China - Jiangxi Agricultural Development Project

Document of The World Bank FOR OFFICIAL USE ONLY CX 0. O97- C: 4A Repert No. 7664-CIA STAFF APPRAISAL REPORT CHINA JJANGXI AGRICULTURAL DEVELOPMENT PROJECT MAY 19, 1989 Agriculture Operations Division Country Department III Asia Regional Office ITis document has a mtdcted dirbutkoo and may be ued by redpl only n tbe perfornce I * .M,, ,, .* J. I, - ., v p i .n-o.Iyl.  CR2 RENY RUIVALEI Currency Unit - Yuan (Y) US$1.00 - Y 3.71 Y 1.00 - US$0.27 (As of Nay, 1989) FISCAL YEAR January 1 to December 31 WEIGHTS AND NEASURES 1 meter (i) - 3.28 feet (ft) 1 kilometer (km) - 0.62 miles 1 hectare (ha) - 2.47 acres 1mu - 0.067 ha 1 ton (t) - 1,000 kg - 2,205 pounds 1 kg - 2.2 pounds ABBREVIATIONS AND ACRONYMS ABC - Agricultural Bank of China ADC - Agricultural Development Corporation AI - Artificial Insemination BFO - Bureau of Forestry BOF - Bureau of Finance CEROILS - China National Cereals, Oils and Foodstuffs Import and Export Corporation CMIEC - China National Machinery Import and Export Corporation EPB - Environmental Protection Bureau ERR - Economic Rate of Return FRR - Financial Rate of Return FTB - Foreign Trade Bureau FTC - Foreign Trade Corporation GVAO - Gross Value of Agricultural. Output ICB - International Competitive Bidding ILS - International and Local Shopping JADC - Jiangxi Agricultural Development Corporation LCB - Local Competitive Bidding MFO - Ministry of Forestry MOA - Ministry of Agriculture MOC - Ministry of Commerce MOF - Ministry of Finance MOFERT - Ministry of Foreign Economic Relations and'. Trade PCC - Provincial Coordinating Committee PCR - Project Completion Report PO - Project Office SAIC - State Administration of Industry and Commerce SFF - State Forest Farm SH - Specialized Household SMC - Supply and Marketing Cooperative SOE - Statement of Expenditure SPC - State Planning Commission  FOR OFFICIAL US ONLY CHINA JIANGXI AGRICULTURAL DEVELOPMENT PROJECT Credit and Proiect Suarv Borrover: People's Republic of China Beneficiary: Jiangxi Provincial Government Amount: SDR 46.2 million (US$60 million equivalent) Terms: Standard, with 35 years maturity. Relending Terms: From Central Government to Jiangxi Province: 15 years, including 5 years grace, with interest at 5.3% p.a. The Province would bear the full foreign exchange risk. End users would pay interest at the Agricultural Bank of China's prevailing rates for similar loans for similar purposes. Project Objectives and Description: The proposed project would assist the Jiangxi Provincial Government to accelerate and diversify agricultural development. It would improve the productivity and incomes of participating farmers and strengthen supporting services at the provincial, prefectural, municipal and county lev3ls, thereby moving farm operations from a subsistence level to commercial orientation. It would ,.lso utilize lands which are unproductive or unsuitable for grains and other crops. It would support a livestock development program featuring pigs and poultry on hilly lands unsuitable for grain cultivation, develop and intensify freshwater fish culture in low-lying areas and in lakes and ponds, rehabilicate low-yielding tea plantations and establish new commercial forest plantations. The project would also establish agroprocessing facilities to increase the value-added of project output, to provide feed for project livestock, and to demonstrate the organization, management and financing of such facilities. Benefits and Risks: At full development, annual incremental production would amount to about 12 million ducks and geese, 26,000 t of eggs, 300,000 pigs, 19,000 t of fish, 2 t of pearls and 5,300 t of tea. Over the 20-year project life, the forestry component would produce some 59,000 m3 of pulpwood, 579,000 m3 of logs and poles, and 88,000 t of resin. The value of annual incremental output would be about US$128 million annually. The project would increase incomes for some 18,650 farm families, create about 8,285 permanent jobs and provide annual employment of casual labor equivalent to about 540 man years. Ecological benefits, in the form of soil and water conservation, would be gained from the afforestation schemes and tea rehabilitation. No unusual technical, financial or organizational risks are anticipated; to minimize any risk associated with availability of livestock feed, an agreement would be reached that the provincial government would make available funds to procure raw materials domestically or abroad. This document has a restricted distribution and may be used by recipients only in the performance | of their official duties. Its contents may not otherwise be di-closed without World Bank authorization.  - ii - Estimated Costs: Local Foreign Total ------------------($ mln)---------------- Livestock Fig production 6.2 1.7 7.9 Poultry production 6.7 0.8 7.5 Aquaculture 13.4 1.0 14.4 Forestry 3.8 1.2 5.0 Tea Improvement 9.2 2 6 11.8 Processing Feedhills 4.0 7.8 11.8 Pork processing 0.5 0.1 0.6 Poultry processing 4.8 3.8 8.6 Tea processing 6.3 1.8 8.1 Rosin production 0.8 0.2 1.0 Research, Training and TA 4.0 1.0 5.0 Incremental Working Capital 16.6 6.1 22.7 Base Cost 76.3 28.1 104.4 Physical Contingency 5.5 1.8 7.3 Price Contingency 7.3 2.7 10.0 Total Project Cost 89.1 32.6 121.7 Financing Plan: IDA 27.4 32.6 60.0 Provincial government 9.0 9.0 Municipal and prefectural governments 10.4 10.4 End-user contributions 17.6 17.6 Domestic loans 24.7 24.7 Total 89.1 32.6 121.7 Estimated Disbursements: Bank/IDA FY 1990 1991 1992 1993 1994 1995 Annual 5.0 16.0 22.0 9.0 7.0 1.0 Cumulative 5.0 21.0 43.0 52.0 59.0 60.0 Economic Rate nf Return: 39% --.. ... ...............  CHIN JIANGXI AGRICULTURAL DEVELOPMENT PROJECT Table of Contents Page I. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 A. Introduction .1 B. The Agricultural Sector .. C. Sectoral Objectives and Bank Lending . . . . . . . . . . . . . 4 D. Agriculture in Jiangxi ..6 E. Project Formulation and Rationale . . . . . . . . . . . . . . . 7 II. THE PROJECT AREAS .8 A. Location .8 B. Climate .8 C. Topography and Soils .8 D. Population and Land Use . . . E. Power and Transport. . . . . . . . . . . . . . . . . . . . . . .10 F. Research and Extension . . . . . . . . . . . . . . . . . . . . .11 G. Livestock Support Services . . . . . . . . . . . . . . . . . . .12 H. Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 III. THE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . . .14 A. Project Objectives and Relation to Sector . . . . . . . . . . .14 B. Project Description . . . . . . . . . . . . . . . . . . . . . .14 C. Detailed Features. . . . . . . . . . . . . . . . . . . . . . . .15 D. Status of Project Preparation . . . . . . . . . . . . . . . . .22 E. ImplementaLion Schedule . . . . . . . . . . . . . . . . . . . .22 F. Cost Estimates . . . . . . . . . . . . . . . . . . . . . . . . .22 G. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . .23 H. Procurement . . . . . . . . . . . . . . . . . . . . . . . . . .23 I. Disbursements . . . . . . . . . . . . . . . . . . . . . . . . .26 J. Accounts and Audits . . . . . . . . . . . . . . . . . . . . . .26 K. Environmental Impact . . . . . . . . . . . . . . . . . . . . . .27 IV. ORGANIZATION AND MANAGEMENT . . . . . . . . . . . . . . . . . . . .28 A. Project Organization . . . . . . . . . . . . . . . . . . . . . .28 B. Project Coordinating Committees and Project Offices . . . . . .28 C. Agricultural Development Corporations . . . . . . . . . . 29 D. Financial Management . . . . . . . . . . . . . . . . . . . .30 E. Execution of Project Works . . . . . . . . . . . . . . . . . . .31 F. Management of Production . . . . . . . . . . . . . . . . . . . .31 G. Monitoring, Evaluation and Reporting . . . . . . . . . . . . . .32 This report is based on the findings of a preappraisal mission to China in October 1988 and an appraisal mission in January 1989. Members of the preappraisal mission were N. Hill, P. Harrell, W. Price, C. Rees (Bank/IDA), M. Pedini, T. Lohavisavapanich (FAO/CP), C. Benigough, C.L. Cheong, J. Hald, W. Roeland, and T.C. Tso (Consultants). The appraisal mission comprised N. Hill, P. Harrell (Bank/IDA), M. Pedini, T. Lohavisavapanich (FAO/CP), J. Hald, and W. Roeland (Consultants).  V. PRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . .33 A. Livestock . . . . . . . . . . . . . . . . . . . . . . . . . . .33 B. Aquaculture . . . . . . . . . . . . . . . . . . . . . . . . . .36 C. Forestry . