment Charges 101.7 100.0 ------Total Disbursement 40,000.0 31.0 4,270.8 3.3 5,306.4 4.1 7,682.4 5.9 36,535.0 28.3

Local/Foreign/Taxes by Financiers (US$ '000) Animal Rescue Animal Rescue Center Center (Revenue) (Counterpart) The Government Total Amount % Amount % Amount % Amount %

I. Foreign - - 11.3 0.1 10.0 0.1 9,569.5 7.4 To II. Local (Excl. Taxes) 10,096.3 9.4 19,720.5 18.3 3,579.0 3.3 107,557.3 83.3 III. Taxes - - 1,302.5 21.5 643.4 10.6 6,045.3 4.7 10,096.3 8.2 21,034.2 17.1 4,232.3 3.4 123,172.1 95.4 To Interest During Implementation ------5,883.5 4.6 Commitment Charges ------101.7 0.1 10,096.3 7.8 21,034.2 16.3 4,232.3 3.3 129,157.3 100.0 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 11

PROJECT IMPLEMENTATION SCHEDULE TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 12

PROCUREMENT PLAN

Project Name: Shaanxi Loan (grant) Number______Loan Amount: US$ 40 Million Executing Agency Shaanxi Provincial Development Reform Committee Date of first Procurement Plan: Date of this Procurement Plan

A. Project Procurement Thresholds

Except as ADB may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

Procurement of Goods and Works Method Threshold

International Competitive Bidding (ICB) for > US$10,000,000, < US$1,000,000 Works International Competitive Bidding (ICB) for > US$ 1,000,000, < - US$500,000 Goods National Competitive Bidding (NCB) for US$1,000,000 Works National Competitive Bidding (NCB) for US$500,000 Goods Shopping (SHP) for Works

B. ADB Prior or Post Review

Except as ADB may otherwise agree, the following prior or post review requirements apply to the various procurement and consultant recruitment methods used for the project.

Procurement of Goods and Works Procurement Method Prior or Post Comments ICB Works Prior ICB Goods Prior NCB Works Usage subject to the provisions of the NCB Annex. Prior review NCB Goods applies to the first three Prior NCB contracts procured by the procurement agent, irrespective of value. Shopping for Works Usage subject to Procurement Guidelines, Post Shopping for Goods section 3.5.

Limited International Bidding Prior Usage subject to Procurement Guidelines, Section 3.2

Direct Contracting Prior ADB needs to be satisfied that the prices 2 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 12

to be paid are reasonable, and method applied in accordance with Procurement Guidelines, Section 3.6 Community Participation Prior ADB needs to be satisfied that the community can demonstrate adequate capacity through previous successful implementation in accordance with PAI 3.05 H and PAI 5.12; prior review applies only to the first community participation contract for each community group. Recruitment of Consulting Firms

Quality and Cost Based Selection (QCBS-80:20) Prior ADB selects firm and of firm by ADB Executing Agency (EA) negotiates and manages the contract. One EA submission required, namely, minutes of negotiations and draft contract. Recruitment of Individual Consultants Individual Consultant Selection by ADB Prior ADB selects individual; EA contracts and manages contract. One EA submission required, namely, the draft contract Individual Consultant Recruitment by EA Prior EA selects, contracts and manages contract. One EA submission required, namely, candidate ranking and draft contract. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 3 Final Report Appendix 12

C. Goods and Works Contracts Estimated to Cost More Than US$ 1 Million

General Description Contract Procurement Prequalification Advertisement Comments Value Method Of Bidders (y/n) Date (quarter/year) Qinling Botanic Garden 11,120 A: Works 8135 Plant greenhouse 2062 NCB Yes Temple restoration 6073 NCB Yes Roading –internal 1928 NCB Yes B: Goods 2985 Services and security 1,382 NCB Yes Cable car equipment 1,603 ICB Yes Hot Springs 2,589 Development A. Works 2,589 Villa A 1,202 NCB Yes 8 packages Restaurant complex 1,387 NCB Yes 2 packages Shaanxi Animal Rescue 15,664 Center A : Works 15,664 Panda Center 5,971 NCB Yes 8 packages Construction Panda Landscaping 4,898 NCB Yes 4 packages Animal Exposition 6,500 NCB Yes Construction Animal Rescue center 1,685 NCB Yes 4 packages landscape In-situ Conservation 9,500 and Livelihoods A ; Works 9,500 Road construction 2,030 NCB Yes 2 lots Pathway 3,010 NCB/DC No 4 lots improvements Planting Materials 4,460 NCB/DC No

D. Consulting Services Contracts Estimated to Cost More Than US$ 100,000

General Contract Recruitment Advertisement International Comments Description Value Method Date or National (US$ (quarter/year) Assignment million) EA selects, EA Package A: 122.5 QBS 3/08 Both negotiates and SARC contracts Package B QCBS VDP, In-situ ADB selects, EA 80:20 Monitoring 1.196.7 2/08 Both negotiates and Technical: Planning contracts Price

E. Goods and Works / Related Services Contracts Estimated to Cost Less than US$ 1 Million 4 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 12

General Value of Number of Procurement / Comments Description Contracts Contracts Recruitment (US$ ‘000) Method Qinling Botanic A: Works Rose Garden 189 Multiple NCB Legume Garden 193.9 Multiple NCB Magnolia Garden – site works 418 Multiple NCB Magnolia Infrastructure 338.5 Multiple NCB Magnolia Nursery 141 Multiple NCB Magnolia Other 428.8 Multiple NCB Bamboo 826 Multiple NCB Suoicc Garden 107 Multiple NCB Ulma 76 Multiple NCB Maple 736.7 Multiple NCB Profol garden 101.5 Multiple NCB Gingko 425.7 Multiple NCB Pine Garden 532 Multiple NCB Yew Garden 380 Multiple NCB Taxo Garden 532 Multiple NCB Cepha garden 357 Multiple NCB Cupress garden 133.9 Multiple NCB Integrated Garden 249.1 Multiple NCB Poisonous Plants 118.5 Multiple NCB Qinbu Garden 117.9 Multiple NCB Herb garden 123.1 Multiple NCB Lawn and landscape 713.1 Multiple NCB Greenhouse for 764 Multiple NCB Greenhouse for Water plants 764 Multiple NCB Greenhouse for Cacti 663 Multiple NCB Greenhouse for Fungus 663 Multiple NCB Public Building 663 Multiple NCB Paleontology Building 726 Multiple NCB Glacier Building 602 Multiple NCB Modern Creatures 648.9 Multiple NCB Public buildings 207.6 Multiple NCB Science building 674.8 Multiple NCB Dining Building 350.4 Multiple NCB Road drainage and bridges 739 Multiple NCB Public Square 989 Multiple NCB Parking 467 Multiple NCB Boundaries 316.9 Multiple NCB Cable car 666 Multiple ICB B Goods Greenhouse Goods 1331 Multiple NCB Electric Supply 246 Multiple NCB Paleontology outfitting 605 Multiple NCB Paleontology specimens 420 Multiple NCB Glacier fittings 411 Multiple NCB Glacier Goods 373.9 Multiple NCB Modern creatures building fitting 541 Multiple NCB Modern Creatures Other 374 Multiple NCB Public Buildings 293.7 Multiple NCB Specimens 526 Multiple NCB Railcar 435.9 Multiple NCB TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 5 Final Report Appendix 12

Science building fitting 311 Multiple NCB Science building other 700 Multiple NCB Dining room fitting 160 Multiple NCB Dining cooking 465 Multiple NCB Road lighting 899 Multiple NCB Other road goods 103 Multiple NCB Water supply 190.8 Multiple NCB Drainage 89.4 Multiple NCB Power and telecom 953.4 Multiple NCB Environmental Protection 524 Multiple NCB Vehicles 283 Multiple NCB Fire control and Office Equip 102 Multiple NCB C: Services Training 274 1 DC Design fee 963 Multiple DC Other fees 354 5 DC Marketing materials 517 Multiple DC/SHOPPING

Hot Springs Development A: Works Villa B 905 Multiple DC Villa C 661 Multiple DC …Pool Development 204 Multiple DC Parking lot and roads 336.3 Multiple DC B : Goods Restaurant equipment 655 Multiple DC Water supply/Irrig 538.7 Multiple DC Boiler and cooling ventilation 807.5 Multiple DC …Power supply and Lighting 600.7 Multiple DC Communication equip 1.7 Multiple DC Decoration and fittings and 301.6 Multiple DC furnishings Vehicles 40 Multiple DC C : Services Training 62.1 1 DC Design fees 376 DC Supervision costs 150 DC Management fees 225.7 1 DC

Shaanxi Animal Rescue Center A ; Works Panda infrastructure 792 Multiple NCB Environment Protection – all 192.3 Multiple NCB Panda Forage 988 Multiple DC /CP Ibis Landscape and 175 Multiple NCB infrastructure (Office and wetland construction) Ibis land 335 1 DC Animal Exposition Construction Animal Exposition Animal Rescue Center Land 881 1 DC NCB Animal Rescue Center 964 Multiple NCB Construction Animal Rescue center 198 Multiple NCB infrastructure G Monkey Land and 975 1 DC 6 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 12 construction G Monkey Infrastructure and 389.5 Multiple NCB landscape B : Goods 1267 Equipment animal rescue center 815.3 Multiple NCB Equipment 208.6 Multiple NCB Vehicles 243.2 Multiple NCB C: Services 925.2 Training 49.1 1 DC Design and Supervision 500.6 1 DC Management fees 253 1 DC

In-situ Conservation and Livelihoods A ; Works Homestay construction 160 Multiple NCB B : Goods Conservation Agriculture plots 68.6 Multiple NCB Homestay fittings 191 Multiple NCB Energy systems 934 Multiple NCB Water Supply 934 Multiple NCB C: Services VDP training 70 1 DC VDP Data collection and 573.6 Multiple NCB surveys VDP Plan production 30 1 DC VDP Planning contracts –NGO 1109 16 DC SME Programs 1570 Multiple DC/NCB Homestay training 58 1 DC Design and Supervision 22.6 1 DC

In-situ - Conservation A: Goods Habitat planting 664 3 DC Implementation grants 161 Multiple DC/CP Planning costs 251 Multiple DC Research grants and 696 Multiple DC endangered spp research

Project Management A: Goods Equipment and vehicles 56.3 2 NCB B: Services Monitoring contracts 62.6 3 DC Resettlement Monitoring 25.2 1 DC Contract Institutional Strengthening A: Services Legal reform contracts 330 6 DC Conservation Replication A: Services WWF Monitoring contract 302.1 1 DC Monitoring equipment 68 2 NCB Data Purchase and collection 121 4 DC include imagery Training 42 1 DC TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 7 Final Report Appendix 12

Research Contracts 616 Multiple DC Awareness contracts 311 Multiple DC

Legend CP = community participation, CQS = consultants qualification selection, DC = direct contracting, ICB = international competitive bidding, LIB = limited international bidding, NCB = national competitive bidding, NCB/CP = combination of national competitive bidding and community participation, NCB/LIB = combination of national competitive bidding and limited international bidding, NCB/SHP = combination of national competitive bidding and shopping, QCBS = quality and cost-based selection, SHP = shopping TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 13

FINANCIAL AND ECONOMIC ASSESSMENT

A. Introduction

1. This appendix contains a summary of the financial and economic analysis for the project components and subprojects as well as the overall Project. A set of detailed analysis is contained in Supplementary Appendix 15.

2. The Project has 3 components, and 8 subcomponents. Component One provides support for the development of ex-situ commercial businesses and has three subcomponents that are implemented by two implementing agencies. The NQBG will strengthen two commercial enterprises being the QNBG and the Shaanxi Animal Rescue Center1. The Louguan Fudi Tourism Group will implement an expansion of the geothermal hot spring development. For each enterprise project costs, financial and economic costs and benefits have been assessed based on the visitation and associated tourism receipts. Component Two supports two subcomponents: the first provides support for in-situ residents to transition to new and more sustainable livelihood options. This subcomponent includes a range of activities from the provision of social infrastructure, road and pathway improvement and access, small and medium enterprise development support with additional support for the development of community based homestay tourism, and the creation of rights to collective forest land to be planted into analog forest systems. Project costs have been estimated and benefits estimated for example enterprises related to essential oils, medicinal plants, and the homestays. No benefits have been quantified for the reduced transport and travel times, improved water and energy supplies. The second subcomponent for the in-situ program provides support for habitat re-establishment and endangered species management for which project costs have been estimated and benefits assessed in qualitative terms.

3. Component three has three subcomponents being (i) Project Management, (ii) institutional strengthening, and (iii) the conservation replication and awareness program. The first two subcomponents are treated as overheads while the third is a public good and global value set that is assessed only in qualitative terms.

B. Assessment Parameters

4. The economic and financial analysis is in constant 2007 prices. An exchange rate of CNY 7.6 = USD 1 has been used throughout. The Project life is set to end in 2035. For the economic analysis the discount rate is 12% and for the financial analysis a weighted average cost of capita of 5.6% is used. The involvement of commercial funding for the Hot spring Development results in an assessed WACC of 6.8% . Details of the WACC calculations are provided in Annex 1.

1. Financial Parameters

5. Project costs and financial analysis were provided by the IAs in the case of the QBG, SARC and Hot Springs. Prices were modified including standardization of unit costs between IAs and corrections to the SARC financial analysis to ensure consistency with PRC and ADB financial guidelines. For investments linked to Component two and three costs and financial analysis were prepared by the PPTA Team.

6. The financial analysis is based on cash items with non-cash items such as depreciation and amortization of intangible assets separated from operating costs. Most of the financial analysis is based on the net cash flow before the payment of corporate tax to remove the influence of differing taxes based on the overall tax position of each enterprise.

7. Price and physical contingencies were calculated using the following table for different expenditure categories in the case of physical contingencies see Table 1.

1 2 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 13

Table 1: Price and Physical Contingencies Price Contingencies Local 2,2% in 1998 and 3.0% per year thereafter International 1.9% per year Physical – Same Percentages to Each Broad Category2 Civil Works 5% Equipment 0% Vehicles 0% Materials 5%3 Training 2% Surveys and Studies 5% Resettlement 10%4

8. The disparity between inflation factors for foreign and local cost impacts purchasing power. The analysis does not apply Constant Purchasing Power (CPP) to exchange rates as the impact is the reverse of the expected exchange rate movement. This leads to exchange rate risk for the borrower.

9. The exchange rate assumptions used are based on constant CNY 7.6 per USD 1 rate as at June 2007. The current expectations are that, despite higher inflation in PRC compared with international inflation, there will be continued depreciation of the USD against the CNY effectively resulting in declining purchasing power for the USD denominated loan. The use of constant purchasing parity could be used to reduce the risks created by exchange rate movement during the construction period; however, the current set of inflation forecasts would, under CPP rules, result in further depreciation of the USD against the CNY compounding the problem of declining purchasing power.

10. Consistent with the ADB’s Financial Analysis Guidelines, the cash outflow for capital is the base cost plus physical contingencies and therefore excludes the price contingencies (based on projected international and local inflation). This measure of capital costs is used because the financial analysis is in constant 2007 CNY.

2. Economic Parameters

11. The economic analysis uses the domestic price level (not the world price level) as the numeraire or reference point for converting financial into economic prices.

12. Financial prices were converted to economic prices through removing taxes, subsidies and market distortions. The sales tax and value added tax adjustments (see Table 2) were made to the financial prices in the investment costs. In addition, sales taxes were removed from operating costs/cash outflow and a factor of 0.95 was applied to the non-wage purchases of the revenue-earning entities during operation. This is consistent with a sales tax rate of about 5%.

2 On assumption that the three ex-situ tourism enterprises are facing similar construction conditions and each used professional design teams, following similar national guidelines, to estimate project costs. 3 Same as civil works. 4 Resettlement estimates not done by a professional design team. Therefore, numbers could change. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 3 Final Report Appendix 13

Table 2: Rates of Taxation to be Applied to the Difference Purchases of Project Financed Enterprises during Construction and Operation Rate of No. Item Remarks Taxation5 (%) 1 Products the Project Will Buy During Construction 1.1 Vehicles 14.076 1.2 Construction materials 5.48 1.3 Furniture 3.85 1.4 Electronic appliances/office equipment 2.92 1.5 Electric equipment 4.07 1.6 Seedling 3.85 1.7 Conventional machines 4.07 1.8 Agricultural chemicals 3.69 Based on sales income 1.9 Electricity and water 5.45 2 The Products/Services the Project will Buy and Sell During Operation 2.1 Admission ticket 5.5 2.2 Tourist reception (villa) 5.5 2.3 Framer’s Agricultural Products 0 2.4 Tourism handicrafts 3.85 2.5 Most other non-wage agricultural purchases 5.5 (Source: Provided to PPTA by accountants in Xi’an.)

13. As the market and Shaanxi becomes more integrated into the international economy, conversion factors are used less often in PRC economic analysis. The Team used a standard conversion factor (SCF) of 1.0 for most non-wage purchases. In recent ADB RRPs for projects in China, there is varied practice with regard to the conversion of financial to economic prices. The Hunan Flood Management Sector Project (June 2006) uses a SCF of 1.09 and a SWRF of 0.90; the Heilongjiang Road Network Development Project (June2006) has a SERF of 1.01 (SCF = 0.99) and a SWRF of 0.67; the Wastewater and Stormwater Management Project (June 2006) states that conversion factors have been used to estimate economic prices but does not state what these factors are; the Guangxi Urban Environment Upgrading Project (June2006) used implied conversion factors between 0.96 and 1.0; and the Shandong Basin Pollution Control Project (May2006) uses a SERF of 1.013 (SCF = 0.987).

14. The one input adjusted was labor cost. A Standard Conversion Factor (SCF) of 1.0 was used for skilled and semi-skilled labor, in light of the growing shortages of such labor in China especially in major urban areas and their suburbs such as Xi’an. the Project Area A is within one hour’s drive from Xi’an and therefore no adjustment for skilled and semi-skilled wages was made.

15. The shadow wage rate factor (SWRF) for unskilled labor is a more complex issue. SERF’s of between 0.25 to 0.8 have been applied to unskilled labor to account of surplus labor especially in rural areas. The Project Area, especially the ex-situ zone) is increasingly part of the Xi’an metro region, and the Project will accelerate this integration. There is evidence that surplus unskilled labor is declining with as a result both unskilled and casual labor wage rates increasing7. Shaanxi for example

5 Includes the construction and education supplementary tax 6 Includes the purchasing supplementary tax 7 See for example a report published recently in the China Daily (May 12-13 on the front page) by the Chinese Academy of Social Sciences on Labor Force Trends in the PRC, which stated that the supply of low-cost labor that has been a major reason for China’s high economic growth since 1978 may start to disappear as early as 2010. One major reason for the potential shortage is that the rural labor force may not be as large as was previously estimated. The report concludes that China is moving from an era of labor surplus to an era of labor shortage. The result is rising labor costs not only in the and the (where wages for unskilled labor have reportedly been increasing for a number of years) but as well in major western PRC cities 4 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 13 has experienced major increases in wage rates for casual unskilled labor for construction and casual farm labor in the past few years. As a consequence a conservative SWRF of 0.8 has been applied to casual and unskilled labor costs.

16. There continues to be high unemployment and underemployment particularly in the in-situ zone. The team applied a SWRF to the construction expenses. This was based on an SWRF of 0.8 with labor costs assumed to account for 50% of the total construction investment. The SCF for construction costs to economic values was therefore 0.9. For planting of trees and the Botanical garden unskilled labor is assumed to be 50% of total costs (excluding the semi-skilled labor costs used to produce nursery plants) and as such the SCF for planting programs was 0.9. Road construction and upgrading costs were also assumed to involve 50% unskilled labor and a SCF of 0.9 was applied. For the Mountain pathways program 80% of costs were assumed to be casual labor and a SCF of 0. 84 used. Finally the home stay investment had a total unskilled labor input amounting to 20% of total costs for a SCF of 0.96).

17. In contrast, tourism workers are semi-skilled to skilled with training included in the investment. No shadow wage rates are applied to workers operating in the tourism enterprises. All of these workers will receive training and arguably should receive a higher wage to retain trained workers and provide a high quality service to their customers. In this situation, it is assumed the opportunity cost of labor equals prevailing market wage rate.

18. The Team’s review of previous national and international project feasibility studies indicated that real discount rates of 8%, 10% and 12% were used as the benchmark rate for the economic internal rate of return (EIRR), depending on the project. An 8% benchmark discount rate was proposed in the PRC document “Indicators and Methodology of Economic Evaluation for the Construction Projects” issued by the National Development & Reform Commission and Ministry of the Construction in 2006. The NPV was assessed at 10% with sensitivity applied at the other levels.

19. The PRC document noted earlier recommended a shadow exchange rate (SER) of 1.08 to be applied to the costs of imports and Project revenues from e.g. international tourists. The analysis did not apply this SER as few Project construction and operating costs involve importation and the number of international visitors to the sites are small relative to overall visitation. In short, internationally traded goods and services will play a minor role in project costs and benefits particularly in the early years. Over a longer time period, the SER will trend towards 1.00 as PRC becomes further integrated with the international economy and its tariff and non-tariff barriers decline through implementing the WTO and other trade agreements. For both reasons, applying a SER would have little impact on the EIRRs computed for the revenue-earning entities of the Project.

C. Project Assessment

20. Benefit and cost estimates are based on the Feasibility study estimates which have been reviewed by the PPTA and modified or reformulated if necessary. Those subprojects with quantified benefit streams – all within Component One – have benefits derived from visitor numbers and visitor receipts including ticket sales, and assorted retail sales. The following section provides the summary of the financial and economic costs for Component One. Benefits are based on marginal increases in visitor numbers for each enterprise.

21. In addition to the quantified benefits that have been incorporated into the Project financial and economic assessments, the project will generate many benefits that have not been or cannot be quantified. Most of these benefits fall into two major categories: environmental and ecosystem benefits and cultural, religious and heritage values. Together these are significant benefits that add further justification for the implementation of the Project whose primary impact seeks to develop sustainable conservation of biodiversity. Included in these categories are:

(i) Benefits accruing from the improved welfare of animals in the SARC (ii) Benefits from the advancement of science related to endangered species recovery from SARC such as Xi’an where wages for unskilled and casual labor reportedly have increased by as much as CNY 10 per day in the last few years. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 5 Final Report Appendix 13

(iii) Benefits from the genetic collection established at QBG (iv) The benefits arising from public awareness and education with respect to the Qinling Mountains and biodiversity conservation (v) Benefits in the overall conservation of biodiversity (vi) Improved ecological functions in the in-situ zone from increased forest cover and the quality of forest cover (vii) The intangible benefits arising from the conservation of Daoist religious sites (viii) Improved environmental quality through the provision of waste management systems

22. Further tangible but not quantified benefits are generated for the current 4,000 residents from the In-situ Livelihood Projects. These include:

(i) Payment for the establishment of Conservation Forestry over 5,000ha that will in the future provide increased livelihoods to 4,000 in-situ residents (ii) Reduced travel times due to improved road and mountain pathway access (iii) Increased economic output derived from alternative livelihoods as represented by medicinal plants, essential oils, and home-stay tourism (iv) Improved health, reduced drudgery, arising from improved access to water and alternative sources of energy with spin-off benefits from reduced fuel wood cutting.

1. Component One Support for Ex-situ Enterprises

23. The financial analysis is presented for the three enterprise investment proposals as well as a consolidation of the two NQBG enterprises into a single financial assessment8.

a. NQBG

i. Qinling Botanical Garden

24. The Botanical Garden will developed to: (i) provide a world class tourism and educational experience to local residents and visitors of Xi’an and SP from other PRC provinces and other countries; (ii) provide an international standard science and research facility on the QM’s bioresources and biodiversity management that will add to the education features of the tourism attraction; (iii) build knowledge, appreciation and understanding of the Qinling experience and culture in particular the Daoist culture and religion which emphasizes harmony between people and nature; (iv) generate a financial surplus, so that a portion of this surplus can be reallocated to support habitat restoration, sustainable biodiversity conservation and sustainable livelihoods in the in-situ portions of the PA and QM ; (v) expand and diversity the tourism base of Xi’an and Shaanxi through constructing and operating an international standard eco-tourism facility; and (vi) provide sustainable livelihoods to local people through employment at the BG, through the sale of goods and services by local firms to the tourism facility, and through the generation of indirect impacts including future tourism investments in (e.g.) home-stay restaurants and accommodation facilities and handicraft production workshops located in the Jixian Township villages near the site to the south and north of provincial highway South 107.

25. A major challenges for the BG is determining the attendance and prices that are needed to provide solid financial performance and loan repayment in the early years, while at the same time offering an exciting tourism experience at an affordable price that will attract significant numbers of domestic tourists and local residents who are on limited budgets and will generate return visitation from both groups.

26. Botanical gardens in PRC typically have high attendance but low entry fees and revenues per visitor. In many cases, these PRC Botanical gardens are older facilities that are not operated on a commercial basis (and/or have already fully recovered their capital costs), and therefore require

8 The consolidated analysis is however not a financial analysis for the NQBG as a whole enterprise. The NQBG also includes the Louguantai Forest Farm and a management overhead that remains unknown to the PPTA. The impact of this could be significant as currently SARC employees are included the Louguantai Forest Farm employees – without agreement on the split and numbers of staff and management overheads a full NQBG financial analysis is not possible. 6 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 13 relatively low entry fees and revenues to cover only operating costs. Most of the current PRC Botanical gardens surveyed have entry fees of CNY30 or less per entry (i.e. visitor). For example, the relatively small but quite appealing Xi’an Botanical Garden near the center of the city has an entry fee of CNY10, as does the much larger and better known Beijing Botanical Garden.

27. In other cases, the site such as the horticultural exhibitions first at Kunming in 1999 and then in Shenyang in 2006 were established and fully paid for as one-year world expo events and therefore can now charge small entry fees that again only need to cover operating costs. Even then, the Shenyang (Liaoning Province) International Horticultural Exposition of 2006, which operated for 184 days from 1 May-31 October 2006, had an entry fee of only CNY50. Now, one year after the Expo, it is operating as a more normal Botanical garden and it is charging an entry fee of CNY20. The Kunming Horticultural Landscape Botanical Garden in Yunnan is now charging the same entry fee. Therefore, to the extent that domestic and international tourists visiting Xi’an – and local residents in southern Shaanxi – have some reference point for what they are prepared to pay to visit a Botanical garden, that reference point would appear to be less than CNY50 a figure confirmed by a small willingness-to-pay survey conducted.

28. The second challenge is that Xi’an and Shaanxi offer a wide range of very attractive tourism facilities that will be competitors of the Botanical Garden and the other PA tourism facilities, particularly in the early years when the BG will be an immature Botanical garden and will not be well known among many visitors to Shaanxi. (A recent survey completed by the Design Team indicated that the BG is well known among local residents because of extensive and favorable media coverage).

29. With the exception of the Terra Cotta Warriors, the Xi’an Wildlife Park and the Xi’an Aquarium, these competing facilities typically charge an entry fee of CNY 40 to 50 and the revenues per visitor appear to be in the range of CNY100-120. The PPTA “willingness to pay” survey confirmed an entry fee of CNY50 and revenues per visitor of about CNY100. Accordingly, a high entry fee and other charges in the early years, and within-site prices total revenues per visitor that are not competitive with alternative tourism facilities in Xi’an and which are seen as not affordable by many local residents and domestic tourists, could result in very low attendance and no growth momentum for the BG based on favorable word-of-mouth advertising. This situation would place early financial performance and ADB loan repayment at risk.

30. In its earlier financial analysis, the BG Team preferred an attendance/pricing scenario which involved lower attendance in the early years – recognizing the immaturity of the Botanical garden and the need to build market interest and image over time – while charging high entry fees and other prices to enter the Park’s attractions. While the low early attendance was justifiable, the PPTA Team argued that the high entry fees and other charges were not competitive with alternative tourism facilities in Xi’an and would not be affordable for many potential visitors from domestic markets especially in the first critical years of BG operation.

31. In its May 2007 FSR, the BG Design Team proposed high early attendance, entry fees and revenues per visitor from 2011 on – with relatively little growth in these parameters9. The Design

9 In fairness to the BG Design Team, it should be stated that the financial analysis guidelines of both the PRC and ADB require that the financial analysis be conducted in terms of real monetary values (where the effects of price inflation are removed) and encourage analysts to use attendance, price and cost parameters that are fixed or at the very least change very little through the projection period. This static approach generally works well for traditional, slow-growth sectors such as agriculture/food processing, forestry and infrastructure.

However, this static approach works less well in high-growth economies like China, and in dynamic sectors such as tourism, where the income elasticity of demand is high (meaning that tourism demand and revenues expand much faster than real per capita incomes) and where effective marketing campaigns and word-of- mouth advertising can move demand curves outward – allowing tourism facilities that are well run and differentiated from competing attractions to raise their prices through time without hurting attendance and revenues.

The static approach applied by the BG Design team leads to situations where attendance and prices appear much too high in the early years but are quite acceptable and even on the conservative side in the later years of the projection period when per capita incomes and tourism demand and revenues in China are higher and the tourism facility is well established within a region’s tourism network for guided and individual tourism. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 7 Final Report Appendix 13

Team used the “analogy” method by assessing attendance and pricing at other tourism facilities, such as the Xishuangbanna Topical Botanical Garden which is 527 km from Kunming, the Shenyang Botanical Garden noted earlier which is 40 km away from the Shenyang City Center, and the Xi’an Qinling Wildlife Park which is also on the North Slope of the Qinling and is 40 km away from the city center. The attendance and pricing figures from these tourism facilities were used to justify first year attendance of 600,000 and an entry fee of CNY70 for the Botanical Garden.

32. The PPTA Team developed a second attendance/pricing scenario that had lower attendance and prices in the early years, which would both grow significantly through time as the BG and the Qinling became better known in the tourism market, the Botanical garden matured and therefore became more interesting to the general tourist as well as biodiversity enthusiasts, and per capita incomes, consumer purchasing power and the percentage of expenditures allocated to tourism and recreation all continue to increase in Xi’an, Shaanxi, and other PRC market segments.

33. The following table compares the pricing strategies of the Design Team and PPTA Team scenarios. Revenues from each source are varied under the PPTA Team pricing/revenue strategy by increasing through time the percentage of visitors who use each service. Alternatively, the same results could be generated by holding the percentages constant and decreasing the price paid for each service. The implications for revenue would be the same. For example, for the same attendance and percentage of visitors (fixed at 85%), the price per visitor to the Ancient Biodiversity Building would need to decrease from CNY30 to CNY25 in order generate the same revenue for 2011 from this source.

34. However, under the PPTA team’s preferred attendance/revenue and pricing scenario, attendance at start-up is also lower – since the Botanical gardens are immature and the BG facility is not yet fully established. Benefit estimation was based on a visitor profile starting from 350,000 in 2011 and increasing at an average growth rate of 5.3 % of the life of the analysis. Entry fees of CNY 50 per visitor were used. The Feasibility study used a start up figure of 600,000 visitor at an entry fee of CNY75 per visitor.

Table 3: QBG Visitor Projection Assumptions

Entry Assumptions: Fee(CNY) 1 BG Attendance at the first year 350000 50 Growth Rate(Average) 5.29% 2 Percentage of Total will visit Paleontology 85% 30 3 Percentage of Total will visit Temple 30% 30 4 Percentage of Total will take electric vehicle 50% 30 5 Percentage of Total will take cableway 30% 60 6 Percentage of Total will have fast food 30% 20 7 Every 50 tourists will park once 50 20

35. The estimated visitors per attraction use din both the financial and economic analysis are presented table 4. 8 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 13

Table 4: Projected Visitor Numbers per QBG Attraction

Attendance 2011 2012 2013 2014 2015 2020 2035 Total Attendance 350000 391753 433506 475259 517012 725776 1272200 Growth Rate (annual) 11.93% 10.66% 9.63% 8.79% 6.10% 2.50% Paleontology 297500 332990 368480 403970 439460 616910 1081370 Temples 105000 117526 130052 142578 155104 217733 381660 Electric Vehicle 175000 195876 216753 237629 258506 362888 636100 Cableway 105000 117526 130052 142578 155104 217733 381660 Fast Food 105000 117526 130052 142578 155104 217733 381660 Parking times) 7000 7835 8670 9505 10340 14516 25444

36. The total investment into the QBG is CNY365 million ($48million) for the investment at the 269ha site only see table 5.

Table 5: QBG Investment Costs – (CNY ‘0,000’s)

Item 2008 2009 2010 2011 2012

A: Financial Costs Fixed Asset 599.4 24605.3 0.0 1712.5 Civil Works 321.7 21785.3 682.0 Equipments 277.7 2820.0 1030.6 Intangible Asset 5910.8 76.7 131.8 13.8 Total investment 9598.7 24709.5 536.5 1726.3 B: Economic Costs Total investment 5910.8 76.7 131.8 13.8

37. The projected revenues and costs are detailed in Supplementary Appendix15. The summary revenue and cost for the construction period through to 2015 is presented in Table 6 below. Based on the project models and the costs provided by the Enterprise the before tax FIRR is estimated to be 9.5% and the after tax FIRR 8%. The inclusion of the shareholder payment for resettlement compensation reduces the FIRR to 9.07% and 7.45% respectively. Both rates of return are above the WACC and are considered to be viable. The major challenge for the QBG will be cashflow during the construction period – something that the PDRC / PPTA EA has confirmed the Government will underwrite cashflow short falls.

38. The Incorporation of a revenue transfer to the Louguantai Forest Farm Division of QNBG will involve an annual charge of $148,000 in 2012 will reduce the post tax FIRR to 6.8%.

Table 6: Forecast Financial Cashflows 2008 to 2015

Item 2008 2009 2010 2011 2012 2013 2014 2015 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 9 Final Report Appendix 13

Cash in 0.0 0.0 0.0 3502.6 4586.9 5075.7 5564.6 6053.5 Revenue 0.0 0.0 0.0 3706.5 4853.8 5371.1 5888.5 6405.8 Sales Tax(5.5%) 0.0 0.0 0.0 203.9 267.0 295.4 323.9 352.3 Residual Value Cash out 9813.2 26738.8 3062.2 4417.2 2693.2 2693.2 3618.7 3561.2 Investment 8889.0 24679.0 539.0 1724.0 Operating cost 831.3 2059.8 2523.2 2693.2 2693.2 2693.2 3618.7 3561.2 Working capital 92.9 Net Cash Flow Before Income Tax -9813.2 -26738.8 -3062.2 -914.5 1893.7 2382.5 1945.9 2492.2 FIRR Before Income Tax 9.52% FNPV Before Income Tax at 10% -2105.2 Income Tax 0.0 0.0 0.0 0.0 0.0 238.0 0.0 265.4 Net Cash Flow After Income Tax -9813.2 -26738.8 -3062.2 -914.5 1893.7 2144.5 1945.9 2226.8 FIRR After Income Tax 8.00% FNPV After Income Tax at 10% -8028.5

39. The financial rates of returns were tested for shifts in both revenue and costs – see Table 7 – and found to be relatively robust, however the assessment suggests that there would be significant benefits from a further critical review of costs to increase the viability and reduce the risk associated with the investment.

Table 7: FIRR Sensitivity Analysis

Sensitive Analysis Before Income Tax After Income Tax FIRR NPV FIRR NPV Operating Cost (10% up) 8.73% -5775.9 7.23% -11393.5 Operating Cost (10% down) 9.86% -633.1 8.26% -7038.4 Operating Cost (20% down) 10.44% 1938.2 8.79% -4860.9

Revenue (10% down) 8.04% -8507.9 6.60% -13395.9 Revenue (10% up) 10.45% 2098.9 8.80% -5036 Revenue (20% up) 11.54% 7402.3 9.80% -856.1

40. Assuming that it is well designed, well constructed and operated to a high international standard, the ex-situ Botanical Garden is expected to: (i) significantly strengthen and diversify the Shaanxi and Xi’an tourism bases, (ii) attract new tourists to the province and city and further expand tourism revenues through extending the length of stay of some current and projected tourists, (iii) help to promote habitat restoration and improved biodiversity management and conservation in the PA and the wider QM through direct investments in science, research, demonstration and outreach and through the education of visitors on the importance of protecting the QM’s valuable bioresources and ecosystems, and (iv) generate sustainable livelihoods for the PA and target populations through: job creation at the ex-situ site and investments in the in-situ area; purchasing goods and services from PA and target area residents, business enterprises and village groups, and demonstrating how improved biodiversity management can lead to higher and more sustainable livelihoods for PA and wider QM households and villages.

41. The number of direct jobs at the ex-situ QBG site during the Phase I construction period could be a total of 6,000 person years, or an average of about 1,500 per year from 2008 to 2011. After startup, the Botanical Garden will directly employ about 270 people and this number will increase with the advances in attendance. The proportion of local resident employed could be as high as 1.5% at the end of the projection period, while perhaps about 6% of the target area households could benefit from employment at this site. However, policies and programs are needed to ensure that these potential local employment benefits, as well as benefits for local businesses and suppliers, are realized. 10 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 13

42. The economic analysis of the QBG estimated the EIRR to be 10.9% - see Table 6. Again whilst above the hurdle rate for the PRC it is marginally viable for ADB purposes highlighting the need for the previously recommended review of costs.

Table 8: QBG Economic Net Cash Flow

Item 2008 2009 2010 2011 2012 2013 2014 2015 Cash in 0.0 0.0 0.0 3706.5 4853.8 5371.1 5888.5 6405.8 Revenue 0.0 0.0 0.0 3706.5 4853.8 5371.1 5888.5 6405.8 Residual Value Cash out 9302.0 24345.6 2935.4 4059.4 2672.7 2672.7 3670.6 3609.3 Investment 8244.0 22190.0 443.0 1386.7 Operating cost 965.1 2155.6 2492.4 2672.7 2672.7 2672.7 3670.6 3609.3 Working capital 92.9 Net Cash Flow -9302.0 -24345.6 -2935.4 -352.9 2181.2 2698.5 2217.9 2796.5 EIRR 10.85% ENPV 3638.5

43. The EIRR is relatively sensitive to the movement in revenue and costs. Given the difficulty in revenue forecasting there is a need for careful reassessment of the investment and the underlying assumptions. The PPTA has been concerned about the assumptions and as a result has taken a conservative position for visitor numbers. The PPTA concludes that the QBG is a viable investment but there is considerable risk of commercial failure arising during the first 5 to 10 years. Experienced commercial management, cost reviews and more market research are important risk management strategies.

Table 9: Economic Analysis Sensitivity Analysis

EIRR ENPV Operating Cost (10% up) 9.99% -59.1 Operating Cost (20% up) 9.41% -2614.1 Operating Cost (10% down) 11.16% 5050.8 Operating Cost (20% down) 11.77% 7607.7

Revenue (10% up) 11.79% 8107.9 Revenue (20% up) 12.95% 13720 Revenue (10% down) 9.26% -3116.2 Revenue (20% down) 7.85% -8728.3

ii. Shaanxi Animal Rescue Center

44. The expansion, modernization and enhancement of SARC to international standards is intended to: (i) significantly increase the personnel and material investments made in wildlife protection in Shaanxi to improve animal welfare and the survival rate of rescued animals; (ii) rescue endangered animals more efficiently and provide a better natural environment for the animals that are raised on site; (iii) develop an important high-quality site for eco-tourism that meets the needs of the modern, well informed and highly demanding tourist, (iv) increase public awareness and support for the rescue, breeding, science, research and public awareness functions of the SARC; (iv) conduct scientific research on wild animal conservation and expand cooperation, information exchanges and partnerships with similar agencies in China and abroad; and (v) distribute information and knowledge on wildlife conservation to promote greater harmony between animals and people.

45. SARC is planning a two phase development with the Project part financing Phase One. Accordingly, phase one and two investments are proposed to address a number of problems with the current SARC facility namely: inadequate rescue equipment, small size and poor layout of the current TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 11 Final Report Appendix 13 animal exhibition area, animal pens that are overcrowded and well below international standards, severe shortage of research equipment, and weaknesses in technical capabilities. To improve and strengthen the rescue and breeding work of rare wildlife, SARC proposes to: (i) enlarge and greatly improving the rescue, breeding, research and other necessary facilities, (ii) establish satellite sites for breeding in different parts of the PA, (iii) actively adopt new approaches, new technologies, new instruments and (iv) through high quality design, building the Animal Rescue Center into a modernized, high standard, ecological institution that is a domestic leader and fully meets international standards.

46. The SARC expansion and modernization is intended to capitalize on the significant growth in the tourism sector of China, Shaanxi and Xi’an particularly in eco-tourism market segments; and on the sharply rising urbanization and urban incomes of Xi’an and southern Shaanxi. These opportunities will provide financial and technical support its main objectives and functions related to rescue, breeding, science, research and public awareness of the Qinling’s rare animals.

47. By focusing on the QM’s rare and globally important animal species and providing facilities of international standard, SARC offers a far more attractive and exciting experience for general tourists and for biodiversity experts and enthusiasts compared with the Xi’an Wildlife Park – located to the south of Xi’an on the North Slope of the Qinling -- which reportedly has been a significant commercial success since 2004 .

48. The enhancement of SARC is a major component of the proposed “Louguan Experience” . The fact that Louguantai is the birthplace of a major world religion coupled with the SARC and the opportunity to view two of the world’s most iconic fauna, the Giant Panda and Crested Ibis, presents a unique opportunity for development, especially for international clientele. There is a massive interest in the Giant Panda worldwide, and holidays specifically to view the panda can now be arranged from most European countries and North America. Because of the rarity value of the animal, these holidays are sold at premium rates. International tourists are increasingly being offered mixed cultural and wildlife tours.

49. Currently SARC does not feature on organized tours or promotions for Shaanxi Province. The close location of SARC to Xi’an, gives it a strong market advantage, unlike Wolong or Foping Nature Reserve access to SARC is only one hour’s drive from Xi’an. The closeness allows visitors to view giant Panda as a ½ day excursion added to the existing flow of visitors to the Terra Cotta Soldiers.

50. The projected attendance figures are based upon the assumptions in Table 10 and include a 10% factor for nonpaying or official visitors due to the iconic nature of giant Panda and the Crested Ibis.

Table 10: Assumptions for Visitor and Revenue Projections

The attendance for the three attraction in 2011 is 280,000. In the first 5 year period from 2011 to 2016, the annual growth rate peaks and decreases gradually. The attendance of Crested Ibis in 2010 is 266,000. 10 % of tourists will be free guests CNY Panda Entry Fee 55 CNY Crested Ibis Entry Fee 50 CNY Golden Monkey Entry Fee 30 CNY

51. The SARC Design Team projects attendance to start at a fairly low level and then to grow quite rapidly through the early years of the projection period. Therefore, this attendance forecast is used for the analysis. However the SARC prices were adjusted downward to be consistent with market studies to be consistent with market research and to provide a conservative base to the overall assessment. The SARC strategy envisages that all visitors to the SARC Animal Exhibition Center/Zoo would also visit the breeding centers for the three species and the animal exposition center. Visitation numbers are presented in Table 11. 12 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 13

Table 11: SARC Visitor and Revenue Projection

Attendance 2010 2011 2012 2013 2014 2015 Attendance 280000.0 336000.0 403200.0 463680.0 519321.6 Growth Rate Yearly 20% 20% 15% 12% Panda 280000.0 336000.0 403200.0 463680.0 519321.6 Crested Ibis 266000.0 280000.0 336000.0 403200.0 463680.0 519321.6 Golden Monkey 336000.0 403200.0 463680.0 519321.6

Revenue (‘0,000) Panda (CNY50/ person) 1386.0 1663.2 1995.8 2295.2 2570.6

Crested Ibis᧤CNY50 /person᧥ 1197.0 1260.0 1512.0 1814.4 2086.6 2336.9

Golden Monkey CNY30/person᧥ 0.0 907.2 1088.6 1251.9 1402.2 Total 1197.0 2646.0 4082.4 4898.9 5633.7 6309.8

52. The investment into SARC is presented in Table 12 and total CNY215 million (USD28.3 million) over a four year period with nearly 84% being civil works.

Table 12: SARC Investment costs (CNY’0,000’s) Item 2008 2009 2010 2011 2012 A: Financial Costs Fixed Asset 1207.9 7236.9 10843.4 589.9 Civil Works 1199.7 6425.4 10549.3 555.9 Equipments 8.2 811.5 294.1 34.0 Intangible Asset 1266.1 131.1 551.6 0.0 Total investment 2474.0 7368.0 11395.0 589.9 B: Economic Costs Total investment 1266.1 131.1 551.6 0.0

53. The forecast financial cashflow before and after tax is presented in Table 13 with the FIRR before tax estimated to be 16% and the after ax FIRR 13.5% both of which are well above the enterprise WACC of capital. The income transfer to the QBCDA programs base don 8% of the net profit will see a contribution of $160,000 in 2012 and reduces the post tax FIRR to 12.75%.

