China - Agricultural Support Services Project

.M * 7 1/b.2 - & Document of The World Bank FOR OFFICIAL USE ONLY Pi,,por t No. :11 147- Ct-hA Type: (SAfR) - I t I- AGRICULTURfAL SUPPf10 Sf-RVIE t-'j I Report No. 11147C& Aiuthor: LI. 12 U-"'lCARATNAM STAFF APPRAISAL REPORT CHNA AGRICULTURAL SUPPORT SERVICES PROJECT JANUARY 22, 1993 Agriculture Operations Division Country Department II East Asia and Pacific Regional Office This document has a restdded distibution and may be used by recipiens ony in the perfonranc of tbeir official duties. Its contents may not otewise be disclosed whout World Bank authorization.  CURRENCY EQUIVALENTS (As of June 1992) Currency Unit Yuan (Y) $1.00 = Y 5.45 Y 1.00 = $0.183 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet (ft) 1 kilometer (ICm) = 0.62 miles 1 hectare (ha) = 15 mu 1 ton (t) = 1,000 kg = 2,205 pounds 1 kilogram (kg) = 2.2 pounds - 2jin ACRONYMS AND ABBREVIATIONS ATEC Agrotechnical Extension Center BAU Beijing Agricultural University CAAS Chinese Academy of Agricultural Sciences CABTS China Agricultural Broadcasting and Television School CAS Chinese Academy of Sciences CATEC County Agro-Technical Extension Center CNCQSTF China National Center for Quality Supervision and Test of Feed CNBTS China National Bureau for Technical Supervision CNSC China National Seed Corporation DAH Department of Animal Husbandry DEER Department of External Economic Relations DOA Department of Agriculture LAE Institute of Agricultural Economics (CAAS) ICAMA Institute for Control of Agrochemicals 1PM Integrated Pest Management IRRI International Rice Research Institute MATEC Municipal Agro-Technical Extension Center NAHVSC National Animal Husbandry and Veterinary Service Center NAPQS National Animal and Plant Quarantine Service NATEC Nat: >nal Agro-Technical Extension Center NBIC National Breed Improvement Center NCIVBP National Control Institute of Veterinary Bioproducts and Pharmaceuticals NQCCVBP National Quality Control Center for Veterinary Bioproducts and Pharmaceuticals NSTS National Seed Testing Station PATEC Provincial Agro-Technical Extension Center PMO Project Management Office SMS Subject Matter Specialist SPF Specific Pathogen Free STPAC Soil Testing and Plant Analysis Center TAC Technical Advisory Committee TATES Township Agrotechnical Extension Station  FOR OMCL4 USE ONLY CHINA AGRICULTURAL SUPPORT SERVICES PROJECT CREDrr AN! PROJECT SUMDARY Borrower: People's Republic of China Benefciaries: Ministry of Agriculture (MOA), and Provinces/Municipalities of Beijing, GuangxP, Hebei, Heilon0iang, Henan, Hunan, Jiangsu, Jilin, Liaoning, Shaaxi, Shahi, and Sichuan A _ounU SDR 83.7 million ($115 million equivalent) Ternm: Standard, with 35 years matrity Objectives and Description: The project would assist the Government in increasing agricultural production and farmers' incomes by strengthening insttutions that provide support services to farmers. The project would: (i) strengthen aiculture, aimal husbandry and animal and plant quarantine management capability thugh improved information, computer networking and monitorng and evaluation systems; (ii) reorganize crop and livestock extension systems from national to county level; Ciii) Improve extion services by providing acilities, upgrading skills of tecnical staff and improvint deir recommeodations throu farm-level demod-iven research programs; (lv) reorne seed centers to separate their production from certfication and reguladon roles and promote seed lization; (v) strengthen veterinary and preventive animal health services, establish a well-coordinated national breed improvement program, and tighten pharmaceutical, agrochemical and feed quality control; and (vI) promote cost recovery for services provided to farmers. The project would also strengthen project management at all levels by providing facilities, traing and technical assistance. Beneits and Risks: At the national level, the project would benefit a sizeable proportion of the country's 200 million farmers through improved policy formulation and stronger national agricultural instiuons. At the provincial and lower levels, approximatly 5.6 million farm households would directly benefit from the project through: strnger extension centers with trained staff who are equipped with fcies and able to respond to farmers' demand; armer assains which would provide fatmers with direct participaion; inputs and markes; and commercialized services which would provide quality mpive services in the areas of input supply, seeds and animal health. At full development, the adoptees would double or triple their incomes. Ihe project ERRs range from 24 percent to 63 percent depending on the technology adoption scenarios. The project would also alleviate poverty in eight of China's poorest counties and IThis document has a restricted distribution and may be used by recipients only in the performance of their offilcial duties. Its contents may not otherwise be disclosed without World Bank authorizaton.  - ii - create substantW demand for labor in farming, hliog, distibuting and procing the incremental output of the project, including more job opportntes fDr women. The project fa no unusual tecical risk. Organizional risks would be minimized tirough intensive trinig and strengthened project management. Changes in organizational, management, and regulatory approaches are expected to serve as models for national replication and may provide the most Important long-term benefits of the project. Estimated Costs: LQcal Foreign iTotl - - - ($ million) Cropslextension 39.8 43.5 83.3 Seeds 12.1 12.0 24.1 Livestock 36.7 38.1 74.8 Quality control 3.3 3.6 6.9 Quarantine 4.0 6.0 10.0 Base cost 95. 103.2 199.1 Physical contingencies 7.8 8.4 16.2 Ptice contingencies 12.0 11.0 23.0 Total roectt La I1. I22 238. Reserved procurement 4.3 13.2 17.5 glal (excluding reseved procurement) J1.4 109.4 220.8 Fbmdtng Plan: Central, provincial, pre- fecture & county govts. 110.1 13.2 123.3 IDA 5.6 109.4 115.0 Fadin4d Disbursemet: I1DA IY 1 I995 199 1997 12 1992 20 2001 ($ million) Annual 15.0 20.0 22.0 25.0 16.0 12.0 4.0 1.0 Cumulative 15.0 35.0 57.0 82.0 98- 110.0 114.0 115.0 Economic Rate of Return: 24-63 percent /A Project is exempt from taxes and duties.  -I II CONTENTS 1 Badguo udd ........................................ 1 A. Inftrodction ......1 A. ha&Xon............................................1 B. The AgiculuaSeto .......Sector...................... 1 C. Jhe Livestock Subsector ............................. 2 D. AgriuludSupportrSe es i Chia ...................lS porsl. 3 E. Sec lObjecives and Bank G rooupLdltg................ 8 F. Project Formulation and Rana e ........................ 9 .2 I1,eProjeAr ................................... 11 A. Gme"M .......................................1 B. .............. 11 B. on. ...........o ci....o.. 11 C. Support S ices . ................................ 12 D. Desip Considerations .............................. 15 3 heI .rojec ........................................ 17 A. G3eral ....................................... 17 B. Projec Descion ................................ 17 C. DetailedlFeatUre ........ ......... 19 D. S"tasofPreparain ....... <33 D. Stmsof Plme oaS^do ....................................... 33 E. ptSchedule ...... 33 F. CostEstimates .............................. . . . .. 33 0. Fimacing . ...................................... 35 H. Prouement ... ................................ 35 . m................................... 37 1. Accounts and Audits................... 37 K. E m enta pac ....... ....................... 38 hi rport i based on an FAOICP preparation repo (July 1991) and the findin of a preappraisd mission in October/November 1991, ed by W.P. Ting Crask Manger IDA) and comprising Ms. R. Jaisaud, Mess. A.C. Brandenburg, R. Vick, L de Alwis, 0. Smith (FAO/CP), C.W. Chen, T. Sitwff, and B. Swaon (Consultants); and an appra mssion in Jue 12, comprising many of the same staff and Ms. R. Jaaard, Messrs. A.C.Brndebug, C. Mguire, W.P. TiS (IDA), P. L@avy, and S.N.H. Putt (Constans). Peer reviewer were Messrs. C. de Haan, A. Pitd rd, LP. Srlatava (AGRPS), nd R. McGoh (ASTPH). The Diiso Chief s Mr. J. Goldberg and the D meDector is Mr. Shahd Javed Bur.  -lv- 4 PRo3e Oje anzon and _a.a.m.e . . . .... .... . . 39 A. PRojectOqrnkzat ..... ....... ..... ............. 39 B. Financial M i"aemn .............................. 40 C. Spevison, Monioing, Evaluation and Rqoting ............ 40 5 ProduCdonandMarlkeb . ............................. . 42 A. Prduction ........ 42 B. Ivarkets ....................................... 46 C. Prices ...... 46 6 Benfts, JustWtaton andRisks .........................48 A. Benefits and Justfication ........................... . 48 B. Employmnn and Incomes ....... ..................... 49 C. Women in velopmet ............................... 49 D. CostRecovery ................................... SO E. ImpactonGovemment Budget.......................... 50 F. Financial and EconomicAnalyss . . . 51 G. Riss ......................................... 52 7 Agreemenit Readied and ................... 53 1. Basic Data on Project Provic ..................e....5..... S 2. CostEstlmates . . ..71 PoSject Cost Summnar y.... 71 Summary Accunts Cost Summary..... 72 cost Suinniary by onmponet........ 74 Project Coniponnt byYea .......................... 75 Estmated SchecedeofDisbr.s.. ..t... . . 91 3. Traizg and T'eical Assistac . . ... . 92 4. Reeach,Educato Extension,FamerLinkages ............ .... 112 5. Farmer Assodaos and ViW Economic Cooperatives ....................................... 116 6. Management Infinrmaton System . . ........................ 121 7. Key Monitoring ndicars ................................. 126 8. SupervsionPlan . .................................... 137 9. Commecaized Agricultu Servis . . ...................... 141 10. Term of Reference ................................... 144 11. Econonic Analyss . .................... ......... 180 12. Selected Douments and Data Available in the Project Fi'e ............................................. 186  -V. TAlS IN lkT 3.1 ProjectCostSunimy .. ............................... 34 3.2 Procutmea Pmflmoe ... ................................ 35 5.1 Extihstn and Potid Crop Yieds (TIRA) Usg Existing bpwoved or New Technologies ...... ...................... 43 5.2 inremta PPoductuand AdoptlnRates ...................*. 44 5.3 ImentalLivestock ProductLon . . ......................... 45 1. Existg Organi nl StUcWe of the Mnitry of Agricula...e.1. 2. Organaion r Project M.lon 189 3. Stuct of the National, Provincial, MuncipalI/ Prfecturd, County and Towfsip Agoenical Extension Centers and Prposet Reorgnized Structure, DIepartmet of Animal Husbandry, 9vlinstry of Agricultur......................... 191 4. mplemadule ......... ....................... 197 5. Schedule .................. 1 IBRD Nos. 23859R, 23909R, 23910R Location of Pojeat Components  1 BACKGROUND A. OMUCIION 1.1 The Governmen of China, recognizing Xt weaknee in present crop and lwestock support services to faumers are constraining producdon of priot foodgrains and other commodities, has requested IIDA stance In fancing a national Agricultal Support Services Project (ASSP) to reinforce these services. Such a project, covering adaptive research, extension, seed supply, livestock, quarante, quality control of inputs and managemen servces, would broaden the scope of IDA's asisne to Chinas agriulture sector. It would provide continuity to, and reifrce the activities supported under the pvious D)Aspported Seeds and Second Agricutural Research Projects. The Project was identified in AugdstSqptmber 1990 and prepared in AprilVMay 1991 by the Minstry of Agriculture (MOA) with assistance from FAO/CP. An IIDA and PAOICP mission preappraised the project in October/November 1991. A technical review mission took place in March 1992 and the project was appraised in June 1992. D. TM AGMCULTBAL SECTOR 1.2 Agriculture in China-including erops, livestock, forestry and isheries-provides susteance for about 1.2 billou people; it is an important soure of uncome for some 200 million farm families and accounts for about 30 pent of the country's GDP. Only about 137 million ha of Chinas land area of 960 million ha are arable. Farming systms are therefre intensive, with heavy inputs of labor, fertizer, smalt mahinery and watr. Nearly half of the crWed area is irrligated. Foodgains occupy about 70 percent of total croplad and account for about one third of the value of agricultural output. Intensive farming has enabled China to meet the basic food requirements of its population, about 22 percent of the wodd's total, and from less than 11 percent of the world's arable land to produce an inrasigy sophisticated mix of cash and commercial crops. 1.3 China's decade-long rural reform program has revitized the agricultural sector and provided impressive growth and structural chge through the introduction of the production responsibility system, increased producer prices and an enlarged role for market forces. The gross value of agricutural output (GVAO) increased by 83 percent in red terms dun the 1978-90 period (6 peret per annmu), susanly faster tham during the previous 25-yea period (3 percent per annm). While significant growth in gri production was achieved in the early part of the period (peaing at 407 million tons in 1984), sta_ grain production has been the Government's central concern in reet years with production ranging between 379 and 402 million tos during the 198548 period as farms sbsdtited other crops for grain. Recent major efforts have been made to increae grain poduction and recenty production appears to  4- have risen to a new plateau, with 446 million tons In 1990 and 435 million tons in 1991. The Government's strateg to increase grain poduton includes diverse mesures, such as increasing state mvestent in agriculture, mainly in irrigaon rebabilitation and xanion, and introducing partial reforms in grain procurement, disbution, prices and subsidies. These refoms have recedy included the general fixing of provinc grain procurement quotas at substily reduced levels, with ever-iucreasing production icmen priced at mariet-based negoated prices; already announced increased wheat quota procurement prices for 1992, so that wheat and corn farmgate prices now approach world levels; the conversion of most official ihprovincial grain shipments from quota to negotated prices; and in 1991 and 1992, the first substantial increases (from 132 percent to 160 percent) in urban ration grain and edible oil prices in 30 years. Recent years have also seen the establishment of fledgling grain commodity exchanges for all major grains in various Chinese cities (e.g., Zhengzhou, Changchun, Wuhan, Harbin, and Changsha). In the conte of preparing a proposed Grain Distrution and Marketing Project, IDA is discussing with the GOC a fiture reform program involving the further substantal elimination of grain consumption subsidies, the opening of the intea grain trade to aU interested units and individuals, the thorough commercialization of grain wholesaling and retailing entaepis, establishment of a futures market in grain, and eventual market-determined pricing of viruly all grain in China. C. TIt JIVEn'OX SUBSECTOR 1.4 The livestock subsector in China has grown rapidly since the reforms of 1978 and its share of agricultura GNP has increased from 14 percent in 1980 to 26 percent in 1990. At the end of 1991, the livestock populaton Included 370 million pigs, 206 million sheep and goats, 132 million cattle and large animals and 2.672 bilion poultry. China is the world's largest pig producer with 42 percent of the world's pigs, but raises only 4 percent of the cattle, 8 percent of the sheep, and 16 percent of the chickens. In 1991, meat production was 28.6 milion tons, egg production was 7.9 million tors and mUk production stood at 5.2 million tons, all enormous advances over 1978 but sill low on a per capita basis by world standads. 1.5 China's livestock feed resources include both grazing lands (55 percent) and crop lands (45 percent). Present husbandry maagement systems tend to minimize the feeding of grain, except for intensively raised poultry and lean pis, and emphasize the use of milled crop and grain by-products, other processing by-products, cut frage produced on unused or margnal lands, and forage from grazing on nau grasslands. China's animal feed industry, even though it is only 15 years old, has become the third largest in the world with an annual output of 31 million tons. 1.6 Future sustnable increases in livestock production would inceasinly bave to depend on higher production efficiency, which would include the feeding of higher levels of grain to nonrmin, pasture improvement and forage production for ruminans, and the utilization of livestock with superior genetic traits derived from indigenous and imported gene pools. The technical feasibility of such increases would depend on the: (a) availability of feed grains, forage and protein supplements; (b) improved and greater accessibility of animal husbandry and feed formulation technology transfer through applied research and extension; and (c) sustainable farmer incentives. To this end, increased bottom-up planning involving the farm population and increased cost recovery of expsive government support service programs would have to be introduced into the system.  -3 - D. AGRIWLTL SAORtT SERVICES IN C }A 1.7 Agricultal A itratn. Lead refsp ilitor agricultral development at the natio level lies with the Minlty of Agriculture (MOA). It i divided into a lage number of dpmrnentslbueaus rep n agriculture (DOA), animal husbandry (DMH), aquatc products and other mportantareas of actvity (Chart 1). MOA s also in carge of the Chinese Academy of Agriultural Sciences (CAAS), the Central Agricultural Broadctng and Televiion School (CABTS) and other bureas providig administrive, financl, plamnig and Inforation services. The departments and "general stations" into which they are subdivided provide recommendations on policy, regulaton and national programs and adminster centrally financed progrms ad projects. Thney are also responsible for monitoring agricultu producton activities and providing informaton services at the mtional level. 1.8 China's provinci administrati- we generally structured like their national counterparts. Programs are implemented through provincial departmens and companies conrsponding to similar stitions at the national level. Prvinces are divided into prefectures and municipalities and further subdivided into counties, township and viUages. There are, on average, 14 prefectu/municipalties per province, 5 counies per prefcture/municipality and about 20 townships per ounty and 16 villages per toWnship. County and lower level auninistrations are generally structured simlarly to the national and provincial ones. Direct ricultura services are provided to farmers by township and viUlage level orgaizations. 