China - Freshwater Fisheries Project

Docment of The World Bank FOR OFFICIAL USE ONLY Report No. P-4289-CHA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION ON A PROPOSED IDA CREDIT OF SDR 52.0 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A FRESHWATER FISHERIES PROJECT April 15, 1986 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency - Yuan (Y) Calendar 1985 March 1986 $1 = Y2.93 Y3.20 Y1.0 = $0.34 $0.31 Fiscal Year January 1 to December 31 Weights and Measures 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 miles 1 hectare (ha) = 2.47 acres 1mu = .067 ha i ton = 1,000 kg = 2,205 pounds 1 kg = 2.2 pounds PRINCIPAL ABBREVIATIONS AND ACRONYMS USED ABC - Agriculture Bank of China BAP - Bureau of Aquatic Products BFA - Bureau of Fisheries Administration BOF - Bureau of Finance CPO - County Project Office FDC - Fisheries Development Corporation FPO - Fishery Project Office CAIC - GeneraL Administration of Industry and Commerce ICB - International Competitive Bidding ILS - International and Local Shopping MAAF - Ministry of Agriculture, Animal Husbandry and Fisheries MACHIMPEX - China Machinery Import and Export Corporation MPO - Municipal Project Office PCC - Project Coordinating Committee RCC - Rural Credit Cooperative  FOR OFFICIUL USE ONLY CHINA FRESHWATER FISHERIES PROJECT Credit and Project Summary Borrower: People's Republic of China Amount: SDR 52.0 million ($60 million equivalent) Terms: Standard Relending Terms: Twenty years, including five years of grace, at fixed interest rate of 4.5Z p.a.; foreign exchange risk to be borne by the project cities. Project Description: In support of the Government's program to triple production of freshwater fish by the year 2000, the proposed project would expand and develop intensive pond culture in the vicinity of eight major urban centers. It would introduce into each project area an integrated fisheries production, extension and marketing system operating on a fully commercial basis. Overall, the project would improve 6,100 ha of existing ponds and establish 11,100 ha of new ponds on land unsuitable for crop production. It would provide equipment, vehicles, and support facilities, including 14 feed mills, 4 cold storage plants, 4 over- wintering facilities, a hatchery, a vaccine factory and 7 trade centers. The project would strengthen fisheries research and extension services through the provision of technical assistance and training and the construction and/or equipping of eight technical service centers. The technical assistance and training component would also be used to upgrade the qualifications of project staff to implement the proposed project and further fisheries development activ- ities. At full development the project would produce annually about 85,000 tons of freshwater fish and 75,000 tons of fish feed and would provide an additional 7,100 full-time jobs in rural areas surrounding the cities. The project faces no significant technical or management risks. [ This document has a stricted distibution and may be used by cipients only in th perfomancu: of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  ,s, , .- ii t l, - ' Estimated Cost: t. , ., . ;; . Local Fore Total * --- (S oln) Pond construction 86.0 20.8 106.8 Support facilities 12.0 5.7 17.7 Vehicles nd construction equipment. 1.5 16.9 18.4 Production materials and equipment 5.4 2.2 7.6 Training and technical- assistance 0.3 0.5 0.8 Base cost .-. 105.2 46.1 151.3 Physical contingencies 9.4 3.9 13.3 Price contingencies 23.1 10.0 33.1 Total project cost /a 137.7 60.0 197.7 Financing Plan: IDA 0.0 60.0 60.0 Provincial governments 7.6 0.0 7.6 Hunicipal governments 63.8 0.0 63.8 County/district governments 24.4 0.0 24.4 Taownships 41.9 0.0 41.9 Total 137.7 60.0 197.7 Estimated Disbursements: Bank/IDA FY 1987 1988 1989 1990 1991 Annual 3.0 15.0 18.0 15.0 9.0 Cumulative 3.0 18.0 36.0 51.0 60.0 Rate of Return: 28% Staff Appraisal Report: No. 5976-CRA, dated April 7, 1986 /a The project is exempt from taxes and duties.  REPORT AND RECOHMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE PEOPLE'S REPUBLIC OF CHINA FOR A FRESHWATER FISHERIES PROJECT 1. I submit the following report and recom=endation on a proposed credit to the People's RepubLic of China to help finance a-freshwater fish- eries project. The credit, for SDR 52.0 million ($60 million equivalent), would be on standard rDA terms. The proceeds oWtheIrDA credit would be onlent to the project cities at 4.5Z p.a. for twenty years, including five years of grace. The foreign exchange risk would be borne by the cities. PART I - THE ECONOMY 2. A country economic report entitled, "China: Long-Term Issues and Options" (No. 5206-CHA) was distributed to the Executive Directors on May 22, 1985. Basic data on the economy are given in Annex I. Background 3. Since 1978, China has initiated economic reforms in both rural and urban areas and in the external sector. Reforms have been greatest in rural areas. Following some experiments with the abolition of collective farming in impoverished areas, the Government implemented a comprehensive restructuring of rural institutions based on various forms of the "production responsibility system". By 1983 the farm household had become the fundamental unit of man- agement and production in agriculture, within a framework of collective or state ownership of land and major fized assets. Reforms have not yet proceed- ed as far in the urban economy, but there have been significant changes in enterprise management and finance. The scope for collective and individual economic activities has been enlarged and state enterprises have been allowed greater freedom in production, pricing and marketing above their mandatory plan targets. State enterprises have also been allowed to retain some profits and investment projects have increasingly been financed on a loan rather than a grant basis. 4. In international trade and investment, China has promoted opening up to the rest of the world in recent years. Between 1978 and 1984, the share of exports to GDP nearly doubled to about 10%, a ratio similar to other large economies such as the U.S. and Brazil. Foreign investment has been encour- aged, first through establishment of four Special Economic Zones and signing of joint venture contracts for offshore oil exploration, and more recently through opening of several coastal cities to foreign investment. Crowth and Stabilization 5. Reforms have helped stimulate rapid development of the whote economy. Real CDP growth averaged 5% p.a. between 1978 and 1981 and 10% p.a.  - 2 - between 1981 and 1984. During these six years, per capita incomes in real terms more than doubled in rural areas and increased by more than 502 in urban areas. Agriculture has continued its remarkably strong performance, with gross agricultural output value (excluding rural industry and commerce) rising at nearly 11% p.a. between 1981 and 1984 and grain output at 8% p.a. (reaching over 400 million tons in 1984). Cash crops and animal husbandry, stimulated by rising demand and attractive prices, have also grown rapidly. Gross indus- trial output value grew at over 102 p.a. over the same period, with heavy industry growing somewhat faster than light industry (12Z p.a. vs. 9X p.a.). If rural industrial output is included, total industrial output value grew at close to 122 p.a. in real terms between 1981 and 1984. The energy constraint on industrial growth was eased by rising coal output (82 p.a. between 1981 and 1984), renewed increases in crude oil production (4Z p.a. between 1981 and 1984) and improvements in the efficiency of energy utilization (primary comr- mercial energy consumption grew only 60X as fast as GDP between 1981 and 1984). Manufactured exports growth at 82 p.a. between 1981 and 1984 was slower than during the 1978-81 period but it started from a much higher base and in the face of worsening world market conditions. 6. The Government continues to face difficulties in combining system reform and rapid overall growth with maintenance of economic stability. During 1979 and 1980, China experienced large budget and current account deficits combined with excessive investment and inflationary pressures. In response, a strict stabilization program was introduced in 1981 relying mainly on administrative controls on investment spending. The program slowed growth but also helped lower the budget deficit from about 52 of CDP in 1979 to less than 12 in 1981, reduce inflation to around 22 p.a., and change China's exter- nal position to one of current account surpluses averaging nearly $4 billion during 1982-84. As a result, foreign debt and debt service ratios remained at low levels ($6.4 billion and 5.52 respectively in 1983) and China's foreign currency reserves (excluding gold) rose to $17 billion (over 7 months' imports) by mid-1984. 7. This comfortable balance of payments position, achieved at the cost of drastic reductions in investment spending and some recentralization of investment decisionmaking, disappeared rapidly during the course of 1984 and earLy 1985. Partly as a result of decentralization of decisionmaking and the lack of effective indirect levers, there was a rapid acceleration of invest- ment and consumption during 1984 and the first half of 1985 causing the econ- omy to overheat. Real GDP grew by 142 during 1984, while average wages in state-owned enterprises rose by 20% and domestic credit grew by 362. The retail price index rose by only 32 in 1984, preliminary figures show an inflation rate of 9% for 1985. Imports of capital goods increased from $4 billion in 1983 to over $7 billion in 1984, with most of the increase occurring in the second half of the year. There was also a rapid expansion in consumer goods imports. These trends continued during early 1985. As a result, foreign exchange reserves (excluding gold) had fallen to about $11 billion by June 1985 (equivalent to 3.5 months of exports), and the current account deficit for the year is likely to be in the range of $10 billion. The Government has responded quickly by launchig a strict stabilization program that includes further increases in interest rates as well as a series of administrative directives governing bank credit and  -3- project approval. As a result, aggregate credit and demand as well as new import orders have begun to slow, though total imports will continue to rise as past orders are filled. Recent Reforms 8. The Central Committee of the Chinese Comnunist Party issued a major document on "reform of the economic structure" in October 1984. Recent reform developments have been fully in accordance with the directions indicated in the October decision: (a) state enterprises should be made fully independent units which pursue profits and are responsible for losses; (b) the scope of mandatory planning should be reduced and replaced by indicative planning while the focus of planning should shift from annual to medium- and long-term guid- ance planning; (c) a more rational price system should be introduced by reduc- ing the role of state-controlled prices and increasing the role of "floating" and free market prices; and (d) the tax system should be improved, finance and banking should be reformed and a larger role should be given to indirect macroeconomic regulation through instruments such as tax, credit and pricing policy. 9. Rural reforms have continued to progress more rapidly than reforms elsewhere in the economy. There has been a remarkable spread of nonagricul- tural activities like processing, transport, and commerce. "Specialized households" (which concentrate on cash crops, animal husbandry, or nonagricul- tural activities) and pooling of capital by small groups of households in various types of ventures are becoming increasingly common forms of economic organization in China's rural areas. Wholesale markets for some agricultural products have emerged. To encourage investment in land improvement and devel- opment, farming contracts between collective and peasant households for the use of land (which typically had been fixed for no more than 3-5 years) can now be extended to as long as 15-20 years. In early 1985, the system of agri- cultural procurement was changed. Previously the Government purchased quota output of grain and other crops at relatively low prices and stood ready to purchase all above-quota output at a higher price. Under the new system, procurement up to a certain amount (below former quota procurement) is based on contracts concluded voluntarily between peasants and procurement agencies. Prices for these purchases are based on the relatively high average price of past years. Output above the contracted amount must be sold by peasants directly on the free market, but the Government will intervene to purchase grain if the price falls to the original low quota procurement price. Thus a considerably larger portion of basic crop production will be produced for and traded on markets with flexible prices. 10. The momentum of urban reforms has revived, with significant progress on several fronts. In enterprise management, the focus has been on broadening and delineating the decision-making authority of urban enterprises. Profit retention now extends to virtually all state-owned industrial enterprises and to nonindustrial sectors like transport, commerce, construction, and other services. Urban collectives and individual enterprises, as well as a variety of joint ventures between them and state enterprises, have grown rapidly (the number employed in urban individual enterprises rose from 150,000 in 1978 to 2.31 million in 1983).  - 4 - 11. In financial reforms, the most important new development has been the implementation of a profit tax system to replace profit remittances by state enterprises to the government budget. Though most enterprises have switched to this system, the benefits have been limited because of the appli- cation of a different effective tax rate for each enterprise, to offset the impact of distorted relative prices and other factors. Similar problems have resulted in the abandonment of an attempt to impose a fee or charge on the fixed capital provided to state enterprises by the Covernment, and they have hindered the shift from grant to loan financing of new fixed investment. Financial discipline at the enterprise level remains weak, in spite of efforts to strengthen accounting and auditing systems and more strictly enforce existing financial regulations. 12. Some progress has been made with price reform. The majority of agriculture commodity prices were decontrolled even before the recent change in pricing and procurement of grain. Prices of many minor consumer goods are also set by negotiations between producers and commercial units. "Floating prices" (up to 20% above or below official prices) are now allowed for many industrial producer goods (either for all output or for output above the man- datory plan target). Price adjustments for key energy products and raw mate- rials (which in many cases are severely underpriced) and for subsidized basic consumer goods like grain and edible oil have proven more difficult to imple- ment, hindered by the potential impact of price changes on urban living stan- dards and on the finances of energy-using enterprises. Nevertheless, some price rises have occurred (e.g., for coal and petroleum), and moreover the share of free market transactions, at largely uncontrolled prices, has increased in recent years. Gradually over time, and only partly as a result of conscious policy, a two-tier system is emerging; a large but shrinking share of the total supply of most important goods is subject to mandatory plan allocation and administratively set prices, while at the margin a substantial and growing share is allocated by the market mechanism, largely at flexible prices. This pattern may permit China to "grow out of the plan" in a rela- tively smooth transition, though there are obvious threats to this strategy arising from the strong incentive for arbitrage between planned and unplanned realms. 13. The Covernment recognizes the need to develop new tools of indirect macroeconomic management and has taken some steps to do so. The People's Bank of China was established as a separate central bank at the beginning of 1984, with its commercial banking functions taken on by the newly created Industrial and Commercial Bank of China. In 1985, new methods of credit planning and control were introduced and lower-level and specialized banks were given sig- nificant redeposit requirements. Interest rates (including deposit rates) were also raised in 1985, with some move toward unification of rates and development of a term structure resembling that in other countries. Technical transformation loans with a maturity less than one year and loans for working capital now carry the same 7.9% interest rate while loans of longer maturity carry higher rates, up to 10.8% for 10-year loans. However, interest rates on budgetary capital construction loans (formerly grants) remain low and there are a variety of directed credit schemes. On the external side greater use is now being made of the exchange rate. The old internal settlement rate was abolished at the beginning of 1985 and between January and end-October 1985  - 5 - the rate against the U.S. dollar declined by over 13%. Despite these changes progress in developing new indirect levers of control has been slow. Recent difficulties in securing macroeconomic balance highlight the need to strengthen institutions and macroeconomic management tools (including mone- tary, fiscal, and exchange rate instruments) for a decentralized and more market-oriented economy. Long-Term Issues and Prospects 14. In September 1985 a national party conference adopted a proposal which will be the basis for drafting a new Seventh Five-Year Plan covering the period 1986-90. The proposal reaffirms a political commitment to economic reform and provides gAidelines for future reform and development. One of the main objectives of the plan will be to create a favorable environment for reform which, in turn, will set the stage for future development. Target growth rates (7Z p.a. for industry, 6% for agriculture, a little over 7% for GNP) are below rates of growth achieved with the Sixth Five-Year Plan, invest- ment is to be restrained in the next few years, and emphasis is to be placed upon quality rather than quantity of output. It is felt that slower growth will facilitate reform. 15. The plan proposal identifies three main areas of reform. First, enterprise management and incentives are to be improved by: giving enterprises greater autonomy in production, pricing, and employment decisions; Lowering and equalizing taxes; increasing competition; increasing accountability for performance; and reforming personnel procedures. In addition, some small state enterprises will be turned over to collective or individual management through contract or lease. Second, the role of the market is to be extended and market networks strengthened. The scope of mandatory planning will be further reduced and markets for capital, technology, and labor will gradually be developed. Third, the emphasis of planning will shift from detailed admin- istrative control to indirect macroeconomic control through economic policy. To this end a series of mutually reinforcing reforms in the planning, pricing, fiscal, banking, and labor and wage systems will be introduced during the plan period. 16. Implementation of the plan proposal will help foster an environment in which fundamental reforms can be gradually implemented in a coordinated way. But specific policy measures will take time to design and then to imple- ment. Many of the reforms required will be difficult, particularly since reforms in different areas are closely interrelated, and thus appropriate sequencing and coordination are essential. For example, price reform in the absence of improvements in enterprise financial discipline will have limited benefits, yet the more profit-oriented behavior that would result from tighter financial discipline would exacerbate the adverse impact of distorted prices. Similarly, reform of the labor allocation system will be incomplete without eliminating many of the "social responsibilities" of enterprises (which now provide housing, medical care, and pensions for their workers and in many cases education and jobs for workers' children) and replacing them with Government-supported social service programs. The plan proposal suggests moving in this direction by commercializing housing.  17. China's objective of quadrupling the gross output value of industry and agriculture between 1980 and 2000 (which means GDP growth of well cver 6Z p.a.) will require significant improvements in efficiency as well as continued high saving and investment rates. The plan proposal recognizes there must be major structural changes in the economy over the next two decades, including a reduction in the share of agriculture, a rise in the share of industry and services (which at present is unusually low), and substantial urbanization. There will also be a shift within agriculture, away from grain and basic crops and into cash crops and animal husbandry. The new plan will emphasize devel- opment of the service sector, mainly through removing restrictions on collec- tive and individual activity. Urban development will focus on small and medium sized cities and towns while restrictions on growth of large urban areas will continue. 18. Certain physical/technical constraints will hinder the attempt to achieve China's targets for the year 2000 and its longer-term goal of catching up with developed countries. Despite rapid growth and substantial improve- - ments in efficiency in recent years, agriculture may again become a constraint on overall growth, since land in China is severely limited. In energy, short- ages of fuel (primarily coal) and electricity may continue to constrain growth in transport and commercial infrastructure. Without large new investments and improved efficiency, economic growth will lag. In mobilizing resources in all these areas, China could profitably make use of foreign borrowing. Finally, the rising share of the elderly in China's population (related to the slowdown in population growth) means that more resources will have to be devoted to maintaining their consumption levels, especially in the decades after 2000. 19. Poor motivation and inefficient utilization of labor in the state sector of the economy are major problems which can be solved only by coordina- ted reforms in labor allocation, the wage system, enterprise management, and social services, among other things. Reforms in the system of education and training to develop China's "human capital" potential also are crucial. Back- ward technology and inefficient use of existing technology must be addressed by a combination of reforms, appropriately directed investment, and transfer of advanced foreign technology. Irrational location of factories, suboptimal scale of many plants, and poor utilization of physical capital in general are related problems. 20. If reforms successfully transform the economic system, with a bene- ficial impact on growth and efficiency, a new set of issues will come to the fore, as the plan proposal recognizes. Management of a reformed economy with indirect fiscal, monetary, and other instruments is a major issue (see para. 13 above). In this context, maintaining an adequate saving rate (if the Gov- ernment no longer accounts for the bulk of aggregate saving) and avoiding inflation (as well as deep cyclical downturns) will be major goals. Assuring an adequate minimum standard of living for the population and an appropriate level of social services will become a major challenge as enterprise and rural communal responsibilities in these areas are reduced. The problem of poor, backward rural areas in various parts of the country will continue to require attention. Redistributing financial resources to these areas through the fiscal system, easing restrictions on migration out of the poorest areas, and lowering nonagricultural wages to make investment in them more attractive are some options for alleviating poverty.  -7- 21. In order to mobilize the external resources needed for rapid, sustained growth the plan proposal calls for export growth of 40-50% over the next five years, greater efforts to attract foreign investment, and increased commercial borrowing. If exports grow at 8Z p.a. between 1984 and 1990 and imports grow at 9% p.a., China would have a relatively modest current account deficit of around $4-5 billion p.a. (except in 1985) during the remainder of this decade, equivalent to about 1% of CGP. This implies that the present debt service ratio would increase only moderately by 1990. If China's exports grow more slowly, imports will probably have to be cut back because a higher borrowing target, though feasible in terms of debt service indicators, ;.'uld probably run into supply constraints as China would become one of the largest developing country borrowers. This highlights the need for continued export growth in order to meet other plan objectives and service greater commercial borrowing. The plan proposal recognizes that greater use of exchange rate and pricing policies will be needed to encourage export growth. 22. Even with continued good export performance, China will have sub- stantial external capital requirements during the renainder of the decade. Under the trade growth assumptions outlined above (exports growing at 8% p.a. and imports at 92 p.a. during 1984-90), the current account deficit would be over $5 billion in 1990 and the gross borrowing requirement would be about $6.5 billion. If export growth fell to 6% p.a. during this period and imports continued to grow at 9% p.a., the current account deficit would reach $14 bil- lion by 1990. Although the plan proposal calls for increased borrowing at commercial rates, access to concessionary capital will play an important role in sustaining China's gruwth. China also has a claim to concessionary lending because it is still one of the poorer countries of the world. But China's access to concessionary capital to finance development and modernization is limited; apart from Bank Group funds, a significant amount of concessionary capital is likely to come only from Japan and a few other bilateral donors and will probably average no more than $500-600 million p.a. during the rest of the 1980s. PART II - BANK GROUP OPERATIONS 23. To achieve the target growth rates envisioned in the Seventh Five- Year Plan, to increase efficiency and to maintain equity in distribution, China will need continuing economic reforms. China will need to import more technology, increase trade, and expand investment. In the next few years, therefore, the Bank can best assist China by increasing its access to foreign technology and capital and supporting the implementation of reforms that will help to increase the efficiency of resource use and reduce poverty. 