Table 13: SARC Forecast Cashflow and FIRR (CNY ‘0,000)

Item 2008 2009 2010 2011 2012 2013 2014 2015

0 0 1131 2500 3858 4629 5324 5963 Revenue 0.0 0.0 1197.0 2646.0 4082.4 4898.9 5633.7 6309.8 Sales Tax(5.5%) 0.0 0.0 65.8 145.5 224.5 269.4 309.9 347.0 Residual Value Cash out 3496.7 8959.2 13249.2 2524.4 2015.0 2015.0 2373.1 2351.2 Investment 2474.0 7368.0 11395.0 589.9 Operating cost 1022.7 1591.2 1854.2 1934.5 2015.0 2015.0 2373.1 2351.2 Working capital Net Cash Flow Before Income Tax -3496.7 -8959.2 -12118.0 -23.9 1842.9 2614.5 2950.8 3611.5 Cash in without project 218.9 218.9 218.9 218.9 218.9 218.9 218.9 218.9 Cash out without project 185.7 185.7 185.7 185.7 185.7 185.7 185.7 185.7 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 13 Final Report Appendix 13

Net Cash Flow without project 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 Net Cash Flow Before Income Tax with project -3529.9 -8992.4 -12151.2 -57.2 1809.7 2581.3 2917.5 3578.3 FIRR Before Income Tax 15.96% FNPV Before Income Tax at 10% 18085.0 Income Tax 0.0 0.0 0.0 0.0 278.8 471.6 555.7 720.9 Net Cash Flow After Income Tax with project -3530 -8992 -12151 -57 1531 2110 2362 2857 FIRR After Income Tax 13.51% FNPV After Income Tax at 10% with project 9605

54. The Financial viability was tested for movement in cost and revenues - see Table 14 - and found to be robust under scenarios involving 20% movement of current projections. The proposed use of commercial management will reduce the risks attached to the commercial operation of the SARC.

Table 14: Financial Analysis Sensitivity

Sensitive Analysis Before Income Tax After Income Tax FIRR NPV FIRR NPV Operating Cost (10% up) 14.81% 15621.1 12.56% 7474 Operating Cost (20% up) 14.20% 13781.5 12.03% 5970 Operating Cost (30% up) 13.61% 11941.8 11.50% 4466

Revenue (10% down) 13.90% 12076.8 11.75% 4875 Revenue (20% down) 12.26% 6692.7 10.29% 773 Revenue (30% down) 10.46% 1308.6 8.70% -3329

55. The expansion and modernization of SARC to international standards with completion of Phase I and Phase II will further strengthen and diversify the Shaanxi and Xi’an tourism base and will provide a high quality tourism experience that, together with the Botanical Garden, the Louguantai Forest Park and other ex-situ facilities, will encourage visitors to the Project Area to spend the whole day there or to come back for a second day to the ex-situ sites. This will lengthen their stay and/or increase their spending in the city and province.

56. Construction employment during the three-year construction period is estimated to be about 3,800 person years or nearly 1,300 construction jobs on a full time equivalent basis each year. The expanded SARC site will as well increase the number of operating jobs provided to local people from the current number of about 40 (including casual employees) to over 200 positions after construction of both phases. This number will increase as the number of visitors and the SARC’s gross revenues expand through the projection period. Based on data earlier provided by SARC on its personnel and operating costs, the Team estimates that under the PPTA Team’s base case scenario, employment at SARC after construction of both phases, including staff servicing tourists, employees caring for animals and administrative staff, would likely be about 250 at start-up in 2011, and this number would likely increase to over 400 by 2020 and to about 500 in 2030. The expanded and modernized SARC facility will as well generate quite significant indirect or spin-off benefits through providing service and supply contracts to local companies and other suppliers of goods and services.

57. Other benefits noted in the SARC FSR include: better care of and more healthy animals based on the breeding bases, animal hospital, rescuing and quarantine facilities, and the expanded research facilities and food/forage bases – leading through time to expansions in the population of rare Qinling wildlife. Better animal care, training and research to promote controlled release to the wild or semi- wild (to be funded perhaps in part under the GEF program) could further add to the benefits from the animal conservation work of SARC. This could be particularly important to Crested Ibis. The genetic resources associated with these rare animals will be better protected and utilized at project completion. 14 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 13

58. Over the longer term, strong national and international interest in iconic Qinling animals such as giant Panda, Crested Ibis and Golden Monkey and SARC’s growing reputation for the rescue, care, breeding and release of these animals and for operating a well-known Animal Exhibition Area and Rescue Center to international standards. This reputation will generate significant funds from international NGOs and other donors (corporations, foundations etc.) to support the animal rescue center’s future activities and development. The project will provide technical support for the design process to ensure that the skills and experience within SARC and the international community are brought to bear on the detailed design.

59. The economic cash flow for the period through to 2015 is presented in Table 15 which results in an EIRR of 17.9% based on the net cash flow for the with and without project. In reality the current center would be unlikely to survive past the short term given the low standards of animal welfare and the increasing public rejection of these standards.

Table 15: Economic Analysis of SARC Proposal

Item 2008 2009 2010 2011 2012 2013 2014 2015 Cash in 0 0 1197 2646 4082 4899 5634 6310 Revenue 0.0 0.0 1197.0 2646.0 4082.4 4898.9 5633.7 6309.8 Residual Value Cash out 3401.0 8220.5 11925.2 2432.2 2009.0 2009.0 2367.1 2345.2 Investment 2378.3 6635.3 10077.0 503.7 Operating cost 1022.7 1585.2 1848.2 1928.5 2009.0 2009.0 2367.1 2345.2 Working capital Net Cash Flow Before Income Tax -3401.0 -8220.5 -10728.2 213.8 2073.4 2889.9 3266.6 3964.6 Cash in without project 218.9 218.9 218.9 218.9 218.9 218.9 218.9 218.9 Cash out without project 185.7 185.7 185.7 185.7 185.7 185.7 185.7 185.7 Net Cash Flow without project 33.2 33.2 33.2 33.2 33.2 33.2 33.2 33.2 Net Cash Flow -3434.2 -8253.7 -10761.4 180.6 2040.2 2856.7 3233.4 3931.3 EIRR 17.86% ENPV (10%) 22965.8

60. The EIRR was found to be robust up to 30% movement in either the costs or revenue streams and as such given he conservative visitor numbers the investment as forecast is considered economically feasible.

Table 16: Sensitivity of Economic Analysis

Sensitive Analysis EIRR ENPV Operating Cost (10% up) 16.33% 20149.4 Operating Cost (20% up) 15.69% 18314.8 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 15 Final Report Appendix 13

Operating Cost (30% up) 15.07% 16480.2 Operating Cost (40% up) 14.46% 14645.6

Revenue (10% down) 15.37% 16286.6 Revenue (20% down) 13.64% 10589.2 Revenue (30% down) 11.77% 4891.8 Revenue (40% down) 9.69% -805.7

iii. Consolidated NQBG

61. The Qinling Botanical Garden and SARC commercial enterprises will be managed under a unified institution to be established before Loan Negotiations. The new institution the National Qinling

62. Botanical Garden will derive its revenue from both of these enterprises and will by 2015 generate a total revenue of CNY 127.5 million and CNY 250 million by 2025. The combined enterprises have an estimated FIRR of 12.1% before tax and 10.2% after tax. The FIRR declines to 9.3% after the inclusion of shareholder payments for the Qinling Botanic Garden resettlers and the transfer of funds to the conservation investment program. All FIRR’s are well above the WACC estimated to be 5.6%.

Table 17: Financial Forecasts and Analysis of Consolidated QNBG Enterprises (CNY 10,000) Item 2008 2009 2010 2011 2012 2013 2014 2015 Cash in 0.0 0.0 1131.2 6003.1 8444.7 9705.2 10888.4 12016.2

Revenue 0.0 0.0 1197.0 6352.5 8936.2 10270.0 11522.2 12715.5 Sales Tax(5.5%) 0.0 0.0 65.8 349.4 491.5 564.9 633.7 699.4 Residual Value 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Cash out 13309.9 35698.0 16311.4 6941.6 4708.2 4708.2 5991.8 5912.4 Investment 11363.0 32047.0 11934.0 2313.9 0.0 0.0 0.0 0.0 Operating cost 1854.0 3651.0 4377.4 4627.7 4708.2 4708.2 5991.8 5912.4 Working capital 92.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Net Cash Flow Before Income Tax -13343.1 -35731.3 -15213.5 -971.7 3703.4 4963.8 4863.5 6070.5 FIRR Before Income Tax 12.12% FNPV Before Income Tax at 10% 34064.9 Income Tax 0.0 0.0 0.0 0.0 278.8 709.7 555.7 986.3 Net Cash Flow After Income Tax -13343.1 -35731.3 -15213.5 -971.7 3424.6 4254.1 4307.7 5084.2 FIRR After Income Tax 10.23% FNPV After Income Tax at 10% 11182.1 Q.B.G. Shareholder Pmt 0 0 0 0 114 143 117 150 NCF less shareholding (after tax) -13343 -35731 -15213 -972 3311 4111 4191 4935 FIRR 9.95% Financial Transfer to QBCDA 0 0 0 0 268 333 337 398 NCF (Post Tax) incl. transfer -13343 -35731 -15213 -972 3043 3778 3854 4537 FIRR (after financial transfer) post-tax 9.28%

63. The economic rate of return for the combined enterprises is estimated to be 13.7% and is considered to be economically justified (see table 18).

Table 18: Economic Cash flows for Consolidated NQBG (CNY 0,000’s)

Enterprise 2008 2009 2010 2011 2012 2013 2014 2015 16 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 13

QBG -9302 -24346 -2935 -353 2181 2698 2218 2796 SARC -3434 -8254 -10761 181 2040 2857 3233 3931 Consolidated NQBG -12736 -32599 -13697 -172 4221 5555 5451 6728 EIRR 13.67%

b. Hot Spring Development

64. The investment will: (i) improve leisure tourism services in the Louguantai area; (ii) promote the development of the tourism industry in the Project Area; (iii) stimulate the growth and development of related industries in the Project Area and Zhouzhi County; (iv) provide a multi-purpose tourism facility that appeals to various tourism groups at different levels of income; and (v) promote understanding of the Daoist culture and religion. Based on the hot springs project in Louguantai, seeks to integrate the tourism resources of Louguantai National Forest Park, expand visitation to the Forest Park, and construct a new Culture Tourism District that relies largely on the metropolitan Xi’an tourist market.

65. As described in the Marketing Guide (see Appendix 30), the Hot Springs development is a complementary attraction for the “Louguan Tai Experience” providing accommodation services for longer stay visits to the area. It services a specialized niche market (health tourism), and it provides an add-on service by providing day access to the hot pools. A full one day ‘package’ can be offered which provides a wildlife-culture-recreation experience. Consultation with the Shaanxi Daoist Association indicated a linkage between the Hot Springs and the Daoist sites.

66. The Shaanxi Tourism Group Corporation (STCG is the largest single tourism state-owned enterprise in Shaanxi holds a 51% share of the joint venture. In 2000, the Shaanxi Province Branch of the Bank of China signed a deal with the Group to finance CNY1.8 billion ($218 million) of the Group’s major tourism investments over the next five years through to 2005. This Group was founded in 1998 as a state owned company with a registered capital of CNY3 billion ($36.14 million).

67. The Group is an investment and capital management company authorized by the provincial government to engage in management and development of cultural and scenic tourism sites, travel services, star-class hotels, bus companies and other tourism products. In conducting these functions, the Group places an emphasis on servicing the tourism industry of Shaanxi Province – although the Group has as well invested in other provinces and cities such as Beijing.

68. The Group and its subsidiary companies are engaged in different tourism services including dining, accommodation, travel agencies, transportation, entertainment, and the management of tourist sites. The STCG operates some of China’s most famous historical sites, in particular the Terracotta Warriors site in suburbs of Xian, and its subsidiary companies include some of the most profitable tourism enterprises in the province. The SPG Tourism Bureau provides the Group with policy advice and guidance but there are no financial and staff relationships between the Bureau and the Group. The Group’s funds are generally raised from commercial markets, with the exception of some smaller subsides from the SPG for specific purposes.

69. The Hot Springs Feasibility Study provides detailed attendance, pricing and financial analysis for Phase II of the development to be partly financed by the Project. The Design team’s financial analysis used a discount rate of 12% as its benchmark FIRR, reflecting their commercial requirements. The construction period was assumed to be 2007-2008 and the operating period was assumed to be 15 years from 2009-2023. The PPTA Team altered these periods to 2008-2009 for construction and 2010-2035 for construction to be consistent with the Project.

70. The operating income is generated from the 18 villas, based on 70% occupancy in each year and different daily rates for the villas as follows: Villa A – CNY5,800 per day ($763); Villa B – CNY4,800 per day ($632); and Villa C – CNY3,800 per day ($500). The daily rates are based on the villa and not the number of people. There will be five bedrooms per villa, and the number of people staying over night will normally be 5-10, with a maximum of 12 overnight visitors. Therefore, when ten people are staying over night – two people per bedroom, the daily rate per visitor would be between CNY380-580. However, even if only two rent the villa for the night, the daily rate will be the same. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 17 Final Report Appendix 13

71. Additional revenues are generated from the eco-restaurant and from parking. Eco-restaurant revenues are generated from over-night visitors to the villas and hotel (constructed in phase one) and from day visitors for bathing (50% of visitors at CNY30 per day visitor) and sightseeing (20% of visitors at CNY20 per head). The cost of sales ratios employed by the Hot Springs Design team for lodging, the restaurant and parking are for the most part very consistent with the ratios identified in the independent research by the PPTA Team.. The HS Design Team analysis assumed the same revenues and costs for every year of operation.

Table 19: Assumptions used for Revenue Projections

Unit Capacity Occupancy Daily Item Price Rate Daily guests (CNY) Hot Spring Residential Villa-A 5800 8 70% 5 Villa-B 4800 6 70% 4 Villa-C 3800 4 70% 3 Catering Tourist guest 20 2000 20% 400 Bathing guest 30 600 50% 300 Parking Car 5 200 50% 100 Bus 10 100 50% 50

72. As the investment is building on the existing development the capital construction and investment is expected to be complete within a construction period of one year and that the occupancy and therefore revenue forecasts be achieved one year following. Based on these projections the total revenue per year is approximately CNY 30 million (USD 4 million). The investment costs for the proposal are estimated at CNY 65 million – see Table 20. The mix of costs differs from the other two enterprises with far greater investment into the equipment budget line to outfit the villas, pool and restaurant.

Table 20: Hot Springs Investment Costs (CNY ‘0,000’s)

Item 2008 2009 2010 2011 2012 A: Financial Costs Fixed Asset 5524.2 0.0 0.0 0.0 Civil Works 3200.3 Equipments 2323.9 Intangible Asset 927.3 Total investment 6451.5 B: Economic Costs Total investment 5299

73. The financial forecasts are presented in Table 21 which highlights the strong cash-flow forecast which results in a FIRR before tax of 13.7% and after tax of 10.9% both above the WACC however the after tax operation is lower than the commercial hurdle of 12%. The enterprise has accepted this rate of return however that will require the construction timetable to be fully met.

Table 21: Hot Springs Financial Cash Flow Forecast

Item 2008 2009 2010 2011 2012 2013 2014 2015 18 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 13

Cash in 0 2640 2640 2640 2640 2640 2640 2640 Revenue 0 2794 2794 2794 2794 2794 2794 2794 Sales Tax(5.5%) 0 154 154 154 154 154 154 154 Residual Value Cash out 6766 1663 1644 1644 1644 1644 1787 1778 Investment 6478 0 0 0 Operating cost 288 1663 1644 1644 1644 1644 1787 1778 Net Cash Flow Before Income Tax -6766 977 996 996 996 996 853 861 FIRR Before Income Tax 13.67% FNPV Before Income Tax at 10% 1916 Income Tax 0 157 162 162 162 162 126 128 Net Cash Flow After Income Tax -6766 820 834 834 834 834 727 734 FIRR After Income Tax 10.90% FNPV After Income Tax at 10% 450

74. The FIRR is however quite sensitive to changes in costs or incomes suggesting that the Project needs to be closely assessed in terms of the assumptions that are applied. Central to these are (i) the construction period and the need to avoid delays, (ii) the occupancy early in the project life, (iii) demand for the day visitation services.

Table 22: Hot Spring Financial Analysis Sensitivity

Sensitive Analysis Before Income Tax After Income Tax FIRR NPV FIRR NPV Operating Cost (10% up) 10.89% 460 8.67% -649 Operating Cost (20% up) 8.03% -997 6.34% -1748 Operating Cost (30% up) 5.00% -2453 3.83% -2846

Revenue (10% down) 9.37% -317 7.44% -1225 Revenue (20% down) 4.68% -2551 3.57% -2900 Revenue (30% down) -1.06% -4784 -1.24% -4575

75. The Economic analysis is however somewhat stronger with a EIRR of 23.33 % suggesting a very good investment. Economically the investment is relatively insensitive to changes in revenues and costs – see Tables 23 and 24.

Table 23: Economic Forecast for Hot Springs (CNY 0,000)

Item 2008 2009 2010 2011 2012 2013 2014 2015 Cash in Revenue 0 2794 2794 2794 2794 2794 2794 2794 Residual Value Cash out 5587 1531 1512 1512 1512 1512 1655 1647 Investment 5299 0 0 0 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 19 Final Report Appendix 13

Operating cost 288 1531 1512 1512 1512 1512 1655 1647 Net Cash Flow -5587 1262 1281 1281 1281 1281 1138 1147 EIRR 22.11% ENPV 5400

Table 24: Economic Sensitivity Analysis

Sensitive Analysis

EIRR ENPV Operating Cost (10% up) 20.19% 4312 Operating Cost (20% up) 17.05% 2967 Operating Cost (30% up) 13.88% 1622 Operating Cost (40% up) 10.67% 277 Operating Cost (50% up) 7.36% -1068

Revenue (10% down) 17.88% 3293 Revenue (20% down) 12.28% 950 Revenue (30% down) 6.29% -1434

c. Component Summary – Economic Assessment

76. Component one has an overall EIRR of 14.2% estimated from the assumptions described above for each of the subcomponents – see table 25. These benefits do not include the intangible benefits linked to species conservation, awareness and education, and the scientific knowledge to be developed from the QBG and SARC.

Table 25: Component One Economic NCF and EIRR Subcomponent NCF 2008 2009 2010 2011 2012 2013 2014 2015 Qinling Botanic Garden -9302 -24346 -2935 -353 2181 2698 2218 2796 SARC -3434 -8254 -10761 181 2040 2857 3233 3931 Hotsprings -5587 1262 1281 1281 1281 1281 1138 1147 Component One NCF -18323 -31337 -12415 1109 5503 6837 6589 7875 EIRR Component One 14.19%

77. The beneficiaries include the domestic and international tourists who visit the tourism sites and enjoy the facilities and services and learning more about the Qinling Mountain’s bioresources, history, culture and religions. By 2011, once the first phases of the QBG and SARC and the second phase of the Hot Springs are completed, the total number of tourists visiting the PA will be about 700,00010, compared with about 300,000 at the present time. With completion of all phases of the three ex-situ enterprises, the total number of visitors to the tourism facilities would approach 1.8 million and could be over 2.3 million by 2030.

78. The target beneficiaries within the Project Area target area people who receive jobs generated by the construction of the Project investments and the operating jobs after construction after construction. The following provides employment estimates from the construction and operation stages of the Project based on estimates provided in the FSRs.

10 This number takes account of the number of visitors who are expected to visit two or even all three ex-situ sites in one day. Actual attendance counts when the three sites are combined together would therefore be higher. 20 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 13

Table 26: Estimated Job Creation from Component One Enterprises Construction: Full-Time Equivalents Operations Aggregated Over the 2008-2013 Construction Period Component I Tourism 10,900 650 in 2011 and 725 in 2013, Facilities (Averaging 3,500 per year from expanding to 870 in 2020 and nearly 2008-2010) 1,100 in 2030

79. The added benefit from component one is the investment generated for input into the in-situ and wider Qinling Mountains. Initial estimates indicate that by project completion this could amount to USD 350,000 increasing to over USD 1 million based on a levy equivalent to 15% of net profit levels from QBG and SARC.

2. Component Two: In-situ Livelihood improvement and Biodiversity Conservation

a. Improved Forest Based Livelihoods

80. The Project will introduce technologies, infrastructure and business development resources to reduce poverty that currently afflicts 70% of the estimate 1,370 households within the 16 administrative villages. Livelihood improvement within forest based production systems will be demonstrated and evaluated to enable policy reforms and replication of successful models throughout the Qinling Mountains. The Project will prepare 16 village development plans including a community forest and natural resource plan prepared using a participatory planning process (see Appendix 10).

81. The plan will identify collective forest land that will be surveyed and demarcated, and the Shaanxi Forest Bureau will issue each collective with the necessary forest tenure certificates establishing rights to forest resources for individuals. During the planning process village forestry associations will be formed through which the conservation forestry program will be implemented.

82. The Project will support the development of 5,000 ha of analog conservation forestry through the provision of technical support, planting materials, site management technologies including light penetration, shade planting, and intercropping. Mixed species forests that mature into forests that are analogous to natural forest will provide substantial wildlife benefits, reduced soil and water loss, and both forest and non-forest products for harvest. It is expected that up to 3.5 ha may be allocated to each household based on 100% involvement and 5ha based on approximately 70% involvement. The benefits of the analog forestry have not been quantified due to (i) the need for a substantial policy and legal reform in terms of issuance of tenure over forest resources, exemptions for manipulating existing forest cover, and the enabling of households to derive revenue from the analog forests once established, and (ii) the long term nature of benefits accruing.

83. In-situ households will also have access to small business development grants to establish value-adding enterprises. Opportunities and interest in such enterprises will be identified during the village planning process. These will be assessed through Project supported research studies into plant and plant extract opportunities including essential oils and medicinal plants. Additional support will undertake market research and market chain linkage studies to ensure viability and to maximize their integration within value chains. Community based ecotourism home-stays for medium to high value clients will be developed to support the growing demand for overnight accommodation in wild or natural environments. It is proposed to differentiate these from existing home stays by providing a slightly higher quality of service and accommodation. A total of 10 - 4 room home stays are include in the project. The forecast financial rates of return indicate that an FIRR of 19.1% for a 4 room home stay that will employ 8 to 10 people on a full time basis.

84. The financial model assumes a 40% occupancy increasing to 50% after 10 years and stabilizing at that level with an average tariff per night of CNY 150.

Table 27: Financial Projections for 4 Room Homestay

Year 2009 2010 2011 2012 2013 2014 2015 P Year 0 1 2 3 4 5 6 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 21 Final Report Appendix 13

Home Stay Compare With Below CNY Home Stay Tourism -- 360 day season 360 Occupancy Rate Starts at 0.50, Four Rooms, 0.4 0.4 0.41 0.42 0.43 0.44 0.45 Potential Visitor Nights Per Year 8 2,880 2,880 2,880 2,880 2,880 2,880 Actual Visitor Nights Per Year 1,152 1,181 1,210 1,238 1,267 1,296 Revenue Per Visitor Starts at RMB 150 (Ex. Sales Tax) 150 150 150 150 150 150 160 207,36 Gross Revenues 172,800 177,120 181,440 185,760 190,080 0 Cost of Sales @ 45% of Revenue 0.45 77,760 79,704 81,648 83,592 85,536 93,312 114,04 Net Income Before Overhead 95,040 97,416 99,792 102,168 104,544 8 Overheads Before PIT 14% of Total Capital 0.14 46,005 46,005 46,005 46,005 46,005 46,005 Net Income After Overheads 49,035 51,411 53,787 56,163 58,539 68,043 Total Capital Cost CNY 328,608 Net Cash Flow -328,608 49,035 51,411 53,787 56,163 58,539 68,043 IRR Based on Total Capital 19.094% NPV at 10% 304,452

85. The economic rate of return for a single home stay is 23.4%. The economic NCF for the 40 rooms developed by the Project is presented in Table 27 indicates that the home stay is economically justified.

Table 28: Economic NCF for 10 Home-stays

2009 2010 2011 2012 2013 2014 2015 Number of 4 room home stays 0 2 2 2 4 NCF per Home stay (econ) 0 -287000 54860 57236 59612 61988 64364 73868 147,73 2009 development -574,000 109,720 114,472 119,224 123,976 128,728 6 128,72 2010 development -574,000 109,720 114,472 119,224 123,976 8 2011 development -574000 109720 114472 119224 123976 2012 development - 1148000 219440 228944 238448 NCF for Home stay program 0 -574000 -464280 -349808 -804584 577112 600872 638888 EIRR 23.254% 22 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 13

NPV at 10% 3,248,667 NPV at 20% 383,699

86. Community infrastructure including 17.5 km of roads along the Tianyu River and 109 km of mountain pathways will be upgraded to reduce travel times and ensure access during adverse weather. No estimates have been made of the time savings.

87. Grants are proposed for either villages or households to develop social infrastructure especially alternative energy sources (biogas and solar) and water supply schemes where these are identified during the village development planning program. Again no quantification of benefits has been made.

b. Conserving In-Situ Biodiversity

88. The in-situ area will be used as a demonstration and training program for those working in other parts of the Qinling Mountain. In it will be used as a field conservation training and demonstration area from which methods and skills are developed and lessons disseminated. For the in-situ area the project will prepare a detailed forest and habitat management plan as a training exercise for staff in the Qinling Mountains.

89. A total of 2,000ha of habitat restoration will be completed using ecological research, forest silviculture, under-storey planting, canopy manipulation. The objective of habitat restoration is to move the existing monoculture forest plantings into mixed species forest cover with the forest architecture of natural forests. Technical assistance will be supported by GEF for defining and implementing the Conservation Forestry Programs. Research into tree and shrub species, ecological impacts and monitoring grad-sects, permanent sampling plots will be supported to assess the impact on floral characteristics, environmental parameters, and overall forest structure. The data sets will provide a strong basis on which to develop future policy and government interventions within the Qinling Mountains and especially to mange the newly created corridors that link protected areas for the purpose of improved biodiversity conservation.

96. The Project will address Qinling Mountains biodiversity and its status as a global biodiversity hotspot through developing endangered species recovery management programs that will operate within and beyond nature reserve boundaries. Support will be provided to undertake research and management planning for five endangered species and then providing budgetary support for initial implementation work programs. The in-situ endangered species management program will focus on using the Project Area as a field conservation research area from which monitoring and lessons can be disseminated throughout the conservation sector in the QM. In addition, the program will increasingly integrate the ex-situ species management program of the Shaanxi Animal Rescue Center (see Component one) with the in-situ endangered species recovery management programs through making significant operational and management changes to SARC and its facilities. The integration will be developed through shared research, joint planning exercises and sharing of data and experiences.

c. Component Two Summary

90. The total investment costs for the in-situ program totals approximately CNY129 million (USD 16.7 million) – see table 2..

Table 29: Investment Costs Component 2 (CNY ‘0,000’s)

A: Financial Costs 2008 2009 2010 2011 2012 Village Livelihoods 543.7 1843.8 4232.3 2601.1 2323.9 Conservation 55.1 84.2 482.0 494.3 287.0 Total 598.8 1928.0 4714.3 3095.4 2611.0 B : Economic Costs Village Livelihoods 535.6 1707.0 3757.6 2225.6 1923.3 Conservation 54.3 80.6 434.9 433.1 238.9 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 23 Final Report Appendix 13

Total 589.9 1787.5 4192.6 2658.7 2162.1

91. The investment in component 2 is predicted to generate approximately 4,000 jobs during the construction phase of the Project and approximately 450 from 2015. These levels of employment are significant and suggest that close to 1/3rd of in-situ households could receive an additional wage after the construction period. Equally the conservation forestry program could impact in excess of 70% of current in-situ households through participation in planting programs and obtaining secure tenure to collective forests.

Table 30: Estimated Employment Impacts of Component Two

Construction: Full-Time Operations Equivalents Aggregated Over the 2008-2013 Construction Period 1,070 66 in 2011, 175 in 2013, 192 in 2014, Component II Tourism and expanding to 230 from 2020 on Facilities (Average of 214 per year from 2009 to 2013 Component II Reforestation 3,000 220 in 2013 and 270 per year from and Road and Path (Average of about 500 per year over 2014 on Construction the 2008-2013 period)

3. Component Three Supportive Institutional Arrangements

92. Component three provides a number of institutional inputs to undertake project management, training, undertake policy and legal research on topics identified as creating significant constraints to the proposed management approaches. The subcomponents for Project Management and Institutional Strengthening are considered as overheads to the rest of the Project and the benefits are not quantified.

93. Subcomponent three will provide a range of replication programs built on action based conservation planning, endangered species management, and monitoring within the Project Area and then disseminating these and other project lessons to the wider Qinling Mountains. The potential impact of small changes to biodiversity management and livelihood improvement is likely to be large however the nature and extent of these is uncertain and therefore these have not been quantified.

94. The component investments are outlined in Table 29 below.

Table 31: Investment Costs Component 3 (CNY0’000’s)

Financial Costs 2008 2009 2010 2011 2012 Project Management 160.8 92.3 110.9 92.1 111.6 Institutional Strengthening 41.2 67.9 69.9 72.0 0.0 Replication 282.5 1112.8 528.0 223.0 217.1 Total 484.5 1272.9 708.8 387.1 328.7 Economic Costs Project Management 148.7 85.1 99.8 79.9 94.6 Institutional Strengthening 40.6 65.0 65.0 65.0 0 Replication 278.6 1065.8 490.4 201.1 190.1 Total 467.9 1215.8 655.1 345.9 284.6

4. Summary of Project Assessment

95. The Project results in significant benefits arising from the visitation program associated with the QBG, SARC, and the Hot Springs enterprises. To these direct employment benefits can be added the indirect benefits from the supply of goods and services by local businesses and households and contracts to village groups and small businesses to conduct biodiversity conservation activities that are funded by the Project or by subsequent activities financed by local governments and the ex-situ 24 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 13 tourism facilities after Project implementation is completed from 2014 on. Finally, the eco-fund loans, repayable contributions and grants will generate additional direct and indirect employment and income benefits once the eco-fund is established. These benefits cannot be estimated at this time. It should be stressed that employment and livelihood benefits to PA and in particular in-situ households and businesses will not happen automatically. These will require major Project and related government and enterprise investments in training, capacity building, and village development to ensure that these potential benefits are actually realized.

96. A set of benefits, only partially captured in attendance projections, benefit-cost analysis and employment estimates, is the value that people place on improvements to the bioresources of the PA and wider Qinling. To some degree, these benefits can be quantified and given monetary values through willingness to pay surveys and through the donations that private individuals, foundations, corporations and other groups may provide to accelerate government and international efforts to restore the bioresources of the Qinling to approach the biodiversity found in the distant past. This quantification was not possible within the resources of the PPTA.

97. The estimated EIRR for the whole project is 11% based on the total Project costs being offset against the benefits quantified for Component one only. Additional benefits not quantified relating to biodiversity conservation, ecological function improvement, and rural livelihoods benefits will only increase the overall economic performance. The investment is considered economically feasible within the caveats of the benefit stream estimation described above. The EIRR is well above the PRC hurdle rate of 8%

Table 32: Project EIRR and NCF through to 2015 (CNY 0,000’s)

Subcomponent NCF 2008 2009 2010 2011 2012 2013 2014 2015 Qinling Botanic Garden -9302 -24346 -2935 -353 2181 2698 2218 2796 SARC -3434 -8254 -10761 181 2040 2857 3233 3931 Hotsprings -5587 1262 1281 1281 1281 1281 1138 1147 Component One NCF -18323 -31337 -12415 1109 5503 6837 6589 7875 EIRR Component One 14.19% Economic Costs Comp. Two -564 -1713 -4043 -2572 -2086 -10979 Economic Costs Comp. Three -458 -1194 -633 -336 -278 -2899 Project NCF -19345 -34244 -17092 -1799 3139 -7042 6589 7875 EIRR Project 10.92% NPV (10%) 8190 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 25 Final Report Appendix 13

ANNEX ONE: ESTIMATES OF WEIGHTED AVERAGE COST CAPITAL (WACC)

Weighted Average Cost of Domestic Government Domestic Capital ADB Loan Loans Funds Equity WACC SARC Weighting 35% 65% Nominal Cost 7.00% 10.00% Tax Rate 25% 0.00% Tax Adjusted Nominal Cost 5.250% 10.000% Inflation Rate 1.90% 3.00% Real Cost of Capital 3.29% 6.80% Weighted Component of WACC 1.15% 4.42% 5.57%

Qinling Botanical Garden Weighting 40% 10% 40% 10% Nominal Cost 7.00% 9% 10.00% 15% Tax Rate 25% 25% 0.00% 0.00% Tax Adjusted Nominal Cost 5.250% 6.750% 10.000% 15.000% Inflation Rate 1.90% 3.00% 3.00% 3.00% Real Cost of Capital 3.29% 3.64% 6.80% 11.65% Weighted Component of WACC 1.32% 0.36% 2.72% 1.17% 5.56%

Hot Springs Development Weighting 20% 40% 40% Nominal Cost 7.00% 9% 15% Tax Rate 25% 25% 0.00% Tax Adjusted Nominal Cost 5.250% 6.750% 15.000% Inflation Rate 1.90% 3.00% 3.00% Real Cost of Capital 3.29% 3.64% 11.65% Weighted Component of WACC 0.66% 1.46% 4.66% 6.77% Project Year One Project Year Two Project Year Three Project Year Four Project Year Five Activity 123456789101112123456789101112123456789101112123456789101112123456789101112 Component I - Commercial ex-situ business investment 1.1 Construction of Botanic Garden Establish specialized gardens Greenhouse development Paleontology muesum Daoist temples and historic buildings Other civil works and infrastructure Cableway Office and vehicles Resettlement Training programs Design input Marketing and education 1.2 Hot Springs Development Villa construction Restaurant and swimming pool complex Site infrastructure Design and supervision 1.3 Shaanxi Animal Rescue Center Panda breeding base Crested Ibis breeding base Animal rescue area Animal exposition area upgraded Golden Monkey base Training Design and management contract Operating program Component II - Improved Livelihoods for Sustainable Management of In-situ Natural Resources 2.1 Village Development Planning Completion of 16 Village Development Plans Conservation forestry planting (5,000 ha) Conservation Agriculture (SALT) Small business development Homestay tourism Training program Roading and mountain path program Social infrastructure program 2.2 In-situ Conservation Lougantai habitat program Endangered species management program Component III - Institutions for sustainable management of Qinling Mountain natural resources demonstrated, replicated and supported through effective project management 3.1 Project Management Operational PMO staffing PMO office development Professional Job Exchanges (13) Project monitoring contracts Resettlement monitoring 3.2 Institutional Strengthening Legal reform program Shaanxi-Qinling Biodiversity Promotion Limited - establishment and capacity building TA 3.3 Conservation Replication Program Biodiversity landscape master planning Tourism planning Establishment of information center and biodiversity monitoring Dissemination program TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 15

INITIAL ENVIRONMENTAL EXAMINATION

1. The project adopts an integrated ecosystem management (IEM) approach to biodiversity conservation, featuring commercial tourism and sustainable land management, and well-managed conservation. The Project embodies very different but highly complementary and strongly linked strategies between the ex-situ zones and the much larger but less populated in-situ zone. The project supports three enterprises in the ex-situ zone, the Shaanxi Qinling Botanical Garden (SQBG), the Shaanxi Animal Rescue Center (SARC), and Hot Springs/Daoist Cultural Center (HSDCC). Within the in-situ Conservation Demonstration Area (CDA) the Project will support Government Policy of increasing the extent and quality of forest cover while also assisting local residents to improve their livelihoods.

2. The project is classified as category B, in accordance with the Asian Development Bank (ADB) environment categorization. This SIEE was prepared based on two Environmental Impact Assessment (EIA) Reports1.

PROJECT DESCRIPTION

A. Project Zoning

3. The Qinling Mountains (QM) range is located immediately to the south of Xi’an, the provincial capital of Shaanxi Province (SP), and runs east-west straddling the southern part of SP in the west region of the People’s Republic of China (PRC). The PA is located on the northern slope of the QM, about 45 km from Xian, comprises an area of 458 km2 with about 20,400 people. The project seeks to develop three commercial enterprises to generate the revenue to support habitat rehabilitation and protection activities and sustainable livelihoods to preserve biodiversity.

4. Ex-situ Area. The ex-situ area consists of a 2 km wide strip of predominantly flat land along the north side of the Qinling Mountains that is heavily developed for agricultural/horticultural and residential purposes. The population is approximately 16,000. The Project will develop a Botanical garden and associated visitor attractions including Daoist temples, enhance the Shaanxi Animal Rescue Center and the support the continued development of the Louguantai Geothermal Hotsprings.

5. Conservation Demonstration Area consists of steepland with a dispersed population of less than 4,600 persons over an area of about 430 km2. The area was previously the Louguantai Forest Farm with large areas heavily logged. Remoter areas retain high biodiversity values. The project will support habitat rehabilitation for biodiversity conservation. There are a number of isolated communities in the in-situ area practicing unsustainable agriculture on steep slopes who will be assisted to develop more sustainable livelihoods and adopt more appropriate land use practices. The long term vision for the in-situ area is to develop and enhance the ecological sustainability of natural resources and ecosystems to enable biodiversity to be enhanced, managed and secured.

B. Project Components

6. There are three project components (see Appendix 7) being:

(i) Tourism Development to Support Conservation

(ii) Improved livelihoods from the sustainable management and conservation of natural resources through (i) Improved village and Forest-based Livelihoods and (ii) Demonstration of Biodiversity Conservation

(iii) Institutional arrangements for sustainable management systems of QM natural resources demonstrated and replicated

1 Shaanxi Qinling Botanical Garden (Ex-Situ Area) and the4 SARC completed by Xi'an University of Architecture and Technology (XUAT)May 2007 awaiting approval which is expected in September 2007. Hot Springs/Daoist Cultural Center (Phase II) No. 203 Institute of Xianyang June 2007awaiting approval which is expected by September 2007 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 2 Final Report Appendix 15

7. The success of the Project will be measured in terms of biodiversity conservation trends, impacts and outcomes in the Project Area and in particular the CDA which comprises 87% of the PA’s land area but only about 20% of its population. The major tourism investments proposed for the ex-situ area are viewed as instruments – or means to an end -- for achieving sustainable biodiversity conservation impacts and outcomes throughout the PA but especially in the CDA. The CDA activities focus on livelihood improvement on collective forest lands (that total 8,100ha) and on improved forest cover and habitat restoration on State Forest Lands.

DESCRIPTION OF THE ENVIRONMENT

A. Physical Resources

8. The PA has a monsoon climate area with an average rainfall of 900~1000mm in high-precipitation years. Its annual average temperature ranges from 8 degrees to10 degrees. The area enjoy about 2,000 to 2,222 hours sunshine with a frost-free period between 200 and 240 days every year. is the dominant wind.

9. Ambient air quality monitoring results indicate that daily average concentration of NO2 to be below Grade I of the National Ambient Air Quality Standard (GB3095-1996). However, sixty percent of the daily average concentrations of SO2 exceeded the same standard at Jinniuping station. PM10 was the main air pollutant at all the three monitoring stations with an exceeding of 100%. It is believed to be caused by smoke emissons from local households and industry.

10. The Qinling Mountains influence the water resources of both the Yellow and Yangtze rivers. The northern slopes supply water to the Yellow River system, which flows to the dry northern parts of the country. Over 90% of Qinling Mountains have been degraded through inappropriate farming, logging, overuse of natural resources, destructive mining operations, as well as pollution from solid waste and agro- chemicals over many decades. As a result, water resource quality is in serious decline.

11. There are two major rivers in the PA, i.e. Tianyu River and Chiyu River. Water quality of Tianyu River has been monitoring by the Xi’an Municipal Environmental Monitoring Central Station (XMEMCS) for 20years at two permanent stations, Results indicate that water quality of Tianyu River meets the Class I water standard – water from natural sources, except coliform bacteria associated with the discharge of human and animals waste.

12. Groundwater from Dianzhen Township the site of the Botanical Garden meets Grade III standard of Quality Standard for Groundwater (GB/T14848-1993), except ammonia (NH3-N) and coliform. It is believed that the relatively high concentration of NH3-N may be associated with the local agricultural activities something that the Botanical Garden will positively impact through reduced nitrogenous fertilizer use.

13. QM is biologically rich and globally significant, with many endangered rare and/or endemic plant and animal species including the Giant Panda, Takin, Snub-nosed Golden Monkey, and Crested Ibis (national bird of Japan). The mountains are characterized by very high levels of endemic biodiversity found in temperate and sub-tropical ecosystems, as well as a vertical spectrum of vegetation types; seventy percent of all vegetation types in the PRC are represented.

14. In the project area, there are six species which are globally threatened including four amphibians and two reptiles. Two species of fish are vulnerable, one of which is protected in Shaanxi, the other is listed as a national red data book as class II. Noted species in the Tianyu River of concern, include the Manchurian Trout, the Giant Salamander and the Soft-Shelled Tortoise.

15. There are a number of national nature reserves (NNR) in the QM area. Five of them are located on the northern slope including Niubeiliang NNR, Zhouzhi NNR, Taibaishan NNR, Zhouzhi Old Town Nature Reserve and the Heihe Wetland Provincial Nature Reserve. The total area of the five nature reserves amounts to 1541.92 square kilometer, 16.16% of the total area (9282 square kilometer) of northern slope of QM. Zhouzhi NNR is about 31 km to the southwest of the PA. Heihe Wetland Provincial Nature Reserve is the closest to the PA but is still 3 to 5km distant the PA does not overlap or adjoin any of the existing nature reserves. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 3 Final Report Appendix 15

16. The PA is included in the Qinling Mountains Ecosystem Function Conservation Area (QMEFCA) within the high priority Central Conservation Zone of Qinling Water Resources and Biodiversity Function Zone (II1). The proposed activities in this Project are consistent with the requirements of the QMEFCA. Under the proposed QMEFCA framework, the “Shaanxi Qinling Mountains Northern Slope Ecological Environment Protection Plan” was prepared and approved by the SEPB in March 2007. The proposed project conforms to the development standards stated in the Northern Slope Protection Plan.

17. The socioeconomic of the Project Area indicates a total population of 43,800 living in 10,500 households most with living standards well below provincial averages. Net farmer income per capita is only 29% of the national average and 47% of the provincial averages. The Ex Situ area is part of an important grain production and exporting region and per capita grain availability for the total target population is above both the national and provincial averages.

Table 1: Socioeconomic Data in the Project and Fringe Areas

Area and Registered Popula. Average Sex c Average Per Capita Per e Key Indicators Population Density Household Ratio Cultivated Net Income Capita (2005) Size b Land d (Y) Grain Ex Situ 15,763 267 4.45 1.06 2.5 966 (30) 422 (196) (104) (114) In Situ 4,593 12 3.73 1.16 3.7 599 (18) 198 (53) (9) (113) Total Project Area 20,356 44 4.26 1.08 2.5 884 (27) 371 (32) (106) (100) Fringe Area 23,405 NA 4.09 1.07 1.9 1,020 (31) 409 (105) (110) Total Target 43,761 NA 4.17 1.08 2.2 956 (29) 392 Population (106) (106) a population density = persons per sq. km. b average household size = persons per household. c Sex ratio = male to female ratio. d = mu per person. e = Kg /person NA = not available. N.B Figures in brackets are percentages of the national average. Source: PPTA MTR

ENVIRONMENTAL IMPACT AND MITIGATION MEASURES

18. The following sections analyze the key environmental impacts anticipated due to the proposed activities under each component of the Project. Table 9 summarizes the potential environmental impacts and mitigation measures. Detail of expected impacts and proposed mitigation strategies are annexed in Project Environmental Management Plan.

A. Sub Component : Shaanxi Qinling Botanical Garden

19. The activities proposed under this component include building 18 specialized gardens covering an area of about 54 ha, one greenhouse of 600 m2, two main exhibition halls, research facilities and infrastructures including irrigation system, drinking water supply, wastewater treatment, solid waste management, roads and cableway. This component also includes reconstruction of 18 Daoist religious sites. Total visitation is projected to be 600, 000 per year by 2011.

20. Potential adverse impact associated with this intervention may include (i) possible invasion by exotic species, (ii) loss of vegetation due to road and cableway construction, (iii) impacts on local water resources from water supply extraction, (iv) waste water and solid waste impacts, and (v) impacts to landscape, culture and religion.

21. The specialized Gardens will involve over 1000 species of plant in the ex-situ area. There is a threat of exotic species invading the CDA is therefore significant. The Qinling Botanic Garden will develop and implement an environmental risk assessment for bio-safety as part of the detailed design. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 4 Final Report Appendix 15

22. A total of 33.57 km roads and a cableway will be constructed for QBG. All natural vegetation impacted will be restored by replanting after the construction.

23. The water supplies for SQBG are from two sources. About 1405 t/d of surface water will be taken from the Tianyu River (less than 1% of total flow) for irrigation system (west part). Ground water, about 252 tones per day will be extracted from a well near the Tianyu River. Given the relative sufficient precipitation and surface water recharge in the area, the demand is not a significant volume and potential impacts can be minimized by site selection, water saving and monitoring program.