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 D. Tea . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 VI. MARKETS AND PRICES . . . . . . . . . . . . . . . . . . . . . . . . .38 A. Market Prospects . . . . . . . . . . . . . . . . . . . . . . . .38 B. Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 C. Marketing Channels . . . . . . . . . . . . . . . . . . . . . . .43 VII.BENEFITS, JUSTIFICATION, AND RISKS . . . . . . . . . . . . . . . .45 A. Production and Benefits . . . . . . . . . . . . . . . . . . . .45 B. Employment . . . . . . . . . . . . . . . . . . . . . . . . . . .45 C. Financial Analysis . . . . . . . . . . . . . . . . . . . . . . .45 D. Incomes . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 E. Economic Analyses . . . . . . . . . . . . . . . . . . . . . . .47 F. Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 VIII. AGREEMENTS REACHED AND RECOMMENDATION . . . . . . . . . . . . . .49 TABLES IN THE TEXT 3.1 Project Cost Summary . . . . . . . . . . . . . 3.2 Procurement Profile . . . . . . . . . . . . . . 5.1 Incremental Production . . . . . . . . . . . . 7.1 Financial Rates of Return . . . . . . . . . . . 7.2 Economic Rates of Return and Sensitivity . . . ANNEXES 1. Background Project Area Statistics (Tables 1 - 3) Project Feed Requirements (Tables 4-8) Distribution of Project Works (Table 9) 2. Cost Data Cost Summaries and Expenditure Schedule (Tables 1 - 5) Working Capital Requirements (Teble 6) Disbursement Schedule (Table 7) 3. Training and Technical Assistance 4. Financial and Economic Analyses Financial Analysis - 4 sows and 60 fattening pigs (Table 1) Financial Prices of Inputs (Table 2) Financial Prices of Outputs (Table 3) Financial Results (Table 4) Fish Production Households - Annual Net Income (Table 5) Selected Conversion Factors (Table 6) Economic Prices of Inputs (Table 7) Economic Prices of Outputs (Table 8) Feed Financial and Economic Price Structure (Table 9) Economic Price Derivation (Table 10) Economic Analysis - 4 sows and 60 fattening pigs (Table 11) Economic Analysis - Whole Project (Table 12)  - iii 5. Operating Guidelines for JADC 6. Trade and Prices National Annual Net Trade in Principal Project Outputs (Table 1) Jiangxi Annual Net Trade in Selected Project Outputs (Table 2) Procurement and Retail Prices for Selected Project Outputs (Table 3) 7. Key Monitoring Indicators Livestock (Table 1) Aquaculture (Table 2) Tea end Forestry (Table 3) 8. Procurement List of Equipment (Table 1) List of Materials (Table 2) List of Vehicles (Table 3) 9. Selected Documents and Data Available in the Project File LIST OF FIGURES A. Implementation Schedule 2. Organization Chart 3. Flow of IDA Funds 4 & 5. Procurement Schedule LIST OF M&A IBRD No. 21453 Project Locations in Jiangxi  CHIN JIANGXl AGRICU;,TLJUL DEVELCPMENT PROJECT I. BACKGROUND A. Introduction 1.1 The Government of China has requested Bank Group assistance .n financing an agricultural development project in Jiangxi Province. The main objectives of the project are to accelerate and diversify agricultural development and increase incomss and employment in the rural sector. The proposed project has components for pig and poultry raising, fisheries, tea rehabilitation, afforestation and agroprocessing and would be concentrated in three regions of the province--the Jitai Basin, Poyang, and Jingdezhen. The project was first identifiel in December 1987. It was prepared by the Jiangxi Provincial Government with assistance of an FAO/CP preparation mission in April 1988. A preappraisal mission visited the project areas in October 1988 and appraisal took place in mid-January 1989. B. The Agricultural Sector 1.2 Agriculture in China, including crops, livestock, forestry and f'isheries, provides sustenance to over one billion people; it is an important source of income for some 190 million farm families and accounts for about 30% of the country's GDP. Only about 137 million ha of China's land area of 960 million ha are arable. Farming systems are intensive with heavy inputs of labor, chemical and organic ierrilizers, small machinery and water. Nearly half of the cropped area is irrigated. Foodgrains occupy about 70% of the cropland and account for about one-third of total agricultural output. This intensive system of production has allowed China to meet the basic food requirements of its population, about 22% of the world's total, and to produce an increasingly sophisticated mix of cash and commercial crops, from less than 11% of the world's arable land. 1.3 China's decade-long rural reform program has revitalized the agricultural sector through improved work incentives, decentralized decision-making, better exploitation of comparative advantages, decontrolled agricultural markets and prices, and technological modernization. The program has resulted in impressive growth of income and production and a remarkable diversification in family diets. The gross value of agricultural output (GVAO) increased by 77% in real terms during 1978-87, at an average annual rate (6.5%) more than twice that of the previous 25 years (3.2%). Grain production, one of the key indicators of China's agriculture, increased by about one-third (100 million tons) over the same period. However, several major problems have emerged in recent years. First, state investment in agriculture has declined, dropping from Y5.3 to 3.7 billion during 1978-86, or from 10.6% to only 3.1% of total state capital construction. The downturn in rural investment has contributed to increasing bottlenecks in infrastructure (roads, power, and market facilities) and a minor decrease in irrigated area. Second, of great concern to the Government, a 5% decline in giain production has occurred since the record harvest (407 million tons) of  1984. Most observers ascribe this development to continuing rigidities in the pricing of grain while liberalization of markets for high-valued products (fruit, meat, fish, eggs, milk, silk, shrimp, etc.) provides much stronger income incentives for farmers. 1.4 The Government has responded to these problems by reversing the decline in state investment in agriculture which was increased to Y4.4 billion in 1987, with priority given to the rehabilitation and. expansion of irrigation. Objecctves for agriculture during the Plan period are to maintain per capita grain :onsumption at current levels while continuing to diversify the overall output structure to accommodate chaneing consumer preferences. This means increasing food grain output to 450 million t by 1995 to match population growth, boosting production of fruits, vegetables, meat, poultry, fish and cash crops, and exoanding output of processed products. To achieve sector growth, Chinese planners, on the one hand, are cailing for technology improvement and maintaining sown area at current levels, ard on the other, are supporting a series of systemic reforms which include: (a) allowing diverse forms of enterprise ownership and management to encourage growth of rural agroprocessing, transport, and commerce; (b) establishing legal guarantees to farmers regarding land use rights and ownership of assets; and (c) expanding marketing channels and introducing some measure of price decontrol. The Bank Group is supporting these reforms through a Rural Sector Adjustment Loan (Ln. 2967/Credit 1932-CHA). Livestock 1.5 Livestock comprised 15% of the GVAO in 1987. Of total meat production, pigs contributed about 88%, poultry 8%, and other livestock only 4%. As part of the government's efforts to improve cotiiumption patterns, targets have been set ror liveqtosk production. By the year 2000, the contribution of the livestock subsector to GVAO is projected to rise to 25%. The major means to achieve production targets would be more efficient production and management, a higher level of grain feeding, pasture improvement for ruminants, and the use of animals with superior genetic characteristics. Technical feasibility would depend on the availability of grain, grass and protein supplements; sustainable farmer incentives would also need to be introduced and maintained. 