24. To address China's objective of updating technology, the Bank will play the role of an intermediary. in transportation, energy, industry, agri- culture and social sectors, the Bank will contribute to technology transfer by bringing the Bank's experience to bear on project design and implementation and by helping China to seek appropriate technical solutions through interna- tional competitive bidding, training, and foreign technical assistance.  - 8 - 25. Bank assistance will be closely linked with the Government's reform efforts. There are five major elements common to both rural and urban reform in China that will be the focus of the Bank's involvement. First, institu- tional change, involving both the separation of economic and administrative functions and further decentralization of decisionmaking, will extend to every sector in which the Bank is involved. Second, financial sector reform, pri- marily development of financial institutions, has become a focus of Bank assistance. Third, improving planning and project analysis will be critical to reform in sectors such as agriculture and industry, where decisions are now being made by households and independent enterprises, as well as in ,nfra- structure where direct government involvement will be required. The Bank will therefore continue its emphasis on introducing appraisal methods and financial planning as well es analysis of intersectoral issues. Fourth, the Bank will be involved in the Government's major program of price reform and development of indirect levers such as control via money, credit and fiscal policies. And finally, the Bank will support reforms in health, education and other social services and measures, in particular, to address the problems of poor regions. Economic and Sector Work 26. The Bank's economic and sector work in China aims at expanding the understanding of the structure and direction of the Chinese economy and intro- ducing to the Covernment new tools of economic management. This work provides a foundation for Bank Group lending and for the dialogue with the Government on development options and policies. Past work has included two major eco- nomic reports, studies on sectoral investment analysis and planning, and col- laborative research with Chinese institutione. The Bank has also organized seminars on macroeconomic and sector issues. 27. Over the next two years, the Bank will carry out a large program of studies to follow up on issues identified in the most recent economic report and analyze policy options. In this program, the Bank will examine alterna- tives for developing the financial system, foreign trade and investment. It will also analyze issues of intersectoral investment coordination and develop- ment of resource-poor regions. One such study is already under way in Gansu province to formulate programs for increasing interregional resource flows, improving the efficiency of investment and reducing poverty. Research on urban development, transport planning, and regional industrial development will also be undertaken to form the basis for project preparation. Collabora- tive studies with Chinese research institutions will continue. An ongoing study of management and guidance of state-owned industrial enterprises will be followed by a study of collective enterpr.ses, which are expected to become increasingly important industrial organizations in the reformed system. Lending Operations 28. Since China's change of representation in the Bank Group in May of 1980, 34 projects involving lending of $3,279.1 million to China have been approved. Of the projects, eleven have been in the agriculture sector, seven in energy, four in transport, four in industry, four in education, two in technical cooperation, and one each in health and water supply. In FY85, IFC made its first investment in China of $17.02 million in automobile manufactur-  - 9 - ing. Annex II contains a summary statement of these loans, credits and IFC investment as of March 31, 1986. 29. In addition to the proposed project and the recently approved second rural credit, third industrial credit, second technical cooperation and pro- vincial universities projects, we expect to present projects to the Board this year for port, railway, power, petroleum and health. For FY87 and beyond, we expect the lending program for China to continue to grow from current levels. Infrastructure projects in energy and transport will remain priorities. Tech- nical renovation of enterprises, particularly in industry, will be given greater attention and support as will the regional approach to project devel- opment, now being used to assess the needs of Gansu province. 30. In the energy sector, future Bank lending will be aimed at improving efficiency of energy consumption and expanding energy production. For exam- ple, in the coal subsector, we will assist in upgrading the facilities and operations of existing mines and in transferring improved technology for mines under construction or in operation. In power, we will assist China in tech- nology transfer, staff training and institution building. Through a power tariff study, we will seek to introduce a tariff system based on marginal cost and to increase the awareness of the need for a nationwide power system devel- opment program. In the petroleum subsector, the rationale for project involvement will lie in the identification, packaging and transfer of special- ized technologies as well as in the strengthening of investment planning and management capabilities. 31. Future transport projects will both upgrade technology and strengthen institutions. In roads, major changes in organization and finan- cing will be required as a result of administrative decentralization and introduction of the production responsibility system in rural areas. In rail- ways, we will focus on technologies to improve domestic production of railway equipment and materials in addition to our work on line construction and elec- trification. We also intend to broaden our involvement in ports to include coastal shipping and inland water transport. For all transport subsectors, we will support efforts to improve financial analysis and investment planning. 32. Agriculture lending will focus on developing institutions to provide services to individual farmers and to monitor and stimulate change in the pace and pattern cf agricultural development. The shift from grant to loan finance and the increased autonomy of the rural banking system will be major aspects of change that will be supported through rural credit projects. We will con- tinue to assist with the training, research, extension, and other service activities of the ministries concerned with agriculture. In addition, we expect to finance programs for specialized agricultural development such as livestock and fisheries, and for irrigation and area development. 33. Bank lending in industry, as in agriculture, will focus on strength- ening of financial intermediaries which provide credit to state and collective enterprises. In addition, we expect that there will be large regional proj- ects in fertilizer, cement and machine tools and other subsector projects con- cerned with upgrading technology and improving organization and management.  - 10 - 34. Bank lending in education will gradually be broadened beyond the present concentration on higher education. For example, we will finance voca- tional and technical education which is now being given great emphasis in China. In view of the Covernment's recent decision to universalize access to primary and lower secondary education, another major aim of education lending will be to assist with basic education, particularly in poor rural areas. In this context, support for teacher education will be given priority. 35. Project preparation in the urban sector is currently concentrated in Shanghai on efforts to improve services, especially in environmental upgrading and housing, and development of municipal institutions. Future lending is expected to include support for development of medium-size and small urban areas in specific provinces. In addition, we expect to continue lending for rural water supply. Bank lending in health will provide access to new medical technologies for more efficient health care in both the lingering problems of communicable disease, primarily in poor rural areas, and the emerging problems of chronic disease. This will involve further support for medical training and planning and management of service delivery systems. Projects will also support the reform of systems for supplying and financing health services. 36. Cofinancing with multilateral and bilateral agencies has been arranged for projects in coal, power, agriculture and rural water supply and will remain a feature of our assistance program. We will explore further options for cofinancing with export credit agencies. Commercial bank cofinan- cing and the use of B-loans also appear viable, particularly as China increases the overall volume of its foreign borrowing. In technical assis- tance, we will continue to incorporate into projects components for training, overseas study, and access to foreign expertise. In addition, we will be the executing agency for a second UNDP umbrella project in China. EDI activities remain an important element of the Bank's program and in coming years will provide an extensive program of policy seminars for senior Chinese officials, and economic and financial management courses and sector-specific training for officials from core and line agencies. Implementation 37. Project implementation is generally proceeding well. Most project agencies, as well as the Ministry of Finance and the State Planning Commis- sion, have established and staffed offices to handle Bank projects. Disburse- ment performance has also been satisfactory. Special accounts have been established for 22 of the 34 approved projects and have helped to speed dis- bursements. In October 1985, the Bank opened a resident office in Beijing to support further expansion of the lending program, accelerate project prepara- tion, improve project implementation and further economic and sector work.  - 11 - PART III - AGRICULTURE AND FISHERIES IN CHINA Agriculture 38. Agriculture in China, including crops, livestock, forestry and fish- eries, provides sustenance to over one billion people, is the source of income for some 190 milLion farm families, and accounts for about 302 of the coun- try's GDP. Only about 100 million ha of China's land area of 960 million ha are arable. Farming systems are intensive, with large inputs of labor, chemi- cal and organic fertilizer and water. Nearly half of the arable land is irri- gated. Foodgrains occupy about 80% of the cropland and account for about 55Z of total agricultural output. This intensive system of food production allows China to meet the basic food requirements of its population (about 22% of the world's total) from less than 8% of the world's arable land. Agricultural production is carried out largely on household-managed farms within a frame- work of collective or state ownership of land and major fixed assets. 39. Since 1979, the gross value of agricultural output has grown at an average annual rate of about 7%, or more than twice the rate achieved over the previous two decades. Output of foodgrains increased by about 3.8% annually over the last decade, reaching a record 407 million tons in 1984 despite declines in cropped area and area sown with grains. Demand for agricultural products is expected to increase steadily over the next two decades in response to increasing per capita income and moderate population growth. If consumption patterns in China follow those observed in other countries, higher incomes will bring about a substantiaL restructuring of consumption involving a market reduction in direct per capita consumption of grain and a correspond- ing increase in the intake of meat, eggs, fish, milk, fruits, sugar and vege- tables. To meet these expected changes in demand, the Government has posed ambitious production targets for the year 2000, including a doubling of fish- eries production primarily through large-scale expansion of freshwater ponds. Success in achieving planned targets will depend on introducing new technol- ogy, strengthening extension programs, and providing price and other incen- tives to producers. Fisheries 40. Background. China's fisheries subsector, including culture and capture production from marine and freshwater sources, accounts for about 1Z of gross value of agricultural output. Total fisheries production, essenti- ally all of which is consumed domestically, increased from an annual average of 4.2 million tons in 1974 to 6.2 million tons in 1984, an increase of 47%. This increase was due mainly to the rapid growth of freshwater fisheries which over the same period more than doubled from I to 2.3 million tons while pro- duction of marine fisheries rose only 18% from 3.3 to 3.9 million tons. Des- pite the overall steady expansion of fisheries output - China now ranks third in the world in total production -- the corresponding growth in China's popu- lation has kept the annual per capita consumption of fish at a constant 5 kg which is less than one-third of the world average and low by comparison to many other developing countries, e.g., Bangladesh (8 kg) and the Philippines (35 kg).  - 12 - 41. Capture and CulLure Fisheries. The Chinese expect little change to the year 2000 in the annual output of capture fisheriem, both marine and freshwater. The marine fish catch, which takes place primarily in waters within the continental shelf, is being expLoited to the fullest already and there is some evidence of overfishing in coastal areas. Output from fresh- water capture fisheries is expected to decLine somewhat over the next decade and a half as a result of overfishing and worsening poLlution problems. Cul- ture fisheries offer greater potential for growth. China has some 5 million ha (75 million mu) of freshwater bodies and 1.3 million ha (20 million mu) of coastal waters which are suitable for aquaculture, of which about 3 million ha (60Z) and 170,000 ha (13X), respectively, are at present being used. About one-third of the 3 million ha under freshwater aquaculture is small pond cul- ture practiced by collective and state-owned fish farms which have fish as the main crop. Management of the traditional system of integrated polyculture practiced on smaLl ponds has been developed to a high standard in many parts of China with careful attention paid to efficient use and recyling of availa- ble resources. 42. In recent years, the Chinese have introduced mechanical devices such as aerators which have had a positive effect on yields. Introduction of con- tract fish farming by specialized households under the production responsibil- ity system has also contributed to a marked increase in yields. Some farms in the lower reaches of the Yangtze and Pearl Rivers report yields as high as 7.5 tons/ha and recent figures for the north (Heilongjiang Province) indicate yields of up to 4.5 tons/ha. Such yields are uncommon, however. Due to a lack of standardization in design and management practices, wide variation in yields exists with the average about 0.9 tons/ha in the north and 2.5 tons/ha in the south. In short, though the introduction of household aquaculture has acted as a spur to increased yields and production, further subsector growth of the magnitude presently envisaged by the Government will require, in addi- tion, broad dissemination of known technologies, ensuring market-oriented prices, and strengthening the role of commercially-operated supply and market- ing services. 43. Fisheries Organizations. At the central level, the primary respon- sibility for the fisheries subsector rests with two bureaus within the Minis- try of Agriculture, Animal Husbandry and Fisheries (KAAF), the Bureau of Aqua- tic Products (BAP) which is responsible for fisheries development activities and the Bureau of Fisheries Administration (BFA) which administers marine fisheries regulations. Most provincial governments have fisheries agencies -- either a separate bureau, a part of a combined aquaculture, animal husbandry and fisheries bureau, or a unit within the water resources bureau -- which are administratively responsible to the provincial government and receive techni- caL guidance from MAAF's BAP. A similar structure of agencies exists at the municipal and county (or district) levels. 44. During the past year, municipal and county governments have begun to establish autonomous fisheries corporations. This move is part of a broader effort within government to disengage enterprise management and operations from the Government's administrative/regulatory activities, thus encouraging growth of enterprises which are independent, profit-oriented and economically efficient. The new corporations are service companies designed to provide on  - 13 - a commercial basis a comprehensive range of support services to fish producers including feed and fingerling supply, cold storage, transport, equipment pro- curement, and extension, marketing, construction and engineering services. At the production level, township governments are encouraging formation of fish farms as commercial enterprises consisting of an average of 75 households and 50 ha of ponds. The municipal and county corporations and farm enterprises are officially licensed accounting units which are authorized to borrow, own assets and enter into contracts. Sectoral Objectives and Bank Lending in Fisheries 45. In the fisheries subsector, the Government aims to double overall output by the year 2000. The culture of freshwater fish is projected to increase nearly threefold or by 8% p.a. and to account for about three fourths of the projected increase in total fisheries output. The Government is encouraging formation of both small- and medium-scale enterprises to produce and market fish products and is undertaking programs to strengthen a range of support services including research, extension, feed processing, and cold storage. 46. Lending in China's fisheries subsector is part of the Bank's broader efforts to assist the Government in diversifying agricultural output to meet expected shifts in consumption and demand. While the proposed Freshwater Fisheries Project is the Bank's first fulL-scale involvement in the subsector, aquaculture components have figured importantly in other Bank-financed proj- ects in agriculture which have had as their primary focus strengthening agri- cultural support services, provision of credit, and area development. The First Agricultural Education and Research Project (Cr. 1297-CHA), the Second Agricultural Education Project (Ln 2444/Cr. 1500-CHA), and the Second Agri- cultural Research Project (Cr. 1516-CHA) are providing scientific equipment, computers and technical assistance and training to expand and upgrade two of China's major fisheries colleges, Shanghai and Dalian, and two key fisheries research institutes, one in Beijing and one at Lake Tai. The ongoing First Rural Credit Project (Cr. 1462-CHA) and the recently approved Second Rural Credit Project (Cr. 1642-CHA) are financing investments in Guangxi, Fujian, and Hunan Provinces to construct and improve freshwater fish ponds managed by collectives, state-owned enterprises, and individual households. Expansion of freshwater pond culture is also being supported under the Pishihang-Chaohu Area Development Project (Ln. 2579/Cr. 1606-CHA) which is strengthening the capacity of about 140 nurseries to supply fry and fingerlings for new and existing ponds in central Anhui Province. Project Formulation and Rationale 47. To help meet the expected shift in consumption patterns over the next two decades, the Government has given priority to expansion of fisheries output, now only IZ of GVAO. Development of freshwater culture fisheries, particularly small pond culture, has been made a special target because of the limited prospects for increasing output from capture fisheries, the potential for significant yield increases from existing freshwater ponds, and the avail- ability of unused or low-lying land suitable for conversion into fish ponds. While in certain limited areas, particularly in the south, integrated carp  - 14 - polyculture has been developed to a high technical standard with yields as high as 7.5 tons/ha reported, a vast majority of existing fish ponds in China produce yields of less than one ton per ha as a result of poorly designed pond layout, use of inappropriate breeds of fish or stocking rates, and poor feed management. To overcome these constraints to planned expansion of production, the Government has developed a program of increased investments in aquaculture development. Because of the inadequacy of transport and cold storage facili- ties, the Government has decided to establish large scale fisheries operations in the suburban areas of major cities where there is a large guaranteed market for fresh fish. 48. The proposed project would build new ponds and improve existing ponds in the vicinity of eight cities which have the available land, adminis- trative infrastructure, and investment resources for fish farm development and where consumer demand is high and increasing. Attention would be given to a range of activities specific to development of freshwater fisheries, beginning with training new farmers, assuring the availability of inputs, strengthening extension services for guidance in adopting new technology, and providing assistance in marketing. The major rationale for Bank involvement in the pro- posed project would be to assist in putting into place this large-scale com- prehensive system of fisheries production, extension and marketing facilities; to enable the BAPs and fisheries development corporations to gain access to technologies available abroad in feed formulation, feed processing, cold storage and intensive monoculture systems; and to help the Government create commercial fisheries enterprises operating on principles of sound economic management. IV - THE PROJECT 49. The original project proposal, prepared by the Bureau of Aquatic Products (MAAF) and the eight municipal governments, was reviewed by a Bank group mission in May 1984. During that and subsequent missions, discussions involving these organizations and Bank staff led to various changes in the project's scope and technical features. Negotiations were held in Washington March 17-21, 1986 with a Chinese delegation led by Mr. Zhu Ping, Deputy Divi- sion Chief, Ministry of Finance (MOF). A Staff Appraisal Report No. 5976-CHA, dated April 7, 1986 is being distributed separately. Special features of the project are given in the Credit and Project Summary and in Annex III. A map showing project locations (IBRD 19410R) is attached. Project Objective 50. The principal objective of the proposed project is to assist the Government in developing freshwater fish culture in the vicinity of eight major urban centers by improving existing ponds and using land unsuitable for crops for new pond construction; providing techniques and equipment for pond management; and strengthening the support facilities for production and marketing of fish.  - 15 - Principal Project Features 51. The eight project cities are: Beijing, Chengdu, Chongqing, Hangzhou, Harbin, Nanchang, Shanghai and Shenyang. The project would include: (a) establishment of 11,100 ha of new ponds and improvement of 6,100 ha of existing ponds, including provision of water supply, drainage, power supply, farm roads and buildings, and where required, pond lining, flood protection, and slope protection; (b) construction and equipping of support facilities, including 14 feed mills, 4 cold storage plants, 6 technical service centers, 7 trade centers, 20 ha of tilapia overwintering facilities, a vaccine fac- tory and a 25 ha running-water hatchery; (c) provision of construction equipment and vehicles to fish farms and support facilities for production, extension and marketing; (d) provision of production equipment and materials to fish farms; and (e) a training and technical assistance program designed to upgrade the qualifications of project staff to implement the proposed project and continue fisheries development in the 8 cities. Detailed Features 52. Pond Development. The project provides for construction of new ponds and improvements of existing ponds according to BAP's guidelines, with modifications to fit the specific situation in different locations. Ponds of uniform size will be constructed in aggregations of 15-150 ha and organized as fish farms. Pond improvement -- which generally involves deepening and reshaping -- and the provision of filling and drainage facilities will be carried out on farms already established. The lands to be developed are swamps, marshes, or low-lying, poorly drained crop lands which are marginally productive. Other conditions for selection of sites included proximity to the market city, topography suitable for economical construction, ready access to water, roads and electricity, availability of construction materials in the vicinity, and minimal risk of flooding. Once these conditions were met, con- sideration was given to the ability of the township to contribute to the pro- posed investment in establishment or improvement of fish farms, and the wil- lingness of individual farmers to participate. 53. All the cities, except Chongqing, have existing irrigation systems which will be the principal water supply source; Chongqing will use a combina- tion of natural runoff and pumping from water sources in adjoining catchments. Wells will be provided in Shenyang and Harbin, for use in winter when irriga- tion systems are not in operation, and in Beijing, to supplement deliveries from irrigation canals where allocations for fish ponds are limited. 54. About 400 km of farm roads will be constructed to connect the farms to the existing county and provincial road systems. These will generally be 1-2 km long and 4m wide with a gravel surface. About 900 km of distribution  - 16 - lines, with the necessary substations and transformers, will be provided to connect with the rural electrification Jystem already in place in the project areas. About 78,000 m2 of offices, dwellings and workshops will be construc- ted on th2 farms. To insure manure supplies for pond fertilization, about 120,000 m of sheds for poultry and swine will be included. 