Document of The World Bank Public Disclosure Authorized Report No: 29172 IMPLEMENTATION COMPLETION REPORT (IDA-28340 TF-29222) ON A Public Disclosure Authorized CREDIT IN THE AMOUNT OF SDR 67.3 MILLION (US$100 MILLION EQUIVALENT) TO THE PEOPLE'S REPUBLIC OF CHINA FOR A SHANXI POVERTY ALLEVIATION PROJECT Public Disclosure Authorized June 25, 2004 Public Disclosure Authorized Rural Development and Natural Resources Sector Unit East Asia and Pacific Region CURRENCY EQUIVALENTS (Exchange Rate Effective May 2004) Currency Unit = Renminbi(RMB) Yuan(Y) Y 1.0 = US$ 0.12 US$ 1.0 = Y 8.3 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS ACWF All China Women's Federation CAS Country Assistance Strategy ERR Economic Rate of Return FAO/CP FAO/World Bank Cooperative Program FRR Financial Rate of Return ICB International Competitive Bidding IDA International Development Association MOF Ministry of Finance MWR Ministry of Water Resources N.B.F Non-Bank Financed NCB National Competitive Bidding NPV Net Present Value O&M Operation and Maintenance PCD Project Concept Document PLG Project Leading Group PMO Project Management Office PPMO Provincial Project Management Office PRC People's Republic of China PSR Project Status Report QAG Quality Assurance Group SAR Staff Appraisal Report SDR Special Drawing Right TOR Terms of Reference YIS Yuncheng Irrigation System YRCC Yellow River Conservancy Commission WTO World Trade Organization Vice President: Jemal-ud-din Kassum, EAPVP Country Director: Yukon Huang, EACCF Sector Director: Mark D. Wilson, EASRD Task Team Leader: Juergen M. Voegele, EASRD CHINA SHANXI POVERTY ALLEVIATION PROJECT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 3 5. Major Factors Affecting Implementation and Outcome 12 6. Sustainability 13 7. Bank and Borrower Performance 14 8. Lessons Learned 15 9. Partner Comments 17 10. Additional Information 17 Annex 1. Key Performance Indicators/Log Frame Matrix 18 Annex 2. Project Costs and Financing 19 Annex 3. Economic Costs and Benefits 21 Annex 4. Bank Inputs 23 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 24 Annex 6. Ratings of Bank and Borrower Performance 25 Annex 7. List of Supporting Documents 26 Annex 8. Borrowers Comments and Assessment 27 Annex 9. Pictorial Overview of Selected Project Achievements 28 Project ID: P003649 Project Name: Shanxi Poverty Alleviation Project Team Leader: Juergen Voegele TL Unit: EASRD ICR Type: Core ICR Report Date: June 25, 2004 1. Project Data Name: Shanxi Poverty Alleviation Project L/C/TF Number: IDA-28340; TF-29222 Country/Department: CHINA Region: East Asia and Pacific Region Sector/subsector: General agriculture, fishing and forestry sector (68%); Flood protection (11%); Roads and highways (10%); Water supply (10%); Agro-industry (1%) Theme: Rural services and infrastructure (P); Gender (S); Land management (S); Water resource management (S) KEY DATES Original Revised/Actual PCD: 01/31/1994 Effective: 09/05/1996 09/05/1996 Appraisal: 06/18/1995 MTR: 09/22/1999 09/22/1999 Approval: 03/26/1996 Closing: 12/31/2002 12/31/2003 Borrower/Implementing Agency: CHINA/SHANXI PROVINCE Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Gautam S. Kaji Country Director: Yukon Huang Nikolas Hope Sector Director: Mark D. Wilson Joseph R. Goldberg Team Leader at ICR: Juergen M. Voegele Juergen M. Voegele ICR Primary Author: Josef Ernstberger 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: HL Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S S Project at Risk at Any Time: No 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The Project's main objective was to help alleviate poverty in 20 of the poorest counties of Yuncheng and Luliang Prefectures in Shanxi Province. The Project included a range of activities aimed at raising incomes for about 3 million poor through rehabilitation of an existing irrigation system, improvements of rural roads and construction of village water supplies, land development, expansion of livestock raising and horticulture, and expansion of primary agricultural processing capacity. 3.2 Revised Objective: There was no change in the Project’s objective. 