1.6 China is the world's largest pig producer. The year-end inventory for 1988 was 342 million head, the number of slaughtered pigs 275 million, and total pork production about 19 million tons. These figures indicate a recovery from the temporary downturn which occurred in the pig industry in late 1987 due to low state procurement prices and high feed costs which caused farmers to rush pigs and breeding sows to slaughter. The central provincial governments undertook a number of policies to increase pi duction, such as raising procurement prices for pork 30-40% to levels mparable to free-market prices and allowing farmers selling pigs to the state to buy grain, fertilizer, diesel fuel and compound feed at low state-fixed prices. From 90-95% of production is accounted for by farmers raising one to four pigs, with thosa raising  -3. one or two generally able to rely solely on non-purchased feed resources (plant and food waste) and thus not affected by feed prices. Given the relatively low level of technology, poor feed quality and inferior breeds being raised by most producers, an average of 5 kg of feed is required for 1 kg weight gain versus a 3:1 ratio on modern Western swine operations. Government officials generally believe that a pig (live weight) to grain (paddy) price ratio of 5:1 is the minimum necessary for profitability: the prevailing ratio is 7:1. The Government -ontinues to en.co-rage breeding of lean meat pigs (for both domestic and export markets) through establishment of lean pig production bases, and in 1987, 21% of slaughter was lean meat pigs. Lean pig production is dependent on production of formulated feed with adequate amounts of both protein and energy components and availability of imported breeds for crossing with local breeds. 1.7 Poultry production, about 75% chicken, 20% ducks and the rest geese and other minor birds, is increasing very rapidly. Output of poultry meat rose to a record 2.3 million t in 1988, a 13% increase over 1987. The government has given special emphasis to poultry development because of poultry's superior feed conversion ratio relative to other livestock. Egg production is also expanding steadily. China produced nearly 6.5 million t of eggs in 1988, up 8% over 1987 levels. Fisheries 1.8 China is the world's largest producer of freshwater fish and the third largest fishing nation afte; the U.S.S.R. and Japan. The subsector, including culture and capture production from marine and freshwater sources, accounts for about 4% of the GVAO. Total aquatic production (including fish, shrimp, shellfish and seaweed ptoduced in Chinese waters and harvested by Chinese vessels in other waters through joint ventures with other countries) increased from 5.3 million t in 1983 to 10.5 million t in 1988, an increase of 98%. The structure of production was freshwater culture (36%), freshwater capture (6%), marine capture (46%) and marine culture (12%). While marine capture fisheries contribute the greatest volume, the high value fish, particularly off the China coast, are facing depletion and increasing amounts of the catch are made up of small fish with low economic value. Government policy since the early 1980s has aimed toward shifting the production structure from capture to culture fisheries by increasing unit output in the Yangtze and Pearl River deltas, areas where there is a long tradition of aquaculture, and by developirng wasteland to expand the area for fish farming. The existence of extensive unutilized land suitable for culture fisheries and the fact that significant increases in yields may be realized through application of new technology and management methods led the Government to adopt in the early 1980s a program to expand annual fisheries production to 11 million t by the year 2000; with prospects of achieving this level by 1990, the target has been revised upwards to 18 million t. A major unknown in the future development of aquaculture is the extent to which it will be economic to feed concentrates as opposed to more traditional feeds such as grass and pig and poultry manure. It is likely that a substantial amount of the incremental feed requirements of aquaculture must come from concentrates, which may be justified by rising real prices for aquatic products.  4- Forest= 1.9 The forest subsector accounts for 5% of GVAO and provides employment for some 2.2 million workers. Present forest cover is about 12t, which translates to a standing wood volume of 9.1 m3 per capita--compared to the world average of l0 m3 per capita. With annual wood consumption of some 400 million o3 and annual incremental forest growth of 300 million m3, China has had to increase imports, overcut natural forests, and open roeote forest stands. Since the gap betweon supply and demand is constraining develop-ent and jeopardizing China's remaining forests, the Government has drafted a plan to increase timber production and reduce imports; this plan calls for afforestation of 8 million ha by the year 2000. 1.10 Tea production grew at an an annual rate of 6.1% over the 1983-88 period to reach 540,000 t in 1988. About 80% of production is green tea, and 20% black tea; however, only 20% of the green tea is exported and about 90% of the black tea, mainly to Eastern Europe. Domestic consumption of about 0.3 kg per capita is expected to rise to at least 0.5 kg by the year 2000; this would require production of about 670,000 t to fill domestic demand. With about 1.1 million ha planted and 80% of this area picked, yields of refined tea are less than 0.6 t/ha--a low rate compared to other temperate climate tea producing areas where yields are in the range of 1.5 - 2.0 t/ha. C. Sectoral Objectives and Bank Lendine 1.11 For fisheries and livestock development, the Government's objectives are to increase production for domestic consumption and exports and provide an additional source of income for the rural population. High-valued aquatic products (shrimp, eel, pearls) and livestock products (meat, wool) are being targeted for export markets. The aquatic development strategy emphasizes establishment of fish culture systems on land unsuitable for crop cultivation--freshwater culture on swamps, floodplains, marshes and poorly drained interior land and marine culture on coastal lowlands, shoals and mudflats. The livestock development strategy emphasizes the provisior of superior breeding stock and good quality feed, industrial (stall-red) management systems, pasture improvement and development of new pasture species, the establishment of processing plants, and the provision of supporting services such as scientific breeding (with greater use of artificial insemination) and improved veterinary services. 1.12 The main objectives of the forestry subsector are to produce and supply timber in the most cost effective way and to substitute for rapidly growing imports. Since the rapid increase in forest production envisioned under the Seventh Five-Year Plan is critically important for the Chinese economy and since its earlier programs for plantation establishment have met with limited success, the Government has requested Bank Group assistance in providing access to state-of-the-art technology, expertise and funds to launch a massive commercially-oriented afforestation program and set up an institutional and managerial framework for efficient  planting and silviculture. For this purpose, a Forestry Sector Loan is under preparation by the Bank Group for FY90. The Bank Group is also financing the Forestry Development Project (Cr. 1605-CHA), which is improving State Forest Farms in three provinces, and the Da Xing An Ling Forest Fire Rehabilitation Project (Cr. 1918-CHA). 1.13 The Bank's strategy for lending to Cnina's agricultural sector has supported government efforts to expand and diversify agricultural production through more efficient use of human and physical resources. Lending to date has covered a broad spectrum of geographic areas and subsectors, with an overall focus on land development, upgrading agricultural support services (such as research and credit), strengthening specialized product subsectors (such as tubber and fisheries), and, more recently, area development. The area development approach, which generally targets difficult development problems, combines in a single project assistance to land development and support services previously the subject of separate projects. Although focussed on specific geographic areas, many of the past projects represented initiatives of the central government. Over the past year the Bank Group has appraised a series of provincial projects in which the area development approach is being applied, but in which responsibility for proposing and preparing components and for repaying project funds rests with provincial governments and their lower level jurisdictions (prefectures, municipalities, counties and townships). This is a new direction intended to increase the efficiency of project management and execution and to expand the Bank's involvement in provincial agricultural investment programs, which now constitute the great bulk cf all investment in the sector. It takes advantage of increasing delegation of development planning and implementation to local government authorities in China, which has generated strong local commitment to the development of profitable and effective subprojects. The Shandong and Shaanxi Agricu-ltural Development projects have recently been approved by IDA. The present project would be the third of this series. 