Report No. PID5517

Project Name -Anning Valley Agricultural (@+) ... Development Project

Region East Asia and Pacific

Public Disclosure Authorized Sector Agriculture

Project ID CNPE49665

Borrower People's Republic of China

Implementing Agency Provincial Planning Commission No. 30 Duyuan St. , Sichuan 610016 People's Republic of China Tel: (86-28) 660-4730 Fax: (86-28) 667-7572

Date PID Prepared March 12, 1998 Public Disclosure Authorized Date PID Initially Prepared July 31, 1997

Project Appraisal Date March, 1998

Project Board Date November, 1998

Background

1. Agriculture in China provides sustenance for 1.2 billion people, contributes about 20 percent of the country's Gross Domestic Product (GDP), and is the main source of income for some 200 million farm families. Farming systems are intensive with heavy inputs of labor, fertilizer, small machinery Public Disclosure Authorized and water. Nearly half of the cropped area is irrigated. Food grains occupy about 70% of the total cropland and account for about one-third of the value of agricultural output. Intensive farming has enabled China to meet the basic food requirements of its population, about 22% of the world's total, with less than 11% of the world's arable land and to produce an increasingly sophisticated mix of cash and commercial crops. China has embarked on a rural reform program which has revitalized the agricultural sector, provided impressive growth and structural change through the introduction of the production responsibility system, increased producer prices and enlarged the role of market forces. Small scale crop and livestock producers, as well as agro-processing enterprises, are striving to adapt to an increasing competitive and sophisticated consumer market and, at the same time, to maintain environmentally sustainable production practices.

2. China's Ninth Five Year Plan puts sustainable and stable growth in Public Disclosure Authorized agriculture and the rural economy at the top of its agenda. The Plan states five goals: to achieve greater self-sufficiency in grain, to raise farmers' standards of living, to make better use of technology, to speed up the development of industries that use agricultural products, and to eliminate poverty. To achieve these objectives, the Government intends to protect and expand agricultural land, to invest in irrigation, to improve research and technology, to expedite commercialization of agriculture and to invest in rural and agricultural enterprises. All provinces in China except Tibet and Qinghai have followed these strategies, and the Bank has supported them by financing various types of agricultural development projects in these provinces.

3. Sichuan Province has substantially invested in (i) expanding irrigation, (ii) increasing the productivity of crops and livestock; and (iii) processing farm outputs. The Sichuan Agricultural Development Project (ADP) supported by IDA has been assisting the government in these efforts. The project area is concentrated in the Chengdu plain of the , which is one of the three major geographical regions in the province, and occupies 29t of the total area of the province. The other two regions are the West Plateau and the Southwest Basin. The West Plateau occupies 45t of the province's total area and is important for cattle and fruit production. The southwest region occupying 299 of the province is composed of a river basin area suitable for grain, sugarcane and oil seed crops and a mountainous area, which supports corn, potato and cattle production. According to the provincial development plan, the Southwest Region is slated for accelerated development due to its abundant resources, large income disparities and minority area status. The proposed project is located in this river basin.

The Project

3. Location. The project is located in the Anning River Valley in southwest Sichuan Province, the second largest plain in the province (after Chengdu Plain) and covers an area of 34,700 km2. It has 220,000 ha of cultivated land and a population of 3.4 million, of whom 2.6 million are dependent on agriculture. The project would cover 15 counties within Liangshan Prefecture and Municipality. The area has a favorable climate for crop production: average daily temperatures range from 17 to 200C, sunshine from 2,000-2,700 hours per annum, there are 200-300 days free of frost, and an average of 1,000 mm of rainfall per annum. Rainfall is concentrated in the May-to-October period, leaving the other six months relatively dry. Shortage of water in the dry season is the main cause of low crop yield and low cropping intensity. Investments have been made in the construction of small diversion weirs to secure supplemental water from rivers and lakes; however, efficient distribution systems to bring water to the fields are limited. The Daqiao dam, which is being constructed on the upper part of the Anning River, is scheduled to be completed at the end of 1998. It will be a major source of water in the project area for irrigation, domestic and industrial uses.

4. The population in the project area is poorer than the provincial average. Six out of 15 counties in the project area are listed as state- or province- designated poor counties. These six counties are mostly in remote mountainous areas, where there is a lack of irrigation facilities, inadequate infrastructure, and limited access to technical and market information. In addition, some of the counties at higher elevations are inhabited by the Yi people which represent 35t and 20t of the project's beneficiaries in Liangshan and Panzhihua, respectively.

