Jiangxi Sustainable Forest Ecosystem Development Project 4

Completion Report

Project Number: 42022-013 Loan Number: 2694 Grant Number: 0229 June 2020

People’s Republic of China: Jiangxi Sustainable

Forest Ecosystem Development Project

This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS

Currency unit – yuan (CNY)

At Appraisal At Project Completion (14 October 2010) (30 July 2018) CNY1.00 = $0.1500 $0.1468 $1.00 = CNY6.6665 CNY6.8131

ABBREVIATIONS

ADB – Asian Development Bank CCF – Climate Change Fund CMS – consultant management system DMF – design and monitoring framework EIRR – economic internal rate of return EMP – environmental management plan FIRR – financial internal rate of return GDP – gross domestic product ha – hectare JFD – Jiangxi Forestry Department JPFD – Jiangxi Provincial Finance Department JPG – People’s Government of Jiangxi Province IEE – initial environmental examination kg – kilogram LIBOR – London interbank offered rate m3 – cubic meter MVRS – monitoring, verification, and reporting system PIO – project implementation office PMO – project management office PRC – People’s Republic of China SFM – sustainable forest management TA – technical assistance WACC – weighted average cost of capital

NOTE

In this report, “$” refers to United States dollars.

Vice-President Ahmed M. Saeed, Operations 2 Director General James P. Lynch, East Asia Department (EARD) Director Yolanda Fernandez Lommen, People’s Republic of China (PRC) Resident Mission, EARD

Team leader Xin Shen, Senior Project Officer (Natural Resources and Agriculture), PRC Resident Mission, EARD Team members Ning Li, Senior Environment Officer, PRC Resident Mission, EARD Jie Li, Associate Project Analyst, PRC Resident Mission, EARD Fang Wang, Senior Financial Management Officer, PRC Resident Mission, EARD Jing Zhang, Operations Assistant, PRC Resident Mission, EARD Wenlong Zhu, Senior Safeguards Officer (Resettlement), PRC Resident Mission, EARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page BASIC DATA i I. PROJECT DESCRIPTION 1 II. DESIGN AND IMPLEMENTATION 1 A. Project Design and Formulation 1 B. Project Outputs 2 C. Project Costs and Financing 4 D. Disbursements 4 E. Project Schedule 5 F. Implementation Arrangements 5 G. Technical Assistance 5 H. Consultant Recruitment and Procurement 6 I. Safeguards 6 J. Monitoring and Reporting 7 III. EVALUATION OF PERFORMANCE 7 A. Relevance 7 B. Effectiveness 8 C. Efficiency 8 D. Sustainability 9 E. Development Impact 9 F. Performance of the Borrower and the Executing Agency 11 G. Performance of the Asian Development Bank 11 H. Overall Assessment 12 IV. ISSUES, LESSONS, AND RECOMMENDATIONS 12 A. Issues and Lessons 12 B. Recommendations 13

APPENDIXES 1. Design and Monitoring Framework 14 2. Project Cost and Financier 16 3. Disbursement of ADB Loan and Grant Proceeds 19 4. Contract Awards of ADB Loan and Grant Proceeds 20 5. Environmental Impact Analaysis 21 6. Status of Compliance with Legal Covenants 27 7. Financial and Economic Reevaluation 36 8. Social Impact and Poverty Reduction 42

BASIC DATA

A. Loan and Grant Identification 1. Country People's Republic of China 2. Loan/grant numbers and financing 2694 OCR/0229 CCF source 3. Project title Jiangxi Sustainable Forest Ecosystem Development Project 4. Borrower People's Republic of China 5. Executing agency Government of Jiangxi Province 6. Amount of loan $40 million Amount of grant $1 million 7. Financing modality Loan and grant

B. Loan and Grant Data 1. Fact-finding – Date started 25 January 2010 – Date completed 29 January 2010 2. Loan negotiations – Date started 11 October 2010 – Date completed 12 October 2010 3. Date of Board approval 9 November 2010 4. Date of loan agreement 3 March 2011 5. Date of loan effectiveness – In loan agreement 1 June 2011 – Actual 15 June 2011 – Number of extensions 1 6. Project completion date – Appraisal 30 April 2017 – Actual 31 October 2017 7. Loan closing date – In loan agreement 31 October 2017 – Actual 31 October 2017 – Number of extensions 0 8. Financial closing date – Actual 30 July 2018 9. Terms of loan – Interest rate London interbank offered rate–based – Maturity (number of years) 26 – Grace period (number of years) 6 10. Terms of relending – Interest rate London interbank offered rate–based – Maturity (number of years) 26 – Grace period (number of years) 6 11. Climate Change Fund cofinancing – Climate Change Fund approval 9 November 2010 – Date of financing agreement 16 March 2011 – Date of effectiveness 4 July 2011 – Closing date in financing 31 October 2017 agreement

– Actual closing date 31 October 2017 – Number of extensions 0 – Actual financial closing date 30 July 2018

12. Disbursements a. Dates – Loan

Initial Disbursement Final Disbursement Time Interval 27 February 2012 14 June 2017 64 months Effective Date Actual Closing Date Time Interval 15 June 2011 31 October 2017 77 months

b. Dates – Climate Change Fund Grant

Initial Disbursement Final Disbursement Time Interval 22 June 2012 9 May 2018 71 months Effective Date Actual Closing Date Time Interval 4 July 2011 31 October 2017 76 months

c. Loan Amount ($ million) Increased Canceled Last Original during during Revised Amount Undisbursed Allocation Implementation Implement Allocation Disbursed Balance Category (1) (2) ation (3) (4=1+2–3) (5) (6 = 4–5) 1. Silviculture 35.84 7.82 4.65 39.01 39.01 – 1A-Chinese Fir and 18.33 5.21 – 23.54 23.54 – Broadleaf Species 1B-Slash Pine and 7.63 – 3.68 3.95 3.95 – Broadleaf Species 1C-Oil Tea 1.66 2.00 – 3.66 3.66 – 1D-Orange 1.96 – 0.97 0.99 0.99 – 1E-Tea 0.24 0.31 – 0.55 0.55 – 1F-Bamboo 6.02 0.30 – 6.32 6.32 – 2. Capacity 0.05 – 0.05 0.00 0.00 – Development 3. Interest and 4.11 – 3.12 0.99 0.99 – Commitment Charges Total 40.00 7.82 7.82 40.00 40.00 0 Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank.

d. Grant Amount ($ million) Increased Canceled Last Original during during Revised Amount Undisbursed Allocation Implementation Implemen Allocation Disbursed Balance Category (1) (2) tation (3) (4=1+2–3) (5) (6 = 4–5) 1A-Satellite Images and 0.03 – 0.01 0.02 0.02 – Measuring Tools 1B-Geographical Information 0.02 0.02 – 0.04 0.04 – System 2A-Domestic Training 0.05 0.02 – 0.07 0.07 – 2B-International Workshop 0.08 – 0.05 0.03 0.03 – 2C-Overseas Study Tours 0.05 0.02 – 0.07 0.07 – 2D-Demo of Sustainable 0.35 – 0.02 0.33 0.33 – Forest Management 2E-Surveys 0.24 – – 0.24 0.24 –

iii

Increased Canceled Last Original during during Revised Amount Undisbursed Allocation Implementation Implemen Allocation Disbursed Balance Category (1) (2) tation (3) (4=1+2–3) (5) (6 = 4–5) 03-Consulting Services 0.18 – 0.05 0.13 0.13 – Total 1.00 0.06 0.13 0.93 0.93 0 Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank.

C. Project Data 1. Project cost ($ million) Cost Appraisal Estimate Actual Foreign exchange cost 0.24 0.23 Local currency cost 66.15 69.36 Total 66.39 69.59

2. Financing plan ($ million) Cost Appraisal Estimate Actual Implementation cost Government 15.96 18.00 Beneficiaries 9.43 10.66 ADB loan 35.89 39.00 CCF grant 1.00 0.93 Total implementation cost 62.28 68.59 Interest during construction costs Government 0 0 Beneficiaries 0 0 ADB loan 4.11 1.00 CCF grant 0 0 Total interest during construction cost 4.11 1.00 ADB = Asian Development Bank, CCF = Climate Change Fund. Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank.

3. Cost breakdown by project component ($ million)

Component Appraisal Estimate Actual A. Base Cost 1. Sustainable forest plantation development and 53.45 63.61 rehabilitation 2. Strengthening forest insurance for natural risk mitigation 0.27 0.11 3. Capacity development for sustainable forest management 1.72 2.73 4. Project management support 2.14 2.14 Subtotal (A) 57.58 68.59 B. Contingencies 4.70 0.00 C. Financing Charges during Implementation 4.11 1.00 Total (A+B+C) 66.39 69.59

4. Project schedule Item Appraisal Estimate Actual 1. Silviculture Multifunction commercial plantation Start of afforestation March 2011 March 2010 Completion of afforestation December 2014 March 2017 Cash trees

Item Appraisal Estimate Actual Start of work March 2011 March 2010 Completion of work December 2013 March 2017 Rehabilitation of low-efficiency plantations Start of rehabilitation June 2011 July 2010 Completion of rehabilitation December 2014 July 2017 2. Capacity Development Start of procurement March 2011 June 2011 Completion of procurement March 2017 August 2017 Start of training activities March 2011 March 2011 Completion of training activities September 2016 October 2017 Start of study tour September 2011 May 2011 Completion of study tour September 2015 October 2017 3. Project Management Start of project management training workshop March 2011 March 2011 Completion of project management training workshop September 2017 October 2017

5. Project performance report ratings Single Project Rating From 15 June 2011 to 31 March 2013 On Track From 1 April 2013 to 30 June 2013 Potential Problem From 1 July 2013 to 31 July 2018 On Track

D. Data on Asian Development Bank Missions No. of No. of Specialization Name of Mission Date Persons Person-Days of Members Fact-finding 25–29 January 2010 3 12 e, f, p Inception 20–26 July 2011 3 16 f, d, g Review 1 27–31 August 2012 4 12 b, f, g, k Grant review 2–6 June 2013 1 4 g Review 2 22–26 September 2013 1 4 b Review 3 26–30 May 2014 1 4 b Review 4 28–30 September 2015 1 2 b Midterm review 4–10 November 2015 6 21 a, b, c, i, n, o Review 5 26–30 December 2016 1 4 b Review 6 28 August–1 September 2017 2 8 b, l Project completion review 14–22 October 2019 5 30 b, h, j, I, m a = head of portfolio management unit, b = senior project officer (Natural Resources and Agriculture), c = senior financial control officer, d = senior social development specialist, e = natural resource economist, f = lead natural resources management specialist, g = climate change specialist, h = senior safeguards officer (resettlement), i = senior project officer (financial management), j = associate project analyst, k = project analyst, l = senior project assistant, m = environment specialist, n = financial control analyst, o = operations assistant, p = project officer.

I. PROJECT DESCRIPTION

1. Jiangxi is an underdeveloped and mountainous province of the People’s Republic of China (PRC). In 2008 the province’s gross domestic product (GDP) per capita was only CNY14,727, one-third less than the national average. Mountainous and hilly areas account for 78% of the province’s total area. Forestry plays an important role in Jiangxi’s economic development and environmental sustainability. In 2008 the sector’s gross output reached CNY76 billion, 14% of the provincial GDP. Jiangxi’s forest coverage ratio ranks second nationally, with about 10.6 million hectares (ha) (62.5% of the province’s area) designated as forestland. However, about 1.5 million ha of this forestland was barren or low yielding, and underutilization had significantly damaged the environment, causing soil erosion, siltation of rivers and lakes, and the deterioration of water quality and conservation. The average forest stock volume was only 34.4 cubic meters (m3) per ha, much lower than both the national average of 76 m3/ha and the world average of 99.8 m3/ha. Thus, the sector’s productivity required significant improvement. Jiangxi’s forest ecosystem was fragile due to its unbalanced age structure and the monoculture structure of its young and middle- aged stands. Major causes of these problems include (i) the underutilization of forestlands because of a lack of investment funds and/or access to credit, (ii) the historical overexploitation of forest resources, (iii) communities’ lack of knowledge of or skill in forest management, and (iv) a lack of institutional experience in sustainable forest management (SFM). The severe snowstorm that occurred in the province at the beginning of 2008 compounded the situation. The project aimed to improve the productivity of the forestry sector; demonstrate an ecosystem-based, forest- development approach; and introduce forest carbon sequestration and climate change-mitigation measures while moving away from the traditional afforestation approach.

2. The Asian Development Bank (ADB) approved a loan of $40 million from its ordinary capital resources for the project on 9 November 2010. At appraisal, the project’s intended impact was improved SFM to enhance forest production, environmental benefits, and rural livelihoods in Jiangxi. The project outcome was improved forest cover and rural livelihoods in the project area. The project comprised four outputs: (i) sustainable forest plantation development and rehabilitation, (ii) strengthened forest insurance for natural risk mitigation, (iii) capacity development for SFM, and (iv) project management support. The Climate Change Fund (CCF) established by ADB financed a grant of $1 million to support capacity development activities under output 3. II. DESIGN AND IMPLEMENTATION

3. The project activities financed by the ADB loan and CCF grant were fully completed by 31 October 2017. The project was implemented in 18 counties, cities, or districts, including eight national poverty counties. The project’s impact and outcome were unchanged. Project implementation generally followed the original project design, while the actual project counties involved and final afforestation or rehabilitation area of each silviculture category reflected the actual interest of local communities and market changes.

A. Project Design and Formulation

4. On the domestic side, the project was highly relevant to provincial and national policies. At the provincial level it was highly consistent with the Jiangxi Forestry 11th Five-Year Plan1 and

1 Jiangxi Forestry Department and Jiangxi Development and Reform Commission. 2006. Jiangxi Forestry Eleventh Five-Year Plan, 2006–2010. Nanchang.

Jiangxi Forestry Medium–Long Term Plan (2011–2020).2 The concept and objectives of these plans turned away from traditional monoculture afforestation schemes, required a transition from short-term production cycles to longer-term production methods, and reflected the new policy of balanced ecological and economic development in the forestry sector. The project was designed to help the Government of the PRC achieve these ambitious objectives and required drastic changes through the development and demonstration of good practices and standards for the transition to SFM.

5. At the national level, the project is fully aligned with the government’s sustainable development agenda for an environment-friendly, resource-efficient, and harmonious society as outlined in the PRC’s Eleventh, Twelfth, and Thirteenth Five-Year Plans during 2006–2020. The project is also in line with the PRC’s Policies and Actions for Addressing Climate Change, which identified afforestation, effective forest management, and reduced deforestation as effectual actions to boost carbon sequestration.3

6. The project remained consistent with ADB’s long-term strategic framework and is fully in line with ADB’s country partnership strategies for the PRC (2008–2010, 2011–2015, and 2016– 2020). These feature the development of environmental sustainability and inclusive growth to support the government’s priorities of realizing an “ecological civilization” to promote sustainable development and curbing costs associated with resource depletion and environmental damage. ADB’s Strategy 2020 identified the environment, including addressing climate change and moving economies onto low-carbon growth paths through SFM, as one of five core areas of operations.4

7. The project design was appropriate to achieve the outcome, and the formulation process, involving proper stakeholder consultation and a household survey, was adequate. The project loan modality was selected. Silviculture activities financed by the loan followed a unit-rate approach, under which for afforestation passed the examination, an end-borrower (e.g., a farmer) would receive a sub-loan based on the acreage and rate of that specific category. This arrangement followed the practices of other forestry projects implemented by other international development partners in Jiangxi. This was a practical approach before ADB began piloting the results-based lending modality in 2013. No major or minor change to the project occurred during implementation.

B. Project Outputs

8. In general, the project was implemented successfully and made satisfactory achievements. At completion, the project had mostly delivered the outputs anticipated at appraisal. The variation in silviculture areas resulted from changing markets and increased afforestation costs.5 Appendix 1 presents the outputs delivered against the performance targets in the design and monitoring framework (DMF).