1.9 Pinancial autonomy is encouraged, and to some ex enforced, at every level of government. This induces local governent to involve themselves in commercal enterprises that generate revenue and to neglect services such as research and extension. Loans for eternay funded development projects have to be repaid by the local governments themselves, makig them reluctant to borrow for nonrevenue-earning, service type projects. 1.10 AgrIeultural Eteuen. Extension is provided through a system of Agrotecnical Extesion Centers (ATECs) which operate at the National (NATEC), Provincial (PATEC), Municipal/Prefectrl (MATE), County (CATEC) and Township (TATES) levels. At each level, the ATEC reports to the conespondn Deparmen or Bureau of Agriculture and is expected to maintain technical likages with the ATECs at the levels mediaty above and below it. 1.11 At the national level, the NATEC is responsible for formulating national agriculurl exesion policy guidelines and for overall planning, coordinating, monioring and evaluaig China's etension programs. However, at the national level, as well as at the provincial and prefural levels, these system uni remain largely undeveloped and the staff undertilized. Furthermore, these levels of the ATEC sysem lack a cleary defined mision that is pveof ensmion field operaions at the county and townip level, and these uniDt have few resources other than their technical staff. At the county level, CATECs attempt to con4uct adate research, but the subject mat speciists (SMSs) lack adeque training and equipment. Also, they are exected to tr and backstop the TATES exesion staff. At present 1,200 of the 2,200 counties in China hve esablished CATECs, with an average of 18-20 technical staff. At the vilage level, about 500,000 full- or part-time Farmer Tedhnicians (FTs), who receive specialized training and support from the TATES extension staff, provide the direct link to farmers. Ther is, on average, about one FT per vilage, coverng an average of 9 demonstation households and about 420 fm households each.  -4- 1.12 The basic etension stategy now being pursued by China is a combination of farmer training and diss ation of new technologies using a vaiety of low co tecmiques. Most farmer tainig, including training of FTs, occurs at ne township level. Short courses are usually held prior to eah cropping seson. CATEC technial staff fiequenty hold special seminars for PTs and demonstration famers, usually In TATES facilities. The FTs, In tur make direct visits to regular and demonstration farmers ard participate in group meetings. Prited materials containg cuent technical recommendions are sometims duplicated by TATES staff at the township government office or by fie CATEC, however, duplicatng equipment is generally iimited to silk scrmeing one page handouts, 'one copy at a time". Printed materials are dissominated at training sessions, and through FTs and demonstation farmers. TATES staff also use the public village loudspeak system on a weekly basis to communicate agricultural recommendations to farmers, and to anounce field days and training courses. Since 1979, a system of contract extension has been intrduced in some provinces. The TATES or other ATEC draws up a contract to provide technical services and inputs to a farm -r or group of farmers and are compensated by the farmers with, typically, 20 percent of the value of the crop above the agreed target. If harvest fits below the agreed target as the result of poor gecbnical recommendations or nonsupply of timely inputs, the pay or bonuses of the TATES workers may be docked up to 80 percent of the shortfall. This approach has worked well in some high crop-intensity areas where input supplies are sufficient. 1.13 During the preproduction responsibility system era, the extension system functioned relatively well in terms of top-down technology transfer, whereby recommendations were passed down to the communes who simply went ahead and implemented them. With the shift to the production responsibility system (PRS), the number of end users to be reached increased many fold and the production practices and new technologies, which the extension staff must disseminate, are becoming more sophisticated and location specific. In this context, the extension system has become inadequate, because it curreatly lacks sufficient adaptive research capacity to develop location specific technology and messages. Also, this new context demands improvement in the technical and farm management knowledge of extension personnel and in their ability to teach and communicate effectively with farmers. Also, it needs more effective institudonal linkages to ensure the continmous and rapid flow of new technology from research to farmers, on the one hand, and the identfication and relaying of farmen' problems to research and administrative authorities on the other. 1.14 Agriculturl Research. Agricultu research in China is carried out by some 90 research insions at the national and provincial levels. The Chinese Academy of Sciences (CAS), China's premier research institution, has about 122 research insties, some of which are involved in agricultural research. The Chinese Academy of Agricultural Sciences (CAAS), functioning under the Bureau of Science and Technology of MOA, has lead responsibility at the national level for agricultural research, planming and graduate training. The CAAS has about 10,600 staff (of whom 48 percent are researchers, 8 percent are anistrators, and 44 percent are support staff) manning 29 research institutes, 3 research centers, 3 research laboratories and a graduate school. Twenty of these research instittes are located in major production centers across the country, the ceWal service facilities being located in Beijing. Ihe institutes undertake key research projects in crop breeding, plant physiology, plant protection, plant genetic resources, biotechnology, soils and fertilizer, agrictura meteorology, animal husbandry and veteinary science.  -- 1.15 At the provincial level, the Provincial Academies of Agricultural Sciences (PAAS) and their affiliated research stitu, under the provincial dpalments of agriculture, fbcus on solving broad based production problems in the province. Also, the PAAS participate in national research projects, but most lack the capacity to carry out a comprehensive program of adaptive research for all mnor agmecological zones in the province; that responsibility must be assumed by the CATECs. Nationwide, there are about 1,120 research institutes at the prefecura level and above, with a staff of over 95,000 enged In agricultural research. Provincial pro,ects are funded by the province and national and regional projects by the central government. However, much of that research capacity, especially at the provincial and prefeural level, remais underutilized due to lack of operational funds. 1.16 Agricultural Credit. Agricultural credit is provided by the Agricultural Bank of China (ABC), which had total loans of Y 69.9 billion in 1991, through a nationwide network of branches. Some 59,000 Rural Credit Cooperatives (RCCs), at the township level, also provide agricultural credit and had total loans of Y 80.1 billion in 1991. However, both ABC and RCC lend primarily to finance commercial and village industria activities rather than agriculture. Less than 20 percent of their portfolios is composed of loans to farmers, with the bulk of farmer lending going into short-term loans of less than one year for crop and livestock production. Some medium-term lendig is also provided to farmers for agricultural equipment, draft animals, farm trucks and services such as sinking wells, but credit rationing limits famers' ability to Invest in such assets. 1.17 Input Supply. Input supply Is largely handled by the Agricultural Inputs Corporation under the Ministry of Commerce (MOC). Local supplies of fertilizer, pesticides, plastic film and tools are issued through Supply and Marketing Cooperatives, which operate 64,000 shops at the townip level and 110,000 additional ones at the village level. Fertlizer distrbution, particularly of urea and phosphate, and other inputs suffer from short and ofte& unreliable supply. Locally manufacted ferdlizers and agrocheaiicals also have low and variable qaity and distribution is constrained by bureaucracy and lack of transport cpacity. 1.18 Seed Supply. Responsibility for the supply of improved ,uality seed is divided between thb China National Seed Corporadon (CNSC), the Bureau of State Fams (BSF) and provinchl, muicipal/prefectural and county seed companies. The CNSC is responsible for the import and export of seed and for coordinating seed production and distribution at the national level; the BSF produces seed mainly for use on state farms with a surplus (about 15 percent) for sale to farmers; and the seed companies produce the bulk of the commerciW seed sold M farmers. The recenty established National Seed Station (NSS) of MOA is responsible for seed policy formulation and overall coedinafion and regulation of the seed company system. 1.19 There are at present more than 2,600 seed companies, most (over 2,200) at the county level and above. Almost al countes have their own seed companies. Annual seed sales increased from 1.55 million tons in 1986 to about 3 million tons in 1991, hybrid seed having the highest rate of increase. The proportion of seeds planted by farmers provided by seed companies increased from 9.7 percent in 1980 to 25 percent in 1991, but is still quite low given MOA's desire to promote hybrid vareties. 1.20 lIvestock Support Servics Extension services are provided through a network of Animal Husbandry and Veternay Service Centers (AHVSCs) l(cated at the provincial, prefecr, county and township leveis, parallel to the agricultural ATEC system. This huge  -6- livestock etsion and veterinary service system Is overseen by only 75 professional staff who mako up the Nationa Animal Husbandry and Health Sevices Center at MOA. Ninety provincial centers (4,110 er"ployees) are supported by 593 prefecur/muIcipal (11,971 employees) and 4,941 county (72,422 employees) ceners. Ihe provincial and prefectural/municipal centers are large;,, concerned with policy, plannig and administrative support. Some 62,300 town;hip cenes with a total of 320,000 fidl-tme employees, provide farmer support in the areas of aimal husbandry, animal health, livestock improvemen and pasture development. Staffing Is adequate, with a national average of one township livestock technician to 625 farm households. The township livestock technical staff are assisted by part-time FTs at the village level. The AHVSCs zre supported at all levels by a limited mumber of spe&dized centers involved in breed and pasture improvement services and research and, at the provincial and national levels, by livestock input production and quality control centers. 1.21 Disease Control. In the recent past, China has relied heavily on vaccine-induced protection against disease outbreaks, and the vaccine production industry with associated vaccine distribution systems is well developed. Viruly all livestock vaccines used in China are produced locally and channeled to cold stores located at the county and township levels. Production of the various vaccines is not yet well coordined with animal protection priorities, and the emphasis should now shift fom infectious disease control toward the more difficult to diagnose and control production diseases. To this end, the veterinary diagnostic system requires upgrading both in tesig technology and staff training. 1.22 Feed Industry. The feed industy is making a major impact on the intsification of poultry, pig and fish production by providing more compound feeds. and by usin underutlized crop and agroprocessing by-products for feed. A number of nati aal and regional feed formulation and nutritional intake standards are in existence, usually developed to serve regional needs from the temperate north to the t-opical south. National feed milling resources consist of about 14,000 mills of from 1,000 to 100,000 tons anmual capacity, with an aggregate annuial capacity of 32 million tons. In 1991, compound feed production totaled 32 million tons out of an estimated 118 million tons of available feed gains. Most mills are registered as either county or township enterprises. Ihe national target is to convert 80 percent of available feed grains into formulated rations by the year 2010. 1.23 The China National Bureau for Technical Supervision (CNBTS), a parastatal agency reportig to the State Council, oversees all quality control programs. Feed quality testing at the national level Is implemented by the China National Center for Quality Supervision and Testig of Feed (CNCQSTF). The Center provides technical supervision to 35 DAH-managed provincial and municipal feed quality control laboratories. Random testing is carried out but limited by smal recurrent budgets. At present, 112 of 900 drafted regulations of a newly proomlgated Feed Law have been passed, with all expected to be legislated by 1995. The CNCQSTF also provides services to the feed industry, including training feed laboratory techician, drafting feed quality stndards, carrying out research on feed quality control techniques, and givig annual awards to superior mils. 1.24 Lvestock Breeding. Livestock genetic resource management is the responsibility of the DAH Division of Gene Resources, with the CAAS Beijing Instiute of Animal Science (BIAS) being the lead research agency. The CAASIBIAS Department of Genetics and Breeding has characterzed and published basic data on all livestock and poultry breeds in China and carries out frequent gene studies to assist in classification of local strains.  -7 - In total, 45 cattle breeds (including yak and buffao), 66 pig breeds, 45 sheep and goat breeds and 50 poultry breeds have been identified. In the dairy Industry, a nadonal catto breeding program, which includes performance tetng, has been Initiated. The Introduction of the lean pork strategy involves the crossing of indigeous fales with lean or locally crossbred boars, and raising the Fl offspin on improved feeds, resulting in improved efficiency and leaner meat. Ihe breedig of specialized broiler and layer strains also appears to have advtages over local dual-purpose birds, given the increaing hitensification Into meat and egg producdon. Local duck and dhicken breed improvement should follow the time-tested pyramdal breeding program. 1.25 IAvestock and Plant Quarante The China Nadonal Animal and Plant Quaranine Service (NAPQS), with headquaters in Beijing and 46 centers and 100 hes across the country located at seaports, airports, inland frontiers and boundary rivers, is responsible for preventing the introduction of exotic or designated animal and plant diseases into the country. The NAPQS also controls the export of endangered species in line with China's obligations as a signatory to ClTES (Convention on Trade in Endangered Species). Four national animal quarantne isolation stions have been set up at Tangu, Beijing, Shanghai and Guangzhou to serve as primary holding areas for Imported stock. The Tangu and Shangai stations have been upgraded under bilateral assistance projects. A further 34 centers to dminister in-country quaantine and animal movement are located in 17 provincial capitals and autonomous regions and controlled by the Bureau of Animal Husbandry and Bureau of Agiculture. The NAPQS's legislative mandate is centered around the 1992 Import and Export Animal and Plant Quarantine Regulations of the People's Republic of China. A seies of 60 bilaterad animal and plant quartine agreemen with other countries contributes to the complexity of the legal framework within which the Service operates. The NAPQS has over 4,000 staff of whom 55 are at headquaters, and reports diety to the MOA, with only informal links with DOA and DAH. 1.26 Quarantine management, as it relates to the enforcement of eistig reglty laws which were redrafted and promlgated in October 1992, is increasingly hampered by the ladck of access by China's national plant and quaantine services to the necessary modern technical and regulatory data bases. China is not a member of the Office Internatlonale Epizootiques (OlE), which has eaerbated its isolation from the international quante world community. Overly L- lexible adminiLative procedures, combined with a previously outated legal quarantine framework have further conibutd to divergences between the application of China's quarantine regulations and those of other counties. lhe lack of modern, computerized data bases upon which information networking systems can be built has prevented a rapid and accurate response mechanism to quartine challenges. Furthermore, laboratory equipment and teting methodology (such as the still widely used complementation test instead of the new and more sensitive ELISA teciology) have been the source of discrepancies in test resuts and resuting disputes with importing countries, to the detriment of importers and to China, which urgently requires continous inflows of genetic plant and animal genetic pools. 1.27 Veterinary Phamacca and Bloproducts Quality Control. The quality control of veterinay pharmaceuticals and biological products is fundamental to improving animal health standards through drug treamt and vaccination programs. Quality control is exercised at the national level by the National Control Institute of Veterinary Bioproducts and Pharmaceuticals (NCIVBP). At the provic level routine and spot checking is cied out by DAH laboratories and by prdectural and comty veteriay stations. AlU ma c plaits  -8- are required to carry out in-house quality control and inspection of products, although only the largest, in fact, joindy carry out meaningful quality control programs. The NCIVBP is restricted operationally and financially by MOA and CNBTS as to the etent of its tesn program, which poses a constraint on its national impact. Recognition by CNBTS of the National Quality Control Center for Veterinary Bloproducts and Pharmaceuticals (NQCCVBP) as the designated national quality control center for veterinary bioproducts and phamaceudtcals would enable it to extend its supervision and inspection activities, and would allow for greater financial self- sufficiency through revenue from testng and licensing fees. E. SECpORAL OBEcnvEs AMD BANK GRoVp IZNJG 1.28 The Government's long-term objectives for the agricultul sector are to increase food production to meet the requirements created by population and Income growth, and raise incomes and employment opportunities in rural areas. Given China's shortage of arable virgin land, development planners have focussed on the need to increase the productivity of presently cropped areas. Per capita and total value added in the crop subsector are to be raised primarily by increasing the yield and quality of food, feed, orchard, and industrial crops as well as agroprocessing. 