1.14 Implementation of most ongoing Bank Group financed projects in the agriculture sector is on schedule. Physical works have been completed on time or ahead of schedule. Disbursements for agricultural projects usually outpace those in other sectors. Notable features of all the projects are the high standard of project management, the enthusiastic participation of farmers and the effective collaboration of government authorities at All levels. The recently completed North China Plain Agriculture Project (Cr. 1261-CHA) demonstrates these features and also achieved economic benefits (an ERR of 56%) that far exceed those anticipated at appraisal. The second agricultural project in China, the Heilongjiang Land Reclamation Project (Cr. 1347-CHA) is now being completed. In only five years, it has succeeded in reclaiming 200,000 ha of bogs in an extremely difficult agricultural regiorn (near the Siber_an border) for the efficient production of wheat, corn and soybeans, while introducing modern large-scale mechanized land preparation and harvesting to China's northeast region.  - 6 - D. Agriculture in Jiangxi 1.15 Jiangxi Province is located about 300 km inland from the southeast China coast, bounded by Zhejiang and Fujian provinces to the east, Guangdong to the south, Hunan to the west, and Hubei and Anhui provinces to the north. The southern and western regions of the province are mountainous and runoff is carried north by five main rivers emptying into Poyang Lake and from there into the Yangtze River which forms the northern boundary of the province. The total area of the province is 166,700 sq km (16.67 million ha), of which 36% is mountainous, 42% hilly, and 22% flat land and water surfaces. The total cultivated area (1987) is estimated at 2.36 million ha of which 1.84 million ha are irrigated. 1.16 Reflecting a high degree of multiple cropping, the area presently sown is about 5.5 million ha, of which 67% is devoted to grain--mainly double-cropped rice, 12% to industrial crops and the balance to other crops. In 1987, agriculture accounted for about 29% of the gross value of output, 65% of the total labor force, and about 60% of provincial exports. Agroprocessing enterprises, depending on raw mat_,rials from agriculture, dominate the light industry sub-sector and account for 65% of its output. Jiangxi's population numbers 35.6 million, of which 82% are rural. In 1987 prices, per capita income of the farming population was estimated at Y429, about 7% lower than the national rural average of Y463. 1.17 The provincial livestock sector is dominated by household production units raising pigs and poultry as a sideline to take advantage of family labor, excess grain and crop by-products, mainly rice straw and bran. It is estimated that individual households are responsible for more than 85% of pig production, specialized households about 9-10%, and state farms about 5%. Most rural families generally have 1-2 pigs and about 10 chickens or ducks. In 1987, the year-end inventory of pigs was a record high of 13.9 million. Growth to slaughter weight (90 105 kg) is slow, due to reliance on forage arnd low energy rice by-products. Poultry number 72 million and annual egg production under household production units is little more than 100 eggs per layer. Cattle and buffalo are used mainly as draft animals. Sheep numbers are very small. 1.18 Total fisheries production in 1987 was 225,800 t, representing a 17% increase over 1986. The province is endowed with a large number of streams, lakes and reservoirs and has a total breeding area of 254,000 ha. Poyang Lake covers some 5,000 sq km and is the largest freshwater lake in China with more than one hundred different fish species. Jiangxi is not considered to be at an advanced level of aquaculture development; modern pond culture practices have been introduced only recently (in part through the Freshwater Fisheries Project, Cr. 1689-CHA). Natural conditions in Jiangxi are favorable for freshwater pearl cultivation, and skilled workers have mastered the selection of the appropriate varieties of freshwater mussel and the delicate technique of tissue implantation for culturing pearls. 1.19 Forest cover in Jiangxi, according to the latest (1983) forest inventory, is about 33% or 5.5 million ha, comprising nearly 4.4 million ha of natural forest and 1.2 million ha of forest plantations. Another  -7- 2.85 million ha are classified as "barren hills suitable for forestry." Between 1975 and 1983, however, total forested area diminished by 0.6 million ha due to overharvesting. Since then, the Bureau of Forestry (BFO) has instituted strict controls on felling and extraction, and wood output has declined from 3.0 million m3 in 1980 to 2.5 million m3 in 1987. Jiangxi's year 2000 targets are to increase forested area from 5.5 to 9.1 million ha (cover rate to increase from 33% to 54%), expand the standing volume of timber from 253 to 360 million m3, and increase the annual growth rate of trees from 5.8 to 7 percent. Chinese fir (Cunninghamia lancelota), Masson Pine (Pinus massoniana), slash or wetland pine (Pinus elliottii) and mixed broadleafs are the main tree species spread throughout the province ResinLI is now tapped only from Masson pine and some 15,000 t of its total output of 35,000 t is exported to Japan, Hong Kong and Western Europe. Slash pine, which is considered suitable for soil conservation in red soils, can also be tapped for resin, producing higher yields and better quality than that of Masson pine. 1.20 Tea plantations cover about 59,800 ha, of which 2,800 ha are classified as immature and 13,000 ha as well beyond economic productivity, thus leaving 44,000 ha of productive tea which accounted for the production of 17,000 t in 1987. About 75% of production is green tea, while 20% is black tea and 5% Oolong. Yields are low at 400 kg/ha, while the national average is 630 kg and the world average is 1,125 kg. Only 6,700 ha or 15% of the total area could be considered as economicallv viable, producing above the bench-mark yield of 750 kg/ha set by the Ministry of Agriculture (MOA). Though natural conditions in these areas are suitable for tea cultivation, yields are low because of poor cultural practices, inadequate plant renewal and inefficient processing. Tea production is mainly concentrated in three prefectures (Shangrao: 7,500 t, Jinjiang City: 3,000 t, and Jingdezhen City: 2,000 t). E. Project Formulation and Rationale 1.21 In formulating the project, the Jiangxi Provincial Government sought to select activities which would provide significant income increases for farmers, communities, and local governments; generate foreign exchange earnings; raise levels of technology and management (particularly in livestock, fisheries, and feed milling sectors) which would be dispersed throughout the project regions via the demonstration effect of higher incomes; and increase forest cover in the province. The project builds on the experience gained under the Nanchang component of the Freshwater Fisheries Project (Cr. 1689-CHA) and the Red Soils Project (Cr. 1733-CHA), particularly in the areas of smallholder livestock, aquaculture and project management. Lessons and experience gained from the proposed project could serve as a model for further agricultural development in the province. The Bank Group contribution, in addition to project design and finance, is in investment analysis to eliminate economically unviable components, a credit program design Lased on recycling funds to benefit increasing numbers of households, regional feed requirement planning for both project production and increases in production of livestock and fish, and technical innovation. particularly in relation to livestock breed improvement and feedmill and agroprocessing plant design and specification. LI Resin, tapped from living pine trees, is processed into gum rosin and gum turpentine for industrial use.  -8- II. PROJECT AREAS A. Location 2.1 The proposed project areas are in the north, northeastern, and central parts of Jiangxi Province. Sites in the north are located in the low flood plain surrounding Poyang Lake. Activities in the Poyang area would focus on development of livestock, aquaculture, and agro-processing in 13 counties covering a gross area of 23,000 sq km and a population of 7 million. To the northeast. .n the hill country surrounding Jingdezhen city, the project would carry out tea and forestry components on about 7,000 ha in five districts which are under city administration. Additional project activities in livestock, aquaculture, forestry, and agro-processing would take place in central Jiangxi in the Jitai Basin to the west of the Gan River. The Jitai sites are located in eight counties and the city of Jian which altogether account for a gross area of 19,500 sq km and 3 million people. Project locations and area statistics are given in IBRD Map No. 21453 and Annex 1. B. Climate 2.2 The three project areas share a subtropical monsoon climate with dry, mild winters and hot, wet summers. Average daily temperatures range from a January low of 5 degrees C to 29 degrees in July. Annual precipitation averages from 1,900 mm in the north to 1,300 mm in central Jiangxi. Rainfall is distributed unevenly throughout the year with about 70% concentrated in the months of March through July. The frost-free period is about 300 days. Climatic conditions in the Jingdezhen area are good for tea production: the warm temperatures and frequent overcast skies and heavy fog during the growing season (April to October) are conducive to growth of high quality leaves. With respect to the slash pine plantations proposed for the Jingdezhen and Jitai areas, the prevailing climate is similar to that of the southern US where the tree originated. C. ToRography and4 Soils 2.3 The Jingdezhen and Jitai Basin areas are similar in topography: predominantly hilly terrain interspersed with broad valleys where rice is the main crop. Elevations in the Jingdezhen area range from 100 to 500 m above sea level; the Jitai Basin is slightly higher, ranging from 200 to 700 m. The Poyang area consists of a flat alluvial plain formed by the province's five major rivers. The Gan River, which intersects Jiangxi from south to north, flows into the Yangtze through Poyang Lake. The lake fluctuates in size during the year, growing to a maximum of about 5,000 sq km and a depth of 20 m at the height of the March-July flood season, and shrinking in winter by as much as ten m into several large, shallow lakes. These lakes are havens for waterfowl which concentrate on the shores with increasing density as water levels reduce during the winter. In 1983, the Ministry of Forestry (MFO) established a 22,400 ha wildlife preserve to the north of the project area near the confluence of the Gan and Xiu Rivers, primarily for the purpose of proLecting the wintering Siberian and other crane populations.  l9- 2.4 Soils in the three project areas are mainly the visibly striking red soils. These soils are characterized chemically by their acid (low pH) condition and a relatively low nutrient status resulting from continuous leaching under the heavy rainfall typical of the regions where they occur. The soils are usually deep and well structured, except where erosion, either natural or man-induced, has truncated or otherwise impoverished the soil profile. With application of fertilizer, red soils are suitable for a wide range of tropical and subtropical crops, especially deep rooting perennials, or for forestry. D. Popuation And Land. Use 2.5 Poyang Lake Region. Some 1.4 million families live in the 13 counties in the Poyang project area, about 80% of them agricultural. Farm incomes are variable. 1987 rural incomes on a per capita basis for the three most populous counties, Poyang, Fengcheng, and Nanchang, were Y341, Y510, and Y517, respectively. The average farm household operates 0.4 ha, 80% of it irrigated. Of the total sown area of 1.4 million ha, two-thirds are planted with grain. Total grain production in 1987 was 4.1 million t or 585 kg/capita. Agriculture occupied 62% of 1987 GVAO (Y2.6 billion), livestock 19%, sideline activities 10%, fisheries 4% and forestry 2%. Livestock raising and fish farming have grown markedly in the Poyang area in recent years, by 10% and 20%, respectively, between 1981-87. The bulk of livestock income comes from meat production which has expanded rapidly in response to consumer demands. The greatest emphasis is on pork production: the 13 counties in the Poyang project _rea produced 177,000 t or over 20% of total provincial pork output in 1987. However, consumer demand for poultry and eggs is on the rise along with a marked preference for lean over fat pork. Consumption of poultry in Jiangxi as a whole increased 19% between 1986 and 1987. Major constraints to continued expansion of meat, poultry and associated products, are shortages of formula feed and the need for genetically improved breeds which are more efficient meat producers. 2.6 Fish farming at present in the Poyang area is primarily carp polyculture in lakes and artificial ponds. Area and production have increased rapidly since 1985; 1987 output stvod at 82,000 t, 36% of the total for the province. Yields from fish ponds average a low 1.7 t/ha. Yields from lake culture are much lower. Major constraints to better yields are lack of technical knowledge of modern pond culture practices and cage and enclosure culture, poor drainage facilities in an area vulnerable to flooding, and limited use of formulated fish feeds. 2.7 Jinedezhen. A total of 284,000 families, half of them engaged in agriculture, live in the five districts which comprise the Jingdezhen project area. The per capita income figure for Jingdezhen municipality as a whole was Y420 in 1987, close to the Jiangxi average of Y429. However, incomes in the tea-producing counties are considerably lower. An income survey of 187 tea households in the project area showed an average per capita income of only Y370. The average farm size in the Jingdezhen area is 0.2 ha with most of the sown area (68%) devoted to production of grain, primarily rice. Total grain output in 1987 was 435,000 t or 349 kg/capita, considerably lower than the rest of the province. Though tea plantations at present occupy only about 10% (6,600 ha) of all land under cultivation in Jingdezhen, the area's high altitude and humid climate provide ideal conditions for producing a high quality tea (variously known as Qihong,  - 10 - I Gongfu, or Congou) noted for centuries as a Jingdezhen specialty product (see para 6.8). Yields in the best areas reach as high as 1.5 t/ha (refined); however, in most of the tea gardens, yields average only .36 t/ha due to inadequate plant renewal and poor management, particularly insufficient weeding and pruning, poor harvesting methods, and limited investment in nutrients. Wood prodtcts, mainly timber and rosin, are an important part of Jingdezhen's economy, accounting for 8% of GVAO in 1987. Some 29,400 ha have been afforested since 1983. 