2 Jiangxi Forestry Department. 2010. Jiangxi Forestry Medium–Long Term Plan, 2011–2020. Nanchang. 3 Information Office of the State Council of the People’s Republic of China. 2008. PRC’s Policies and Actions for Addressing Climate Change. Beijing. 4 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, 2008–2020. Manila. 5 ADB approved an increase in sub-loan unit rates for Chinese fir, slash pine, and bamboo on 26 September 2012. This adjustment was intended to address the significant increase in labor costs since appraisal.

1. Output 1: Sustainable Forest Plantation Development and Rehabilitation

9. At completion, 29,727 ha of timber plantation (83.3% of the target) was developed on barren forestland to improve forest productivity and help meet local demand for construction materials and other wood products. Major timber species include Chinese fir and slash pine. The project planted broadleaf trees in fire protection belts to improve ecological biodiversity and multiply the functions of the timber plantation. The project rehabilitated 12,761 ha of low-yielding and snowstorm-damaged bamboo forests (13.9% above the target). The project helped forest farmers remove dead culms, plough soil, and plant broadleaf species mixed with bamboo groves to protect against climate-related disasters, pests, and diseases. The project also helped farmers establish 5,150 ha of economic tree crops (128.8% of the 4,000-ha target) to improve the productivity of the project land and rural households’ income. These crops included orange, oil- tea, and tea trees. A total of 46 forest farms, 59 forest enterprises, 9 united households, 225 large households, and 127 individual households directly benefited from the plantation activities.

2. Output 2: Strengthening Forest Insurance for Natural Risk Mitigation

10. A forest insurance policy for the 29,727 ha of timber plantation was implemented to improve the risk resilience of forest farmers, enterprises, and farms. This supported the government’s initiative establishing an insurance policy to protect the forestry sector from risks. The premium for timber forests is CNY1.6 per mu, 0.4% of the CNY400 that it costs to replant the trees per mu.6 The total annual premium for the insured area is CNY0.7 million. The government subsidizes 60% of the premium, and the insurant bears the remaining 40%. The project trained forest farmers to raise awareness of forest insurance and risk mitigation measures.

3. Output 3: Capacity Development for Sustainable Forest Management

11. To advance forestation practices in a more profitable and sustainable manner, the project implemented a training and extension program including “training of trainers” to disseminate concept, corresponding technical guidelines, and skills on SFM and climate change mitigation and adaptation to project beneficiaries and project staff in the province, counties, and townships. The program trained (i) 23 officials through an international study tour and 736 officials through domestic study tours (about 25% women) on SFM and climate change mitigation measures; (ii) 2,700 forest officials and farmers (about 25% women) as trainers for SFM and climate change mitigation; and (iii) 7,230 forest bureau staff, forest farmers, and forest workers (about 20% women) on SFM. Meanwhile, the project implemented the CCF co-financed activities, including: (i) a monitoring, verification, and reporting system (MVRS) established and demonstrated to improve forest carbon stock estimation in Jiangxi; and (ii) 80 pilots on SFM with a total area of 380 ha established to demonstrate SFM in snowstorm-damaged and low-function forests to enhance carbon sequestration capacity and mitigate the risk of climate disasters.

4. Output 4: Project Management Support

12. The project implemented all project management support activities, as follows: (i) designated the Foreign Fund Utilization Office of Jiangxi Forestry Bureau as the project management office (PMO); (ii) established project implementing offices (PIOs) in 18 project counties; (iii) trained 850 staff from the PMO, PIOs, state forest farms, and enterprises on project management, ADB guidelines and procedures, and project monitoring and reporting; and (iv)

6 A mu is a Chinese unit of measurement (1 ha = 15 mu).

4 established and operated a project performance management system to monitor forestation status, loan utilization, and achievement of the DMF indicators.

C. Project Costs and Financing

13. The project cost estimate at appraisal was $66.39 million, including an ADB loan of $40.00 million (60.25% of the total financing), a CCF grant of $1.00 million (1.51% of the total financing), the beneficiaries’ contribution of $9.43 million (14.20% of the total financing), and government funding of $15.96 million (24.04% of the total financing). At completion, the total project cost was $69.59 million, slightly higher than the cost at appraisal. The ADB loan was fully utilized, while $0.93 million of the CCF grant was disbursed, with $0.07 million savings. The beneficiaries’ contribution totaled $10.66 million, and the government provided $18.00 million in funding. The domestic counterpart funds totaled $28.66 million (41.18% of the total cost) at completion, compared to $25.39 million (38.24% of the total cost) estimated at appraisal. The actual unit costs for silviculture increased due to rising labor costs, while the financing charges during implementation decreased substantially. Appendix 2 presents the project cost and financiers at appraisal versus at project completion.

14. The CCF grant specifically co-financed two sub-outputs: (i) the establishment of a forest carbon MVRS, and (ii) the demonstration of SFM practices in storm-damaged and low-function forests to enhance the carbon fixation capacity of forest stands and mitigate the risks of climate disasters. The project used the $0.93 million grant for demonstration and survey activities, consulting services, training and study tours, and satellite image and geographic information system equipment.

D. Disbursements

15. ADB disbursed the loan from 27 February 2012 to 14 June 2017. The first disbursement of the CCF grant took place on 22 June 2012 and the last disbursement on 9 May 2018. ADB financially closed the loan and grant accounts on 30 July 2018 and canceled $0.07 million of grant savings at project financial closing.

16. The project mainly used the loan proceeds for expenditures under the silviculture component, for which procurement of seedlings and labor was undertaken using established commercial practices acceptable to ADB. These expenditures were paid under the loan using advance (imprest) fund procedure, based on unit cost per ha as agreed with ADB. In using these procedures, onlending agreements were executed between county governments and the farmer households, forest farms, and enterprises. Payments were based on quality progress verified and documented with inspection reports. Retroactive financing of about $6.25 million was applied which accounted for 15.63% of the loan. For the CCF grant, advance fund and direct payment procedures were used. ADB performed a sample review of the use of statement of expenditure procedures and found it acceptable.

17. The projected and actual disbursements are in Appendix 3. Although the actual disbursements happened more rapidly than projected, the final liquidation went beyond the normal winding-up period. During the final liquidation, some county governments adjusted the review procedure for using a forest rights certificate as collateral following the restructuring of the government, which complicated and prolonged the process.

E. Project Schedule

18. The project was to be implemented over 6 years from 1 May 2011 to 30 April 2017, and the loan was to be closed on 31 October 2017. Actual implementation generally adhered to this schedule and no loan extension was required. ADB approved the loan and grant on 9 November 2010. The loan agreement and project agreement were signed on 3 March 2011 and declared effective on 15 June 2011. The grant agreement of CCF was signed on 16 March 2011 and became effective on 04 July 2011. Silviculture activities for retroactive financing began in mid- March 2010, and project implementation fully began after the loan effectiveness. The project completed all ADB-financed activities by 31 October 2017. However, the project did not complete all liquidation within the winding-up period and it was financially closed in July 2018 (para. 17).

F. Implementation Arrangements

19. The implementation arrangements were adequate to deliver the project outputs and outcome. The People’s Government of Jiangxi Province (JPG) represented by the Jiangxi Forestry Department (JFD) was the executing agency. The project county and district governments were the implementing agencies. The JPG set up a project leading group chaired by the Vice Governor of the JPG in charge of agriculture and forestry comprising representatives from the concerned JPG departments to provide policy guidance for project implementation. The JFD established a PMO in its foreign fund utilization office to take charge of day-to-day project management. The PMO has been responsible for supervising project preparation activities, managing environmental impacts, monitoring project progress and impacts, and helping participating counties and cities to implement their subprojects. The PMO has maintained since the start of project preparation and has functioned effectively since its establishment, despite staff turnover. Each participating county established a PIO led by the director of each county forestry bureau.

20. The Jiangxi Provincial Finance Department (JPFD) was responsible for managing, monitoring, maintaining, and reconciling the advance accounts established for the loan and grant. The PIOs prepared withdrawal applications and submitted them to the JPFD through the county finance bureaus and PMO. The JPFD consolidated the withdrawal applications and submitted them to ADB for disbursement. On behalf of the national government (the borrower), the Ministry of Finance relent the ADB loan proceeds to the JPFD, which received them on behalf of the JPG. The JPFD onlent the loan proceeds to sub-borrowers (state forest farms, enterprises, and participating farmers) through the county finance bureaus of participating local governments. The institutions involved in the project fulfilled the required functions and responsibilities for financial management.

21. The project was carried out in line with the implementation arrangements that were set during appraisal and remained unchanged throughout the implementation period.

G. Technical Assistance

22. ADB approved the project preparatory technical assistance (TA) to the PRC for preparing this project in November 2008 with a grant of $700,000 from ADB’s TA funding program. The TA team provided its major inputs from May 2009 to January 2010. The TA thoroughly reviewed the status of Jiangxi’s forestry sector and clearly identified gaps between past practices and the new objective of balanced ecological and economic development of the forestry sector. Based on an analysis of key problems and opportunities, project design for respective outputs and sub-outputs were formulated. A participatory approach was adopted to solicit stakeholders’ views and

6 suggestions on the project design and implementation mechanism. Past experiences and lessons of international development partners in Jiangxi Province were carefully reviewed and incorporated in project design. This improved the soundness of the project design and contributed significantly to achieving the project outcome.

H. Consultant Recruitment and Procurement

23. The ADB loan financed silviculture costs, including seedlings and labor for forestation through sub-loans to end-borrowers, other than the capitalization of interest and commitment charge during implementation. Procurement of these items followed established commercial practices, with an assessment carried out during project preparation. All procurement under the CCF grant followed ADB’s Procurement Guidelines (2010, as amended from time to time), without any major deviations or mis-procurement. Two supply contracts for equipment and satellite images financed by the grant were awarded through shopping procedure, while consulting services contracts were awarded following ADB’s Guidelines on the Use of Consultants (2010, as amended from time to time). The original contract award projection was realistic. The procurement process encountered no serious issues or difficulties that significantly constrained project implementation. No complaints or dissent from the bidders were received during the procurement process. The PMO was not satisfied with the overall technical competency of the individual consultants financed by the CCF grant, and terminated the services contracts of two of the five recruited consultants, because the two national consultants could not fulfill their obligations to carry out the activities and produce the outputs in accordance with the requirements specified in the terms of references. Although this did not hinder the delivery of the CCF sub- outputs, the project could have benefitted more from the consulting services if it had recruited highly competent and experienced consultants. The performance of the agencies and experts financed by the domestic counterpart funds was satisfactory.

I. Safeguards

24. Environment. The project was classified as environmental category B. At appraisal, an initial environmental examination (IEE) report based on a draft domestic environment impact assessment covering all components was prepared, in accordance with the ADB Safeguard Policy Statement (2009), and was circulated to the ADB Board of Directors in June 2010. The IEE indicates that the project is expected to achieve significant environmental benefits; and concluded that any negative impacts with respect to water and soil erosion, ecology, land, fertilizer and pesticides, and health and safety were temporary and localized. Proposed mitigation measures— such as the conservation of natural resources and biodiversity, sustainable natural resource management, pollution prevention, proper infrastructure design and construction, and good health and safety management practices—can minimize relevant impacts to an acceptable level. As the project was implemented in accordance with the provisions set in the environmental management plan (EMP) and relevant PRC laws and regulations, these adverse environmental impacts were prevented or minimized to an acceptable level. The PMO and PIOs carried out environmental monitoring. The project received no complaints on environmental impacts during implementation, and there were no pending issues at project completion, beyond the need to continue implementing the EMP, especially to guide the maintenance of the project plantations. Overall, the project implemented the required environment safeguard measures satisfactorily.

25. Involuntary resettlement and indigenous people. The project was categorized as C for both involuntary resettlement and indigenous peoples, and needed no involuntary resettlement and indigenous peoples plan following ADB’s Safeguard Policy Statement. During implementation, the JPG ensured that no land acquisition or change of land use occurred, as all

7 subprojects were strictly selected in accordance with the following criterion: the proposed location of the subproject must have land use rights valid for a minimum of 25 years for the development of forestry under the contractual arrangement sanctioned by the laws and regulations concerning the forestry development contractual system. All land leasing arrangements under the project were voluntary in nature and based on agreements with landowners. There are no ethnic minority communities in the project area.

J. Monitoring and Reporting

26. All covenants specified in the loan, project, and grant agreements have generally been complied with at project completion. All covenants were still relevant up to project completion. No covenants were modified, suspended, or waived during project implementation. Appendix 6 details the status of compliance with legal agreements at completion.

27. ADB fielded a project inception review mission as well as midterm, annual, and project completion review missions. The PMO submitted necessary reports including progress reports and the executing agency’s project completion report, despite some delays. Following the IEE monitoring requirement, environmental monitoring reports were combined with progress reports. DMF focused project performance management system was established, and achievements were reported regularly in progress reports.

28. The project adequately set up the implementation arrangement for financial management and utilized and disbursed the ADB loan following the provisions specified in the covenants and ADB’s Loan Disbursement Handbook. In general, the project financial management was satisfactory, with on time submissions of annual project financial statement for the loan and grant audited by Jiangxi Provincial Auditing Department. The audit opinion in all reports was unqualified. The executing and implementing agencies and end-borrowers adequately addressed the auditor’s recommendations, as noted in the succeeding audited financial report and PMO’s letters to ADB. A satisfactory final audit report covering the period through the project financial closing date was submitted to ADB in June 2019, with no pending issues related to the ADB loan or CCF grant. The project complied with ADB’s Anticorruption Policy (1998, as amended to date).

III. EVALUATION OF PERFORMANCE

A. Relevance

29. The project is rated relevant. The project impact, outcome, and outputs are fully aligned with provincial and national policies and plans for medium- to long-term forestry development; a sustainable development agenda for an environment-friendly, resource-efficient, and harmonious society; and addressing climate change. The project has remained consistent with ADB’s country partnership strategies and Strategy 2020, which feature environmental sustainability and inclusive growth, including addressing climate change and moving economies onto low-carbon growth paths. The project design and modality were appropriate. The project scope and DMF were not changed, and the project was completed within the original schedule. The project demonstrated good practices and standards for Jiangxi Province to achieve the transition from traditional, monoculture, low-quality afforestation schemes to SFM balancing ecological and economic development.

B. Effectiveness

30. The project is rated effective in achieving the expected outcome and outputs. It substantially delivered all outcome and output indicators, and overachieved the capacity building and gender equity indicators. The project fully achieved four of the six outcome indicators and underachieved two sub-indicators, namely, jobs created for villagers and rent from land leasing. The project mostly overachieved the 15 output indicators, but did not fully deliver two: timber plantation development following SFM practices, and related insurance. These shortfalls occurred mainly because the total afforestation and rehabilitation areas decreased from 50,900 ha to 47,638 ha as a result of increased afforestation and rehabilitation unit costs (especially labor costs). The project effectively strengthened institutional capacity for SFM through training, study tours, and pilots.

31. The project realized the outcome of improved forest cover and rural livelihoods through SFM. Forest coverage in the project area increased by 1% (47,638 ha), and the project provided job opportunities to about 76,000 local farmers, creating 5.6 million person-days of jobs (of which 66% went to women). About 25,000 households received CNY6.6 million annually in rent from land leasing. A total of 46 forest farms, 59 forest enterprises, 225 households, 9 united households, and 127 individual households received ADB loans and benefited from improved forest cover. Forest product yields in the project area are comparable to those of Jiangxi’s first- rate forests (the top 10%), and due consideration was paid to balance the economic and ecological functions of the project forest. Tea tree oil yields increased from 225 kilograms per hectare (kg/ha) to 531 kg/ha, orange yields reached 22,612 kg/ha, and tea leaf yields reached 3,088 kg/ha.

32. The project implemented environmental safeguard measures, especially the EMP, during construction and operation. No land acquisition or change of land use occurred as anticipated during project appraisal. There are no ethnic minority communities in the project area.