1.29 The Bank Group lending to China's agricultra sector is designed to support the Government's efforts to increase and diversify agricultural production. Bank Group agricultura lending to date has comprised 30 operations amountng to $3.6 billion and has covered the full spectrum of geographic areas and subsectors, with overall focus on land development, irrigation and drainage (7 projects), upgrading agricultural support services including agdcultural research, education, credit and seed improvement (7 projects) and developing specialized subsectors including rubber, forestry, fruit and fisheries development (8 projects) and area development (8 projects). In recent years, the Bank Group has supported a series of provincial development projects in which an area development approach has been applied, with responsibility for proposing and preparing the investment proposaIs and repayment of project funds restng with provincial and lower level governme. Many of these provinci projects include limited assistance to support services. The Rural Sector Adjustment Loan (Loan 2967-CHA/Credit 1932-CHA) contributed to the articulation and strengthening of the reform process. Several projects approved since 1989, namely National Afforestation (Credit 2145-CHA), Mid-Yangtze Agricultural Development (Credit 2172-CHA), Fourth Rural Credit (Loan 3265-CHA/Credit 2182-CHA), Henan Agricultural Development (Credit 2242-CHA) and Tarim Basin (Credit 2294-CHA), contain significant subsectoral reform elements. 1.30 Several projects, now complete or nearing completion, are of particular relevance to the proposed project. The Agricultural Education and Research Project (Credit 1297-CHA) provided much needed manpower trining at local and overse institutions of higher learning as well as buildings, equipment, and technical assistance. The Second Agriculural Education Project (Credit 2444-CA) was aimed at improving the quality and supply of high and middle level agriculural manpower through improvement of 23 key agricultura colleges, establishment of 8 trainig and extension support centers and supply of civil works, furniture, equipment, technical assistance and training. The Second Agricultural Research Project (Credit 1516-CA) supported improvements to 15 research centers responsible for research in food and cash crops, livestock, aquatic products, forestry, hydrology and meteorology and a pilot program to strengthen the extension work of ten county agoical extension centers. The Seeds Project  -9- (Credit 1577-CHA) has provided modern seed processing equipment and trained staff in seed processing, tsing and certification at 18 seed centers. 1.31 Implementation of most ongoing Bank Group projects in the agriculture sector is more or less on schedule. Exceptions are support service type projects (Agriculural Research, Education, Seeds) involving considerable inputs of foreign training, technical assistance and intetional procurement, for which slightly longer disbursement periods would have been more appropriate. Experience in previous Bank Group agricultual projects in China is that physical works have been completed on time or ahead of schedule. Disbursements for agricultral 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 coilaboration of government authorities at all levels. Project completion reports of projects that have been completed indicate that implementation was generally successf Ul, that economic rates of retrn reached or exceeded apprai estimates, and that technology used was sound and appropriate for wider application. 1.32. Lessons learned from closely related completed projects have been used in the design of this project. Greater weight is given to intrventions at the lower levels, i.e., county level and below. The project woud firther strengthen linkages between provincial and lower level agricultur services, as well as with other supporting institutions. The project would reinforce the Bank Group's policy and instiuional reform dialogue with the Government, through the introduction of a number of reforms such as instituonal restructuring of the xension system, cost recovery for services, linkages between national, provincial and local level agrictural services, mantenance of price incentives to farmers, and commercialization of enterprises and services. Greater emphasis would be given to service, maitan, spares and operator training for equipment provided under the project. Based on experience gained in the implemention of support service type projects involving considerable training and technical assistance, a longer disbursement period than the standard profile would be required for this project. F. PfOJWr FORMULAT[ON AND RTIONALE 1.33 Most of China's cultivable land is already being exploited. Further growth in agricultural production to meet the urgent needs of the county's increasing population must, therefore, necessarily come from the intensificationof land use, i.e., increased yields and greater cultivation intensities. Such intensification of production systems among the 200 million smallholder farmers, who account for practically all of China's agricultural outut, would require (a) appropriate policies to ensure the maintance of attractive farm level incentives, (b) increased investment in agriculture, (c) availability of quality farm inputs, and (d) development and timely transfer to farmers of advanced technologies that address their crop and animal production constaints. The Government recognizes that the country does not have adequate finmcial resources to invest heavily in new irrigation, land reclamation and other capital Intensive measures to intensify agricultural production. The Government's approach therefore, is to invest in the development of science and technology as a means of increasing output In the short and medium term this trUnslates into the adaptation of existg improved technology to local agricultural oonditions and its dissemination to farmers on lands with potential for substata production increases.  - 10- 1.34 Previous Bank Group intevendons have dealt with specific aspects of the developmt of speafic support services such as agicultura research, agriculura education and seed poduction at a nationa level (or at least with a national focus) as wetl as with provincial agricultural development projects having elements of suport to these sevices. A naiona agicultura support services project would extend the experiences gained under these previous Bank projects to new areas (e.g., vetinary, quarantine and quality control of inputs). Ihe project would also promote the role of women in tension related actvities and afford them greater access to training and job opportnites (para. 6.8). The project would support human capital development and introduce appropriate technologies and tecdniques to strengthen the agriculturl support service system as a model to be replicated outside the project areas.  -11 - 2 THE PROJECT AREAS A. General 2.1 The proposed project is national in scope, and would directly or indirecty sre the agricultur services provided by MOA and its provinc and lower level affiliates throughout China. Improvemens in national services, such as those dealing with quarantn, Input quality control and information, would have an impact on the production environment of farmers in the whole country. For these services, the project area is, therefore, the whole country. 2.2 Project actilties to improve field-level seices to farmers-such as agotical etension, seed supply and livestck field services, would directly benefit farmers in selected project counties in seleted provinces, including eight counties in poor areas. It would also indiredy benef farmers in the "nonproject' counties of the selected provinces by sengthening the capacity of each province and/or prefectwe to give technica support to all its counties. Outside of the selected provinces, project interventions are designed to create models that will have d on effects on nonproject provinces and institutions and, as such, they can be considered to be national in scope. B. LoCANION 2.3 For the agrotechnical extension component, project intervendions are proposed for ten provinces (Guangxi Hebei, Heilongiang, Hunam, Jiangsu, LiaonIng, Shaanxi, Sichuan, and Shanghai and Beijing municipalities), 13 prefectures or municipalities, 52 counties, and 649 townships. The seeds component would involve ten provinces, 14 prefectures or municipalities, and 41 counties. The livestock services component woud cover nine provinces, 18 prefctue or municipalities, 56 counties, and 308 townsps. Project provinces, prefures/municipalities and counties are shown on IBRI) Maps Nos. 23859, 23909, and 23910, and area statistics and basic features of the twelve provinces selected for implentation of the different field service components are summarized in AMi 1. 2.4 The selection of project areas for field services was based on the criteria that (a) the local govermnents have crop and livestock production as a priority in their development plan; (b) the areas have high demonstaton value and represent the major agroecological regions and firming systems; (c) the areas have high potential for rapid increase in production with the improvement of support services alone and without investment in irrigation facilities, soil improvement, input supply, storage, credt or marketg cities; and (d) they are not covered by other smilar projects.  - 12 - C. SUPPORT SERVICES 2.5 ihe main instittona weaknes and constain which limi China's ablity to provide efficit ort services to fams are as follows: 2.6 The major weakmess in agricultural aIniron is the lack of commnication and coordinato horizontally among technical bureau with differen speciaizatons and vertialy betweean natonal technical burea and their provincial counterparts in given specities. This has resulted in duplication of efforts, inefficiency in program execution, and divetge objectives. There are also too many bureaus or equivalent hnstitutions to be effectively manaed directly from the office of the Ministe of Agriculture. Arrangemen for Int errovnca coordination of agricultural services and for monitoring and evaluadon, even for many of MOA's own programs, are weak to nonexstent Magement information systems as well as agricultura information systems for technical services (crop fioecing, dise monito , etc.) are fagmented and un ad. Ihe serious difficuties encountered in btWaft and cordinating crop and livetock production support services at all ae levels are an example of this. 2.7 An sbandry n. Siminar organizaonal and adminisve constrints as fund under DOA are also apparent under DAR and its provincial counterparts, BAH; a lack of verical and horizoa communication; duplication of effort and inefficient program implemention; lack of clearly defined line agency responsibilities for anmal produtcdon, health and support services; ovely extensive administrative inructures at the expen of service orientation; a lack of bIttutonal hands-on training for field personnel, and limied access by DAH and BAR staff to farmers as the result of limited field mobilit, lack of opeating budgets, lack of etension resources and field-directed technology trfer, espeially in animal productin.he DAR and DMB infastructes also suffer from a pre iance of animal health-directed programs, with animal production and support services takdag relativdy minor roles. Crop Sevces 2.8 A ltl ienon. The major weaknesses in agricultural extension services are structural. The ATECs at differe levels do not have clearly defined functions. Each level tends to have duplicative functions and the staff have unclear reponsibiities. These functions are ot propedy liad in an integmted systm able to backsop frn-4ine extension workles with adapted te cal messages, training or other types of assce in solving farmers' problems and provig feedback of farme problems upwards. Ihe system is fiurter cnstained by lack of opeating fnds, nadequM education and trai of the field staff to enable them to absorb sophisticatd techologies, the lack of appropate exnsion methods in the diss ion of new technology to fars, and the lack of laboratory, training, coicatons and transport faciltes and equipment 2.9 Adaptive R arh Research inses carring out adaptive reearch work in reative ioolaton and considerable dupliat Few foml linkges ext between a cultur research, educ and exnsi Research Intiutes ofien have their own etension programs, and thdr staff sped consirble time, energy and resources rnnig them. Applied research  - 13 - findings at provincia and prefectr leve are supposed to be tested, adapted to local, farm-level conditions and passed on to extension by the CATECs. However, CATECs do ot exist in about half the countes, and where they do, they usually have limited, poorly equipped staff assigned to cary out adaptive research prgrams and have little direct contact with the higher level research institutes. There is no mechnism for Identiig urgent farm-level problems or promoting programs of demand-driven research. Technical staff have little or no training in on-fam, adaptive research methods. The supporting laboratoTles at the CATEC level are usually inadequately equipped, and CATEC technical programs are frequently interrupted by shortages of operating funds. 2.10 Seed Services. Constrains which affect China's seed industry include duplication of functions and responsibilities between seed production and seed certification and regulation, inadequate regulatory procedures and lack of traned staff. The industry also suffers from lack of proper quality control and lacks adequate faciities for seed testng, drtying, processing and storage. The seed markeXt system is inefficient and lacks finaneial autonomy from the Government. The Governmen's long range plans caU for upgrading some 300 important seed centers throughout China, but so far only 18 have been modernized, under the previous Bank-supported Seeds Project (Credit 1577-CHA). Uvestock Seices 2.11 Livestock tion and Research. Extension services in China are by necessity crop-oriented, and inadequate attention is given to livestock extension. Practically no on-farm adaptive research is carried out on livestock. In general, etension staffing levels are adequate but staff are only semiskilled in biological sciences, with the result that basic concepts of disease control, epidemiology and prevention are poorly understod. Training schedules are planned but seldom executed due to inadequate recurrent budgets. Course contents are generaly theoretical, and important fields like extension methodology, communication skills and farm management are rarey covered. Extension staff frequently have their extension efforts diluted by nonextension demands. The flow of technical inormation is constrained by shortages of technical journals and textbooks. nbrmation flow from and between research and extension staff is poor and usually top-down. Interegional tehnical information transfer is particularly weak. 2.12 Townsip and county exsion offices often lack the basic resources for efftive communication of information to famers. Staff often lack basic tools and drugs for animal husbandary programs. Ihis situon stems from the Government's policy of self-sufficiency at all levels and is aggavated by the DAH's philosophy of providng total services to farmers (feed, product marketing and proesing) without the necessary resources. 2.13 Veterinary Field Services. Field exposure of veterinary staff remains relatively limited due to transporaion and drug supply shortage. As a result, veterinary field services have taken on a passive, rather than active role. ITis lack of field exposure also limits sample collecton and effects diagnostic laboratory operions, which deend on field specimen inflows. Disease invesgation in the field is chronically hampered by the lack of transportation, poor diagnostic skills and indequae diagnostic equipment. Knowledge of epidemiological and veteriny ecomic principles is also vtly absent, as these subjects are not an officW part of the vetrn curriculumL Most disease invesdgations, therefore, conDist of a basic statistical anysis of the nidence andlor preaence of die. The inability to carry out disease  - 14- mapping and forecasting exercises and disease outbreakprojections has consequences for national vaccine production and disease control strategies. A main constraint found in many management Inonation systems is the techial Inability to convert input data into Interpreted, anytic action reports with resulting feedback to the lower levels. 2.14 Feed Quality Control Seri. Feed testig and quality control at the national and provincial levels is constained by limited testng budgets, expertise, field mobility and organizational factors. Since there is no system of payment for services, China National Burea for Technical Supervision (CNBTS) is in chronic financial difficulty. Greater autonomy for CNCQSTF to charge for tesdng would increase the organization's incentive to carry ou; its regulatory mandate. At present, laboratory resources are often diverted to industdal testing as a source of income to support operadng budgets. The project would initiate a system of cost recovery for services and would strengthen staff capabilities and laboratory facilities. The project would also promote the gradual take over by feed mills of responsibility for their own in-house testing, leaving regulatory spot checklng to government laboratories. 2.15 Vderinary Pharmaceutical Quality Control. Ihe Insttutions and legislative provisions for quality control of vetnary pharmaceuticals and bioproducts are in place (para. 1.27). The NCIVBP does not provide routine testng services to commercial producers of veterinary pharmaceuticals and vaccines and therefore neither effectively supervises these enterprises nor generates funds from testing and licensing fees. Such generation of fees would ease its present lack of facilities and equipment. 2.16 Vaccine production in China requires significant upgrading. Local vaccine production primarily involves poultry virus and bacteria vaccines, with smaller amounts of pig and cattle vaccines. The quality of poultry vaccines is variable depending on the ability to manintain comnant-free replication substrates for vaccine vhrus propagation, commonly carried out in specfic pathogen free (SPF) eggs derived from isolated SPF layer flocks. The presence I incubation eggs of conta t viruses/mycoplasmas or other pathogens seriously undermines vaccine efficacy and can cause disease outbreaks upon vacination. To guard against fhis eventuaity, poultry vaccine production requires significant upgrading in terms of SPF egg supply linked to stringent contaminat monitoring capabilities in vacine production laboratories. Vaccine handling is also constrained by lack of adequate thermos containers or ice in the field, and defective storage freezers and cold storage rooms. 