2.8 Jitai Basin. The average family landholding in the Jitai project counties is 0.5 ha, 90% of it irrigated. The area produces large quantities of grain, mainly rice; total 1987 output amounted to 1.5 million tons or 490 kg/capita. As in the Poyang area, in Jitai the availability of locally produced rice and rice products has given a boost to pig production. The 1987 year-end pig inventory was 890,000 head and pork output 60,400 t. At the same time--again like Poyang--the area must depend for its formula feed needs on feed grains and protein meals imported from other provinces. The climate and soils in the Jitai area offer considerable potential for expansion of tree plantings, particularly of the high-yield, fast-growing slash pine. Output of timber and rosin presently accounts for 8% of GVAO. Farm incomes in the Jitai counties are generally below average for the province. Per capita income figures for the three most populous counties, Jian, Suichuan, and Taihe, were Y430, Y358, and Y387 respectively in 1987. E. Power and TransRort 2.9 The provincial power grid serves the project areas and virtually all towns and most villages have access to electric power. As in the rest of China, the demand for power in Jiangxi exceeds supply. In 1987, total Jiangxi consumption was 10 billion kWh, up about 10% over the previous year. 2.10 The transportation network in Jiangxi consists of some 1,500 km of railways, 4,900 km of navigable inland waterways and 31,800 km of roads. There is also limited commercial air service out of the cities of Nanchang and Jian. Road network density in Jiangxi is slightly higher than the national average with major highways radiating out from Nanchang and linking the province with the neighboring provinces of Hunan, Zhejiang, Guangdong, Hubei and Anhui. However, the overall condition of the road network is poor. Less than 12% of Jiangxi's roads have asphalt or concrete surfacing and about 50% are dirt roads with limited utility during the rainy season. China's main north-south rail line cuts through the Jingdezhen project area; a north-south trunk line running between Nanchang and the Yangtze port city of Jiujiang is close to the Poyang area sites. Transport of coal, construction material, grain and fertilizer demand approximately 70% of Jiangxi's total rail freight capacity. 2.11 Project products will be transported by road, rail, and waterways, but the bulk of tonnage will be moved by truck along roads of varying quality which extend throughout the project areas. Road freight traffic in Jiangxi has grown at an annual rate of 15 to 2" percent which results in doubling every four to five years. Ninety percent of the truck fleet in the province consists of medium to large vehicles with capacities of greater than four tons; in 1988, this amounted to approximately 68,000 trucks. Over the last few years Jiangxi has lagged behind most other  - 11 - provinces in per capita investments in upgrading the road network. The Jiangxi Provincial Highway Project (Credit 1984-CHA), recently approved for Bank financing, would provide urgently needed capacity in the heavily travelled corridor between the provincial capital, Nanchang, and the important Yangtze River port of Jiujiang. The ton-km of road freight required by the project after full development is estimated to be less than one percent of the present provincial road transport volume. F. Research mnd Exte.ngion 2.12 Jiangxi has in place a well-established research and extersion network which has functioned effectively in the past, but which is increasingly constrained by lack of modern equipment and staff trained in new technologieE. The leading agricultural research organization is the Provincial Academy of Agricultural Sciences, a locally-funded affiliate of the MOA's Chinese Academy of Agricultural Sciences. The Provincial Academy operates a network of prefectural institutes specializing in various aspects of crop and livestock research--e.g., at the provincial level, a Horticultural Research Insitute, Forage Experimental Station, and Veterinary Research Institute. A Red Soils Research Institute which has a staff or 50 researchers and 120 laboratory technicians has been responsible for basic research on red soils improvement and its facilities are being strengthened under the Bank-financed Red Soils Project. 2.13 In forestry, Jiangxi has in place the standard research hierarchy: a provincial institute which has ties to MFO's China Forestry Research Institute, prefectural or municipal research units and, in each county, a forestry station which organizes demonstration activities but is more concerned with extension than research. The larger state forest farms (SFFs)--notably Fengshushan--support demonstration/extension stations as well. The main research focus in forestry is on (a) developing improved nursery and planting techniques, (b) conducting trials on new species, and (c) disease prevention. Fisheries research is directed by the Nanchang Fisheries Research Institute which is financed by the Bureau of Aquatic Products. A new operation with a staff of only 15-20 people, the Institute is currently carrying out some experiments in fish nutrition, but its primary work involves demonstration and extension rather than actual research. Jingdezhen City has a Tea Research Institute under its agriculture bureau staffed with 11 technicians. A limited number of demonstration activities are being carried out on 10 ha of experimental area, but the research program is generally weak due to lack of financing for equipment and staff training. 2.14 Formal education in agriculture is the responsibility of such institutions as the Jiangxi Agricultural University, the Yichun Agricultural Polytechnic, and the Animal Husbandry and Fisheries Technical School. In the area of non-formal training, the county agriculture bureaus operate a number of technical training and advisory units, including an agro-technical extension station which advises on farm management and coordinates short-term training courses with units specializing in plant protection, soil analysis, animal husbandry, and aquatic products. Typically, the county agro-technical station has a staff of 15-20 people, most of them graduates of specialized secondary schools and above. There are on average 17 agricultural technicians per 10,000 farmers in the project areas. Stations routinely conduct week or two-week long training  12 sessions which are available to all farmers during the off-season. In Taihe County (agricultural population-396,000), for example, about 12,000 farmers are trained annually in courses held at county stations or affiliated units in townships and villages. While in some provinces the agro-technical extension stations have been set up as financially self- supporting units, in Jiangxi, these stations provide free services to farmers. Extension services in forestry are provided by a similar network of units under the forestry bureau. Forestry technicians total about 3,000 or one per 400 ha of plantation area. Tea extension work in Jingdezhen is provided by 160 technicians operating city, county, and township stations. G. Livestock SUpRort Services 2.15 Jiangxi Province was one of four sites selected for special study in the Bank's 1986 survey of China's livestock sector. Since the final report, China: Th& Livestock Sector (Report No. 6589-CHA), was issued in early 1987, a number of the problems raised have been addressed, both in Jiangxi and nationally; namely, farmers are now paid a price premium for lean meat pigs, minimum standards for energy and protein content have been applied to formula feeds, and disease reporting has become mandatory. Other changes--e.g., in scale of production, farm management, and hygienic standards in agro-processing--are under way and would be furthered through the proposed project. 2.16 Veterinary stations e-ist in most counties, townships, and villages. Staff are for the most part technical middle school graduates whose numbers are adequate but whose knowledge of animal nutrition and breeding is often weak. The county Agriculture and Animal Husbandry Bureaus offer a regular disease prevention program for poultry (Newcastle's disease, Marek's disease, cholera, bronchitis, parasites) and pigs (cholera, Alljesky's disease, foot and mouth disease, and parasites). Vaccination of both adult and young animals is a regular part of disease prevention. Farmers are encouraged to have annual blood tests for their pigs through the county laboratories. Tissue samples are also submitted from abattoirs. Disease reporting from the local veterinary stations up to the province level is now routine. Data for Jiangxi for 1983-87 show mortality rates for pigs of 2-2.5% and for poultry of 8-12%, which are within the normal range for pig and poultry populations. 