C. Efficiency

33. The project is rated highly efficient based on the high efficiency of the investment and the fact that the project was completed without an extension. The economic re-evaluation was conducted for the overall project and for the six plantation types developed by the project, comparing situations with and without the project and using the same methodologies and major assumptions as the economic analysis at appraisal (Appendix 7). The economic internal rates of return (EIRRs) without indirect benefits at completion ranged from 16.1% for Chinese fir to 37.2% for orange, and 19.6% for the overall project. These can be compared with the EIRRs estimated at appraisal of 18.6% to 32.2% for various plantation types, and 20.7% for the overall project. Quantifying the indirect benefit of carbon sequestration raised the EIRR for the overall project slightly to 20.7%, while indirect benefits were not quantified for analysis at appraisal. As the EIRRs with and without indirect benefits for all plantation types and for the overall project at completion are higher than the economic cost of capital (9%), the project investments in the establishment of the various plantations were economically viable at project completion. The sensitivity analysis tested the robustness of the economic viability of the six plantation types and of the overall project using three scenarios: (i) a 10% decline in benefits, (ii) a 10% increase in operation and maintenance costs, and (iii) a combination of both. All plantation types and the overall project remained economically viable in the tested scenarios. The overall EIRR is higher than 18%, supporting the highly efficient rating.

D. Sustainability

34. The project is rated likely sustainable given its financial and institutional sustainability, and the sustainability of its environmental and social impacts.

35. The financial internal rate of return (FIRR) was reevaluated for six plantation types and the overall project based on the assumptions and methodology used at appraisal but with updated unit values and land cost included. The FIRRs at completion ranged from 13.1% for Chinese fir to 30.6% for orange. Timber plantations generally registered lower rates of return given the long time required to generate salable timber. Economic tree crops include high-value species (e.g., oil tea and tea trees) or a local specialty (e.g., orange trees) that benefit from a relatively high market price premium. These species mature and generate revenue much earlier than do timber plantations. The FIRR for the overall project at completion was 14.3%, lower than the 17.4% estimated at appraisal. The difference in the FIRRs mainly resulted from the different market prices of economic crops; the inclusion of land costs; and increased labor costs for forest tendering, timber cutting and transportation, fruit harvesting, and the preliminary processing of products. Timbers indicated lower results at completion, partly due to the market appetite for larger diameter timber, which delayed revenue generation. All results are substantially higher than the weighted cost of capital, demonstrating the project’s financial viability. The sensibility analysis suggested that each plantation type and the overall project are robust in the three tested scenarios.

36. However, fluctuations in the price of forest products remain a risk. Despite the significant price increase observed over 2010–2019, such fluctuations may not always favor the forest operators given the multiple factors affecting the supply–demand relationship. Other risks include climate disasters, forest fires, and plant pathogens that may affect the quantity and quality of forest products. Forest insurance is in place with strong government support, although the insured forest value is too low. The project effectively addressed the issue of a lack of investment funds and access to credit. End-borrowers obtained the sub-loans with the same terms and conditions as those of the ADB loan, which allows end-borrowers to repay without undue stress.

37. The SFM concept and approach were institutionalized within the JFD through capacity development activities, and within the JFD’s foreign fund utilization office as the PMO has been applying SFM in other international and domestic projects.

38. The project will continuously generate positive environmental and social impacts. Occupation of the project forest plantation land is stable. Under the project, 42% of the forestlands were acquired through land-lease contracts with a lease length of 30–45 years, while state-owned farms own the rest. Intensive project training and extension programs improved local communities’ understanding of and skill in SFM. Therefore, both the environmental and social impacts are sustainable.

E. Development Impact

39. The project is rated satisfactory with respect to its development impact. It has generated significant environmental benefits, contributed to sustainable socioeconomic development and poverty reduction in the project area, generally achieved the targeted impact indicators and expected contribution to the ADB results framework, and improved SFM in Jiangxi Province.

1. Environmental Impacts

40. The project generated significant environmental benefits in the project area. With 47,638 ha of forest newly developed or rehabilitated, the forest coverage rate in the project area increased by 1%. The project reduced land surface runoff through tree canopies, trunks, and roots, thus preventing flooding, extending the water flow period and increasing permeation, improving water quality, and adjusting the water supply downstream. Annual water conservation was estimated at 18.0 million m3. The accumulation of humus under the canopy and topsoil improved soil stability and fertility, and soil erosion declined by about 95,300 tons annually. The project also contributed about 142,900 tons in carbon sequestration annually. The project reduced the use of chemical fertilizers by 3.2 million kilograms per year and replaced them with organic manure, compounds, and compost. This changed local cultivation customs and contributed positively to the local environment by reducing contamination. The application of integrated pest management and bio-agents prevented air pollution and outbreaks of pests and diseases. Incremental increases in biodiversity on bare mountains and slopes corresponded to improved habitat conditions for a wide variety of flora and fauna. Mixed forest plantations further improved the structure of forest stands and enhanced resistance to pests and fire, increased biodiversity, and boosted water and soil conservation, thus reducing pesticide application, forest fire damage, and soil erosion. The project also contributed to the rehabilitation of forest resources damaged by snowstorms in early 2008 by adopting environmentally sound practices and decreased the possibility of pest outbreaks by clearing and restoring damaged forests in a timely fashion. Past experiences showed that forest damage from pernicious biological creatures peaks 2–3 years after the infliction of massive damage, and if the damaged trees are not removed in time, the affected stands will become bases for explosive outbreaks of pests. The project generally implemented the EMP and environmental monitoring plans well to guarantee forest ecosystem development. The project implementation reinforced environmental protection awareness among various stakeholders and built a sound foundation for future forest activities.

2. Social Impact and Poverty Reduction

41. A total of 46 forest farms, 59 forest enterprises, 225 large households, 9 united households, and 127 individual households received ADB loans. The total afforestation area under the project reached 47,638 ha. The current growing situation and yields indicate that average yields under the project will resemble that of Jiangxi’s first-rate forests (the top 10%). The project implementation not only improved the productivity of the forestry sector, but also mitigated forest resource degradation, addressed forestland sustainability problems, and improved the efficiency of forest management. A total of 11,919 households have participated directly in afforestation and bamboo rehabilitation or through profit sharing via farmers’ cooperatives or companies; and 25,014 households have benefited from the project by leasing their forestland for CNY6.6 million in annual rent. Moreover, the project provided 75,368 local farmers and individuals leasing their land, of whom 50,073 (66%) were women, with job opportunities totaling 5.3 million person-days during project implementation, including land preparation, tree planting, forest tending, daily maintenance, and harvesting.

42. As mentioned above, the project demonstration effect and the demand for nursery stock, fertilizer, and forestry equipment resulting from the project contributed to GDP growth, increased rural incomes, and reduced poverty in the project area. From 2011 to 2018, per capita GDP growth in the project counties ranged from 79.1% to 187.4%; rural per capita net income growth ranged from 95.9% to 205.7%; and the poverty incidence rates of eight national poverty counties in the project declined from 24.28%–33.90% to 0.25%–4.71%. The social impact and poverty reduction details are in Appendix 8.

3. Framework Indicators

43. Impact indicators. The project’s impact is improved SFM that enhances forest production, environmental benefits, and rural livelihoods in Jiangxi Province, with four indicators to assess this achievement by 2020 (Appendix 1). As of 2019, the provincial forest coverage stabilized at 63%, about 87 million tons of carbon is sequestered each year in Jiangxi, the project established a pilot forest carbon MVRS, and Jiangxi is carrying out the work following the national guideline and program on Land Use, Land Use Change and Forestry. Regarding forest stand stock, the latest data are from 2016, and a new round of forest inventory is ongoing.

44. Results framework indicator. At approval, the project’s targeted contribution to the ADB results framework was the annual sequestration of 150,000 tons of carbon to reduce greenhouse gas emissions. Following the same method used at approval, it is estimated that the 47,638 ha of forest land afforested or reforested by the project sequestrates 142,914 tons of carbon each year.

F. Performance of the Borrower and the Executing Agency

45. The overall performance of the borrower and the executing agency was satisfactory. The borrower, represented by the Ministry of Finance, fulfilled its responsibilities, while the JPG as the executing agency and local governments including counties and cities took ownership of the project from the design phase and remained strongly engaged until project completion. The PMO established in the JFD, which was the executing agency’s representative, managed the project implementation in 18 counties without the support of consultants, and the project achieved all of its intended outcomes. In the absence of loan consultants, the PMO made efforts to learn ADB procedures and regulations and handled the issues encountered during project implementation. The PMO compiled technical guidelines and project management regulations, and organized capacity-building training of the implementing agencies on project management, disbursement, audit, financial management, and safeguards. The PMO closely monitored and controlled the construction schedule, quality, and costs. Internal controls were in place to promote the effective use of funds. All counterpart funds were provided as required, and withdrawal applications were submitted. Although the turnover of PMO personnel during project implementation created some difficulties with the project assignments, the borrower, executing agency, and implementing agencies performed their responsibilities and obligations effectively.

G. Performance of the Asian Development Bank

46. ADB’s performance was satisfactory. During project implementation ADB fielded 10 review missions, including an inception mission, midterm review mission and project completion review mission. The review missions and regular office supervision provided timely guidance and suggestions to the JPG, PMO, implementing agencies, and consultants under the CCF grant, thus improving and facilitating project implementation. ADB was responsive to the government’s requests to support effective project implementation. The ADB officers and analysts involved were readily available to assist on project administration issues related to ADB procedures. The project preparatory TA was considered relevant and effective. ADB also administered the CCF grant effectively. In its completion report, the PMO noted that the project team maintained frequent communication and exchanges with the PMO to solve problems encountered in a timely manner; and its review, supervision, and guidance were adequate and constructive, which was very important for the project’s success.

H. Overall Assessment

47. Overall, the project is rated successful. It is deemed relevant, because the intended project impact and outcome were fully aligned with the government’s strategy and ADB’s country partnership strategy. The project was considered effective as it substantially delivered all outcome and output indicators, and overachieved the capacity building and gender equity indicators. It was rated highly efficient, given the high efficiency of the investment with an EIRR of 20% for the overall project and the fact that the project was implemented without an extension. The project is likely sustainable given its financial sustainability, and the sustainability of its environmental and social impacts. The project enhanced forest production, environmental benefits, and rural livelihoods in the project area.

Overall Ratings Criteria Rating Relevance Relevant Effectiveness Effective Efficiency Highly efficient Sustainability Likely sustainable Overall Assessment Successful Development impact Satisfactory Borrower and executing agency Satisfactory Performance of the Asian Development Bank Satisfactory Source: Asian Development Bank.

IV. ISSUES, LESSONS, AND RECOMMENDATIONS

A. Issues and Lessons

48. Accepting forest property and forestland tenure right as collateral. A lack of investment funds and access to credit had led to the underutilization of forestlands and affected the quality of afforestation. The project adopted a flexible approach to help the farmers and forest enterprises overcome the difficulty of accessing financing support, as in the past financing agencies had only accepted real estate collateral. The project addressed such constraints on financing services, a longstanding issue within the agriculture and forestry sectors, by taking advantage of forestland tenure reform in Jiangxi Province.

49. Balancing the ecological and economic development of the forestry sector. The following practices proved effective for the transition: (i) replacing monoculture with mixed stands to reduce biotic and abiotic calamities and improve biodiversity; (ii) selecting site-adapted, native tree species for afforestation; (iii) integrating existing natural regeneration in the structure of new stands; (iv) planning for long-term management with clear and specifically defined development objectives; (v) changing to low-impact site preparation and planting techniques; and (vi) applying selective weeding and tending methods.

50. Establishing a geographic information system for project management. All project sites were delineated as subcompartment-level vector data with major attributes recorded for transparent, dynamic, and precise project management at all levels. Of the multiple international forestry projects implemented in Jiangxi Province, this is the first to establish such a subcompartment-level spatial database. This improves project traceability and laid a good foundation for effective project management in the long run.

51. Sustaining demonstration effects after project completion. During project implementation, the high quality and productivity of the ADB forest attracted farmers’ attention and influenced silviculture activities beyond the project. Intensive project training and extension programs also improved local communities’ understanding of and skill in SFM. To extend the impact further, the PMO organized an assessment at project completion to recognize high-quality afforestation sites and encourage continued efforts in post-project forest management. Signboards were installed on prize-winning sites to boost publicity and set examples.

B. Recommendations

1. Project Related

52. Maintenance and monitoring of Climate Change Fund demonstration sites. It is recommended that the JFD make proper post-project arrangements so that state forest farms can properly maintain all demonstration plots for SFM practices in snowstorm-damaged and low- function forests, and that the monitoring of growth rates and carbon sequestration continues, making it possible to study the effectiveness of enhancing the carbon sequestration capacity of forest stands.

53. Timing of the project performance evaluation report. It is recommended that the project performance evaluation be conducted after 2022. By this time, the difference in carbon density between the experimental and control groups will be more significant, and the effectiveness of the SFM demonstration under the CCF component can be better assessed.

2. General

54. Consultant recruitment. When recruitment involves a highly specialized field, it is recommended to advertise the consultant position in relevant professional media besides ADB’s consultant management system (CMS) to improve the quality of expressions of interest. The acceptance of email submissions would encourage wider participation of non-CMS registered experts, and CMS registration can remain mandatory before contract signing. This will help expand the pool of CMS experts in the long term, and would resolve the low competency issue encountered by the executing agency.

14 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Indicators and Targets Project Achievements Impact By 2020 Improved sustainable forest management • Forest coverage in Jiangxi province • Forest coverage in Jiangxi province that enhances forest reached 63% stabilized at 63% since 2009 production, • Forest stand stock reached 750 • By 2016, forest stand stock reached environmental benefits, million m3 507 million m3 (the new round of forest and rural livelihoods in inventory is ongoing) Jiangxi Province • 150,000 tons of carbon • About 87 million tons of carbon sequestrated each year sequestrated each year in Jiangxi Province, and about 0.9 million tons of carbon sequestrated each year in the project forest. • A forest carbon monitoring, • Following the national guideline and verification, and reporting system Program on Land Use, Land Use adopted in Jiangxi Province Change and Forestry for carbon sequestration monitoring and reporting, Jiangxi Province is carrying out the forest carbon monitoring and reporting work; while a pilot forest carbon monitoring, verification, and reporting system was established under the project with CCF financing support. Outcome By 2018 By 2018 Improved forest cover and rural livelihoods in • Forest coverage in the project area • Forest coverage in the project area the project area increased by 1% increased by 1% • Tea tree oil yield increased from • Tea tree oil yield increased from 225 225 kg/ha to 525 kg/ha kg/ha to 531 kg/ha • Orange yield reached 22,500 kg/ha • Orange yield reached 22,612 kg/ha • Tea leaf yield reached 3,000 kg/ha • Tea leaf yield reached 3,088 kg/ha • Up to 6 million person-days of jobs • Up to 5.6 million person-days of jobs created for villagers, of which at created for villagers, of which at least least 15% are for women 66% are for women • 20,000 households received CNY9 • 25,000 households received CNY6.6 million annually in rent and profit million annually in rent from land share from land leasing leasing Outputs By 2017 By 2017 1. Sustainable forest plantation development • Sustainable forest management • Sustainable forest management and rehabilitation practices adopted on 35,700 ha of practices adopted on 29,727 ha of timber plantation timber plantation • 11,200 ha of low-yielding and • 12,761 ha of low-yielding and snowstorm-damaged bamboo snowstorm-damaged bamboo forests forests rehabilitated rehabilitated • 4,000 ha of economic tree crops • 5,150 ha of economic tree crops established established • Bamboo yield increased from 1,500 • Bamboo yield increased from 1,500 kg/ha to 7,000 kg/ha kg/ha to 7,460 kg/ha • Bamboo shoot yield increased from • Bamboo shoot yield increased from 400 kg/ha to 1,400 kg/ha 400 kg/ha to 1,549 kg/ha

Appendix 1 15

Design Summary Performance Indicators and Targets Project Achievements 2. Strengthening of forest insurance • 35,700 ha of timber plantation • 29,727 ha of timber plantation insured for natural risk insured against natural risks against natural risks mitigation • Training to raise awareness of forest • Training to raise awareness of forest insurance and natural risk mitigation insurance and natural risk mitigation measures delivered to forest farmers measures delivered to forest farmers (including women) at an overall rate and the coverage of women accounts of at least 20% to 40% of farmer participants 3. Capacity development for • 12 officials trained on sustainable • 23 officials trained on sustainable forest sustainable forest forest management and climate management and climate change management change mitigation measures through mitigation measures through international study tour international study tour • 600 officials (20% women) • 730 officials (about 25% women) participated in domestic study tours participated in domestic study tours • 2,500 forest officials and farmers • 2,700 forest officials and farmers (20% women) trained as trainers for (about 25% women) trained as trainers sustainable forest management and for sustainable forest management and climate change mitigation climate change mitigation • 7,000 forest bureau staffers, forest • 7,230 forest bureau staff, forest farmers, and forest workers (20% farmers, and forest workers (about 20% women) trained on sustainable women) trained on sustainable forest forest management management 4. Project management • The PMO is set up in the Jiangxi • The Foreign Fund Utilization Office of support forestry department Jiangxi Forestry Bureau is designated as the PMO for the project. • 23 PIOs are set up in project • 18 PIOs were set up in project counties. counties. • 500 staff from the PMO, PIOs, and • 850 staff from the PMO, PIOs, and state farms and enterprises trained state farms and enterprises trained on on project management, ADB project management, ADB guidelines guidelines and procedures, and and procedures, and project monitoring project monitoring and reporting and reporting • A project performance management • A project performance management system set up and implemented system was set up and in operation, effectively, including monitoring of including social and gender indicators social indicators ADB= Asian Development Bank, CCF=Climate Change Fund, ha = hectare, kg = kilogram, m3 = cubic meter, PIOs= project implementing offices, PMO = project management office. Sources: Asian Development Bank and Jiangxi Project Management Office.