55. Feed Mills. A 6-8 ton/hr feed mill will be constructed in Beijing, and 13 smaller mills with capacities of 1.5-2.5 tlhr will be provided in the other seven cities. These mill, will have a combined annual output of 73,000 tons of high quality pelletized or extruded feed concentrate. Initial opera- tions will be for the manufacture of a single type of feed to fit the carp poLyculture system. The mills wiLl be equipped with laboratories for analyz- ing raw material to determine the optimal feed composition with respect to nutrients and price and to stimulate development of balanced formulations for feed conversion efficiency. The use of feed concentrates in fisheries is relatively new in China and proper formulations are under experimentation at a number of research institutes. Study tours are planned for observation of feed mills in the United States and Scandinavian countries, and feed formula- tion studies will be conducted by local research institutes. 56. Cold Storage Facilities. Two cold storage plants with nominal capa- city of 500 tons will be located in Harbin, and 1,000 ton capacity plants will be provided for both Shenyang and Nanchang. The Nanchang facility will also have a 25-ton per day ice making unit. The new plants will utilize rack stor- age for improved handling and space management. In Beijing and Chongqing, cold storage facilities will consist of 25-50 ton capacity prefabricated units incorporated into the trade centers. The larger plants will be used for stor- age of frozen fish to be sold during the main holiday seasons, and the smaller units will be mainly for overnight refrigeration of unmarketed fish. 57. Technical Service Centers. The project will provide for construc- tion and equipping of technical service centers. Each city will have a tech- nical service center with simple laboratories, classrooms and offices, which will be the locus of training and extension activities for project farmers. Each center will be staffed with 25-30 persons, most of them fisheries spe- cialists, engaged in conducting training courses for extension staff and proj- ect farmers. From 1,500 to 2,500 fish farmers and aquaculture technicians will be trained annually, to achieve a ratio of one "farmer technician" per 8 fish farms and 1 aquaculture technician per 15 farmers. 58. Trade Centers. Trade centers will be constructed in six cities. The trade centers will be staffed and equipped to provide market information to farmers and supply farm materials such as nets, thread, lines, grass seed, fertilizer, and fuel. They will have retail fish outlets and may, when needed, provide transport of fish from farm to market. Cafeteria and dormi- tory facilities will also be included. In Beijing and Chongqing, the trade centers will include prefabricated refrigeration units. 59. Other Support Facilities. Other support services to be provided by the project include tilapia overwintering facilities, a vaccine factory and an enclosed flowing-water hatchery. Tilapia overwintering facilities will be constructed in Chengdu, Chongqing and Hangzhou, where environmental conditions  - 17 - are suitable and a market for tilapia exists. The facilities will be mainly for overvintering brood fish so that a supply of fry and fingerlings can be provided to project farmers. In Beijing, a combination carp hatchery and tilapia overwintering facility will be provided. A vaccine factory will be constructed and equipped in Shanghai to produce a vaccine which can reduce fish mortality due to a viral "bleeding disease." A hatchery, using power plant exhaust heat, will be constructed in Harbin. Harbin is the northernmost city in the project area and, until now, has had to rely on obtaining fry and finaerling supplies from Cuangdong and other southern areas. The 25 ha hatch- ery facility will provide a reliable supply of better quality stock through in:ensive monoculture techniques. 60. Construction Equipment and Vehicles. The equipment fleets of the project offices, FDCs (para. 75), support facilities and project area farms will be expanded and replaced through procurement of 2,085 vehicles. Trucks will be used primarily to transport fresh or live fish (in water or ice) from farm to market; other uses will be for transport of fingerlings and fry, grass, manure and other inputs. Trucks will be allocated to farms on the basis of one ton of vehicle capacity per 6-10 ha. In addition, the project will provide 30 bulldozers and seven excavators, which will be used for con- struction or improvement of project ponds in Beijing, Harbin, Nanchang and Shenyang. 61. Production Equipment and Materials. The project includes production equipment such as workboats, nets, aerators, automatic feeders, blenders, and fishing equipment. The project also provides for the initial stocking of fin- gerlings, the first application of chemical fertilizers to the newly construc- ted ponds, and feed components such as fish meal and vitamins, for the first year's operation. 62. Training and Technical Assistance. To upgrade the qualifications of local fisheries staff, the project will provide about 131 man-months of over- seas training and study tours, 144 man-months of local training, and 5 man- months of consulting services. About five one-month study tours with six to eight persons each will visit feed mills, cold storage plants, fish breeding facilities, and feed-intensive monoculture operations primarily in Northern Europe, the US, Japan, and Southeast Asia. Overseas training will consist of: (a) two- to six-week special programs, including visits to equipment manufacturers and attendance at international conferences, organized for senior project staff; and (b) short-term (one to three-month) courses for technical staff in such areas as fish nutrition and fish farm management. Additional short-term training opportunities in aquaculture technology as well as business management will be provided under the local training subcomponent. During negotiations, assurance was obtained that the training component will be carried out in accordance with a program acceptable to IDA. The project will also include five man-months of consulting services to help organize and conduct local projects and computer-assisted data management. Consultants will be selected under terms of reference agreed at negotiations and in accordance with Bank Group Guidelines on the use of consultants. Feed mill equipment suppliers will provide training in operation and maintenance as part of the procurement packages. Research institutions in each project city will be commissioned by the project coordinating committee and municipal project  - 18 - office to provide technical advice to the project as necessary and to carry out studies and experimentation to develop city-specific feed formulations. 63. To assist in early procurement of equipment and other aspects of project preparation, the IDA-financed Technical Cooperation Credit (Cr. 1412-CHA) is being used to finance two preproject study tours abroad to inspect feed mill equipment and fish breeding operations. Implementation Schedule 64. The project will be implemented over a five-year period beginning in mid-1986. Pond construction will start in July 1986. Preparation of bid documents by mid-1986 will allow the feed mills and cold storage facilities to begin operation by early 1988. Technical service centers will be completed by mid-1987, trade centers by mid-1988, and overwintering facilities by late 1988. The hatchery will be in operation by 1989. All project works will be completed by the end of 1990. Cost Estimates 65. Total project cost in January 1986 prices is $197.7 million, with a foreign exchange component of $60 million, or 30Z of the total. Unit prices applied to quantity estimates for pond development and improvement, including transmission lines, water supplies, roads, farm buildings, and the civil works portion of support facilities are based on recent experience with similar work in the vicinity of the cities. Prices for locally available materials and equipment are based on data provided to the municipal project offices by local suppliers. Prices for construction equipment, vehicles, feed processing, cold storage and imported laboratory and production equipment are based on list prices obtained from manufacturers. Physical contingencies (10Z of base cost) range from 5% for equipment to 15% for civil works. Assumed price increases amount to 20Z of the base cost plus physical contingencies and are based on annual price escalation factors for goods and services of domestic and foreign origin in US dollar equivalents of 7.0% in 1986 and 1987, 7.5% in 1988, 7.7% in 1989 and 7.6% in 1990. Financing 66. Bank Group assistance will be an IDA Credit of SDR 52 million ($60 million equivalent) and will cover 30% of total project costs. The balance of $137.7 million equivalent will be met from provincial governments ($7.6 mil- lion equivalent), municipal governments ($63.8 million equivalent); county and district governments ($24.4 million equivalent) and townships ($41.9 million equivalent).  - 19 - PROCUREMENT ARRANCEMENTS ($ million) ICB ILS Other /a Total Pond development Earthworks 68.9 68.9 (20.7) 20.7 Other construction /b 4.7 /c 67.9 72.6 (4.7) (0) (4.7) Support facilities Buildings 2.5 /c 11.6 14.1 (2.5) (0) (2.5) Equipment 8.7 0.7 9.4 (5.4) (0.7) (6.1) Vehicles and construction equipment Vehicles 18.0 18.0 (18.0) (18.0) Construction equipment 4.4 4.4 (4.4) (4.4) Production materials and equpment Production materials 6.3 6.3 (2.7) /d (2.7) Production equipment 3.1 3.1 (0.2) (0.2) Training and technical assistance 0.9 0.9 (0.7) (0.7) Total 38.3 10.1 149.3 197.7 (35.0) (3.6) (21.4) (60.0) /a Includes (i) local procedures, including force account and local competitive bidding; and (ii) technical assistance and training. lb Includes slope protection, pond lining, flood protection, water supply and drainage, power supply, roads and farm buildings. /c Steel and other construction materials. 7d Excludes fry and fingerlings. Note: Figures in parentheses are the respective amounts financed by the Credit. All amounts include contingencies. Procurement 67. Goods worth about $38 million will be procured through international competitive bidding (ICB) in accordance with Bank Group guidelines. The main items to be procured are: (1) equipment for cold storage facilities and feed processing plants ($8.7 million); (2) vehicles and construction equipment ($22.4 million); and (3) steel and other construction materials ($7.2 mil- lion). Qualified domestic manufacturers will receive a preference of 15% of  - 20 - c.i.f. bid price or the applicable customs duty, whichever is less, in bid evaluation. Prior IDA review of contract awards will exclude small contracts (Less than $200,000) estimated to cover less than 15% of the value of all con- tracts. Working groups, composed of representatives from each municipality, will prepare preliminary specifications for vehicles, equipment, and machinery for cold storage and feed mills with the final preparation of bid documents to be carried out by China Machinery Import and Export Corporation (MACHIMPEX), the main agency for machinery procurement in China. Bid invitation and bid evaluation and award recommendations will be the responsibility of MACHIMPEX in consultation with the Fisheries Project Office (FPO). 68. Laboratory and audio-visual equipment (for technical service cen- ters, the vaccine factory, and the hatchery, totalling $0.7 million), produc- tion materials (chemical fertilizers, fish meal, vitamins and feed additives, totalling $2.7 million), and production equipment (totalling $0.2 million) will be procured on the basis of three quotations, in accordance with proce- dures acceptable to the Association. Most of the production equipment is fabricated locally production material requirements will be spread over the implemented period and be in relatively small amounts. The FPO will consoli- date, as far as practicable, the eight cities' procurement requirements into single packages. 