5. Objectives. The project would support the Sichuan Government's policy to develop the Anning River Valley. It aims to increase the production, productivity, marketability and value-added of agriculture, horticulture, forestry and animal husbandry in the area, with the particular objective of reducing the poverty of farmers in remote areas. These objectives would be

-2 - achieved through: (a) supplying additional and more reliable water supply for irrigation and also industrial and urban use; (b) developing land and technology for grain and vegetable production; (c) developing marginal land for fruit production; (d) improving sericulture technology; (e) improving farmer income by introducing new varieties and technologies for livestock production; and (f) adding value to crop and animal products through processing. The project would foster the effective use of existing natural resources, promote the development of mountainous areas, encourage the participation of women in production processes, improve the environment, and reduce soil erosion.

6. Rationale for Bank Involvement. The proposed project is consistent with the Bank's overall assistance strategy for China, which includes the intensification of agricultural development, while at the same time addressing regional disparities and environmental sustainability. It specifically addresses two of the four principal focus areas for Bank assistance: poverty alleviation and environmental protection. The project also responds positively to the assistance strategy identified in the 1997 CAS; to accelerate commercialization of agriculture, develop new income generating activities and promote better utilization of marginal agricultural lands through the introduction of improved, sustainable production practices. The Bank's involvement would promote the efficient use of limited resources, introduce appropriate new production and processing technologies and promote better planning and management to enable producers to respond to market demand. Bank participation would also be instrumental in introducing environmental standards in the design of agro-processing plants, developing effluent monitoring systems and promoting environmental protection practices.

7. Description. The project would have seven components: (a) water resource development, (b) crop development, (c) orchard development industrial, (d) sericulture development, (e) livestock development, (g) agro- processing, and (f) institutional strengthening.

(a) Water Resource Development: (estimated cost: US$128.5 million). The water resource development component would have three subcomponents. The Manshuiwan subcomponent would comprise the construction of a weir across the Anning River and trunk, main and branch canals. The construction of the lower level canals and the field ditches would be carried out with the participation of the farming communities. An 18 MW hydroelectric power station would also be constructed. The Huang Qiao subcomponent would construct a dam and main and branch canals, to provide water for irrigated agriculture for Miyi Town. It would supply water to two small hydroelectric power stations with a total installed capacity of 640 kW. The lower level canals and field ditches would be constructed with the participation of the farming communities. The Shengli subcomponent would include the construction of the branch and lower level canals, which would distribute water from an existing reservoir for irrigation of high value tree crops.

(b) Crop Development: (estimated cost: US$35.5 million). This component aims to increase grain and vegetable production in the project area by developing wasteland and low-yielding and marginal land for crop production (rice, wheat and corn), supplying new and improved seeds and other agricultural inputs, and providing improved support services. The development of irrigation and drainage system under the project would enhance additional cash crop production such as vegetables after grain.

- 3 - (c) Orchard Development: (estimated cost: US$36.7 million). The project aims to increase the quality and the number of varieties of high quality fruit in the project area. It would develop marginal land and improve existing orchards for high quality fruit production. It would invest in seedling nurseries, develop 2,080 ha of new mango, longan, navel orange and pear orchards, rehabilitate 300 ha of existing pomegranate, pear and navel orange orchards, construct post-harvest facilities, and support research and extension.

(d) Sericulture Development Component: (estimated cost: US$44.9 million). This component aims to increase and improve the quality and productivity of silk production by introducing new sericulture production and processing technologies to mulberry and cocoon-production households. It would invest in silkmoth egg grainages, young silk worm rearing centres, silk cocoon drying centres and silk reeling mills.

(e) Livestock Development: (estimated cost: US$15.6 million). This component aims to increase the household income of project farmers through livestock. It would support the expansion and productivity improvement of sheep, goats, cattle and ducks. This component would introduce sheep as an alternative to goat production in the fragile mountainous areas with the objective of reducing soil erosion. It would introduce rabbits as an income generating activity for women. The project would introduce new improved breeds of all livestock varieties and would promote improved pasture management and forage utilization. This component would also support production technology for ammonification and ensilaging of straws and forages for winter feeding. It would strengthen the support and veterinary services of the Animal Husbandry Bureau.

(f) Agro-Processing: (estimated cost: US$15.8 million). This component aims to provide essential linkages between the production, processing and marketing of livestock, farm produce and cash crops produced under the project. Investment in each subcomponent would be based on specific commercial criteria. The proposed enterprises comprise rice processing mills, seed processing centers, a duck slaughterhouse with feed mill and meat processing facilities. The project would finance orchard houses, fruit packing stations and coldstore facilities.

(g) Institutional Development. (estimated cost US$11.0 million). The project would support the establishment of an Anning River Basin Water Resource Management Committee, invest in overall project management and strengthen institutional arrangements for agricultural and livestock research and extension services and environmental protection.