24. It is estimated that about 201 tones of wastewater and 1.51 tones of solid wastes will be produced daily. Secondary sewage treatment will be constructed to treat sewage up to the national irrigation standard and discharge will be used for grey water irrigation purposes. Solid waste will be collected and sorted for recycling on-site and trucked to the municipal solid waste treatment facility.

25. Reconstruction of the eight historical culture sites ranging in size from 200 to 3600 m2 will add to local cultural values. The design and style of these reconstructions will be consulted on with the public and religious groups to ensure the buildings are consistent with historical standards.

B. Sub component B: Shaanxi Animal Rescue Center

26. The proposed SARC development will expand from 141 ha (current operation) to 1,333 ha (proposed operation). The expanded SARC is being designed to promote animal welfare and captive breeding of at risk species. These functions are linked to tourism development and to adopt new innovative approaches for rescuing, protecting and improving the living conditions of endangered and rare wild animals. The proposed activities include (i) animal hospital, rescue/emergency department, zoology research lab and a dormitory for experts; (ii) breeding and raising bases for giant panda, crested ibis, golden monkey, takin and other artiodactyls, as well as forage bases for the above animals; (iii) animal protection and exhibition facilities; (iv) infrastructure, including road and path, security gate (tunnel) for giant panda base, and wastewater treatment plant.

27. While all these activities will have positive impacts on biodiversity conservation, certain environmental problems may occur at design, construction and operation stages. These problems may include (i) soil erosion, (ii) source water protection, (iii) loss of vegetation, (iv) water pollution and (v) waste disposal

28. Eighty five percent (85%) of the expanded area will be used for forage bases to plant bamboo and other suitable plants and fruits for the animals. This operation will be favorable for water and soil conservation. However, there are 64 ha of land that will be converted into animal breeding and raising. Development of infrastructure facilities in these bases may create soil erosion during construction. The soil erosion will be effectively controlled by sound planning, good engineering, and integrated management.

29. Water pollution associated with this component would mainly occur in two areas, which are the ex- situ area and the breeding bases. A secondary biological wastewater treatment facility with a capacity of 300t/d is designed for treating wastewater generated by animals and visitors in the ex-situ area. The sewage generated in the breeding bases is relatively small and scattered and is currently sold to local farmers who seek the dung and organic matter. On-site wastewater treatment (secondary biological) will be installed where necessary. The treated effluent will be used for irrigation and no direct discharge to the surface water will take place. Solid waste will be managed in the similar way as proposed for SQBG.

C. Sub-component C: Hot Springs/Daoist Cultural Center

30. The HSDCC project includes phase two. The second phase is an expansion of the accommodation and will add 18 detached villas (total of 5848 m2), one eco-restaurant (3000 m2), and parking lot and wastewater facilities.

31. The HSDCC, together with Daoist Temples, will enrich the Daoism culture in the area and provide convenience and relaxation to the visitors of both SQBG and SARC. Potential impacts include over- extraction from the underground aquifer and surface water pollution issues associated with wastewater disposal. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 5 Final Report Appendix 15

32. The proposed development will extract water from an existing artesian well. To evaluate the sustainability of the groundwater resource, a study was conducted by the Shaanxi Geological Survey Institute in 1992. The EIA of HSDCC(II) was carried out by the No. 203 Institute of Xianyang. The study results show that the geothermal well was developed in December 1992 with a depth of 1701 m. The hot water is stored in a fractured rock aquifer under Qinling piedmont. The aquifer is 443m thick and is located at a depth of between 1258m to 1701m. The isotopic study showed that the aquifer is recharged by both deep geothermic water and surface infiltration. It was reported the water head was 24 m above ground and the outflow rate was 33.7 m3/h with a temperature of 56º C when the well was constructed in 1992. Based on 15 years’ observations, there is no significant change in water level, temperature and water chemistry. The current demand, 144m3/d, therefore does not break the recharge/discharge balance. The study concluded that the geothermal water supply is sustainable if it is maintained at the current outflow rate. A protection zone is in place with no geothermal well allowable within 1 km of north/south direction and 2 km in east/west direction.

33. It is anticipated that the total wastewater discharge will be 59,536 tons per year after the completion of Phase II, of which 12,415 tons per year will be from the hot spring. A wastewater treatment system has been designed for treating the sewage before its discharge to the municipal sewer system. The proposed sewage treatment system includes pretreatment by a septic tank and further treatment by a biological treatment system. The system will also remove the high content of iron, fluoride, chloride and sulphate from the used hot spring water. Sewage sludge will be disposed in accordance with the requirements of EPB or used as fertilizer. Solid waste, 185 t/a, will be collected, sorted on site and then disposed in the Zhouzhi landfill site.

D. CDA Component

34. The CDA of the PA will be managed for the primary purpose of biodiversity conservation. The long term vision for the in-situ area is to develop and enhance the ecological sustainability of natural resources and ecosystems to enable biodiversity to be enhanced, managed and secured. The long term status of the CDA involves improved coverage and quality of forest to increase the habitat for Qinling Mountain biodiversity.

35. The reforestation and silviculture development proposed while on a large scale is not expected to have any negative effects and will be managed through the preparation of a habitat and forest management plan for CDA. Any small enterprise development including home-stay tourism and forest product processing will need to be screened by the PMO and Louguantai Forest Farm division of QNBG priority to being approved.

36. Rural Livelihoods improvement will be through the development of small enterprises, provision of social infrastructure linked to water and solar energy with potential adverse impact associated with construction or renovation of the basic facilities, and tourism activities during their operation. These will be mitigated by the environmental considerations of: (i) Design should be consistent with the landscape and will include sustainable practices to reduce environmental impact. The sites selected should enable the infrastructure to integrate harmoniously with nature and cultural environments. It is encouraged to use natural colors and materials to blend with the landscape, and traditional local design features. Use of concrete and steel is to be avoided. (ii) Low energy consumption technologies for lighting will be utilized. Where feasible, water heating will be provided by solar panels. Cooking will be undertaken using a combination of biogas and main electricity supply. Construction combines traditional and modern technologies and material to ensure robust and energy saving buildings. (iii) Solid waste: Convert biodegradable waste to compost that can be used on site. Non-biodegradable would be collected and removed from the in-situ area for disposal in the municipal landfill. A policy of recycling will be introduced. (iv) water supply: It is expected that the water supply will be from a local spring source (quality tested), (v) sewage and wastewater: Septic tanks combining with on site small biological treatment will be applied. (vi) walking trails - existing footpaths will be used. Low numbers of users will require no upgrading /surfacing of paths. (viii) All the ecology, homestay and other micro-scale resource based tourism activity will be covered by a monitoring system under the environmental monitoring plan of the Project.

37. Subcomponent D includes road and mountain pathway improvement. The canyon road covers a total length of 17.5 km mountain path improvements would involve a total length of 109 km. The seven mountain paths would have the following routes: Jinniuping – Shouyangshan – 13.2 km; Jinniuping – TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 6 Final Report Appendix 15

Dongniandao – 15.5 km; Jinniuping – Yeniuhe – 20.0 km; Xiagukou – Shangyangpo – 11.0; Tielucha – Liangding – 14.2 km; Guanyinyan – Laojigou – 17.0 km; and Liziping – Yeyanghe – 18.5 km.

38. The design, of the proposed road and mountain path improvements are under review with reference to the final detailed design and the needs identified during the village development planning process. Potential adverse impacts associated with this intervention are: (i) uncontrolled vehicles and visitors to enter environmentally sensitive areas (ii) construction requiring earthworks (iii) possible blockage of wildlife movement. (iv) impacts during construction (wildlife disturbance and temporary or permanent displacement). (v) river bank erosion by increased traffic, unintentional wildlife and habitat disturbance, and (vi) other construction associated impact.

39. Mitigation measures for impacts associated with construction will be the same as outlined in the projects’ environmental management plan. For the other impacts, the mitigation measures will include (i) careful site (alignment) design to avoid encroachment into the sensitive wildlife area. (ii) controlled attendance numbers at the QNBG entrance (iii) fencing of construction sites and restriction of access for laborers (iv) carrying out the construction quickly, suspending construction activities between dusk and dawn or avoiding excessive noise in order to mitigate impact on wildlife displacement. (v) replanting and afforestation along the road and river bank to minimize soil erosion and protect habitat.

E. Benefit Analysis

40. The overall impact of the proposed project will be improved environmental management to rehabilitate ecosystems in the PA and QM area. The longer term outcome and impact will be demonstrate and build capacity to replicate conservation programs linked to commercial enterprises while building commercial enteprises from on conservation resources. The Project will ensure effective protection of wild flora and fauna and conservation of biodiversity within the PA. This Project is the first of its class in the QM area. The demonstration effects of the Project will contribute to increased awareness of environmental protection within and surrounding the PA. The benefits associated with the Project are significant. There will be positive impacts on both the environment of the project area and globally important biodiversity.

INSTITUTIONAL REQUIREMENTS AND ENVIRONMENTAL MANAGEMENT PLAN

A. Institutional Requirements

41. The Shaanxi Provincial Development and Reform Commission (PDRC) will be the Executing Agency for the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project and will have overall responsibility for ensuring that all environmental standards and procedures are followed. Under the supervision of PDRC, the two implementing agencies (IAs), QNBG and the HSDCC will be responsible for the implementation of all corresponding environmental mitigation measures and to monitor programs recommended in its EIA and this SIEE.

42. Prior to project construction, QNBG will form an environmental management unit (EMU) for environmental management and operation, including environmental supervision of contractors. The EMU will ensure implementation of the environmental management plan and environmental monitoring plan during construction and operation of the Project. The EMU will be staffed by a project manager and at least one technical officer. The construction contractor will designate an environmental representative, who will be responsible for the environmental management of construction activities during project construction.

43. SEPB is the top environmental authority in the province and has overall responsibilities for overseeing and supervising environmental enforcement according to the national and local environmental regulations. During the project design stage, SEPB provides services in consulting on environmental policies and regulations, confirming that environmental standards and emission standards are applied to the project, and reviewing and approving the environmental impact assessment report, including the environmental management and monitoring plan. During the project construction stage, SEPB may entrust the local environment protection bureau, Xian Environment Protection Bureau (XEPB), with responsibility to ensure the enforcement of the mitigation measures described in the environmental management plan (EMP). However, SEPB reserves for itself the final evaluation and approval of the projects’ environmental protection facilities. After the completion of the project, XEPB, on behalf of SEPB, will supervise the environmental performance of the project. Appendix I present the major activities under this environmental supervision plan. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 7 Final Report Appendix 15

B. Environmental Management Plan

44. The summary environmental management plan (EMP), included in this SIEE (Appendix II), is based on the full EMP, included in the EIA report. The Project Management Office (PMO) will translate the SIEE, including the summary EMP, into Chinese. PDRC/PMO will ensure that the SIEE (including summary EMP) and the full EMP in the corresponding EIA are included in all contractors bidding documents and operating contracts. The EMU will be responsible for implementing the EMP during project construction and operation. The EMU will ensure that the EMP is updated periodically during construction.

C. Environmental Monitoring Plan

45. The project will utilize appropriately qualified environmental monitoring service providers for conducting the environmental monitoring duties specified in this SIEE. This entrustment will be arranged through SEPB. The environmental monitoring agency will visit project sites and conduct the monitoring program. The monitoring agency will submit environmental monitoring reports to PDRC/PMO, SEPB and IAs semiannually during construction and annually for 2 years after completion of construction. Monitoring requirements for the main activities are summarized in Appendix III..

PUBLIC CONSULTATION

46. Public consultation exercises have been extensively involved in the Project’s environmental assessment since the original project proposal was promoted.

47. The results were used to modify the EIA and project design. Two major forms of public participation were adopted, i.e., questionnaires and workshops. Specifically, the major stakeholder consultation activities comprised: (i) dissemination project information to the public through media and SQBG’s website; (ii) public consultative surveys; and (iii) workshops.

48. Two public consultative surveys were conducted during the project preparation. The first one was conducted in a smaller scale, 24 valid respondents from 30 questionnaires, during the previous EIA in October 2002 in the central project area. The second survey, 97 valid respondents from 101 questionnaires, was conducted in a larger scale in December 2006 during the supplementary EIA study. A total of 131 questionnaires were randomly issued to the public in the PA and the fringe area. 121 valid responses were received. The two surveys shared the same questionnaire and are considered to have sufficient representatives in the project area. A breakdown of the respondents is presented in Table 11.

Table 2: Summary of Public Survey Respondents

Classification Respondent Details Number of Percentage Respondents % Number Male 113 93 Surveyed Female 8 7 Total 121 100 Age Distribution <20 1 1 20-40 57 47 >40 63 52 Education Level Elementary School 51 42 Junior High School 49 41 Senior High School 21 17 and Vocational School Occupation Farmer 110 91 Other 11 9

49. Of the responses received, 74 percent of the interviewees were aware of the Project by TV news. Eighty-one percent deemed the Project will be beneficial to the county’s economic development and 74 percent of them would like the Project to be completed as soon as possible so that they can settle down earlier. In terms of most concern questions of the local residents, 74 percent wanted to improve the road TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 8 Final Report Appendix 15

system so that they can go out to the Mountains and be accessed easily; and 67 percent were worried about the changes in their daily lives, their incomes, and psychologically to be caused by relocation. Quite a few respondents indicated that they are worried about the potential impacts on the forest and wild animals due to the increasing number of tourists. The extracted survey results are provided in Table 12.

Table 3: Public Consultation Survey Results

No. Survey Content Number of Percent Respondents % 1 Channels of knowing TV 90 74 the project Newspaper 57 47 Radio 70 58 Meetings 23 19 This Survey 9 7 Other 18 15 2 Impact on the local Beneficial to the whole Zhouzhi Country 98 81 economy Only beneficial to outside of the County 1 1 Negative impact or no impact 0 0 3 Most concern issues Road construction 90 74 Immigrating/relocation 81 67 Tourists increase 70 58 Disturbance with wild animals 7 6 Destruction of forest 36 30 Environmental pollution 23 19 Soil erosion 32 26 Reduction of farmland 38 31 Compensation to farmland reduction 63 52 4 Suggestion to the To start the project as soon as possible 89 74 project and related Pay attention to environmental protection 4 3 environmental issues Pay attention to immigrants 10 8

50. Two workshops were held on December 15 and 16, 2006, respectively, with a panel of 47 participants including representatives from relevant departments of Shaanxi Provincial Government and local governments including the development and reform commissions, agricultural bureaus, forestry bureau, environmental protection bureau, tourism bureau, poverty reduction office. Leaders of the townships and village in the vicinity of the PA, academy and NGO representatives, such as Xian Office of WWF, were fully involved in the workshops.

51. Participants at the two workshops described some of the implications for a project design that emphasizes biodiversity conservation. First, such a design requires a participatory approach, which ensures that all potential stakeholders and beneficiaries, including less prosperous townships, villages and households, are directly involved from the outset in project design and are fully engaged as participants, investors, employees, suppliers and/or key interested parties in project implementation.

52. Second, biodiversity conservation would need to be addressed as the central goal in the preparation of all project investments and other components. All tourism investments and interventions in such areas as eco-tourism, home tourism and other resource based tourism, would need to be assessed from the perspective of their impacts on the Project Area’s fragile ecology and their ability to serve the central goal of biodiversity conservation.

53. Finally, many participants emphasized that biodiversity conservation, protecting the QM’s unique physical and human environments, and tourism development should be seen as complementary not conflicting objectives. For example, biodiversity conservation and restoration and environmental protection is essential to the development, pricing, and promotion of low impact, high value added tourism products for the eco-tourism, adventure, religious, cultural and other high income tourism markets; and for providing higher more sustainable living standards and quality of life to the residents of the project area. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 9 Final Report Appendix 15

54. The public participation has played a very important role in the EIA and project design. For example, the width of the road from Jinniuping to Caihulu via Shouyangshan, in the in-situ area, has been reduced from 6 m to 1.5 m with a saving of about USD 1.7 million. Some of the other proposals like hotspring resorts in Meidenbao and Dianzhen, scientific research base in Fenghuangling, cable-car project in the in-situ area have been cancelled, saving costs of about USD 2 million. To minimize the potential impact on the aquatic ecosystem, the proposed 20 km riverbank engineering proposal was also deleted from the Project. All these adjustment will not only save the project cost, but reduce the potential environmental impact on the fragile ecosystem in the PA and contribute to a sustainable and cost effective investment.

CONCLUSIONS

55. The analysis undertaken in this SIEE indicates that the majority of the Project’s impacts are environmentally beneficial; many of the project’s activities are explicitly designed to have a large and positive impact on securing long-term biodiversity conservation and sustainability in the QM. Some minor adverse impacts are associated with the Project, mainly related to construction activities; all of these can be mitigated by appropriate measures. It is therefore concluded that no Environmental Impact Assessment is required.

TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management 11 Project Final Report Appendix 15

ANNEX I: ENVIRONMENTAL SUPERVISION AND ENFORCEMENT

Key Supervision Schedule for Responsibilities Agency Environmental Supervision Pre- Confirm the environmental standards and SEPB As needed Construction emission standards applied to the project Phase Review and approve the environmental impact assessment report Review and approve the environmental management and monitoring plan Review the preliminary design for environmental protection facilities in the project (three simultaneousness) Review and confirm environmental investment Construction Review site-specific environmental XEPB/PMO/EMUs Before work Phase management plan and work plan with site commences supervisors Make sure all required mitigation measures are in place XEPB/PMO/EMUs Weekly

Ensure the sites for storage and preparation are appropriately located Document inspection findings Recommend improved mitigation measures as necessary Suspend work if adverse impact are noted The key areas should include: SEPB Twice a year earthmoving, hydrological modification, wastewater discharge, construction noise, dust, and solid waste Make sure the sites are restored timely Ensure the environmental facilities are completed (three simultaneousness) Operation Review the environmental and XEPB/EMU Quarterly Phase management plan Review the environmental monitoring plan Ensure the environmental facilities are functional and in operation(three simultaneousness) Ensure the sensitive environmental elements are protected Update environmental management and monitoring plan SEPB =SHAANXI ENVIRONMENT PROTECTION BUREAU; XEPB =XIAN ENVIRONMENT PROTECTION BUREAU; EMU =ENVIRONMENTAL MANAGEMENT UNIT; PMO =PROJECT MANAGEMENT OFFICE ON BEHALF OF PDRC

TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 13 Final Report Appendix 15

ANNEX II: SUMMARY ENVIRONMENTAL MANAGEMENT PLAN

Environmental Mitigation Measures Location Time Frame Responsibility Impact/Issue Implementation Supervision A. Construction Phase 1. Impact on Flora Impact to flora (1) Some vegetation will be removed at the construction sites. All works will All construction sites Construction IAs XEPB be carried out to minimize damage or disruption to vegetation, After Contractors EMU completion of construction activities, temporarily occupied areas will be replanted. (2) Due to the temporary increase in workers to the construction site, the potential of illegal fuelwood collection is increased. Mitigation measures will include (a) provision of adequate heating and cooking facilities, and (b) provision of environmental training on environmental issues including penalties for illegal fuelwood collection. (3) Improvement of access road to the construction sites will increase access to QM, with potential of overgrazing and forest fire. To prevent this, SQBG will guard the entrances.

2. Impact on Fauna Impact to fauna (1) Because of the temporary increase in workers to the construction site, All construction sites Construction IAs XEPB the potential for illegal animal poaching is increased. Mitigation measures Contractors EMU will include environmental awareness education including penalties for illegal poaching and hunting. (2) Construction activities will disturb the habitat of terrestrial animals immediately adjacent to the project site. This may result in movement of wildlife from the project vicinity. However, the impact is anticipated to be temporary during construction.

3. Soil Loss of topsoil Loss of topsoil will be avoided by stripping and storing topsoil (where All construction sites Construction IAs XEPB Disposal of excess present) prior to construction and using it for restoration works. Contractors EMU earthworks Excavated rock and aggregate will be used in embankment construction to the maximum extent possible. Selected sites will be used to dispose of excess earthworks where the catchments area is minimal. Sites will be covered with soil and planted with shrubs and grasses. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 14 Final Report Appendix 15

Soil erosion and Soil erosion and siltation will be minimized by preventive measures All construction sites Construction IAs XEPB siltation including: (1) sediment trap for the access road to collect and slow runoff, Contractors EMU (2) appropriately engineered storm-water diversions, (3) optimizing work schedule, especially excavation related work, to minimize the exposure time and avoid rain season. (4) reduction of slop and appropriate engineering design in the terrace (5) restoration construction sites with planting shrubs and grass. 4. Wastewater Disposal of septic About 135t/d sanitary wastewater will be discharged from the work camps All construction sites Construction IAs XEPB wastewater during the construction phase. All wastewater will be collected by mobile Contractors EMU toilets and transferred to the temporary septic tank and treated to national standards and used for watering forestland. No direct discharge of untreated wastewater will be made to surface water bodies.

Recycle of It is anticipated that some wastewater, about 0.5 m3/ per washing, will be All construction sites Construction IAs XEPB construction produced during the concrete preparation. This type of wastewater usually Contractors EMU wastewater contains suspended solids of 5000 mg/L with a pH value about 12. The wastewater will be treated onsite by sedimentation and neutralization in a treatment tank. The treated clean water will be reused. Site will be covered with soil and planted with shrubs and grasses.

5. Air Quality Generation of dust Increased dust levels from construction activities will be the major impact All construction sites Construction IAs XEPB on air quality. The dust emission sources include construction machinery, Contractors EMU rock blasting, foundation excavation, cement mixing and material transportation. The dust control measures implemented on a case-by-case basis, such as siting the storage and preparation of construction material nearby and in a downstream area so that the transportation and impact can be minimized. Dust from construction traffic will be mitigated by covered transport truck, road compaction, and water spraying.

6. Noise TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 15 Final Report Appendix 15

Noise impact Noise will be generated from vehicular movements, sand and aggregate All construction sites Construction IAs XEPB processing, concrete mixing, excavation machinery, construction noise and Contractors EMU blasting. Residents in a few villages nearby construction sites may affected by the noise during construction. Mitigation measures include using low noise machinery and no construction activities are allowed within 200 m of residential area during night. Mitigation measures for noise impact on construction workers will include standard occupational health and safety practices. 7. Solid Waste and Hazardous Materials Solid waste disposal Domestic waste and construction waste will be disposed in approved All construction sites Construction IAs XEPB disposal sites. Hazardous waste will be collected in designated areas with Contractors EMU anti-leakage measures and then will be transferred to the garbage disposal areas of Zhouzhi county that has hygienic and safety measures.

B. Operation Phase Wastewater disposal It is estimated about 201, 305, and 670 tones of wastewater will be Tour sites, SQBG Operation IAs/EMUs XEPB generated daily in SQBG, SARC and HSDCC, respectively. Three facilities and EMU wastewater treatment plants will be built in the three tourism attractions to accommodation treat the wastewater collected by the sewer system within their territory. area Septic tanks and land treatment will be used to treat the wastewater from the areas where sewer system is not available. Bio-toilets will be used in the tour sites. Noise impact Noise will be generated from parking lots, internal shuttle buses, cable-cars Park lot, tour routes Operation IAs/EMUs XEPB and occasionally from the helicopter. Mitigation measures will include: (1) and accommodation EMU using low noise, low emission tour buses (2) taking noise reduction area measures, where required, to reduce the noise level to meet the national standards. Solid waste disposal Domestic waste will be generated at 1.17 t/d, 2.9 t/d and 7 t/d in SQBG, Park lot, tour routes Operation IAs/EMUs XEPB SARC and HSDCC, respectively. Domestic waste will be collected and accommodation EMU separately and stored in a depot in Dianzhen, and it will be transferred to area and treated (including recycle, reuse) in a designated site by the municipal sanitation authority. Disturbance of High volume of tourists may cause disturbance of flora and fauna along the Tour sites Operation IAs/EMUs EMUs ecosystem tour routes. The preventative measures include warning signs, conducting environmental awareness educational programs (videos, brochures, tour guiding) at the main entrance, as well as building necessary protective fences. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 16 Final Report Appendix 15

ANNEX III: ENVIRONMENTAL MONITORING PLAN

Environmental Location Parameters Frequency Imp. c Sup. d Media Agency Agency (tentative)

Construction Phase Air SQBG SO2 ,NO2 , PM10 2 times/year XEMCS EPB Louguantai In-Situ Area

Surface Water Jiulongcun pH, NH3-N, DO, BOD5, CODCr , 4 times/year XEMCS WRB Tianyukou O&G, coliform bacteria and suspended solids Noise Construction site LAeq b 1 time /month XEMCS EPB boundaries and sensitive sites (including residential areas)

Operation and Air SQBG SO2 ,NO2 , PM10 2 times/year XEMCS EPB Maintenance Phase Louguantai In-Situ Area

Surface Water Jiulongcun pH, NH3-N, DO, BOD5, CODCr, O&G 2 times/year XEMCS WRB Tianyukou and coliform bacteria Groundwater SQBG Drinking Water Standard 2 times/year XEMCS EPB HSDCC

Effluent from WTP SQBG pH, NH3-N, DO, BOD5, CODCr, O&G 4 times/year XEMCS EPB HSDCC and coliform bacteria Noise Dianzhen LAeq 4 time /year XEMCS EPB Jinniuping b The equivalent continuous sound level c Implementing agency d Supervision agency

NH3-N =ammonia, DO =dissolved oxygen, BOD5 =biochemical oxygen demand, CODCr =chemical oxygen demand, TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 17 Final Report Appendix 15

O&G=oil and grease, SO2 =sulfur dioxide, NO2=nitrogen dioxide, PM10 =fine particulate matter Source PPTA Environmental Consultant and SPEPB TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 16

LAND ACQUISITION, RELOCATION AND RESETTLEMENT PLAN

1. Qinling National Botanical Garden (QNBG), co-constructed by Shaanxi Provincial People’s Government, National Forest Bureau, Chinese Academy of Science and Xi’an Municipal People’s Government, is listed as a modal project by the State Council under the loans from Asia Development Bank (ADB) for study, protection and utilization of the biological diversity of Mt. Qinling district, one of the ten biggest ecological function zones.

2. As an important part of the general plan of QNBG, the Project of ex-situ conservation area aims at: scientific study on biological diversity, popularization of scientific knowledge concerning biological diversity, protection of biological diversity and tour of biological diversity. The basic constructions are composed of ex-situ conservation of plants, industrial development and poverty relief and biological tourism.

3. Located at in Zhouzhi County, Shaanxi Province, the planned land for the Project is up to 269.3 ha (4,039.5 mu), and the total investment is estimated about CNY397.1069 million. The Project includes 18 special gardens, resource museums for popularizing science, and paleontology museums, like gymnosperm area, angiosperm area, area for special plants within Qinba Mountains, medical plant area and rock plant area, etc. Of the total 269.3 ha (4,039.5 mu) area, the land to be acquired totals up to 293.63 mu; and as for the remained land of 3745.87 mu, the right of use is to obtained by means of pooling of land. (The numbers here shall be determined finally in accordance with the signed agreement). Buildings demolished occupy up to 19,319.97 m2 altogether, and there are 504 villagers in 115 households under the impact of the land acquisition, 617 in 143 households under the impact of the relocation.

4. The total investment in the Project is estimated up to CNY981 million, of which the Qinling Botanic Garden investment is CNY 470 million of which CNY45.9 is estimated to be used in relocation and resettlement. The Project is planned to last for five years, commencing in 2008.

5. The economic and technological feasibility studies of the Project as well as the initial preparation have been carried out one after another. The reports on the feasibility studies are undertaken by QBG of Shaanxi and Shaanxi Construction Investigation and Design Co., Ltd. and up to now, the first drafts of the reports have been accomplished. Relocation and Resettlement Plan (the first draft) is undertaken by Qinling Botanic Garden of Shaanxi and Shaanxi Kexin Consulting Co., Ltd.

A. Impact

6. The affected area, 50 km from Xi’an city, is located at Dianzhen Village, Zhouzhi County of Xi’an, Shaanxi Province, and totals up to 4,039.5 mu. Zhouzhi, located in the hinterland of Qinchuan plain running about 400 km, belongs to the temperate continental, monsoon climate zone. The annual average temperature is 13.2ഒ in the plain. With a total area of 2,974 m2, the county has farmland more than 900,000 mu, a population of 630,000 living in nine towns, 13 townships and 379 administrative villages, and it is one of the well-known large counties in Guanzhong Plain. By the end of 2006, the total output value reached CNY2.35 billion, the average net income in the rural area CNY1,822.

7. Dianzhen Village, affected by the Project, is one of the poorest areas in Shaanxi Province, and the average net income of farmers is CNY1,547, equal to 68% of the average net income of farmers in the whole province, and 43.2% of that in the whole nation. There are 25 households with an average income per capita below CNY600. The main cause is that they have no other income resources besides farming, and some families even live on relief. Yet, their farming income mainly relies on grain crops, almost no economic crops. Due to weakness or illnesses of the main supporters, or lack of laborers, some families live in desperate poverty.

8. There are no minorities living in the area, and all residents speak Chinese. 2 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 16

B. Supervision

9. The investigation and supervision over the affected area of the Project are in the charge of the Development and Reform Committee and Foreign Loan Office of Shaanxi Province, and undertaken by Mt. Qinling Botanical Garden of Shaanxi and Shaanxi Kexin Consulting Co., Ltd. respectively.

10. The supervision work at the early phase includes two main parts: one is surveys on the impact of the Project and on the social economy. By now, the overall survey on the development of social economy in Dianzhen Village and the affected districts and counties in the province, and on the population, land, houses, and coverings. The other is that the expert group from Shaanxi Kexin Consulting Co., Ltd., after analyzing and processing the data and information under the surveys, has compiled the “Land Acquisition, Relocation and Resettlement Plan under the Project of Ex-situ Conservation Area of Plants in Mt. Qinling National Botanical Garden”. 

Table 1: Social and Economic Data of the Areas Affected by the Resettlement and Preservation Project for the Qinling Mountains National Botanical Gardens Land Acquisition Project

Items County/ Village Population Total Farmland Farmer Net Land Discrict Committee (10,000) Land Area Average Average Area (10,000 Income Production (km2) Acres) (CNY) (CNY)

ZhouZhi County of Xi’an 63.0000 2,974.0 90.0 1,822 City Dian Zhen Village of the 0.3780 6,157.5 45.5 1,547 1,110 Zhou Zhi County

C. Affected Quantities and Categories by the Project

Table 2: Different Aspects Affected by the Resettlement and Preservation Project for the Qinling Mountains National Botanical Gardens Land Acquisition Project

Affected Land Demolited Buildings Attached Designated Young Crops Facilities Facilities

Types Irrigated land ᇬ dry Brick & Concrete fruit trees ᇬ useful Irrigating facilitiesᇬ Vegetables Brick & Wood, grain crops landᇬhousing land woods power facilities, etc earth and wood enclosure etc etc ᇭUncultivated land simple

Table 3: Different Aspects Affected by the Resettlement and Preservation Project for the Qinling Mountains National Botanical Gardens Land Acquisition Project

Aspects Total Land Number of Shareholder Houses and Population Young Areas Area Acquisition Households Land Area Buildings Affected Crops Affected Area (Acres) Affected (Acre) Demolished Affected (Acres) (People / (Acres) Households)

Zhou Zhi County 4,039.50 293.63 504 people / 3,745.90 19,319.97 617 people / 3,907.90 Dian Zhen Village 115 143 Households Households D. Organization Setup

11. The organization setup of the Project is detailed as follows: TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 3 Final Report Appendix 16

Figure 1: Qinling National Botanical Garden Relocation Protection Project – Land Acquisition, Demolition, Resettlement Organizations

Shaanxi Provincial Government, State Forestry Administration, Chinese Science Asian Development Bank Academy, Xi’an Municipal Government

External Supervising Organization Coordinating Committee of the Qingling (5 people) National Botanical Garden Construction Director’s Office (Resettlement Arrangement Office) ㈐扐ⅉ⛧ 5 ⅉ Internal Supervising Organization (3 people)

Zhou Zhi County Land Acquisition and Resettlement Coordinating Directors and Their Offices

Ji Xian Town Land Acquisition Coordinators (2 people)

Dian Zhen Village Land Acquisition Coordinators (2 people)

E. Policies for Land Acquisition, Relocation and Resettlement

1. National Laws and Regulations Concerning Land Acquisition and Relocation

12. In accordance with the following legal documents, the construction unit is entitled to the land acquired upon compensating the affected units and people.

(i) Law of Land Administration of the People's Republic of China (Enforced on Jan. 1, 1999) Main contents: The right of use to land, overall planning of land use, protection of farmland, supervision and investigation, legal responsibilities, including the criteria for formulating relocation subsidy, land acquisition compensation fees in connection with resettlement and ways of relocation have been prescribed.

(ii) Implementation Regulations for PRC Law of Land Administration (No. 256 Decree of the State Council of the People’s Republic of China on Dec. 27, 1998) Main contents: Concrete implementation methods, in conformity with Law of Land Administration of the People's Republic of China, have been prescribed.

(iii) Regulations on the Protection of Basic Farmland (No. 257 Decree of the State Council of the People’s Republic of China on Dec. 27, 1998) Main Contents: In accordance with Law of Agriculture of the People's Republic of China and Law of Land Administration of the People's Republic of China, concrete prescriptions concerning that the government carries out protection of basic farmland, mainly including demarcation, protection, supervision and administration, legal responsibilities, etc have been stipulated.

(iv) Provisional Regulations of the People's Republic of China Governing Farmland Use Taxation (No. 27 Document [1987] of the State Council on April 1, 1987) Main contents: The standard for farmland use tax paid for the land used for national construction and scope of collection have been formulated. 4 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 16

(v) Implementing Measures of Shaanxi Province on ‘Law of Land Administration of the People's Republic of China’ (Approved by the standing committee at the 12th session of the Ninth People’s Congress of Shaanxi, on Nov. 30, 1999, and enforced on Jan. 1, 2000) Main Contents: In accordance with Law of Land Administration of the People's Republic of China and Implementation Regulations for PRC Law of Land Administration, concrete implementation regulations have been stipulated in the light of the actual conditions of Shaanxi.

(vi) Detailed Implementing Rules of Shaanxi Province on Regulations on the protection of Basic Farmland (issued upon the No. 30 Decree of Shaanxi Provincial People’s Government on April 4, 1996) Main contents: In accordance with Law of Land Administration of the People's Republic of China and Regulations on the protection of Basic Farmland by the State Council as well as related legal documents and in the light of the actual conditions of Shaanxi, concrete regulations on Shaanxi Province’s protection of basic farmland have been stipulated.

(vii) Decision on Furthering Reform of Land Management of the State Council (Guofa [2004] No. 28)

(viii) Notice on Printing the Suggestions for Completing Compensation and Relocation System of Land Expropriation by the Ministry of Land Resources of People’s Republic of China (Nov. 3, 2004, Guotuzifa [2004] No. 238)

2. Guiding Principles of ADB Concerning Relocation and Resettlement

13. The policy on relocation and resettlement launched by The Asian Development Bank (ADB) aims to ensure that the relocated people can benefit from the Project. In specific, the policy includes the following items:

(i) Try to avoid the involuntary migrants or reduce the number of the involuntary migrants to the minimum in a feasible way; (ii) If it is inevitable to relocate people, relevant relocation and resettlement plan shall be mapped out. The policy of ADB is released to help improve or, at least restore the life of the relocated people; (iii) The relocated people are entitled to compensations for their property loss, and to the profits generated from the Project, as well as obtain help in the process of relocation and resettlement; (iv) The relocated people shall be supported in terms of restoring their previous livelihood, income and production strength; (v) The special demand of the disadvantaged relocated people shall be fulfilled; (vi) Public participation is encouraged in the process of planning and implementation of the relocation and resettlement; (vii) The relocated people shall be integrated with the residents from the resettlement area in terms of social and economic aspects; and 8) Peasants affected by the Project shall be provided with land, house, infrastructures and other compensations.

3. Comparison of Relocation Policies between ADB and China

14. Comparatively speaking, the relocation policies between ADB and China are the same in the following aspects: trying to reduce the number of the relocated people; appropriately resettling down the production and life of the relocated people; ensuring that the livelihood and production level of the relocated people can keep pace with the previous level and even be greatly improved. The relocation policy of China advocates the exploitable relocation, and underlines that the concept of national compensation along with self-reliability shall be applied in relocation and resettlement work; while ADB emphasizes public participation and special concerns for the disadvantaged groups. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 5 Final Report Appendix 16

F. Compensation Standard for Land Acquisition and Resettlement Plan in the Implementing Area

1. Policies and Principles

15. In accordance with legal regulations concerning land acquisition and relocation by the national and local governments and guiding principles of ADB concerning relocation and resettlement, and especially in order to carry out the construction of the Project, the Project shall be implemented in adherence to improving or not lowering the production conditions and living standard of the affected people. The affected residents are entitled to get compensations from the implementation party that should help the affected residents to resume or improve the level of their income and life. In conformity to the above principles, the Foreign Loan Office of Shaanxi Province, the executing unit, and Mt. Qinling Botanic Garden of Shaanxi, the implementing unit, together with Shaanxi Provincial Department of Land Resources and other related departments, draw out relative policies and measures in respect of the Project as per the guidance and requirements of Decision on Furthering Reform of Land Management of the State Council (Guofa [2004] No.28) and Notice on Printing the Suggestions for Completing Compensation and Relocation System of Land Expropriation (Guotuzifa [2004] No. 238) by the Ministry of Land Resources.

(i) Compensation shall be made in accordance with the actual condition of the demolished houses, regardless of their ownerships, in order to ensure that the demolished households can obtain the houses of the same structure and areas as their demolished ones stipulated in RAP. According to the guide for house relocation settlement and the structure and type of houses, the people affected by demolishment shall be compensated directly, and their previous houses shall not be depreciated; besides, the affected residents are entitled to the construction materials of their previous house. (ii) For villagers who lose their houses, the village and township government shall allocate land bases for them to build houses by themselves with the assistance of compensation fees and house removal fees; or they can ask the village and township government to build the house. No matter which way of rebuilding is adopted, the house cannot be demolished until the demolished households have removed to their new houses.

16. In accordance with the assessment and approval of the real estate management bureaus of the county or the city, the compensation standard is as shown in Table 4 below.

Table 4: Housing Compensation Standards

Type Brick and Brick and Earth and Simple (m2) Concrete Wood (m2) Wood (m2) (m2) Unit: CNY/m2 Standard 520 450 350 150

17. As to the illegal temporary constructions, only appropriate sum of removal fee shall be granted for timely demolition.

2. Affected Land Compensation Standard

18. Standard for land compensation fee and relocation subsidy – In line with the spirit and requirement of the Decision on Furthering Reform of Land Management of the State Council and the Notice on Printing the Suggestions for Completing Compensation and Relocation System of Land Expropriation (Guotuzifa [2004] No. 238) released by the Ministry of Land and Resources, land compensation fee and relocation subsidy shall be calculated according to the legal maximum of the summation of both land compensation fee and relocation subsidy, namely, totally 30 times of the average output of the land within the project area in the first three years since the land is expropriated. The young crops compensation shall be calculated according to the maximum of 40% to 90% of the average output of the land with damaged young crops in the first three years. Compensation for orchard, residential base and barren land shall be calculated according to the Implementation of ‘Land 6 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 16

Administration Law of the Peoples Republic of China’ of Shaanxi Province: compensation for farmland shall be made according to four to six times of the average annual output of the medium-sized arable land in the local county (city or district) with expropriated land in the first three years; land compensation for other lands shall be calculated according to one to four times of the average annual output of the medium-sized arable land in the local county (city or district) with expropriated land in the first three years; compensation for orchard shall be calculated according to six times of the legal maximum of the average output of dry land within the project area in the local county (city or district) with expropriated land in the first three years; compensation for residential base shall be calculated according to four times of the average output of the dry land within the project area, whereas compensation for barren land shall be calculated according to one time of the figure. Shaanxi Provincial Development and Reform Committee, Shaanxi Foreign Loan Office, Shaanxi Provincial Department of Land Resources and Shaanxi Provincial Bureau of Statistics jointly enact the compensation standard of the Project (see Table 5).

Table 5: Project Land Compensation Standard

Type Irrigated Land Orchard Dry Farmland Housing Land Uncultivated Land Unit: CNY/mu Standard 35,790 10,500 15,000 3,000 50 Note ᧶ Land compensation and resettlement compensation are estimated together ᧨ housing land and uncultivated farmland are not included in the compensation

Table 6: GPD of the Affected Areas (based on the average of the three years from 2003-2006) Column Column Column Column Column Column Heading Heading Heading Heading Heading Heading Unit: CNY/mu GPD 1,193 According to dry 500 land standard

19. According to Article 47 of Land Administration of the Peoples Republic of China and the relevant regulations released by Shaanxi Provincial People’s Government, the formula for calculating the compensation fee for arable land is as follows:

Q1=A•a (e.g.: irrigable land 35,790 = 1,193 × 30) Among which: Q1 = land compensation fee A = average output of the land in the first three years since the land is expropriated A = coefficient of land compensation fee and relocation subsidy=30

20. Compensation for young crops is calculated according to 90% of the average annual output of the land before expropriation in the first three years. See table 7 for the compensation standard.

Table 7: Young Crop Compensation Standard

Type Vegetable (10% of the young Other young crops (mainly grain crop total) crops) Unit: CNY/mu Standard 1,000 500 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 7 Final Report Appendix 16

3. Other Affected Facilities

21. After the assessment of the relevant authorities, compensation fee for the affected auxiliary facilities shall be fulfilled according to alternative prices of the facilities. See Table 8 below for the compensation standard.

Table 8: Affiliated Facilities Compensation Standard

Scattered Fruit Young Fruit Useful Woods Useless Woods Brick Earth Trees (No.) Trees (No.) (No.) (No.) Enclosure (m) Enclosure (m) Unit: CNY 60-80 5 10-20 5-10 40-80 10-40

22. All specialized facilities, including facilities for hydraulic work, power and communication, as well as yards, pools and vault storeroom, shall be compensated according to relevant regulations of Shaanxi Provincial People’s Government and their real construction cost or alternative value.

4. Evaluation of the Compensation Standard

23. According to the spirit and requirement of the Decision on Furthering Reform of Land Management of the State Council (Guofa [2004] No. 28) and the Notice on Printing the Suggestions for Completing Compensation and Relocation System of Land Expropriation (Guotuzifa [2004] No. 238) released by the Ministry of Land and Resources, the compensation standards for houses, affected land and young crops of this Project are proposed by Shaanxi Foreign Loan Office, namely the executing agent and the implementation agent of the Project along with Shaanxi Provincial Department of Land Resources and Shaanxi Provincial Bureau of Statistics, in the light of the social and economic development strength and features within the Project area of Shaanxi province, incorporating the part of suggestions put forward by every districts when they enact the uniform standard for annual output. Therefore, these standards are lifted by a large margin compared with the previous ones. The compensation standard for land and young crops of the Project has been stipulated with incorporation of the suggestions of the local government and residents, so it is highly rated by the local government and residents according to the feedbacks.

5. Payment of Compensation Fee

24. Compensation fee for land expropriation takes a part in the total investment of the Project, thus it has already been considered in the budgetary estimation. All the compensation fees are allocated by Shaanxi Foreign Loan Office; they shall be given to the affected collectivities and people, and no one shall intercept or embezzle them: land expropriator shall sign contract with the previous owner of the expropriated land; the compensation fee shall be drawn with the signature of the payee; and all the materials shall be kept in archives.

25. Land compensation fee belongs to rural collective economic group, thus it shall be given directly to the village committee in a bid to develop production and restore the economic strength of the affected people. The affected people are entitled to discuss and participate in the economic restoration plan.

26. Compensation fee for house, specialized facilities and auxiliary facilities, as well as young crops shall be directly paid to the entitled people.

6. Demolition Subsidy

27. The affected people shall be paid the demolition subsidy in addition to the house compensation fee according to the standards, including transition fees and the standard house removal fee of CNY500 to every household.

28. If the land expropriation and relocation institution of the Project provides the temporary house for transition or demolishes the house after the new house has already been built up, the subsidy for transition shall not be covered. If houses for the production and business operation are suspended by 8 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 16 demolition, appropriate sum of subsidy shall be provided. The maximum duration for payment of transition fees shall not exceed the production restoration period.

G. Land Compensation and Dividend for the Voluntarily Pooled Land within the Project Area

29. The Project will utilize 4,039.5 mu of land area, of which 293.63 mu of land will be expropriated, and the rest part of land, totally 3,745.87 mu, shall be utilized by the peasants within the project area through voluntarily buying shares. The land utilization and compensation of this area includes two aspects: the compensation for ground attachment and young crops of the pooled land; and the policy on dividend for the pooled land. The standard for the former two items shall comply with the relevant requirements of the national policy and ADB (Asia Development Bank).

1. Compensation and payment for the ground attachment and young crops of the pooled land within the project area

30. According to the research report on The Project of Land Expropriation, Relocation and Conservation of Mt. Qinling National Botanical Garden, it is preliminarily confirmed that the pooled land is 3,745.87 mu, of which the irrigable land and dry land take up 1,186.07 mu, and hillside land 2,559.8 mu. The compensation standard for the ground attachment and young crops of the pooled land shall conform to that of the expropriated land of the Project.