69. Civil works for pond development ($136.8 million) and construction of support facilities ($11.6 million) will be carried out by local construc- tion teams. Because these works will be small and dispersed geographically among 8 cities and 45 counties, they will not be suitabLe for ICB. Earthworks will be carried out by force account or by other procedures acceptable to IDA. In general, the work will be carried out by a township's own construction bureau, with assistance from the county or municipal construction bureaus. However, recently there has been a growing trend toward competitive bidding for local construction jobs, with construction teams organized by collectives or operated by county water conservancy and highway construction bureaus bidding on works of the type included in the project. Wherever feasible, the project management will encourage competitive bidding. Although procedures vary among localities, bid advertisement is wide enough to secure numerous bidders, and contract documernts clearly define the rights and obligations of the parties involved and spell out the terms of payment. Disbursements 70. Disbursements under the Credit against expenditures for feed mills, cold storage and technical service center equipment, vehicles, construction equipment and materials, and production equipment and materials will be at 100% of foreign exchange costs of imported items, 100% of the ex-factory price of locally manufactured items, and 75% of local expenditures for items pro- cured locally. Disbursements for overseas and local training and technical assistance will be 100% of total costs. Disbursements for earthworks will be at 30% of total expenditures. Disbursements for training and contracts for technical assistance, technical service center equipment, production materials and equipment, and chemical fertilizers costing less than $200,000, and for earthworks, will be made against statements of expenditure (SOEs), the sup- porting documentation for which will be retained by the FPO. In the case of  - 21 - earthworks, SOEs will be supported by progress reports showing physical quan- tities and unit prices which will be updated annually by the FPO and reviewed by the Bank. 71. In order to provide for efficient disbursement of credit proceeds, a special account will be opened in US dollars in a bank acceptable to IDA with an initial deposit of dolLar equivalent of SDR 3.5 million which represents the average estimated four-month expenditure. Applications for replenishment of the special account will be submitted quarterly, or whenever the special account is drawn down to 50Z of its initial deposit, whichever comes first. 72. The disbursement experience in China, although short, has been very favorable and better than Bank-wide and regional averages. The projected dis- bursement profile for the proposed project is in line with that for specific investment loans in China. The project is expected to be completed by about December 1990 and the closing date is June 30, 1991. Accounts and Audits 73. Records of expenditures will be compiled by county project offices (CPOs) on the basis of accounts maintained by the township fish farms and county FDCs. These records will be forwarded to municipal project offices (MPOs) which will prepare consolidated accounts including their own records of municipal level expenditures. After certification at the municipal level, these accounts will be forwarded to MAAF's Fisheries Project Office (FPO) for review. The FPO will in turn compile a complete report of project expendi- tures. Assurances were obtained at negotiations that consolidated porject cost accounts will be audited annually by independent auditors acceptable to IDA and the audited accounts submitted to IDA within six months of the close of each financial year. It is expected that the State Audit Agency of the central government will audit the consolidated accounts submitted by the FPO. Environmental Effects 74. The project will not have any adverse effect on environmental condi- tions. Water drained from the ponds will have a high biological oxygen demand and be deficien-. in dissolved oxygen; however, drained to irrigation systems, these characteristics will not be detrimental and the water will have value as fertilizer for crop application. Project Organization and Implementation 75. General. The proposed project will be executed by the eight city governments under the overall direction of BAP in KAAF. A Fisheries Project Office, established in BAP, will coordinate project activities in the eight cities and serve as the main link with IDA. Each project city, acting through its BAP, bureau of finance (BOF) and other technical agencies, will be respon- sible for carrying out project activities in the counties and districts under its jurisdiction. City and county (district) BAPs will provide experienced technical and managerial personnel to staff MPOs and CPOs established to man- age overall project planning and to supervise the inputs of local government agencies in the execution of project physical works. Commercial fisheries  - 22 - entities - city and county fisheries development corporations or other type of entity authorized to engage in commercial activities (FDCs), township fish farms and state farms -- will operate the support facilities and fish ponds developed under the project. The Government and the project cities will enter into Onlending and Project Implementation Agreements setting out their respec- tive obligations in project implementation. Signing of the Onlending and Project Implementation. Agreement with each of the project cities, except Shanghai, on terms and conditions satisfactory to IDA will be a condition of Credit effectiveness. Signing of the Agreement with Shanghai, as well as delivery of a satisfactory legal opinon on the Agreement will be a condition of disbursement for the Shanghai component of the project (para. 80). 76. Fisheries Project Office. The FPO within MAAF will be responsible for maintaining project accounts and submitting disbursement applications to IDA; monitoring construction schedules; administering local and overseas training programs; supervising equipment and vehicle procurement; coordinating interministerial activities; and compiling semi-annual reports on project progress. A Technical Advisory Group will be formed to assist the FPO in such matters as selection of foreign consultants, selection of candidates for local and overseas training, and organization of conferences and exchange programs among China's fisheries research institutes. 77. Municipal and County Project Organizations. Each city has set up a Project Coordinating Committee (PCC), an interagency organization consisting of representatives from provincial and municipal level technical and financial agencies involved in the project. The PCC, chaired by a deputy mayor or a key provincial official, will serve as a policy, planning and review board for the project. To manage the day-to-day aspects of project implementation on behalf of the PCC, each municipality has established a project office within its BAP. Typically, the MPO will consist of staff from the provincial and municipal BAPs, from other municipal agencies such as planning and finance, and from the FDCs. The MPOs will coordinate and supervise overall project implementation in participating counties and districts; prepare the annual work program and budget for fish pond development and other civil works; secure all government approvals; review site selection and technical standards for design and con- struction of project works; approve construction contracts and supervise con- struction; and arrange for distribution of equipment and vehicles financed by the IDA Credit. All project disbursements will be made by municipal finance bureaus on the recommendation of the MPOs. 78. A structure of PCCs and project offices similar to that at the muni- cipal level will be established for the counties and districts in the project. The CPOs will prepare work schedules, construction contracts, and annual bud- gets for county PCC approval. In addition, the CPOs will prepare preliminary surveys and designs and supervise local units involved in construction of project works. An assurance was obtained at negotiations that the project offices at the ministry, municipal and county levels will be maintained during project implementation and adequately staffed with qualified personnel. 79. Fish Farm and FDC Operations. Project ponds, both new and improved, will be organized by the townships into fish farms of about 50 ha and 75 households each. Each farm will operate under the General Administration of  - 23 - Industry and Commerce (CAIC) license as a township (i.e., collectively owned) enterprise with stipulated borrowing, contracting and ownership rights as well as tax and accounting obligations. Farm:rs will be selected to join the farm enterprises on the basis of applications screened by their own village coun- cils and appropriate township offices. 80. Project FDCs (para. 75) consist of support facilities -- cold storage plants, feed mills, hatcheries, trade centers, technical service cen- ters, and construction units -- serving mainly but not exclusively farmers in the project areas. At the municipal level, with the exception of Shanghai, FDCs will be state-owned corporations, with charters prepared and registered with the GAIC in accordance with State Council regulations (August 14, 1985). Drafts of the corporete charters for the municipal FDCs of Beijing, Chengdu, Chongqing, Hangzhou, Harbin, Nanchang and Shenyang, were reviewed and dis- cussed at negotiations. Receipt of the charters in final form approved by the appropriate office of the CAIC will be a condition of Credit effectiveness. The Shanghai Municipal FDC (Shanghai Aquaculture General Farm), under current government arrangements, is not a corporation registered with GAIC; however, it is authorized to carry out production and commercial operations, including activities planned under the project, through legal documentation issued by the Shanghai Municipal Government. Delivery of documentary evidence and a legal opinion with respect to the legal status of Shanghai Aquaculture General Farm, satisfactory to IDA will be a condition for disbursement of Credit pro- ceeds for the Shanghai component. An assurance was obtained at negotiations that FDCs will be operated in accordance with operational guidelines aceptable to IDA. The draft operational guidelines for the FDCs were reviewed and dis- cussed at negotiations. These guidelines include arrangements for provision of equity, financing plans, debt equity ratios; accounts and audits; staffing; and management of enterprises. At full development, the FDCs will generate sufficient profits from the support services to cover operating expenses, depreciation, and repayment of investment costs. 81. Flow of Funds. The proposed IDA Credit will be disbursed against expenditures for vehicLes, equipment, r-.oduc.ion materials, and construction materials; for earthworks in construction of fish ponds; and for overseas and domestic training, study tours, and consulting services. Funds for these items will be onlent by the Ministry of Finance (MOF) to the eight municipal governmencs at 4.5Z p.a. interest to be repaid over 20 years including a 5- year grace period. The foreign exchange risk will be borne by the municipal governments. These terms will be outlined in Onlending and Project Implemen- tation Agreements between the Government and each of the project cities to be concluded as a condition of effectiveness of the Credit, or a condition of disbursement (in the case of Shanghai). Most IDA funds will be disbursed directly to vendors under standard ICB arrangements. An additional portion will be used by the cities to cover the costs of technical assistance and training. The remaining IDA funds and all domestic funds will be chanreled through local bureaus of finance and, upon approval of the local project offices, will be disbursed for project expenditures incurred by the FDCs and fish farms. The main source of domestic funds will be the municipalities with additional contributions from counties, townships and (in the case of three project cities: Chengdu, Harbin, and Nanchang) provincial governments (Sich-ran, Heilongjiang, and Jiangxi, respectively). An assurance was obtained  - 24 - at negotiations that the three provincial governments will provide in timely fashion the required contributions. 82. Cost Recovery. The Government's economic reform policy since 1979 has supported a shift from grant to loan financing of development projects. As a first step, funds from budgetary sources, both central and local, were made available as interest-free loans. More recently, the governments at various levels have begun to charge interest on these funds. While these measures represent substantial and rapid progress towards greater investment efficiency and financial discipline on the part of borrowers, there is not yet in place a uniform interest rate structure which will apply to both bank loans and loans from budgetary sources. In the proposed project, in order to ensure consistency with other Bank-financed agriculture projects in China, recovery of the IDA portion of total funding will be as follows: (a) for equipment and materials for the trade centers and technical services centers, at a fixed interest rate of 4.5% p.a., and (b) for all other items, at rates acceptable to IDA, which are expected to average 7% p.a. An assurance to this effect was obtained at negotiations. An understanding was reached that the criteria for acceptability will normally be rates comparable to the ABC prevailing rates for development loans, and that their acceptability will be reviewed by IDA from time to time. An understanding was reached at negotiations that the interest differential between MOF's rate to the cities (4.5%) and the cities' rate to the FDCs and fish farms will accrue to the cities to cover the foreign exchange risk associated with the project and to be reinvested in freshwater fisheries development. Domestic funds will be recovered on terms and condi- tions determined by the various local governments. These terms provide for full cost recovery but at interest rates somewhat lower than ABC rates. 