2.17 Lvestock Breeding. The lack of a single national livestock breeding agency with a mandate to oversee national stock improvement programs is a major constraint in Chinas efforts to upgrade and itensify livestock and poultry production. Heavy reliance on imported germplasm and breeding stock cannot replace the indigenous gene pool required to upgrade national herd and flock numbers. Increasing reliance on the upgrading of domestic livestock and poultry gene pools would be required to achieve this objective. Such efforts are underway in the dairy cattle industry and, to a lesser extent, in the national pig population. The National Livestock Genetic Resource Center at Beijing University would be responsible under the project for coordinatg breeding programs. 2.18 Animal and plant Quarantine Services. Deficiencies in tehnical operations and quaant management at NAPQS have in the past acted as an obstacle to the upgrading of China's animal and plant genetic resources and have also resuted in heavy losses of livestock and plant product epots and breeding stock imports. The major constains are related to  - 1S - outdated, cumbersome and obscure quarantine regulations and procedures; inadequate diagnosic laboratory equipment and facilitles for ttng for animal and plant diseases; inapproprate or outaed testng methodologies; lack of plant quaane facilities; lack of a system of rapid information exchange on nadonal and aional quarantdne matters, and, above all, poorly aed staff who have not been exposed to modern quarantine concepts and practices. Daft uarann laws were issued on October 31, 1991, and came into frce on Aprfl 1, 19. The updated legal infastructure would have to be matched by upgraded physical and human resource-based dignostic systems and reater ineraction with the intrntonal qua ne comuity. D. DESGN CoNSMRATos 2.19 A number of considerations have been taken into account in the design of the project. The more important of these are discussed below. Project Focu 2.20 The foc is of the project would be on strengening institutions that provide support sevices to farmes. As identified in paras. 2.6-2.18, weaknesses in these instttions affect their abilities to provide efficient services and constitute major constraints to improvements in the volume and quality of farm producdon and in farm incomes. Supports to other services of inportce to farmers such as markeing, irrigation, machinery services and distution of fertilizer and insecticides are excluded, not only to keep the project within manageable proportions, but also because these services are provided by ministies other than the Minisy of Agriculture, and are being supported through other sources. Choice of Componets 2.21 Several considerations have guided the choice of components for the project. The fast priority is given to strengthening insttions which provide support services. Highest priority would be to strengthen field-level services, including county, township, and village crop and livestock exsion services, veterinary and prevenive animal health services, and cetain aspects of the input supply services. Also, the project is concerned with providing support to adapdve research, animal breed improvement, foundation seed production, training of field service personnel and information services. Finally, MOA's management capacity and nationallprovincial-level regulaory services would be strengthened. Specific reasons for the selection of the individual components of the project are discussed below. 2.22 At present, the MOA and provinal departments of agriculture and animal husbandry are not organized or equipped to provide support services efficiently. Restructring of some of MOA's institutions, particularly the DOA, is necessary, including the creation of an etension management capacity, establishment of information systems, insitutional and resource support to field services, and monitoring and evaluation. In addition, since MOA would coordinate the implemention of the project, and the management requirements for this project are complex, arrangements must be made to insure that the organization, manpower, training, tehnical assistance and related management systems are in place in the MOA and provinc level organizadons. A reorganization review of the central Department of Animal Husbandry (DAB) and provinal Bureau of Animal Husbandry (BAR) was completed and deemed satisfactor at negodations.  - 16 - 2.23 A reorganization of the ATEC system would be carried out wihin project units. One dimension of the proposed reorganization is flmctiona specialization within various levels of the system to avoid the cure duplication of activities. Another dimension conces the restructuring of the system at each level. First, the tecinical subject matter unit would be reorganized into a unified system of adaptive research and message development. Second, a new etension, tinin and conication unit would be developed at each level to enable it to prepare appropriate publications and tWaing materials. Finally, syems of extension linkages with research institutes, the agricutural universities and with farmers would be established (AnUex4). These new structu arrangements proposed are shown in Chart 3. 2.24 The design of adaptive research progrms would emphasize strengthening ATEC's adaptive research and technology testing system so that general recommendaions can be tailored to local needs and provide demand-driven adaptive resech to anayze and address farm-level problems. The seed subcomponent would contne and extend interventions commenced under the World Bank Group supported Seeds Project. The inclusion of seed industy development in the present project would provide an opportunity to move towards commercialization of the operadons of seed companies, strengthen foundation seed production, and separate the regulatory aspects of the industry from its production and commercial aspects. 2.25 The major design considerations in crop and livestock field services concern what approaches to take and the scale of the interventions. The approach to be pursued through ftis project would be to build on the strengths of the curre system and direct project inputs toward stregthening weaknesses and alleviating identified consaints. Therefore, project activities and mnputs would involve rationalizing the organization of the existng AIEC system, strengthening its infrastructure where necessary, upgrading the educational level as well as the technical and etension skills of frontline extension workers, providing postgraduate education and adaptive research traing for subject matter specialists at the county and prefecture levels, and improving extion linkages with research insituaes, agricultura universities and farmer oiganizations. 2.26 The project would aim to provide an ATEC model which can be replicated outside the project areas. To achieve this, it is important tat the reorganization of the services cover the whole extension system. A pyramidal model comprising of one PATEC, two MATECs, six CATECs and ten TATES has been used for the selection of ATECs to be included in the project. Parallel pyramidal models have been proposed for seeds, livestock and veterinary services. A review of present facilities and manpower of selected ATECs would be carried out. The project would finance facilities and training to enable the ATECs aftr reorganization to be fully functional with respect to their reassigned roles and responsibilities. 2.27 As for livestock field services, emphasis would be on improvements in the balance of livestock production and health services, increased integration of the cropflivestock system for smallholders (crop and livestock extension programs would be fiuily itegrated in two project counties, including joint planning of extension acties and shaing of training resources), improved adaptive research tcnologies and their transfer to traditional farmers, improved livestock extension programs, metodology and communications, increased involvement of Farmer Associations in the bottom-up plawi'iur of livestock services and program development, and better field regulatory control of animal feeds, vetnary drugs and vaccines. National breed improvement programs would also be better focussed and prioritized. Quaraine services would be better trained and equipped, more responsive to end-user needs, and would operate in greater harmony with their international counterpart services.  -17- 3 TUE PROJECT A. GENERAL 3.1 The objective of the project would be to uist the Government in increasing agricultural producdon and farmers' incomes. Tis would be achieved by s the iNions tat provide support srvices to farmers. Ihe project would increa. the efficiency of their opeons and the efectiveness of their research, etension and other support progrms. TIe indirect result of ftis improvement in instiutons and programs would be to irease the proctty and iensity of crop and lhvestock production. *I. PRBOcr DESC ION 3.2 Ihe proposed project would comist of seven major components as Mlows: (a) Aicultre Mmnagent and liformation. This component would restructure the atension services of the agricura detmes at the national, provinca and local levels, Improve their managmt capability and establish intrmatioun, netwokng and monhoring and evaluation systems; (b) Agriulual Eenion Svices. hi compone has been designed to: (1) organize the ATEC system to acieve futiona specialization by levd and subject matter Integration wilhin each level, and the creation of new extension, training and comunications units at SaU levels, national to couny; (i) strenthen the physical resources of the ATEC sysem, inuding provision of laboratory, training and office f"cides and equipment, and vehicles tO inrease staff mobility; (Ii) improve the human resources of the ATEC system dtough the provision of both in-service education and training to upgrade the capacity of Ihe ATEC staff and to mnease their job specific skills and knowledge; (rv) strenthen the ATECs' abilty to boti tailor general recomtons to local needs daptive reseach and tecnology tesng and alo address farmlevel problems thrwogh demand-driven resech programing; and  . 18- (v) strengthen extension linkages with research Itutes, agricultural universities and colleges, and farmers through an expanded network of farmer associations. (c) Seed Supply Seric. IThe focus of this component would be on strehening county-level seed companies to increase the quanty and qua: y of seed supplied to farmers. The project would reorganize project seed centers to separate seed production from certification and regulation and would provide equipment, facilties and training to the oanized center and commercialized companies. The project would assist the latter In improving commercial performance. (d) lIvestock ServIcs. This component would support: () Livestock Field So-vices. The stengthening of direct services to frmers, including anima production and health services, Animal Husbandry and Vetriny Serice Centers and extension and breeding services for smallholders through upgrading of facilities, equipment and training; (ii) lIvestock Support Activities. Investments would be provided to establish a Nadonal Animal Husbanry and Vetrinary Service Center (NAHVSC), a specific pathogen free (SPF) vaccine egg production unit in Nanjing, a National Plant and Livestock Geneic Resource Center under CAAS and a National Veterinary Diagnostic Reference Laboratory with Epidemiology and Libary Units under Beijing Agriculura University (BAU). (e) National Animal and Plant Quarantine Services. This component would improve China's access to the quaratne-related information of other counties, streamline its control procedures against the ety of exotic pests and diseases and increase its exposure to moder quarantne concepts, procedures and praces through traiing, improved iormation systems and the upgrading of laboratory and quarantine facilities. (f) Quality Control and Rqeulatory Services. This component would support: (i) development of effective regulatory and monitoring services for fertilizers and psicides; (ii) establishment of provincial seed testng laboratories and improvement of provincial and prefectural inspection facilities; (iii) upgrading of the human and physical resources of the National Control Instiute for Veerinary Bioproducts and Pharmaceaticals and nine provincial centers; (iv) upgrading of the human and physical resources of the China National Center for Quality Supervision and Testing of Feed (CNCQSTF) in Beijing, and nine proviia centers;  (v) the establishment of a new National Center for Quality Control of Veterina Equipment under the NAHVSC, and (vi) the establishment of a new National Center for Quality Control of Veterinary Products, also under the NAHVSC. (f) Project n t. Te project would strengthen aional and provincial project coordination offices by providing equipment, facilities, training, technical assistace and study tours. C. DrAMED FEATURES Agricultural Administration 3.3 M!anagement Services. Technical assi nce for the restructuring of the DOA is underway. The restructuring and strengthening of t., DAH and NATEC would be assisted by the provision of technical assistance comprising 4 person months of an internationally recruited consultant and 5 person months of local consultants. Initially, an iternationally recruited agricultural institutions expert would be working with a local management consultant to cary out a review and analysis of the DAH and to prepare a report contning recommendations on the organization strucure and linkages whhin the DAHI for effective delivery of support services to farmers. Ihis work would be based on the broad proposals made in this report. Restuctring and strengthening would be facilitated by overseas training and stdy tours [72 person months (p.m.)J for senior stff from DOA, DAH, NAPQS and the ten provinces and other levels participating in the project. At nepoatiaons, assurances vere obtaied that NAIEC and DAM would be reorganized on the basis of .n organizatonal struture agreed with IDA to be comnpeted by June 30, 1994. 3.4 Overall upgrading of MOA's management services would be done by hitensive uainig (390 p.m. of local and 220 p.m. of in-service refresher training). The internal tining is mainly aimed at improving language and computer skills. Language training courses of six months duration would be provided to 30 national and 40 provincial officers at recognized Chinese language training institutions. Training courses of one month's duration in computer software operations (DOS, word processing, spreadsheets, data bases) would be provided to 195 national officers by the Information Center of MOA. Advanced computer programming and information systems management training of two months duration would be provided to S national and 15 provincial officers by selected Chinese institutions. In-service training (40 p.m. for national and 180 p.m. for provincW officers) would be provided for officers to attend in-service courses, workshops and seminas directed at upgrading their skills in management services and information systems. 3.5 Agricultural Inornmation System. Plans for strengthening the agricultural information systems in the MOA are summaized ineAm 6. These plans were originally prepared by an information systems planner, with the assistance of the Information Working Group that has been established in MOA for this project. These plans were modified somewhat to pursue a decentralized approach that would be more cost-effective in providing computing and information serAces to the paricipating units. The departments and units would still have access to the information cente's computing and technical assistance resources through high speed modems. A comparable approach to computing and agricultural information services is being  -20 - pursued at the provincial level. Overseas training (12 p.m.) would be provided for hardware design and local area networking. ITree p.m. of intematlonal and 4 p.m. of local technical assistmce related to project preparation/impuentation support, would be pwvided to assist In the preparation of hardware and software fncional and technical specifications, staff trning, and preparation of data base management prgrams. Agrotechnlcal Exnson SevIces 3.6 Under this component, the project would rationalize and strengthen key institutions and linkages of the agrotechnical extension system at the NATEC in MOA headquarts and in approximately 13 prefectures, 52 counties Pod 649 townships across 10 provinces. Specific dimensions of the project follow: 3.7 Reorganizing and Strengthening the ATEC System. To eliminate the existig duplication of activities among different levels in the agrotechnical technical extension system and the consequent inefficient use of resources, its organizational structure would be modified by assigning specialized, but vertically integrated functions to each level of the ATEC system. Within each level, functional integration of the subject matter specialists (SMS) would be effected by combining the soil and fertilizer, plant protection, and food/cash crop production units into a single, integrated division under the leadership of an experienced, broadbased SMS. The major functions recommended for each system level are described in the Working Paper for Agrotechnical Extension Centers in the project profile (Annex 12). The structural arrangements for this reorganized system are given in Chart 3. 3.8 The project would also create new extension training and communications units from the national to county levels of the system. In addition, linkages with research institutes and agricultural universites would be improved through the establishment of extension committees and consultancy arrangements, on the one hand, and with farmers, through farmer study groups and associations, on the other. The basic outline of the proposed new structural arrangements is illustrated and described in the above Working Paper. In order to assist in the transformation of the proposed organizational structure into a functional ATEC system, an institutional development technical assistance team, comprising internaional (15 p.m.) and local (34 p.m.) consultants would be eligible for retoactive financing. Terms of reference for these technical assistance services are given in Annex 10. 