31. The pooled land shall not change its nature for agricultural use, thus all kinds of specialized facilities on the ground of the pooled land for hydraulic work, power, communication, as well as yard, vault storeroom shall not be ravaged or relocated. If compensation is necessary in the Project, it shall be fulfilled in accordance with the relevant regulations of the Shaanxi Provincial People’s Government and the real construction cost, or the alternative price.

32. The compensation and payment for the ground attachment and young crops of the pooled land shall be fulfilled a month earlier prior to the implementation of the Project.

33. Consultation, complaints, appeal, public participation, supervision and assessment procedure and method concerning the above-mentioned compensation standard and payment shall be in conformity with that of the expropriated land of the Project.

2. Profit-sharing

34. According to settlement policy on pooling of land in Instruction on Consummation of Land Appropriation Compensation System by the Ministry of Land and Resources (Guotuzifaᇿ2004ሀ No.238), the Project shall acquire land-use right of 3,745.87 mu by the way that farmers are shareholders with free will. Besides compensation of ground attachment and green seedling of appropriated land, the original land user shall share profit. In order to protect the interest of the original user on the appropriated land, profit sharing of the original land user shall be counted by fixed profit sharing and revenue profit sharing.

35. The fixed profit sharing standard is CNY500 for irrigable land, CNY400 for dry land and CNY300 for sloping land at the first year. Since the second year, sharing of each category shall be elevated CNY20 per year.

36. From the year Mt. Qinling National Botanical Garden gains admission income, the original land user shall enjoy operation profit sharing and the fixed profit sharing will not ascend.

37. Operation profit sharing enjoyed by the original land user is admission dividend, with the standard of CNY7,500/mu for sloping land, CNY10,000/mu for dry land and irrigable land of CNY12,500/mu with land-use right of 50 years to be paid for shares. Decide ticket division proportion to be a percentage, according to the land investment proportion on the total capital stock of the Garden. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 9 Final Report Appendix 16

38. Legal representative of fixed profit sharing and operation sharing is Villager’s Committee of Dianzhen Village, Zhouzhi in affected areas, which shall grade the participating land according to its practical type and make sure that the amount of every mu is allocated to the participating original land user.

3. Revenue analysis of land profit sharing

40. The relocation and conservation project of Qinling National Botanical Garden will achieve the use right of 3745.87 mu land by farmers’ voluntary participating in the project area. Before the profit sharing, the 3745.87 mu land could obtain an annual net income of RMB1, 195,800 Yuan, with RMB 320 Yuan every year per mu on average. The fixed dividend after the pooling is RMB400 Yuan for each mu per year. So the income after the pooling is RMB1, 498,300 Yuan for this part. Therefore, the income of farmers could increase by 25.25% annually merely from fixed dividend of land. According to this assessment, and the preliminary agreement with Denzhian villagers in relocation protection zone, all the participating land should take up about 6% of the total investment of Qinling National Botanical Garden. For budget purposes it is assumed that the share holder villagers will also receive 6% of the project net profit. The profit sharing will be much higher than the existing income. See Table 9 & Table 10.

Table 9: Shareholder Land Profit

Dian Zhen Land Origina Original Annual Earnings after opening business Village l Rental (mu) Net ᧤6᧡ of annual profit1 see table 10) Net Payment Profit receiv’d Profit ᧤RMB 10,000᧥ (Yuan/ (RMB (RMB 10,000) 10,000) Mu) 2011 2015 2020 2025

Before 3,745.87  ᧪ becoming Shareholder After 3,745.87 0.00 149.83     becoming Shareholder PPTA Cash 3,745.87 0.00 149.83     Flow (400) (CNY/mu)       Shareholder 600     return CNY per mu (PPTA figures)

Note: The income cost and financial assessment after the project operation have been analyzed in details in the project research report of feasibility. This profit list adopts the analysis result of the research report of feasibility.

1 This is based on the Chinese Feasibility Forecasts. The PPTA has reduced the rate of visitation in year one from 600,000 to 350,000 effectively reducing the net cash flow and also the return to shareholding. 10 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 16

Table 10 Income forecast table after the project completion (Unit: RMB10000

Gross income annually 8, 634.00 9, 345.72 10, 573.82 11, 963.31 Total cost evaluation 5, 473.19 5, 148.05 4, 874.29 4, 639.89 Annual profit 3, 160.81 4, 193.67 5, 699.53 7, 323.42 (Feasibility Study) PPTA Revenue 3,706 6,405 8,992 11,579 PPTA NCF (Before Tax) - 9,140 2,492 5,220 7,956 Note: The gross income annually consists of the income from ticket, food service, various facilities service, etc. The visitors consume RMB143.92 Yuan once on average.

41. Therefore, the income of land affected households falls into two parts after the construction of Qinling National Botanical Garden: One is the annual fixed distribute bonus of RMB 400 Yuan/mu on average; the other is land sharing distributed income based on the profit of the Garden. And both of these two kinds of income greatly increase the income of farmers enjoying land share once the project is implemented. In 2011, the project will come into operation. The income will increase 83% or so than that prior to the project construction so as to greatly improve the farmers’ living standard in the project area.

42. According to investigation, after participating of the farmland, the fixed profit sharing can increase the income of every farmer by 37.39%. If analyzing according to research report of feasibility, all the participating land of households in Dianzhen Village takes up about 6% of the total investment of Mt. Qinling National Botanical Garden and the operation profit sharing will be much higher than the existing income. See Table 9.

4. Distribution and Surveillance of Village-level Land Compensation Fee

43. Land compensation fee and relocation subsidy due to the Project shall be allocated to the lower level institutions by the construction unit through formal channels. According to Land Administration Law, the land compensation fee is directed at the owners and entitled users, whereas relocation subsidy shall be mainly used for the relocation of the agriculture residents after land expropriation. Therefore, land compensation fee shall be disposed by the village committee, while relocation subsidy shall be disposed by people who are in charge of the relocation work of the agriculture residents. If the affected people want to initiate their own business or dispose the money by themselves, the relocation subsidy shall be given to the affected people. No one shall intercept and embezzle the land compensation fee and the relocation subsidy.

5. Measures of Restoring the Economy

44. The most important point of the demolition and relocation plan for land expropriation of this Project is the appropriate reallocation of the land, assisted by other measures of restoring economy.

45. According to relevant laws of the country, the land required by the Project, the demolished houses and the ground attachment shall be compensated by the construction unit.

H. Implementation of the Plan

46. The land expropriation and relocation work will start from _____ (month), ____ (year), and shall be finished one month earlier before the construction. The plan can be undertaken in three phases: first phase, preparation; second phase, implementation; third phase, examination/supervision/assessment (the external and internal supervision will run throughout the whole process of the construction). TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 11 Final Report Appendix 16

Table 11: Land Acquisition Compensation Progress

Year Responsible Party Jobs 200 – 200 County Government  Establish Project Management Offices Qinling Botanical Gardens  Project Promoting  Shaanxi Scientific and Social and Economical Analyzing Communicational Consulting Co. 200 – 200 Shaanxi Provincial Foreign Loan Office  Compile land acquisition and resettlement project Qinling Botanical Gardens proposal  Collect opinions from people and government at all levels  Continue project promotion  Distribute information brochures 200 - Shaanxi Province Foreign Loan Office  Put land acquisition border dividers into place Zhou Zhi County Government  Quantity measure and analyze 200 - Shaanxi Province Foreign Loan Office  Sign agreement on the land acquisition Zhou Zhi County Government compensation  Go through land use procedures 200 - Shaanxi Province Foreign Loan Office  Distribute compensation payment periodically Zhou Zhi County Government  Distribute all kinds of compensation payment to people affected

2008.- Shaanxi Province Foreign Loan Office  Check project progress Shaanxi Scientific and  Supervise compensation payment distribution Communicational Consulting Co. 2008.- Shaanxi Province Foreign Loan Office  Process appeals Shaanxi Scientific and  Check fund distribution Communicational Consulting Co.  Implement internal and external supervision Zhou Zhi County Government  Follow up study of the affected villages  Evaluate the land acquisition project

I. Fund Budget and Compensation Cost

1. Total Costs

Table12 : Land Acquisition and Resettlement Expenses Breakdown Total (CNY) A. Basic Expenses 1. Land Compensation 5,838,055.00 2. Cultivating Land Compensation 1,957,631.21 3. Farmland Compensation 880,890.00 4. Soil Erosion Compensation 293,630.00 5. Housing Compensation 6,143,716.90 6. Land Use Fees for Newly Converted Construction Land 2,741,916.94 7. Other Building Compensation 904,800.00 8. Young Crop Compensation 2,149,350.00 9. Irrigating Facilities Compensation 20,000.00 10. Villages Resettlement Compensation 71,500.00 11. Villager Transition Compensation 71,500.00 Total Basic Expenses 21,072,990.05 B. Administration Expense 590,043.70 C. Service Charge (3% of the Basic Expenses) 632,189.70 D. Supervision and Assessment fee 205,000.00 E. Planning Expenses 60,000.00 F. Unpredictable Expenses (30% of the Basic Expenses) 6,321,897.00 Total 28,882,120.45 12 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 16

Table 13: Land Compensation Breakdowns

Type Irrigated Dry Orchard Housing Uncultivated Total Land Farmland Land Land Quantity (mu) 133.0 42.2 29.7 42.9 88.7 336.5 Compensation Standard 35,790 15,000 10,500 3,000 50 (CNY) Compensation Expenses 4,760,070 633,000 311,850 128,700 4,435 5,838,055 (CNY)

Table14: Housing Compensation Breakdowns

Type Brick and Brick and Earth and Simple Total Concrete Wood(m2) Wood (m2) (m2) (m2) Quantity (m2) 776.82 4,151.20 8,564.51 5,827.68 19,320.21 Compensation 520 450 350 150 Standard (CNY) Compensation 403,946.4 1,868,040.0 2,997,578.5 874,152.0 6,143,716.9 Expenses (CNY)

Table15: Demolition Breakdowns

Type (m) (m) Pole Pole Total Total Trees Trees Power Power tion Pole Water Well Converters Converters Power Cable Power Cable tion Cable (m) tion Cable Enclosing Wall Enclosing Telecommunica Telecommunica

Quantity 3,541 960 1,125 16 1 17 1 7,150 Compensation (CNY) 177,050 9,600 11,250 3,200 50,000 1,700 80,000 572,000 904,800

Table16: Young Crop Compensation (including Shareholder Land Young Crops)

Type Vegetables Other Crops Total Quantity (mu) 390.8 3,517.1 3,907.9 Compensation Standard (CNY) 1,000 500 Compensation (CNY) 390,800 1,758,550 2,149,350

2. Fund Process

47. Land acquisition, relocation compensation cost shall be paid directly to villager’s committee and affected individual by the County Project Office through the Bank and the Project Office of affected County People’s Government by the executing unit.

3. Examination and Approval Requiring Added Costs

48. Project executing unit are entitled to unexpected costs within the estimation. As for the unexpected costs and the rising prices exceeding the estimation, Shaanxi Provincial Development and Reform Committee and Foreign Trade Office to Development and Reform Committee and the Ministry of Finance shall make submission to the National Development and Reform Commission and the Ministry of Finance for approval, and then it can be added into the budget, which shall take less than one month. TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 13 Final Report Appendix 16

J. Complaints, Appeals and Public Participation

1. Complain and Appeal

49. In order to protect the affected individual’s interest, if anyone feel dissatisfied about the allocation work, he or she may make complaint and appeal to project offices at correspondent levels, further, he or she may take judicial proceedings to the People’s Count of county or municipal level..

50. Institutes transacting complaint and appeals are: Construction and Coordination Commission of Mt. Qinling National Botanical Garden and affiliated Construction and Coordination Office of Mt. Qinling National Botanical Garden, the Project Construction of the County, Coordination and Guidance Group and Project Office, People’s Government of the town and the Villager’s Committee.

51. The appeal transaction institutes are People’s Count of the County and the Municipal Intermediate People’s Count. The appeal transaction institutes and procedures are listed as follows:

Figure 2: Appeals Procedure

Municipal Intermediate People’s Court

 County People’s Court 

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 County Resettlement Offices



 Town Government People affected 

Village Committee

2. Propaganda and Public Participation

52. As a vital social activity for land acquisition, resettlement and compensation, propaganda should be well-prepared with the aim to make every correlative individual acquaint with the 14 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project Final Report Appendix 16 significance, processes, appropriation, compensation, appeal and the way of settlement and problems existing in the project construction and propaganda shall be carried on before hand.

53. Land acquisition, resettlement and compensation shall be carried out by two methods: first, social medium; second, correspondent management mechanism. (2) The propaganda shall cover relevant contents about land acquisition, resettlement and project construction, and upon the approval on (Month) (Day), 200x, Amendment of APR shall be issued to Project Offices of affected counties and the Land Acquisition and Resettlement Information Manual (Revised edition) shall be sent to affected villages at the same time.

54. Besides the propaganda, wide public participation shall also be taken into consideration, including inviting representatives of People’s Government of all levels and affected individuals to take part in the activity and have a better understanding about the courses of land acquisition, resettlement and compensation in accordance with the concrete articles of RAP and taking into consideration the interest of units and individuals.

3. Public Inquiry

55. Public inquiry includes objective, scope, land acquisition and resettlement policy, compensation standard, method of payment, executing institution and accomplishment plan etc. The acceptance institutions shall be project management institutions and villager’s committee. After the start-up of the Project, principals of project management institutions, their office address and telephone number shall be notified in the affected areas.

4. Resettlement Information Manual

56. In order to ensure that affected objects acquaint with the detailed information of resettlement plan, the project executing institution compiled Land Acquisition, Resettlement and Information Manual which include project introduction, affected scope, compensation standard, resettlement policy, responsibility institution, public participate, inquiry and appeal process.

57. This Manual will be send to all the affected households, county or village people’s government and villager’s committee prior to (Month) (Day), 200x. See Annex I for the model of manual.

K. Supervision and Evaluation

58. In order to ensure that land acquisition, resettlement goes smoothly as scheduled, two supervision methods will be adopted by two independence institutions from two different aspects: First, interior supervision system made up of governmental departments through administration aspect according to RAP articles; Second, exterior supervision system consisting of sociologists for carrying on evaluation and supervision through social survey.

1. Interior Supervision

59. Interior supervision comprises supervision to correlative administration departments (including county and village or town people’s government and resettlement of affected individual, it shall be carried out according to articles of RAP.

2. Exterior Supervision

60. In order to ensure that land acquisition, resettlement and compensation of the Project go smoothly, a famous public Consulting institution is invited to carry out exterior supervision. Foreign Loan Supporting Project Management Office of Shaanxi Province, the executing institution, will entrust Shaanxi Kexin Consulting Co., Ltd. to carry out exterior supervision, with the supervision outline as follows:

RESETTLEMENT ACTION PLAN (RAP) SUPERVISION OUTLINE

61. Foreign Loan Supporting Project Management Office of Shaanxi Province, the executing institution invites Shaanxi Kexin Consulting Co., Ltd. to carry out supervision and check of land TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 15 Final Report Appendix 16 acquisition, resettlement and compensation in an independent and candid manner so as to ensure that the policy objective of ADB is implemented broadly and accurately.

A. Supervision Contents

(i) Check if the acquisition and resettlement are carried out according to articles of RAP. (ii) Make sure works that should be finished prior to construction are accomplished. (iii) Decide an overall objective of acquisition and resettlement plan and the schedule of implementing RAP. (iv) Make sure that the lost fortune is equivalent to the replacement price, building dismantling and resettlement go smoothly, and affected individuals recover their original income. (v) Satisfaction degree of affected individuals about land acquisition and resettlement as well as the living standard recovery measures. (vi) Satisfaction degree of affected individuals about land acquisition and resettlement and quality and quantity of redistribution land. (vii) Satisfaction degree of affected individuals about location of resettlement and difference of environment with the original location. (viii) Satisfaction degree of affected individuals about compensation standard and method of dismantled houses, buildings, ground attachment. (ix) Satisfaction degree of affected individuals about subsidy standard and amount in resettlement. (x) In the course of acquisition and resettlement, whether correlative institution and local government consult fully with affected individuals and whether any forced dismantled and resettlement happened. (xi) Supervision on fund flow of land acquisition and resettlement.

B. Schedule of Supervision

61. The supervision shall begin from (Month) (Day), 200x and wind up as the general supervision evaluation is worked out upon the completion of the Project. PROJECT EXECUTIVE SUMMARY REQUEST FOR COUNCIL WORK PROGRAM INCLUSION UNDER THE GEF TRUST FUND

GEFSEC PROJECT ID: Financing Plan ($) EA PROJECT ID: PDF/PPG Project COUNTRY: China GEF Total 225,000 4,270,000 PROJECT TITLE: Shaanxi Qinling Integrated Co-financing Details provided in Ecological Management Project Section b: Co-financing GEF AGENCY: Asian Development Bank GEF IA/ExA 40,000,000 OTHER PROJECT EXECUTING AGENCIES: Shaanxi Government 84,887,250 Provincial Development Reform Commission of the Others Shaanxi Provincial Government Co-financing DURATION: 5 years 124,887250 Total GEF STRATEGIC OBJECTIVES: Biodiversity GEF FOCAL AREA STRATEGIC OBJECTIVES: BD-1; Total 129,157,250 BD-2 (SLM-1; SLM-2) GEF OPERATIONAL PROGRAM: OP1; OP2; OP3; OP4; (originally OP12 under the PRC-GEF Partnership on Land Degradation in Dryland CONTRIBUTIONS TO KEY INDICATORS Ecosystems, and also responds to OP15) IDENTIFIED IN THE FOCAL AREA PIPELINE ENTRY DATE: STRATEGIES: EXPECTED STARTING DATE (PROJECT): MARCH 2008 EXPECTED CEO ENDORSEMENT: GEF AGENCY FEE: $50,000

David McCauley Senior Environment Specialist IA/ExA Coordinator Tel. and email: +632 632 6951/ [email protected] 1. PROJECT SUMMARY1

a) Rationale

1. Shaanxi Province is part of western China where economic growth rates have lagged those in the eastern provinces. Shaanxi grew at an average of 7.5% from 1990 to 2000 compared with a national average of 10% to 11%. When coupled with population growth, GDP/capita fell from 75% of the national average to less than 60% over the same period. From 2000 to 2005 Shaanxi achieved an average growth rate of 9.8% per annum exceeding the national average and increasing the GDP/capita to 63% of the national average. A major stimulus for the increased growth was the additional investment made under China’s western development strategy under the Tenth Five Year Plan. Among the 31 provinces, autonomous regions and independent municipalities in China, Shaanxi currently ranks 16th in terms of population size, 22nd in terms of the size of the economy and production base (as measured by GDP and industrial production), and 26th with respect to GDP/capita2. Shaanxi is home to about 2.8% to the country’s population, contributes 1.8% to its GDP, and has a land area of 206,000 sq. km. (2.1% of the nation’s total).

2. Shaanxi’s economic development is limited by (i) continued dependence on primary sector production systems that are weakly linked to markets and local value addition, (ii) limited off-farm employment in rural areas, (iii) below average productivity and efficiency in productions systems due to the current structure of smallholder agriculture, (iv) low levels of industrial production and limited private sector investment, (v) low savings rates to support future investment, (vi) limited local government revenue for service provision, (vii) markedly lower levels of urbanization than in other areas (40% compared with 60% in eastern provinces), and (viii) limited export trade that amounts to only 7% of GDP (compared with 30% for PRC) and FDI inflow of 1.3% of GDP (compared with a national average of 4%). Shaanxi has a predominantly rural economy that continues to lack the capacity to generate sufficient output for export trade, reinvestment and as a consequence the inability to generate sufficient employment to diversify the economy out of agriculture.

3. The higher growth rates since 2000 derive largely from additional investment into infrastructure and from the expansion of tourism demand that utilizes the past investment into accommodation and product development in Shaanxi, especially in the capital Xian. Xian city accounts for 21% of provincial population but contributes over 40% of GDP. Shaanxi’s poorer rural counties have GDP/capita less than 30% of the national average resulting in 55 of the 88 counties being classified as poverty counties. In 2004, the average annual income of Shaanxi urban residents was CNY5,928 ($730 equivalent) while per capita income of the rural population was CNY1,050 ($130 equivalent). At these levels rural incomes are only 35% of the $1/day poverty criterion and approximately 50% of the average provincial income level.

4. The Shaanxi Province 11th Five Year Plan was approved on November 16, 2006. GDP is targeted to grow in real terms by 11.5 % per year, the population is to grow at a modest pace to reach 38.3 million in 2010 compared with about 37 million at the present time, per capita GDP is targeted to increase to CNY16,000 – which equates to about $2,050, and government revenues are targeted to increase from the current level of CNY60 billion to about CNY100 billion, a real growth rate of nearly 14% per year.

1 A more detailed description of the Project may be found in the Project Document that is an attachment to this submission. Greater detail on the environmental aspects of the Project can be found in the Environmental Assessment Report, available at http://www.adb.org/Documents/Environment/PRC/38660/38660-PRC-SEIA.pdf, while further detail on the social aspects of the Project can be found in the Resettlement Planning Document available at http://www.adb.org/Documents/Resettlement_Plans/PRC/38660/38660-01-PRC-RP.pdf. 2 Used as a proxy indicator for the standard of living and consumer purchasing power at the provincial and sub-provincial levels. i) Tourism 5. One of the strongest sectors in the Shaanxi economy is tourism, which is benefiting from the strong growth in the Chinese tourism industry. The tourism industry is a major driver of the Shaanxi economy. China is now the largest tourist destination in Asia, and is currently ranked fourth in the world in terms of international tourist arrivals and sixth in terms of international tourism receipts. From 2000 to 2006, international visitors to China rose by 7% per annum from 83.4 million to 124 million, providing a growth rate of nearly 7% per annum – despite a dip of 6.4% in 2003 because of the SARS epidemic. Foreign exchange earnings over the same period rose by 13% per year from $16.2 billion to $33.9 billion. From 2000 to 2006, the number of domestic tourists experienced even higher growth of 11% per annum from 744 million to 1.39 billion, while the revenues generated by domestic tourists increased from CNY317.6 billion to CNY623 billion, which provides an annual average growth rate of nearly 12% per year.3

6. The Shaanxi Tourism Bureau reports 1.06 million international visitors in 2006, nearly 70 million domestic tourists (which accounts for 5% of the national total)4, and tourism receipts from all sources of $5.4 billion or about CNY42 billion. This amounts to about 10% of Shaanxi’s GDP in 2006. Currently international tourists spend $480 over 2.7 days, while domestic tourists spend $70 over a period of 2.9 days.

7. The tourism industry’s enterprise structure is divided between hotels/accommodation facilities, travel and tour agencies, and tourism attractions and tourist sites. The province’s tourism base and supporting infrastructure are well developed. There are currently about 300 starred hotels in SP divided as follows: five star – 4 hotels, four stars – 24 hotels, three stars – 135, two stars or below – 137 hotels. The total number of beds in star rated hotels is 60,000. When the non-starred hotels are added, the province has well over 330,000 beds. Four and five star hotels are generally owned by the state and/or operated through foreign joint ventures. While some are under private ownership, most of the two and three star hotels are also owned by the state but their management is contracted out to the private sector – generally to domestic enterprises.

8. The product structure of the SP tourism industry is dominated by historical and cultural products and ancient buildings and sites from a relatively few centuries in the province’s long history – mainly the Qin and Han dynasties. The Shaanxi Province Tourism Bureau plans to diversify the tourism product through: (i) placing greater emphasis on later historical periods; (ii) marketing Xi’an as an important international cosmopolitan city within the western region of China; and (iii) expanding eco-tourism and other resource-based tourism. This strategy recognizes ands hopes to capitalize on the strong growth now taking place in the international and national nature based tourism market. This is reputed to be the fastest growing sector of the tourist industry. While tourism has been growing year on year at around 4%, eco-tourism/nature-based tourism is growing at three times faster than tourism as a whole5 (around 12%). The Shaanxi Tourism Bureau is currently preparing a strategy to support eco-tourism and other resource- based and cultural tourism in the Qinling Mountains. The Bureau is seeking funding to conduct research

3 See for example: World Tourism Organization, “Tourism Highlights: 2006 Edition “, 2006. 4 The national tourism data classifies domestic tourists as travelers who stay away from home for more than six hours. The provincial tourism data noted below on average length of stay would suggest that most domestic tourists who are resident in SP or from other provinces stay overnight. Based on this classification, the country’s domestic tourists increased from 750 million to 1.2 billion from 2000 to 2005, providing a growth rate of about 10% per year over the first half of the current decade. The number of foreign tourists entering China (which as noted above excludes visitors from Hong Kong, Macao and Taiwan) nearly doubled over the same period to reach 20 million foreign visitors in 2005. Shaanxi’s share of China’s foreign (other country) visitors is a little less than 4%. Therefore, Shaanxi’s shares of both foreign and domestic tourists is well over the province’s contributions to the country’s population and GDP, pointing out the importance of tourism to Shaanxi and the high reputation enjoyed by the province’s tourism sector in both national and international markets. 5 The Ecotourism Society (2005) Ecotourism Factsheet Vermont to support the development and implementation of the QM tourism strategy and to identify approaches to eco-tourism that are fully tailored to the needs and circumstances of the Qinling Mountains. Among other issues, the research would review the models and experiences elsewhere in China and other countries for using eco-tourism for promoting sustainable biodiversity conservation and sustainable livelihoods in a fully complementary manner, the experience with eco-tourism in the Qinling Mountains nature reserves in recent years and other PRC nature reserves.

9. While tourism is an important source of economic strength, jobs, investment and business development in Shaanxi, the province’s and Xian’s tourism sector is losing ground to other PRC destinations particularly in attracting and lengthening the duration of stay of the higher spending international tourist. Tourism officials recognize that the industry remains too dependent on a narrow range of products associated with the Qin dynasty (e.g., the Terracotta Warriors). Product diversification and in particular the development of more specialized higher value products that will appeal to higher income market niches in both China and other countries is needed to attract greater numbers, increase the duration of stay, and increase the spending of each visitor to Shaanxi.

10. More specifically, Shaanxi seeks to capitalize on potential tourism opportunities related to the Qinling Mountains biodiversity. There is an outstanding opportunity to promote conservation-based tourism linked to existing visitation at sites such as the Terracotta Warriors to increase the duration of visitor stays and the value per tourist. This requires not only appropriate product development and marketing but as well: (i) reversing the land degradation and biodiversity losses now taking place in the Project Area and the QM; and (ii) the preparation and enforcement of appropriate tourism standards and the training of local people living within or near the Project Area to fully participate as workers in, suppliers to, and/or owners of the tourism facilities established in the ex-situ area and the much larger in- situ part of the Project Area.

11. Tourism will play a major role in achieving the Shaanxi’s Provincial economic targets under the 11th FYP. Based on projections provided by the provincial Tourism Bureau and contained in the SP Eleventh Five-Year Plan, it is estimated that from 2005 to 2010, the number of international tourists will expand from 930,000 in 2005 to 1.75 million in 2010, and the number of domestic tourists will grow from about 60 million to perhaps close to 110 million. Tourism receipts from both sources are expected to expand from about $4 billion to approach $10 billion in 2010 – contributing over 10% to the province’s gross domestic product in that year.

12. To further strengthen the Shaanxi tourism base, provincial tourism planning is emphasizing intensive higher value-added tourism, providing a better balance between quantity, quality, efficiency and environmental protection. The Qinling Mountains are seen as important in strengthening and broadening the tourism products available in Shaanxi Province. The Shaanxi 11th FYP identifies ten major tourism sites one of which is the Qinling Botanic Garden to be developed in this project. In addition, the Qinling Mountain Ecological Tourism Area is one of six tourism “brands” to be emphasized in the tourism strategy under the Shaanxi 11th FYP.

ii) Poverty-Land Degradation

13. For Rural Shaanxi poverty rates often exceed 70% of households. Low living standards and high levels of poverty reflect structural inadequacies including small plot sizes, low levels of mechanization, limited value chain development, production systems that expanded onto marginal steep lands as part of historical incentives to increase production. A large proportion of rural residents suffer poverty as a result of past land-use decisions where farmers managed on a subsistence income derived from marginal and often steep land. Over time soil erosion increased, forest cover increasingly reduced and the impact of past land-use increasingly reduced the productivity of their land. As rural populations increased with migration and natural increase income per capita often fell. 14. Poor rural households had few options other than seek to recover lost income by further expanding production systems onto more marginal land or through intensification of production using agrichemicals, fertilizer and expanding livestock production. The outcome of this process was more short term gains but increased degradation, siltation of rivers and resultant flooding, land use change involving the conversion of remaining forest to cropping land and only short term improvement to incomes. The level of poverty continues to contribute to degradation processes as farmers search for more income from higher outputs through gains in efficiency or expansion agriculture onto even more marginal land. Most rural households lack the education and training to compete for permanent employment off-farm effectively locking them into casual day labor and agricultural activities.

15. As a direct consequence of these processes policy development has sought to minimize the off- site costs relating to soil erosion and flooding events in neighboring provinces. The policy sequence has included major reforestation programs, engineering interventions for flood protection, natural forest management programs, land conversion schemes that sought to retire land from inappropriate land uses, grain for green programs that sought to subsidize the conversion of land out of damaging cropping practices, and ecological resettlement to move households out of remote fragile ecosystems. Further sector policies included the banning of all logging, bans of using natural forests and non-timber forest products and the withdrawal of production quota’s from the State Forest Farms. In total the policies seek to prevent degrading practices by withdrawing farmer rights to steep land agriculture and forest based livelihoods.

16. The reality is that most rural households are poor in terms of their development assets from which they could exit poverty and introduce more sustainable land use practices. For example, most households have very limited or weak human resource development, there is only limited social capital, most live in remote areas with poor infrastructure which includes the withdrawal of many social services such as education and health, and have limited or no access to formal credit. They do have significant natural resources but without skills, finance, and services are unable to invest for more sustainable outcomes. The effect of the policy programs is to increasingly attenuate or withdraw their rights to these natural resources compounding their livelihood and poverty issues, which of course results in further degradation.

17. Policy-makers continually seek to address this degradation cycle by adopting policy and decision making processes that seek to attenuate local resident’s rights to natural resources and land further i.e., if they do not manage it withdraw it as opposed to how can they be assisted to adopt sustainable practices. These policies have been implemented by using enforcement over resource use and through the encouragement of voluntary ecological resettlement. While some have resettled many of these have done so to gain access to education for children or to gain employment often retaining the rights to their land. Some even return to crop their land. Those that remain have few choices and are locked into existing poverty cycles. Those households that do not have the personal resources or will to relocate voluntarily have livelihoods that continue on a downward trend adding to future non-sustainable land use decisions. The current policy mix has simply reinforced the poverty-land degradation nexus and in some places simply added to the threat of continued degradation.

18. The new Socialist Countryside Policy in the 11th Five Year Plan represents the latest policy initiative to address rural poverty- land degradation issues and draws heavily on successful poverty alleviation programs. The Policy explicitly recognizes the disparity in economic opportunities between rural and urban economies created in favor of urban communities over the last three decades. This policy places emphasis on increasing farm production from crops, apples and other economic trees and strengthening county level economies. The county level economies will be targeted for the development of local industry based on local comparative advantage and through the strengthening the province’s system of agricultural service centers. The underlying context is to link rural areas to cities and rural producers to enterprises. Rural counties and townships will have investment into improving water supply, electricity supply, social services and other public facilities at the village level, expanding local government revenues in counties, townships and villages, and enhancing democratic management and accountability at the local level.

iii) Land Degradation and Conservation

19. Increasing population pressures, cultural traditions, and economic development have degraded China's biological resources. The combination of a large population (over 1.3 billion people with an annual growth rate of 0.59 percent or nearly 8 million people) and limited land and water resources (only ten percent of the land area is arable and freshwater per capita is one fourth the world average) has caused extensive loss of habitats. As a result, the IUCN World Conservation Union Red List of globally threatened species in China includes 804 species in total, 442 plants, and 362 animals. China’s own Red Data Book of threatened species includes a larger total.

20. In terms of biodiversity conservation, modern China presents a mosaic of apparent contradictions. Unprecedented rates of extinction and rapidly escalating human-caused threats to wildlife are occurring at a time when China’s nature reserve systems is growing rapidly toward a 2050 goal of 2,000 protected areas. China’s policy, legal, and regulatory framework for nature conservation is among the world’s strongest, and is continually improving. China’s growing network of protected areas combined with its policy and legal framework could reverse most of the deteriorating trends in biodiversity if management, implementation and enforcement were effective and supported by updates to adapt to changing situations (such as the new nature reserve law now being drafted).

21. The Forest Law (revised in 1986), specifies goals of maintaining an average of 30 percent forest cover over the entire country, including 40 percent in mountainous areas, and prohibits logging in protected areas. It also imposes strong penalties for illegal felling of trees and attempts to establish closer links between harvesting and reforestation. The Environmental Protection Law of 1989 promotes rational use of natural resources and facilitates the development of a comprehensive system of nature reserves. The Wildlife Conservation Law of 1989 includes categories of protection for endangered and threatened wildlife.

22. China is increasingly active in international nature conservation efforts. China participates in the UNESCO Man and the Biosphere Program, and ratified the Ramsar Convention in 1992 and the Biodiversity Convention in 1993. China acceded to CITES, the Convention on International Trade in Endangered Species of Flora and Fauna, in 1994. National environmental strategies and actions plans have been prepared as required by China’s involvement in international conventions. A national nature conservation strategy was produced in 1987 that provided a general overview of conservation status and trends. A Biodiversity Conservation Action Plan was completed in 1993 with assistance from the Global Environment Facility (GEF) and IDA, and was approved by the State Council, which establishes national priorities in biodiversity. A National Environment Conservation Action Plan was approved by the State Council. China’s National Agricultural Conservation Action Plan was approved in 1999, and a National Wetland Conservation Action Plan was approved in 2000. Early in 2007 a revised National Biodiversity Framework as developed to specify revised priorities and strategies.

23. Whilst the above land degradation and poverty problem is common in the PRC the effect of rural poverty within Shaanxi and especially the Qinling Mountains is particularly important. The importance reflects the effect of these on the ecological function of the Qinling Mountains. These functions include water supply to the Yangtze and Yellow Rivers, the source of water for Xian city, and the water and fuel sources of local residents. In addition, the remaining forest cover also contributes to absorption of carbon and climate moderation processes. Most importantly, the Qinling Mountains are regarded as a global hotspot for biodiversity with an impressive representation of PRC’s remaining flora and fauna due in large part to the mountains forming the major divide between the subtropical/temperate south and the temperate north.

24. In spite of the rapid growth in the protected area network and China’s impressive policy and legal framework, nationwide there are few situations where species and/or habitat conservation crises have been resolved with positive outcomes. The Qinling Mountains represent one location where this is happening. The coverage of protected areas is increasing, a range of stakeholders participate in natural resource management, sustainable use is not an abstract concept but a working goal, and the areas of many important habitats and wildlife populations that rely on them are either maintaining current levels or are recovering.

25. The Qinling Mountains are a major watershed of the Huang He (Yellow) and Chang Jiang (Yangzi) rivers cover 50,500 km2 in Shaanxi Province6 and 76,500 km2 in total7. The Qinling range is an important geographical divide between north and south China and between the Yellow and Yangzi River watersheds. The highest peak, Taibai Shan, is 3,767 m above sea level. The western part of the range reaches elevations from 2-3,000 m, while most of the eastern part is below 2,000 m.

26. The Qinling Mountains remain well forested and while representing 0.6 percent of China’s land area supply 1.1 percent of China’s forests. On only 1.1 percent of China’s forested area, the Qinling supports nearly 14 percent of China’s vascular plant biodiversity and over 17 percent of China’s vertebrate faunal biodiversity. Based on its high levels of biodiversity (and its importance as part of the Yellow and Yangzi River basins) the Qinling was identified by SEPA as one of 10 national pilot sites for establishment of ecological function protection areas. A second testament to the importance of the biodiversity of the Qinling is its designation as one of 16 biodiversity hotspots in China designated in the National Forestry Nature Reserve System Plan. The Daba range immediately south of the Qinling was also selected as one of the 16 hotspots. Together they account for one eighth of the biodiversity hotspots identified in the SFA plan8. These two areas are combined in SEPA’s ecological function conservation area in the Qinling.

27. The rich biodiversity in the region means that it is not feasible to address the conservation status and requirements of all 3769 vascular plants and 577 vertebrate animal species. There are a number of species considered to be of regional, national, or global conservation concern. Only those species listed as threatened by IUCN-World Conservation Union (IUCN), listed in China’s Red Data Book (RDB), restricted in international trade by the Convention on International Trade in Endangered Species (CITES), or included in conservation treaties are addressed in this summary.

Table 1: Land and Forest Area, and Species in the Project Area, Qinling and China Project Project Qinling as Qinling Area as a Area China Total a percent Total percent of Total of China Qinling Land area (km²) 458 50,500 0.8 9,326,410 0.6 Forest area (km²) 242 13,635 1.8 1,286,300 1.1 Ferns (no. of species) 71 323 22.0 2,600 12.4

6 Anon. 2006. Cities in Shaanxi Strive to Balance Environment, Development. 18 May 2006. China Daily. 7 Tsun-shen Ying and David E. Boufford. 1998. Phytogeography of the Qinling Mountains and a Comparison with the Flora and Vegetation of Japan. In: Sino-Japanese Flora, its Characteristics and Diversification, Boufford, D. E. and H. Ohba (eds), 1998, The University Museum, The University of Tokyo, Bulletin No. 37, Tokyo. 8 Li Diqiang, Song Yangling and Ouyang Zhiyun. 2003. Research on the National Forestry Nature Reserve System Plan. World Bank-GEF Forest Resources Development and Protection Project, Nature Reserves Management Project. China Land Press, Beijing, in Chinese and English. Gymnosperm (no. of species) 12 45 26.7 193 23.3 Angiosperm (no. of species) 1,219 3,401 35.8 24,357 14.0 Total: vascular plants 1,302 3,769 34.5 27,150 13.9 Fish (no. of species) 12 109 11.0 1,010 10.8 Amphibians (no. of species) 7 19 36.8 220 6.8 Reptiles (no. of species) 9 26 34.6 380 8.6 Birds (no. of species) 91 308 29.5 1,186 26.0 Mammals (no. of species) 35 115 30.4 509 22.6 Total: vertebrate fauna 154 577 26.7 3,305 17.5

28. Of the approximately 3,124 native species in the flora of the Qinling Mountains about 1,620 (51.9%) are endemic to China. Of the 192 species restricted solely to the Qinling, 60 are woody, 128 are herbaceous, and four are lianoid. The woody species, except for Jasminum humile L. forma kansuense (Kobuski) Miao, are all deciduous. Among the 128 herbaceous species only four species (1.6%) are annual. The proportion of annual endemic species is low in this region. Among these endemic species, 40 are restricted to the western Qinling, 12 to the eastern part, and 136 to the central part, of which 29 extend westward to the western part and ten extend to the eastern part. Only four endemic species have a widespread distribution across the Qinling. Most of these endemic species occur between 800 and 2,000 m elevation. In addition to the species that are strictly endemic to the Qinling, about 1,428 species in the flora of the Qinling Mountains are endemic to China. Among these, 1,181 are dicots, 219 are monocots and 28 are gymnosperms.

29. The Qinling ecosystem is sufficiently biodiverse and distinct from other ecosystems that it is assigned its own biogeographic unit, the Qinling Mountains. Similar to the case for flora, the fauna of the Qinling Mountains reflects the meeting of temperate and sub-tropical faunas. Fauna species are listed in Table 2.

Table 2: Numbers of Vertebrate Species in the Qinling by Taxonomic Order Order Family Genus Species Fish 6 13 67 109 Amphibians 2 7 12 19 Reptiles 3 8 26 26 Birds 17 49 166 308 Mammals 7 27 81 115 Total 35 104 462 577

30. The fauna of the Qinling, similar to the flora, is distinguished by its diversity in general, and by its mammalian diversity in particular. Birds and mammals are the most thoroughly studied, whereas the invertebrate fauna is relatively unknown but promises to be rich as well. In an eight-year study of the butterfly fauna of the south slope of the Qinling 191 species were recorded, three of which were new to China and 44 were new to Shaanxi9. One new genus and three species of eriophyid mites were discovered in the Qinling in 200610. Also in 2006 nine new Qinling species of linyphiid spiders were assigned to an existing genus while five more new species were assigned to a new genus11. Increased scientific attention to the Qinling invertebrate fauna would probably lead to additional discoveries of new taxa.

9 Zhou, X, L. Sun, W. S. Pan, Z. Lu, Y. Ni. 2002. The Faunal Study on the Butterflies of the South Slope of Qinling Mountains. Peking Univ. Vol.37 No.4 pp.454-469. 10 Xue, X.F., Z. W. Song and X. Y. Hong. 2006. A new genus and three new species of Phyllocoptini (Acari: Eriophyidae: Phyllocoptinae) from the Qinling Mountains, Shaanxi Province, northwestern China. Zootaxa1275:31- 41. 11 Tanasevitch, A. V. 2006. On some Linyphiidae of China, mainly from Taibai Shan, Qinling Mountains, Shaanxi Province (Arachnida: Araneae). Zootaxa 1325:277-311. 31. The Qinling Mountain ecosystem is recognized as an extraordinary resource. The Qinling is renowned nationally and globally as a site supporting China’s “big four” species of wildlife: Giant Panda, Golden Snub-nosed Monkey, Crested Ibis, and Golden Takin. Several nature reserves in the Qinling support the three mammals. Extensive literature exists about the importance of the ecosystem including hundreds of scientific and popular manuscripts, mainly in the Chinese, on discrete issues. Despite this only for the giant Panda have long-term research programs been undertaken and summary results published in formats relevant to conservation management. For other species and groups of species the research efforts and literature are fragmented due to the scarcity of funding for applied long- term field research. Thus there is often detailed knowledge of the biology or ecology of a given species (e.g. the group sizes of Sichuan Golden Monkeys or Golden Takin and their seasonal distributions), but there is seldom adequate synthesis. This also results in part from the lack of funding for synthesis of past efforts and lessons learned.

32. Examples of the need for consolidation and interpretation of scientific information are: (i) summary of the three giant Panda censuses and interpretation with respect to conservation of all recorded fauna besides giant Panda; (ii) summary of the semi-annual transect surveys carried out by WWF and SFD in terms of implications for species management and recovery, and overall conservation biology of the Qinling; and (iii) a third pressing need is for a consolidation of all Qinling research projects and publications related to biota and presentation of the results by species, community, vegetation type and other relevant categories.

33. A major impact of the nexus between land degradation and rural poverty has been the transformation of natural habitats and forests into fragmented agricultural landscapes with continuing threats to the biodiversity. The history of the global icon of conservation - the giant Panda – provides a well documented example of the impact of land degradation forces with giant Panda numbers plummeting as habitat was lost or fragmented through forestry and agricultural land use changes.

34. Initial conservation responses included the protection of the remaining islands of habitat through the creation of nature reserves. Within the Qinling Mountains and in most of PRC new nature reserves continue to be created. In the case of the Qinling Mountains this has evolved into the creation of habitat corridors that link, at least on paper, the small nature reserves. Throughout this process and with substantial input from donors and in particular GEF nature resource management systems were modernized with capacity building, equipment and new approaches being introduced. The current models of nature reserve management suggest that for some reserves this support has been relatively successful and led to more reserves and increased use of corridors along with far more participatory systems of management. The challenge remaining is how to affect these changes across a wider proportion of the Qinling Mountains and then how to restore much of the lost habitat to support the larger wild populations need to secure a species.

35. The three types of protected areas that relate to the Qinling Mountains are nature reserves (NRs), forest parks (FPs), and ecological function conservation areas (EFCAs). The Qinling Mountains support 27 nature reserves and one EFCA. All but two of the nature reserves are administered by the forest sector and 98% of the protected land area is administered by Forestry. Water Resources Bureaus manage the remaining two nature reserves that account for 2% of the protected land area. Qinling nature reserves cover 557,298 ha or nearly 10% of the 5.05 million ha total area of the Qinling mountain area in Shaanxi Province. New reserves have been designated in the Qinling since 1965. The declining trend in gazettal of new reserve area reflects the increasing difficulty of establishing reserves in a human- dominated landscape. Figure 1: New Reserves in the Qinling Mountains

200,000 180,000 160,000 140,000 a 120,000 100,000 80,000 Area (h 60,000 40,000 20,000 0 1965-93 2001-2 2006-10 Year interval Panda Non-panda

36. As a further safeguard giant Panda were moved into ex-situ management for captive breeding and research. These programs have eventually resulted in significant progress in assisted reproduction technology that is currently increasing the number of captive Pandas to the point that leading centers are achieving close to the reproductive potential of the captive population. Subsequent field research has confirmed through Panda census that the number of Panda in the wild has increased and is most likely limited by available habitat. Wild populations are self limiting by the amount of habitat available and the ex-situ captive population faces a singular future as a captive with little or no possibility of wild or controlled release programs. Without further development or restoration of habitat the need or purpose of increasing captive panda numbers remains unclear.