2.17 An estimated 85% of Jiangxi's pigs are produced under backyard systems in which farmers raise only 1-2 pigs; pig raising specialized households (SHs) account for another 10%, and state farms for about 5%. The backyard producers rely primarily on food waste, green feeds, and crop byproducts in fattening their pigs. In Jiangxi, China's largest per capita rice producer, these scavenger pigs may also count on being fed locally produced rice and rice products. An estimated 34% of livestock feed in Jiangxi comes from rice bran which has about 90% of the energy value and 130% of the protein value of corn. In the last few yearL, particularly in response to increased demand for lean meat pigs, there has been a perceptible shift from backyard production to the more efficient, larger- scale SH and state farm systems which must rely un purchased feeds. Feed mill output has correspondingly increased, from 870,000 to 1 million tons, for example, between 1986-87. Increased milling has put pressure on available supplies of corn, wheat, protein meals, and other ingredients of the formula or concentrate feed product. Analysis of raw material sources  - 13 - for J'angxi shows that in 1987 about half of the required corn, soybeans, and wheat were procured from outside, mostly from surplus-producing provinces in the north and northeast. As long as Jiangxi is willing to pay market or near-market prices for these imported feedstuffs, it is expected that supplies will be assured even in the face of transport shortages and other constraints to interprovincial trade that exist in China at present. Projections for raw material supplies are shown in Annex 1, Tables 4-6. 2.18 Feed industry managemnt is one of the key responsibilities of the Jiangxi Provincial Grain Bureau (others are grain and oilseed procurement, processing, and distribution). The Grain Bureau works with the Provincial Planning Comission on projections for feed requirements and arrangements for purchase of essential feedstuffs from outside the province. Under the Grain Bureau, the Jiangxi Feed Company has been organized as an independent accounting unit to supply feed grains to farmers and mills, and to manufacture and distribute compound feedstuffs. The Feed Company manages most feed mills at levels above the county and provides technical guidance to the county-owned mills. A Feed Inspection Station under the Grain Bureau is responsible for monitoring feed quality. A Feed Association, under the Provincial Planning Commission, is responsible for approving applications to establish township mills and advises the provincial government on feed quality and supplies. Quality standards for concentrate, formula and protein supplement feeds as set by the Grain Bureau are somewhat lower than those used in developed countries, but appropriately accord with current local conditions (Annex 1, Table 7). H. Credit 2.19 The Jiangxi branch of the Agricultural Bank of China (ABC) began operations in 1979 and has at present an extensive network of prefectural central offices (11), county sub-branches (100), township offices (1,520), and savings offices (460). Associated with ABC are some 1,870 Rural Credit Cooperatives. About 80% of ABC's total staff of 15,000 are employed in county sub-branches and savings offices, the main operational units of the ABC. Its financial resources come from deposits, borrowings from the Central Bank and equity, which at the end of 1987, amounted to Y3.6 billion, Y2.2 billion and Y700 million, respectively. Although loan disbursements have expanded rapidly in recent years, ABC's dependence on the Central Bank for most of its longer term resources has limited its ability to lend for slow-maturing investments such as tea planting or afforestation. ABC has been able to operate profitably making consistently good profits, which amounted to Y96 million in 1987, more than double the level in 1984. However, expansion of operations is constrained by a shortage of qualified staff experienced in loan management, particularly financial evaluation and market analysis.  - 14 - III. THE PROJECT A. Proiect Obiectives and Relation to Sector 3.1 The main objective of the proposed project would be to assist the Jiangxi Provincial Government to accelerate and diversify agricultural development. The proposed project is intended to improve the productivity and incomes of participating farmers, communities and local govenments and move farm operations from a subsistence level to commercial orientation. It also seeks to utilize lands which are unproductive or unsuitable for grains and other crops and to take advantage of sunk costs by making additional modest investments to improve productivity. It would focus on three regions--the Jitai Basin, the Poyang area, and Jingdezhen--with the aim of developing replicable technical and managerial models and generating additional fiscal revenue which could be utilized for subsequent development of other regions. 3.2 Various levels of government are addressing the issue of underemployment which has arisen in rural areas since the communal system of agriculture management was replaced by the production responsibility system. Programs have been devised not only to develop rural industry but also to promote specialized households (SHs, currently defined as households which devote at least 60% of their time to a single farming activity, market 80% of their farm output, and derive 50% of their income from those activities). Though most of the project's production activities would be carried out by SHs, the livestock and aquatic poultry components, in particular, would provide greater opportunity for individual households to receive financial rewards commensurate with the success of their operations and to plan for expansion of their operations; the main constraint to expansion of livestock production in the past has been insufficient investment capital for larger herds/flocks and working capital for feed and labor. The SHs in the project have generally been selected for their demonstrated initiative and management capability and would provide models for other farmers to emulate. B. Proiect DescriDtion 3.3 The proposed project would support a livestock development program featuring pigs and poultry on hilly land unsuitable for grain cultivation, develop and intensify freshwater fish culture (in some cases, integrated with livestock activities) in low-lying areas and in lakes and ponds, rehabilitate low-yielding tea plantations, and establish new commercial forest plantations. Agroprocessing facilities would be established or improved to facilitate and process the additional livestock and agriculture production, to provide formula feed for the project animals, and to demonstrate the proper methods to organize, manage and finance upgraded processing and handling facilities. The project has a short-term credit element which would cover those initial investment costs which could be recovered within one production cycle, e.g. day-old ducks and geese, fish fingerlings, sows, feed, labor and other production costs. These funds would then be available for recycling to other project participants and altimately to expand the scope of production activities. The geographical distribution of project activities is shown in Annex 1, Table 9. The main features of the project are:  - 15 - (a) Livestock - provision of breeding farms, on-farm facilities, and initial working capital for some 12,900 SHs to produce pigs, ducks, geese, and specialty chicken ; (b) Aquaculture - construction and improvement of about 2,058 ha of ponds, 1,279 ha of cages, enclosures and barriers, establishment of 200 ha of pearl farming, and provision of initial working capital for some 3,300 SHs; (c) Forestry - establishment and maintenance of 6,705 ha of slash pine for both pulpwood and resin production; (d) Tea - rehabilitation of 4,bOO ha of old tea gardens; and (e) Agroprocessing - establishment or improvement of feedmills and facilities for processing pork, aquatic poultry, tea, resin and raw materials for feedmills, and provision of initial working capital; and (f) Training and technical assistance - facilities and programs for staff development and training to upgrade research, extension and project management. C. Detailed Features Livestock 3.4 Pigs - Investments in the pig industry would promote increased production of crossbred pigs which have a higher lean-to-fat ratio than native breeds. The project would provide for the import of foreign breeds for parent stock, expansion of three existing breeding farms (the Provincial Pig Breeding Farm, the Shangrao Prefectural Pig Breeding farm, and the Jian Prefecture Breeding Stock Farm), establishment of a provincial production farm under the guidance of the Agricultural Bureau, and setting up about 3,800 SHs with breeding sows, pig pens and initial working capital. The production farm would serve to popularize advanced pig raising technology, meanwhile producing annually about 9,000 market pigs for Nanchang and export and about 1,000 breeding pigs for sale to SHs. SHs for this component would be selected from locales which have hilly or mountainous waste lands (precluding large scale development of grain crops) and are accessible to water, electricity and transport. 