8. Organization and Management. The project would be managed by the Government of Sichuan Province through Project Leading Groups (PLGs) and Project Management Offices (PMOs) at provincial, prefectural and county levels. The PLGs, which will include representatives of technical bureaus and the All China Women's Federation (ACWF), will provide guidance to the PMOs on project coordination and the resolution of project implementation issues. Representatives from ACWFs at each level would assist the county PMOs in selecting the project beneficiaries and monitoring the participation of poor farmers and women. The Science and Technical Committee (STC) set up under the project would give overall guidance on the technical aspects of the agricultural and livestock production components. This would ensure that

- 4 - appropriate technologies are used in both development and production and that the quality of crop and livestock production is maintained. The Provincial Finance Bureau would manage the financial aspects of the project, including disbursement. County PMOs would work with the county technical bureaus and farmers in implementing project activities. Line agencies (e.g., agriculture, livestock and water conservancy bureaus) would be responsible for technical implementation aspects of the components within their mandate. The Manshuiwan sub-project would be implemented by the Daqiao Hydro-Electric Development Corporation (DHDC) which is owned by the Provincial Water Resources Bureau. DHDC will also be responsible for O&M of irrigation and other infrastructure facilities following project implementation. The Shengli and Huang Qiao subcomponents will be implemented by units of the Water Conservancy Bureaus in Shengli District and of Panzhihua Prefecture. Agriculture and livestock production would be managed by farm households. Agro-processing plants would be managed on a commercial basis with managers responsible for profit and loss. Most of the above project management structure is already in place.

9. Environmental Aspects. The proposed project is rated category B. Please see Attachment 1 for more details.

10. Resettlement. Moderate resettlement will be required under the Manshuiwan and Huang Qiao subcomponents. The number of people to be resettled under the Manshuiwan weir is 545 (or 130 families) and for the Huang Qiao storage facilities is 596 people (145 families). Substantial preparatory work has already been done by the provincial and local governments for the anticipated resettlement. Resettlement Action Plans (RAP) conforming to the Bank's Operational Directive for Involuntary Resettlement (O.D 4.30) are being prepared.

11. Project Benefits. The irrigation facilities to be developed under the project would provide irrigation to about 20,000 ha, supply 380,000 m3/day of raw water for domestic and industrial use and generate 117,000 MWh of electricity per annum. With reliable water supplies available 3,200 ha of marginal land would be developed for agricultural production, and the productivity of 16,000 ha of existing fields would be increased.

12. At full development, the project would generate incremental annual production of 92,160 tons of grain, 52,513 tons of fruit, 71,250 tons of vegetables, and 21,600 tons of tons of meat (beef, mutton, goat and duck), and 13,960 tons of fresh cocoon. Additional income would come from value-added from rice milling, fruit grading and silk reeling. The provincial capacity of silk reeling would be increased by 150%. The project would directly increase the incomes and employment of about 500,000 families and indirectly benefit over 1.5 million households. Newly reclaimed land would be allocated to poor farmers. Eighty percent of livestock, vegetable and silk-cocoon production would be carried out by women. Other benefits would be: (i) the positive impact of the project activities on the environment in the project area, (ii) improved planning and management of Anning River Basin Water Resources, (iii) demonstrated effective commercial agriculture where production depends on market demand, and (iv) improved research and extension.

13. An Anning River Basin Water Resources Management Committee to be established under the project would address policy and legal issues related to water quantity and quality. It would provide guidelines for overall water

- 5 - resources management to ensure the efficient allocation and use of water resources, to develop the ability to prepare for emergencies (flood, droughts, etc.) and to provide a base for research. The Scientific and Technical Committee would ensure that appropriate technologies are used in the project area. It would also control the quality of crop and livestock production. Representatives from the ACWF and the minority groups would monitor the participation of minority, poor farmers and women in the project.

Contact Point: Rapeepun Jaisaard, Task Manager The World Bank 1818 H Street, N.W. Washington, D.C. 20433 Telephone No. (202)458 4057 Fax No. (202) 522 1500

Note: This is information on an evolving project. Certain activities and/or components may not be included in the final project.

Processed by the InfoShop week ending March 20, 1998

- 6- Annex

1. The Project contains many features that are expected to exert positive environmental impacts. Tree planting would help to reduce soil erosion and maintain watershed. Terracing and contouring of land for orchard development would also reduce soil erosion and provide a demonstration future models of development of land with steep slopes. Pasture development and management would help to reverse the prevailing grassland deterioration. The agro- processing plants proposed under the project are of the types not expected to have major potential environmental damage. All plans for processing plants are required to include an environmental assessment report to identify potential pollutants and to propose mitigating measures. Wastewater treatment would be incorporated in the design of all the project's agro-processing plants and monitoring plans would be developed for the project. The Environmental Assessment will be prepared by the time of appraisal and will be available at the Public Information Center.

2. Resettlement Action Plans (RAP) conforming to the Bank's Operational Directive for Involuntary Resettlement (O.D 4.30) have been prepared for 564 people ousted by the construction of the Manshuiwan weir and 632 people by the construction of the Huang Qiao dam. The RAPs have been reviewed during pre- appraisal in October 1997 and found to be satisfactory.

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