37. The future priority for the Panda conservation program therefore lies in the ability to extend the area of suitable habitat to enable future numbers in the wild that will secure the population. There is scope for the development of habitat programs within the whole Qinling Mountains landscape that can enable either wild population increase or controlled reintroduction programs to be undertaken. However at this stage there is only limited science on which to undertake ecological and habitat restoration and the current set of Natural Forest laws prohibit intervention to assist restoration processes.

38. While progress in conservation management is making significant progress in the Qinling Mountains there remain critical unresolved issues including (a) Developing a professional cadre requires sustained operational funding. The Qinling protected area system is outstanding in terms of its coverage of critically important habitats for Giant Panda and many other, often globally threatened, species. This represents many years of difficult and painstaking yet innovative work by many stakeholders to plan and establish various types of protected areas in one ecosystem. SFD often with GEF support and WWF involvement have led this effort and deserve recognition for their successes.

39. One detractor from the effectiveness of the protected area system is the limited frequency of interaction between the many stakeholders. WWF has worked hard to involve more stakeholders in management of the Qinling and these efforts have achieved positive results. However, there is a need for continuing communication among stakeholders to improve management of the system as a whole and there is a need for a more formal venue for interaction of individuals, groups, and agencies.

40. For example, professional managers and scientists at nature reserves do not have adequate interaction with colleagues at other Qinling nature reserves. Similarly, researchers often interact with a single nature reserve to carry out a given project, but seldom extend their results to other nature reserves. Tourism, land management, and water resource agencies are stakeholders in Qinling resource management but there is no formal venue for exchange and discussion of their contributions. Village, township, and county leaders have limited opportunities to interact with resource managers in the Qinling except where Nature Reserve Managers have received training and project level support to do so. For a few NR’s such as Taibaishan, Zhouzhi and Foping significant and ongoing benefits to both eh NR and local communities is reported however the lack of sustained operational funding after Project completion is eroding many of the management gains.

(b) From Reforestation to Habitat Restoration two species of exotic larch were planted in mono- cultures in the Qinling beginning in the 1950s and accelerating in the 1980s. In addition to introducing exotic species that are ecologically inappropriate to the Qinling, these plantations have also formed dense stands of trees with little or no under-storey vegetation. WWF has begun a program to plant indigenous bamboo species beneath the larch canopies for restoration of foraging habitat of the Giant Panda. This program is hampered by the institutional restriction against felling of trees on the Qinling (NFPP) and in protected areas (State Council regulation on activities permitted in nature reserves). These institutional barriers prohibit removal of unwanted, inappropriate trees that were planted during an era when introduction of exotics was seen as a fast means of establishing forest cover and wood supply and when exotic species were not viewed as an ecological threat. Retaining such trees precludes efficient planting of indigenous bamboos that are preferred by the Qinling flagship species, giant Panda, and would contribute directly to continued recovery of Panda populations in the Qinling Mountains.

(c) Adaptive management and Learning. Recent programs for land conversion e.g., Natural Forest Protection Program (NFPP) and Steep Land Conversion Program (SLCP), have not received adequate monitoring to determine their ecological or socio-economic effectiveness. Natural forests have not been studied after the logging ban of NFPP in 1998 to assess recovery rates or ecological aspects of forest and vegetation recovery. Use of timber by villages in and around protected areas has not been assessed. Comparative analyses of remote sensing data have not been undertaken to assess NFPP impacts on total forest cover.

41. SLCP was applied to 6,000-8,000 km2 of the Qinling and the program continues through 2007. No monitoring has been undertaken to quantify effectiveness in terms of vegetation cover, tree survival, or outcomes in terms of farm economics.

(d) Species Recovery. The captive populations of Crested Ibis have grown to unmanageable levels at the Yang County (over 200 birds) and Zhouzhi County (over 220 birds) breeding centers. Maintenance of such large numbers of captive birds of any species is ill advised, particularly in the era of SARS and avian influenza. China’s increasing network of wetland nature reserves provides a wealth of potentially suitable release sites for some of the captive birds. PRC is planning a release program as is IUCN-SSC through its Stork, Ibis and Spoonbill Specialist Group. Japan is also developing a release program at Sado Island based on recent successes in natural reproduction of captive birds (young fledged from nests built and tended by captive adult birds). Nature reserves in Russia and the Koreas have also expressed interest to participate in a release program.

42. Similar to the giant Panda the Crested Ibis program has successfully bred and reared captive birds to te point that some breeding centers are financially unable to grow further due to the cost of forage or food. To date limited release of birds has been undertaken and even this is poorly monitored. There has been a significant lack of research and development into the needs of wild or controlled release programs through which the value of captive breeding could be exploited through the establishment of a secure wild population. There needs to be significant field research into habitat availability and food sources to ascertain what habitat management is necessary to achieve successful reintroductions.

(v) Diversity in Target Species Biodiversity inventories of Qinling protected areas are generally thorough except for invertebrate taxa. Of the 38 globally threatened species in the Qinling, 34 species are non-migratory. The big “four” species receive most research and conservation attention: Giant Panda, Golden Takin, Sichuan Golden Monkey, and Crested Ibis. The remaining 30 species have been little studied and are seldom the target of conservation programs. These include 11 species of indigenous plants, six species of wetland vertebrates (four amphibians and two reptiles), one upland bird and one wetland bird, and eleven mammals. Study of 11 indigenous plants should also be a priority for simultaneous species recovery and ecosystem restoration. One plant species (Brown Moccasin Flower) is Critically Endangered, the most threatened of IUCN Red List categories.

43. The globally threatened amphibians include Chinese Giant Salamander (Critically Endangered12), a flagship species for mountain wetlands in China. While restoration of forests will indirectly benefit Qinling wetland habitats of Chinese Giant Salamander, more direct intervention is needed because of the pressure on Qinling rivers for gold mining and abstraction for transfer to other basins. Great investments have been made in commercial rearing of Chinese Giant Salamander, but these have not been matched by investments in field conservation. The 11 mammals include two species that will not directly benefit from habitat protection for Giant Panda: Desert Cat (Vulnerable) and Asian Wild Dog (Endangered). These species have different habitat needs and these will require dedicated study and management projects.

(v) Captive Propagation. Conservation biology increasingly focuses on science-based management of people, habitats, and ecosystems. One successful conservation project in Shaanxi Province is the collaborative effort of SFD and WWF to conserve the Giant Panda by protecting and restoring its forest habitats and movement corridors in the Qinling Mountains ecosystem. There is, however, a tendency to approach conservation of wildlife in China from the perspective of captive propagation. Examples are Giant Panda, Crested Ibis, species of sturgeon and other fishes, and two sub-species of tiger. While successes have been achieved in captive breeding of some of these species, none of these programs has yet led to significant conservation gains for wild populations. Giant Panda and Crested Ibis numbers are increasing in the Qinling Mountains because of successful habitat management---not because of release of captive bred animals. Fisheries biologists world-wide have concluded that release of captive-bred fish from hatcheries can cause more problems than it solves. Russia has shown that habitat protection is the key to tiger conservation and all efforts are made to avoid taking Siberian Tigers into captivity. The captive rearing approach is taken world-wide only as a “last chance” strategy when numbers of a species have declined to a level where extinction in the wild is certain. The Qinling eco-region does not need more captive rearing and breeding programs to save threatened wildlife. Rather, as in the case of the Giant Panda, habitat protection and restoration is the priority for future investment based on scientific knowledge of the requirements of the species targeted for conservation.

iv) Proposed Project Area

44. The Project area comprises 458 km2 (less than 1% of the Qinling Mountains) and is located on the northern slope of the Qinling Mountains adjacent to Louguantai Township. It is located in Zhouzhi County, 50km south and west of Xian with a travel time from Xian of less than one hour. The Project area includes: (i) the Tianyu River and the Chiyu River Valleys, (ii) the hill and plain area to the north of the Qinling Mountains, (iii) the existing Louguantai Historical and Cultural Area, (iv) a Hot Springs

12 Yet still harvested from the wild to build captive breeding programs for the local restaurant trade with apparent impunity from law enforcement development under construction, (v) an existing collection of bamboo species, (vi) an animal rescue center with endangered animals including giant Panda, Crested Ibis Golden Monkey and Takin, (vii) the ancient Dao temples regarded as the birthplace of the Daoist religion, and (viii) the Louguantai Forest Farm.

45. The registered population of the Project Area is 20,400 of which approximately 16,000 live on the 6000ha of flat land to the north (zoned as ex-situ conservation zone for the Project) and 4,500 in the 39,000 ha hill and mountain landscape (in-situ zone) in a mostly scattered settlement pattern. Recent policy has sought to encourage voluntary resettlement of residents from the in-situ zone and to convert people away from agricultural land use practices in the Grain for Green program. This policy has had mixed results, and along with logging bans leaves local residents with extremely limited livelihood options and currently some 70% of households in the in-situ zone are extremely poor. This compares with poverty levels in the flat lands that are estimated to be 28% of households.

46. The Project Area is representative of the northern slopes of the Qinling Mountains and has well- developed tourism that generates revenues of about CNY17 million ($2.2 million) from 500,000 people each year mostly visiting the home of the Daoist religion for major festivals. As with the majority of flat and rolling toe slope land to the north of the Qinling Mountains the Project Area faces significant pressure from outside investment into intensive agriculture, demand for rural-residential land, and “wild” tourism development. Whilst the Project Area is not within Xian’s peri-urban belt much of the current pressure for land on the northern slope is speculative development seeking to benefit from the rapidly increasing land values and demand for rural lifestyles in large stand alone homes that are increasingly weekend urban retreats. To the south of the flat and rolling hill land the hill and mountain area currently ranges from degraded agriculture and forestry land to near pristine natural forest. The Project Area is mostly forest land held either by the Provincial Forest Bureau through the Louguantai Forest Farm or as collective forest land through Zhouzhi County.

47. The Project will contribute to the economic growth of Shaanxi Province through diversifying the existing range of products within the tourism sector as part of the Shaanxi Province 11th Five Year Plan. The focus of this diversification will be based on nature and wildlife tourism opportunities that fit within the tourism strategy to develop ecotourism as a means of increasing the value per tourism within Shaanxi. The Project will support tourism development within the Project Area on the north slope of the Qinling Mountains and will manage the impacts and effects of tourism through a zonation program. The Project area will be zoned for either (i) intensive mass tourism (ex-situ zone) or (ii) extensive low impact development (in-situ zone). Within the ex-situ zone investment will be associated to existing cultural and nature based tourist attractions including Daoist religious and temple sites, geothermal hot springs, an ex- situ wildlife management center and will also develop a new botanic garden representing the plants of the Qinling Mountains. Within the in-situ zone the Project shall support the restoration of forest habitats, eco- tourism and sustainable rural livelihoods.

48. Three commercial tourism enterprises will be supported within the in-situ zone linked to biodiversity and nature tourism. In return for support each of these enterprises will reinvest a proportion of their revenue into conservation and livelihood programs in the in-situ zone to re-establish natural habitats, improve livelihoods and to demonstrate new technologies and approaches to conservation within the wider Qinling Mountains. The three enterprises are (i) the existing Shaanxi Animal Rescue Center, (ii) the Shaanxi Forest Bureau Hot Springs Joint Venture, and (iii) the Qinling Botanic Garden. The SARC and Hotsprings are adjacent to each other in Louguantai and the Daoist temples and museum that already attract a substantial visitation. The Qinling Botanic Garden will be located further east of Louguantai at Dian Zhen village.

49. The Project will generate revenue streams that will be used to maintain conservation programs in the Qinling Mountains including the strengthening of livelihoods for Qinling Mountain residents. As such the Project seeks to address: (i) the lack of rural investment and rural enterprise development in Shaanxi, (ii) diversification of revenue and economic development in rural areas, (iii) provide leadership in the development of eco-tourism to complement the cultural and history tourism sector, (iv) to demonstrate how the use of commercial tourism linked to biodiversity can be used to finance conservation programs in a more sustainable manner, and (v) to move conservation programs into an active habitat restoration and management program. b) Objective

50. The impact of the proposed Project will be to improve the wellbeing of rural communities in the Project Area based on the sustainable conservation and use of Qinling Mountain resources. There will be increased smallholder incomes and skills for livelihood diversification including the ability of the rural poor to access higher paid employment. Income diversification will be supported through the development of Small and Medium Enterprises (SME), the expansion of pro-poor tourism and ecotourism opportunities, and the reallocation of land and adoption of appropriate forest based land use activities. Biodiversity conservation will be enhanced through habitat protection and restoration programs linked to conservation forestry, strengthened management and ex-situ species management programs and extensive awareness and education programs. . c) Outcomes

51. The Project’s outcome is to introduce an integrated landscape management approach to provide sustainable livelihoods for the population of the Project area as a demonstration for the wider Qinling Mountains. The Project will address underlying causes and effects of both historical and contemporary resource degradation. The main targets and indicators will be (i) demonstration of an integrated spatial plan for Louguan Township and surrounding forest farm; (ii) livelihood improvement for up to 12,000 farmers and 40 associated enterprises, (iii) environmental treatment of over 90% of all waste streams arising from mass tourism, (iv) management plans prepared for at least 6 endangered species, (v) measurable increases in the extent and quality of habitat within the Project area, (vi) increased tourism visitation from 300,00 to more than 1 million by 2020, and (vii) contribution to at least 2 managed conservation breeding programs.

d) Activities/Project Components

i). Component One: Tourism to support Conservation

52. Component one will support three commercial enterprises to develop and expand their business models within the ex-situ zone. These enterprises include (i) Qinling Botanic Garden, (ii) the Shaanxi Animal Rescue centre, and (iii) Louguantai hot Springs Development.

53. Qinling Botanic Garden (QBG) is a new business enterprise consisting of 269 ha of constructed gardens to represent the plants of Qinling and PRC. The gardens will be interlinked with walkways along which public education and awareness displays will inform the public on themes such as natural history, environment and biodiversity. The QBG will also construct a major exhibition hall to represent aspects of natural history and a service reception center including hospitality and restaurant functions. The gardens will be linked by walkways and a 1230m cable car to a series of Daoist temple sites that will be restored and protected. The vision of the botanic garden is that it will be the entry point for visitors to the “Lougauntai experience”.

54. The 18 constructed gardens will amount to 57 ha interspersed amongst 25 ha of lawn. The garden display will be supported with a geothermal heated greenhouse operation for propagation and display purposes. The site will require utilities and infrastructure to minimize the visitation impact on the environment and the gardens themselves. Electric vehicles will be used to move people around the garden as needed. 55. The Qinling Botanic Garden (QBG) will use 4039.5 mu (269.3 ha) of collective owned rural land from Dianzhen village for development under this project. While the QBG has received approval to prepare the Project Feasibility Study for the Project Area the QBG currently has no land use rights. Two approaches have been proposed to access land use rights. These include (i) land acquisition amounting to 293.63mu (19.64 ha) for the purpose of constructing infrastructure, and (ii) a land shareholding agreement for 3,746 mu (249.66 ha) for wider planting and landscaping where holders of current land use rights gain shares in the QBG enterprise.

56. The enterprise has been granted permission to develop the Project and will need to establish land use rights. In doing so some 143 households will require resettlement of some 143 households whose land will be acquired outright. Most land will be rented through and compensated through a fixed payment per mu to farmers with a supporting profit-share agreement determined by the ratio of their shareholding to total capital. As the profit share increases it propsoed for the fixed payment to decline, however these detaisl have yet to be determined and will in all likelihood only happen after Project Completion. . In total the QBG will employ over 250 people with the local residents and affected persons having the first right of refusal for any employment opportunity.

57. Revenues will be generated from day visitation and the use of entry tickets along with profits from attractions or services including the cable car, restaurants, rental cars, temples sites and exhibition hall. Visitor numbers are expected to rise from 350000 in 2011 to 478,000 on project completion to over 1.1 million in 2035. Revenue forecasts indicate a revenue stream increasing from CNY 37million to CNY 64 million in 2015 and CNY 158 million in 2036. Employment will move from the current 40 staff to over 250 staff by Project completion.

Table 3: Forecast Financial Performance of QBG Year Visitor Numbers Revenue NCF (CNY million) (CNY million) 2011 350,000 37 -5 2015 517,000 64 8.4 2020 725,776 90 31 2036 1,270,00 157 96

58. The Shaanxi Animal Rescue Center (SARC) currently operates from an existing site of 141 ha within the Lougauntai Forest Farm. The main rescue center is based around a 6 ha site for animal pens. This area is open to the public. The current site is in poor repair with significant animal welfare issues. The center attracts 30,000 tourist visitors per year mostly to glimpse panda, golden monkey, crested ibis, and takin. The Project seeks to significantly expand and enhance the current facility to reposition it as a center of excellence in the management and display of threatened indigenous species. As such the center is intended to demonstrate to the rest of PRC the potential opportunities and benefits from establishing international standards in the care and welfare of the animals within this ex-situ conservation, education and research center.

59. The project will modernize the center to meet international standards by: (i) increasing the personnel and their capacity in wildlife conservation, (ii) achieving more efficient rescue of wild endangered animals and their rehabilitation, (ii) developing a high quality tourism site, (iv) increasing the quantity and quality of research into wildlife, and (v) creating an awareness and education program for visitors and local communities on wildlife and biodiversity. The Project will achieve this by increasing the area of the rescue, breeding, research and husbandry facilities from the current 141 ha to 1,112 ha. The enlargement will include the development of three satellite sites in more natural environments for giant panda, crested ibis and golden monkey within the wider Project Area. 60. The current animal rescue and exposition site13 will complete a refurbishment and reconstruction program designed to ensure animal welfare and animal presentation is world class. The Project will provide an international design expert to prepare site layouts, design specification and detailed terms of reference for the SARC design institute to follow in the completion of a detailed engineering design. To avoid potential public and media ridicule, ADB will require final detailed engineering design to be reviewed by ADB and the international expert to ensure compliance with the TOR’s provided.

61. At Project completion the center will have 70% of the forage area developed and be able to support 80% of total planned numbers of iconic species. The center will undertake the science for controlled release of species from breeding centers as numbers and the science enables this to occur. It is proposed that the giant Panda Breeding Center be expanded to include 10 nursery rooms, 32 enclosures, and a research and feed growing areas. The Crested Ibis Center will include construction of an artificial wetland and mangement office to ensure a prey base is established and water quality will support the futrure Ibus Satellite center. The Golden Monkey site will involve 10ha of forested/treed land that will support 30 animals in a more natural environment.

62. Being located one hour drive from Xian provides the SARC a major marketing advantage over competing panda attractions. It also has the added benefit of having access to other iconic Qinling Mountain species. The rapid expansion of Chinese tourism and the central role of Xian and the Terracotta Warriors in this growth offers a large accessible visitor population of both local and international tourists. A visitation management program will be introduced.

63. Revenue will be generated through the visitation program. Visitation is projected to increase to 430,000 by Project completion and then increase to over 1 million in 2030. Revenue levels will increase to CNY 33.3 million by Project completion, CNY 63 million by 2015, and CNY 130 million in 2036. SARC management will contract a commercial tourism operator to manage the commercial aspects of the site. Current staff levels of 28 full time and 12 part-time will increase to nearly 200 full time jobs.

Table 4: Forecast Financial Performance of SARC Year Visitor Numbers Revenue NCF (CNY million) (CNY million) 2011 280,000 26.4 -1.5 2015 519,000 63 21.7 2020 829,000 100.6 50 2036 1,100,000 130 77 (Source: PPTA Estimates)

64. Hot Springs Center involves an existing development of the Shaanxi Louguan Daoism Hot Spring adjacent to the Animal Rescue Center. The first stage of development is due for completion during late 2007 and involves an accommodation and bath area. The Development is being undertaken as a joint venture between the Shanxi Forest Bureau (as represented by the Lougauntai Forest Farm 49%) and the Shaanxi Tourism Group Corporation (51%). The Project will support the second phase of the

13 The Exposition site was originally scheduled for Phase two development after Project Completion. However the SARC has agreed that it is important to address the major animal welfare issues at the exposition center as it represents the “public window” of the center and how it will be judged. AS a result the SARC proposal will shift USD 7 million away from the crested ibis proposal to enhance the animal exposition center. This change is currently not included within the Project costab file due to the timing of the agreement , however as it will only involve the shifting of existing budgets the change will be cost neutral. The change will be made at the Final Report stage. development to improve leisure tourism in the Project Area, to promote tourism and the Project Area as a tourism attraction, to stimulate growth in local industry through providing goods and services to visitors, and importantly to promote greater understanding of Daoism as a religion.

65. The Project will support the construction of 18 multi-room villas with five bedrooms for two people each or a total capacity of 180 people per night. In addition the project will support development of a restaurant, bathing pool complex, internal utilities and site infrastructure, equipment and vehicles and staff training programs. Visitation is expected to derive from both over night stays and day visitors with the development providing the top end of available accommodation in or around Louguantai. Accommodation occupancy is expected to reach 70% by 2020. Day visitation would start from about 300,000 in 2011 and reach 500,000 in 2023 at which level it would reach operational capacity. Management of the operation will be undertaken through a commercial management contractor with substantial experience in the tourism sector. The Shaanxi Tourism enterprise needs to raise private sector funding for the completion of the hot springs development14.

ii) Component Two: Improved Village Livelihoods from sustainable management and conservation of natural resources

66. Component two will support the implementation of an in-situ zone management strategy resulting in improved conservation values through increasing forest cover and manipulation of existing forests to improve their function as wildlife habitat. The in-situ zone supports 4,500 residents that lost income sources due to policies removing their access to forest products, livestock and agriculture on steep lands.

67. Financing of in-situ conservation is a core outcome for the Project to ensure finance is made available after Project completion. The Project will introduce an innovative financing mechanism to achieve this based on the ex-situ enterprises (component one) supplying funds for in-situ reinvestment. The propsoed mechanism for this will be a charge against fixed assets including land creating the additional incentive for increased efficiency in capital utilization. Until assets are valued and final cashflows are prepared the actual terms of the charge are not defined. For the purpsoe of the feasibility study a proxy amounting to 8% of forecast net profit is used. Under this system the net profit during the construction period will be modest as capital is invested. By 2012 the profits involved increase substantially and will support investment into in-situ conservation beyond the Project Area with an estimated USD 400,000 being transferred to in-situ in 2012 from the Qinling Botanic Garden, SARC, and the Hotsprings development.

68. The existing institutional arrangements for land use and the provision of a financing mechanism are a major risk to the reinvestment arrangement. The Project will support the rationalization of the institutional and organizational issues (see Component three) to increase the efficiency of the current management systems and also to provide a more practical option for managing the transfer of funds from the commercial enterprises to the in-situ zone. It is also recommended that the transfer be considered a cost of business and not a residual profiut redistribution to minimize avoidance.

Table 5: Projected Financial transfers to the Eco-fund based on 15% of Net Cash Flow (after tax and loan repayment) - USD `000’s

Source 2012 2013 2014 2015 2016 2017 2018 2019 2020 CNY(0000) 300 338 304 347 390 432 475 518 561 USD (000) 400 451 405 462 519 576 633 690 747

14 It is recommended that prior to ADB approval a Bank Guarantee or letter of credit should be provided to ensure that financing is available Source (PPTA Estimates)

69. The revenue available for in-situ funding is estimated based on 8% of after tax net cash flow from Qinling Botanic Garden, SARC, and the hotspring. These estimates indicate that by Project completion USD 400,000 would be transferred and that this would increase to $0.5 million after 5 years. It is suggested that in the last year of the Project that the transfer could be allocated according to the following guidelines (i) Monitoring 25% ($100,000), (ii) In-situ habitat development 25% ($100,000), (iii) implementation of endangered species management plans 25% ($100,000). (iii) social development and livelihood programs 25% ($100,000). As the amounts increase the funds allocated to wider livelihood and conservation programs can also increase including options such as scholarships for residents of the Qinling Mountains to work in conservation or livelihoods, livelihood enterprise grants etc.

70. Improved Village and Forest-Based Livelihoods The Project will introduce technologies, infrastructure and business development resources to reduce poverty from the current 70% of households within the 16 administrative villages to 20% at Project completion. Livelihood improvement within forest based production systems will be demonstrated and evaluated to enable policy reforms and replication of successful models. The Project will result in 16 village development plans that include a community forest and natural resource plan being prepared for the collective forest land in a participatory planning process (see Appendix 7 and Supplementary Appendix 2 and 9). The plan will identify collective forest land that will be surveyed and demarcated, and the Shaanxi Forest Bureau will issue each collective with the necessary forest tenure certificates establishing rights to forest resources and the collective will assign these to individual households. If households resettle outside of the Project Area and land rights assigned to their households will be redistributed amongst the remaining households. During the planning process village forestry associations will be formed through which the conservation forestry program will be implemented. The Project will support the development of up to 5,000 ha of analog conservation forestry through the provision of technical support, planting materials, site management technologies including light penetration, shade planting, and intercropping. Mixed species forests that mature into forests that are analogous to natural forest will provide substantial wildlife benefits, reduced soil and water loss, and both forest and non-forest products for harvest. The area per household is unknown until areas are demarcated but estimates of 3.5 ha per household if 100% of the local population participates a figure that increases to over 5ha with 70% participation.

71. QBCDA (in-situ) households will also have access to small business development grants to establish value-adding enterprises that tareget the processing of local produce and a rnage of produc`iton grants to produce medicinal and essential oil plants (See Supplementary Appendix 9) to provide raw materials for the processing enterprises. Opportunities and interest in such enterprises will be identified during the village planning process. These will be assessed through Project supported research studies into plant and plant extract opportunities including essential oils and medicinal plants. Additional support will undertake market research and market chain linkage studies to ensure viability and to maximize integration within value chains. Community based ecotourism home-stays for medium to high value clients will be developed to support the growing demand for overnight accommodation in wild or natural environments. It is proposed to differentiate these from existing home stays by providing a slightly higher quality of service and accommodation. Community infrastructure including 17.5 km of roads along the Tianyu River and 109 km of mountain pathways will be upgraded to reduce travel times and ensure access during adverse weather. Grants will also be available to either villages or households to develop social infrastructure especially alternative energy sources (biogas and solar) and water supply schemes where these are identified during the village development planning program.

72. Demonstration of Conserving In-situ Biodiversity The in-situ area will be used as a demonstration and training program for those working in other parts of the Qinling Mountain. In effect it will become a field conservation training and demonstration area from which methods and skills are developed and lessons disseminated. The project will prepare a detailed forest and habitat management plan for the in-situ area using a particpatory action learning process to provide training for wider Qinling Mountains conservation management staff.

73. Habitat modification and restoration covering 2,000ha of newly established forest cover and further areas of monitored natural regeneration will be supported using ecological research, forest silviculture, under-storey planting, canopy manipulation etc. The objective of habitat restoration is to move the existing monoculture forest plantings into mixed species forest cover with the forest architecture similar to natural forests. Technical Assistance will be supported by GEF for defining and implementing the Conservation Forestry Programs. Research into tree and shrub species, ecological impacts and monitoring grad-sects, permanent sampling plots will be supported to assess the impact on regeneration, floral characteristics, environmental parameters, and overall forest structure. The data-set will provide a strong basis on which to develop future policy and government interventions within the Qinling Mountains and especially within the newly created corridors that link protected areas. Lessons learned should be incorporated into the proposed landscape planning exercise, biodiversity monitoring and information services and project dissemination program (see Component 3).

74. The Project will address Qinling Mountains biodiversity and its status as a global biodiversity hotspot through developing endangered species management programs that will operate both within and beyond nature reserve boundaries. Support will be provided to undertake the research and management planning for five to ten endangered species along with budgetary support for initial implementation programs. The in-situ endangered species management program will focus on using the Project Area as a field conservation research area from which monitoring and lessons can be disseminated throughout the conservation sector in the Qinling Mountains. The program will also seek to increasingly integrate the ex-situ species management program of the Shaanxi Animal Rescue Center and Qinling Botanic Garden (see Component one) with the in-situ endangered species management programs through making significant operational and management changes to SARC and its facilities and supporting planning programs that involve representatives of bothSARC and Qinling Botanic Garden. The integration will be facilitated through shared research, joint planning exercises and sharing of data and experiences. In the medium term options for controlled release programs and supporting research will be included in species management plans.

iii) Component 3: Institutional arrangements to support market based approaches for biodiversity conservation

75. The Component will develop the institutional arrangements and mechanisms to introduce programs supported by market based approaches. The component will deliver (i) effective Project Management, (ii) legal reforms , and (iii) a conservation replication and dissemination program.

76. Project Management will be undertaken by a Project Management Office that will coordinate implementation amongst the three sub-borrowing Implementing Agencies: (i) Qinling Botanic Garden, (ii) Shaanxi Animal Rescue Center and (iii) Hot Spring Development Joint Venture. The PMO will be supported with 11 experienced staff, office facilities and equipment. Project Impact Monitoring contracts will be awarded in Project Years 1, 3 and 5. A resettlement monitoring expert will be contracted over the first three years and will report to both the PMO and ADB on resettlement outcomes. A total of 13 professional job exchanges are offered for periods of approxiamtely two months and will be allocated to QBG (3), SARC (5), and other non IA’s and EA staff(5). Procurement planning will be undertaken by each of the Implementing Agencies and will be administered by a local bidding company contracted by the PMO on a fee basis. 77. Institutional Strengthening The Project will support essential legal reforms for the purpose of enabling project implementation and long term feasibility and sustainability of the Project strategy. The Project will undertake legal reviews and develop recommendations for the Government on four policy issues relating to (i) reform of collective land tenure in Shaanxi Province, (ii) the establishment of community partnerships in natural forest management, (iii) the development of policy guidelines for the implementation of more sustainable development programs, and (iv) the preparation of operational guidelines and standards for ecotourism in Shaanxi. The studies will be awarded as contracts to institutes and individuals with a strong knowledge in the subject matter.

78. The amalgamation of the Qinling Botanic Garden, SARC and the Louguantai Forest Farm into a single organisation to manage the Project Area is a major innovation and provides a strong lesson into how improved natural resource and conservation management can be supported through institutional reforms and the linking of revenue streams to conservation and poverty reduction programs. It is propsoed that ADB provide an institutional strengthening Technical assistance grant to build capacity of current enterprises within the Project Area. The removal of the institutional uncertainty creates reduction to the risk to future decisions that is essential to achieve sustainable natural resources.

79. The Qinling Botanic Garden enterprise is the latest unit to be formed and be allocated mandates within the Project Area. The result is that there is a complex of ambiguous, overlapping and often uncertain institutional arrangements regarding the jurisdictions and authority over resources and decision making in the Project Area. All these units including the Qinling Botanic Gardens are within the umbrella of the Shaanxi Forest Department and as such will be amalgamated into the QNBG government unit with each of the existing enterprises forming independent divisions under the collective management. The long term nature of the botanic garden, Shaanxi Animal Rescue Center and the associated benefits from joint marketing and promotions, the need for a legal mechanism for transferring funds (see appendix 7), the efficiency from moving towards a commercial manager of the commercial entities (as proposed already by SARC) need certainty in tenure and management authority to create the correct incentives for long term sustainable outcomes.

80. The inclusion of the Louguantai Forest Farm is essential given its mandate and legal jurisdiction over land and forestry functions. Their inclusion would also address a major weakness in the initial Project proposal being the Qinling Botanic Garden control over the in-situ zone. The current management capacity, vision, and on-going desire to introduce high volume tourism into the in-situ zone by the QGB proponents indicates the total inadequacy of this organisation to fullfill this role. Given the forest restoration focus of the in-situ strategy the Louguantai Forest Farm has the current mandate and staff resoruces to best implement the strategy. Whilst Qinling Botanic Garden claim this role their proposed research agenda, roading and tourism development suggest very limited awareness of biodiveristy conservation needs.

81. The QNBG will be established before Loan Negotiations and all assets and business interests transferred into the new organization. No long-term investment into the Project, SARC, the Qinling Botanic Garden should be approved prior to the formation of the QNBG to ensure that reforms are enacted in a timely basis. It is recommended that ADB consider a stand-alone technical assistance grant to support this process by financing a 1 to 2 year institutional strengthening program.

82. Under the QNBG the requiremetn for devleoping sustainable financing mechanisms is facilitated. Under the consolidated organization, a share of the revenue raised from commercial enterprises determined as a capital levy can be captured and then earmarked for conservasiton of the in- situ area. These funds can be managed through the internal accounting system and transferred to a separate ledger account and even Bank account if necessary. These funds would become the revenue for the proposed in-situ Louguantai Forest Farm division. It is suggested that the access to funds be based on a decision by the Board of Directors based on a rolling three year work plan and an annual work plan budget. Provision for this arrangement will need to be written into the constitution of the new organization.

83. Conservation Monitoring and Awareness Program The Project will undertake a series of participatory programs involving biodiversity expertise from over the whole Qinling Mountains using the Project Area as a basis for developing and testing approaches to field conservation. Shaanxi Forest Department is currently working through out the Qinling Mountains with WWF to implement an wide ranging conservation monitoring program. This program operates under a three year MOU based on WWF provision of funding and seeks to move toward a wider landscape approach to the conservation and management of Biodiversity through the linking of Nature Reserves with corridors and the remaining forest farm lands.

84. The Project shall support a process of defining and testing a landscape planning and management model for the Qinling Mountains where the total Project Area shall be used to complete a landscape planning and management model. The model will be evaluated and then used to prepare landscape management guidelines for the Qinling Mountains. The approach seeks to develop consensus, understanding and skills, as well as identify existing data and approaches that could be applied to the Qinling Mountains Landscape planning program. Participants will form a professional communication network for conservation workers that form a central commuication system for the dissemination program. This network also seeks to build a stronger professional cadre across geographically and institutionally scattered personnel. An integral part of the landscape plan will be a master tourism plan for the ex-situ zone and Louguantai in particular. The project will assist stakeholders to develop a tourism spatial plan that can guide the ongoing investment program in terms of spatial layouts, design specifications and marketing.

85. An important part of the replication program will be the capture and analysis of data and its subsequent dissemination. Support is provided for the development of a data collection system including field monitoring equipment such as camera traps, GPS etc., data collection costs for 4 years including the purchase and interpretation of imagery, training for existing Louguantai Forest Farm staff to form a field monitoring team. The tema will be trained by WWF for two years and the data collected will be provided to the SFD an incorproated into the Qinling Mountains monitoring data base and GIS for analysis and reporting purposes. WWF is selected due to its existing extensive monitoring program in the Qinling Mountains and it close association with the Shaanxi Forest Department– the likely owner of the proposed QNBG. The GIS capability of SFD will form the basis of an information service provider for the Project and planning processes within the Project. These include a range of research and planning contracts to be undertaken in other components. The Project will develop a biodiversity monitoring framework for the Project Area based on work completed to data and similar initiatives being support by SFD through WWF. Technical assistance is provided for developing advanced field monitoring techniques and for the provision of field monitoring equipment. The baseline will be formed through a series of contracted field survey and research studies involving (i) vegetation studies, (ii) vertebrates, (iii) invertebrates, (iv) fish and aquatic biodiversity, (vii) amphibians, (viii) soil microbial organisms. While the ability to detect and quantify biodiversity impacts will be limited within the life of the Project, the data sets and analysis will be used in future evaluations and management decision making.

86. The dissemination program shall be contracted by the PMO to an NGO or institute with proven experience in awareness and communication in rural China and the Qinling Mountains in particular. The program will develop a communication strategy for the project as a whole and will work with the SFD GIS and information services. The Program will include communication of data, analysis and lessons learned from the project to a wide set of stakeholders in conservation and government administrations within the Qinling Mountains. The program will also provide training programs for the development of awareness and understanding of market based approaches to senior officials and to field level staff and their managers. e) Key Indicators, Assumptions and Risks

22. Key indicators include (i) Objective Indicators  Area experiencing land degradation and soil erosion reduced by 15% by 2020  Critical habitats covered by protected area -- e.g. growth in protected area that successfully protects endangered and non-priority species  Increased tourism revenues from both mass and high value tourism  Investment and business opportunities increased with 40 new small businesses started and $1 million investment by 2015  Increased rural smallholder incomes with skills to complete for off farm employment and self employment

(ii) Outcome Indicators  By 2013 integrated landscape management is demonstrated  7,000ha of forested land managed  3 large scale commercial enterprises providing a minimum of 8% of profits to the in-situ conservation program  In-situ poverty household decline from 900 to 200 (from 70% to 20% of total hh) by 2020  Ex-situ poverty count (hh level) declines from 980 to 260 (from 28% to 7% of total hh)  Environmental protection from mass tourism is treating over 90% of all waste streams  5 globally threatened species are protected through habitat regeneration and management Endangered species of giant panda, takin, golden monkey, crested ibis, giant salamander, red panda, clouded leopard, brown-eared pheasant, Manchurian trout, gingko tree, Chinese mountain larch, one flower kingdonia, mao-tai maple, and Chinese fir are monitored with numbers increasing by 2015  Tourism visitation increases from current 300,000 per year to 800,000 by 2015 and 1.2 m. by 2020  Ex situ enterprise revenue increases from CNY 62 million to RMB 158 million by 2015 and RMB 415 million by 2035  500 jobs for in-situ community members  870 jobs for the ex situ community members  Approximately 15,000 full time job equivalents during construction

(iii) Outputs Indicators

87. Component 1: (i) 269 ha botanical garden established with 18 formal gardens and walkways and supporting public education facilities (ii) 870 jobs created for community members in the ex-situ zone (iii) 143 households resettled, (iv) 18 Daoist sites restored, (v) 1 cable car constructed, (vi) Qinling Botanic Garden revenue increasing from CNY 30 million to 65 million by 2015, (vii) Botanic garden investing 15% of its Project profits into the in-situ Project Area, (viii) Animal rescue centre extended and refurbished with extensive enclosures with satellite areas for Ibis, Panda, and golden monkey, (ix) Upgraded animal exposition center, (x) SARC investing 15% of net profits into In-situ program, (xi) Phase II of hot springs development/Daoist cultural center completed and operating, (xii) tourism visitation increases from current 300,000 per year to 800,000 by 2015 and 1.2 million by 2020. 88. Component 2: (i) 16 Village development plans prepared including conservation forest and nature resources plans, (ii) 5000ha of collective forests with certificates awarded to individual households planted and maintained as conservation forests, (iii) 40 business development grants awarded and 10 homestay tourism enterprises started, (iv) 17.5km of road upgrading completed, (v) 109km of mountain pathways upgraded, (vi) 100 alternative energy (biogas) and 100 water supplies completed, (vii) In-situ (Louguantai Forest Farm) habitat restoration plan prepared and 2000ha of habitat management implemented, (viii) Endangered species recovery management plans for 5 species prepared and being implemented with supporting research contracts.

89. Component 3: (i) Project Area management organization formed and operating with annual profits reinvested and 11 full time staff employed, (ii) Project disbursement ratio targets achieved more than 85% of the time, (iii) Annual work planning and evaluation achievement completed on time, (iv) Five legal reform studies completed and proposed reforms submitted to the SPG, (v) New QNBG formed by loan effectiveness and implementing an institutional strengthening program by end of PY 1, (vi) 15 job exchanges completed before the end of PYr 4, (vii) Sustainable financing program operating by the end of Yr 4 as part of new institution, (viii) integrated landscape habitat management plan for the Project Area completed within a action planning and capacity building approach by Yr 4 including a tourism master plan completed as part of the Landscape Habitat Management Plan, (ix) conservation monitoring contract awarded and implemented by mid PY 2, (x) ecological research contracts awarded and completed by Pyr 3, (xi) data collated for the PA, remote sensing analysis completed and stored with operational database accessible to staff by PY 4, (xii) public education and awareness program implemented and lessons learned disseminated.

90. The Project formulation uses the assumption that there is a strong commitment to biodiversity conservation using commercial market based approaches. These approaches will also address (i) economic development goals, (ii) sustainable natural resource management and rural livelihoods, and (iii) the sustainable financing of new biodiversity conservation approaches within the Project Area and the Qinling Mountains through the reinvestment of profits. The ability to diversify the economy in a sustainable manner based on commercial tourism will require a significant change from existing tourism practice and requires management expertise to support the development and marketing of niche tourism operations that can link to an established tourism sector. A significant risk is the ability of the existing enterprises to move from cost recovery and revenue generation into a relatively sophisticated tourism niche that demands quality at all levels. While SARC recognize this the current Qinling Botanic Garden enterprise does not have the same level of understanding or appreciation within their existing staff and management.

91. Building commercial enterprises on conservation and natural resources requires a commitment from all resource users to ensure best practice and to recognize that if one enterprise or attraction fails to maintain best practice the overall “Louguantai experience” may suffer. The almost total lack of coordination and collaboration of the separate entities prior to the PPTA suggest that there is no commitment to a unified tourism product that complements existing attractions. The current situation is characterized by competitive behavior for control over land and resources and not a commitment to a singular and common goal for the Project Area. Developing and committing to a unified tourism market for all of Louguantai is an essential factor in future success. This requires incorporating conservation values (including religious, natural resource and social-cultural) into future decisions on land and water use, farming practices, commercial tourism and recreation. Key assumptions also include that the regulations enacted and the institutions to support these will provide clear land and water rights and contractual agreements for stakeholders and commercial interests. Consultants need to be mobilized and studies done, and the planned institutional arrangements need to be effective. It is assumed that agreement over in-situ management will be reached and implemented. Without such an agreement there is no basis for GEF investment. 92. The main risk to the Project’s success arises from the prevailing models of economic development and lack of consideration for natural resource and biodiversity. SPG and PRC commitment to fast economic growth with inadequate attention to the environment has resulted in loss of habitat, fragmentation of habitats, and further ecosystem degradation. The risk can be partly mitigated through the technical studies, demonstrations, extra knowledge gained through training of project participants, public participation and education and exposure to ecosystem recovery, and the linking of commercial revenues to conservation values. To achieve science-based solutions for sound ecosystem management from profits requires the work of the Project to be fully understood and endorsed by political leaders who will act as “champions” for reform. Other key risks include (i) the ex-situ conservation program being poorly managed and resulting in wild harvest – especially for giant Panda and giant Salamander; (ii) endangered species are mismanaged for commercial advantage, (iii) invasive species a Qinling Botanic Garden, and (iv) no resolution of organizational issues.

2. COUNTRY OWNERSHIP

a) Country Eligibility

93. The PRC is party to (i) the Convention on Biological Diversity (CBD) (ratified 5 January 1993). Within the framework of the CBD, the PRC completed its Biodiversity Action Plan (BAP) in June 1994 that outlines a strategy and a set of strategic actions designed to conserve the country’s rich biodiversity. The United Nations Convention on Combating Drought and Desertification (UNCCD) was ratified in 1997.

b) Country Drivenness

94. The Project is consistent with the priorities and national and regional plans of the Government of the PRC. Since ratification of the CCD the PRC has progressively increased its conservation investment with currently 15.5% of total land being included in the national reserve system, however much of this remains unmanaged or under-performs its conservation role. The Shaanxi Province have further increased the land allocated to conservation through the creation of habitat and wildlife corridors within the Qinling Mountains and the creation of the Ecological Function Conservation Areas. The movement of land out of agricultural production in the ex-situ zone for conservation of Qinling Mountains flora and the movement of land from damaging agricultural practices to more forest based land uses all indicate a strong commitment to resolve the issue of land degradation and the associated impacts upon biodiversity and water and soil protection functions. The proposed Project Area while not a protected area is to be managed for conservation and its size exceeds the largest existing Qinling Mountain nature reserve. The acceptance of the need to move commercially generated revenues to finance conservation and habitat restoration also demonstrates a willingness to forgo revenue to obtain the long term benefits of conservation.

95. The 11th Five Year Plan outlines Shaanxi’s proposed program that includes new approaches and initiatives to address resource degradation, the effect of rural poverty on sustainable resource management and to introduce new mechanisms to finance conservation. These include the new socialist countryside program, the development of ecotourism, the introduction of urban and regional development that links urban to rural communities, and the improved coordination for the implementation of programs.

96. The willingness of the SP to borrow approximately USD $40 million, and to invest a further USD $85 million of its own resources into the Project in addition to the anticipated $5 million GEF contribution is indicative of the ownership of the need for change. The willingness to finance public goods relating to rural livelihoods, habitat restoration, recreation and public education including the provision of subsidies to the rural poor to adopt more sustainable land use and achieve improved livelihoods, are signs of strong ownership. Other indications include the SPG willingness to address key legal and policy reforms in a manner that ensures best practice is identified and then applied to the development of institutional arrangements for managing multi-purpose forest based landscapes is a major recognition of the acceptance of the need to change..

3. PROGRAM AND POLICY CONFORMITY

a) Fit to GEF Focal Area Strategic Objectives and Operational Program

97. The project is an integral part of the PRC-GEF Partnership on Land Degradation in Dryland Ecosystems, and was referred to in the Framework Brief that was approved by the GEF Council in October 2002. As noted, the Partnership is governed by a Country Programming Framework (CPF) which covers a 10 year period (2003-2012). The CPF supports a sequenced set of priority activities that: (i) strengthen the enabling environment and build institutional capacity for integrated approaches to combat land degradation; and (ii) demonstrate viable integrated ecosystem management models for widespread replication.