16 Appendix 2

PROJECT COST AND FINANCIER

Table A2.1: Cost Estimates by Financier at Appraisal ($ million)

ADB= Asian Development Bank, CCF=Climate Change Fund, SFM= sustainable forest management. Note: Numbers may not sum precisely because of rounding. a Includes taxes and duties. b Percentage of cost category. c Percentage of total project cost. Source: Asian Development Bank estimates.

Appendix 2 17

Table A2.2: Cost Estimates by Financier at Completion ($ million) Asian Development Bank CCF Beneficiaries The Government Total Amout % b Amout % b Amout % b Amout % b Amout % c A. Investment Costs a 1. Sivilculture a. Chinese Fir 23.54 73.33 0.00 0.00 3.80 11.84 4.76 14.83 32.10 46.13 b. Slash Pine 3.95 60.52 0.00 0.00 1.71 26.20 0.87 13.29 6.53 9.38 c. Oil Tea 3.65 47.56 0.00 0.00 1.56 20.33 2.46 32.12 7.67 11.03 d. Orange 0.99 48.04 0.00 0.00 0.46 22.37 0.61 29.59 2.06 2.96 e. Tea 0.55 56.10 0.00 0.00 0.29 29.58 0.14 14.33 0.98 1.41 f. Bamboo 6.32 44.29 0.00 0.00 2.80 19.62 5.15 36.08 14.27 20.50 Subtotal 39.00 61.31 0.00 0.00 10.62 16.70 13.99 21.99 63.61 91.41 2. Insurance 0.00 0.00 0.00 0.00 0.04 36.36 0.07 63.64 0.11 0.16 3. Capacity Development a. Consulting Services 0.00 0.00 0.13 100.00 0.00 0.00 0.00 0.00 0.13 0.19 b. Equipment 0.00 0.00 0.06 100.00 0.00 0.00 0.00 0.00 0.06 0.09 c. Training, Seminars, Conferences i. Domestic training 0.00 0.00 0.07 6.36 0.00 0.00 1.03 93.64 1.10 1.58 ii. International workshop 0.00 0.00 0.03 100.00 0.00 0.00 0.00 0.00 0.03 0.04 d. Demonstration of SFM 0.00 0.00 0.33 100.00 0.00 0.00 0.00 0.00 0.33 0.47 e. Overseas Study Tours i. ADB Loan Financing 0.00 0.00 0.00 0.00 0.00 0.00 0.08 100.00 0.08 0.11 ii. ADB CCF Financing 0.00 0.00 0.07 77.78 0.00 0.00 0.02 22.22 0.09 0.13 f. Surveys 0.00 0.00 0.24 100.00 0.00 0.00 0.00 0.00 0.24 0.34 g. Administrative and Support Costs 0.00 0.00 0.00 0.00 0.00 0.00 0.67 100.00 0.67 0.96 subtotal 0.00 0.00 0.93 34.07 0.00 0.00 1.80 65.93 2.73 3.92 4. Project Management 0.00 0.00 0.00 0.00 0.00 0.00 2.14 100.00 2.14 3.08 Subtotal (A) 39.0 56.86 0.93 1.36 10.66 15.54 18.00 26.24 68.59 98.56 B. Contingencies 0.00 0.00 0.00 0.00 0.00 100.00 0.00 0.00 0.00 0.00 C. Financing Charges During 1. Interest During Implementation 0.80 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.80 1.15 2 Commitment Charges 0.20 100.00 0.00 0.00 0.00 0.00 0.00 0.00 0.20 0.29 Subtotal (C) 1.00 100.00 0.00 0.00 0.00 0.00 0.00 0.00 1.00 1.44 Total Project Costs (A+B+C) 40.00 57.48 0.93 1.34 10.66 15.32 18.00 25.87 69.59 100.00 ADB= Asian Development Bank, CCF=Climate Change Fund, SFM= sustainable forest management. Note: Numbers may not sum precisely because of rounding. a Includes taxes and duties. b Percentage of cost category. c Percentage of total project cost. Sources: Project completion report prepared by the executing agency.

18 Appendix 2

Table A2.3: Project Financing at Appraisal and Completion ($ million) Source At Appraisal At Completion Total % Total % Asian Development Bank loan 40.00 60.25 40.00 57.48 Climate Change Fund grant 1.00 1.51 0.93 1.34 Government 15.96 24.04 18.00 25.86 Beneficiaries 9.43 14.20 10.66 15.32 Total 66.39 100.00 69.59 100.00 Sources: Asian Development Bank and Jiangxi provincial project management office.

Appendix 3 19

DISBURSEMENT OF ADB LOAN AND GRANT PROCEEDS

Table 3.1: Annual and Cumulative Disbursement of ADB Loan Proceeds ($ million) Annual Disbursement Cumulative Disbursement Year Amount % of Total Amount % of Total 2011 0.03 0.08 0.03 0.08 2012 4.08 10.20 4.11 10.28 2013 4.87 12.18 8.98 22.45 2014 15.97 39.93 24.95 62.38 2015 6.33 15.83 31.28 78.20 2016 4.09 10.23 35.37 88.43 2017 4.63 11.58 40.00 100.00 Total 40.00 100.00 40.00 100.00 Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank.

Table 3.2: Annual and Cumulative Disbursement of CCF Grant Proceeds ($ million) Annual Disbursement Cumulative Disbursement Year Amount % of Total Amount % of Total 2012 0.10 10.72 0.10 10.72 2013 0.00 0.00 0.10 10.72 2014 0.00 0.00 0.10 10.72 2015 0.00 0.00 0.10 10.72 2016 0.28 30.18 0.38 40.90 2017 0.48 51.95 0.87 92.84 2018 0.07 7.16 0.93 100.00 Total 0.93 100.00 0.93 100.00 Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank.

Figure 3.1: Projection and Cumulative Disbursement of ADB Loan and Grant Proceeds ($ million)

$ Millions 15

0 2011 2012 2013 2014 2015 2016 2017 2018

Projection Actual

20 Appendix 4

CONTRACT AWARDS OF ADB LOAN AND GRANT PROCEEDS

Table 4.1: Annual and Cumulative Contract Awards of ADB Loan Proceeds ($ million) Annual Contract Awards Cumulative Contract Awards Year Amount % of Total Amount % of Total 2012 1.69 4.33 1.69 4.33 2013 4.00 10.26 5.69 14.59 2014 10.79 27.67 16.48 42.26 2015 6.00 15.38 22.48 57.64 2016 3.61 9.26 26.09 66.90 2017 12.92 33.13 39.00 100.00 Total 39.00 100.0 39.00 100.00 Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank.

Table 4.2: Annual and Cumulative Contract Awards of CCF Grant Proceeds ($ million) Annual Contract Awards Cumulative Contract Awards Year Amount % of Total Amount % of Total 2012 0.07 7.40 0.07 7.40 2013 0.00 0.00 0.07 7.40 2014 0.29 30.73 0.36 38.14 2015 0.00 0.00 0.36 38.14 2016 0.45 48.08 0.80 86.22 2017 0.13 13.78 0.93 100.00 Total 0.93 100.00 0.93 100.00 Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank.

Figure 4.1: Projection and Cumulative Contract Awards of ADB Loan and Grant Proceeds ($ million)

40.00

35.00

30.00

25.00

20.00 $ Millions 15.00

10.00

5.00

0.00 2012 2013 2014 2015 2016 2017

Projection Actual

Appendix 5 21

ENVIRONMENTAL IMPACT ANALYSIS

A. Environment Categorization and Due Diligence

1. The Jiangxi Sustainable Forest Ecosystem Development Project includes four components: (i) sustainable forest plantation and rehabilitation in a total of about 47,638 hectares (ha) of forestland, (ii) forest insurance against natural risks, (iii) capacity development for sustainable forest management, and (iv) project management support. This project was classified category B for environmental safeguards by the Asian Development Bank (ADB). Environmental analysis was carried out in accordance with national environmental regulations and the Safeguard Policy Statement (2009) of ADB. The Government of Jiangxi Province (executing agency) engaged Jiangxi Academy of Agriculture Science to conduct the environmental assessment and prepared the domestic environmental impact assessment (DEIA) report. The DEIA was reviewed and approved by the provincial Environmental Protection Department in December 2009. Based on the findings, an initial environmental examination (IEE) was prepared in English, including an environmental management plan (EMP). To accommodate the large number of subprojects, a tailor-made environmental code of practices (ECoP) was prepared at inception stage of loan implementation. At appraisal, due diligence of the environmental performance and practices of the representative participating state forest farms, enterprises and large households showed that they were complying with the environmental regulations.

B. Institutional Setup and Capacity Development

2. The provincial project management office (PMO), established under Jiangxi Provincial Forestry Department, was responsible to ensure compliance with environmental safeguards during implementation. An environmental management unit (EMU) was established in the PMO to oversee environmental compliance. The unit was adequately staffed and worked in consultation with staff at 18 subproject counties/cities forestry bureaus (PIAs) who closely worked with local environmental protection bureaus (EPBs), as well as with staff of water conservation bureaus, to monitor compliance with the environmental regulations of the People’s Republic of China (PRC) during construction and operation.

3. The project provided technical support and training during implementation to assist the PMO/PIAs in overseeing the monitoring of environmental impact and mitigation measures. The PMO regularly conducted sampling field inspection at least once per year for each subproject, while each local PIA undertook its own environmental monitoring and required mitigation measures. Training organized by the PMO was also provided to participating state forest farms, enterprises and large households at a total of at least 762 person-times on: (i) ADB environmental safeguards; (ii) implementation of EMP, environmental protection, pest control and safety rules for using pesticides; (iii) climate change mitigation and adaption in forest sector; (iv) carbon sequestration monitoring and verification; and (v) sustainable forest eco-system management.

C. Environmental Safeguard Measures, Monitoring and Reporting

4. Conservation of Natural Resources and Biodiversity. Plantation site selection excluded land with more than a 35-degree slope to avoid water and soil erosion. Planting sites were selected on the principle of forest classification management and strictly excluded valuable natural forests and community forests and protecting habitats of rare and endangered plants and ecosystems. The planting sites kept away from nature reserves, cultural heritage and natural heritage sites by 1,000 meters (m), public benefit forest by 100 m, main rivers by 50 m and branch rivers by 20 m. Site selection kept the passageway of wild animals and original vegetation

22 Appendix 5 between nearby planting patches. On the planting sites existing natural regeneration was preserved and integrated in the reforestation or rehabilitation schemes. Planting material selections focused on tree species suitable for site conditions and avoided unreasonable species resulting in slow growth, less water and soil conservation and pest or disease outbreaks. Local species were prioritized as planting materials. Planting materials were purchased from strong and excellent seed origin or seeds cloned with pest resistant features. Single species or clone monoculture was forbidden in timber forest. Economic tree plantations used different varieties or clones (5-7 clones). The area of each clone was within 10 hectares and intercropped with shrubs or short crops to build up a diversified ground cover and fix the soil. No impacts on nature reserves or protected species were identified. In addition, the project counties actively explored better clonal varieties for afforestation. For example, Anfu county promoted advanced seedling techniques, including cutting roots, rooting and seedling transplanting, etc., in the afforestation of some pine forests.

5. Sustainable Natural Resource Management. Burning out vegetation and residual bushes and grasses was strictly prohibited when clearing planting sites. Only grasses or bushes which were obstacle to planting activities and tree growth in patches or strip shape were cut and piled up between planting rows or holes for naturally decay. When clearing planting sites in patches or strips on land with slopes of more than 15 (to 25) degrees, every 30 m clearance cutting skipped a 3 m contour strip to allow for original vegetation. Where the land slopes were more than 25 degrees, bushes and grasses were cut in narrow strips and kept original vegetation between planting rows. Vegetation including bushes and grasses on steep slopes, tops of slopes, gully bottoms and bank of rivers was retained. Natural broadleaf trees were kept when preparing planting sites so as to develop coniferous with evergreen or deciduous broadleaf mixed forests. Based on the type of site condition, different soil preparation methods were taken including pit, strip, anti-slope etc. Slope land of more than 35 degrees was banned to be reclaimed. Slope land of lower than 15 degrees and gentle land were completely reclaimed but vegetation belt and water and soil conservation measures were set up. All reclaimed soil preparation was medium or small scale; strip preparation was conducted along contour lines; pit soil preparation followed contour lines arranged in a triangle shape (Pingzi). Soil preparation and planting were conducted at least one month ahead of the rainy season and covered by cut grasses or bush branches to avoid wind or water erosion. Area with serious water and soil erosion due to soil, climate, rainfall and landform conditions used anti-slope terrace preparation regardless of slope angle. During planting, surface soil including humus filled planting holes, tamped down and covered by grass, bushes or stones. Young forest tending used enlarged planting pits and loosening of the soil. According to the analysis of afforestation ecological benefits of the Zhuyuanpengbei subcomponent in Jishui county, which was located in the mountainous forestry village, prior to this project, due to years of serious indiscriminate logging, the forest resources of the village were seriously damaged resulting in soil erosion, ecological disruption, suffering drown and flood. With implementation of afforestation of 113 ha under this project and strictly abiding the ECoP, even in the dry season, the ditch of the village was still clear, with enough clean water for irrigation. According to the survey, the average wind speed of the village was reduced by 30%, evaporation reduced by 40%, humidity increased by 8%, the water source increased by 60,000 cubic meters (m3), and the soil erosion reduced by 1,800 tons, while rice yield increased by more than 40%.

6. Pollution prevention. Organic fertilizers, compounds and compost were used as base fertilizers to reduce nutrient loss. Compound fertilizers were applied including nitrogen, phosphate and potassium according to soil nutrient tests based on the requirements of tree growth. Application of inorganic fertilizers abided by guidelines, including strictly forbidding spraying of chemical fertilizers to prevent fertility loss and contamination of nearby water bodies. Seeds and seedlings were quarantined before plowing and planting to prevent dissemination of any pests or

Appendix 5 23 diseases. Tree species’ resistance was enhanced against pests and diseases through cultivation techniques including the use of multiple varieties and strong seedlings, tending, and management. No pest/disease breakout was reported. Mineral agents, biological agents of low toxicity and high efficiency were used instead of pesticides that were forbidden or restricted by World Health Organization and only limit preferred pesticides was used. Selection of herbicides followed the guidelines on application and physical and chemical features of the herbicide. Training was provided to relevant technicians and operators about proper pesticide and herbicide application techniques and procedures including time, weather effects, and appropriate methods.