3.5 Two models have been proposed for the project: a 4 sow/60 pig model and a 12 sow/180 pig model. It is planned that about 3,500 Slls would have the smaller model and about 300 SHs, already experienced in pig production, the larger model. On-farm facilities would include sheds and pens for sows and fattening pigs. In addition, the project would provide initial working capital for one production cycle (six months) in order that farmers would be assured of funds for purchase of sows, feed, veterinary services and other expenses. Housing for the SHs would not be provided under the project; the ability to borrow for housing would be one of the criteria for selection. Farmers would be required to use Artificial Insemination (AI) for breeding their sows, and veterinary and AI stations would be established for each group of 30-50 farmers. In most cases, the SHs would be provided with 0.3-1.0 ha of undeveloped hilly  - 16 - land, the purpose of which would be two-fold: development of unutilized land and provision of silage material, both as a supplement to and as insurance against inadequacy of feed supplies. 3.6 Poultry - The project would provide for establishment or expansion of 23 breeding farm/hatcheries (2 for egg ducks, 10 for local Ma ducks, 9 for large meat ducks and 2 for geese) and setting up 9,150 specialized households (3,950 for duck raising and 5,200 for gee:e) with poultry sheds and initial working capital for one production cycle. Technical services, including veterinary facilities, would be strengthened in all participating counties and state farms. Breeding farms would be equipped with incubators, hatchers and emergency generating plants and would be isolated as far as possible from other poultry flocks to minimize the danger of infection. Four production models have been proposed for the SHs: egg ducks - 1000 birds/500 day cycle; local Ma ducks - 1000 birds/120 day cycle; large meat ducks - 1000 birds/70 day cycle; geese - 200 birds/120 day cycle. The project takes advantage of the adaptability of the local Ma duck to feed on paddy rice as well as formula feed and of geese to feed on grass areas along channels and ponds, while introducing and encouraging development of large meat ducks which have a higher meat content and faster growth rate, but which are dependent on formula feed. In addition, the blackbone chicken breeding farm at Taihe would be expanded to supply parent stock for local farmers and finished chickens for commercial use. Aouaculture 3.7 This component has been designed to expand fisheries production by constructing new ponds on waterlogged areas uiith no economic potential for crops and increasing the unit output in existing ponds through simple improvements in structure. The project would include construction of 1,167 ha of new ponds and improvement of 891 ha of existing low-yielding ponds, development of 1,100 ha of barriers, 276 ha of pens and 30,700 m2 of cages, establishment of 200 ha of pearl farming -rea and provision of initial working capital for some 3,300 households. 3.8 New ponds would be built in low-lying, waterlogged areas and provided with dikes for river flood protection and pumping stations for connection to drainage systems. The ponds are designted as modules of 1.2 ha, comprising 1.0 ha grow-out ponds and 0.2 ha nursery ponds. Separate inlets and outlets would be built, and the feeder canal would be common to two ponds. Ponds would be developed in aggregations ranging from 8 to 110 ha. Some 973 SHs would be involved, of which 638 would integrate fish farming with pig rearing and 266 with duck raising; the remaining 69 would produce only fish. 3.9 Pond improvement would take advantage of sunk costs and would be carried out by deepening existing ponds--requiring about 3,000 m2/ha of earthworks. Water supply, drainage and power would be provided where necessary and livestock sheds would be included. Some 891 SHs would be involved, of which 282 would integrate pond operations with pig rearing and 268 with duck raising; the remaining 341 would produce only fish.  - 17 - 3.10 Fish barriers for extensive fish farming would be erected by fencing off protected bays in lakes and stocking fingerlings to utilize the natural productivity of the lake. The barriers would consist of 4 m wide net (3 cm mesh size) held in place by bamboo poles. Intensive farming would be carried out in 1 ha circular enclosures, likewise constructed with net and bamboo poles. Cages would measure 4m x 7m x 2 m and would be used for intensive monoculture of grass carp. Sinco experience with fish barriers, pens and cages is still relatively limited, the design of the technical packages (feed, cultivation, etc.) for enclosures and cages will be modified as the project progresses. 3.11 Pearl farming would be expanded on 200 ha, adjacent to another smaller freshwater pearl farm. The project would provide buildings and rearing infrastructure on land, equipment, production tools, initial rearing stock of implanted mussels and working capital. This activity would take place on a state farm and salaried workers would be hired for carrying out the operation. Forestry 3.12 The project would establish 6,705 ha of new plantations of slash pine with seedlings grown from imported superior quality seed; construct facilities for state furest farm staff, and strengthen BFO research capability. The project would provide seed, fertilizer, and labor to establish and maintain 2,246 ha of slash pine plantations on the Sanfang SFF in Jian County, another 2,246 ha on Taihe County's Tianmashan SFF, and 2,213 ha on the Fengshushan SFF in Jingdezhen Municipality. Selection criteria for planting sites include a soil depth of over 50 cm, soil gravel content of less than 20%, slopes under 30 degrees, and a minimum contiguoun area of 50 ha. Seedlings would be grown in SFF nurseries. Land preparation and planting would be caried out by hired labor, either from the SFF or nearby villages, on a contract basis. Holes would be dug six to eight months before planting to allow for weathering of the soil. Seedlings, encased in plastic containers, would be planted from January to March at a density of 1,650/ha (spacing of 2x3 m). The project would supply some 7,200 t of chemical fertilizer (35% F and 65% Urea) for use at the time of planting and for subsequent applications as required at weeding and thinning. To protect against fire, the project would provide 279 km of firebreaks (consisting of a 15-20 m strip of fire resistant trees) at a density of 1 km per 24 ha of plantation, and would construct 13 watchtowers and 5 forest service stations. The MFO plans to include Jiangxi Province in the Forestry Sector project now under preparation (para 1.12). To insure consistency of objectives and approach between the two projects, an assurance was obtained at negotiations that the standards and methods of afforestation of this project would be subject to consultation with the Bank Group from time to time; it was confirmed that the standards and methods applicable to the project's forestry component would be the Standards for Fast-Growing, High-Yielding Forest Plantations, developed by the Ministry of Forestry and modified for conditions in Jiangxi. 3.13 Tne project would provide for rehabilitation of 4,807 ha of seriously degraded and neglected tea gardens within the Jingdezhen area.  - 18 - Tea production in the area has a number of comparative advantages, including favorable climate and soils and a long tradition of cultivation and processing of a specialty black tea. Under collective management systems in the pre-reform period, tea gardens were poorly maintained resulting in declining yields and low incomes for tea producers (para 2.7). The introduction of the production responsibility system has stimulated interest in tea productio- again, and, at the same time, there is a suitable technology for tea rehabilitation--mainly, severe pruning and regular fertilizer application. The project would provide credit for labor to cut back the tea bushes by pruning to