3.9 The NATEC and the selected project units at the lower levels (see para. 3.6), would be expected to serve as a replicable model for evenully strengthening the entire ATEC system in China. As a demonstration of the reorganized system, each project Unit would be provided with a modest level of capital inputs for training and staff development, to enable them to be fiuly functional with respect to their assigned roles and responsibilities after the reorganization. In general, each project unit would receive the following types of inputs: 3.10 Civil Works. Funds would be provided under the project to expand or upgrade ATEC training centers, office facilities and laboratories at the national, provincial, mnumcipal/prefecture, county and township levels. At the national level, this would include a 6,800 m2 building to house the new unified agrotechnical service division, including the reorgaized NATEC and the other production management and regultory units. The additional building requirements for training, laboratory and office space at the PATEC, MATEC, CATEC, and TATES levels have been .,dmated by applying norms for the building space  -21 - reuired at each level, In relation to the volume of taning to be conducted, the number of soil, plant and other analyses to be completed on an amual bass, and the number of staff to be accomoe and then subtg the respecdve facilities that are already available at each project site. It is esimated t the project units to be funded uader this project would include about 2,500 m: of civil works for each PATEC, 1,250 m2 for each MATEC and CATEC, and about 140 ne for each TATES to provide a farmer trWaining classroom. 3.11 Equipment and Vehicles. For each level of the ATEC system, the project would provide appropriate training equipment, as well as audiovisual (A-V) equipment to produce a wide range of training and extension materials; laboratory and field equipment to support the on-farm adaptive research program, and to upgrade diagnostic (plant protection) and soil testing services to farmers; and vehicles in support of on-farm research and demonstration acdvities. Specifically, the project would supply NATEC with one video production unit, a fully developed publication facility with two offset press and the necessary printing and binding equipment, a complete set of A-V equipment for the NATEC training center, computers, office equipment and furniture and transport. Also the Central Agricultural Broadcasting and Television School (CABTS) would receive support to upgrade its video production equipment to mest national (education) television stndards. 3.12 In each PATEC, a video production unit would produce trainivg videos for use in the in-service training program of CATECs and TATES, and for broadcast on provincial TV and for exdhange with other provinces. The video production units being provided to each PATEC would be shared with fteir respective Provincial Agricult Broadcasting and Television Schools to enable these units to produce and duplicate video tapes for use by the county and township schools throughout each province. A basic A-V training equipment package, a modest prinfing capability, fiuniture, books, training materials and microcomputers would also be supplied to each PATEC. Six vehicles per PATEC would be provided to meet the transport requirements. In addition, each PATEC would be equipped to carry out on-farm, farming systems research and crop management research traing for MATEC and CATEC level SMSs. 3.13 The project would strengthen about two MATECs per province to enable them to conduct fiaming systems-oriented adaptive research, coordinate and promote the exchange of information on adaptive research, supervise the on-farm constraint analysis and adaptive research programs of CATECs, and to monitor the resources, activities, and ongoing programs being conducted by each CATEC and TATES in the prefecure. Also, project fimding would cover: civil works, A-V and print media equipment; upgrading the soils and fertilizer, plant protection, and agronomy laboratori to a common acceptable standard; and vehicles to support the adaptive research and outreach activities of the selected MATECs. 3.14 About six CATECs per province (three per municipality) would be strengthened under the project. The project would provide civil works, fnimnp, and requisite training and prnt media equipment. Agrotechnical laboratory equipment would be upgraded to enable the CATEC to carry out a larger volume of soil and plant analyses, to develop a diagnostic laborantory for plant protection, to provide basic test plot equipment for on-fam constrait anaysis and adaptive research, and to provide a microcomputer, software and accessories for data analysis. Also, a recom ed vehicle package for each CATEC would be supplied. Trining and communications equipment would be supplied to about 10 TATES per CATEC, plus about l40 m2 of civil works would be provided for a firmer training classroom and sales  -22 - office as well as a twin cab to facilita staff mobility at each selected TATES. Detailed lists of equipment and vehicles needed by project units at each level are specified in the ATEC Working Paper located in the project tiles and smmaized in the cost tables. 3.15 Approximately 24 CATECs would obtain loans from the ABC to establish or expand fertilizer blending plants and to operate them as independt commercial entities. The rationale and detaiLs for this pilot project are descibed in Annex 9. These plants would produce compound fertilizer formwlated to meet location specific requiements, based on on-farm research results (and soil/foliar anwlyses). Ihe objective would be to generate recurrent fiuds to supplement the anual program budget of participating CATECs. This pilot project will be carefully evaluated by the commercialized agricultural services unit in the reorganized NATEC and, if successful, then this unit would disseminate infmation on this type of commercialized agriculturia services activity to other CATECs in the country. 3.16 TaIning and Tehnical Assisan The NATEC would be reinforced to fufil its expanded extension role through M.Sc. degree training of four subject matter specialists and with another 12 SMSs receiving a two year combined technical/extension postgraduate course at the Beijing Agriculturl University (BAU). These individuals would become the leading tecbnical specialists/trainers in their respective subject matter areas within the new integrated technical unit of the reorganized NATEC. An additional 20 staff members from the Extension Support Unit would be sent for a one-year diploma course in different areas of extension education/management at BAU. Technical support staff would be trained for one to two months in the use of new A-V equipment provided under the project. A one-month overseas study tour has been progamed for three senior staff members of the NATEC; additional extension specialists would be sent for study tours to observe the organization and use of farmer associations in other Asia counties. 3.17 In addition to the consultants required to plan and implement the institutional development technical assista for the reganizaon plan (para. 3.8), one foreign agricult taiing specialist would be required for a total of 3 p.m. and one local specialist would be needed for a total of 21 p.m. to carry out a skll-lgap analysis that would be used in preparing provincial and overall master training plans. Also, three p.m. of foreign and three p.m. of local consultants would be required to assist in ordering and instling the A-V equipment, and then in training the staff in its effective use. Funds would also be made available to allow NATEC to access the serices of agncultural universities and research institutions in carrying out special stdies, undertakingjoint research projects (e.g., Rhizobium, mycorthiza, zero tilage, etc.), and preparing training packages or modules for training the ATEC staff. 3.18 At the PATEC level, the project would provide funding for three to four M.Sc. degree candidates, eight two-year technical/extension training courses, eight one-year diploma courses in extension education/management at BAU, a one-month overseas study tour for PATEC directors, a four-month short course for five SMSs/trainers (including one adaptive research specialist from each PAAS) at the Intemational Rice Research Institute (IRRI) and a armer association study tour for two extension specialists. Technical support staff, such as the A-V production staff, would be sent for one month short courses. Technical assistance (domestic) would be provided to help plan and install the new video, training, and communication equipment. Also, at the PATEC level, a special fund would be set up to finance joint research projects, and for the preparation of training modules with PAAS and universities.  - 23 - 3.19 In order to upgrade on-he-job skills and knowledge of the MATEC staff to cary out faring systems oriented adaptive resah, and to monitor and coordinate CATEC programs, a standard in-country training packag is proposed. Similarly, at the CATEC level, agm-techicl SMSs would be trained to carry out and analyze on-farm adaptive research trials and laboratory thician would be trained to perform the necessy laboratory analyses. Diploma level trainn would be provided for extension trainers and short courses would be provided for personel in the training and communications unit. All farmer technicians assigned to the TATES, but lacking at least a CABTS qualification, would be findd to complete this requirement on a part-ime basis. Details of proposed training and technical assistance programs at differt levels are given inAm 3. 3.20 Integrated pest management (IPM) is a key technology which would be purued within the ATEC component. IPM pilot projects, involving rice, cotton and vegetables would be implemented in six pwvinces. These projects would further strenghten research and extension linkages by directly involving three natonal research instutes that deal with rice, cotton and vegetables. Farmer associations (FAs) in the project areas would be organized and utilized to help Implement the IPM programs. Funds have been allocated for the six pilot projects and NATEC is developing specific proposals for IDA review at negotiations. 3.21 The project is givi.g particular emphasis to the organization of FAs in both crop and livestock sectors. These FAs are aready springing up throughout the country but with varying degrees of succes. The project would fund a series of acies, including a study of FAs in China (already underway), a study tour of FAs in other Asian countries, a national workshop, and pilot projects to develop and test the most appropriate methodology and models for establishing FAs troughout the project area and country. CATECs and TATES would establish advisory committees and panels for farmers to have a direct input into the formulation of adaptive research progruns and in guiding and evaluating extension programs. It is expected that FAs would develop a close working relationship with the county level Science and Technology Commissions that fund research-ension projects that are proposed by each CATEC. Through these different types of intaction, farmers would have a direct impact on ormuatin adaptive research-ension priorities and programs. Asuranes were obained t FA acties would be carIed ot wuder terms of reference and timng agreed with DA. Seed Supply Seores 3.22 The supply of quality seed to farmers would be improved by strengthening a representive cross-ection of the seed industry comprising 10 provincia seed companies, 14 prefetual/municipal seed companies and 41 county seed companies. 3.23 The overall management of the seed company program would be undertaken by the NSS, which would coordinate and supervise all provincial level acies and amrange for overseas and in-country training, overseas study tours and technical assistance in collaboration with the central Project Management Office (PMO). At provincial level, the provinci seed company would set up a technical working group of all participating seed companies in the provin to coordinate project activities. Individual companies would manage their own programs. The roles and responsibilities of the seed institutions at different levels in the system would be redefined. The NSS would also niiate commercial developmeft of the seed industry, to be implemented by stages. Three to four county seed companies would be selected as 'pilot projects" for the commercalization of the seed industry, and a consultant would be engaed to  -24 - assis in drawing up plans for ntrcounty seed trade, as well as establhing proper accounig sym for use in setting seed prioes. Assurances were obined that a pilot program for conmercdalization the seed lndustty woud be sulbWd to IDAfor reiew by July1, 1994 and implmnted thereafter as agreed with the Associaon. 3.24 The proposed facilities at the various seed companies/stations have been based on a careful assessment of needs of each company. Special attention would be given to the anticipated throughput of seeds. Complete sets of seed processing and packdng equipment are proposed for each uit and would include: an airsceen and indent cylinder cleaner, a grvity table, a chemical applicator, a packaging machine, elevators, dust extraction equipment and electrical power supply. Ihe pacddng equipment should range from 0.5 kg to 50 kg and include both plastic and power packs. The gravity table would only be provided, where necessary, for the production of basic or foundation seeds. Construction of additional concrete drying floors would also be undertaken (500 m2 of floor area per prefecture station and 1,000 r2 per county company, including 100 mn2 of office space and 100 ni2 seed shop). 3.25 Ihe project would support the construction of seed storage facilities to augment those which already exist in seed statons/companlies at all levels. Cold room facilities would be constructed at provincial seed stations for storage of breeder seed (40 e2 of floor area) and at prefecural seed stations for storage of foundation seed (100 m2 of floor area). Cmnty seed company warehouses for commercial seed would be increased by 750 m2lcompany to accommodate the anticipated increases in production and the strategic storage of hybrid cultivars required by government policy. 3.26 The seed regulatory function and associated testing would be separated adminstratively from the seed production system and built up as an independent service (see paras. 3.64-3.65). However, seed testg facilities for purposes of intenal quality control would be established (or improved as the case may be) in all prefecture seed stations and county seed companies to monitor seed quality from preharvest through to the point of sale to farmers. The equipping of seed laboratories with a full range of instruments for seed sampling, moisture testing and 1,000 grain weight, germiation and physical purity deteminations would be standardized nationally. In addition, county level laboratories would be equipped to undertake varietal purity detminations by biochemical means, in order to determine the level of hybridity of hybrid seed of certain crops (especially coM). Laboratory buildings are generally available at seed companies and no funds for buildings would be provided. 3.27 Training and Technical Asstan The project would assist the management and teclhical development of personnel at all levels. iernational traiig would be provided at a recognized university for two senior staff members from the National Seed Station (NSS) to stdy macromanagement of the seed industry, leading to a M.Sc degree (24 p.m.) A special training in seed enterprise management would be designed for county seed company managers at a university in Thailand (10 p.m.). Two specialy selected seed analysts would be sent to the Danish lttute of Seed Testing to gain experience in seed laboratory establishment and the development of quality control systems (12 p.m.). Local taining at M.Sc, B.Sc and diploma levels in all aspects of the seed industry would be provided for 264 individuals. These courses would be held at agricultural universities and colleges in Chia. Technical assistance for instiMional development would be provided for (a) quality control (10 p.m.), (b) seed producdon (10 p.m.), (c) seed company man_aent in financia and accounig matters (20 p.m.); this would include the operation of microcomputers provided under the project and  - 25 - training in both the tchnical and business aspects of seed enterprise management, and (d) seed processing-design and construction of new processing facilities. The terms of reference for tis training progra was agreed upon at negotations. Lvestodk Swvice 3.28 Is component would include: (a) the strengening of livestock field seices and (b) investms in livestock support activides. Trainig programs for national and provincial subcomponens, and a schedule of intenaional technical assistance inputs is provided in A 3. The livestock services component would cover nine provinces, 18 prefectres or municipalities, 56 countdes, and 308 owns p. 3.29 eri on. The core organizational change would be the amalgamation of 23 existing amintrtive units in MOA's Department of Animal Husbandry and Veterinary Services and National General Station of Anima Husbandry Into four overseeing Divisions of Animal Production, Animal Health, Livestock Support Services and Administration. Animal Producdon and Animal Health would become more balanced adminisraive counterparts (in favor of animtnl production), supported by common service and administaive unis. Two internationay recruited consultants, working with local counterparts and supervised by the team leader of the DAH restruct mission (para. 3.3), would be recruited for up to two person- months each to study two selected provinces and the central DAH. The resultng report was approved by DAH and approved by IDA at negotiations. I wi form the basis for reorganization of DAH. Uvestock leld Services 3.30 AIma Husbandry and Vderinary Service Centr Networlk The project would strengthen the livetock field senices at the national, provincial, prefectural, county and township levels through the development of a network of Animal Husbandry and Veteinary Service Centers (AHVSCs) at each level. At the national level, NAHVSC facilities (6,970 ml) would be constructed to house: (a) a technical traing center ( association with the proposed NATEC headquarters), a data management center, an audiovisual and media communications unit, and an audiovisu van for the production and mutiplication of livestock production teaching materials, livestock extension, infomaion systms and audiovisual preparaon, (b) a national veterinary reference laboratory (1,000 m) to be located at the E wU, and (c) a Livestock-Plant Genetic Resource Center. 3.31 The NMHVSC tranng center would contain al ncessary facilities, (kItchen/ dining rooms, seminar rooms, libary, etc.) to meet the needs of 30 trainees and five trainers. Both county and prefectre staff would receive a portion of their training at this center. Incrementa staff nputs at AHVSCs would include audiovisual specialists and computer managers to run the data maagent units. Assistac would be provided in developing location-specific data management software. 