3.3 Original Components: The original components included: a) the improvement of the Yuncheng Irrigation System commanding an area of 123,000ha, b) the development of some 13,000ha river beach-land along the Yellow River, c) the construction of village water supply schemes, d) rural roads, e) soil and water conservation including terracing, afforestation and check dam construction, f) horticulture development, g) livestock raising, h) expansion of agro-processing, i) targeted support to women households, and j) project management support and training. This relatively broad mix of components was designed to address short-, medium- and long-term income generating options to achieve the Project objective, and the mix of components took into account the differences in natural resource endowment between the two project areas. Yuncheng prefecture has large areas of flat, fertile land, whereas Luliang prefecture is hilly with few tracts of flat irrigated land. Thus the irrigation and river beach-land development were appropriate for Yuncheng only, while the soil and water conservation component was suited to the upland areas of Luliang. 3.4 Revised Components: No components were dropped or added, however, the relative importance of components was adjusted in response to emerging economic opportunities during the project implementation. When the Project started national food security and grain production was still high on the political agenda, while over time concerns over farm income gained overriding importance. Consequently higher value cash commodities gained importance over irrigated wheat and corn and the respective Yuncheng irrigation component was reduced in favor of the horticulture and livestock components. This process was accelerated by significant improvements in communication infrastructure (such as information systems and roads including a new expressway system), which greatly enhanced the market prospects for high value farm products. This also led to the inclusion of a large number of greenhouses in the horticulture component for production of fresh vegetables. 3.5 Quality at Entry: Quality at Entry was satisfactory. The Project objectives were consistent with the Bank’s CAS in China, which called for sustainable agricultural development in impoverished and environmentally vulnerable areas and for diversified agricultural production; and with the Government's long term policies which focus on increased production, income generation and employment creation in rural areas. Project design incorporated valuable experience and lessons learned from other Bank- and non-Bank financed land and water development projects in Shanxi Province. The Project also fully addressed the Bank's safeguard policies in project design. - 2 - 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The overall outcome of the Project is rated satisfactory. Most components were completed ahead of the schedule envisaged in the SAR with the main physical targets of many components being exceeded. An estimated 4.1 million people1 directly benefited from the Project as compared to an SAR expectation of 3 million beneficiaries. Farmers’ incomes per capita in constant 1995 prices increased from Y 480 to Y 1,217, which also exceeds the SAR expectation of Y 700 by far. The development objective of the Project is clearly achieved. The success of the Project was supported by the favorable economic development in the country. However, the broad mix of components in the Project that addressed both short and medium-term income opportunities have proved to be the right choice to take advantage of this supportive overall economic environment. The priority areas such as livestock, high value fruit and vegetable crops, and value added processing together with improved rural infrastructure, proved to be forward looking at the time when this Project was designed ten years ago. It was only much later, when these became priority areas in the restructuring and reorganization of the agricultural sector in China. The Project has timely and flexibly addressed emerging opportunities and challenges from the opening of the Chinese markets and the changing food consumption pattern of a wealthier urban population. Adjustments made during the Mid-term Review have further focused the Project in this direction. The horticulture component was significantly increased, new elements such as greenhouses for fresh vegetable production and new livestock activities like dairy production and deer raising were included in the Project. This made this Project not only valuable by its direct poverty reduction impact in the 20 poor project counties, but the Project also provides lessons for agricultural restructuring and farm income generation in general. The Project demonstrates successful investment opportunities in agriculture using medium- to long-term loans, which can easily be scaled up in other