7. Infrastructure Construction. Forest path utilized present trails combined with village trails and fire control trails to reduce disturbance of surface soil. Direction of forest trail was carefully designed and places for construction, earthworks and digging selected correctly to reduce vegetation disturbance as much as possible. During trail construction, deeper ditches were excavated simultaneously with construction or in phases to minimize disturbed soil. After trails were built, the vegetation was immediately rehabilitated. After construction was completed, the ground was leveled, any open pits or ditches were filled in and excess soil was removed as soon as possible to assist in recovering vegetation and avoiding long-term bare land.

8. Health and Safety. Transport avoided night and early morning hours; at sensible points water was sprayed to rescue dust during transportation; and overloading of trucks was strictly forbidden. The application of chemical fertilizers and pesticides in the plantation sites and nurseries was drastically reduced. The workers were instructed about the health hazards, provided with appropriate equipment to minimize risks, and received training to use and comply with health and safety procedures and protective equipment. Ample attention was given to avoid exposure to both accidental and natural hazards, especially where the failure could result in injury to the community. The project avoided or minimized the exacerbation of impacts caused by natural hazards, such as landslides or floods that could result from project activities. The PIAs informed affected communities of significant potential hazards in a culturally appropriate manner and where necessary prepare to respond to accidental and emergency situations. No major safety or health accident was reported during project implementation.

9. The PMO, with oversight by the environmental safeguard coordinator, conducted regular field visits to the project counties for monitoring and supervision. The environmental safeguard coordinator in the PMO worked closely with the Jiangxi Environmental Protection Department, municipal and county EPBs, and water resource bureaus to ensure compliance. From 2014, the PMO had submitted four annual project progress reports including environmental monitoring information to ADB. An environmental completion report was submitted in 2019. The project is considered to be in compliance with the project’s safeguard documents and national environmental regulations, as also observed during PCR mission field visits at. The Jiangxi Environmental Protection Department also confirmed that the project did not cause any serious environmental concerns, and that all impacts were being mitigated.

D. Cost of Implementing the EMP

10. During project preparation, no specific cost estimate was prepared for the implementation of the EMP. These costs, in line with PRC common practices, were incorporated into the total project investment and management costs. ADB has been unable to determine the actual expenses for environmental monitoring, administration, compliance inspection, institutional strengthening, and training because the PMO accessed multiple sources for the implementation of the plan.

24 Appendix 5

E. Environmental Benefits

11. Post-project surveys were conducted by the PMO/PIAs to assess the environmental benefits of the project. The increase of forest coverage rates had a positive impact on the local ecological environment. Project implementation reduced land surface runoff through tree canopies and trunks, thus preventing flood, extension of the water flow period and increased permeation, improvement of water quality and adjustment of water supply downstream. As trees grow, the ability to fix carbon dioxide and maintain air balance, minimizing dust and pollutants, was greatly enhanced. Soil stability and fertility after project implementation were improved by humus accumulation under canopy and topsoil. Environmental improvements offered favorable living conditions for soil micro-organisms. Furthermore, the biodiversity of the area was improved. These results conformed to the IEE assessments. Detailed environmental benefits are listed as the following (Table A5.1): • Forest coverage1 rate was increased by 1.0%2 in project area and 0.2% in Jiangxi Province • An annual 95,276 tons3 of soil erosion was effectively reduced (annual soil erosion reduction 2 tons/ha 4 according to standards of the Soil & Water Conservation Department). • Annual water conservation 18.0 million m3 was achieved5 (annual water conservation 377 tons/ha6 estimated according to standards of the Jiangxi Provincial Forest Research Institute). • The project established a forest carbon sequestration monitoring and verification reporting system in Jiangxi. Based on roughly estimates, this project annual carbon sequestration 142,914 tons7 (based on the calculation of annual carbon sequestration 3 tons/ha). • Annual oxygen production 142,914 tons8 (based on the calculation of annual oxygen production at 3 tons/ha). • Mixed forest plantations (a proportion of 80% conifer and 20% broadleaf trees mixed in patches or strips9) further improved the structure of forest stands to enhance resistance to pests and fire, increase biodiversity and water and soil conservation, thus to reduce pesticide application for pest control, forest fire damage and soil erosion. • The project in snowstorm-affected sites contributed to the rehabilitation of forest resources damaged from the snowstorms in early 2008 through adoption of innovative and environmentally sound practices; and decreased the possibility of pest outbreaks by timely clearing and restoring damaged forests from pernicious biological creatures. • Reduced use of chemical fertilizers and increased use of compound and organic fertilizers or manure and compost by 3.23 million kilograms annually on over 47,638 ha forest. • Incremental increases of biodiversity in bare mountain and slope ecosystems were corresponded to improved habitat conditions for a wide variety of flora and fauna. • Households and enterprises with forest management tenure strictly followed the environmental policies and regulations both from the Chinese government and the ADB. Through project implementation, different stakeholders reinforced environmental

1 This project includes a total of 47,638.19 ha of artificial afforestation (34,877.37 ha) and bamboo (12,760.82 ha). 2 Target set as 1.2% at appraisal. 3 Target set as 100,000 tons at appraisal. 4 84.5t/ha was proposed at borrower’s PCR. Here more conservative figure (at appraisal) is used. 5 Target set as 19 million m3 at appraisal. 6 4,392.6 ton/ha was proposed at borrower’s Project Completion Report. 7 Target set as 150,000 tons at appraisal (based on the calculation of annual carbon sequestration 3 tons/ha). 8 Target set as 150,000 tons at appraisal. 9 Target set as 60%:40% at appraisal.

Appendix 5 25

protection awareness and had a sound foundation for future forest activities.

Table A5.1: Environment Benefits Calculation Based on Index Used in the RRP Water Carbon Oxygen Soil erosion conservation Sequestration Production Item Plantation Area (ha) Sa (ton/a) S (ton/a) S (ton/a) S (ton/a) 1 Tea 443 2 887 377 167,335 3 1,331 3 1,331 2 Orange 1,137 2 2,274 377 428,750 3 3,411 3 3,411 3 Bamboo 12,760 2 25,521 377 4,810,829 3 38,282 3 38,282 4 Chinese Fir 24,447 2 48,895 377 9,216,707 3 73,342 3 73,342 5 Slash Pine 5,279 2 10,559 377 1,990,390 3 15,838 3 15,838 6 Oil Tea 3,569 2 7,138 377 1,345,584 3 10,707 3 10,707 Total 47,638 95,276 17,959,597 142,914 142,914 ha = hectare, RRP = report and recommendation of the President, ton/a = ton per annum a Unit: ton*ha/a

12. In line with a new study which was conducted in 2018, more environment benefits can be achieved as below:

Table A5.2: Environment Benefits Calculation Based on Index from New Study Carbon Oxygen Area Soil erosion Water conservation Item Plantation Sequestration Production (ha) Sa (ton/a) S (ton/a) S (ton/a) S (ton/a) 1 Tea 443 84.54 37,523 4392.6 1,949,699 19.2 8,522 14 6,214 2 Orange 1,137 84.54 96,144 4392.6 4,995,572 19.2 21,835 14 15,921 3 Bamboo 12,760 84.54 1,078,800 4392.6 56,053,178 19.2 245,007 14 178,651 4 Chinese Fir 24,447 84.54 2,066,792 4392.6 107,388,089 19.2 469,392 14 342,265

5 Slash Pine 5,279 84.54 446,333 4392.6 23,190,951 19.2 101,367 14 73,913 6 Oil Tea 3,569 84.54 301,739 4392.6 15,678,024 19.2 68,528 14 49,968 Total 47,638 40,27,333 209,255,513 914,653 666,934 ha = hectare, RRP = report and recommendation of the President, ton/a = ton per annum a Unit: ton*ha/a

F. Public Participation

13. During the project implementation, the public participation programs were designed and implemented effectively. No complaint on environmental impacts was received during the project construction and operational periods.

G. Conclusion

14. The project met the initial objectives and delivered substantial environmental benefits through turn from the traditional "afforestation" or "tree planting" to forest ecosystems development. It was based on a multifunctional forest management approach and emphasized the links between sustainable forest development and management practices and the conservation and improvement natural ecosystem functions in the project area. It had significant positive environmental impacts on the project area, including erosion reduction, water

26 Appendix 5 conservation, carbon sequestration and oxygen production. Environmental management and associated mitigation measures were properly implemented during construction and operation. Environment monitoring was carried out by the PMO and PIAs.

Appendix 6 27

STATUS OF COMPLIANCE WITH LEGAL COVENANTS

No Description Reference Compliance Status in Legal Agreement SAFEGUARDS COVENANTS 1 Environment PA, Complied with. JPG, each Project City and each Project County shall Schedule, The project was ensure that the Sub-borrowers carry out the Project Para. 6 implemented in activities, including forestry plantation and maintenance, accordance with the in strict conformity to (a) all applicable national and local provisions set in the government technical guidelines, environmental laws, EMP and relevant regulations, and procedures; (b) ADB’s Environmental PRC laws and Policy (2002) and guidelines; and (c) the environmental regulations. mitigation and monitoring measures set out in the IEE and EMP, and the respective concerned EAR. In case that any Subproject is cited for a violation of any law, regulation, standard, or ordinance related to environmental protection within the reporting period, a certification from the environmental authorities concerned will be included in the reports showing that the defect has been corrected or a corrective action plan has been accepted or approved. 2 Land Acquisition and Involuntary Resettlement PA, Complied with. JPG, each Project City and each Project County shall Schedule, The project did not ensure that (a) each Project Beneficiary shall have valid Para.5 involve land acquisition and legal entitlement to the land on which development or involuntary construction of the Project facilities under the proposed resettlement during Subproject will be carried out, (b) no land acquisition be implementation. required for such proposed Subproject, and (c) no resettlement be required for such proposed Subproject. 3 Gender Development PA, Complied with. JPG shall ensure that (i) women representatives be Schedule, The project related involved in Project implementation at village level; (ii) the Para. 7 information was Project collect gender-disaggregation data, through PIOs accessible to women, for monitoring of gender targets set under the Project; (iii) and about 2,300 women have representation and are consulted in all opportunities on project-related events and meetings, and that minutes training and 3.7 include information on their participation; and (iv) million person-day opportunities be provided for women to participate in employment were capacity-building and trainings, and women be given provided to women. employment opportunities if any in participating the Project work. FINANCIAL COVENANTS 4 JPG and each Project County shall ensure that (a) all LA, Schedule Complied with. domestic financing necessary for the Project be provided 5, Para. 4/ The required funds in a timely manner, and (b) additional counterpart PA, were timely provided financing be provided in the event of any shortfall of funds Schedule, to support project or cost overruns to complete the Project. Para. 4 implementation. 5 JPG, each Project City and each Project County shall (i) PA, Section Complied with. maintain separate accounts for the Project; (ii) have such 2.08, Para. The project financial accounts and related financial statements (balance sheet, (a) management system statement of income and expenses, and related has been in place.

28 Appendix 6

No Description Reference Compliance Status in Legal Agreement statements) audited annually, in accordance with Separate accounts appropriate auditing standards consistently applied and and records for the procedures applicable to the Project Cities and Project project were Counties, by independent auditors whose qualifications, maintained. experience and terms of reference are acceptable to Audit reports were ADB; and (iii) JPG shall furnish to ADB, promptly after submitted timely as their preparation but in any event not later than 6 months required. after the close of the fiscal year to which they relate, certified copies of such audited consolidated accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the covenants of the Loan Agreement as well as on the use of the procedures for imprest account/statement of expenditures), all in the English language. JPG, each Project City and each Project County shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request. 6 The Borrower shall cause JPG to establish immediately LA, Schedule Complied with. after the Effective Date, an imprest account at a bank 3, Para. 6(a) The imprest account acceptable to ADB. The imprest account shall be was established and established, managed, replenished and liquidated in managed as accordance with the Loan Disbursement Handbook, and required. The ceiling detailed arrangements agreed upon between the of imprest account Borrower, the EA and ADB. The currency of the imprest was increased to $9 account shall be Dollar. The ceiling for the imprest million as approved account shall not exceed the lower of (i) the estimated on 23 May 2014. expenditure to be financed through the imprest account for the next 6 months of Project implementation, or (ii) the equivalent of 10% of the Loan amount. 7 Each Project City and each Project County shall ensure PA, Complied with. that the proceeds of the Sub-Loans be used by the Sub- Schedule, Sub-loans lent to borrowers for (i) purchase of seedlings that are approved Para. 10 sub-borrowers were by respective IAs, and (ii) labor cost for tree planting and to cover afforestation tending. and bamboo rehabilitation cost including seedling and labor. 8 JPG, each Project City or each Project County shall PA, Section Complied with. enable ADB, upon ADB's request, to discuss the Project’s 2.08, Para. Auditors were invited financial statements and their respective financial affairs (b) for discussions from time to time with the auditors authorized for the during ADB review Project’s accounts and financial statements, to the extent missions. relevant to the Project, JPG, each Project City or the Project County, pursuant, to Section 2.08(a) hereabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of JPG, the concerned

Appendix 6 29

No Description Reference Compliance Status in Legal Agreement Project City, or the concerned Project County unless JPG, the Project City or the Project County shall otherwise agree. OTHER COVENANTS 9 JPG, represented by JFD, shall be the Executing Agency. PA, Complied with JPG shall set up a PLG to provide policy guidance to the Schedule, The PLG was set up Project implementation. The PLG shall be chaired by the Para. 1 / and functioned well. Vice Governor of JPG in charge of agriculture and LA, Schedule forestry; and shall comprise representatives from the 5, Para. 1 concerned provincial development and reform committee, financial department, planning commission, and other concerned departments in JPG. 10 JFD shall establish a PMO in its Foreign Fund Utilization PA, Complied with Office, responsible for detailed Project implementation. Schedule, The PMO was set up The PMO shall comprise the full time and regular staff, Para. 2 / in its Foreign Fund including not less than 2 financial officers and 3 project LA, Schedule Utilization Office of officers, who will take charge of the day-to-day Project 5, Para. 2 JFD and responsible management activities. for overall project implementation and coordination with PIOs. 11 The governments of the Project Counties and the Project PA, Complied with. Districts shall be the Implementing Agencies. At the Schedule, 18 PIOs were set up as county or the district level, each Project County or each Para 3/ required. Project District shall establish a PIO, led by the director of LA, Schedule each county's or the district’s forestry bureau to oversee 5, Para. 3 the project implementation. 12 Each Project City or each Project County shall ensure that PA, Section Complied with. the PIOs established to implement the Project under the 2.10 18 PIOs functioned Project City’s or the Project County's responsibility and effectively. the Sub-borrowers at all times conduct their business in accordance with sound administrative, financial, environmental and forestry practices, and under the supervision of competent and experienced management and personnel. 13 (a)JPG shall, and shall cause the Project Cities and the PA, Section Complied with. Project Counties to undertake the responsibilities and 2.01, Para. JPG and project perform the obligations provided for in this Project (a), (b), and cities or counties Agreement. (c)/ performed the (b) JPG, the Project Cities and the Project Counties shall LA, Art. IV, obligations set forth carry out the Project with due diligence and efficiency, and Section 4.01 in the loan in conformity with sound administrative, financial, agreement and engineering, environmental and forestry practices. project agreement. (c) In the carrying out of the Project and operation of the Project facilities, JPG, the Project Cities and the Project Counties shall perform all obligations set forth in the Loan Agreement to the extent that they are applicable to JPG, the Project Cities and the Project Counties and all obligations set forth in the Schedule to this Project Agreement.