3.32 Te Na4onal Vetrny D1agosdc Reference L boratory would be built on the campus of BAU to serve as a reference resource for provia veeinary diagnostic laboratories and would include pathology, bacwtiology, virology, serology, parasitology, biochemistry and media preparatstizaon secdons. The laboratory would also house a national disease Investigaionunit and a library. A director and laboratory staff (5 postgraduate and 10 graduate  .26 - technicians) would be recruited, and the necessary equipment and a desk top computer would be supplied. Vehicles would be provided for field investigation work. 3.33 At the proWncida level, nine AHVSCs would be developed to include: a 200 mu veteinary diagnostic laboratory with postmortem facilities; a training center able to accommodate 40 resident trainees; a data processing office with a personal computer; an extension media preparation unit; a combined feed and veteinary drug quality control laboratory, offices and equipment storage facilities. Appropriate audiovisual equipment, office and training equipment and laboratory equipment including a personal computer, would be provided. Vehicles would be provided for field investigation and training purposes. The provincial laboratory would engage in similar, but less sophisticated, diagnostic work as the national certer and provide practical training to prefecture and county level laboratories. 3.34 Teams would be established at the provincial level to plan a livestock adaptive research progm and integrated livestock extension services, focussing particularly on the devepimnent of appropriate forage, animal husbandry and integrated crop/livestock production technologies and worldng closely with the species evaluation program to be developed by the national Genetic Resource Center (para. 3.47). Two pilot areas would be selected for integrated crops and livestock extension services. Proposals for the integration of the two services would be discussed wiffi IDA at negotiations. 3.35 Prefecture evel project support would be confined to about two prefecture AXVSCs per project province (except Beijing, Guangxi, Heilongjiang, Sichuan and Shaghai). Each existing center would be expanded to include a 240 m2 veterinary diagnostic laboratory with postmortem facilities; a training center; a combined feed and veterinary drug quality control laboratory; a data processing office; an extension media preparation unit; and offices and storage facilities. The laboratory would be equipped to carry out routine diagnostic bacteriology, parasitology, serological tests and simple biochemical analysis in support of disease investigations by prefecture and county field staff and routine disease surveillance. EU-SA (enzyme-linked immunosorbent assay) diagnostic kits would be used whenever appropriate to improve accuracy and minimize laboratory overhead. Specimens requiring more sophisticated examination or analysis would be forwarded to the provincial laboratory. 3.36 The prefecture diagnostic and disease investigation staff would assist the provincial staff in epidemiology and disease surveilance programs by coordinating the field work of county veterinary teams. County-based adaptive research programs would be supervised at prefecture level by a team selected from existing DAH staff and universities. As at provincial level, prefectural AHVSC staff would be equipped for an applied forage research program. 3.37 At the county lvel, each AHVSC would include: a 140 im2 veterinary diagnostic laboratory with postmortem facilities; a training center accommodating 30 trainees and five trainers, with associated kitchen, dining, library and other facilities; a data processing office; an extesion media preparation unit, and service areas and facilities. 3.38 County laboratores would be equipped to carry out simple diagnostic techniques in bacteriology (excluding culture work), routine parasitology, slide agglutination tests, ELISA tests for surveillance work, and the use of suitable diagnostic kits for field investigations. The anma health and production serices at count level, in collaboration with township staff, would be responsible for implementation of most of the field work for the veterinary diagnostic,  -27 - disease surveillance, and livestock mnitoring programs. They would also be responsible for county-level adptive research and exteion activities, supported with in-service technical and extension training of staff, vehicles for traiing and field work, training, adaptive research and forage research equipment and increment recurrent costs. The project would also provide 50 m2 for animal breeding units at pig Al semen collection and cattle breeding centers, and laboratory equipment for routine semen examination, and storage and sterilization of instruments. 3.39 The cold dcin vaccine dWbudon system would be rehabilitated and extended under the project to ensure that vaccines are maintand at the cofrect temperature from their point of production to farm level. Freezers and refrigerators would be provided at prefecture, county and township levels, ice boxes and vaccine storage containers at county and township levels and a refrigerated van ad, where appropriate, a mobile cold storage laboratory unit at prefecture level. 3.40 Ihe project would support pwldp Ietoc serices through investments in towns-hlp AHVSCs. To encourage the trend towards cost recovery for services and increasing commercialization of these centers, some could be regstered as enterprises to make them eligible for business loans, with any future investments based on credit from the Agricultural Bank of China. Township staff would receive comprehensive training at county level in such sklls as clinical diagnosis, sampling techniques, treatment, and farm hygiene. This would be backed up with strong support by county level staff for planning and superiion of livestock extension and disease control programs. Farmer training would also be provided to selected project demonstration households and Fam Associations at both couty and township levels. It is envisaged that township level extension and veterinary services would evenully be provided on a conual basis by township livestock cet enterprises. Vilage farmer technicims would be provided with biweekly 112 to 1 day training sessions at county or township govenment expense. 3.41 Training and Technical Assistance for Livetock Field Services would include substantal tri inputs in the form of domestic and international study tours, technical affliadons, post gaduate progms and in-service traing. Much of the training would focus on animal health, animal production, livestock extension, and management pertaining to the provincia livestock upport programs adminstered by the AHVSCs at the provincial, prefectul, county and township levels. The total training program for field services woud encompass 8,537 p.m. (Annes 3!. 3.42 Domestc traing would consist of 521 p.m. of study tours related to improved animal health and production technology; 2,832 p.m. of training in livestock exteion methodology for field extesion agents; an equal alotmt to the establishment, through the AHVSCs, of a livestock production/disease monioring ad evaluation system; 177 p.m. in 1- year postgraduate training; 1,482 p.m. have been reserved for training activities to be deterined during the course of the project. A total of 77 p.m. has been allocated for the training of taining managers. 3.43 Technkcl AssAsc for Ins aIrl Delpment has been allocated to brig specaists in a range of animal disease and production and feed quality control specialties to the provinces to provide group training to local speciaists. A total of 15 p.m. has been reserved for this purpose; 5 p.m. of this allocation is to be based on further need assessments. Local  -28- tdical assstuce would be provided though 61 p.m. of computer ramming in support of the establishmet of a livestock prodcdon/disas Infomation system which would serve to pride base line and other data for ilvestigatIon, reatory and statstical purposes. lvestodck Spport Aedvites 3.44 Under thi submponent, he project would finance the development of the following seleced productlactivities in support of the field services: 3.45 SWF Egg Producion. An SPF egg production ficility would be established at the Nanjing Vteriny Bioroduct and Instrument Plan The project would fund the building for the egg production plant (1,555 mi), an air condtoning unit; the specialized equipment necessary for the egg production, and the laboratory equipment requied for the routine testig of birds. 3.46 Ivaetk-Plant Genetic RoreoI Center. This Center would support and coordint breed improvement progrms at natona level and would be responsible for livestock ad forage germplasm strage, evaluation and development Ihe project would fund the construction of a center at the Beijing Institute of Animal Science of the CAAS, which would inude animal embryo/semen and forage germplasm storage banks; smen, embryo and forage germplasm lbrtries, and a data management unit. Laboratory and liquid nitogen equipment would be supplied. Vehicles would be provided for in-seice training and field programs. Incremental staffing would include a computer manager, two biometicians and an animal geneticist 3.47 A new Ltwato* Products TesdngLaboratory and Veteay Iuwnn Testing Laboratoy would be established within the Nadonal AHVSC to ensure the qualirty and regibtro of livesCk production eqipme and other products to be used in all MOA faciites. hese functons were heretofre carried out on a limited scale by other, non-MOA inSst . 3.48 IhIng and Teccl Assanefor L vesock S*pport Servce is dikled in domestc and teraona raining, and the provision of inteaional technical assistance. Trainig involves the national AHVSC, the two quality control centers, the national vetediny diagosdc referen laboratory, the geneic resource cent, and the SPF unit. 3.49 Domestc Trainng. Management trang, in the form of senior managemeat traiing for cente directs (200 p.m.), laboratory managemt (40 p.m.), project management by nation PMO staff (80 p.m.), livestock production management for national progrm dieto (100 p.m.), and computer management (200 p.m.), would represent an important component Training in a range of tebnical topics rdated to disese investigation (75 p.m.), livestock extenion (300 p.m.), feed production (80 p.m.) and laboratory technology (200 p.m.) would provide s upgrding for nationa center tehical stas. Specialized Waining in getmplasm pr technology (32 p.m.), advanced epidemiology (15 p.m.), SPF egg poduction nd monit (10 p.m.), and fedlphamc quality control tesng (45 p.m.) would spcifcally beneft tehnia staff in dignosdc and quality control centers, and would be nked to innatona technica assistance inputs to prove foow up support.  -29- 3.50 Tntnanal rludIg. A tot of 217 p.m. would be allocated to overseas trining, ncudn 34 p.m. in stdy tours to international techmical Insttutes. Retrnees would serve as taner trainers, so that overseas training skills can be then spread through the multiplier efect. Short term technical atahments (105 p.m.) to be carried out in a single location wowd serve the same fmcton. Overs B.Sc program would include 24 p.m.; SPF training 4 p.m., and quality contrl training, 50 p.m. 3.51 Internatonal Techical AsIstanee. Under the livestock support services program, a total of 25 p.m. of interational technical assistance for Institudonal development has been allocated to the national centers for feed and veery parmaccals quality control (12 p.m.); SPF egg production (9 p.m.); laboratory managemen, disease investigation, animal breen and forage development (4 p.m.). Animal and Plant Quarantine Srices 3.52 This component would aim to ewpose Cinas quaranie services to modern quarantine concepts and practices used elsewere, improve their access to qurantine-related information in other countries and streamline routine quarantiae corol prcedures. Ihe quarantane component consists of: (a) establishment of a computeized quarantine in ation system, (b) upgrig of 18 provincial arane laboratories, and (c) computizaton of Shenzlen quantne enty points and development of the Dalian Plant Quaranine Isolation station. 3.53 EvaluatIon of Quarantine law and Practlce Two inteational specialists, one each for plant and animl quarantine would be recruied and collaborate with local countpars to evaluate the recenly issued quaratine laws and reated practices, and make recommendations to the NAPQS as to their compatibility with internationa quarantine laws. In addition, the overseas training program would ensure that trainees gain maximum exposure to new quarantine management techniques. Assuracs wre obined that, by December31, 1993, the Borrowr would prepa and fwrish to IDA a plan of action to ensure that qwarandne procedures are consistent with best iernadonaipractkes, and hereafe 1nplemem the program as agreed with IDA. 3.54 Quaantn nformation. A comprehensive computrized dat base of tncal and regulatory information to cater for the requiement of the NAPQS is included under the Management comPonet (An . Induded in this system would be access to the technical inormaon from he Comonwealth Agricultur Bureau (CAB) Abstr and Silver Platter Infornm&ion Retrieval System (SPIRS) software. 3.55 Equipment. Equipment requirements for routine diagnosdc and support acdvities would be supplied to the NAPQS and the central laboratories of the 18 provincial quarantie services proposed for upgrading. Funds would be made available for the purchase of adtanced equipment to be used in developing and refiing tecdniques for testng plants and abnials and their products. 3.56 PlantQuntneFadlitIes. Existing,preexitandpo etryquanefaclties would be upgraded and eopded to enable the secure Importation of more improved plan genetic material. The Dalian Plan Quaantine Station would be improved through the erecton of three addional Insectscreed, eme-controlled quarantine grenhouses totalling  - 30 - 300 2 and three additional screenhouses totalling 400 n2. A headhouse of 100 W2 would be provided to serve the three greenhouses. Thirty quaranine entry points of the Huanggang substation under the NAPQS Shenzhen quarane services Inflrastructure would be equipped with computerized data information and networklng systems. 3.57 Trainng and techncal assistance for plant and anfmal quaranine services Includes overseas ad domestic training, and international technical assistamce. Training would be provided in all aspects of quarantine management including quarantine policy nd management, risk assessment and management, establishment and monitoring of control procedures, development of appropriate performance indicators and review mechanisms, priority assessment and resource allocation. Officers would also be trained in techical quarantine testing skills and the interpretation of test results. Technically qualified middle management quaante officers would be sent on study tours to countries with modern quarantine practices and facilities. Based on a program of training to pass on the experience gained by these officers on their study tours to other officers in the service, they would conduct workshops to discuss its application to China. 3.58 Overseas trahnng would include 41 p.m. in quarantine management; 310 p.m. in technical training, and 104 p.m. in study tour. Local training would comprise 1,350 p.m. of in-service training for project and nonproject staff; 2 p.m. in training management, and 100 p.m. domestic technical assistance. A total of 10 p.m. of international tecdical assltance has been allocated of which 2 p.m. would be reserved for one plant and one animal quarantine specialist each, to evaluate and recommend of the legal aspects of quatine bylaws, clauses and states. Regulatory Control of Pesticides and Fertilizers 3.59 PestIcides. The pesticide analysis laboratories of the Institute for Control of Agrochemicals (ICAMA), an institute under MOA, ad ten corresponding provincial institutes for control of Agrochemicals (ICAs) l/ would be upgraded with replacement and supplementary equipment The equipment for ICAMA would improve the analytical capability and capacity of its analysis, pesgiide residue and biodetmination laboratories. 3.60 A central information service and network would be established at ICAMA to service the provincal laboratories, and for the preparation of publication of training materis. For this purpose, the project would fund the purchase of microcomputers, modems, laser and dot matrix printers, facsmile machine, photocopy machine and ancillary equipment. A vehicle would be provided for technical supervision and inspections. Provision is also made for one- month in-service training courses for three ICAMA staff at MOA's central computer unit, in the use of computers, data base management, networking and information exchange. 3.61 The seven provincial ICA laboratories would also be provided with appropriate supplementary analytical equipment to enable them to undertake the full range of pesticide analyses. A computer would be supplied to each provincial ICA for development of a data base on pesticide testing and for networking and information exchange with ICAMA. One-month in- service taining courses by ICAMA are proposed for six ICA staff per province in analytical I/ In the sams provinces selected for upgading the ATEC services.  -31 - techiques. Three ICA staff from each provinre would also undergo the same computer taini by MOA staff as their ICAMA counterparts. 3.62 FertUzer. The labortries of the Soil Testng and Plant Anaysis Center (STPAC) wihin the Institute of Soils and Fertilizers (ISP) of the CAAS would be supplied with addional equipment and accmorles for upgrading exist equipment. The STPAC would also be provided with a microcomputer, dot matrix printer and facsimile machine for setting up a data base on fertilizer analysis results and a communication network with provincial ferdlizer testing laboratories. In order to facilkate its expanded program of fertilizer tesig, monitoring and supervision, a vehicle would also be provided. The provincia soils and fertilizer testing laboratories in the ten provinces in which agrotechnical services are being strengthened, would be upgraded through the supply of additional equipment, computers and vehicles. The incrmental recurrent costs of the expanded fertflizer ting program would also be met by the project. Traing for one month In analytical techniques would be financed for three staff members from each provincial laboratory at the relevant PAAS or local agriculturai university. Staff ftom STPAC and three staff from each of the provinces would undergo one-month courses of computer training at the MOA's central computer center. Regulatory Seed Quality Control 3.63 The regulatory control of seed quality is being set up as an independent service of the Nationa Seed Testing Station (NSTS). Operating as a statutory requirement of the Seed law, a network of seed testng laboratories would be established at the provincial and municipal level. Random sampling would be carried out, the iitial target being 10 percent of the seed lots offered for sale. These samples would then be evaluated ir the laboratories financed under the project. lhe development of these laboratories would be a major part of the duties to be cardied out by the seed analysts who are to receive training as part of the program. 