83. The municipal and county project offices will have primary responsi- bility for monitoring the repayment of project costs by the enterprises to the finance bureaus. In the case of fish pond development, funds for equipment, vehicles, construction materials and labor will be provided primarily by cities, counties, and townships and also by the IDA credit. The mechanism for recovery of these funds will be stipulated in contracts between the farmer and the farm and between the farm and CPO. The townships will recover their investment in pond development through taxes on profits of project fish farms. 84. Funds for development of FDC support facilities will be provided from the IDA Credit for vehicles, processing equipment, construction equipment and materials; and from the provinces, municipalities or counties, for other local costs, mainly civil works. FDCs' financial obligations and methods of repayment in respect of the loan funds will be outlined in contracts between FDCs and the cities and counties. MPOs will be responsible for recovery from the FDCs of funds originating above the county level; the CPOs will handle recovery of county investments. Freshwater Fisheries Production 85. The proposed project represents a transitional stage between the traditional carp polyculture, based on stocking a combination of species which utilize Lhe natural flora and fauna of the pond, and a modern feed intensive monoculture. While in most of the project ponds, the traditional combination  - 25 - of carp species will be stocked and grass application and manuring will be continued, artificial feeding will be introduced in the standard pond manage- ment practices. The project will support feed formulation research and the adoption of modern aquaculture equipment and techniques, thus paving the way for the introduction of intensive monoculture systems. 86. Total output in the project area is expected to reach nearly 100,000 tons of fish at full development, with yields ranging from 4.5-7.5 t/ha, depending on climate. With availability of higher quality balanced feed con- centrates and provision of training and extension advice on pond management, projected yields may be reached in the sixth year after new pond construction and in the third year after pond improvement. Yield increases will be obtained from higher stocking density and better growth potential or properly constructed and maintained ponds. Strong markets exist in the eight cities for aquatic products, especially freshwater fish. 87. Strong markets for freshwater fish exist in eight project cities and their surroUisding areas. Following sizeable increases in rural and urban incomes during the period 1978-84, per capita consumption of fish and fish products increased from 3.5 kg to 4.4 kg in rural areas and from about 6.0 kg to 7.8 kg in urban areas. However, per capita consumption rates are low in comparison with other developing countries. Benefits, Justification and Risks 88. The project will convert existing wastelands and Low-yield lands to productive use, strengthen and expand the production base in freshwater fish- eries, and help to fill the growing gap between the demand for and supply of fish in eight major cities. The project will also strengthen the institu- tional capabilities of local fisheries agencies to promote fisheries develop- ment consistent with sound technical standards. The project will directly benefit some 15,000 families or about 60,000 individuals involved in fish production. At full development, the annual incremental output of fish will amount to about 85,000 t or about six times the 1985 freshwater fisheries production in the project areas. Production of fish feed at full development will be about 75,000 t. At full development, the fish pond operations will create an annual incremental demand for labor equivalent to 6,600 full-time jobs. The project-assisted support facilities will generate about 500 full- time jobs. The per capita annual incomes of the families operating the fish- ponds are expected to range from Y 600 to Y 1,100, compared to the without- project income of about Y 300. 89. The financial rate of return (FRR) for the project is estimated at 20%, and the economic rate of return (ERR) at 28%. By city, the financial rates of return are estimated to range between 17% and 21% and the economic rates of return between 22% and 36%. The aggregate financial rate of return for new fish ponds will be about 17% and for improved fish ponds, about 28%. Regional differences in civil works and operating costs account for the varia- tions between cities, which range from 16% to 18% for new fish ponds and 16Z and 36% for improved fish ponds. Cash flow analysis indicates that cost recovery will require periods ranging from 12 to 15 years for new fish ponds and from 9 to 12 years for improved ponds. The investments in feed mills and  - 26 - cold storage plants which will be managed by the municipal FDCs on a commer- cial basis are estimated to yield FRRs of about 33% and 20%, respectively. The rates of return for feed mills and cold storages tend to be sensitive to variations in both costs and benefits, and, therefore, FDCs will ensure that these are operated with cost efficiencies, improved output both through greater capacity utilization and efficient management, and appropriate output pricing. The support services to be provided by FDCs, are expected to be priced at levels sufficient to cover costs with a modest surplus. At a discount rate of 12Z, the net present value of the project is estimated at Y 675 million ($225 million equivalent). 90. ERRs for new and improved fishponds range between 23% and >50Z. Because economic prices for rural labor and some nontraded inputs are lower than financial values, ERRs are higher than the FRRs. Sensitivity testing indicates that the ERRs for new and improved fishponds are fairly sensitive to changes in output prices. A decline in output prices, however, is not expec- ted to occur. 91. The project faces no significant technical or management risks. Chinese fish farmers have had long experience with integrated carp polycul- turep and aquacuLture practices and technology to be introduced by the project have been proven elsewhere. Managers, technicians, and farmers in the project areas have the requisite incentives and basic skills to apply the improved practices and technology. Moreover, technical service centers established by the project will train extension staff and fish farmers to ensure optimum efficiency in pond operation. Some risk may be associated with development in timely fashion of feed concentrates specific to the requirements of each proj- ect city. To minimize this risk, the project will provide funding for local research institutions to carry out feed formulation studies and will establish feed mills equipped with laboratories for analysis for feed mixes. 92. The project management structure is already in place at the central, municipal and county levels with project offices staffed by experienced per- sonnel from the BAPs and other agencies involved in the project. A system of fish farms as township enterprises and county- and city-owned FDCs has been organized in order to put fisheries production and support services on a fully commercial footing in contrast to past practices. Given the fact that these enterprises have strong backing from local governments including initial financial and technical support as well as support for operational indepen- dence, no problems are expected in project implementation and, therefore, in achievement of projected levels of production.  - 27 - PART V - RECOMHENDATION 93. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve the proposed credit. A. W. Clausen President by: M.A. Qureshi April 15, 1986 Washington, D.C.  -28- ANNEX I Page 1 of 7 CHINA. PEOPLES IUP. OP - SOCIAL INDICATORS DATA SHCET CHINA. PEOPLE'S RcP. OF *PIMUNCI C PS (WEHIHTED AVIRACGE) IA mOmT (HOST =CgNT CTIltATE) /b UCENT LOW INCOII MIDDLE INCOME 196ioo 197041b hShIIATELk ASIA A PACIFIC ASIA A PACIFIC ASA (TwaSAw SQ. nO TOTAL 9561.0 9561.0 9561.0 AGRICULTURAL 3257.6 3882.0 3665.9 COP MM CAPITA (flS) .. . - 300.0 278.3 1011.1 gmC COISulmwlm PIIR CAPTTA (KILOGRAMS OF OIL EQUIVALENT) 202.0 259.0 &41.9 265.7 566.6 omuTIOoN A-D VITAL STATISTICS POPULATION.MID-YEAR (THOUSANDS) 651000.0 815160.0 1019102.n URDAN POPULATION (2 OF TOTAL) 16.4 /c .. 21.0 22.3 35.9 POPULATION PROJECTIONS POPULATION IN YEAT 200 (KILL) 1242.3 STATIONARY POPULATION (HILL) 1571.0 POPULATION MOMENTUM 1.6 POPULATION DENSITY PER SQ. KM. 68.1 65.3 106.2 173.6 386.9 PER SQ. It. AGRE. LAND 199.8 210.0 260.8 353.3 1591.2 POPULATION AGE STRUCTURE (Z) 0-14 yRS 38.9 37.6 32.0 36.3 36.2 15-64 YRS 56.2 57.2 63.1 59.4 57.7 65 AND AOVE 4.7 5.0 5.0 4.3 3.5 POPULArTON GROWTH RATE (:) 70TAL 1.1 2.2 1.7 2.0 2.3 URBAN .. .. .. 4.1 4.1 CRUDE BIRTH RATE (PER HOUS) 39.2 /d 35.7 16.6 27.5 30.1 CRUDE DEATH LATE (PER mHOUs) 23.5 77d 6.8 7.1 10.2 9.4 GROSS REPRODUCTION RATE 2.6 7d 2.3 1.0 1.7 1.9 FAMILY PLANNING ACCEPTORS. ANNUAL (THOUS) .. USERS (2 OF MARRISD WOMEN) .. .. 71.0 69.4 56.5 OD ASD NUTRITION mNDEx or FooD PROD. PER CAPITA (1969-71-100) .. 100.0 123.0 116.6 12^.4 PER CAPITA SUPPLY OF CALORIES (2 OF REQUIREMENTS) 94.6 /d 101.6 119.8 106.3 115.7 PROTEINS (GRAMS PER DAY) 53.0 7d 56.2 69.7 60.1 60.3 OF WHICH ANIMAL AND PULSE 12.5 77 13.3 15.9 14.4 14.1 CHILD (AGES 1-4) DEATH RATE 13.5 8.5 2.0 7.3 7.2 HALTH LIFE EXPECT. AT BIRTH (TEARS) 41.0 /e 60.9 67.1 60.5 60.6 INFANT MORT. RATE (PER TNOUS) 165.0 7 69.0 36.0 69.2 64.9 ACCESS TO SAFE WATER (%PoP) TOTAL .. .. 50.0 44.2 46.0 URBAN .. .. 85.0 77.2 57.6 RURAL .. .. 40.0 34.6 37.1 ACCESS TO EXCRETA DISPOSAL (2 OF POPULATION) TuTAL .. .. .. 7.8 50.1 URUIN .. .. .. 28.8 52.9 RURAL .. .. .. 5.5 44.7 POPULATION PER PHYSICIAN 7940.0 If 3690.0 1f 1740.0 /f 3318.0 7751.7 POP. PER NURSING PERSON 3830.0 2760.0 1710.0 4690.7 2464.8 POP. PER HOSPITAL BED TOTAL 1040.0 760.0 440.0 1039.2 1112.1 URBAN 210.0 .. 160.0 299.1 651.6 RURAL 10140.0 .. 1020.0 6028.2 2596.9 ADMISSIONS PER HOSPITAL BED .. .. .. 52.3 41.1 n08IS1ic AVERAGE SIZE OF HOUSEHOLD TOTAL .. .. 5.1 URAN .. .. 4.1 RURAL .. .. 5.4 AVERAGE No. OF PERSDNS/ROOM TOTAL .. .. URBAN .. .. RURAL .. .. PERCENTAGE OF DWELLINGS WITH ELECT. TOTAL .. .. URBAN .. .. RURAL .. ..  -29 - ANNEX I Page 2 of 7 CIlA. PLE' RE. 0i - IOICIL INDICATORB DATA SHEET CIIAZ, PIOPLES REP. FrENCE ROUPr MWINTED AVIRAGES) /a MOST (HOST RECINT ETIMATE) lb z,9oLk 19701k R"CUT LOW INCDHE MIDOLE INCOME IT197UKIATE ASIA A PACIFIC AlIA PAcIrIc ADJUSTED ZNROLLHENT RATIOS mrtt.s TOTAL 109.0 110.0 110.0 92.6 100.7 KMAE .. ., 123.0 105.5 104.4 AL . .. 97.0 79.3 97.1 UEWDARYI TOTAL 21.0 23.0 33.0 31.3 47.8 HMLE .- .. 46.0 40.6 50.6 EALE . . 25.0 21.9 44.8 VOCATIONAL (S OF CONDAY) .. .. 2.2 3.2 18.4 PUPIL-TEACE RATIO P1ZMT *.* 33.0 25.0 38.0 30.4 IOIDARY .. 22.0 16.0 17.4 22.2 m" PASSNGER CARS/THOUSAND PoP .. .. 0.2 'I 0.9 10.1 RADIO IECIVER/mTOUSA POP .. 14.7 210.1 129.8 172.9 TV EIM RITOUSAND o .. 0.6 35.3 19.8 58.5 NEWSPAPER C"MA!LY C L INE=REST') ciuwAno. PER TOUSAIMD POPULATION .. .. 33.4 25.7 65.3 CINEMA ANNUAL ATTENDANCE/CAPITA .. .. .. 6.0 3.4 LUABO TOTAL LAOR FORCE (1T3OU) 321646.0 380555.0 470692.0 FALE (PERCEN) 38.3 38.0 37.3 33.2 33.6 AGRCULTUgl (PZRCENT) .. .. 68.9 69.6 52.2 NDUSTRI (PERCENT) .. .. 18.7 15.6 17.9 PARTICIPATION RAZE (PERCET TOTAL 46.8 45.0 46.1 41.9 38.9 KALE 55.9 54.5 55.4 53.6 50.8 F-MA 37.0 35.0 35.1 29.1 26.8 ECONOMIC DEMPDENCY RAITIO 0.9 1.0 0.8 1.0 1.1 INWIE DISTRIBDTC PRCENT OF PRIVATE INCME RECEIVED BY ICUEZST 5S0o NOFUSEEOLOS .. .. 12.5 .. PIOI;ST 20X OF NOUSEHOLDS .. .. 39.37j .. 48.0 LOWEST 20S OF HOUSEHOLDS .. .. 6.8 .. 6.4 LOWEST 401 OP OUSEOLDS .. .. 18.4 .. 15.5 yM1T TSA C ESTINATED ABSOLUTE POVERTY lNODIZ LML (USS PER CAPITA) Ulm .. .. .. 133.9 RUR .. .. .. 111.6 151.9 ESTIMATES RELATIVE POERTY INCOME LEVEL (USS PZE CAPITA) URN .. .. .. .. 77.9 RURAL .. . .. 61.7 164.7 ESTIMATED POP. SELOW ABSOLUTE POVERTY INCOME LEML () UR . .. .. 43.8 23.3 RUmAL . .. .. 51.7 37.8 NOT AVAILABLZ NOT APPLICABLE IO T E S ls The group averagee for eaeb indicator are populatioc-vaighted arithmetic mans. Coverage of countries among the indicators depends on availability of data and is not uniform. /b Utles. othbrvise noted, "Data for 1960" refer to any year between 1959 and 1961; "Data for 1970" between 1969 nd 1971; and data for "Aost Recent setimato" between 1981 end 1983. /c 1964; /d 1955-65 average; /a 1955-64 aversga; /f Senior doctor of western medicine; jM Distribution of people ranked by households per capita income. 1979 data; /h 1980. JUN. 1985  - 30 - Annex I Page 3 of 7 DOinNlONS OF SOCIAL INDICATORS - 1 Kate Alh_ouh the data am drawn fhrmn aa grlyjudgd the t authuritative and relhIblek It should ailo be noted tbsn the y nay not be iierunatsuaally comparahb bcm or the ink or sumndadlsd deflaitiomn nd cortpt umed by dikrent countre in clctimng the date. The dat aire nonehleh. ueful lo dacriht ordecbrso mnritude Indiri trids and chametu m canln mejor dfintm betn esuntrie. The rece roups are l the eam coutry group oft subc ountrynd(2)acotry group with mmnewh high*r mrage min e iha thc co unRty greuprobf the whbm eountry (eacptt for "Hgh Income Oil Expotrn" group whee "Middl Income North Africa and MuddkE lat i hsen bCme of stranger sotio.ealsural aMnitkle In the Leraenc group data the meumps ar populauon weighted anthmlutcan or ach indkcator and shown only when meuwity ofthe oountries In a gpet has dta fortat Indicator. Since Ihe couorag ooe atnions the lndcatomedepmnds on the eaiadabilipy arda end Is nol uniror.n cautionmtbiesereled In resting avempuof one indicaore totnoter Theeaverage are only useful ncunpanng thevaleofoneindicatorat tnincenonig the country and reference groups. AREA (thousand sq.km) Crdrth Rat (prthad- Numberoflivebirthsintheyear Treal-Total surfaece are comnprisng land arme and inland waters; per thousand of mid-year population. 