98. The CPF is consistent with the GEF Operational Strategy, with Operational Program #12: Integrated Ecosystem Management (OP12), and with recently approved GEF guidance on the programmatic approach as contained in relevant GEF documents. The project is also consistent with and will contribute to the accomplishment of goals of OP15, OP3, OP4 and OP1. Although the project draws exclusively from Biodiversity Focal Area funding, GEF’s publication “A Conceptual Design Tool for Exploiting Inter-linkages between the Focal Areas of the GEF” has been referenced during project design. The Project meets the eligibility criteria as set forth in the CPF (Attachment 2 shows the linkage between the Project and the CPF). The project is also consistent with the GEF-4 programmatic approach that seeks to secure a larger and sustained impact on the global environment, through integrating and mainstreaming global environmental objectives into local government development strategies and plans, through partnership with local government stakeholder institutions.

99. The Project builds on the findings of the ADB, Government and GEF-funded capacity building program, which has recently completed the preparation of the Shaanxi Provincial Strategy and Action Plan for addressing Land Degradation. These studies have highlighted the centrality of biodiversity conservation within Shaanxi and the threats to biodiversity arising from land degradation especially on the north slope of the Qinling Mountains. The strategy and action plan highlights the need to address more effective land management for soil and water protection and biodiversity conservation in the Qinling Mountains and the integration of conservation and ecosystems values within wider economic development pressures.

1. PRC Biodiversity Conservation Priorities

100. In order to redress the fundamental governance (policy, institutional, managerial and incentives) weaknesses in the current approach to biodiversity conservation, to exploit unique opportunities, and to significantly lessen threats to biodiversity nationally, the Government of China is proposing a new goal: to address the governance drivers of biodiversity loss. In this case the term governance is used broadly to encompass; policy and planning, institutional coordination and capacity, the “vertical” connect between national policy and local implementation, incentives, management and technical expertise. The framework has four inter-connected themes: (i) strengthening the overall enabling environment for biodiversity conservation; (ii) mainstreaming biodiversity conservation into socio-economic sectors and development; (iii) protecting biodiversity inside protected areas, and (iv) protecting and sustainable utilization of biodiversity lying outside of protected areas. Hence, the activities cover the required short- term measures to conserve biodiversity (Themes iii and iv), and the required longer term measures to modify the drivers of biodiversity loss (Theme ii). Theme i will provide the overall direction and coordination, and further ensure that activities are to become fully integrated into the national development process. The Linkage of Project activities with the National Biodiversity Priorities is presented in Table 6 below. Table 6: Linkage of Project to National Biodiversity Framework National Biodiversity Project Expected Performance Activities Project Output Indicators Contribution

Theme 1: Improving Biodiversity Governance. Under this theme, relevant policies, strategies, institutions, communication systems and human resources in China will be strengthened or developed to conserve biodiversity. Development of measures to address the threat of climate change to biodiversity is also included under this theme. The focus of activities will initially be at the national level, but will be increasingly at provincial and lower levels over the coming decade. The contributions of the Project to the relevant indicators are listed below. 1. The national legal and policy system  Development of demonstrations of habitat restoration  Demonstrable examples of sustainable for biodiversity conservation is effective  Development of landscape based conservation planning conservation and analog forestry  Endangered Species recovery management guidelines  Endangered spp managed for Qinling  Conservation forestry models based on analog forestry Mountains to demonstrate how national species for biodiverse collective forests management plans can be developed and  Ex-situ species management guidelines implemented  Ecotourism guidelines 2. Nationally, law enforcement is Not applicable other than the use of market based incentives to integrated and strengthened increase local stakeholder contribution to protection 3. An institutional framework for  Landscape planning approaches to biodiversity  Collaborative planning for entire Qinling biodiversity is established across sectors conservation Mountains demonstrated with guidelines for and over administrative levels  Endangered species recovery programs for Qinling landscape scale planning systems Mountains not simply Nature Reserves  Information sharing amongst Qinling Mountains  Monitoring and information dissemination programs conservation staff along with professional across all stakeholders development training and participation forums  Establish Shaanxi Qinling Biodiversity Promotions Ltd as a unitary organization that reinvests profits into biodiversity conservation and sustainable livelihood programs 4. Financial flows to biodiversity  Project investment during project construction period  US $ 5million invested by GEF and $5 million conservation increase over current  Increased revenue for commercial ex-situ botanic invested by SPG baseline gardens and SARC  Starting 2012 USD $ 390,000 reinvested from  Financing via eco-fund mechanisms commercial enterprises increasing to USD $1 million plus by 2025 from ex-situ enterprises  Conservation forestry supporting small and National Biodiversity Project Expected Performance Activities Project Output Indicators Contribution

medium sized enterprises built on production of local Qinling Mountains plants 5. The general public is supportive of  Conservation education and awareness roles and  Awareness and education products developed to conserving biodiversity programs at QBG and SARC international standard at each ex-situ site plus  Monitoring and information services disseminating local information sharing programs Louguantai success stories  Tourism Marketing information and campaigns on benefits and resources of Louguantai  Dissemination programs for GEF programs throughout the Qinling Mountains 6. Communities, NGOs and private sector  Re-integration of in-situ communities into conservation  Increased involvement of research institutes, play an adequate role in biodiversity forestry programs universities, design institutes, NGO’s, township, conservation  Employment to biodiversity linked enterprises and county and provincial agencies programs  Increased partnering within planning processes,  WWF involvement in monitoring and information and plan implementation sharing programs  NGO contracted for Village Development Planning programs  Ex-situ communities involvement as shareholders in ex- situ QBG  Competitive grants for research contracts  Community biodiversity SME programs . Human resources and capacity for basic  Training programs Trained staff in Project Area and wider Qinling Mountains research and experimental ability are  Participatory planning for the conservation of biodiversity, ecotourism, planning and rural livelihoods enhanced  Conservation forums and planning systems for the Qinling Mountains as a whole that use the PA in-situ area as a field conservation pilot area 8. Biodiversity conservation adapted to  Reforestation of 7,000ha  Increased forest cover within the Project Area climate change  New policy and guidelines for forest management in  Increased natural revegetation in in-situ area Qinling Mountains  Reduced deforestation rates in the wider Qinling National Biodiversity Project Expected Performance Activities Project Output Indicators Contribution

Mountains Theme 2: Mainstreaming Biodiversity into Socio-Economic Sectors, Plans and Investment Decision-Making The actions under this theme will focus on the national and local socio-economic planning systems that determine government spending priorities – including on biodiversity. The aim here is to integrate biodiversity so that it will be seen increasingly as an important ‘development issue’ rather than a separate and unlinked issue. Under this theme, regulations, tools, mechanisms and procedures will be developed and operationalized for all sectors (including private production sector), for all levels of administration and all components of the economy. A strong emphasis will be to develop strong economic incentives frameworks. The contributions of the Project to the relevant indicators are listed below.

10. Biodiversity conservation and Not applicable sustainable use are mainstreamed into national development plans 11. Biodiversity is mainstreamed into Not applicable relevant plans and laws of sector ministries and departments 12. Biodiversity conservation and  Landscape plan  Planning systems agreed and demonstrated sustainable use is mainstreamed into local  Forest use and conservation forest principles  Plans being used to guide implementation and plans demonstrated day to day operational management  Policy studies  Endangered species programs being  Endangered species recovery management plans implemented and new [plans being proposed for  Legal studies the National and Shaanxi Provincial level  Joint monitoring and information sharing 13. An incentive framework for the  Ex-situ reinvestment financing mechanism  Evidence of reinvestment into in-situ zone natural-resource based business sector to  Conservation forestry rights  Potential of a public good fund research and conserve or sustainably use biodiversity is options for implementation recommended established  Increased reinvestment from ex-situ business 14. Biodiversity conservation and poverty  In-situ livelihood program addressing access to natural  New models of forest based sustainable alleviation programs in China are resources, physical infrastructure, social capital livelihoods demonstrated mutually supportive development, human capital development and access to  New enterprise development incentives result in grants and employment increased local added value  Ex-situ householders become shareholder and employee National Biodiversity Project Expected Performance Activities Project Output Indicators Contribution

of commercial enterprises  Landscape planning to link social ecological and economic planning  Ecotourism development at enterprise and community level  SME development grants Theme 3: Investing Effectively in Reducing Biodiversity loss in Protected Areas Under this theme, the framework of the national system of protected areas will be strengthened as well as capacities to effectively manage individual protected areas. Under this theme, work will be undertaken so that nature reserve system is well designed, well managed and is protecting habitats and species in all important ecosystems. The contributions of the Project to the relevant indicators are listed below. 17. Harmonized and effective national  Landscape planning that covers nature reserves,  A consensus based landscape planning system for selecting and designing, biodiversity corridors and associated collective and State procedure for the Qinling Mountains with managing and monitoring protected areas Forest Land landscape planning guidelines produced  Endangered species management plans 18. Key and priority individual protected Not applicable areas are effectively managed 19. Key and priority individual protected  Access to additional finance offered in medium term  Increased non-government funding for areas have stable and sufficient finance options to develop similar mechanisms elsewhere in conservation Qinling Mountains  Market based systems demonstrated

20. At key and priority individual  Landscape planning and access to conservation resources  Landscape, habitat and conservation forestry protected areas, local communities, NGOs in the long term plans adopted and being implemented and/or the private sector are involved in PA co-management Theme 4: Investing Effectively in Reducing Biodiversity loss outside Protected Areas: This theme focuses on the significant portion of Chinese biodiversity that lies outside protected areas and is unlikely to be brought into the protected area system in the near future. The two results under this section will ensure that socio-economic actions in biodiversity rich areas outside of protected areas are using biodiversity in a sustainable manner. The contributions of the Project to the relevant indicators are listed below. 21. Land-use planning and management  Landscape planning for biodiversity planning  Plans completed using participatory process and systems contribute effectively to  Louguantai town spatial tourism master plan agreed by SPG decision-makers conserving biodiversity  Habitat and conservation forestry management plans  Village development and forestry /natural resource National Biodiversity Project Expected Performance Activities Project Output Indicators Contribution

management plans  Landscape planning for the Qinling Mountains 22. Restoration of forest, agricultural, Conservation analog forestry on collective land  7,000ha of forest cover under conservation ocean, freshwater, grasslands, drylands Habitat restoration in Louguantai Forest Farm forestry and habitat management programs Natural and assisted regeneration programs  and urban ecosystems demonstrate Conservation agriculture programs Ongoing investment into the up-scaling of incorporation of biodiversity objectives habitat management programs Theme 5: Cross-Cutting and CBD Emerging Issues: This theme encompasses measures to address a range of issues that have recently emerged under the Convention on Biological Diversity coherently and strategically. The Results under this theme also address key cross-cutting issues, such as invasive alien species and access and benefit sharing. The contributions of the Project to the relevant indicators are listed below. 23. Effective and strategic ex-situ  Ex-situ wildlife program for Qinling Mountains species  International standard ex-situ management for conservation and reintroduction of based at SARC within an increasing wild or natural Qinling Mountains fauna and flora in ex-situ endangered species environment with supporting research program zone supporting research and monitoring  Ex-situ plant collection at the Qinling Botanic Garden programs that are integrated with in-situ with supporting ecological science program programs and plans  Endangered species recovery programs  Habitat restoration programs 24. Effective ex-situ conservation of  Ex-situ wildlife program for Qinling Mountains species  Successful SARC enterprise commercially-important species and based at SARC within an increasing wild or natural varieties environment with supporting research program  Ex-situ plant collection at the Qinling Botanic Garden with supporting ecological science program  Production of commercial plant varieties for value adding – essential oils and medical plants 25. Indigenous knowledge is contributing Not applicable to biodiversity conservation and indigenous people are benefiting from genetic resource use based on indigenous knowledge 26. An effective risk evaluation, Not applicable however the protocols for the QBG will need to  Enterprise operating guidelines management and monitoring for genetic address potential GM plants and their role in the botanic garden modified organisms operating National Biodiversity Project Expected Performance Activities Project Output Indicators Contribution

27. An effective risk evaluation, QBG will need alien invasive species management and operational  Enterprise operating guidelines management and monitoring systems for procedures invasive alien species operating 23. Effective and strategic ex-situ  Endangered species management planning  Endangered species recovery management conservation and reintroduction of  Habitat management planning program operating at the Qinling Mountains endangered species  National species management for iconic species level with demonstrable impacts on decision including crested Ibis, Golden Monkey, Takin and other making priority species in the Qinling Mountains  Reintroduction research and policy dialogues  Qinling Mountains landscape planning and monitoring developed programs increasingly address species level information

3. GEF Strategic Objective Fit

101. The proposed Project is closely aligned to the biodiversity criteria and strategy for GEF. In particular there is strong association with Strategic Objectives 1 and 2 and also with Strategic Objective 4 (see Table 7). The recently revised Biodiversity Conservation Focal Area Strategy emphasizes geographic focus premised on the same principles and fundamentals as the IEM approach, and this reflected in the Project’s design.

102. Major threats to conservation occurring across the wider landscape require systemic approaches if issues relating to land conversion, urban expansion, pollution, habitat loss, water loss, water contamination, tourism impacts, invasive species, and inappropriate use of biodiversity are to be addressed in an effective manner. The project seeks to support the SPG priority for the introduction of effective spatial planning through the support for training and implementation of planning systems within the Project area to build capacity, information systems and ensure the scope of such systems includes conservation values including existing biodiversity and potential future habitats.

Table 7: Proposed GEF investment by GEF Strategic Objective1 Strategic Objectives GEF Biodiversity, Priority Proposed GEF and Outcomes Project Activities Indicative Priority Activities Overall goal of conserving biodiversity and instituting sustainable land management in a geographically continuous manner through: BD Strategic Objective 1: Catalyze Sustainability of Protected Area Systems BD Strategic Objective 2: Mainstream Biodiversity Conservation in Production Landscapes/Seascapes and Sectors

A: Capacity Building A: Systems level protection A: Capacity Building. Training program using conservation, habitat Systemic capacity and management restoration, tourism spatial planning systems, endangered species management building development for whole of Qinling Mountains Institutional capacity B: Systems level procedures. Legal, regulatory and policy development linked building to the management and restoration of habitat in forest landscapes. Targeted individual B: Individual PA A: Qinling Mountains. Endangered species management plan, including capacity building management to demonstrate population research and management. Landscape planning and corridor new tools and approaches integration with habitat modification programs B: Financing and revenue systems C: Individual PA A: Qinling Mountains in-situ and ex-situ species management of up to 8 Management to secure priority species. C: Community and globally endangered species B: Sustainable financing programs for conservation in the Project Area and the Indigenous wider Qinling Mountains involvement initiatives C: Village forestry associations actively involved with conservation forestry and habitat restoration programs D: Integration of conservation with tourism through the botanic gardens, animal rescue center and the development of ecotourism products

BD Strategic Objective 3: To Safeguard Biodiversity

1 Strategic Objectives as described in GEF/C.31/10 – “Focal Area Strategies and Strategic Programming for GEF-4”. Strategic Objectives GEF Biodiversity, Priority Proposed GEF and Outcomes Project Activities Indicative Priority Activities A: Building capacity a) strengthening the policy A: Legal reforms for managing natural forests and the provision of financing for the implementation and B: Management of habitats that have been modified due to the introduction of of the Cartagena institutional environment; two alien species into the Qinling Mountains to develop improved natural Protocol on Biosafety b) prevention using an forest landscapes ecosystem approach; c) B: Prevention, control appropriate risk and management of analysis procedures; invasive alien species d)early detection and rapid response e) managing priority alien species Invasions in pilot sites to ensure conservation and sustainable use of biodiversity. BD Strategic Objective 4: Build Capacity on Access and Benefit Sharing A: Information Outcome 1: Design and A: Design. Builds on OP12 land degradation strategy and the 11th five year systems and access to implementation build on plan for linking tourism to conservation and sustainable land management up to date information good practice B: Implementation. Horizontal coordination through multi-sector coordination committee. Support for involvement of WWF /SFB monitoring program within B: Capacity building the Qinling Mountains in the Project Area and endangered species through exchange of management plan. information and User based monitoring/evaluation linked to the information service. Education lessons – regionally and awareness strategies extended lessons learned throughout the wider and locally Qinling Mountains.

C: Demonstration of Technical training through international secondments, research contracts and new approaches for habitat monitoring replication Demonstration of habitat and endangered species management programs, landscape planning and integrated tourism and conservation spatial plans.

Workshops and Qinling Mountains symposia to share lessons learned and work within the Project Area as a field conservation experimental plot. Development and incorporation of conservation data sets for biodiversity and habitat management across the Qinling Mountains. Outcome 3: Countries A: Legal and policy reforms. effectively formulate Access B: Sustainable financing through revenue transfer from commercial enterprises and Benefit Sharing for in-situ conservation programs mechanisms that facilitate C: Information sharing was a condition for lending. Wetland management. the implementation of the D: Ecological and spatial management zones regulated. Bonn Guidelines b) Sustainability (including Financial Sustainability)

103. Adopting an market based conservation and tourism strategy for the Project Area in ways that are commercially viable and environmentally sensitive, is a cornerstone of Project design. Financial benefits are envisaged to accrue from the adoption of integrated approaches to biodiversity conservation through commercial tourism enterprises, which will yield flow-on benefits to the wider Project Area and local rural beneficiaries. These benefits will accrue through the transfer of revenue to the in-situ conservation programs including habitat restoration, rural livelihoods and conservation forestry, conservation monitoring and extension.

104. Complementary local and global benefits are expected to result in the long-run, as policies and planning systems and financing mechanisms adjust resource incentives to encourage local inhabitants to protect forested habitats and landscapes that will provide increasing value as habitat for wildlife. From a social and environmental perspective, sustainability will be achieved through strengthening resource rights, generation of off-farm employment, developing forest based livelihoods, tourism and SME enterprises.

105. Specific legal reforms will ensure the sustainability of the Project are addressed through the following: (i) regulatory reforms to provide a clear legal basis and empowerment for the management of natural forests and conservation forests in the medium term; (ii) institutionalization of Project Area management into a single organizational entity; (iii) strong information and monitoring systems that are linked to the existing successes of the SFB/WWF partnership which will be further strengthened as a focal point for the Qinling Mountains (iv) ecosystem zoning and spatially planned management of zones within ecosystem capacities and not site-specific management guidelines; (vi) addressing systemic resource management problems to avoid further inappropriate land use, habitat loss, and the underlying cause relating to poverty.

106. Financing of in-situ conservation will continue after Project completion through the three ex- situ enterprises involvement in a profit share and redistribution program. During the construction period of the Project the profits will be modest. After 2014 the amounts involved could increase substantially and be able to support in-situ conservation beyond the Project Area. The existing institutional arrangements for land use and the provision of a financing mechanism are a major risk to the profit share arrangement. The Project will support the rationalization of the institutional and organizational issues (see Component three) to increase the efficiency of the current management systems and also to provide a more practical option for managing the eco-fund and the transfer of monies from the commercial enterprises to the in-situ zone. It is also recommended that the transfer be based on an asset charge (levy on land and capital assets) to create incentives for efficient use of land and to ensure funds are available to the in-situ program . Table 8: Projected Financial transfers based on 8% of Net Cash Flow (after tax and loan repayment)

Source 2012 2013 2014 2015 2016 2017 2018 2019 2020 CNY (0000) 300 338 304 347 390 432 475 518 561 USD (000) 400 451 405 462 519 576 633 690 747 Source (PPTA Estimates)

107. The revenue available for in-situ conservation funding is estimated based on 8% of after tax net cash flow from Qinling Botanic Garden, SARC and the Hot srping development. These estimates indicate that by Project completion USD 400,000 would be transferred and that this would increase to $0.5 million after 5 years. It is suggested that in the last year of the Project that the transfer could be allocated according to the following guidelines (i) Monitoring 25% ($100,000), (ii) In-situ habitat development 25% ($100,000), (iii) implementation of endangered species management plans 25% ($100,000). (iii) livelihood grants etc 25% ($100,000). As the amounts increase the funds allocated to wider livelihood and conservation programs can also increase including options such as scholarships for residents of the Qinling Mountains to work in conservation or livelihoods, livelihood enterprise grants etc. Increasing the percentage of the NCF transferred can increase the transfer dramatically – see Table 7.

Table 7: Projected Revenue Flows to In-Situ Conservation (USD ‘000) % Post Tax 2012 2013 2014 2015 2016 2017 2018 2019 2020 NCF Transferred 5% 255 288 259 295 332 368 405 441 477 8% 400 451 406 463 520 577 634 691 748 10% 533 601 541 617 693 769 845 921 997 15% 711 802 721 822 924 1,025 1,126 1,228 1,329

c) Replicability

108. The Project Area contains habitat and ecological functions that are typical of those found in the wider Qinling Mountains. The Project seeks to demonstrate the following conservation innovations that can be replicated through out the Qinling Mountains. These are (i) market based approaches that link commercial enterprises to the funding of field conservation programs, (ii) landscape planning systems, (iii) ex-situ research and reintroduction programs, (iv) Landscape planning systems, (v) habitat restoration and modification, (vi) conservation forestry, (vii) community tourism and SME development, (viii) endangered species management programs, and (ix) conservation management monitoring.

109. The approach to conservation will be to use the Project as a training and development opportunity for building capacity and linkages throughout the Qinling Mountains and move toward a more landscape based approach. Through linking Project activities to the conservation cadre throughout the Qinling Mountains it is envisaged that new skills and consensus will emerge on priority conservation management techniques and their application in the Qinling Mountains.

d) Stakeholder Involvement

110. The Project had significant stakeholder involvement during the preparation phase: (i) each subcomponent has been developed through extensive stakeholder consultations which are reflected in design. Rural smallholders have been consulted regarding their participation, perspectives, current situation, proposed needs, and preferred options; (ii) a detailed survey has assessed rural livelihoods especially their development assets and vulnerability assessments, and rural focus groups and interviews have been conducted; (iii) Project design assessments were conducted using three stakeholder workshops to review every aspect with smallholders and agency staff; (iv) the IAs have been involved at every step and participated in reviewing progress and restructuring of proposals including the PRC agencies for safeguards such as the Poverty Reduction Office, the Environment Protection Bureau; (v) implementation will involve farmer’s associations, and the use of contract land use systems; (vi) a total of four major workshops have been held to review and restructure the project proposals.

111. The most significant aspect of this Project is the integration of tourism, forestry and agricultural sectors in a manner that builds capacity and cooperation During preparation, implementing agency proposals were revised and supported with the inclusion of ecotourism and in-situ conservation programs, technical capacity building, improved management processes, needed legal reforms, absence of planning systems, and monitoring and evaluation needs. This process was further extended and indicated that (a) bottom-up implementation will involve associations/groups and the wider Qinling Mountains conservation community; (b) lending programs need to capitalize and build on existing programs and visitation and empower community -based grassroots institutions, enabling them to become self-reliant.

e) Monitoring and Evaluation (M&E)

112. Monitoring and evaluation will conform to both GEF and ADB guidelines for project implementation, monitoring and evaluation. As an ADB project, it will be subject to the standard M&E procedures, reporting and supervision arrangements. The use of the WWF/SFD monitoring framework within a reformed set of organizations for the Project Area will play a major role in M&E as this will create the basis for the new organizations MIS.

113. ADB’s standard monitoring procedures include financial and work progress, compliance with environmental and social safeguards, and performance monitoring. The Government and ADB will review the Project at least twice a year for the first three years and annually thereafter. A comprehensive mid-term review will also be undertaken. To monitor the progress of the Project in achieving the planned outcome and outputs, the PMO will establish and maintain a project performance management system (PPMS), which will be designed to permit adequate flexibility to adopt remedial action regarding Project design, schedules, activities and development impacts. The PPMS will adopt the following agreed indicators (i) project progress, (ii) enabling framework improvements (policies legal/regulations harmonization and clear institutional mandates), (iii) results of capacity development, (iv) progress towards demonstration and field targets, (v) environment improvements, and (vi) related social impacts of the Project. At Project inception, the PMO, in consultation with each sub-borrower and with the assistance of a contracted service provider, will develop comprehensive PPMS procedures to establish baseline values and systematically generate data on inputs and outputs of the project activities; and the socioeconomic, agricultural, and environmental indicators to measure project impacts.

114. The PMO will refine the PPMS framework, confirm achievable targets, firm up monitoring and recording arrangements, and establish systems and procedures no later than 6 months after Project implementation. Baseline and progress data will be reported at the requisite time intervals by the IAs to the PMO, including annual reporting on the environmental management plan. The PMO will be responsible for analyzing and consolidating the reported data through its management information system, and for reporting the outcome to ADB through the quarterly progress reports

115. The monitoring program is based on agencies monitoring their implementation of project activities and the immediate outputs with all data transferred to the WWF supported SFD data bases where it will be shared, analyzed and reported. Implementing agencies will be responsible for the routine monitoring as part of their management information systems and adaptive management program, including (i) threat assessments; (ii) problem status and changes; (iii) beneficiary assessments; (iv) input, output and impact monitoring; (v) economic, social and environmental; (vi) resource efficiency monitoring; and (vii) institutional monitoring.

116. The PMO will hold an annual evaluation workshop for all implementing stakeholders who would present their progress and reasons for deviations and then the whole project would assess these for input into the next annual plan. Baseline and impact monitoring will be contracted to suitable local institutes for surveys and assessment in Yr 3 and Yr 5 and will be reported as part of a Project Area status report. The mid-term surveys will inform the mid-term review which will use an adaptive management approach by redirecting the project towards successes and away from areas that progress less than expected. The final survey will form the basis of the completion report evaluation and the assimilation of the lessons from the Project. All monitoring data will be fully integrated and communicated within the wider dissemination program.

4. FINANCING a) Project Costs Project Components/ Outcomes Co-financing GEF Total ($’000) ($’000) ($’000) 1. Commercial Ex-situ Enterprise 101,775 174 101,949 Development 2. Sustainable Livelihoods and Conservation 15,855 1,181 17,036 of in-situ resources 3. Strengthening Institutions 2,780 2,915 4,186.9 4. Charges 6,200 0 5,985 Total Project Costs 124,857 4,270 129,157 b) Project Management Budget/Cost2 Component Estimated GEF Other Sources Project Total Staff- Weeks ($000) ($000) ($000) Locally recruited personnel/consultants 2,860 0 439.6 439.6 Internationally recruited consultants* Office facilities, equipment, vehicles and 307.2 307.2 communications (including recurrent costs: vehicle O&M and office equipment) Travel (included under budget line items for consultants) Total 0 746.8 746.8 * Local and international consultants in this table are those who are hired for functions related to the management of project. Note that ADB does not use GEF funds to cover the compensation of ADB staff. For those consultants who are hired to do a special task, they would be referred to as consultants providing technical assistance. For these consultants, please provide details of their services in c) below:

c) Consultants working for technical assistance components: Component Estimated GEF Other Sources Project Total Staff-weeks ($’000) ($’000) ($’000) Personnel 0 0 0 Local consultants 228 139 183.9 322.9 International consultants 112 392 208.7 600.5 Total 340 531 392.6 923.4 d) Co-financing Sources3 Co-financing Sources Name of Classification Type Amount ($) Status* Co-Financier (Source) ADB Multilateral Agency In cash 40,000,000 Committed Govt Local Government In cash 84,886,500 Committed Total 12,886,500

117. The estimated total cost of the project is US$129.2 million. ADB will provide a loan of US$40 million and manage a supporting GEF grant of $4.27 million that will be matched by a government counterpart contribution equivalent to US$ 84.9 million.

5. INSTITUTIONAL COORDINATION AND SUPPORT

a) Core Commitments and Linkages

118. The Project has the full commitment of the principal co-financier, the ADB. The objectives of the Project are consistent with ADB’s Country Partnership Strategy (2008-2010) which stresses improving environmental management and reducing poverty. ADB’s operations will support the 11th FYP and focus on the broad themes of equity and environmental sustainability. Project activities are aimed at promoting sustainable rural development with emphasis on ecosystem management and addressing rural poverty through livelihood programs. The Project is also fully consistent with ADB’s recent Country Environmental Assessment for China (2007).

6 For all consultants hired to manage project or provide technical assistance, please attach a description in terms of their staff weeks, roles and functions in the project, and their position titles in the organization, such as project officer, supervisor, assistants or secretaries. 3 Refer to the paper on Cofinancing, GEF/c.206/Rev.1 119. The SPG commitment is demonstrated in its commitment to (i) invest in the preparation of the Project, (ii) the alignment of the Project with the 11th FYP reflecting Government’s initiatives to improve conservation management and address rural development inequities as part of the wider “new socialist rural countryside” portfolio. The Executing Agency (EA), the Shaanxi Provincial Development Reform Commission, will take responsibility for overall implementation of the ADB loan and GEF grant financed projects, and coordinate the three sub-borrowers (Qinling Botanic Garden, Shaanxi Animal Rescue Center, and Louguantai Fuda Hot Spring Joint Venture) in ensuring that the Project achieves its objectives in the way it has been designed.

120. GEF’s commitment to the ongoing CBCLDP in SPG (also supported by ADB) and the other 5 provinces/regions has laid the basis for developing far greater awareness of land and resource degradation issues and has started to develop understanding of potential means to address the underlying causes of degradation. The Project aims to keep building on this through further demonstrating new approaches to achieve sustainable development outcomes.

b) Consultation, Coordination and Collaboration between IAs and EAs

121. The PRC-GEF Partnership on Land Degradation in Dryland Ecosystems has provided the umbrella mechanism for coordination of GEF IA and EA contributions. With ADB serving as the lead GEF agency, the Partnership and its Capacity Building to Combat Land Degradation Project has helped to establish a long-term and comprehensive strategy embodied in the Country Programming Framework (CPF). Through this mechanism, there has been strong coordination of all participating GEF agencies – at this stage, including the World Bank (through the ongoing Gansu-Xinjiang Pastoral Development Project) and IFAD. IFAD is preparing a project aimed at improving comprehensive agricultural capacity for food production in Ningxia (to the south of this Project) which will build on and replicate the Project’s approach. The Project Identification Form (and PDF/PPG allocation) for this project – the Dryland Ecological Conservation and Rehabilitation Project – has been included in the pipeline of 2007 IFAD projects under the framework of the PRC-GEF Partnership on Land Degradation in Dryland Ecosystems. Close coordination will be maintained between these two GEF-assisted projects.

c) Project Implementation Arrangements

122. The Project will be implemented through the SPFD as the Chinese EA with support of a Project Management Office operated by SPDRC and staffed from SFD, PDRC, DOF. The selection of SFD as the EA reflects the mandate of SFD and its relationship to QNBG enabling SFD to have sufficient influence over the Implementing Agencies to ensure agencies respond to Project’s needs; a lesson from the other donor programs is the need for sector level cordination of Project work programs. The SPG has formed a high level Project coordination committee with representatives of sector agencies and Provincial adminstration under the chairmanship of the Vice-Governor that will provide coordination across sectors and levels of administration, undertake high level reviews of proposed institutional reforms, and provide decisions for project implementation. Inter-sector conflict or implementation issues requiring higher level authority will be addressed through the Coordinating Committee.

123. The Project Management Office (PMO) will operate from the SPDRC. While the PMO will not implement investment activities financed by ADB, it will be responsble for implementing institutional strengthening programs using GEF and counterpart funds and will also contract the use of GEF funds. The will provide implementation reports to the Coordination Committee and ADB. It will also provide implementation coordination by consolidating work plans, planning and implementing procurement, financial management, and safeguard monitoring. The PMO will link to the implementing agencies that will form Project Implementation Offices (PIO) and will ensure the PIO staff are fully trained in Project adminstration, reporting and procurement procedures. 124. The QNBG will be the sub-borrower. The Project Implementing Agencies will be QNBG and include the: (i) Qinling Botanic Garden, (ii) Shaanxi Animal Rescue Center, (iii) Louguantai Forest Farm and (iv) the Louguantai Fuda Hot Springs Joint Venture. The implementing agencies will develop consolidated work plans for the activities under their jurisdiction, supervise implementation, provide counterpart funds, and provide the supporting project management, reporting and administration functions. Each Chinese Implementing Agency will operate through Project Implementing Office (PIOs).

125. The PMO will also undertake a number of implementation functions relating to the use of GEF funds and through the contracting of implementation. This will include a significant contract for WWF/SFD for the application and implementation of their biodiversity monitoring framework to the Project Area . The Project will be implemented over five years, with year one being used for mobilization, establishment of project management capacity and procedures, the completion of detailed engineering designs and Government and ADB approvals. The period from year 2 through 4 are envisaged as the major investment period during which most of the Implementing Agency work program will be completed although the in-situ program will be implemented through to Year Five and will continue thereafter through the sustainable financing mechanism proposed. The final year will have outstanding investments being completed and a significant process of Project evaluation and review to identify key lessons.

126. Each year the Chinese Implementing Agencies will develop an annual plan based on the Project design which they will then pass to the PMO for review and assessment. The PMO will ensure (i) that the Project objectives are followed, (ii) that the proposed work program does not create unexpected effects of their sector programs and (iii) to ensure that opportunities for joint programs and supporting programs are coordinated. Once the PMO has approved all plans it will provide a consolidated plan to the Coordinating Committee and ADB for review. The process will require iteration between the Coordinating Committee and PMO/PIO’s. Once ratified the annual work plan will be implemented. The PMO will coordinate procurement and implementation programs. Counterpart funding will be provided through each sub- borrower and there various agreements and will require coordination of procurement activities with all procurement contracts being signed by both the PMO and the respective borrowers.

127. The Chinese Implementing Agencies will provide monthly accounts and quarterly reports that will be consolidated by the PMO and submitted to the SPG and ADB. Each year there will be an evaluation workshop where each key stakeholder will present the findings of its monitoring and implementation progress for discussion amongst all agencies and to inform the following year planning process. In Year 3 and 5 a detailed benefit and project impact monitoring study will be used to identify the future needs and priorities of the project and to audit past monitoring reporting.

128. ADB/GEF will hold 6 monthly review missions in the first 3 years and work closely with the FDMO to ensure that Project implementation progress is as expected.

129. The PMO will be responsible for reporting on GEF financed activities presented in Table 2. The GEF will finance activities in components one, two and three that are directly related to strengthening the conservation of biodiversity in the Project area and the Qinling mountain range. GEF funds target the global benefits from globally threatened species and the GEF priority biodiversity conservation themes related to biodiversity conservation outside of nature reserves in the wider landscape and the sustainable financing of biodiversity. The approach to the use of funds from GEF emphasizes the development of communication and shared information and lessons through wider participation in conservation planning and decision making, the demonstration of new management systems related to landscape wide planning, the development of species management plans over the total Qinling Mountain, new technologies including monitoring and information systems, the use of analog forestry models and ecologically defined habitat restoration programs. 130. In output 1, GEF financing of US $174,000 is used to support the SARC ex-situ species recovery and management technical expertise for Giant Panda, Crested Ibis, and Golden Monkey. In addition ex-situ conservaiton faciltity design expertise will be provided to advise the detailed design process. The expertise will ensure that a world class ex-situ breeding program is undertaken and the these programs are consistent with national priorities and plans.

131. In output 2, GEF will provide US $ 1.2 million of funding into the demonstration of conservation of biodiveristy (subcomponent 2). Specifically the funding will be used to support (i) the preparation of a habitat and natural forest management plan ($99,600), (ii) ecological research grants ($318,700) to develop the data sets and to test silviculture systems for habitat restoration, (iii) conservation forestry technical assistnace to support the habitat restoration programs. Additional suppoirt is provided for the developmet of capacity and programs for endangered species recovery including (i) field survey contracts ($ 378,600), (ii) species recovery management plans ($151,100) and (iii) initial implementation of recovery implementation programs ($160,900).

132. In output 3, GEF funding of $ 2.9 million will support (i) 4 legal reform studies and drafting programs, (ii) landscape conservation planning ($749,700), (iii) field conservation monitoring including monitoirng contracts ($151,100),WWF technical support and training contract ($44,000), monitoring equipment ($35,000) and monitoring training ($42,100), (iv) Technical assistance for species and monitoring expertise, (v) monitoring baseline research contracts ($576,200), (vi) support 15 job exchange opportunities for technical conservation staff, and (vii) a replication and awareness program ($291,800). These programs involve an on-going planning process that seeks to develop a communication process between conservation stakeholders, define how to do biodiversity conservation planning within the Qinling Mountains landscape and actually demonstrate this within the Project Area. This process will not adopt a nature reserve focus but will focus on key species and their management within the Qinling Mountain Range and how the scattered management units and their staff can jointly contribute to the overall goal.

133. Replication systems rely heavily on shared data and through the process of joint planning and discussions, the ongoing piloting of ideas and technologies in the Project Area, ecological and species research programs. These activities will generate substantial data, information and lessons that will captured within the Qinling Mountains GIS held by SFD and supported by WWF. A WWF contract will be awarded for year one and two to provide technical monitoring training to QNBG.

Table 8 Project Use of GEF Funds Component Item Amount Subcomponent (USD ‘000’s) Component One Technical assistance for captive breeding 174 Component Two 2.2 - In-situ conservation of biodiversity - Habitat Plan 99.6 - Ecological research 319 - Conservation Forestry Expert 72.4 - Endangered species program – (5 plans, research 690.6 contracts and initial implementation grants) Component Three 3.2 - Institutional Strengthening Legal Reforms 330 3.3 - Replication Programs Qinling Mountains Landscape Planning 750 Monitoring and information - SFD monitoring costs 151.1 - WWF training 44 - Training in monitoring 42.1 - Monitoring equipment (SQNBG) 35 Component Item Amount Subcomponent (USD ‘000’s) - TA 517.7 - Research Monitoring Contracts 576.2 Job exchange 176.6 Dissemination programs 291 Total GEF Investment 4,270 46 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority One: Catalyzing Sustainability of Protected Area Systems at National Levels

Annex 1: Incremental Cost Aalysis Components, Item Baseline Domestic Benefit Baseline Total Project Global Benefit Description Incremental and Investment Description – what is achieved Investment Increment – what is Cost – GEF Subcomponents USD with just loan and counterpart USD additionally achieved with (b) – (a) $millions $millions GEF $ for global importance Option B (a) (b) USD $millions

1.0 Establishing Successful Ex-situ Enterprises The Project develops three commercial enterprises being (i) Qinling Botanic Garden, (ii) Shaanxi Animal Rescue Centre, (iii) Hot Springs Joint Venture 1.1 Qinling 55.4  269 ha of botanic garden 55.4 0 Botanic developed including 59ha Garden of planted gardens, Develope landscaping, 18 Daoist d temples upgraded, Greenhouse displays, exhibition halls and cable car, and general administration buildings

1.2: Hot Springs 8.5  Villa accommodation , 8.5  0 Joint swimming and bathing Venture complex, restaurant Phase 2 developed developed

1.3 Shaanxi 38.06  SARC extended from 145ha 38.06  Ex-situ breeding 0.174 Animal to 1150 ha including the Technical assistance to Rescue establishment of 3 satellite ensure world standards Center areas for Panda research, are incorporated into Upgraded Crested Ibis, Golden breeding programs and and Monkey and upgrading of animal exposition expanded the animal rescue center facilities and animal exposition programs 

47 Component 1 101.78 101.95 0.174 Total 2.0 Sustainable In-Situ Livelihoods and conservation of In-situ Biodiversity The Project will introduce a village development planning process for 16 in situ communities through which forest use rights will be confirmed, conservation forestry introduced to 5000 ha , conservation agriculture demonstrated, small and medium enterprises developed, community home stays tourism operations, infrastructure. On forest land a forest habitats management plan will guide 2000 ha of habitat development based on silviculture manipulation of existing plantation orientated planting, ecological research, endangered species recovery management. 2.1 Sustainable Village 1.83 16 village development plans 1.83 livelihood Developm completed ent Planning Conservatio 4.47 (i) establish forest rights and 4.47 n Forestry demarcate collective land Implemen (ii) complete planting on ted 5,000ha Conservatio 0.07 (i) 16 SALT demonstrations 0.07 n developed Agricultur e (SALT) demonstra ted Small and 2.27 (i) Biodiversity businesses 2.27 medium researched enterprise (ii) Market Research studies s (iii) Training, developed Home stay 0.43 10 community home stay 0.43 Tourism businesses operating 80 rooms Road and 4.48 17.5 km of roads and 105 km 4.48 pathway of pathways upgraded upgrading Social 1.64 Priority alternative energy and 1.64 Infrastruct water supplies schemes ure Conservation 0.0 Louguantai Forest Farm 0.1 (i) Habitat management plan 0.1 of In-situ Habitat Management Plan outlining programs to biodiversity increase forest cover and the quality of existing forest cover to increasingly reflect and mimic the architecture of natural forest habitats resulting in increasing trends in 48 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority One: Catalyzing Sustainability of Protected Area Systems at National Levels

biodiversity 0.0 Ecological Research contracts 0.32 Research findings to inform 0.32 habitat restoration and forest manipulation Habitat 0.67 Implementation of habitat 0.67 0.0 Restoratio Management plan for a total n of 2000ha of treatments Program 0.0 (i) Conservation forester to 0.073 (i) Conservation forester to 0.073 prepare silviculture practices develop biodiverse planting models (0.024) (ii) SARC design and Wildlife vet inputs to ensure international standards apply to new satellite and animal exposition

0.0 Endangered Species Recovery 0.69 (i) 5 priority species 0.69 Management management plans prepared for the Qinling Mountains (ii) Research contracts to generate information to inform species management programs (iii) implementation of management plans started Component 2 15.86 17.04 1.18 Total Sub Component 3.1: Institutional arrangements to support market based approaches for biodiversity conservation. The Project will develop the institutional arrangements and mechanisms to introduce programs supported by market based approaches. The component will deliver (i) effective Project Management, (ii) institutional reforms and strengthening, and (iii) a conservation replication and dissemination program 3.1 Effective Project Managem ent Staff Costs 0.44 Staff contracted to PMO 0.44 0.0 Training 0.014 PMO staff trained to ensure 0.014 biodiversity is included in work plans and is reported Office 0.02 Functioning Office 0.02 49 Equipmen t Office rent 0.15 Functioning Office 0.15 Project 0.06 Project Monitoring and 0.06 Monitorin reporting to include the g biodiversity parameters Resettlemen 0.03 Resettlement plan compliance 0.03 0.0 t monitorin g Subtotal 0.75 0.75 0 Project Management 3.2: Institutional strengthening for market based Conservation of biodiversity Legal reforms 0.330 Legal studies on (i) reform of 0.330 collective land tenure in Shaanxi Province, (ii) the establishment of community partnerships in natural forest management, (iii) the development of operational guidelines and standards for ecotourism in Shaanxi, (iv) an assessment of options for developing a managed for public-good fund (Eco-fund) for the long term financial sustainability of natural resource management. Sub component 0.33 0.33 total Conservation Awareness, Dissemination and Awareness Program Conservation landscape 0.75 (i) Conservation professional 0.75 planning from Qinling Mountains develop consensus on Landscape planning and use Project Area to pilot techniques and applications (ii) Project area management plan including social, ecological and economic planning layers used to provide future protection of landscape, Louguantai landscape features

50 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority One: Catalyzing Sustainability of Protected Area Systems at National Levels

(iii) mainstreaming of biodiversity conservation and biodiversity conservation outside protected areas Louguantai 0.507 Spatial plan to management the 0.507 0.0 Township negative effects of wild tourism Tourism development that would not Spatial Plan support the proposed Louguantai ecotourism models Biodiversity 0.02 Contract of information services 1.56 (I) Information sharing 1.54 Monitoring to WFF/SFB to integrate PA through out the Qinling and conservation monitoring with Mountains information Qinling Mountains monitoring (ii) sharing of lessons learned services initiatives being implemented by in Project area within the SFB with support of WWF, job wider Qinling Mountains exchanges conservation programs Field studies involving (i) vegetation studies, (ii) vertebrates, (iii) invertebrates, (iv) fish and aquatic biodiversity, (vii) amphibians, (viii) soil microbial organisms completed Outputs included in monitoring systems and information disseminated throughout the QM Dissemination Program 0.29 (i) Lessons learned from the 0.29 Project activities and results of research and implementation programs monitored reported through out the Qinling Mountains (ii) joint planning and sharing of information forums (iii) media releases

Sub 0.52 3.109 2.59 component total Component 1.22 4.19 2.92 total Charges 6.2 6.2 0.0 51 PROJECT 124.887 129.157 4.270 TOTAL

52 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority One: Catalyzing Sustainability of Protected Area Systems at National Levels

Annex Two: Strategic Tools – Tracking document

i. Section One: Project General Information

I. Project General Information

1. Project Name: The Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 2. Project Type: 3. Project ID (GEF): 4. Project ID (IA): TA 4721- PRC 5. Implementing Agency: Asian Development Bank 6. Country(ies): People's Republic of China

Name of reviewers completing tracking tool and completion dates: Name Title Agency Work Program Inclusion Project Mid-Term Final Evaluation/Project Completion

7. Project Duration: Planned: 5 years Actual ___ years

8. Lead Project Executing Agency: SRDC

9. GEF Operational Program: dry lands (OP 1)  coastal, marine, freshwater (OP 2)  forests (OP 3)  mountains (OP 4) agro-biodiversity (OP 13)  integrated ecosystem management (OP 12)  sustainable land management (OP 15)

10. Project coverage in hectares 53 2. Targets and Timeframe

Foreseen at Achievement Achievement project start at Mid-term at Final Evaluation of Evaluation of Project Coverage Project Project Extent in hectares of protected 557,298 areas targeted by the project

54 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority One: Catalyzing Sustainability of Protected Area Systems at National Levels TA 4721–PRC: Preparing the ShaanxiI–Qinling Mountains Integrated Ecosystem Management Project List of nature reserves targeted by the Project Category No. Name of Protected Area New? Area (ha) Global Designation Local Designation IUCN Category 1 Taibaishan No 56,325 Man & Biosphere Reserve National IV 2 Foping No 29,240 Man & Biosphere Reserve National IV 3 Zhouzhi No 56,393 National IV 4 Changqing No 29,906 National IV 5 Zhouzhi Laoxiancheng No 12,611 Provincial IV 6 Ningshaan No 26,732 Prefecture IV 7 Guanyinshan No 13,500 Provincial IV 8 Tianhuashan No 25,485 Provincial IV 9 Sangyuan No 13,800 Provincial IV 10 Wuliangshan No 13,700 Provincial IV 11 Motianling No 11,700 Provincial IV 12 Niuweihe No 13,087 Provincial IV 13 Yingzhuishi No 10,732 Provincial IV 14 Qingmuchuan No 10,200 Provincial IV 15 Huangboyuan 2006 25,409 Provincial IV 16 Pingheliang 2006 17,275 Provincial IV 17 Niangniangshan* 2008 17,000 Provincial IV 18 Panlong* 2008 18,844 Provincial IV 19 Banqiao* 2008 36,130 Provincial IV 20 Baofengshan No 29,500 Provincial IV 21 Luoyang Dani 2006 5,740 Provincial IV 22 Niubeiliang No 16,418 National IV 23 Zhuhuan No 37,550 Provincial IV 24 Xushui No 5,740 Prefecture IV 25 Lingkou Dani 2006 5,715 Prefecture IV 26 Long Xian No 6,559 Prefecture IV 27 Huashan No 12,007 Prefecture IV 557,298 *Not gazetted by mid 2007

55 Section Two: WB/WWF Site-Level Management Effectiveness Tracking Tool for Protected Areas

Note that the Proposed Area contains no protected areas but is part of the overall Qinling mountain range where there are 27 government protected areas. The ADB-GEF-PRC Project will indirectly and directly affect the conservation management regimes in these nearby 27 protected areas. For this reason, a single tracking tool is shown here for the entire range and its 27 protected areas.