30 Appendix 6

No Description Reference Compliance Status in Legal Agreement 14 JPG, each Project City and each Project County shall PA, Section Complied with. make available, promptly as needed, the funds, facilities, 2.02, Para 1/ All required services, equipment, and other resources which are LA, Art. IV, counterpart funds required, in addition to the proceeds of the Loan, for the Section 4.02 were mobilized on carrying out of the Project. time. 15 (a) In the carrying out of the Project, JPG, the Project PA, Section Complied with Cities and the Project Counties shall, and shall ensure 2.03, Para. The consultants and that the Sub-Borrowers, employ competent and qualified (a) and (b) contractors required consultants and contractors, acceptable to ADB, to an for the project extent and upon terms and conditions satisfactory to ADB. implementation were (b) Except as ADB may otherwise agree, all Goods, engaged in Works and consulting services to be financed out of the accordance with the proceeds of the Loan shall be procured in accordance provisions specified with the provisions of Schedule 4 to the Loan Agreement. in Project Agreement. ADB may refuse to finance a contract where Goods, Works or consulting services have not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not acceptable to ADB. 16 JPG, the Project Cities and the Project Counties shall PA, Section Complied with. carry out the Project in accordance with plans, 2.04, Para. 1 The project was specifications, work schedules and construction methods implemented in acceptable to ADB. JPG, the Project Cities and the accordance with the Project Counties shall furnish, or cause to be furnished, to applicable PRC’s ADB, promptly after their preparation, such plans, technical standards. specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request. 17 JPG, each Project City and each Project County shall, to PA, Section Complied with. the extent applicable to the Project, maintain, or cause to 2.05, Para. 1 Expenditures related be maintained, records and accounts adequate to identify to the project the Goods, Works, consulting services and other items of implementation were expenditure financed out of the proceeds of the Loan, to recorded and disclose the use thereof in the Project, to record the accounted properly. progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition. 18 (a) ADB on the one part and JPG, the Project Cities and PA, Section Complied with. the Project Counties on the other part shall cooperate fully 2.06, Para. a, PMO prepared and to ensure that the purposes of the Loan will b, and c submitted the project be accomplished. progress report on a (b) JPG, each Project City and each Project County shall regular basis, and promptly inform ADB of any condition which interferes review missions were with, or threatens to interfere with, the progress of the conducted to discuss Project, the performance of its obligations under this the project Project Agreement or the Sub-Loan Agreements, or the implementation accomplishment of the purposes of the Loan. issues with JPG. (c) ADB on the one part, and JPG, the Project Cities and the Project Counties on the other part shall from time to

Appendix 6 31

No Description Reference Compliance Status in Legal Agreement time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, JPG, any Project City or any Project County, and the Loan. 19 Each Project City and each Project County shall ensure PA, Complied with. that the Sub-borrowers shall include state forest farms, Schedule, To ensure enterprises, and farmers and each of such Sub-borrowers Para. 9 compliance, the sub- shall meet the following selection criteria: (i) where the borrowers were Subproject is proposed to be carried out, having land use selected in right for development of forestry valid for minimum of 25 accordance with the years to the land under the contractual arrangement as specified criteria sanctioned by the laws and regulations concerning which was stipulated forestry development contractual system, (ii) being in sub-loan equipped with technical capability that can comply with agreement. forestation related regulatory requirements, and (iii) showing that forestation land not overlap with project sites of other external assistance agencies sponsored projects. 20 The concerned Project County or the concerned Project PA, Complied with. District shall provide the loan proceeds to the Project Schedule, The template for sub- Beneficiaries through Sub-Loans in local currency and the Para. 11 loan agreement was financial terms and conditions of each Sub-Loan shall be developed at project as follows: (i) interest at the same rate as that of the Loan, start-up and further with the interest due for payment during the grace period revised in September being financed by the interest capitalization under the 2013 to ensure full Loan, (ii) a repayment period including a grace period compliance of identical to those applied to the Loan, and (iii) each Sub- requirements for borrower bearing interest rate and foreign exchange terms and conditions. variation risk on the Sub-Loan. 21 Except as ADB may otherwise agree, each Project City or PA, Section Complied with. each Project County shall, and shall ensure that the Sub- 2.11 Sub-borrowers used borrowers, apply the proceeds of the Loan to the the loan proceeds for financing of expenditures on the Project in accordance the activities as with the provisions of the Loan Agreement and this specified. Project Agreement, and shall ensure that all Goods, Works and consulting services financed out of such proceeds are used exclusively in the carrying out of the Project. 22 Except as ADB may otherwise agree, each Project City or PA, Section Complied with. each Project County shall ensure that the Sub-borrowers 2.12 Sub-borrowers shall duly perform all their respective obligations under performed the the Sub-Loan Agreements, and shall not take, or concur obligations specified in, any action which would have the effect of assigning, in the Sub-Loan amending, abrogating or waiving any rights or obligations Agreements. of the parties under the Sub-Loan Agreements. 23 The Sub-borrowers shall have the following obligations in PA, Complied with. respect of implementation of the Subproject: (i) keeping or Schedule, Sub-borrowers using the woodland for forestry purposes, and refraining Para. 12 performed the from using it for non-forestry development; (ii) protecting obligations in respect and rationally using the woodland in accordance with law, of implementation of and refraining from causing permanent damage to the the Subproject. land; and (iii) that the assignment of the Sub-borrower’s

32 Appendix 6

No Description Reference Compliance Status in Legal Agreement rights and obligations under the forestry development contractual arrangements before the full repayment of the Sub-Loan shall be done with the prior consent of the concerned IA and the assignee shall undertake the same obligations of the Sub-Loan. 24 JPG shall ensure that the rights afforded to the Sub- PA, Complied with. borrowers under the relevant laws and regulations of the Schedule, The project cities and Borrower be reflected in the contractual arrangements Para. 13 counties complied entered into between the concerned local government with the provisions agencies and the Sub-borrowers and ensure that such set in the contractual rights not be infringed and violated. agreements with the Sub-borrowers. 25 All Goods, Works and consulting services to be financed LA, Schedule Complied with. out of the proceeds of the Loan shall be subject to and 4, Para. 1&2 Procurement under governed by the Procurement Guidelines, and the the loan was Consulting Guidelines, respectively. undertaken using established All terms used and not otherwise defined in this Loan commercial practices Agreement have the meanings provided in the acceptable to ADB, Procurement Guidelines and/or the Consulting based on plantation Guidelines, as applicable. area and unit costs. 26 Except as ADB may otherwise agree, Goods and Works LA, Schedule Complied with. shall only be procured following ADB’s Procurement 4, Para. 3 Procurement under Guidelines (2010, as amended from time to time) on the the loan was basis of the methods of procurement set forth below: ICB, undertaken using NCB, Shopping. established commercial practices The methods of procurement are subject to, among other acceptable to ADB, things, the detailed arrangements and threshold values based on plantation set forth in the Procurement Plan. The Borrower may only area and unit costs. modify the methods of procurement or threshold values with the prior agreement of ADB, and modifications must be set out in updates to the Procurement Plan. For seedlings and labor for forestation, procurement will be undertaken following the established commercial practices which are acceptable to ADB. 27 All contracts procured under international competitive LA, Schedule Complied with. bidding procedures and contracts for consulting services 4, Para. 7 Procurement under shall be subject to prior review by ADB, unless otherwise the loan was agreed between the Borrower and ADB and set forth in undertaken using the Procurement Plan. established commercial practices acceptable to ADB, based on plantation area and unit costs. 28 (a) The Borrower shall ensure that all Goods and Works LA, Schedule Complied with. procured (including without limitation all computer 4, Para. 5 No contracts hardware, software and systems, whether separately financed by the Loan procured or incorporated within other goods and services were involved in any procured) do not violate or infringe any industrial property industrial property or or intellectual property right or claim of any third party. intellectual property

Appendix 6 33

No Description Reference Compliance Status in Legal Agreement (b) The Borrower shall ensure that all contracts for the right or claim of any procurement of Goods and Works contain appropriate third party representations, warranties and, if appropriate, indemnities from the contractor or supplier with respect to the matters referred to in subparagraph (a) of this paragraph. 29 The Borrower shall ensure that all ADB-financed contracts LA, Schedule Complied with. with consultants contain appropriate representations, 4, Para. 6 No consultant warranties and, if appropriate, indemnities from the contract was consultants to ensure that the consulting services financed under the provided do not violate or infringe any industrial property loan. or intellectual property right or claim of any third party. 30 The Borrower shall ensure that the activities of its LA, Art. IV, Complied with. departments and agencies with respect to the carrying out Section 4.03 Sound administrative of the Project and operation of the Project facilities are policies and conducted and coordinated in accordance with sound procedures were administrative policies and procedures. followed. 31 The Borrower shall take all actions which shall be LA, Art. IV, Complied with. necessary on its part to enable JPG, Project Cities, Section 4.05 Respective Project Counties and Project Districts to perform their obligations under the respective obligations under the Project Agreement, and Project Agreement shall not take or permit any action which would interfere were performed with the performance of such obligations. 32 JPG through PMO, each Project City and each Project PA, Section Complied with. County shall enable ADB's representatives to inspect the 2.09\ The ADB review Project, the Goods and Works financed out of the LA, Art. IV, missions inspected proceeds of the Loan, sites, properties, and any records Section 4.04 the project on the and documents to the extent relevant to the Project. regular basis. 33 (a) PG shall, to the extent applicable to the Project, PA, Section Complied with. furnish to ADB all such reports and information as ADB 2.07, Para. shall reasonably request concerning:(i) the Loan and the (a) and (b) Nine project progress expenditure of the proceeds thereof; (ii) the Goods, Works reports were and consulting services and other items of expenditure submitted to ADB. financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of the concerned Project City or the concerned Project County; and (v) any other matters relating to the purposes of the Loan. (b) Without limiting the generality of the foregoing, JPG shall furnish to ADB semi-annually reports on the execution of the Project and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following 6 months.

34 Appendix 6

No Description Reference Compliance Status in Legal Agreement 34 Promptly after physical completion of the Project, but in PA, Section Complied with. any event not later than 3 months thereafter or such later 2.07, Para. PMO submitted the date as ADB may agree for this purpose, JPG shall (c) project completion prepare and furnish to ADB a report, in such form and in report to the ADB as such detail as ADB shall reasonably request, on the required. execution and initial operation of the Project, including its cost, the performance by JPG and each Project City or each Project County of their respective obligations under this Project Agreement and the accomplishment of the purposes of the Loan. 35 JPG, each Project City and each Project County shall PA, Complied with. comply with ADB’s Anticorruption Policy (1998), as Schedule, JPG, each project amended from time to time. JPG, each Project City and Para. 8 city and each project each Project County agree: (a) that ADB reserves the county complied with right to investigate any alleged corrupt, fraudulent, ADB’s Anticorruption collusive, or coercive practices relating to the Project; and Policy and supported (b) to cooperate fully with any such investigation and to ADB activities as extend all necessary assistance, including providing specified. access to all relevant books and records, as may be necessary for the satisfactory completion of any such investigation. Grant Agreement 36 In the carrying out of the Project and operation of the GA, Article Complied with Project facilities, the Recipient shall perform, or cause to IV, Section The recipient be performed, all obligations set forth in Schedule 4 to this 4.01 performed the Grant Agreement. obligations set forth in the grant agreement 37 The Recipient shall (i) maintain, or cause to be GA, Article Complied with maintained, separate accounts for the Project; (ii) have IV, Section The imprest account such accounts and related financial statements audited 4.02 for the grant was set annually, in accordance with appropriate auditing up and maintained standards consistently applied, by independent auditors appropriately by JPFD. whose qualifications, experience and terms of reference Project audit reports area acceptable to ADB; (iii) furnish to ADB, as soon as for the loan and grant available but in any event not later than 6 months after the were submitted timely end of each related fiscal year, certified copies of such as required. audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Grant proceeds and compliance with the financial covenants of this Grant Agreement as well as on the use of the procedures for imprest account/statement of expenditures), all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request. 38 The Recipient shall enable ADB's representatives to GA, Article Complied with. inspect the Project, the Goods financed out of the IV, Section Inspected through proceeds of the Grant, and any relevant records and 4.03 review missions. documents.

Appendix 6 35

No Description Reference Compliance Status in Legal Agreement 39 In addition to the two demonstration sites selected based GA, Complied with. on screening of the 23 project counties, i.e. Suichuan Schedule 4, A total of six County with Bizhou and Dafeng township in Jian Para. 3 demonstration sites Municipality, and Zixi County with Ma Tou Shan and Wu in Fenyi, Suichuan, Shi Zhen townships in Fuzhou Municipality, other sites Anfu and Jishui shall be proposed by the EA and added if they fulfill the Counties were following criteria: (i) representative of the forest selected in management types at lower and upper elevations, (ii) accordance with the representative of the different level of damages in the criteria as specified affected forest types, (iii) beneficiary willingness and and endorsed by technical capacity to actively participate in the innovative ADB. restoration measures, and (iv) institutional capacity of the county forest bureau, including trained staff, and well- equipped office. 40 Implementation of the project activities shall be carried out GA, Complied with in the selected counties which are representative to the Schedule 4, All activities were seven major type of forest development in Jiangxi Para. 2 carried out in Province, including Chinese fir, pine, mixed broadleaved association with the deciduous and evergreen, Camellia oil tea, bamboo, Loan project. shrub, and other economic forest. ADB = Asian Development Bank, EA = executing agency, EAR = environmental assessment report, EMP = environmental management plan, GA = Grant Agreement, IA = implementing agency, ICB = international competitive bidding, IEE = initial environmental examination, JFD = Jiangxi Forestry Department, JPG = People’s Government of Jiangxi Province, LA = loan agreement, NCB = national competitive bidding, PA = project agreement, PIO = project implementing office, PLG =project leading group, PMO = project management office. Sources: ADB and Jiangxi PMO.

36 Appendix 7

FINANCIAL AND ECONOMIC REEAVLUATION

A. Scope of Reevaluation

1. Financial and economic reevaluations were conducted to assess the financial and economic viability of the project and each of the six types of plantations developed by the project at completion. Data used in the analysis were derived from field studies undertaken during the project completion review. The project period was assumed to be 25 years (2010 to 2034), including 7 years of overall construction works for the establishment of all plantations.

B. Project Outputs

2. Project outputs at completion included establishing 29,727 hectares (ha) of timber plantation (Chinese fir and slash pine), 5,150 ha of economic tree crop plantation (tea tree oil, orange, and tea), and rehabilitating 12,761 ha of existing bamboo forests. A salient observation is that the market prices of various economic tree crop products (bamboo shoots, orange, tea- tree oil, and tea) have increased significantly over the period of 2010-2019, which explained the fact that the value of physical outputs increased by 39% despite the 6% decrease of total planation area. The outputs at completion as compared with the appraisal estimates are presented in Table A7.1.

Table A7.1: Project Outputs at Completion vs. Appraisal Physical Outputs Value (CNY million) Area (ha) Item Unit At appraisal At PCR At appraisal At PCR At appraisal At PCR Chinese fir million m³ 6.1 6.1 4,279.9 5,444.1 23,950.0 24,447.5 Slash pine million m³ 3.2 1.2 2,194.1 831.5 11,699.0 5,279.6 Resin million kg 96.5 29.4 386.1 235.0 Bamboo shoots million kg 254.2 289.7 106.9 1,016.7 11,200.0 12,760.8 Bamboo million kg 1,343.7 1,531.0 941.4 1,071.7 Orange million kg 859.1 389.1 1,202.7 1,739.2 2,300.0 1,137.3 Tea-tree oil million kg 14.3 27.6 515.2 2,659.8 1,500.0 3,569.2 Tea million kg 11.9 20.4 107.0 496.5 200.0 443.9 Total 9,733.3 13,494.5 50,849.0 47,638.3 CNY = yuan, ha = hectare, kg = kilogram, m3 = cubic meter Sources: Asian Development Bank and Jiangxi project management office estimates.

C. Methodology and Assumptions

3. The methodology and assumptions for financial reevaluation were based on the model used at appraisal but with updated unit values to estimate the financial internal rate of return (FIRR) at completion. The financial reevaluation was conducted for each type of plantations in the following steps: (i) estimation of net cash flow, (ii) estimation of the weighted average costs of capital (WACC), (iii) estimation of the FIRRs, (iv) assessment of the project financial viability based on the FIRR and WACC, and (v) sensitivity analysis.

4. The financial capital costs included costs of (i) establishment of plantations (civil works for infrastructures, seeds/seedlings, inputs like fertilizers/pesticides and labors for site clearing, preparation, planting, tending etc.); (ii) other indirect fees (e.g. designs, management and monitoring); (iii) rental fees for land occupied for planation; and (iv) the cost of project management and others including insurance, capacity development, interests/commitment charges during construction. The financial capital costs used for the re-evaluation were actual

Appendix 7 37 expenditures expressed in the prices of the year when they were actually incurred. Land cost was not considered in the appraisal estimates based on the involvement of state-owned farms which owned the land and did not anticipated incremental cost for land. With the participation of private forest enterprises and households, 42% of the forestland developed under the project were obtained through leasing schemes, the cost of which was annualized and included in the reevaluation.