190. 1970. and 1983 data. 1960. 1970 and 1983 data. Cr Dette (per taan) Number of deaths in the year Agrleur,al-Estimate of agricultural area& usd lemporarily or per thousand of mid-year population; 1960. 1970. and 1983 data. permranently for crops. patures, market and kitchen gardens or to Gress Reprdutiese Rar-Average number of daughters a woman lie fllow. 1960, 1970 and 1982 data, will bear in her nornal reproductive period if she experiences present agcpecific fertility rates; usually five-year averages ending GNP PER CAPITA (USS>-GNP per capita estimates at current in 1960. 1970. and 1983. market prices cakulated by same conversion method as World Y PMVSir Acceptors Aaia (thousansa Annual nusus Bank Atlas (I 981143 basis); 1983 data. her of acceptors of binh-conirol devices under auspices olnational ENERGY CONSUMPTION PER CAPITA-Annual apparent family planning program. consumption of commercial primary energy (coal and lignitc. PasO, flthanl-Users (percr o ef raried awne) The percen petroleum, natural gs and hydro-. nuclear and geotherma dee- tape of married women of child-bearing age who a tc practicing or tricity) in kilograms of oil equivalent per capita; 1960. 1970. and whosc husbands are practicing any form of contr.tceptton Woirien 1982 data. of child-bearing age are generally women aged 15-49. although lor some countries contraceptivc usage is meaSured lot uthrs ige POPULATION AND VITAL STATISTICS groups. Total P1pBl3Mmuw MM-Yes (theusaadu)-As orJuly i; 1960. 1970. FOOD AND NUTRITION and 1913 data. UIndx oRfFood Pnr hr Capita iIS 9-71- 100i Indct of per fJrhaa PeopLatin (percent' of total)-- Ratio of urban to total capita annual production of all food cornmoditics Production population; different definitions of urban areas may affect compar- excludes animal feed and seed for agrisulur. Food commodities abifity of data among countries; 1960. 1970. and 1983 data. include primary commodities e g. sugarcane instedd .r suoprl Popdadu hrcrieos which are edible and contain nutrecnts (e.g coffee And ter arc Poplation in yr 20(X)-The projection of population for 20. excluded): they comprise cereals. roos crops. pubes, til seeds. made for each economy separately. Starting with information on vegetables, fruits, nuts. sugarcane and sugar beets. livestock, and total population by age and sex, fertility rates, mortality rates, and livestock products. Aggregate production of each country is hased international migration in the base year 1980. these parrneters on national average producer price weights: 1961-65. 1970. and were projected at five-year intervals on the basis of generalized 1982 dtta. assumnptions until the population became stationary. Per Capi Sqy of Calorie rcnt ofrrqdea mnuj (oomput- S:ationrypopubarion-ls one in which age- and sex-specifc mor- odfrorncaloriecquivalentof nct food suppliesavailabletn country tality rates have not changed over a long period. while age-specific per capita per day Avatlable supplies Lonspruse domesic produc- fertility rates have simultaneously remained at replacement level tion. imnports less expons. and changes in stock. Net supplies (net reproduction rate= 1). In such a population. the birth rate is exdludeanimal feed. seeds for use in agriculture. quantities used in constant and equal to the death ratc. the age structure is also food processing. and losses in distribution. Requirements wcre constant. and the growth ra:e is zero The stationary population estimated by FAO based on physiological needs fur normal activui size was estimated on the basis of the projected characteristics of and health considering environmental tempe: ture. body weights. the population in the year 2000. and the rate of decline of fertility age and sex distribution of population. and allo.wing I n percent for rate to replacement level. waste at household level: 1961. 197U1 and 192N datt Population Momnrntsn-Is the tendency for population growth to Per Caira Supply of horein (rmns per day) ir nlicit consent of continue beyond the time that replacement-level fertility has been per capita net supply of food per day Net supr vol Ilo-d i, delined achieved: that is. even after the net reproduction rate has reached as above. Requirements fbr all countries est% hhbhed h) t SID-% unity. The monentum ofa population in the year r is measured as provide for minimum allowances of60 grams. r total piPUUiCI PC0 a ratio of the ultimate stationary population to the population in day and 20 granis olanimal and pulsc protcin .. iAhich Ill granin the year :. given the assumption that fertility refnains at replace- should be animal protein. These standard. are lowcr Ihan ihose .t ment level from year : onward. 1985 data. 75 grams of total protein and 23 grams of animal proten as an Populatio Densay average for the world. proposed h) FAG tn ihe Third Wolid 1 ..a! Per sq.kmu.-Mid-year population per square kilometer t100 hec- Supply. 1961. 1970 and 1982 data. tares) of total area 1960. 1970. and 1983 data Per CapiaheinS Spply rone AA sa rdalse- Protein uppl% Per sq.km. agrindtral /anr-Computed as above for agricultural offood derived from animals and pulses in grams per day. 19*65. land only. 1960. 1970. and 1982 data. 1970 and 1977 data. Abpahniier Age Strwctare (percent)- Children tO-14 years). work- CkiWd (eseI-4 Der J iherl ul de.atin' .ii ing age(15-64 years).and retired (65 yearsand over)as percentdge children aged 1-4 years pcr thousand children in the ame age or mid-year population; 1960. 1970. and 1983 data. group in a given year For mosL developing cotintrie' d.i.u lden' cd Pbposion Growth Rate (perceaer)--oal-Annual growth rates of from lirc tdbles: 1960.1970 and 19113 data total mid-year population for 1950-60. 1960-70. and 19703. HEALT'H Popauion Growth Rae (percent)-mrhan- Annual growth rates Life Erperaery at Birth resj) Number of vear a ne bonn of urban population for 1950-60. 1960-70. and 1970-83 data. infant would lue if prevailing pattems of monalito tir all pevplr  - 31 - Annex I Page 4 of 7 at the time of of its birth were to atay the ame throughout its lire. Apl-tewer tatio - primary, and senndary-Total students en- 1960,1970 and 1983 data. rolled in primary and secondary levels divided by numbers of wae Mwtert Rate (per th.mid)-Number of infants who die teachers in the cormsponding levels. before reachng one yer of age per thousand live births in a given year 1960.1970 and 1933 data CONSUMPTION Am t S;fer Wair (percent of dOF U40t. Mad aseagr Ce-s (per tdemad paoplieion)- -Passengei cars cgin ran -Nnmber of people (total urban, and rual) with reunable pise motor cars seating kss than eight persons. exclude,.uanbul- am to safe water supply (includes treated surac water or ances, hearse and military vehicks. untreated but uncontamninated water suh as that from protected Ratio ReceIvers (per theuummdppiaplauims-AlII types of recovers borehoi supinp ad u an wl)m perucntage of thePir reIpee- for radio broadcast to general public per thousand of population; tive populations. In an urban area a public fountain or tndpost excludes un-licensed receivers in countries and in years when located not more than 200 meters from a house may be considered registration of radio sets was in effect; data for recent years may as being within reasonable access of that ouse. In rura aras not be comparable since most countries abolished licensing reasonable aess would imply that the houswife or rnembers of the tVRe co (perahbe mdpcepmo M - TVt receiwm forbroAd lNit housdhold do not have to spend a disproportionate part of the day to general public per thousnd population; excudes unhier nsed TV in fetching the fanaily's water needs.t ec!pbi e huidpouain xldsulcsdT Aa: fetching Err nDy's wt r needs.r receivers in countries and in years when registration of IV sets was Amce to E,erea Diupani (perceut of peplatdon)-tetral, urban' in effect. ad rural-Number of people (total, urban, and rural) served by excreta disposal as percentages of their respective populations. Nfespa Cbrtat (pr thousand poultion) Slhows (he avei - Excreta disposal may include the collection and disposal, with or age irculation of 'dail) general interest newspaper.' dehned as a without treatment, of htanan excreta and waste-water by water- periodical publication devoted primuarily to recording general news borne systems or the use of pit privies and similar installations. It is considered to be "daily" if it appears at least four times a week Pulti e per hysidon-N'pulation divided by number of prac- Cluem. Aiural AtaeudawCe per Caper Year- Bied on the tising physicians qualified from* a medical school at university level, number of tickets sold during the year. including admissrins to Populari per Nwnqr Perso--Population divided by number or drive-in cinemnas and mobile units. practicing male and female graduate nurses, assistant nurses. LABOR FORCE practical nurses and nursing auxiliaries.LBR OC epurua nesa osing aura4 r rus- opulation Total Labor Force (ahsnnrdfl-Economically active persons. in- (total, urban and rural) divided by their respective number of cluding armed forces and unemployed but excluding housewives. (totl. rba. an rual)divded y teirresectic nmbe of students. elc. covering population of all ages. Definition% in hospital beds available in public and private, gneral and spcialired various countries are not comtparble. 1960. 1970 and 19b3 data. hospitals and rehabilitation centers. Hospitals are estabishments pennanently staffed by at least one physician. Establishments prov- Femakl (rperun---lemak labor force as perLentage or total labor iding principally custodial care are not included. Rural hospitals, force however, indude health and medical centers not pernanently staffed Apicurke iperreutr- -Lahor force in inamtog. forrt,s h.ntinti by a physician (but by a nedical assistant, nurse, midwife, etc. and fishing as percentage of total labor fore 1960. 1970 and IQNtj which offer in-patient accommodation and provide a limited range data. of medical facilities. htmstry (perret)--Lahor force in mlining. constriU1Lci.. .m.iiie.- Adimssioan per Hospat hi-Total number of admissions to or facturing and electricity, water and gas as picrcent agc ol tta1l lihair discharges from hospitals divided by the number of beds. force: 1960. 1970 and 19S0 data. Pmrwicitpm, Rote (percent)j--e.r nik auif, sd lwwk-articipition HOUSING or activity rates are computed as total. male. and female la;bor I utie Avre Ste of Houeho (peros per household)-ttal. arban, as percentages of total, male and female populauts of alt agem andrral-n A householdconsistsofagroupof individuals who share respectively: 1960. 1970. and 1983 data. These are ba-ed on ILO's living quarters and their main neals. A boarder or lodger may or participation rates reflecting age-sex structure of the population and may not be included in the household for statistical purpose. long time trend. A few estimates are from niational sourx' AveirW Number of Person per Roue-rotal. arban. and rua- Eeonmic Dependeacr Riod -Ratio of population under i'. and Average number of persons per room in all urban, and rural 65 and over, to the working agc population (thox ag-l 15-o4; occupied conventional dwellings respectively. Dwellings exclude non-permanent structures and unoccupied parts. INCOME DIS'rRIBUTION Peentaep of D Es wit Etc.etridry-4ota1. u.rbn, ad rurat PerceNtage of Total Dispoable eram- (bulk in cash and kind) Conventionaldwellingswith electricity in livingquartersas percen- Accruing to percentile gniups of househilds ranked hv trotal hous- tage of total, urban, and rural dwellinp respectively, hold inconm. EDUICATION POVERTY TARGET GROtUPS Adjuted E,relkitwt Ratios The following estimates arc very appro umate measures oi pn eart> Primary school - total, male and femae --Gross total, male and levels, and should be interpreted *ith considerable caution female enrollment of all ages at the primary level as percentages of Estimated Absolte Pofbvty Income Letel (t'SS per captai- - urban respective pnsmary school-age populations. While many countris and rural-Absolute poverty income level is that income level consider primary school age to be 6-11 years, others do not. The below whkh a minimal nutritionally adequate dic plus essenial differences in country practices in the ages and duration of school non-food requirements is not affordabk are reflcted in the ratios given. For sone countries with universal Estimated Reative Poverty Income Leretl ISS per eapuc--urhan education, gross enrolnient may exceed 100 percnt since some and ral -Rural relative poverty icome lvcel is n-ne third ot pupils are below or above the country's standard primary-school average per capita personal income of the countr). Urhan kidl i age. derived from the rural lc el wilh adjustment for higher c.'. - 1- Seonary school - total mde and trvad., -Computed as above: living in urban areas secondary education requires at least four years of approved pri- E