NATURE RESERVES ON THE QINLING MOUNTAIN RANGE Mr. Lei Yinghu, Vice Director, Contacts Date July 2007 Shaanxi Forestry Department

Telephone 13509185620 E-mail [email protected]

Address Shaanxi Province Forestry Department, Nature Reserves & Wildlife Division

Name of reserve Qinling nature reserves (27 reserves in total)

Management Authority Shaanxi Province Forestry Department, Nature Reserves & Wildlife Division

Geographic location Shaanxi Province, Qinling Mountain Range

national, Date approved to be 5 national, earliest Date of establishment Class of reserve provincial, 17 provincial, in 1983 national or provincial local reserve 5 prefectural

Type of reserve conservation of fauna, deciduous broadleaf forest

Size of reserve (ha) 557,298 Area of core zone (ha) not known

Giant Panda, Golden Takin, Golden Snub-nosed Monkey, Crested Ibis, associated habitats, Protection targets broadleaf deciduous and coniferous forest Permanent not No of staff Planned staff not known Part-time not known staff known

No of residents in reserve not known No of residents around reserve not known

56 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority Two: Mainstreaming Biodiversity in Production Landscapes/Seascapes and Sectors TA 4721–PRC: Preparing the ShaanxiI–Qinling Mountains Integrated Ecosystem Management Project Qinling Issue Criteria Qinling Comments Next steps Score 1. Legal status The protected area is not gazetted pursue upgrades of provincia 0 24 nature reserves gazetted as national national nature reserves; and provincial reserves since 1983; Does the protected The government has agreed that the protected area gazette five corridors as exten 1 area have legal should be gazetted but the process has not yet begun three proposed reserves and five of nature reserves; corridors not yet gazetted; status? The protected area is in the process of being gazetted gazette three proposed nature 2 but the process is still incomplete application for upgrade to national reserves as extensions of reserve is in preparation for several existing reserves; The protected area has been legally gazetted (or in the nature reserves Context case of private reserves is owned by a trust or similar) begin consolidating reserves 3 feasible and advantageous 2. Protected area There are no mechanisms for controlling inappropriate Integrate nature conservation 0 regulations land use and activities in the protected area Older, better established reserves are land use. Mechanisms for controlling inappropriate land use and well protected but road and tourism Publicize and adhere strictly t developments threaten integrity; Are inappropriate activities in the protected area exist but there are major 1 national regulations gover land uses and problems in implementing them effectively Poaching is largely controlled; use of core, buffer, and activities (e.g. Mechanisms for controlling inappropriate land use and Timber harvest in reserves is stopped experimental zones of natu poaching) controlled? activities in the protected area exist but there are some 2 but in adjacent areas, household reserves; problems in effectively implementing them use of firewood continues to Convene annual meetings of r 3 Mechanisms for controlling inappropriate land use and degrade forests (15m per managers to review laws, household per year). regulations, and assess Context activities in the protected area exist and are being 3 effectively implemented performance Provide additional resources t 3. Law The staff have no effective capacity/resources to Resources and capacity for 0 increase staffing and enha enforcement enforce protected area legislation and regulations enforcement are limiting in newer capacity for enforcement; There are major deficiencies in staff capacity/resources and smaller nature reserves; to enforce protected area legislation and regulations 1 Organize periodic training ses Can staff enforce Reserves typically disregard national (e.g. lack of skills, no patrol budget) to enhance performance o protected area rules regulations that prohibit virtually all enforcement personnel; well enough? The staff have acceptable capacity/resources to activities in core and buffer zones; enforce protected area legislation and regulations but Strictly adhere to national 2 Reserves typically disregard national some deficiencies remain regulations to prevent dam regulations that allow only limited The staff have excellent capacity/resources to enforce core, buffer and experimen Context 3 activities in experiemental zones. protected area legislation and regulations zones. 4. Protected area No firm objectives have been agreed for the protected Conservation objectives have been Draft and/or update managem 0 objectives area written into management plans for plans with explicit conserv The protected area has agreed objectives, but is not older, larger, and better established objectives; reserves; Have objectives been managed according to these objectives 1 Include a monitoring & evalua agreed? Newer reserves require management plan as an appendix to eac The protected area has agreed objectives, but these plans with clear descriptions of management plan to track are only partially implemented conservation objectives and reserve performance. 2 monitoring protocols to assess Planning

57 Qinling Issue Criteria Qinling Comments Next steps Score The protected area has agreed objectives and is progress towards achievement of managed to meet these objectives 3 objectives.

Improve PA network by gazett 5. Protected area Inadequacies in design mean achieving the major Current design of nature reserve proposed reserves and co design management objectives of the protected area is 0 network is well suited to and consolidating these in impossible conservation (large, contiguous existing reserves where fe Does the protected Inadequacies in design mean that achievement of protected areas with corridors 1 to avoid duplication of per area need enlarging, major objectives are constrained to some extent joining them). and infrastructure. corridors etc to meet Design is not significantly constraining achievement of Design and efficiency could be 2 Extend the PA network down its objectives? major objectives, but could be improved enhanced by consolidation of some to lower elevations to inclu Reserve design features are particularly aiding proposed reserves and corridors winter habitat for elevation achievement of major objectives of the protected area into existing reserves Planning 3 migrants (e.g. takin, panda The boundary of the protected area is not known by the Additional demarcation might be Assess the potential impacts management authority or local residents/neighbouring 0 needed to inform local residents boundary demarcation; land users but the habitat impacts of this must Assess the potential impacts The boundary of the protected area is known by the be carefully weighed against demarcating internal PA zo potential benefits: It might not be management authority but is not known by local 1 Undertake demarcation only i residents/neighbouring land users advisable to demarcate if it requires excessive removal of vegetation or areas where public awaren The boundary of the protected area is known by both fragmentation of habitats. will be enhanced and ecolo the management authority and local residents but is not 2 impacts minimized. appropriately demarcated

58 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority Two: Mainstreaming Biodiversity in Production Landscapes/Seascapes and Sectors TA 4721–PRC: Preparing the ShaanxiI–Qinling Mountains Integrated Ecosystem Management Project Qinling Issue Criteria Qinling Comments Next steps Score The boundary of the protected area is known by the management authority and local residents and is appropriately demarcated

3

Is the boundary known and demarcated?

Context 7. Management plan There is no management plan for the protected area Management plans were prepared for 5 Draft or update management, 0 reserves by World Bank GEF and recovery plans for all project; reserves; Is there a A management plan is being prepared or has been 1 management plan prepared but is not being implemented Other reserves need assistance to Integrate management of adja develop and implement plans. reserves to enable them to and is it being An approved management plan exists but it is only in concert. implemented? being partially implemented because of funding 2 Older plans need to be updated and constraints or other problems expanded to include conservation Include quantifiable conserva

59 Qinling Issue Criteria Qinling Comments Next steps Score Planning An approved management plan exists and is being objectives, Monitoring & objectives in all manageme implemented 3 Evaluation, Habitat Recovery, and plans. Species Recovery. Additional points The planning process allows adequate opportunity for Duplicate the World Bank GEF key stakeholders to influence the management plan +1 participatory planning proc World Bank GEF project included all reserves. There is an established schedule and process for stakeholders in planning at five Incorporate research on Giant periodic review and updating of the management plan +1 reserves. that lists abundant reason Other reserves are planned in a top- abandoning attempts to re The results of monitoring, research and evaluation are down process starting with a pandas to the wild. routinely incorporated into planning master plan for construction of Schedule periodic (annual) rev Planning infrastructure and with little scope of management plans to in +1 for stakeholder input; annual Monitoring & Evalu by an independent agency (possibly an NGO). 8. Regular work plan No regular work plan exists 0 Add impact assessment to reg work plans that call for Is there an annual A regular work plan exists but activities are not Work plans exist and are carried out construction of roads, buil work plan? monitored against the plan’s targets 1 but not scientifically monitored. or other tourism infrastruc A regular work plan exists and actions are monitored Work plans seldom address impacts of Add Monitoring & Evaluation t against the plan’s targets, but many activities are not 2 proposed infrastructure such as work plans to determine w completed roads and buildings. projects were completed, i Planning/Outputs A regular work plan exists, actions are monitored budgets were properly use against the plan’s targets and most or all prescribed 3 what were project outcome activities are completed 9. Resource There is little or no information available on the critical inventory habitats, species and cultural values of the protected 0 area Base management more fully Do you have enough Information on the critical habitats, species and cultural Long-term monitoring supported by research and monitoring re information to values of the protected area is not sufficient to support 1 SFD and WWF since 2005 produces manage the area? planning and decision making data but information quality and Fill the important gaps in the Information on the critical habitats, species and cultural utility are not yet determined. protected area network an management approaches; values of the protected area is sufficient for key areas 2 Inventory focuses on the “big four” of planning/decision making but the necessary survey species and little is known of other Spread research and monitori work is not being maintained funding to cover other thre Context globally threatened species. Information concerning on the critical habitats, species species. and cultural values of the protected area is sufficient to support planning and decision making and is being 3 maintained 10. Research There is no survey or research work taking place in the Older national reserves have excellent Use research and monitoring protected area 0 programs but newer reserves lack to guide management plan sufficient funding and capacity for and implementation (e.g. u

60 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority Two: Mainstreaming Biodiversity in Production Landscapes/Seascapes and Sectors TA 4721–PRC: Preparing the ShaanxiI–Qinling Mountains Integrated Ecosystem Management Project Qinling Issue Criteria Qinling Comments Next steps Score Is there a programme There is some ad hoc survey and research work research and monitoring. the 2001 habitat suitability 1 of management- Research and monitoring results are analyses for reintroduction oriented survey and Crested Ibis). There is considerable survey and research work but it not widely used to guide research work? is not directed towards the needs of protected area 2 management. If Golden Takin and Wild Boar management problematic due to increas populations, research Inputs There is a comprehensive, integrated programme of management options; survey and research work, which is relevant to management needs 3 Where exotic trees have been in revegetation, research o for removal and replanting 11. Resource Requirements for active management of critical Strictly protect known ecolog management ecosystems, species and cultural values have not been 0 requirements of threatened assessed wildlife; Road building and tourism Is the protected area Requirements for active management of critical development threaten habitat Carry out additional research adequately managed ecosystems, species and cultural values are known but 1 integrity in some reserves; monitoring to understand (e.g. for fire, invasive are not being addressed requirements of Non-Big-F Villages and agriculture threaten species; species, poaching)? Requirements for active management of critical habitat suitability for Crested Ibis at ecosystems, species and cultural values are only being 2 prospective release sites. Manage adaptively to remove partially addressed trees from plantations to p Process Exotic trees have been planted to Requirements for active management of critical natural succession in natu restore forest but natural reserves; ecosystems, species and cultural values are being succession is limited in such areas. substantially or fully addressed 3 Publicize success stories suc the recovery of the Qinling Panda. 12. Staff numbers There are no staff 0

Are there enough Staff numbers are inadequate for critical management Older, national nature reserves have people employed to activities 1 adequate staffing levels; Hire and train additional manage the conservation personnel fo protected area? New and proposed reserves have few reserves and corridors. Staff numbers are below optimum level for critical or no personnel. management activities 2 Inputs Staff numbers are adequate for the management 3 needs of the site 13. Personnel Problems with personnel management constrain the Personnel management is good but Fund positions and hire addit 0 management achievement of major management objectives emphasis needs shifting in favour conservation personnel at Problems with personnel management partially of strict conservation objectives; reserves and five corridors Are the staff constrain the achievement of major management 1 Salaries and benefit packages (such as Fund training programs for objectives education and training) are not personnel at new reserves

61 Qinling Issue Criteria Qinling Comments Next steps Score managed well Personnel management is adequate to the adequate to attract graduates in corridors. enough? achievement of major management objectives but 2 wildlife and forestry sciences. Enhance salaries and benefits could be improved as training) to attract grad Process Personnel management is excellent and aids the in wildlife and forestry scie 3 achievement major management objectives 14. Staff training Staff are untrained 0 Fund and implement additiona Many nature reserve personnel are training programs to includ Is there enough Staff training and skills are low relative to the needs of recruited from other disciplines and periodic field trips to neigh training for staff? the protected area 1 have no knowledge of nature reserves to develop more Staff training and skills are adequate, but could be reserve or wildlife management; cooperation for conservati further improved to fully achieve the objectives of 2 Field staff do not have adequate management. management training opportunities in nature Fund and develop short- and Inputs/Process Staff training and skills are in tune with the conservation. term training programs bo management needs of the protected area, and with 3 country and internationally anticipated future needs 15. Current budget There is no budget for the protected area Most reserves lack adequate funding 0 for staff training, conservation education, research and Is the current budget The available budget is inadequate for basic Increase allocations for monitoring, public awareness and sufficient? management needs and presents a serious constraint 1 conservation projects but to the capacity to manage other activities; roads, tourism and other infrastructure developmen The available budget is acceptable, but could be further Budget shortfalls are made up by without adequate environm improved to fully achieve effective management 2 commercial activities that do not promote conservation but rather safeguards; The available budget is sufficient and meets the full degrade nature reserves; II. INPUTS management needs of the protected area Increase allocations for salari Budget allocations favor infrastructure benefits to attract qualified 3 development rather than personnel conservation management and this degrades PAs. 16. Security of There is no secure budget for the protected area and Budgets for national reserves are budget management is wholly reliant on outside or year by 0 secured to some extent by national year funding funding from SFA. Is the budget secure? There is very little secure budget and the protected area could not function adequately without outside 1 All 27 nature reserves in the Qinling PA Increase funding to provincial funding network contribute to conservation local reserves to enhance of all species but provincial and management. There is a reasonably secure core budget for the lower reserves have little budget protected area but many innovations and initiatives are 2 Inputs security and often must develop reliant on outside funding outside sources of funding such as There is a secure budget for the protected area and its tourism. management needs on a multi-year cycle 3 17. Management of Budget management is poor and significantly There is too much focus on building Drop the focus on consrtructi 0 budget undermines effectiveness and too little on active management realign activities to achiev

62 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority Two: Mainstreaming Biodiversity in Production Landscapes/Seascapes and Sectors TA 4721–PRC: Preparing the ShaanxiI–Qinling Mountains Integrated Ecosystem Management Project Qinling Issue Criteria Qinling Comments Next steps Score Budget management is poor and constrains of habitats, ecosystems, and conservation objectives. Is the budget effectiveness 1 species. managed to meet critical management Budget management is adequate but could be needs? improved 2

Process Budget management is excellent and aids effectiveness 3

18. Equipment There is little or no equipment and facilities 0 Purchase additional equipmen Is equipment There is some equipment and facilities but these are research, monitoring, and adequately wholly inadequate The main gap is in research, 1 conservation activities. In maintained? monitoring, and conservation use of auto-trigger camera equipment for field and office use. There is equipment and facilities, but still some major other remote technologies gaps that constrain management 2 monitoring. Process There is adequate equipment and facilities 3

19. Maintenance of There is little or no maintenance of equipment and equipment facilities 0

Is equipment There is some ad hoc maintenance of equipment and adequately facilities 1 maintained? There is maintenance of equipment and facilities, but 2 there are some important gaps in maintenance Process Equipment and facilities are well maintained 3 20. Education and There is no education and awareness programme Public awareness of nature awareness 0 conservation is addressed mainly by SFD and WWF programs and programme There is a limited and ad hoc education and awareness Is there a planned 1 publications; Communities need additional programme, but no overall planning for this awareness training, particu education Some PAs have museums that include There is a planned education and awareness in schools to educate yout programme? conservation education materials; programme but there are still serious gaps 2 about conservation values There is a planned and effective education and Homestay programs have boosted Process awareness programme fully linked to the objectives 3 conservation awareness in some and needs of the protected area reserves.

63 Qinling Issue Criteria Qinling Comments Next steps Score 21. State and There is no contact between managers and 0 commercial neighbouring official or corporate land users neighbours Adjacent land users are mainly nature There is limited contact between managers and 1 Convene annual meetings of Is there co-operation neighbouring official or corporate land users reserves and forest farms; protected area managers; with adjacent land There is regular contact between managers and Cooperation is lacking between nature Carry out joint training of pers users? neighbouring official or corporate land users, but only reserves on management of natural 2 Carry out joint monitoring and limited co-operation resources and on research and monitoring. research. Process There is regular contact between managers and neighbouring official or corporate land users, and 3 substantial co-operation on management 22. Indigenous Indigenous and traditional peoples have no input into people decisions relating to the management of the protected 0 area Management is the responsibility of Do indigenous and Indigenous and traditional peoples have some input state or provincial agencies. There traditional peoples into discussions relating to management but no direct 1 are few indigenous peoples on the resident or regularly involvement in the resulting decisions Qinling thus little opportunity for using the PA have Indigenous and traditional peoples directly contribute to input by indigenous or traditional 2 input to management some decisions relating to management peoples. decisions? Indigenous and traditional peoples directly participate 3 Process in making decisions relating to management 23. Local Local communities have no input into decisions relating 0 communities to the management of the protected area Villagers participate in provision of Encourage all reserves to follo tourism services and facilities. Local communities have some input into discussions Taibaishan model of comm Do local communities relating to management but no direct involvement in 1 In some reserves, villagers also have participation in reserve resident or near the the resulting decisions direct involvement in other reserve management. protected area have management issues such as Local communities directly contribute to some Carry out training of PA perso input to management 2 construction of infrastructure (e.g. decisions relating to management Taibaishan NNR. decisions? Local communities directly participate in making Taibaishan). 3 Process decisions relating to management Additional points There is open communication and trust between local In the older and better established stakeholders and protected area managers +1 reserves there is communication Programmes to enhance local community welfare, with local communities. Extend the Taibaishan commu involvement programs to o Outputs while conserving protected area resources, are being The homestay program enhances implemented +1 community welfare as do programs reserves. at Taibaishan where villagers are guides, wardens, and monitors.

24. Visitor facilities There are no visitor facilities and services 0 Older, larger reserves have adequate Carefully plan visitor facilities facilities. accordance with national Visitor facilities and services are inappropriate for regulations for nature rese Are visitor facilities 1 There is a risk of overbuilding facilities current levels of visitation or are under construction management. (for tourists, pilgrims to earn income from tourism. Visitor facilities and services are adequate for current etc) good enough? 2 Carry out impact assessments levels of visitation but could be improved 64 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority Two: Mainstreaming Biodiversity in Production Landscapes/Seascapes and Sectors TA 4721–PRC: Preparing the ShaanxiI–Qinling Mountains Integrated Ecosystem Management Project Qinling Issue Criteria Qinling Comments Next steps Score Visitor facilities and services are excellent for current tourism developments. Outputs levels of visitation 3 25. Commercial There is little or no contact between managers and 0 tourism tourism operators using the protected area There is contact between managers and tourism Carefully balance developmen Do commercial tour operators but this is largely confined to administrative 1 There is a wide range of interaction tourism with conservation operators contribute or regulatory matters between protected area managers of habitats, ecosystems, a species. to protected area There is limited co-operation between managers and and tourism operators. In some management? tourism operators to enhance visitor experiences and 2 reserves, it is good. In others, not Follow the Zhouzhi NNR Houz maintain protected area values yet developed. model where tourism facili are good and concentrated Process There is excellent co-operation between managers and tourism operators to enhance visitor experiences, 3 protect values and resolve conflicts 26. Fees Although fees are theoretically applied, they are not 0 If fees (tourism, fines) collected Investigate potential for levies are applied, do they The fee is collected, but it goes straight to central Entry fees are levied at some reserves, ecological services such a help protected area government and is not returned to the protected area or 1 but not all. water purification and sup management? its environs Revenues are used to cover operating especially with respect to t The fee is collected, but is disbursed to the local expenses. South-North water transfer Outputs authority rather than the protected area 2 scheme. There is a fee for visiting the protected area that helps to support this and/or other protected areas 3 Important biodiversity, ecological and cultural values The Qinling as a whole is reasonably Protect areas at lower elevatio 0 are being severely degraded well covered by protected areas at Recover degraded resources, Some biodiversity, ecological and cultural values are higher elevations. 1 particulary forest and wetl being severely degraded Lower elevations are not protected. habitats and wildlife popul Some biodiversity, ecological and cultural values are The intensifying focus on transport Remove exotic Japanese Larc being partially degraded but the most important values 2 development and tourism results in encourage natural habitat have not been significantly impacted

65 Qinling Issue Criteria Qinling Comments Next steps Score Biodiversity, ecological and cultural values are some loss of biological resources. succession. predominantly intact With improving protection, some Develop regulated hunting pro wildlife populations will increase to earn revenues for the PA out of control in the absence of from hunting surplus anim predators (e.g. Golden Takin, Wild Boar).

3

Is the protected area being managed consistent to its objectives? Outcomes There are active programmes for restoration of degraded areas within the protected area and/or the protected area buffer zone.

Forest protection and restoration is effective in some areas but not in Improve restoration technolog others. through application of scie Exotic species used in reforestation address ecological needs +1 are problematic. globally threatened specie Species recovery is not integrated with Remove exotic species to enc reforestation and habitat protection natural forest recovery initiatives.

Outputs

66 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority Two: Mainstreaming Biodiversity in Production Landscapes/Seascapes and Sectors TA 4721–PRC: Preparing the ShaanxiI–Qinling Mountains Integrated Ecosystem Management Project Qinling Issue Criteria Qinling Comments Next steps Score 28. Access Protection systems (patrols, permits etc) are ineffective assessment in controlling access or use of the reserve in 0 accordance with designated objectives Are the available Protection systems are only partially effective in Carefully control spatial and management controlling access or use of the reserve in accordance 1 Access control is effective except in temporal distribution of to mechanisms working with designated objectives some PAs where tourism is with respect to wildlife and to control access or Protection systems are moderately effective in developing rapidly. use? controlling access or use of the reserve in accordance 2 habitat resources. with designated objectives Outcomes Protection systems are largely or wholly effective in controlling access or use of the reserve in accordance 3 with designated objectives 29. Economic benefit The existence of the protected area has reduced the The main benefit is the homestay assessment options for economic development of the local 0 program. It was started by WWF communities and is successful. The risk is that it Carefully control tourism developments to ensure th Is the protected area The existence of the protected area has neither 1 grows out of control and degrades providing economic damaged nor benefited the local economy conservation values. do not degrade natural resources. benefits to local There is some flow of economic benefits to local Taibaishan NNR provides economic communities? communities from the existence of the protected area 2 benefits to villagers who serve as Extend the Taibaishan model but this is of minor significance to the regional economy guides, porters, wardens and other reserves to develop There is a significant or major flow of economic monitors. alternative incomes for far and loggers. Outcomes benefits to local communities from activities in and 3 Villagers also build infrastructure in around the protected area (e.g. employment of locals, Taibaishan. locally operated commercial tours etc) 30. Monitoring and There is no monitoring and evaluation in the protected evaluation area 0 Additional monitoring technol needed for biota and habit There is some ad hoc monitoring and evaluation, but WWF-SFD support semi-annual provide information for no overall strategy and/or no regular collection of 1 transect wildlife monitoring over management. results most of the Qinling. This began in 2005 and results are not yet been Completed academic research There is an agreed and implemented monitoring and projects must be reviewed evaluation system but results are not systematically available for use by management. Planning/Process 2 understand their implicatio used for management management. A good monitoring and evaluation system exists, is well 3 implemented and used in adaptive management

TOTAL SCORE 66

67 134. 135. APPENDIX 3 –Tracking Tool for GEF Biodiversity Focal Area Strategic Priority Two, Mainstreaming Biodiversity in Production Landscapes/Seascapes and Sectors

I. Project General Information

1. Project Name: The Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 2. Project ID (GEF): 3. Project ID (IA): TA 4721- PRC 4. Implementing Agency: Asian Development Bank 5. Country(ies): People's Republic of China 6. Name of reviewers completing tracking tool and completion dates:

Name Title Agency Work Program Inclusion Project Mid-Term Final Evaluation/Project Completion

7. Project Duration: Planned: 5 years Actual ___ years

8. Lead Project Executing Agency: SRDC

9. GEF Operational Program: dry lands (OP 1)  coastal, marine, freshwater (OP 2)  forests (OP 3)  mountains (OP 4) agro-biodiversity (OP 13)  integrated ecosystem management (OP 12)  sustainable land management (OP 15)

10. Production sectors and/or ecosystem services directly targeted by project:

10. a. The main production sectors involved in the project. (“P” indicates sectors that are primarily and directly targeted by the project and “S indicates those that are secondary or incidentally affected by the project). Agriculture S Fisheries 68 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority Two: Mainstreaming Biodiversity in Production Landscapes/Seascapes and Sectors TA 4721–PRC: Preparing the ShaanxiI–Qinling Mountains Integrated Ecosystem Management Project Forestry P Tourism P Mining Oil Transportation Other (please specify)

10 . b. For projects that are targeting the conservation or sustainable use of ecosystems goods and services, specify the goods or services that are being targeted, for example, water, genetic resources, recreation, etc.

1. genetic resources (goods) 2. non-timber forest products (goods) 3. timber forest products (goods) 4. biodiversity conservation (service) 5. recreation (service) 6. soil conservation (service) 7. conservation of water quantity (service) 8. conservation of water quality (service)

II. Project Landscape/Seascape Coverage

10. a. The extent (in hectares) of the landscape where the project will directly or indirectly contribute to biodiversity conservation or sustainable use of its components.

Targets and Timeframe

Achievement at Achievement at Foreseen at Project Coverage Mid-term Evaluation Final Evaluation of project start (ha) of Project Project

Landscape area directly1 45,800 covered by the project Landscape area indirectly2 5,050,000 covered by the project)

1 Direct coverage refers to the area that is targeted by the project’s site intervention. For example, a project may be mainstreaming biodiversity into floodplain management in a pilot area of 1,000 hectares that is part of a much larger floodplain of 10,000 hectares. 69 Explanation for indirect coverage numbers: The Qinling mountain range is estimated to cover 5.05 million ha. The Project is expected to indirectly cover the entire Qinling range. The Project Area covers 45,800 ha, which would be the third largest protected area on the Qinling range if the entire Project Area were gazetted (see list in item 10b).

10. b. List of protected areas within the landscape covered by the project by name, category, and extent (shaded reserves were not gazetted by year-end 2006).

Category Area No. Name China IUCN (ha) 1 Taibaishan National IV 56,325 2 Foping National IV 29,240 3 Zhouzhi National IV 56,393 4 Changqing National IV 29,906 5 Zhouzhi Laoxiancheng Provincial IV 12,611 6 Ningshaan Prefecture IV 26,732 7 Guanyinshan Provincial IV 13,500 8 Tianhuashan Provincial IV 25,485 9 Sangyuan Provincial IV 13,800 10 Wuliangshan Provincial IV 13,700 11 Motianling Provincial IV 11,700 12 Niuweihe Provincial IV 13,087 13 Yingzhuishi Provincial IV 10,732 14 Qingmuchuan Provincial IV 10,200 15 Huangboyuan Provincial IV 25,409 16 Pingheliang Provincial IV 17,275 17 Niangniangshan Provincial IV 17,000 18 Panlong Provincial IV 18,844 19 Banqiao Provincial IV 36,130 20 Baofengshan Provincial IV 29,500 21 Luoyang Dani Provincial IV 5,740 22 Niubeiliang National IV 16,418 23 Zhuhuan Provincial IV 37,550 24 Xushui Prefecture IV 5,740 25 Lingkou Dani Prefecture IV 5,715 26 Long Xian Prefecture IV 6,559

2 Using the example in footnote 5 above, the same project may, for example, “indirectly” cover or influence the remaining 9,000 hectares of the floodplain through promoting learning exchanges and training at the project site as part of an awareness raising and capacity building strategy for the rest of the floodplain. Please explain the basis for extrapolation of indirect coverage when completing this part of the table. 70 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority Two: Mainstreaming Biodiversity in Production Landscapes/Seascapes and Sectors TA 4721–PRC: Preparing the ShaanxiI–Qinling Mountains Integrated Ecosystem Management Project 27 Huashan Prefecture IV 12,007 557,298

III. Management Practices Applied

11. a. Management practices employed by project beneficiaries that integrate biodiversity considerations and the area of coverage of these management practices are listed in the table below. Note: this could range from farmers applying organic agricultural practices, forest management agencies managing forests per Forest Stewardship Council (FSC) guidelines or other forest certification schemes, artisanal fisher folk practicing sustainable fisheries management, or industries satisfying other similar agreed international standards, etc.

Targets and Timeframe Achievement at Area of coverage Achievement at Mid-term foreseen at start of Final Evaluation of Evaluation of project Project Management practices Project (hectares) (hectares) that integrate biodiversity (hectares) 1 Reforestation w/ 5,000 native species 2 Forest Farm forest 2,000 conservation 3 SALT Pilot Area to reduce agro-chemical 100 inputs 4 Sustainable tourism 45,800 5 Use of biogas sludge 100 as compost/fertilizer 6 Botanic Garden 269 7 Biodiversity and 45,800 landscape planning

11. b. Is the project promoting the conservation and sustainable use of wild species?

 Yes __ No

Sustainable use of the following wild species is promoted by the project.

71 HERBAL MEDICINE &ESSENTIAL OIL PLANTS OF THE PROJECT AREA Essential Oil Herbal Medicine Plants Herbal Medicine and Essential Oil Plants Producing Plants Found in Project Area Found in Project Area Allium macrostemon

Allium senescens

Allium tubiflorum Rendle

Allium victorialis

Asarum sieboldii

Asparagus cochinchinensis

Atractylodes chinensis

Belamcanda chinensis

Betula platyphylla

Betula utilis

Broussonetia papyrifera

Cannibis sativa

Caryopteris tangutica

Castanea mollissima

Commelina communis

Convallaria majalis

Coriandrum sativum

Cyperus rotundus

Daucus carota

Dioscorea opposita syn. Batatas

Foeniculum vulgars

Fritillaria taipaiensis

72 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority Two: Mainstreaming Biodiversity in Production Landscapes/Seascapes and Sectors TA 4721–PRC: Preparing the ShaanxiI–Qinling Mountains Integrated Ecosystem Management Project Essential Oil Herbal Medicine Plants Herbal Medicine and Essential Oil Plants Producing Plants Found in Project Area Found in Project Area Gastrodia elata – Blume

Ginkgo biloba

Gymnadenia conopsea

Hypericum perforatum

Iris ensata – Thunb

Iris tectorum

Juglans cathayensis

Juglans regia

Lilium brownie

Lindera glauca

Lindera obtusiloba

Liriope spicata

Macrocarpium officinale

Mentha haplocalyx

Morus australis

Morus alba – L

Nepeta cataria

Ophiopogon japonicus

Origanum vulgare

Physalis alkekengi

Polygonatum cirrhifolium

Polygonatum odoratum

73 Essential Oil Herbal Medicine Plants Herbal Medicine and Essential Oil Plants Producing Plants Found in Project Area Found in Project Area Polygonatum sibiricum

Populus simonii – Carrière

Potentilla chinensis var. chinensis introduced

Pteroceltis tatarinowii

Quercus aliena – Blume

Quercus dentata – Thunb

Quercus variabilis – Blume

Salix caprea

Saruma henryi

Saururus chinensis

Sedum majus endemic to area?

Ulmus macrocarpa

Ulmus parvifolia

Ulmus pumila

Valeriana officinalis

Verbina officianalis Potential Essential Oil Supplimentary List (further investigation required) Abies chensiensis

Abies fargessii

Picea wilsonii

Pinus armandii

Pinus taebulaeformis

74 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority One: Catalyzing Sustainability of Protected Area Systems at National Levels TA 4721–PRC: Preparing the ShaanxiI–Qinling Mountains Integrated Ecosystem Management Project

OIL PLANTS FROM QINLING MOUNTAINS

ENGLISH NAME FAMILY DISTRIBUTION HABITAT PURPOSE CURE NAME

Cunninghamia Yangtse River oil from timber, resist lanccolata Taxodiaceae Basin and low altitude plain area vapor distilment Chinese fir erode (Lamb.)Hook. south QLM resin is an industrial fragrant, adding into QL and prefer sunshine, around Liquidambar cigarette and soap. Hamamelidaceae southern Haihe village of flat region and solvent extraction formosana Hance refined maple resin can river sub-natural forest of hill add into toothpaste to stanche and acesodyne oil from per carp. Flavor Citrus reticulata Rutaceae southern QLM for foodstuff and cold squeeze mandarin Blanco cosmetics altitude 850 to 2500 meter. Growth under Convallaria costful flavor, for Convallariaceae Shaanxi forest or beside stream solvent extraction lily of the valley majalis Linn. cosmetics on shadow slop, prefer humidity sunshine slopes, prefer Flavor extract from vapor distilment, Shaanxi growth on edge of forest steam and roots. Costul Maxim. 炱⻍䱠 solvent extraction and stream flavor for cosmetics. oil could directly add Cymbopogon into cosmetics. Mint vapor distilment, distans (Nees) A. Shaanxi on hillside 䱍㦻䱠 ketone can be extracted solvent extraction Camus from oil. distrube under altitude Nepeta cataria 2500m. Growth under Labiatae Shaanxi oil is flavor vapor distilment catmint Linn. bush or beside residence altitude 500 to 3600m. Origanum vulgare oil prepare to be Shaanxi Beside road, side hill vapor distilment Linn. ➖ㇱ䱠 essence and under forest. Salvia sclarea originally from oil contain with vapor distilment Linn ➖ㇱ䱠 European. ambergris. Use for and solvent

75 OIL PLANTS FROM QINLING MOUNTAINS

ENGLISH NAME FAMILY DISTRIBUTION HABITAT PURPOSE CURE NAME

Cultivation in cosmetics, foodstuff and extraction Shaanxi, chinese wineᇭ Henan etc. oil from stem and roots execute stearine. Atractylodes Shaanxi and side hill, under forest Refined oil can confect vapor distilment chinensis Koidz. 噙䱠 northern-china and grassland to be other kind of essence like tuberose, lilac, sunflower Caryopteris Shaanxi, Hebei on altitude 2500m. Dry oil can be ingredient of vapor distilment tangutica Maxim. 泻樼嗘䱠 etc side hill essence material original from mediterranean. oil from seeds can be Cultivation in flavor and season vapor distilment Coriandrum Shaanxi, linalool in oil can be and solvent sativum Linn. ↭ㇱ䱠 northern/southe materials to synthesize extraction rnwest china, flavor etc Chimonanihus oil from flower use Shaanxi and praecox (Linn.) Mountain forest directly for cosmetics, solvent extraction 妰㬔䱠 other province Link like perfume and soap altitude between 500- Betula luminifera Shaanxi and 2500m, sunshine slop ingredient of essence vapor distilment H. Winkl. 㫵㦷䱠 other province shaw forest oil use directly to altitude 800 to 2300m. cosmetics and foodstuff Litsea pungens Shaanxi and Beside stream and and ingredient of vapor distilment Hemsl. 㲮䱠 other province under/beside the forest essence. Citral can also on sunshine slop be extracted from oil. under the altitude 1000, Lindera oil from leaf can be Shaanxi and side hill, valley, beside erythrocarpa ingredient of cosmetic vapor distilment 㲮䱠 other province stream and under forest Makimo essence and soap etc. Lindera glauca Shaanxi and under altitude 900, side oil from per carp use for vapor distilment (Sieb.et Zucc.) Bl. 㲮䱠 other province hill and edge of forest ingredient of soap

76 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority One: Catalyzing Sustainability of Protected Area Systems at National Levels TA 4721–PRC: Preparing the ShaanxiI–Qinling Mountains Integrated Ecosystem Management Project

OIL PLANTS FROM QINLING MOUNTAINS

ENGLISH NAME FAMILY DISTRIBUTION HABITAT PURPOSE CURE NAME

and road essence Lindera obtusiloba hair oil on altitude 500 to 1500m. Prefer sunshine southern of and worm and humidity. oil of turpentine; oil from Pinus massoniana Han river basin Tolerant to drought, leaf and fruit can be vapor distilment Lamb. 㨍䱠 of Shaanxi bare soil growth well in ingredient of cosmetics fertility humidity and profound soil dispersive distribute in Shaanxi and forest. Altitude between oil from stem and roots Juniperus other province. 200 to 500 in eastern use for ingredient of vapor distilment formosana Hayata 㩞䱠 Only in China. china and 1800 to 3400 cosmetic essence in western china Mentha oil Corn mint haplocalyx Verbina Vervain herb tincture officianalis Tincture

77

Tracking Tool for GEF Biodiversity Focal Area Strategic Priority One: Catalyzing Sustainability of Protected Area Systems at National Levels TA 4721–PRC: Preparing the ShaanxiI–Qinling Mountains Integrated Ecosystem Management Project 11. c. For the species identified above, or other target species of the project not included in the list above (E.g., domesticated species), please list the species, check the boxes as appropriate regarding the application of a certification system, and identify the certification system being used in the project, if any.

A A certification A certification Certification certification Name of certification system is system will not be Species system will system if being used being used used be used

None

IV. Market Transformation and Mainstreaming Biodiversity

12. a. The Project seeks to develop a range of commercial tourism enterprises at the Louguantai township to build on current visitation and to link increased tourism visitation to nature and wildlife. The close integration of tourism products, forestry, and Daoism religious leaders offers a unique opportunity to develop ecotourism that is associated with both iconic wildlife and unique religious identities. Linked to these enterprises is the potential development of new ecotourism products linked to the ex-situ conservation program including giant Panda, Golden Monkey and Crested Ibis. The proposed botanic garden, animal rescue center visitor programs and attractions linked to exhibitions and the recreation opportunity created by the hot-springs development will generate a new niche in the local tourism market building on current visitation to the Terracotta warriors and other historical and cultural attractions.

The sectors and sub sectors and measures of impact are listed in the table below.

Name of the market Unit of Market Market Market that the project measure of condition at condition at condition at seeks to affect market the start of midterm final (sector and sub- impact the project evaluation evaluation sector) of project of the project Traditional tourism visitors/year 300,000 Ecotourism visitors/year 10,000 Small and medium Enterprises 0 enterprises based on biodiversity – flora

12. b. Please also note which (if any) market changes were directly caused by the project.

The Project represents the first and potentially most important nature and ecotourism development in Shaanxi province and will develop this niche as an additional product with

79 the current tourism portfolio. This will include community based tourism, private sector based eco-lodge development and the mix of nature and religious tourism.

V. Improved Livelihoods

13. For those projects that have identified improving the livelihoods of a beneficiary population based on sustainable use /harvesting as a project objective, please list the targets identified in the logframe and record progress at the mid-term and final evaluation.

Local or Number of Achievement Achievement indigenous Improvement Improved livelihood targeted at Mid-term at final communities foreseen at measure beneficiaries evaluation of evaluation of project is project start (if known) Project Project working with Increased jobs in-situ 4,000 all 500 Increased jobs ex-situ 15,800 all 750

VI. Project Replication Strategy

14. a . Does the project specify budget, activities, and outputs for implementing the replication strategy? Yes__x_ No___

14. b. Is the replication strategy promoting incentive measures & instruments (e.g. trust funds, payments for environmental services, certification) within and beyond project boundaries? Yes_x__ No___

If yes, please list the incentive measures or instruments being promoted: 1. Eco-Fund will support a micro-credit scheme that will enable villagers to construct eco-friendly projects including: solar energy; biogas; homestay lodges, wind power; and conservation agriculture.

80 Tracking Tool for GEF Biodiversity Focal Area Strategic Priority One: Catalyzing Sustainability of Protected Area Systems at National Levels TA 4721–PRC: Preparing the ShaanxiI–Qinling Mountains Integrated Ecosystem Management Project

14. c. For all projects, please complete box below.

Replication target Achievement at Mid- Achievement at foreseen at project term Evaluation of Final Evaluation of Replication Quantification Measure start Project Project 1. Conservation forestry (ha) 2,000 2. SALT (ha) 100 3. Conservation farming and alternate crops (ha) 5,000 4. Alternative energy projects (number) 100 5. Community Homestays (number) 8 6. Monitoring biodiversity (percent of area) 80% QM 7. Monitoring & land use (percent of area) 80% QM

VII. Enabling Environment

For those projects that have identified addressing policy, legislation, regulations, and their implementation as project objectives, please complete the following series of questions: 15a, 15b, and 15c.

15. a. Please complete this table at work program inclusion for each sector that is a primary or a secondary focus of the project.

Sector Statement Agriculture Fisheries Forestry Tourism Biodiversity considerations are mentioned in sector policy Yes Yes Yes ? Biodiversity considerations are mentioned in sector policy through specific Yes Yes Yes ? legislation Regulations are in place to implement the legislation Yes Yes Yes ? The regulations are under implementation Yes Yes Yes ? The implementation of regulations is enforced Yes Yes Yes ? Enforcement of regulations is monitored ? ? ? ?

15. b. Please complete this table at the project mid-term for each sector that is a primary or a secondary focus of the project.

81 Please answer YES or NO to each statement under the sectors that are a focus of the project.

Sector Agriculture Fisheries Forestry Tourism Other Other (please (please Statement specify) specify) Biodiversity considerations are mentioned in sector policy Biodiversity considerations are mentioned in sector policy through specific legislation Regulations are in place to implement the legislation The regulations are under implementation The implementation of regulations is enforced Enforcement of regulations is monitored

15. c. Please complete this table at project closure for each sector that is a primary or a secondary focus of the project. Please answer YES or NO to each statement under the sectors that are a focus of the project.

Sector Other Other Agriculture Fisheries Forestry Tourism (please (please Statement specify) specify) Biodiversity considerations are mentioned in sector policy Biodiversity considerations are mentioned in sector policy through specific legislation Regulations are in place to implement the legislation The regulations are under implementation The implementation of regulations is enforced Enforcement of regulations is monitored

82 All projects please complete this question at the project mid-term evaluation and at the final evaluation, if relevant:

15. d. Within the scope and objectives of the project, has the private sector undertaken voluntary measures to incorporate biodiversity considerations in production? If yes, please provide brief explanation and specifically mention the sectors involved.

An example of this could be a mining company minimizing the impacts on biodiversity by using low-impact exploration techniques and by developing plans for restoration of biodiversity after exploration as part of the site management plan. ______

VIII. Mainstreaming biodiversity into the GEF Implementing Agencies’ Programs

16. At each time juncture of the project (work program inclusion, mid-term evaluation, and final evaluation), please check the box that depicts the status of mainstreaming biodiversity through the implementation of this project with on-going GEF Implementing Agencies’ development assistance, sector, lending, or other technical assistance programs.