5. The operating cost was estimated on the assumptions of: (i) a single rotation, which means that none of the costs or benefits of replanting a site have been considered; (ii) a 25-year period, which captures the full rotation of all timber species financed under the project, including the construction period of 3 years for the establishment of plantations as at appraisal; (iii) complete production and harvesting costs, including the costs of extraction trails, logging, and skidding to the roadside; and (iv) thinning and tending measures applied for all relevant species. Key difference in updated values as compared with original assumptions is regarding the labor cost which increased from CNY50 per day to CNY120 per day for unskilled labor over the implementation period. The hike of labor cost boosted the operating cost for forest tendering, timber cutting and transportation, fruit harvesting, as well as preliminary processing of products. The insurance premium for commercial forests increased to about CNY3.2 per mu,1 for which government subsidizes 60% of the premium, and the forest farmers will bear the remaining 40%.

6. On revenue side, timber species have different growth rates, which resulted in the generation of revenues at different times. The first and second thinning generated income from small-diameter thinned wood, however the volume of which was adjusted as operators tend to reduce the thinning practices to benefit from the market appetite for bigger-diameter timber. For economic tree crops, revenue generation began in years 3 and 4 and reached full production in year 6. For bamboo, the incremental production of bamboo shoots started in year 2 and the incremental production of bamboo stemmed in year 4, maintaining an improved level over the rest of the project period. Though the market prices grew significantly over the period of 2010- 2019 for some products such as orange, oil tea, and tea, the averaged prices based on the prices during the project preparation and prevailing at completion with deduction of losses due to harvesting or transportation of products were used in the reevaluation. This is consistent with the expectation of interviewed operators and market experts in view of the anticipated market fluctuation over the project lifetime.

D. Weighted Average Cost of Capital

7. The WACC was calculated for each type of plantation based on the actual composition of financing sources made during the implementation. The results ranged from 1.67% to 3.47%, while the WACC for the overall project was 2.51%, against 3.44% estimated at appraisal. The WACCs at completion were lower than those estimated at appraisal mainly because of the lower interest rate of the ADB loan (10-years LIBOR-based plus 0.6% spread including maturity premium) prevailing at the completion and its higher proportion.

E. Re-evaluated Financial Internal Rate of Return

8. FIRR at completion ranged from 13.1% for Chinese fir to 30.6% for orange. Timber plantations registered generally lower rates of return because of the long time required to generate salable timber. For economic tree crops, the species involved are of high value (tea tree oil, tea), or a local specialty (orange), which enjoy relatively high market price premium. These

1 A mu is a Chinese unit of measurement (1 ha = 15 mu).

38 Appendix 7 species mature and generate revenue much earlier than timber planation. The FIRR for overall project at completion was 14.3%, lower than 17.4% estimated at appraisal. The differences in FIRR results were mainly due to the difference in market prices of economic crops, inclusion of land cost and hike in labor costs for forest tendering, timber cutting and transportation, fruit harvesting, as well as preliminary processing of products. Timbers indicated lower results partly due to the market appetite for bigger-diameter timber which prolonged the time of revenue generation. All results are substantially higher than the WACC, demonstrating the financial viability of the project. The FIRRs and WACCs at completion and the FIRRs at appraisal are summarized in Table A7.2.

Table A7.2: FIRR and WACC at Appraisal and Completion At Appraisal At PCR Item FNPV FNPV WACC(%) FIRR(%) WACC(%) FIRR(%) (CNY million) (CNY million) Chinese Fir 3.00 15.8 1,254 1.67 13.1 1,361 Slash Pine 3.50 15.9 633 2.35 14.4 400 Bamboo 3.62 19.7 299 3.46 16.1 194 Oil-tea 4.41 20.6 114 3.04 21.6 353 Orange 4.72 22.5 247 3.02 30.6 324 Tea 4.32 24.9 22 2.59 20.6 73 Overall Project 3.44 17.4 2,535 2.51 14.3 2,428 FIRR = financial internal rate of return, WACC= weighted average costs of capital, FNPV = financial net present value. Sources: RRP and ADB estimates.

9. The sensitivity analysis tested the robustness of the financial viability of the six types of plantations and overall project, using three scenarios: (i) a 10% revenues decline, (ii) a 10% operation and maintenance (O&M) cost increase, and (iii) a combination of both. Table A7.3 shows that all types of plantations and overall project would remain financially viable in tested scenarios. The 10% revenues decline would have a moderate impact on the FIRR for all type plantations and the overall project, while a 10% O&M cost increase would have less impacts. The financial viabilities of all six types of plantations and overall project have been proven to be robust at project completion.

Table A7.3: Summary of the Sensitivity Analysis FIRR (%) Item Revenue O&M Cost O&M Cost+10% Base -10% +10% Revenue -10% Chinese Fir 13.1 11.9 12.6 11.4 Slash Pine 14.4 5.8 6.3 4.8 Bamboo 16.1 11.6 13.0 7.6 Oil-tea 21.6 16.9 18.1 13.0 Orange 30.6 27.0 28.1 24.2 Tea 20.6 16.5 17.4 13.0 Overall Project 14.3 13.1 12.2 10.9 FIRR = financial internal rate of return, O&M = operation and maintenance. Sources: RRP and ADB estimates.

Appendix 7 39

F. Financial Sustainability Analysis

10. Forest plantation requires long period to obtain stable financial returns, so secured land occupation is critical. Under the project, 42% of the forestlands were acquired through land-lease contracts covering leasing length of 30-45 years and the rest are owned by respective state- owned farms. With such arrangements, forest operators are more likely to sustain the forestry operations for long-term benefits.

11. The project effectively addressed the issue of lack of investment funds and access to credit. End-borrowers obtained the sub-loans with the same terms and conditions as those of the ADB loan. These terms, in lower interest rates and longer tenors than the loans typically available at commercial banks, were in line with the features of forest investments and allowed end- borrowers to repay without undue stress. Debt services have been conducted on time and no defaults have happened as of the time of the report.

12. Price fluctuations for forest products is a major risk, despite the significant price increase observed over the past years. Farmer’s access to market information has improved with the development of on-line trading systems in PRC, and additional benefit was gained when individual farmers linked up with agro-enterprises through guaranteed buyback schemes. However multiple factors play in the relationship of demand and supply and the fluctuation may not always be in favor of the forest operators.

13. Other risks concern climate disasters, forest fires, and plant pathogens that may affect the quantity and quality of forest products. Forest insurance for fire and natural risk has been fully covered in the project with strong government support, however the forest value insured is too low.

G. Economic Reevaluation

14. The economic re-evaluation was conducted for six types of plantations developed by the project and the overall project, comparing situations with and without the project and using the same methodologies and major assumptions as the economic analysis at appraisal, following ADB’s Guidelines for the Economic Analysis of Projects. 2 The economic reevaluation was conducted for each types of plantations as well as the overall project in the following steps: (i) estimation of net economic benefit flow, (ii) estimation of the EIRR, (iii) comparison of the EIRRs with the economic cost of capital (9%), (iv) comparison of the EIRR at completion with the EIRR at appraisal, and (v) sensitivity analysis.

15. The economic costs of each type of plantations consist of incremental capital costs required for the establishment of plantations, normal O&M costs of the plantations and harvesting costs. As at the appraisal, O&M costs are the same as in the “without project” scenario and are not considered. The financial costs used for the financial analysis were converted to the economic costs by adopting the same methodology used at appraisal. For purpose of the economic reevaluation, all costs that were incurred prior to the project implementation were treated as sunk costs and were excluded from the analysis.

16. The economic benefits that were quantified in the reevaluation included (i) direct benefits computed from the sales of the products with output prices based on actual border prices for comparable imported timber, fruits, and fertilizers and are adjusted for transport and processing

2 ADB. 2017. Guidelines for Economic Analysis of Projects. Manila.

40 Appendix 7 costs; and (ii) indirect benefits of carbon sequestration quantified following the same method adopted at appraisal. Indirect benefits were not included for EIRR analysis at appraisal.

17. Other specific assumptions used for the economic reevaluation are below. (i) The project life was assumed to be 25 years, including an implementation period of 7 years; (ii) The domestic price numeraire is used in estimating economic costs and benefits which were expressed in 2019 constant price. (iii) The Chinese yuan (CNY) is the unit of account. The exchange rate used is CNY6.8176 per $1 at the loan financial closing. (iv) The economic costs and benefits of tradable goods and services were derived from the respective financial costs and benefits by applying a shadow exchange rate factor of 1.023. The shadow wage rate factor used was 0.84 of the prevailing wage rate for unskilled labor and 1.0 for skilled labor. (v) Transfer payments such as taxes, duties, and subsidies are excluded from the valuation of economic costs and benefits. (vi) Residual value was estimated on the remaining value of timber species which would be harvested beyond the operation period; (vii) A discount rate of 9% per annum is assumed as the economic opportunity cost of capital; and (viii) Economic price of carbon dioxide of CNY28 per ton was used, which is consistent with the trading price of carbon dioxide on local markets.3

18. The EIRRs without indirect benefits at completion ranged from 16.1% for Chinese Fir to 37.2% for orange, and 19.6% for the overall project. With indirect benefit, the EIRR for the overall project increased slightly to 20.7%. The EIRRs with and without indirect benefits of all types of plantations and overall project at the completion are higher than the economic cost of capital (9%), demonstrating that the project investments in the establishment of various plantations are economically viable at project completion. The EIRR results and the costs and benefits for the overall project are presented in Table A7.4 and Table A7.5.

19. The sensitivity analysis tested the robustness of the economic viability of the six types of plantations and overall project, using three scenarios: (i) a 10% benefit decline, (ii) a 10% O&M cost increase, and (iii) a combination of both. Table A7.6 shows that all types of plantations and overall project would remain economically viable in tested scenarios.

Table A7.4: EIRR at Appraisal and Completion Item At appraisal At Completion EIRR EIRR EIRR with indirect ENPV@9% (%) (%) benefits (%) (CNY million) Chinese Fir 18.6 16.1 17.5 292.0 Slash Pine 19.0 16.8 17.7 91.1 Bamboo 21.7 22.5 23.0 123.4 Oil-tea 24.7 27.5 28.2 160.4 Orange 28.6 37.2 37.7 158.6 Tea 32.2 27.8 28.3 32.1 Overall Project 20.7 19.6 20.7 828.8 EIRR = economic internal rate of return, ENPV = economic net present value. Source: Asian Development Bank estimates.

3 This value is conservative as compared with the global social cost of carbon at a unit value of $36.30 per ton of carbon dioxide or its equivalent in 2016 prices, to be increased by 2% annually in real terms, which was suggested in Guidelines for the Economic Analysis of Projects (footnote 1).

Appendix 7 41

Table A7.5: Economic Internal Rate of Return (CNY million) Net Benefits Net Benefits Capital Operating Direct Residual Indirect without Year Cost Costsa Benefitsa Value Benefits indirect with indirect benefits benefits 2010 23.3 0.37 -2.52 0.01 -26.20 -26.20 2011 51.4 -0.03 -4.20 0.25 -55.60 -55.35 2012 75.7 -0.37 -5.54 0.81 -80.90 -80.10 2013 70.4 5.37 3.91 1.78 -71.86 -70.08 2014 69.9 18.20 17.79 2.89 -70.30 -67.41 2015 35.0 37.48 42.72 4.29 -29.73 -25.45 2016 38.7 59.35 67.68 5.78 -30.40 -24.62 2017 13.8 87.8 118.5 7.4 16.9 24.3 2018 3.0 119.6 169.9 9.0 47.3 56.2 2019 0.3 140.6 214.7 10.6 73.7 84.2 2020 150.7 251.9 12.0 101.2 113.3 2021 156.6 267.0 13.8 110.3 124.1 2022 167.7 291.0 14.3 123.3 137.7 2023 180.4 325.7 14.7 145.3 160.0 2024 190.9 381.6 14.8 190.6 205.5 2025 199.5 425.1 14.9 225.6 240.5 2026 196.3 417.1 14.9 220.8 235.7 2027 215.0 426.0 14.9 211.1 225.9 2028 232.4 503.5 14.9 271.2 286.1 2029 243.1 560.8 14.9 317.7 332.6 2030 216.4 496.0 14.9 279.6 294.5 2031 200.4 469.2 14.9 268.7 283.6 2032 185.6 425.4 14.9 239.8 254.6 2033 164.8 373.8 14.7 209.0 223.7 2034 245.5 617.3 2,550.4 13.3 2,922.2 2,935.5 EIRR= 19.6% 20.7% ENPV@9%= 758.0 828.8 EIRR = economic internal rate of return, ENPV = economic net present value. a Negative value in earlier years is due to the bamboo component which incurred higher results in without-project scenario than those in with-project scenario in early years. Source: Asian Development Bank estimates.

Table A7.6: Sensitivity Analysis on EIRR Base Case 1 Case 2 Case 3: Switch Value (%) with Plantation Indirect O&M Benefits Benefit-10% plus O&M Benefit Benefit +10% -10% O&M +10% Increased Decreased

Chinese fir 17.5 17.1 16.3 15.8 183.2 51.5 Slash Pine 17.7 17.4 16.8 16.4 282.9 61.5 Bamboo 23.0 20.8 19.3 16.8 52.8 29.8 Oil-tea 28.2 25.2 23.8 20.5 58.8 34.7 Orange 37.7 35.5 34.2 31.8 122.4 53.3 Tea 28.3 25.5 24.4 21.4 69.2 38.9 Overall Project 20.7 19.5 18.4 17.2 94.8 42.0 EIRR = economic internal rate of return, O&M = operation and maintenance. Source: Asian Development Bank estimates.

42 Appendix 8

SOCIAL IMPACT AND POVERTY REDUCTION IN THE PROJECT AREA

A. Background

1. A poverty reduction and social impact analysis was conducted during project preparation. Based on the analysis, the project beneficiaries include farm households with forestry landholdings, farmers’ cooperatives, private enterprises, and the state forestry farms. The beneficial households will earn income by (i) directly managing forestry land, (ii) providing wage labor during project implementation and operation, and (iii) renting or sharing revenue for leasing out forestry land. The project is classified as Targeted Intervention-Geographic (TI-G) and expected to contribute to poverty reduction in more remote forestry areas.

B. Socioeconomic Growth in the Project Areas

2. The project has improved the productivity of the forestry sector, mitigated forest resource degradation, addressed the sustainability problems of forest lands, improved the efficiency of forest management, and contributed to regional economic growth in the project area, including 5.3 million person-days job opportunities and CNY25 million investment in nursery stock, fertilizer, forestry equipment, etc. The statistical data shows that socioeconomic conditions in the project area have improved rapidly in recent years. From 2011 to 2018, the per capita gross domestic product (GDP) growth in 17 counties in the project areas ranged from 79.1% to 187.4% (Table A8.1). Furthermore, the per capita GDP growth rates in all 17 counties in the project areas have been higher than the average growth rate in Jiangxi province except Xiangdong County (Figure A8.1).