3.64 Ihe NSTS would be responsible for the establishent of a seed inspectorate. Ulimately this organization would consist of technical and admini ve staff at the provincial and municipal level. In the inital stages of the project the NSTS would have to select the regions, provinces and municipalities where this can begin, as due to the shortage of trained personnel it would be impossible to operate effectively in al the provinces included in the project The NSTS would also be responsible for developing and coordinating the system of quity control under which this inspectorate would be expected to operate, taking coiane of the seed law. Laboratory buildings, ancillary facilities, essential tesing and office information equipme, wwould be provided at each of the provincial seed testing stations. The Nationa Seed Testng Center would also be provided with 300 m& of laboratory buildings, essenal seed testig and office iformation equipment, and vehicles would be purchased to enable the spate staff to carry out their duties. Training for these technicians would be part of the quality control program outined above. At the end of a five year period the inspectorate would have the following typical field staff complements-a manager, secretary and six agronomists/inspectors at the provincial level, a manager, four inspectors and two agronomists at the municipal level. The regulatory quality control program would be managed and coordinated by the NSTS. RIlaqtory Livetock Feed and Drug Control 3.65 Uvestock Feed Quality Control. The China National Center for Quality Supervision and Tesaing of Feed (CNCQSTF) and its analogue for pharmaceutical quality control  -32 - would share commcm laborory resources at the provnl level and be managed as single units. The China National Bureau for Te cal Supervion (CNBTS) would delegate its auihority for manaing feed quality control programs to CNCQSTF. 3.66 Tho CNCQSTF would be provided with 3,000 mn headquarte space (icluding office, library, data processing room, lecur hall, audiovisua om, lecture room, service areas), and 2,400 in' of laboratory for a research center. Labowry equipment, office and audiovisual equipment and a mobile test laboratory van would be Anded. Vehides would be provided for adminitrtive, training and field sampling purposes. 3.67 At the proWvndal kwl, veterinary products and feed quality control services would be amnilgamated within the same laboratory faclies. Feed qualit control services in each of the nine provinces covered by the project's livestock services would be improved throuigh construction and fiumnishing of common laboratory buildings and provision of laboratory equipment, which, where appropriate, would also serve pharm cal quality control purposes (paras. 3.70-3.71), and a desk-top computer. 3.68 Selected mwadpaltyprecwure level feed quality control centers would have laboratories constructed and equipped for proximate analysis of feedstuffs. A desk-top computer would be installed and staff mobility for factory visits improved through provision of a jeep. 3.69 Quality Control of Veterinay Bloproducts and Pharmaceutcals. At the nadional kvel, the bioproducts testing facilities of NQCCVBP would be upgraded by the insaation of a modem air fitration system, incubaton rooms and a reftigeration system. A new building would be constructed and furnished for prm cal quality control work by the NQCCVBP to replace the existng dilapidated facilities. Equipgmt would be provided for both the bioproducts and pharmaceutical testig laboratories to enable a wiler range of tests, including tests for toxicity and residues and animal tests for efficacy, to be carried out. A laboty animal building would also be constucted, and tro n for staff visits to producdon plants for inspection and traing purposes. Provincial laboratory-based inspectrs would be responsible for random sampling programs. This component would be contingent on the delegation by CNBIS of its authority for veterinary product quality contrul to the NQCCVBP. 3.70 Pro4nclal paceutical quality ontrol centers would be provided with laboratory space, in combination with that of the provincial feed quality control centers, and with equipment, which would be shared with the latter. A vehicle would be allocated to each provincial center for training and sampling. For industry in-service training, 25 p.m. have been allocated for feed and veterinay quality control programs. Project Man ent 3.71 The central Project Management Office (PMO), which would coordine the implementation of the project, would be provided with the necessary office equipment, computers and transport. Provincial Projet Managemenet Offices (PPMOs) would receive more modest complements of office equipment, compute and vehicles but, where needed, small office buildings (150 in) would be constructed. Tecbnical assistance for institutional development (29 p.m. for international consultants and 12 p.m. for local consultants) would be financed to provide a senior advisor and projec monitoring speciis to the PMO, to draw up a detailed Implementation schedule for the project, to develop and insl a project monitoring  .33 - system and to sist In carrying out a mid-term reviw of the projdct. Part of the foreign TA (9 p.m.) woud be held in serve for fite needs. Provision woud also be made fo consuancy fes for specialist on the Technical Advio Pad CrAP) to be set up to asist the Project Magement Office. 3.72 Project impleme aio, pervision, moning and management sklls of natonal MOA [especially the Depatment of Extnal Economic Relations (DEER)] and provinca staff would be upgraded through 30 p.m. of ovea training, 220 p.m. of national training and 220 p.m. of in-service training. 3.73 Human reurce development would be a key project acty in proviig skills necs for the achievement of project objectives and creatirg the capacity withi the MOA to sustain quality services to the sector. Ite project would therefore: (a) provide training in trainin program management for Trainig Coordinators (s); and (b) provide ncentives for staff to participate in training programs. An= 3 cotains a summay of training and education activities for each component together wfith phasing plans. Detailed descipdons of proposed trainin programs may be found in the secon describing the major components. Asura wre obined at negotaonstw aUl project local and owrseas tnig, study tors, adaplve research and extension programs, and techn assine shal be canted ow in accordha with pla agreed with JDA, and the Project Manageme Offlce wouldnsh to DA,fr revew and pp , annuoplans by Sqepte*be 30 of each year durig project n . D. STAUS OF PRARATION 3.74 The project is at an advanced stage of preparation. Ihe tedmical, satal level compolvmts (Quarantne, Qualiy Control and Regatory Services) as well as the national level ItAerventi for Agrotechnical Extension, Seed Supply and Livestock Services have been prepared in finad form. Preliminy designs for buildings, drafg of opaonal protools and memoranda of undedig relating to dational centers, and prepration of workflow plans for quality conul laboratoris have been completed. Midaities for linking DOA, DAH, and NAPQS with MOA and the reo of NATEC have also been finalized. E. IM M ATION SCHEDJL 3.75 The project would be implemented over a six-year period beginning early 1993. Detailed umple schedules are given in Chart 3. Prliminary designs for -ill works under th project would be fnalized in December 1992, and conuction migt bgin in Jamuy 1993. Bid documens for about 50 percent of the equipment are expected to be completed before negoiations, and bid iviton for the first phase of eupme pruement won4d begin in mid- 1993. A second phase of equipme procurement would begin In late 1993. Training activites would be epected to start immediately following neation nd consultant services by mid- 1993. F. Cosr ESlIAMES 3.76 The total project cost, including physical and price cotigencies, is esmated at Y 1,337.4 milion ($238.3 million) of which the fo excanmge compon woud be $122.6 milion or 51.5 percent of the total. The total project cost excluding reserved prorment is esmated at Y 1,242 million ($220.8 million) of whih the foreign exchange  -34 - component would be $109.5 millionor 49.6 perent of the total. Ihe Costs at nadonal level have been estimated In final form for a project components. Cost esdmates at provincial and lower levels also have been finaized fir the crops, livestock, seeds, quality corol, quarantne and management services components. 3.77 The base cost estimates are computed from unit prices prevailing at the time of appraisal in June 1992 adjusted to 1993 price levels, and on the then existing exchange rate of Y 5.45. No duties or taxes are included in the project costs. The total project cost includes physical contingencies at 10 percent on all items (except for technical assistance, local salaries, and maintenance of buOidings, vehicles, and equipment, for which they are zero). Price cont encies are based on annual inteational prie escalaion rates for all goods and services of 3.7 percent for 1993-98 when expressed in US dollars. When expressed in Yuan, annual price escalation rat of 6 percent were used for 1993-98. Total contngencies amount to 20 percent of the total project costs. Table 3.1: PROJF Cosr SumMARY TOCO 8'000 S Forun X Total Loal Yordu total Local lorlu Setotal *eobane bae costa A. CroIb.tenaou 1. National hgrotechnica 26,934.0 28,162.0 53,096.0 4,942.0 5,167.0 10,109.0 51.1 5.1 2. Agrot.cnicl Igt. Dev. 190,136.0 208,913.3 399,049.3 34X887.4 38*3,3.1 73,220.5 52.4 36.8 Subtotal 217.070.0 237.075.3 454.145.3 39.829.4 43.500.1 93.529.5 52.2 41.6 9. Sg 1. Se4 Supply 46,012.2 46,642.7 92,654.9 8,442.3 8,558.3 17,000.8 50.3 8.5 2. Seed Quality Control 19*774.9 18,514.3 38,289.2 3,628.5 35397.1 7,025.6 48.4 3.5 $Ubtotal 65.7*1.1 65.157.0 130,944.1 l..071.0 1.955.4 14.26.4 49.8 12.1 C. ivwe k 1. eld 1Av.etoek Sernice 179,506.5 186,99.? 366,502.2 32,937.0 34,311.1 67,248.1 51.0 33.8 2. iveatook Support Setvrie 20,552.6 20,8e5.6 41*438.2 3,771.1 3,852.2 7,603.3 50.4 3.8 Subtotal 200X059.1 20t.bl$.3 4075940&4 M.7TO,1 f8.143.3 74551.4 51.0 3J.6 D. QualitV Control 18.017.0 19.492-6 37.509.6 3X3060 3.576.6 6.*S2.6 5. 35 S. Quarantine Service. 21.o78.0 32.764.0 54.642.0 4.014.3 6031.6 10.025.9 00 5.0 otal Baa Costs 522.81.2 562,370.2 1.085.181.4 95.92848 103.187.0 199.115.8 51.8 100.0 hysical coAtiouie 42,181.7 45,853.4 88,035.3 7,739.4 $8413.5 16,152.9 52.1 8.1 P ce oln*eaie 85,434.7 78,795.1 164,229.8 11,988.0 11,036.5 23,024.6 47.9 11.6 Total Project Coate 650.427.6 6*87.018.9 1.337.446.5 115.656.2 122.637.1 MM8.29.$ 51.5 119.7 3.78 Over three fourths of the total base cost of the project is accounted for by the Agrotechical Extension (42 percen) and Livestock Service (38 percent) components. Other components with a significant share of the base costs are Seed Supply (12 percent) and Quality Control (3.5 percent) and Quarantn Services (5 percent). Seventy-five percent of total baseline costs are investment costs, of which 23 percent are for equipment, 28 percent for buildings and anotier 11 percent for training. Technical assistance acounts for 1 percent of the total base costs. All project costs are incrental. Incremental rec et costs (25 percent) are made up largely of operation and maitenance items (16 percent) and consumables (7 percent). Estimated costs are summaized in Table 3.1 and detailed in Aanx 2t Table 1.  - 35 - G. FINARN 3.79 Bank Grotp financing would be an IDA Credit of SDR 83.7 million ($115 million equivaet) and would cover 48 prce of tot project costs or 52 percent of tot project costs excluding reserved prcrement. Ihe remaining 52 percent would be financed by cetral, provincial, prefctureumicipal and county governments. Ihe contributions from each source are as follows: $ mUllon (a) IDA Credit 115.0 (b) Centr, provincial, prefecura and county governments 123.3 H. PftocRMErr 3.80 Procurement arrangements are summaized in the following table: Table 3.2: PROCURDENT PROFLE ($ million) Procurement method Project element ICB LCB Other NIF Total Civil works - 64.3 2.8 - 67.1 (32.2) (1.4) (33.6) Equipment and materials 43.9 6.0 7.3 - 57.2 (38.7) (3.0) (3.7) (45.4) Vehicles 15.6 - - 11.1/a, 26.7 (14.0) (0.0) (14.0) Training and technical assistance - - 28.0 - 28.0 (22.0) (22.0) Management and operating co0t8 - - - 59.3lb 59.3 (0.0) (0.0) Total 59.5 70.3 38.1 70.4 238.3 (52.7) (35.2) (27.1) (0.0) (115.0) No: Fies in parenthes are amounts to be financed by EDA Credt. NIF: Not IDA Fhnaced. Figurs incude contngendes. & Resrved proement of 660 vehicles valued $11.1 million. & Indude operaion and m nau of 660 vehiles valued $6.4 mimon.  - 36 - 3.81 ail Works ($67.1 millon). All woks in the project are too small to be of inerest to foreign bidders. Pacaging has been done as much as is practicable; however, all the works are smal, scheduled over the six ye life of theprojecta dscatteted over the 12 provinc involved in the project. None would exceed $1.0 million and the aveag cost per work would be $24,000. Most are smail bufldings that would serve as offices and other support service at the provincial, prefecte as wel as county levels. None would be of interest to foreign contractors. Approxmely $64.3 milion (96 percnt) of the works wold thus be let under local competitive bidding (LCB) proedures acceptable to IDA. The remainig $2.8 million (4 percent) are for very small works (less han $15,000 each) that are difficult to schedule or are in remote areas, and as such, would best be done by county or municipal work groups through force account work. 3.82 Goods ($83.9 milUon). About 660 vehicles esmated at $11.1 million are prohibited by government to be imported and would be fully financed by local fius. The remainin 950 vehicles esdmated at $15.6 million would be procured under ICB procedures. The vehicles ($15.6 mfilion), stel ($8.0 million), fertlizer ($1.9 million) and the large or complex equipment ($34.0 million), 80 percent of the goods, wil be procured using ICB procedures. A margin of preference equal to 15 percent of the c.i.f. price of imported goods or the actual customs duties and import taxes, whichever is less, will be allowed the domestic manufacrers on ICB. Contracts cosdng less than $200,000 equivalent may be procured under LCB procedures acceptable to the Association. The inexpensive basic eqgipment (total $4.5 million) that will be required to equip the over 700 new agkulture support services facilities will be procured in small quantities near each facility using LCB procedures that we acceptable to IDA. Specialized laboratory and testiDng equipment (not to exceed $5.3 million in tot) hat is avaiable ftom only a few suppliers would be procured through limted intenaional bidding (IB). Small quantities of office supplies, funiure and the very basic equipment (not to exceed $2.0 miUlion in tot) wfll be procured thwogh shopping. The proement schedule (Chart 5) shows how the six largest goods packages, totaling $65.1 million, would be scheduled. An assurance was obtand at negotiaons that te Borrower wold procure abosu 660 whkles required for te project In accordance with a plan acceptabl to the Associaon and would funish a draf plan to the Associaon no loa th Jldy 1, 1993. 3.83 Trainn and TecIcal Assistamce ($28.0 milDon). Theprojectwouldprovide $24.9 million of trainig and $3.1 million of tecnical assistance (TA). A detaied training and TA program has been drawn up. Apprwximatly half of the training and TA wiUl be supplied from overseas. All consultants will be arranged in accordne with IDA's Guidelines on the Selection and Use of Consultants. 3.84 AdminitratIon. All goods contracts of $200,000 or more, and civil works packages over $0.5 milion would be subject to IDA's prior review. This would cover about 80 percent of the goods and 10 percent of the works, and would involve about 12 conacts over the six-year life of the project. All training and TA contracts (about 15) would also be subject to prior review by IDA. All other contracts would be subject to selective postaward review. Ihe China National Instrument Import and Export Cotporation (CNIIE would be the procurement agent for the project. CNIEC has previous experience on Bank projects and knows IDA's requirements. The project will use the model bid documents prepared by MOP and accepted by IDA. Even though foreign competition is not expected under the above mendoned LCB procedure, foreign fims would not be prohibited from bidding.  -37 - L D 3.85 Disb s for equipm, matls, and vehicles would be made at 100 percent of the foreig co for direct imports, 100 percent of loca ex-facy cost for locally manufactred items, and 75 percent of local expenditures for other Items procured locally. Diment agaist civi works would be 50 percent of toWal expenditues. Disbursemet for training, study tours, and consultant services would be at 100 percent of total expenditures. Disbursements would be made agapst staements of exdium for goods and works contracts, each costing less than $200,000 equivalent, for civil works under force account and training. Supportng doc on would be rened in the Project Office in Beijing and Provincial PMOs and be made available to IDA supervision missions. In order to provide efficient disbursement of the credit proceeds, a Special Account would be opened in US dollars in a bank acceptable to IDA with an authorized allocation of $5 million, the estimated average four-month disburemt. The Special Accont would be operated and m tined by the Minstry of Finance (MOF). Applications for replenishment of the Special Account would be submitted monthly or whenever the Special Account is drawn down to 50 percent of its inital deposit, whichever comes first. In order to facilitate early startup of the project to take advantage of labor mabity during the 1992/93 winter season, as well as the restuct of DAR and NATEC,rthi Government has proposed to use up to SDR 3.5 million ($4.7 million, 3.9 percent of the ciit) for retroactive financing of expenditures made between July 1, 1992 and date of signing of the Development Credit Agreement. 3.86 The project is expected to be completed by December 31, 1999 and the closing date would be December 31, 2000. Disbursement experience in China has been favorable and better than Bank Group and Asia regional averages. The project disbursement profile is essenmtialy In line with that for previous instiution buRding projects in China (para. 1.30). The estIm disbursement shedule is given in Annex 2, Table 6. 