Time Frame Work Program Mid-Term Evaluation Final Evaluation Status of Mainstreaming Inclusion The project is linked to IA development assistance, sector, lending programs, or other technical assistance  programs.  Natural Forest Protection Program; The project is indirectly linked to IAs development Sloping Lands assistance, sector, lending programs or other technical Conversion Program assistance programs. (Grain-for-Green); Forest sector corridors and nature reserves  The project has direct links to IAs development Forest Farm assistance, sector, lending programs or other technical management; assistance programs. threatened species recovery  The project is demonstrating strong and sustained provincial tourism complementarity with on-going planned programs. development; Shaanxi Ecological Function Conservation Area

IX. Other Impacts

17. Please briefly summarize other impacts that the project has had on mainstreaming biodiversity that have not been recorded above.

84 TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project 1 Final Report Appendix 18

PROBLEM TREE ANALYSIS

Problem Tree Analysis

IMPACT OP 12: Improved biodiversity conservation and reduction of land degradation in the Qinling Mountains

OP 12: Establishment of sustainable biodiversity conservation and land management in the Qinling Mountains OUTCOME

TA 4721-PRC A commercially sustainable initiative for biodiversity conservation and land management in Qinling Mountains

Reduced net Increased Improved Pollution of globally emissions and Improved conservation and Causes and negative impacts awareness of conservation important terrestial INTERMEDIATE increased storage of OUTCOME sustainable use of of land degradation on integrated and sustainable and aquatic greenhouse gases in biological diversity ecosystems mitigated ecosystem use of water ecosystems terrestial and aquatic management bodies prevented ecosystems

Lack of knowledge of ISSUE/ Structural Direct and fragility and real value PROBLEM Encroachment of all extraction, indirect Lack of Lack of civil Reduction in of environmental available land for degradation and reduction in enforcement society water quality goods and services production activities habitat wildlife regulations participation and quantity provided by the destruction population ecosystem

Polices and regulations in ROOT Underdeveloped Limited local agriculture, livestock Lack of policies and/or CAUSES/ economy and High poverty management and forestry sectors infrastructure to control UNDERLYING limited use of CAUSES capacity have encouraged pollution technology unsustainable practices

Limited Lack of Low Low Low Low business financial commercial production investment income opportunities services exchange ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project 1 Final Report Appendix 19

INSTITUTIONAL STRENGTHENING PROPOSAL

A. Background

1. The Shaanxi Qinling Biodiversity Conservation and Demonstration Project will develop three commercial tourism enterprises adjacent to Louguantai Township on the lower Northern slopes of the Qinling Mountains approximately one hours drive from Xian. These enterprises will generate revenues to support a wider conservation and rural livelihood program within the Project Area of approximately 45,000 ha most of which includes the existing Louguantai Forest Farm.

2. The three tourism enterprises will include (i) the establishment of a new botanical garden and surrounding park landscape including visitor attractions such as cable car, Daoist religious temples, exhibitions and conservation education centers, (ii) the enhancement of the Shaanxi Animal Rescue Center for the exposition, research and captive breeding of endangered species including four major iconic species being the Giant Panda, Crested Ibis, Golden Snub-Nosed Monkey and Takin, and (iii) the existing Louguantai Fudi Tourism Development Group that will extend its geothermal Hot Spring Development to include high end accommodation and spa facilities.

3. These enterprises will transfer a share of profit to the conservation program to be implemented by the Louguantai Forest Farm which holds a 49% shareholding in the Hot spring development. To achieve this will require a consolidation of the above enterprises into a unified management structure as the investment are long term and need to have clear unambiguous mandates, authority and jurisdictions over the Project Area. A further requirement for the consolidation is that it provides a legal basis for the sustainable financing of the conservation program as to collect and then transfer funds is not currently legal in PRC.

4. The SPG has agreed to complete the consolidation of the Qinling Botanic Garden, Shaanxi Animal Rescue Center, and Louguantai Forest Farm into one Government Unit the Shaanxi Qinling National Botanical Garden (SQNBG). The transfer of financing to conservation will therefore be an internal accounting transfer which is expected to be set at 8% of forecast post tax net cash flow and in the case of the Hotsprings enterprise 49% of the rate. The total forecast revenue transferred at this rate would be $400,000 in 2012 and increases thereafter.

5. Until profit streams are created the Project will finance the initial investment into the conservation demonstration area program through support for conservation planning, landscape planning, habitat restoration planning and implementation, endangered species recovery, and conservation monitoring systems. Livelihood improvement for the 4,593 local residents will b e supported through the development of social capital in a village level development planning exercise that will identify opportunities and interest in the establishment of collective level forestry associations, the creation of formal and secure use rights to collective forest land, forest planting and development programs, small enterprise development, homestay tourism enterprises, and social infrastructure programs.

6. The proposed project was developed by each individual enterprise which prepared an investment program for their own enterprise priorities and interests and as such the wider development issues relating to poverty reduction and conservation of biodiversity in the interior mountainous region of the Project Area were not adequately addressed. Another shortfall was the lack of commercial orientation to the structure of the enterprises with most being expanded and technically focused despite requiring commercial success before being a viable investment. Technical capacity strengthening was included in the enterprise investment proposal however there was no institutional strengthening for the commercial management and the consolidated QNBG which was finally agreed at the completion of the PPTA.

7. The following paper presents a summary of the current institutional setting and the need for an institutional strengthening investment into QNBG for the development of commercial management capability and organizational systems. Without this investment the PPTA concludes that the QNBG will most likely fail both commercially and financially. ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 2 B. Overall Institutional Framework

8. The overall institutional framework governing project implementation is currently characterized by a large number of national and provincial government agencies with at times overlapping responsibilities. In addition to oversight from national agencies based in Beijing, the following province and local government agencies have the potential to influence development see table 1.

Table 1: Institutional Responsibilities Loan Loan Use & Use Natural Tourism Interests Interests Planning Scientific Business Research Research Discharge Discharge Approvals Approvals Resources Resources Monitoring Replication Replication Repayments Repayments Resettlement Resettlement Development Development Conservation Conservation Water use and and use Water Agriculture Mgt Land ownership ownership Land Protected Areas Protected Biodiversity and Biodiversity Qinling Botanic Gardens, and            subsidiary Co. Shaanxi Animal            Rescue Center Shaanxi Provincial  Government Shaanxi Provincial Development    Reform Comsn Shaanxi Forest Survey and Design   Institute Shaanxi Provincial Environmental     Bureau Shaanxi Environmental   Monitoring Center State Environmental   Protection Agency Shaanxi Forest     Department State Forest  Administration Shaanxi Water   Resources Bureau Land Resources   Authority Shaanxi Wildlife and    Nature Reserve Shaanxi Provincial Animal Research Institute Civil Affairs Office  Ministry of  Communications Ministry of  Construction Ministry of Land and   Resources Ministry of Power  and Industries ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 3

Ministry of Water   Conservancy Chinese Academy of Science (Shaanxi  Branch) Eco Systems Function  Conservation Area Louguan Fudi Tourism            Development Ltd Louguantai Forest      Park National Development  Reform Commission NW Institute Forest Inventory, Planning Design State Administration  of Cultural Heritage Xi’an Municipal  Government County of Zhouzhi,      and Land Bureau Townships of Jixiam,      Juifeng, Louguan Shaanxi Tourism    Bureau Shaanxi Tourism   Group Corporation Xi’an Tourism  Administration Dao Community  China Bank Regulatory  Commission Total Number 4 9 6 6 6 5 5 2 4 2 3 8 5

9. What the table does not show, because there is insufficient information available, is the degree of interaction and overlap with other national or provincial initiatives in terms of research and sharing of information. This applies within and beyond the Province. For instance, the work of the Shaanxi Animal Rescue Center should align with, and supplement other research programs on panda breeding and habitat, while breeding and release of Crested Ibis can support similar national and international programs1. Research initiatives of Qinling Botanical Garden should complement the National Plant Conservation Strategy announced in June 20072.

10. The entities within the Project Area include (i) the Qinling Botanic Garden, (ii) SARC, and (iii) Louguantai Forest Farm. The Qinling Botanic Garden has two subsidiary entities although none trade in a commercial sense. Currently the Qinling Botanic Garden consists of 20 staff under the leadership of a researcher. The Qinling Botanic Garden staffing is proposed to increase to over 250 in three years. SARC is a small trading entity focusing on wildlife rescue, breeding and research that is supported by both PRC and commercial revenues. The current staffing (excluding day labor) is

1 For instance, the Japanese have a long established Crested Ibis Program. 2 One such example is the recently publicized development of plant conservation strategies announced between SFA, the Chinese Academy of Science, and the State Environmental Protection Agency. ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 4 between 30 and 40 all of whom are part of the Louguantai Forest Farm cadre of nearly 300. On the completion of the merger of enterprises the QNBG could have a core staff of close to 600 paid employees. Few of these employees and managers have direct commercial experience and often technical skills may not be well developed for the envisaged roles. Further the QNBG will have direct financial relationships with approximately 4,000 resettled individuals and a further 4359 CDA residents through livelihoods and forestry programs.

11. Within the Project, each enterprise has included in their feasibility study and investment that development of their staff technical capacity resulting in a comprehensive training investment for both staff and their stake-holding beneficiaries. The building of QNBG is however not included in these proposals reflecting (i) the late agreement for the QNBG model and (ii) the lack of commercial and managerial focus in the original feasibility studies for the Qinling Botanic Garden. The decision to implement the QNBG as the main Project Implementation Agency while providing an organizational structure within which the issues relating to mandate, authority and jurisdiction are technically resolved. What is not addressed is the underlying capacity and systems to enable the QNBG to fulfill its role in the Project Area in an effective and cost efficient manner. Given its status and role as the unitary organization for the management of the Project Area including the commercial tourism developments and the wider conservation and development objectives QNBG requires effective and strategic management input with a strong commercial focus. In summary while the QNBG resolves the institutional overlaps it has not addressed the underlying functional and strategy issues that will underpin a successful commercially orientated institution. Without these in place the Project is considered to be a risky business venture. The issues raised by this are summarized in the following section.

A. Problem Analysis

12. The QNBG represents a significant change in the institutional arrangement for the Project Area. While this consolidation of institutional jurisdictions, authorities and mandates has been accepted by the SPG the allocation of the three enterprises into a consolidated institution does little to address the significant shortfalls in leadership, vision, skills and capacity that have been identified as under-mining the likely success of the Project

13. The QNBG needs to be viewed as a long run entity and not simply as a project implementation organization. The institution needs to be strengthened to fulfill its multiple roles including that of (i) a commercial entity, (ii) a conservation and development instrument, and (iii) a project implementation unit. Most importantly is the need to establish an effective commercial entity as without commercial success the conservation and development and project implementation will not be effective either.

14. To achieve an effective commercial entity will need the component parts of the QNBG to work in a coordinated manner and for the QNBG to act in a unified and strategic manner. As such the QNBG needs to develop its identity and culture as a collective organization as opposed to simply three disparate but linked enterprises. The institutional strengthening necessary was not included in the Project design due to the manner in which the Project feasibility was undertaken. The proponents of the feasibility studies adopted a structural approach where the existing institutional entity’s proposed investments for their own best interest and not necessarily into the interests of the wider Project Area and the institutional needs for the Project Area. The failure to adopt a holistic approach to the management of the Project Area has created a significant weakness in the design and the Project achievement of a holistic management and conservation objective for the Project Area.

15. Each enterprise division needs to have its own responsibility and functions that will be delivered not only for project implementation but for a successfully operated division that is well-lead, targeted, and efficient at achieving its overall organizational goals and outputs in a planned and cost– effective manner. Once this is achieved, there is a need to ensure that there is full integration between the three operating divisions to ensure least-cost and a highly efficient operation is in place. Without this integration the potential project cost escalations and delays could be extreme and threaten the viability of the Project investment, the enterprises, and the QNBG itself.

16. The proposed Project design also demands a change to the functions assigned to existing staff in each of the enterprises. This is especially so for the Louguantai Forest Farm that will be ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 5 responsible for implementing conservation spatial planning, conservation and social forestry, biodiversity conservation through habitat restoration, and forest-based livelihood promotion. These changes are significant changes that need to be undertaken and completed in a structured and timely manner. The nature of these changes will be demanding on management and staff and there is clear evidence that such changes required planned and effective change management processes to be successful. To date few, if any, senior management staff of QNBG has change management experience or training. Most have not experienced any significant public sector reform programs from which to design, lead and implement an effective change management process within the three enterprises and the QNBG.

17. Qinling Botanical Garden as a totally new enterprise with no management or commercial expertise or track record will employ over 250 staff and operate assets valued in excess USD 35 million. While acting as a determined Project Champion the leadership of the Qinling Botanic Garden does not have the prerequisite skills to operate large commercial enterprises. This has been highlighted throughout the entire PPTA including the Qinling Botanic Garden attempt to complete the feasibility report without technical expertise, and with no recognition of the commercial needs relating to marketing, business development, commercial outlet management such as retail outlets, ticketing systems, cash management systems etc.

18. SARC management has a more sophisticated existing business than the other enterprises in QNBG. The current management does however recognize its lack of experience in commercial management through the inclusion of contracting costs for commercial tourism management. While this is provides important additional capacity it does not address the need for strategic operational management that guides the strategic planning and development of SARC into an international standard animal exposition and rare animal protection and breeding center. SARC management needs to introduce major improvements to the standards of animal welfare while also integration the SARC into the wider conservation and endangered species management programs in both the Qinling Mountains and the PRC national programs. To achieve this will require a far wider strategic approach to the future management and growth of the SARC.

19. The success of QNBG will be defined in terms of the achievement of commercial objectives yet the proposed senior management was appointed based on highest graded official from existing cadres in the three enterprises. Seniority is not considered to be the best indicator of managerial capability and may result in additional and significant risks to establishing a successful commercial operation. The proposed management do not have commercial or tourism sector experience with all individuals coming from technical and research driven public sector backgrounds.

20. Existing staff within the current enterprises have little knowledge or understanding of the Project beyond their own enterprise interest other than the awareness raised through consultative processes. They have less understanding of the requirements of a commercial entity and have no experience or training in the range of institutional procedures that will be necessary to operate SNBG successfully. The impact of the consolidation and the expected requirements of the QNBG are likely to be daunting at best - threatening at worst. As a consequence the proposed organization changes will be slowed and even side tracked as staff resent or oppose necessary change. Effective change management leadership will be essential however as mentioned above this is unlikely to evolve form the existing management without significant support and strengthening. Without committed and skilled staff QNBG will fail.

B. IS Approach

21. Experience and the lessons learned from institutional strengthening programs (ISPs) identifies main principles that need to be applied if the goal, purpose and other development outcomes of the Project are to be achieved. Lessons learned and suggested priorities for ISP are:

 Start with the end in mind: Sustainability must commence with the design of the project, featuring an explicit exit strategy. By the end of the project staff need to have the confidence to deliver service without support and the project must provide this opportunity. Assessment of staff competencies and the subsequent capacity building program will be undertaken in association with senior staff. ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 6

 Strategy before function, before organizational structures, before “technical” inputs: ISPs must follow the lessons from successful public sector and organizational reform projects. Without a clear sense of direction, clear priorities, and aligned with the tourism and conservation sector and QNBG staff, the project will not yield the planned outcomes. Technical aspects have received most attention because traditionally this has been the donor role. A technical focus will not provide sustainability for QNBG. Corporate and sector planning and organizational development must precede the technical inputs for sustainable benefits.

 Match absorptive capacity of QNBG with the proposed inputs. The QNBG is a new organization and there is a real risk that the Project activities could overwhelm staff. Either the QNBG work program or the project will suffer – commonly both will be compromised. Overcoming the limitation of absorptive capacity will be achieved by aligning the SQBNG and project work plans in a strategic planning framework.

 Capacity building inputs must not create a dependency: The ISP advisers should facilitate the development of QNBG staff, but they must not undertake tasks on behalf of the staff. Sustainability of the QNBG requires that the focus is upon developing the skills and knowledge of the QNBG staff to more effectively fill their respective roles and achieve the goals of the Corporate Plan.

 Effective partnerships must be created with partners: private sector, community-based organizations, small holders, and government agencies: Development of the QNBG role as a commercial manager requires the development of strong and effective partnerships with the other members of the tourism and conservation sector. It is important that the QNBG is strategic in its approach. ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 7 C. Proposed TA Approach and Methodology

1. Organization development

22. The TA purpose is institutional strengthening of the QNBG so that it can improve the implementation performance for the Project. The methodology employed to achieve organization-wide development should be firmly based on the principles outlined in Section D above.

23. The focus upon strategy and function before structure is essential to underpin organization development. The strategy formulation will respond to defined priorities and needs, as opposed to the existing institutional and organizational structures and procedures. The strategy needs to be reflected in a Corporate Plan and reflect a shift from past functions to the management of commercial tourism linked to conservation. The participatory development of the Corporate plan will ensure strong sector support for the Corporate Plan and to draft a functional workplan that will guide the rest of the project implementation.

24. The QNBG staff must also be committed to the plan and contribute to workshops where the plan is reviewed; their involvement is essential and to ensure the role of the IS TA is limited to Facilitation, Negotiation and Collaboration with QNBG staff. The responsibility for critical functions will be confirmed followed by an organizational phase of defining the necessary strategies to successfully implement these functions. Once strategies are agreed by senior management the TA will develop programs to strengthen organizational structure and systems both internally and externally including administrative procedures; work planning and budgeting, job descriptions and performance assessments and monitoring. The approach effectively builds internal systems, skills and corporate culture while developing external functions and programs. The methods that will be used are straightforward. They are built upon participatory methods and the principles of change management which are explained in the Change Management section below.

25. The methods associated with undertaking these tasks and implementing their outcomes must, however, recognize that the QNBG is a new organization with a limited absorptive capacity. The Corporate Plan is important in that it provides the strategic direction for the organization, but it must be broken down to an operational level through annual work plans. The annual work plan preparation process affords the opportunity for the QNBG staff to have a significant role in planning the direction of the organization. It also provides the opportunity for the QNBG to link with the sector by involving stakeholders in the assessment, and preparation, of plans. The IS TA will conduct a series of capacity building activities that not only assist the staff to prepare plans but are also based upon performance measures. Monitoring and reporting systems, that measure QNBG performance against output indicators, will be developed over the life of the TA.

26. The TA role is to ensure that the necessary steps, tasks and processes are identified, sequenced, resourced for implementation and then evaluated. Where skill gaps exist, awareness and training sessions will be provided at the appropriate step in the process. For the remainder of the program the TA role is mentoring the responsible managers and staff to implement the change programs and auditing of their performance. As such the TA needs to operate over a minimum period of two financial years.

27. This requires facilitating development of skills and capacity in work planning and budgeting within the corporate internal systems, as well as work planning, for the provisions of services and programs to clients. Successful capacity building programs are driven by learning-by-doing and reinforcement of skills while institutionalizing the agreed procedures and approaches that support staff to undertake their roles efficiently.

28. The TA Role in Change management will be central to the success of the associated Project. Change in the QNBG will result from the necessary functions to be undertaken as well as those assigned to contributing organizations. How best the organizational structure “fits” with these defined roles and functions i.e., can the current structure effectively deliver the services required under the new QNBG, will be an important first step. ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 8 29. The move to a commercial delivery culture is a significant change and will require sound management. An approach based upon the drivers of change method3 will be used by the IS TA to facilitate change management. It is emphasized that the QNBG Board and the CEO must be leaders in the change process. The IS TA cannot be the leader and will only facilitate and guide the QNBG management in these matters.

30. There are a number of aspects that need to be considered in successful change management and these include:

31. Address the “human side” systematically. Any significant transformation creates “people issues.” New leaders will be asked to step up, jobs will be changed, new skills and capabilities must be developed, and employees can be uncertain and resistant. A formal approach for managing change — beginning with the leadership team and then engaging key stakeholders (farmers, tourists, wholesalers, transporters, retailers, research organizations, national and provincial government and local administration.) need to developed early, and adapted often as change moves through the organization. The change-management approach should be fully integrated into program design and decision making, both informing and enabling strategic direction.

32. Start at the top. Because change is inherently unsettling for people at all levels of an organization, when it is on the horizon, all eyes will turn to the leadership team for strength, support, and direction. The leaders themselves must embrace the new approaches first, both to challenge and to motivate the rest of the institution. They must model the desired behaviors and champion the change process

33. Involve every layer. As transformation programs progress from defining strategy and setting targets to design and implementation, they affect different levels of the organization. Change efforts must include plans for identifying leaders throughout the QNBG and relevant stakeholders and pushing responsibility for implementation down, so that change “cascades” through the organization.

34. Make the formal case. Individuals are inherently rational and will question to what extent change is needed, especially stakeholders who already hold a level of scepticism over QNBG ’s role. They will question whether the Agency is headed in the right direction, and whether they want to commit personally to the goals stated in the Corporate Plan. The creation of a written vision statement are invaluable opportunities to create or compel leadership-team alignment.

35. Create ownership. Ownership requires more than mere buy-in or passive agreement that the Corporate Plan goals are acceptable. It demands ownership by leaders of each stakeholder group willing to accept responsibility for making change happen in all of the areas they influence or control. Ownership is often best created by involving people in identifying problems and crafting solutions. This demands extensive participatory processes throughout the TA.

36. Communicate the message. The role of the communication will be to reinforce the core messages through regular, timely advice that is both inspirational and practical. Communications are targeted to provide QNBG staff and stakeholders the right information at the right time and to solicit their input and feedback.

37. Address culture explicitly. The diagnosis of current QNBG culture will identify the core values, beliefs, behaviors, and perceptions that must be taken into account for successful change to occur. They serve as the common baseline for designing essential change elements, such as the new corporate vision, and building the infrastructure and programs needed to drive change. Once the QNBG organizational culture is understood, it should be addressed thoroughly. Leaders should be explicit about the culture and underlying behaviors that will best support the new way of doing business (such as the shift to a customer-satisfaction model), and find opportunities to model and reward those behaviors.

3 The drivers being (i) agreement over the need for change, (ii) an agreed future or vision, (iii) the resources (skills and finances), and (iv) the first actionable steps. ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 9 38. Prepare for the unexpected and adapt. Effectively managing change requires continual reassessment of its impact and the organization’s willingness and ability to adopt the next wave of transformation. Fed by real data from the monitoring and evaluation framework activities are supported by solid decision-making processes, IS TA technical advisers and QNBG management can then maintain momentum and drive results.

39. The TA Needs to Facilitate, Negotiate, and Consult through ensuring participation in the IS process by stakeholders being involved in decisions that affect their lives. Three types of participation are required:

 Process participation: the direct involvement of people in specific development interventions, e.g. through the choice of issues for analysis, the collection of data (quantitative and qualitative), to a degree in the analysis, and in the design and choice of the intervention.  Democratic participation: the influence citizens exercise over decisions made by the state bodies and organizations which represent them and/or control the territory in which they reside. In the Project QNBG needs to be seen to be responsive to these participants in terms of resettled land use right holders, visitors and CDA local residents  Systemic participation: the creation of institutions and conditions that foster and promote participation broadly in society.

40. Incentives: Primary stakeholders will participate if it is their interest to do so, and if there is low political or economic risk. Projects must be designed to provide appropriate incentives to motivate active participation

41. Participatory Research: A range of participatory methodologies can be used to enhance primary stakeholder participation in analyzing farmer issues and needs, program planning, and evaluation of program impact. Participatory Rural Appraisal (PRA) is often used for assessing needs, context, and impact at the village level. Other methods include a range of participatory and more conventional research approaches such as socio-economic surveys, mapping, conflict analysis, stakeholder analysis, and ecological studies.

42. Consensus-building strategies: Central to reaching consensus is forming business linkages with industry partners and the enterprises it controls. The QNBG must be seen as partners with the local industry be it tourism, agricultural enterprise or conservation and not simply competitors.

43. Training and capacity building: Capacity-building activities themselves can be a mechanism to catalyze participation. Activities can be implemented to increase participants’ understanding and practical skills in conflict resolution, SLM education, participatory research methods, and project monitoring. The conservation programs in the CDA are all designed on planning systems that build involvement and consensus and QNBG will need to the vision and capacity to lead these processes.

44. Information sharing: Printed materials such as research reports, workshop proceedings, and training materials, as well as accessible maps and posters, designed to reach different audiences, from policymakers to local villagers, are crucial for dissemination of results, education and extension efforts, as well as for stimulating discussion and negotiation over conservation and corporate management decisions.

D. Strategic IS tasks to be completed

45. The following tasks need to be undertaken in an ISP approach. The QNBG will need to develop the capacity building response to the initial findings, and emerging understanding derived from:

 Strategy for QNBG confirmed: As part of the inception phase the QNBG strategy as outlined in the Corporate Plan needs to be confirmed with the stakeholders. If modifications to the overall strategic direction of the QNBG are required these should be highlighted and an action plan prepared. This will involve meetings with the SFD ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 10 and the QNBG management team followed by a workshop through which the strategy can either be confirmed or defined in the form of a mission or vision statement that specifies the scope of business for QNBG.  Role and functions of the QNBG: Defining the role of functions of the QNBG will occur in the preparation of the Corporate Plan. This needs to be reviewed, especially if the strategic direction is modified. The project purpose highlights the need to clarify the role of QNBG in the tourism and conservation sector. The TA will need to hold enterprise / QNBG division level workshops to confirm the role and functions of each unit and how these contribute to the overall QNBG mission statement. Once the enterprise workshops are completed each enterprise management team will prepare a enterprise function statement that will be presented to the senior management team. The Senior management team will consolidate the function statements into the beginning of a corporate plan and will work closely with the enterprise mangers to develop a complete corporate plan for the next five years.  Review organizational structure: Alignment of the organizational structure to its role and function is essential. The internal structure of the organization must be designed to meet the new role and functions. Further reorganization may be required as the project evolves and the focus moves from investment to operational capacity and growth. The QNBG mission, strategy and corporate plan will then be used to review the QNBG structure and how the structure fits to the agreed function and strategy. A structural reform program will be outlined where necessary for example, it may be more efficient to move marketing and commercial management arrangements into the senior management team of QNBG and have these resources provide a collective response.  Assess internal operational processes: Assessments of the main functional areas including: financial management; HR management; planning, reporting and monitoring; technical services; etc. These need to be assessed and a program to strengthen them prepared. Once the structural program is complete the necessary organizational systems required to operate the division and the QNBG in totality will be assessed and strengthened. A critical aspect of this is the need to review staffing and training needs. Once programs are agreed each Division will prepare an annual work plan as part of the IS program.  Capacity of the staff: The QNBG staff must have the skills to implement the Corporate Plan. Assessing their current skill levels and matching that to skills needed for the QNBG delivery capacity will lead to the preparation of a HR development plan. The Training need assessment will be used to build a HR policy and HRD plan for QNBG and its Divisions. This will be facilitated through assessment of work requirements within the enterprise divisions and the senior management team, the training needs once identified will be reconciled against proposed Project investment into training and the training programs adjusted accordingly. o The assumed number of staff for training are: Qinling Botanic Garden 20 management and 230 field operations staff yet to be appointed SARC 18 management and approximately 130 field staff Louguantai Forest Farm 20 management and 130 field staff (assuming all SARC staff are part of Louguantai Forest Farm)  Performance measure systems: The IS will develop a M&E system for the QNBG, but the QNBG needs to develop performance measures that assess its performance. The Corporate Plan should contain indicators and these need to be reviewed and further developed. Through the development of the QNBG mission, strategy, corporate plan, annual work plans the process will identify performance indicators for inputs, outputs, and impacts. These will be reviewed by senior management and a reporting system developed for each level of the organization that clearly indicates the status and impacts of each divisional work plan.  Prepare and implement a communications strategy: Communications, both internally and external, is essential. Internally, communication is essential to get buy-in and co-operation for the impending change management. It is also important that the QNBG clients and stakeholders gain a clear understanding of the project and what it will deliver so they know how they will benefit and therefore willingly participate. ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 11

 Effective delivery – supporting initial winners: The QNBG implementation role will be reviewed and the capacity of its technical services assessed. The TA, and QNBG management, during the inception phase should identify areas where service delivery can be enhanced early in the project. These early “winners” provide a visible example to stakeholders of what the future holds. The institution role of the Project is primarily this i.e., to provide SNBG the first steps and early winners on which it can develop a successful future.

E. Proposed TA inputs

46. An ADTA provided by the ADB over the first two years of the Project is proposed. The TA would provide (i) technical support through the contracting of international and national experts, (ii) support the capacity development of QNBG senior management through training, study tours and exchanges visits, (iii) communication and awareness programs within QNBG through staff seminar and workshop programs. In addition the TA would support the provision of office equipment and the completion of policy studies for the successful institutionalization of SNBG. The total Budget is estimated to be US $0.562 million of ADB TA grant funds.

Table 2: Proposed TA Budget

Item Units Total Cost (USD) 1: Technical Assistance $270 1.1: International $120 - Organizational and strategic 6 persons months $120 planning expert 1.2: National 30 person month $150 - Training and HRD 6 person months $30 - Organizational systems 12 persons months $60 - Financial Management 6 person months $30 - IT Specialist 6 person months $30

2: Management Development $192 2.1 Study tours $85 - Hong Kong (wetlands center) 4 $1600 per person $5 people 3 days per year - London Zoological Society 6 $3,300 per person $40 people 7 days/yr - Kew Gardens 6 people 7 days/yr $3,300 per person $40 2.2 Management Short Courses $32 - 4 people 10 days per each per $2,500 per person $20 year (Hong Kong) (8 in total) - 4 people Xian Management $3,000 per person $12 Course MBA 2.3 Staff Seminar and Workshops $75 - Management (3 per year) $1,500 per each 9.0 - Enterprise staff (Qinling Botanic $1,000 per each 8.0 Garden – 4 per year) - Enterprise Staff – Louguantai $2,000 per each 16.0 Forest Farm (4 per year) - Enterprise Staff – SARC 2 per $ 1,000 per each 4.0 year - SQBNG Stakeholders $1,500 each 6.0 2.3 In House training courses 240 days @$50 per day 12.0 - contracting of trainers (2 trainers per event, 20 events per year at 3days per each per year) ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 12

- training materials 20 3.0 Essential Equipment $30 3.1 Training Computer sets $2000 per set incl. printer 10 (5 sets) Photocopier $3,000 for one – total two 6 Production of training materials and $14,000 14 digital projector 4.0 Institutional studies and 5 @$4000 – Management Studies $20 advice contracts and Jiahong University or equivalent 5.0 Contingency 10% $50 Total $562

F. Terms of Reference

1. International Organizational Specialist

1. The specialist shall have qualifications in business strategy and organizational development with at least 10 years experience in undertaking organizational reviews and restructuring. The specialist shall be responsible for the following:

 Work with the enterprises to ensure that there are clear strategies for achieving the planned outcomes  Ensure that financial reporting systems reflect these non financial targets  Assist each of the individual enterprises to identify all resource requirements (staff, finance, buildings and other assets) necessary to operate efficiently, bearing in mind projected work volumes and estimated time required to complete tasks  Ensure that all major functions have been evaluated, bearing in mind that many functions will be new to the organization  Work with the managers to determine the optimum organization structure, bearing in mind levels of delegated authority and accountability, and the associated workloads  Assist the managers to determine skill requirements for all positions, and appropriate employee selection criteria  Provide high level workshops for Shaanxi Forest Bureau and the proposed Shaanxi Biodiversity Promotions in principles of governance and the different roles of Boards of Directors and company mangers, ensuring that the senior managers are equipped with the necessary skill and knowledge to fulfill their functions

2. Specifically the consultant shall undertake the following tasks:

 Working with each of the existing entities and the consultant team assist in the definition of operational guidelines for the QNBG for (i) governance systems, (ii) executive decision making, (iii) business group operational procedures.  The business operational guidelines will specify levels of delegated authority, decision making procedures, work planning and accountability, financial budgeting, staffing levels and administrative procedures  Assist the Shaanxi Forest Department to formally establish and transfer staff and resources to the QNBG  Work with both the Board of Directors and the executive to develop a corporate plan and mission statements and then work with the business unit management to develop medium term work plans and detailed annual work plans.  Undertake staff awareness and training for the newly established entity including the development of commercial management skills  Develop an overall annual planning model, including criteria relating to the level of detail expected within each part of the submission, that can be used as the basis for submission from operating Divisions to QNBG Board of Directors, and approval of all annual plans ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 13

 Present a specially tailored workshop for PDRC and the Shaanxi Forest Department into the techniques they can use to appraise the quality of strategic plans submitted covering the commercial, scientific, biodiversity conservation and livelihoods groups funded under the project,  Present detailed strategic planning workshops that can be used as the basis for developing specific strategies for each of the institutions included in the TA  Include guidance on how to consider associated resource requirements at the time that such strategies are developed  Ensure that agreed strategies are reflected in any bidding documents for operation of commercial functions for the botanic gardens, the animal rescue centre and the hot springs facilities  In association with the Marketing Specialist, prepare criteria to evaluate marketing proposals submitted to the institutions’ with commercial interests  Work with Shaanxi Forest Department to ensure that all other institutions having an interest in ecosystems management and biodiversity conservation and livelihoods improvement are consulted and have the opportunity to contribute to proposed strategic goals and strategies, and that there is full alignment between all stakeholders  Develop an approach for later mainstreaming and replication of project successes  Prepare a medium term strategic plan for (i) the establishment phase of two years and (ii) the ongoing operational phase of the preferred option. The strategic plans shall include (i) Corporate level plans, (ii) business group plans  Provide capacity building to all staff in the QNBG to implement planning procedures through mentoring and facilitating each business group and also for senior management  Prepare planning procedural documentation for including into the corporate procedural manual including reporting against planned programs and the procedures under which plans are updated or revised.

2. National Training Specialist

3. The Consultant shall have experience in undertaking both training needs assessments and the preparation and coordination of training plans for donor funded projects. The consultant shall undertake the following:

 Review the final QNBG institution and its staffing, staff qualifications and experience at all levels  Working with the QNBG HRD manager prepare in a participatory manner a training needs assessment and report this to the PMO and management of QNBG  Identify potential training providers and assess their capacity, availability of courses and timing  Identify the need for a training of trainers programs, if necessary develop using the Technical assistance resource in the Project  Prepare a training and HRD plan for QNBG and provide awareness and training with management and operational directors. The training programs may be developed by Technical assistance including the preparation of training materials  Ensure the training plan includes a program for institutionalizing the training into existing training providers and university programs.

3. National Organizational Specialist

4. The candidate shall have worked in the public and private sector on organizational reform and restructuring and shall have a proven knowledge of State Owned Enterprise reforms and establishment in China

5. The Consultant be responsible for:

 Review existing governance and performance management systems and procedures in use within the institutions involved in detailed project implementation and governance, and obtain agreement on where improvements are required ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 14

 Work with the other team specialists to develop detailed management reporting systems that provide successive levels of detail for the purposes of governance and management, including consideration of both commercial and non commercial objectives  Assist with both high level workshops and more detailed workshops at lower levels on the use of governance and performance management tools  Provide subsequent mentoring in the development and use of annual planning and performance monitoring tools  Act as advisor to PDRC, Shaanxi Forest Department and the Board of Directors of QNBG during initial governance reviews and the first annual planning cycle  Provide check lists of matters to be considered during future planning and performance reviews

4. National Financial Specialist

6. The candidate shall have a minimum of ten year experience of financial analysis and financial systems development for commercial enterprises and or State Owned Enterprises.

7. The specialist will be responsible for::

 Review existing financial systems where these exist at present, and their adequacy or otherwise for the future  Develop specifications for financial reporting for each institution, reflecting the major objectives of that institution and requirements for more detailed internal analysis  Specify how individual financial reports from each enterprise will be consolidated within the financial reporting for QNBG  In those cases where the institutions currently have existing financial and accounting staff, assess the changes that this may involve in existing systems  Prepare estimates of staffing requirements and computer systems necessary to compile the proposed financial reports  Prepare training material relating to the new financial systems, for use when the new companies become fully operational  Recommend appropriate audit trails  Recommend safeguards against internal cross subsidization which distorts the true cost of individual “product lines”  Identify relevant audit trails  Prepare financial management guidelines for the SBP and for each of the cost center and business groups  Develop financial budgeting and fiduciary policy for inclusion within the operating manuals  Develop and train all staff in financial management systems and techniques  Facilitate the QNBG to develop a full set of financial projections for the 2009 year including physical targets – provide training as required  Assist the CEO to develop a consolidated budget and hold training and awareness programs for the senior management team members

5. National Management Information and IT Expert

47. The expert shall have experience in the development of organizational management information systems and the provision of an IT platform to support this. The consultant shall undertake the following tasks:

 Review current IT platforms and information systems within each individual enterprise and identify potential commonalities  Prepare an IT strategy based on the needs and planning systems identified by other consultants to be included within the three recommended options  Implement the IT change strategy including the development of IT policies, IT operational procedures and guidelines ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 15

 Work with the management team to develop a MIS system for the initial period of establishment and train staff in the implementation and use of the MIS  Pilot test the MIS system for each business group and address any gaps and weaknesses  Train staff in the IT and MIS systems  Ensure the financial and physical records of the QNBG are able to be captured and stored appropriately. ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 16 TRAINING

48. The proposed training program is incorporated within each component of the project design. The logic for this reflects both the manner in which the proposals were developed and also from the technical focus of most of this training. The training for the CDA area was proposed mostly by the PPTA and is included in Component two.

49. Much of the conservation planning programs and monitoring programs are all part of both training and IS programs. These programs include village development planning, conservation and landscape planning, habitat and forestry management plans and tourism planning. All of these are integral parts of action based research and implementation designed to develop local capacity to build adapt and implement the programs.

50. The role of the consultants within the program is an integral part of the training programs and the proposed IS program. The consultants shall be considered as a training resource that will be used to develop training materials, train trainers and to assist in the delivery of training programs. The purpose of the technical assistance is to add new approaches, technology and international experience to the action based programs to ensure that new opportunities are not forgone.

51. Given the lack of agreement over the staffing details and organizational arrangements for the Project and the fact that nearly 40% of the staff of the enterprises are still to be employed a training needs assessment will be required. This is included as one of the building blocks for the IS program.

52. The following table summarizes the proposed training programs for the enterprises and the beneficiaries. ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project 17 Final Report Appendix 19

Training Summary Table 3: Over view of Project Capacity Building Program

Organization / Division Target Skill Gaps Indicative Training Inputs/outputs Shaanxi Qinling National Botanic Training Needs Assessment [To be included in Proposed Garden Unit consultant 2 person months ADTA] Needs Assessment agreed with PMO/SQNBG Training plan prepared for Project including QNBG and project partners and beneficiaries

A: Management Total = 14 Strategy Strategic planning ( 2 courses - 42 Manager courses  Director Investment and Business 14 personnel) 20 persons international  Deputy Director Management Team building and exposure tours  Commercial Manager and Corporate Plan communication (1 course deputy Annual Work plans 14personnel) [ Proposed ADTA for Institutional  Public Relations and deputy Investment appraisal (2 courses Strengthening ]  Financial Manager and Unit Budget and financial Performance – 8 people per course) deputy Corporate planning and work  Human Resource Management Support staff 6 planning ( 14 people ) Monitoring and Reporting

B: Administration Total Staff = 22 Administration support for Unit Each Dept to receive 2 training Local level training – 14 admin  Finance Dept (4) Project Record keeping and courses per year for 3 years. courses  Admin Dept (5) reporting Total – 3 dept, 2 courses, 3  HR Dept (4) MIS systems years to be defined by staff skills Project admin included in  Office Staff (5) appointed Component 3  Project support (4)

C: Botanical Garden Division Total Staff = 219 plus 20 Enterprise management Manager and Deputy’s Operational managers and management Planting,  Planning professional staff training 93 local courses included in the  Full time 105 Maintenance, of gardens  Budgeting loan project  Part Time 114 Repair and maintenance  MIS  Promotion and marketing Education and awareness 114 workers trained in botanical programs In house staff training garden skills – identification of Visitor Management  Guiding plants, planting, maintenance  Environmental education ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 18

Organization / Division Target Skill Gaps Indicative Training Inputs/outputs and awareness Job exchange for senior staff  Botanical garden related to education and management awareness and visitor  Visitor management management , and botanic  Part time staff will receive garden management basic horticulture and planting training as an in- house training program

D: Animal Rescue Center Total Staff = 150 Commercial Management and Commercial management and Included in Subcomponent 1.2 Division Management (20) visitor programs visitor management will be including international exchange 1. Center Manager developed through contracting inputs and design inputs commercial services 2. Director Research and Endangered species recovery Breeding management 70 staff trained in local courses Endangered species training – or through TA supported 3. Director Marketing Vet and wildlife recovery skills work based programs with courses 4. Director Operation and support from national and Administration international TA Captive breeding technology TA expertise for animal recovery  Admin – 5 and breeding programs for  Research and monitoring Animal exposition and Panda, Ibis, Golden Monkey, Staff – 10 management Takin  Rescue and animal hospital – 12 Conservation Education and Operational management and  Compliance 12 Awareness admin included in ADTA  Keepers 50  Visitor management 6  Market (19 provided by contract b y tourism dept)

E: Field Conservation Division Existing Staff excluding 30 A: Planning – habitat and A: Planning processes and Included in component 2 and (Louguantai Forest Farm) SARC staff – approximately 120 conservation forestry, option developed in consultation Component three (GEF)  Manager Operations Landscape with wider conservation  Forest Park programs and staff Livelihood Program  Conservation Forestry Village planning and community  20 village planning Programs livelihoods Capacity building through facilitators ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 19

Organization / Division Target Skill Gaps Indicative Training Inputs/outputs  Community Forestry undertaking a planning program  Technical assistance Programs Collective /community forestry (domestic) 6 pmnths  Compliance and Protection programs Village development planning  Economic Plants and SME  Monitoring training of planning facilitators development training for  agency staff in Qinling Species Recovery Biodiversity identification Management Mountains by IMPLAD for 2 Conservation and community years Habitat restoration forestry based on analog and conservation forestry systems designed for social and local Conservation forestry Conservation Forestry conditions  Habitat and forestry master plan (plan by doing) with 40 Field Patrolling Habitat restoration – Project and to 60 people trained other forestry experts to provide  Technical assistance to Monitoring and data training support training and management planning processes Plant identification course (9pmnths domestic) a total Endangered species of 40 trained staff management and recovery  Endangered species Field patrolling – Project office recovery training and staff planning for 4 years – 50 to 75 people trained – a total of Biodiversity monitoring training 15 trained staff

Endangered species recovery Landscape Planning  Planning process (100 trained by doing)  24 IA staff  250 agency and institute from Qinling Mountains  Planning working groups with support of TA

Tourism Planning

 Implementing Agencies agency and Qinling Mountains staff (50) - TA (international) – 10 pmnth - TA (domestic) – 24 ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 20

Organization / Division Target Skill Gaps Indicative Training Inputs/outputs pmnth - 12 local tourism planning facilitators

Conservation Monitoring  Monitoring contract (WWF technical support for training – 2 years)  Implementing Agencies and conservation staff in Qinling Mountains training 100 per year for 3 years  Technical assistance for Training and capacity development - International – 15 pmnth - National – 15 pmnth  International/regional job exchanges – 15 ( 3 for Qinling Botanic Garden, 6 SARC, 6 for non- Implementing Agencies staff)  A total of 50 staff trained in conservation monitoring under WWF technical support contract  4 year education and dissemination program in the Qinling Mountains

B: Project Management PMO (11) Project planning Procurement ADB procedures training – Training provided by ADB head Project procurement Disbursement and before effectiveness office and PRCM prior to loan Directors, Management, and Project administration replenishment procedures In-house training of effectiveness Administrative staff of QNBG Project disbursement Project BME and MIS Implementing Agencies staff (15) Project reporting Follow on training provided in Component 3 ADB TA 4271 Shaanxi Qinling Biodiversity Conservation and Demonstration Project Final Report Appendix 19 21

Organization / Division Target Skill Gaps Indicative Training Inputs/outputs Project Beneficiaries Local Residents in in-situ area Village planning Group formation Course training facilitators Component 2 training Community forestry Spatial planning and Planning exercises for all  16 SALT demonstrations Small enterprise development prioritization agencies staff including staff  160 mu in 16 Forest Plant Home stay tourism Forest land allocation from agencies operating outside production demonstrations the Project  SALT Community forestry programs Small enterprise - tree and shrub planting demonstration (10 to 16)  Farmer training program (2 - tree shrub maintenance Forestry Group training days using TA input and SFB staff year NGO contract) - biodiversity awareness  Farmer and household - small business development education program for 3 Implementation planning and years Home stay tourism oversight through LFF - marketing and promotion  Homestay tourism training - hosting - 70 employees trained Enterprise training programs - 10 manager courses - cleanliness - cooking and food preparation SALT Demonstrations and - guiding and value adding farmer training SALT - agro-ecology - contour planting and management - agricultural technologies