Table A8.1: Per Capita GDP in the Project Areas (CNY/person) Project County 2011 2012 2013 2014 2015 2016 2017 2018 Growth Suichuan 11,894 13,273 17,543 17,684 18,887 20,752 23,411 23,498 97.6% Yongxin 11,618 13,250 14,851 16,398 17,486 19,258 22,097 24,218 108.5% Anfu 20,141 22,864 25,873 28,645 30,405 33,291 34,121 37,158 84.5% Jishui 14,800 17,000 19,078 20,110 21,579 23,600 29,127 29,557 99.7% Jinggangshan 23,367 28,653 30,051 32,510 34,147 40,439 44,617 48,082 105.8% Xiangdong 33,840 36,947 43,836 46,698 49,057 53,059 56,011 60,604 79.1% Xiushui 9,322 11,723 13,272 14,677 15,645 17,428 22,174 26,790 187.4% Yudu 12,544 14,089 16,247 17,744 19,144 21,095 24,298 26,582 111.9% Longnan 23,656 28,163 31,392 34,944 37,012 41,283 45,466 49,967 111.2% Shicheng 8,630 9,725 10,970 11,855 12,550 13,875 16,061 17,715 105.3% Ruijin 11,484 12,628 14,361 16,080 17,344 21,265 23,477 25,061 118.2% Nanfeng 21,955 26,413 30,378 33,542 35,980 39,143 42,972 46,238 110.6% Guangchang 10,725 14,195 17,517 19,715 20,938 23,946 26,937 29,307 173.3% Chongren 16,943 19,047 23,517 23,870 27,290 28,155 31,049 33,440 97.4% Zixi 17,632 20,074 23,857 25,877 27,127 29,706 33,662 36,288 105.8% Guangfeng 23,371 27,148 31,532 35,329 37,852 41,677 48,655 53,326 128.2% Fenyi 43,993 47,078 56,066 62,108 66,731 71,990 78,354 84,857 92.9% Jiangxi Province 26,150 28,800 31,930 34,674 36,724 40,400 45,187 47,434 81.4% Source: Statistic books of Jiangxi province and 17 counties in the project area.

Appendix 8 43

Figure A8.1: GDP Growth in Project Areas Figure A8.2: Rural Income in Project Areas

3. A total of CNY406.8 million wages have been paid to laborers recruited during project implementation, and CNY6.6 million annual rents have been disbursed for land lease. In general, the project implementation has contributed to the growth of rural incomes in the project areas, to some extent. With the demonstration effect and influence of the project implementation, more local farmers have engaged directly in afforestation and related business. The local farmers also benefited from the services and technical support provided by the project or project-financed farms and enterprises. From 2011 to 2018, the rural per capita net income growth in 17 counties in the project areas ranged from 95.9% to 205.7% (Table A8.2). The income growth rates in project counties have caught up with the average rate in Jiangxi Province (Figure A8.2).

Table A8.2: Composition of Rural Households by Per Capita Annual Net Income (CNY/person) Project County 2011 2012 2013 2014 2015 2016 2017 2018 Growth Suichuan 3,735 4,370 5,125 6,752 7,677 8,570 9,506 10,648 185.1% Yongxin 5,406 5,989 5,809 6,667 7,587 8,432 9,453 10,710 98.1% Anfu 6,752 7,725 8,636 9,985 11,063 12,125 13,289 14,604 116.3% Jishui 7,166 8,522 9,741 11,292 12,568 13,910 15,180 16,652 132.4% Jinggangshan 5,401 6,163 6,459 6,799 7,685 8,577 9,556 10,583 95.9% Xiangdong 8,956 10,371 11,427 13,116 14,046 15,481 16,828 18,012 101.1% Xiushui 3,615 4,186 4,950 5,547 7,599 8,496 9,415 10,437 188.7% Yudu 3,931 4,430 5,134 6,878 7,862 8,799 9,635 10,775 174.1% Longnan 5,185 5,910 6,820 7,640 8,572 9,506 10,481 11,591 123.5% Shicheng 3,132 3,556 4,223 5,818 6,662 7,398 8,435 9,573 205.7% Ruijin 4,576 5,176 6,242 7,235 8,251 9,211 10,301 11,355 148.2% Nanfeng 10,707 12,367 13,776 15,688 17,147 18,519 20,130 21,774 103.4% Guangchang 3,545 4,108 4,876 6,553 7,430 8,304 9,300 10,399 193.3% Chongren 8,765 9,626 11,103 12,266 13,908 14,873 16,193 17,574 100.5% Zixi 6,839 7,728 8,879 9,831 10,725 11,605 12,649 13,762 101.2% Guangfeng 7,656 8,558 9,125 11,268 12,541 13,760 15,134 16,541 116.1% Fenyi 8,629 9,844 11,308 12,575 13,656 14,831 16,166 17,540 103.3% Jiangxi Province 6,892 7,828 8,781 10,117 11,080 12,140 13,242 14,460 109.8% Source: Statistic books of Jiangxi province and 17 counties in the project area.

C. Project Beneficiaries

4. A total of 46 forest farms, 59 forest enterprises, 225 large households, 9 united households, and 127 individual households have been provided with Asian Development Bank (ADB) loans. A total of 11,919 households have participated directly in afforestation and bamboo rehabilitation or through profit sharing via farmers’ cooperatives or companies; and 25,014 households have benefited indirectly from the project by leasing their forestland. In total, 36,933 rural households in 875 villages have benefited from the project (Table A8.3).

44 Appendix 8

Table A8.3: Project Beneficiaries Project County Forest Forest Large United Individual Benefit Benefit In which, Farm Enterprise Household Household Household Village Household Directly benefit household Suichuan 4 10 21 1 17 216 1,173 69 Yongxin 2 - - - - 36 1,188 1,188 Anfu 6 - - - - 81 9,121 6,312 Jishui 2 - 18 2 - 40 1,450 130 Jinggangshan 3 1 - - - 32 1,245 481 Xiangdong 3 1 - - - 26 37 - Xiushui 2 4 5 - - 38 1,250 5 Yudu - 10 18 - - 85 12,000 2,300 Longnan - 3 25 - - 26 2,820 25 Shicheng - 2 5 6 2 22 342 236 Ruijin 1 3 1 - - 3 125 16 Nanfeng 1 - 40 - - 23 87 40 Guangchang 8 3 15 - 82 116 291 97 Chongren 3 5 9 - - 23 156 39 Zixi 3 10 64 - 26 30 2,000 500 Guangfeng - 4 1 - - 15 1,628 1 Fenyi 7 3 3 - - 52 1,800 260 Fengshushan Farm 1 - - - - 11 220 220 Total 46 59 225 9 127 875 36,933 11,919 Sources: Jiangxi provincial project management office and 18 project implementation offices in the project area.

Figure A8.3: Project Participants Figure A8.4: Land Leasing

5. The total afforestation area under the project has achieved 47,638 hectares (ha) by completion, in which 20,025 ha forest lands’ use rights were transferred from farmers through land leasing agreements, accounting for 42%. A total of 25,014 households with 93,751 persons in 645 villages have leased out their forest lands and received CNY6.6 million annual rent. The leasing agreements signed by female members count for around 7% with a range from 2% to 15% in the project counties. The annual rents per hectare are various from CNY150 to CNY800 and lease terms between 29 and 45 years (Table A8.4).

Table A8.4: Land Leasing Project County Total In which, Village Household Farmer Annual Lease Signed by Afforestation Leased F armers’ Rent term Female (ha) (ha) (HH) (Person) (CNY/ha) (Year) (%) Suichuan 4,572 2,847 216 1,104 5,865 225 30 5 Yongxin 1,611 - - - - Anfu 3,062 194 47 2,809 6,840 390 35 15 Jishui 1,815 900 40 1,320 5,280 300 30 10 Jinggangshan 2,779 127 13 764 3,056 450 30 5 Xiangdong 438 138 26 37 150 250 35 5 Xiushui 1,708 785 38 1,245 4,300 400 30 8 Yudu 6,310 6,139 54 9,700 38,800 300 30 5 Longnan 4,620 1,160 26 2,795 8,460 300 45 10

Appendix 8 45

Project County Total In which, Village Household Farmer Annual Lease Signed by Afforestation Leased F armers’ Rent term Female (ha) (ha) (HH) (Person) (CNY/ha) (Year) (%) Shicheng 816 735 22 106 424 150 34 7 Ruijin 717 102 3 109 436 150 30 8 Nanfeng 1,602 287 16 47 188 300 30 10 Guangchang 3,363 1,476 34 194 738 380 35 2 Chongren 1,741 1,056 15 117 542 300 35 2 Zixi 4,766 2,800 28 1,500 6,000 375 29 3 Guangfeng 4,190 950 15 1,627 6,512 800 30 5 Fenyi 1,591 330 52 1,540 6,160 350 30 5 Fengshushan Fa 1,935 - - - - Total/Average 47,638 20,025 645 25,014 93,751 329.39 29~45 2~15 Sources: Jiangxi provincial project management office and 18 project implementation offices.

D. Poverty Reduction in the Project Area

6. The incidence of poverty in the project area has been reduced significantly from 2011 to 2018. Among 17 project counties, 8 counties were designated as national poverty county before project implementation, including Suichuan, Yongxin, Jinggangshan, Xiushui, Yudu, Shicheng, Ruijin, and Guangchang. The poverty incidence rates of those national poverty counites have been declined from 24.28~33.90% to 0.25~4.71% (Table A8.5). It was also noted that the poverty reduction rates in the project areas have been much higher than the average rate in Jiangxi Province as a whole (Figure A8.5).

Table A8.5: Poverty Incidence in Project Areas (%) Project County 2011 2012 2013 2014 2015 2016 2017 2018 Reduction Suichuan 24.28 18.48 16.38 13.31 9.38 6.19 3.17 0.96 18.09 Yongxin 24.73 21.90 18.52 10.40 8.65 6.08 1.02 0.92 18.65 Jinggangshan 27.48 21.50 17.14 13.80 6.06 1.60 0.42 0.25 25.88 Xiushui 24.51 19.87 16.48 14.30 10.70 7.30 4.40 3.50 17.21 Yudu 33.90 29.49 27.13 20.84 15.60 8.77 6.49 4.71 25.13 Shicheng 26.30 25.60 20.80 14.80 9.78 8.57 6.85 0.80 17.73 Ruijin 28.37 24.25 20.12 14.30 10.09 5.02 0.92 0.72 23.35 Guangchang 31.75 30.09 23.66 9.67 8.66 5.47 0.82 0.57 26.28 Jiangxi Province 12.60 10.80 9.20 7.70 5.70 3.30 2.37 1.38 9.30 Sources: Jiangxi provincial project management office and 8 counties’ poverty reduction offices in the project area.

Figure A8.5: Reduction of Poverty Incidence Figure A8.6: Labor and Employment

46 Appendix 8

E. Labor and Employment

7. A total of 75,368 local farmers or those that lease out lands have been provided job opportunities associated with forestland nearby through this project (Table A8.6), including land reclamation, tree planting, forest tending, daily maintenance, harvest, etc. Of which, 50,073 women were recruited in afforestation, accounting for 66%. A total of 5.6 million person-days labor force employment has been generated during the project implementation. In addition, so far, a total of 284 long-term jobs for forest maintenance have been provided for local labors including 41 female laborers, accounting for 14%. Less participation of women in forest maintenance since the job is actually a forest ranger in those remote mountains.

Table A8.6: Job opportunities Created by Component Project County Labors for In which, Working Wage Total wage Labors for In which, Salary Annual Afforestation female days maintenance fem Salary (Person) (Person) (Days/pers (CNY/ (CNY (Person) (Person) (CNY/ (CNY on) day) million) month) million) Suichuan 11,580 8,833 60 70 48.64 24 5 3,000 0.864 Yongxin 7,845 5,320 35 70 19.22 9 2 2,500 0.270 Anfu 1,200 690 274 80 26.30 15 3 2,800 0.504 Jishui 5,000 3,400 60 70 21.00 12 - 2,000 0.288 Jinggangshan 2,560 1,856 106 80 21.71 15 3 2,500 0.450 Xiangdong 1,200 500 30 90 3.24 3 - 2,000 0.072 Xiushui 2,434 1,720 76 70 13.02 12 2 1,800 0.259 Yudu 8,526 6,500 67 70 39.99 42 3 1,800 0.907 Longnan 4,000 2,200 100 100 40.00 25 2 2,000 0.600 Shicheng 2,100 1,370 45 70 6.62 6 - 1,500 0.108 Ruijin 570 360 185 70 7.38 5 - 2,000 0.120 Nanfeng 3,800 2,300 45 80 13.68 10 1 2,000 0.240 Guangchang 2,325 1,820 172 80 31.99 26 4 1,800 0.562 Chongren 3,880 2,480 45 75 13.10 10 3 2,300 0.276 Zixi 9,000 4,800 50 80 36.00 18 6 3,000 0.648 Guangfeng 5,468 3,504 80 80 35.00 31 4 1,800 0.670 Fenyi 1,200 670 150 80 14.40 10 3 2,300 0.276 Fengshushan Farm 2,680 1,750 83 70 15.57 11 - 2,200 0.290 Total/Average 75,368 50,073 406.86 284 41 2,183 7.404 Sources: Jiangxi provincial project management office and 18 project implementation offices in the project area.

Labors for Afforestation (person) 12,000 Total Afforestation (ha) 7,000

10,000 6,000 5,000 8,000 4,000 6,000 3,000 4,000 2,000

2,000 1,000 - - Zixi Anfu Yudu Fenyi Jishui Ruijin Xiushui Yongxin Nanfeng Longnan Shicheng Suichuan Chongren Xiangdong Guangfeng Guangchang Jinggangshan

Fengshushan Farm Figure A8.7: Labors vs. Afforestation Figure A8.8: Yield of Forest Products

F. Yields of Forest Products

8. The forests under the project have gradually provided or will yield various forest products depending on different species. Based on current growing situation and yields, the experts from county forest bureau forecast the yields under the project, including timber, rosin, tea-seed oil, oranges, tea leaves, bamboo, and bamboo shoot (Table A8.7). The average yields under the project will be similar to the first-rate (top 10%) in Jiangxi Province (Figure 8.8).

Appendix 8 47

Table A8.7: Yields of Forest Products Project County Timber Rosin Tea-seed Oil Oranges Tea Leaves Bamboo Bamboo Shoot Suichuan 217 1,350 525 22,000 3,000 7,040 1,780 Yongxin 220 1,120 600 18,900 2,300 7,200 1,200 Anfu 188 1,200 480 24,000 3,600 8,870 1,200 Jishui 196 1,600 450 24,500 3,400 7,700 1,330 Jinggangshan 211 1,200 650 23,000 3,300 7,500 1,275 Xiangdong 187 850 650 21,000 3,400 6,600 1,250 Xiushui 131 1,300 450 22,000 3,550 7,600 1,150 Yudu 207 850 440 20,000 3,200 6,000 2,000 Longnan 260 700 600 23,000 3,150 8,000 1,700 Shicheng 132 860 700 25,000 2,600 7,500 1,600 Ruijin 130 850 470 21,000 2,500 5,250 1,500 Nanfeng 190 1,330 440 29,500 3,100 6,600 1,750 Guangchang 220 1,030 525 23,000 3,200 8,300 2,000 Chongren 280 1,000 550 24,000 2,700 8,700 1,640 Zixi 200 980 460 18,500 3,150 8,000 1,500 Guangfeng 152 800 480 19,000 3,350 8,200 1,750 Fenyi 204 866 560 26,000 3,000 7,625 1,650 Fengshushan Farm 245 900 7,600 1,600 Sources: Jiangxi provincial project management office and 18 project implementation offices in the project area.

G. Gender Development

9. The project was categorized as some gender elements (SGE) during project preparation. Most afforestation activities were implemented in the remote mountain areas, where women are primarily responsible for household work and farming activities, while many men mainly work as migrant laborers in Guangdong province. The land leasing agreements signed by female family members only count for 7% average in the project counties. During project implementation, the women remaining in the villages actively participated in the afforestation. 50,073 local women were recruited in afforestation, accounting for 66% of total labors recruited. Around CNY268 million wages have been paid to female labors. With the project’s implementation, the training and job opportunities provided have enabled local women to gain skills and income. Having an additional income earner in the families may lift many households out of poverty while increasing the status of women within their households and communities.

H. Conclusion

10. The project has contributed to sustainable socioeconomic development and poverty reduction in project areas. This is especially because (i) the project activities have generated a large number of employment opportunities for local farmers, in which, around 66% of laborers are female; (ii) the land used for forest plantation was transferred from local farmers voluntarily through land leasing agreements. The rent was paid at lumpsum or annually based on the agreements; (iii) the project has contributed to poverty reduction including paid wages income, profit sharing mechanism through farmers’ cooperative, and subsidized incremental wage for those labors from poverty households; and (iv) the project implementation improves the productivity of the forestry sector, including higher yields of forestry products.