China - Heilongjiang Agricultural Development

 ICRR 12014 Report Number : ICRR12014 ICR Review Operations Evaluation Department 1. Project Data: Date Posted : 03/23/2005 PROJ ID : P038988 Appraisal Actual Project Name : Heilongjiang Agricultural Project Costs 239.8 208.8 Development US$M ) (US$M) Country : China Loan/ Loan US$M ) 120 /Credit (US$M) 120 Sector (s): Board: RDV - Animal Cofinancing 0 0 production (41%), US$M ) (US$M) Agro-industry (40%), General public administration sector (10%), General agriculture fishing and forestry sector (7%), Agricultural extension and research (2%) L/C Number : L4161 Board Approval 97 FY ) (FY) Partners involved : None Closing Date 06/30/2003 06/30/2004 Prepared by : Reviewed by : Group Manager : Group : Christopher D. John R. Heath Alain A. Barbu OEDSG Gerrard 2. Project Objectives and Components a. Objectives (1) To raise incomes and living standards (2) To expand rural employment by increasing livestock and aquaculture production and expanding or improving crop and livestock processing (3) To stimulate market development in rural Heilongjiang industries (4) To introduce new production and processing technologies (5) To enhance environmental standards in the design of crop and livestock processing plants . b. Components (a) Livestock production (US$ 116.0 million at appraisal, US$ 100.3 million actual) (b) Aquaculture (US$ 7.9 million at appraisal, US$ 4.8 million actual) (c ) Agroprocessing (US$ 104.3 million at appraisal, US$ 92.0 million actual) (d) Institutional development (US$ 11.7 million at appraisal, US$ 11.7 million actual) c. Comments on Project Cost, Financing and Dates Actual costs were 87 percent of appraisal estimates due to the reduced scale of the beef production, aquaculture, and agroprocessing activities . As a result, the Bank's contribution increased from 50 to 57 percent of total costs. The project was extended one year in order to accomodate the completion of the physical construction of the remaining 3 (out of 14) agroprocessing enterprises, which had been delayed due to the inadequacy of counterpart funds . The combined contribution of the provincial government, county government, and local government declined from the appraisal estimate of $63.8 million to $19.9 million, while that of the beneficiaries increased from $ 56.0 million to $68.9 million. The Bank's contribution remained unchanged . 3. Achievement of Relevant Objectives: (1) Raising incomes and living standards : The rural per capita income of the project counties is expected to reach US$ 404 -- an increase of 130 percent over the baseline year and 26 percent higher than the appraisal target . (2) Expanding rural employment: About 45,800 households participated directly in the livestock and aquaculture programs. The utilization rate of family farm labor increased from 41 percent at the baseline year to 87 percent at completion, compared to the appraisal target of 69 percent. The 14 agroprocessing enterprises supported by the project generated 2,289 full-time jobs for local people by project closing, which is expected to increase to 9,000 full-time jobs at the full development of the project . More than 70 percent of the project beneficiaries have been women. (3) Stimulating market development: All 14 enterprises financed by the project carried out enterprise reforms; this experience is contributing to SOE reform throughout the province . (4) Introducing new technologies : These have included new feeding strategies in livestock production and processing, maize silage, improved husbandry and breeding, and better livestock building design . Milk production per lactating period increased from 2.5 to 3.0 tons before the project to 4.5 tons at project completion. (5) Enhancing environmental standards : Construction of wastewater treatment facilities was completed in 12 out of 14 project enterprises according to standards approved by an independent panel of experts . 4. Significant Outcomes/Impacts: All four components had satisfactory outcomes . The dairy subcomponent of the livestock component appears to have been particularly successful . This has benefited from a strong provincial policy and attracted substantial incremental private sector investment in dairy processing, which has improved services and prices for farmers over the project life. Most project farmers have adopted maize silage technology and improved feed rationing practices, which has resulted in significantly higher milk production per lactating period than the appraisal estimate . The overall appraisal target for fresh milk production was 99 percent met. All of the fourteen agroprocessing enterprises that were supported by the project have carried out enterprise reforms, albeit to varying degrees, to create autonomous corporate enterprises . This has included merging, selling, or leasing state assets to employees to diversify the ownership or privatize the enterprises . In this way, a number of nationally known flagship enterprises have brought financial resources and management experience to the project enterprises . 5. Significant Shortcomings (including non-compliance with safeguard policies): The outcome of beef farming subcomponent -- which was the largest subcomponent of the livestock component -- was not satisfactory. The expected development of a high value beef -processing sector did not materialize and local market demand for finished beef remained flat . Most beef farmers shifted to more profitable livestock activities, such as dairy farming, after the first cycle of cattle fattening . The outcome of the subcomponent for strengthening the facilities of government -owned seed companies was not satisfactory, due to the change in government seed legislation which permitted private sector participation in the seed industry. The government-owned seed companies have not yet responded positively to these changes . Inadequate provision of counterpart funds affected all project activities, slowing project progress . The requirement for pre-financing of livestock procurement by farmers reduced participation in the project, particularly by the poorest smallholders, and in some cases, compromised the quality of the purchased livestock . 6. Ratings : ICR OED Review Reason for Disagreement /Comments Outcome : Satisfactory Satisfactory Institutional Dev .: Substantial Substantial Sustainability : Likely Likely Bank Performance : Satisfactory Satisfactory Borrower Perf .: Satisfactory Satisfactory Quality of ICR : Satisfactory NOTE: NOTE ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness. 7. Lessons of Broad Applicability: (1) It is important to have flexibility in the implementation of an agricultural development project of this nature in order to adjust quickly to changing market opportunities and central government policies which affect the sector . (2) The timely and adequate provision of counterpart funds is important . Counterpart funds for private investments (as opposed to public goods ) should be self-mobilized. More active involvement of local financial institutions during project design might have mitigated this problem . (3) Improved technology plays a key role in projects of this nature . Financing for research and development should be accessible on a competitive basis rather than allocated to a single institution . (4) Voluntary farmers' associations have begun to play a key role in agricultural development in China . It would be good to enhance their role with additional investments in leadership and management training . 8. Assessment Recommended? Yes No 9. Comments on Quality of ICR: The ICR is well written and covers all the bases . However, the connection between some of the lessons learned in section 8 and the previous seven sections is weak . While overall, the lessons are sensible, in some cases, these introduce entirely new issues that were not raised previously in the ICR .