3. AccouNs AND AuD1s 3.87 Separate accounts, regarding all project expenditures, would be maintained at participating project counties and pref s by their respectve project implementtion units or finace deparmens. Ihese records would be forwarded regularly to the provincial project management offices (PPMOs). The provincial finance deprtments would assist the PPMOs in consolidating these accounts and also in mainaining separate aecounts for expenditures at provincial level. These would aU be audted anmually by the Provincial Audit Bureau within 4 montfs of thi close of the financial year. The PPMOs would forward their accounts to the centra PMO, which would also receive reglar returns from the Project Implemention Units at national level (DOA, DAH, NAPQS, CAMS, etc.). The Finance Department of MOA wodd assist the PMO in comining all these into one consolidated report, with separate accounts for local expenditures and imports, to be submitted to IDA. Assurances were obtained that (a) the Specdal AcouW would be audited by deaedent audo acptabk to IDA and the PMO, and (b) the PAMO and PPMOs would maiain consolated accounts of aU cmponents for annual audtng by independent auditors acceptable to IDA, and the audied accouns together with the auditor's report wold be sumitd to l A wthin six months of*e dose of eachfinancal year. Ihe consolidated audit report would contain a sumary of the provincial audit report and audited accounts of MOA's project expendures. It would include detils of withdrawals from the Credit Account made on the basi of Staemen of Expediue and the auditor's opinion as to wheter such withdrawals were against expendire eligible for reit by IDA.  -38- KI ENVONMERrNTAL bDMACr 3.88 The project would reduce the effects associated with the excessive use of ferdlizers by promoting more balanced fertilizer recommeions better adapted to local conditions through Its adptive research program snd by encouragig the application of dosages tailor-made to farmers' needs (as dermined by its soil testing program). By improving the quality control of frilizer, the project would also eliminate some of the gueswork involved in applyig (and ineviably sometime over-applying) ir ferilize products. 3.89 Ihe environmental problems asocated with the use of pesucides in Chinese agricultre, though not well documented or quanified, include: (a) excessive use (as in the Yangzhou county of Jiangsu province where 9 applications of insecticide and fungicide are made annually on a wheat-rice rotation), (b) widespread use of fake manuactured insecticides or home made products (e.g., 3 percent solution of carbofuran granules in water) which are dangerous to crops, naural predtors and humans, (c) use of products dhat are known to be harmful and banned in other counies (e.g., nitrogen), (d) buildup of pesticide resistance due to indiscriminae use (e.g., resistance of Heiodds andgera to pyrediroids in cotton-25 sprays per crop are common), (e) high residue levels in havested crops (e.g., in vegetables), and (t) the high cost of crop protection due to exclusive dependence on pesticides and lack of information on economic threshOlds. 3.90 Ihe project would actually reduce the level of pesticide used through the promodon, by adapdve research and extsion, of ntgrated Pest Management (IPM). This has been demonstated for example by the FAO program for traiving farmers in IPM, which reduced pesticide use by 10 percent (and increased profits by 20 percent). Through improved quality contol and better regulation of the manufacture and distrbution of pesticides, the project would reduce the use of spuious and dangerous product that now find their way to the market and would regulate the use of active ingredients used in the manufature of pesticides. The capacity to conduct pesticide residue analysis is being built int the strengthened analytical capacity of ICAMA's laboratory network to better monitor residues in agricultural products. Finaly, by promotig the economic threshold concept for spraying and safety in the handling and we of pesticides, the agrotehnical extension services would furtier reduce tie envonmenal hazards of pesicide use.  -39 - 4 PROJECT ORGANIZATON AND MANAG A. PROJrCT ORGAZANTON 4.1 Ihe Ministry of Agricture (MOA) would have ovea responsibility for implementng the project. A Project Leading Group (PLO) has been established to oversee its management. Ihe PLG would provide senior management suppott for the project, dedde policy matters, solve intream a o or interage_ncyproblems, and would meetpiodically to review progress and resolve problems that may aise in project implem enion. 'he PLG consists of a vice Minister as Leader, the Director of MOA's General Planing Department as Deputy Leader, the heads of MOA's concened departments and agencies (DEER, DOA, DAR, NAPQS, CABTS, the Departm of Finance, Department of Admion, Deptent of Peonnel and Labor, CAAS, Infrmation Center and the AgriclEural Eneering Inste), and repesentatives frm the State Planning Commission and MOF's Department of Agicultura Finace (see Chart 2). 4.2 At the cenr level, the DOA, DAH, NAPQS and CABTS would implement their respectiveprojectcompones, wih aremostly involvedwiththeirlinefunmcdons. PtoJect Implementation Units (PlUs) have been established in each of the units to oversee the execution of its paticular component A central Project Mangement Office (PMO), staffed by personmel from DEER and other releva agencies, has been established hi the MOA to oordinaW the activNies of the project on a day-to-day basis, monitor progress in execution of the project and bring any problems ta arise to the notice of the PLO for prompt resolution. The PMO wod be headed by a Director and asstd by two Deputy Diecors (from DEER and Planing). Among PMO's spcfic res;posibilities would be to: (a) amist in drawing up impl schedules for the project components; (b) coordinae project activities with the line agencie at the nationl level and with provin institutions; (c) arage combined prouement under ICB or LIB; (d) coordinate insuiona devdeopment aspects, particulady in respect of organiational restrcturing, overseas traling and tecdnical training, tecnical assistance, rough vropriate commitees constituted for those purposes; (e) assist and coordinate the preparation of applications for withdrawal of the IDA credit; (f) ensure that consolidated accounts, audits and progress repors are prepared and submitted in tme; (g) aminister the Special Account; h) undertale project monhoring and supervision (see AnMo 8); and (') arrange for a mid-term evaluation of the project as well as regular evaluations of project impact 4.3 The Ministry of Fina would be responsible for the financial management of the project and maitaiin g consolidated project accouns. The Administration DEptment, MOA, would be responsible for the civil work wie the Agriculmral Engineering Inst would prepare the designs. Ihe Adminion and Personnel and Labor Departments would assist the PMO (and relevant technical deatmen and prwvincial ins ons) undertake the  -40 - proposed instiutional development actities. The insftiute of Agricultura Economics of the CAAS, supported by consultant as needed, would carry out the project evaluation, including the mid-term evaluation. A Technical Advisory Panel (TAP) comptg experts from different technical agencies would be set up and drawn from when speciflc technical advice Is needed by the PLG or PMO. 4.4 Analogous arngements for project management would be made at the provinc level. Each Provinci Project Leading Group (PPLG) would be headed by a Vice Goveror and include the Prvincial Directors of Agriculture and Livesock, the heads of the Provincial Department of Ext Economic Relations or its equivalent, the Finance Department, the Provincial Planning Commission, and a representative from the Provincial Academy of Agriculur Sciences (PAAS). The Provincid Director of Agriculture would be responsible for implementing the Agrotechnical Extension and Seeds components of the project and the Provincial Direcor of Animal Husbandry for the livestock component. Other components (eg. the Regulatory Services) havig interventions at provincial level would be managed from the central PMO, assisted by the relevant ptovincia organiation. A Provial Project Maagement Office (PPMO) would be set up in each project province under the leadership of the Provincial Department of Exernal Economic Relations or the Pvincial Plaing Commission to coordinate project activities and ensure regular reporting. A Provincial Technical Advisory Panel (PTAP) would be set up as a source of expert advce to be drawn on by the PPLG and the PPMO. Ihe Provinci Finance Department would keep consolidated project acunts. Assurances were obtaid tat the promject prnc enter ito Project bplmentaton Agreement (PUs) w*t MOF and MOA, to ensure at their project conponent is carred ou and aeditftakds would be onkmnt (ara. 4.5). Condcuson of the PMAs, satfactory to IDA, would be a condition of credit effecveness. ln addition, PiUs would be established in the other provincial levels, the prefecture/municipal, county and township to implement the project activities. At negoatioms, an assurance was obtae ftom the Borrower that the PMO, PPMOs, and PIUs would be maitne and adequaely sted with qualedpersonnel daring the life of the project, with sqff conWos*n accetabk to IDA. B. FJANCLAL MANAGEMENr 4.5 MOF would onlend the porton of the IDA creditfor the provincil cmp to the provinces wader the PIlAs, at an annual nerest rate qf 4 percn, wth a repaymentperiod of 20 years, iuslw of sb years' grace period, and assurances to ta effect wuld be obined at negoations. The provinces would oniend the relevant portions of the credit to project municipalities/prefectures and counties on the same terms as the loans from the MOF to the provinces. The foreign exchnge risk would be borne in each case by the end-user of the credit. C. SUPIRVSIONI MONTOR , EVAWLAMiON AND RIPORNG 4.6 The Project Management Offices at national ad provinciad levels (PMO and PPMOs) and the Project Implementation Units (PIUs) at prefectual and county levels, would monitor the project's progress. In order to ensure smooth implementaton of the project, the central PMO has etablished procedures at each level for project supervision. Regular supervisions would be carried out to asss the physical, financia and technical aspects of the projecL Deails of the suevision plan are desrd in Annex. The central PMO ad PPMOs would also asist in the evaluation of the project's impact on agricultural practices, production, fam incomes and selected environmental parameters, under the direction of the  -41 - nstltte of Agricultr Eonomics (AB) of the CAAS. Nonproject countes would be inluded inte evauation as cotrols. A basdine survey wouldbe carried out inthe firstyear of project ImiDpeeE on, covering a range of counties with varying drs of project Influence (direct, indirect and remote). A teem, composed of the IAE, project technical assice, the PMO, PPMOs and PlJs would establish a system of project montoring and evaluation using physical, fiancial and environmental indicators, which would be specified during the preparation of the implementon schedule and the baseline survey. Progress reports would be produced every six mons by the project management at each level and discussed at workshops in order to sseminate the lessons learned. Assurances were obtand ha the PMO swuld wmderlake with IDA a nmd-trn reiw of the project by December 31, 1995.  -42- 5 PRODUCTION AND MARKETS A. PROWDUCTON 5.1 The strengthening of agricultur support services would result in increased crop and livestock production only to the extent that farmers adopt improved techologies to raise yields, increase cropping intensity and raise meat producton. 5.2 Tecnology Typs. The increase in production would come from two types of improved techology, one a set of Lproved exsting, readily adoptable technologles and the second a set of newer, more advanced technologies that have not been disseminated much beyond reseach Insions. Ihe fist set of techologies has been successily tested at fium level and i amlready being used by some advanced farmers. Further work may be needed to adapt them to loD condions, in parclar counties, before they are extended to fams ere. Te Improvem in the exension system under the project are designed to help spread these technologies. Among such technologies are: (a) beter adapted local variedes; (b) improved cultura practies, such as planting dates, seeding rates, spatial arrangements, cropping systems; (c) better water management, including conJunctive use of surface and well water; (d) optimum ferlizer strates based on climate, soil c s and crop variety, application rates and dming, orection of microelement deficiencies; and (e) pest and disease control, including through better crop mixes and the preservation of natral enemies. 5.3 The second set of more advanced production-increasing technologies include: (a) superior varieties of hybrid rice and corn resulting from recent access to germ plasma from intenational organiztions; (b) Rhiobitn bacteria to fix nitrogen for soybeans, peanuts and alfalf; and (c) the use of integrated pest management, Including better pest and diseas foecng, assessment of the economic theshold for pesticide application, and the use of parasites and predatrs for biological control. Some of these technologies are currenty being evaluated at research stations and/or being tested at farm level for adaptation to diverse agroecological conditions. Ihe stregthened linkages between research and etension resulting from the project will facilitate the flow of these technologies to farmers.  -43 - 5.4 Ylelds. Th increase in average yields achievable in the project areas for major crops using these two levels of technology are: Table 5.1: EXTNG Am PrzRmrM CROP YEmS (T/Hu) UsIG IMROVED EX*TING OR NEw TEHOWGIES With pro1ect Existing Without Improved New practice project existing technology technology development Rice 5.0 5.6 6.2 6.6 Wheat 2.5 2.7 3.2 3.5 Maize 3.4 3.8 4.4 4.9 Cotton La 0.7 0.8 1.1 1.3 Soybean 1.4 1.5 1.8 2.1 Peanuts 1.3 1.5 2.1 2.7 Rapeseed 1.0 1.2 1.6 1.9 Sweet potatoes /b 3.2 3.5 4.5 5.6 La Lint cotton. & Grain equivalent (5 tons tuber:l ton grain). Yields by province (ncluding only projeat counies) can be foud in A= I 1 Table 1. Ihey sume that the various inputs reqired by te teclogies, includig seed, fertilizer, agrochemicals, etc. are availble to implement them. 5.5 Adotion Raws of new tehology by fiamers will obviously vary enormously according to the nature of the technology, epcted Inemena income, risk, input, credit and labor milabilty, and other constn, in addion to th effectiveness of the adaptive reseach and extension sevices. The pota inremen production and net income under the project was estmated using dient scenmaios acrtng to adopton raes for the two technology types. Improved adsting technology will be adopted fast tm new thnology. Incementa production for each crop under each adoption-te scenaio is esmated as follows:  .44 - Table S2: JNaRINTAL PEODuCFION AND AoflioN ItATs With 2re42ct Present Without s8enarioe production project I II III Adoption rate (2 of households) Ixzstiug tech. 252 352 452 SO5 S02 New tochnology 12 32 52 202 302 Production Incremental production ('000 tons) ('000 tons) Riee 5,098 5,631 172 493 662 Wheat 2,979 3,216 78 246 339 Ize 3,763 3,965 68 228 318 Soybean 461 489 46 137 186 Sw.Potatoes 337 365 10 30 42 Total grain* 12,638 13,666 374 1,134 1,547 Rapeseed 442 572 43 130 177 Peanuts 49 54 2 5 7 Total oil crops 491 626 45 135 184 cotton 181 233 18 61 85 Now: Set &no1L Table 2 for detas. 5.6 It is esdmated ht about 25 pecent of m In the projdct counes have already adopted the improved technology. As beline data, ta gSin, oil seed and cotton producton was 12.6 milion, 491,000 ad 181,000 tons, respectvy, in 1991. R is asumed tha wio the project, the adoption rat would ease to 35 percent for the Improved eistng tecnology and to 3 perce for the w technology over the six-ye time fiame of the project. his would resul in production wWit the project of 13.7 million tons ), 626,000 tons (oil seed) and 233,000 tons (coto). 5.7 c producXion w% the project varies acrding to sumptons made about the adopdo ra iied by the project. In the wors scario (45 pecen adoption of mpwroved exis g tehology and 5 prcent of new technology), Incemental grain production beyond pected production wihout the proct) would be only 0.4 million tons compared to 1.5 million tons for the best scearo (50 perct dopton of improved exitg techology and 30 pen now technology). Icmenta oil-crop productin woud be 45,000 tons for the worst scArio compgred to 184,000 ts for the best And incement cotton production would be 18,000 tons for the worstsnrio and 85,000 tons for the best. It is unlikely that either the best or worst adopt scAos wod occur in rdIty. Sconario 11 is considered the most likely  -4S - scenario; in this scenario, incremea grain, oil-crp and cotton production would be 1.1 million tons, 135,000 tons and 61,000 tons, respectively. LUvetodc Producion 5.8 Increml liveso production from the project would come from improved support services to livestock famers to promote healthier animals, superior breedig stock, improved feed, better animal husbandry practices and imved farm management. In tUrn, improvements in these areas woud reduce mortality rates and incase animal weight, growth aes and meat quality. It is esmated tha, over the six-year time frme of the project, the improved support services under the project would result in (a) reduced mortality of 6, 13, S, and 8 percent, for cate, pigs, poultry, sheep/goat respectively, (b) increased meat offtae of 13, 11, and 5 percet for cattle, pigs and sheep/goats, respectively, and (c) increased yield for both milk and eggs by 7 perce (See Awn nLl Table 3). 5.9 Production. A livestock producton model was developed to assess project impact on production based on the above production parameters. It was esmated that the present adoption rate of about 23 percent would increase to 37 percent without the project by end of 6 years. With the project, adoption rates of 48, 64 and 80 percent in three scenarios have been used. In the worst and best scenarios (adoption rates of 48 percent and 80 percent), incremental production for all livesck with the project would be 403,000 tons and 1.5 million tons, respectively, above what it would be without the project (in the same six-year time frame). Scenario II is the most likely scenario to occur; in this scenario, incrmenta poduction woud be 1.0 million tons. In more detail, the model's estmates of the increment production of beef, milk, pork, poultry meat, eggs and mutton/goat meat over the six-year time frame of the project are as follows: Table 5.3: INCREMENAL LtmxOC PROnDUCION With iroiect Present Without Scenario Production Project I II III Adoption rate 23S 37Z 471 641 801 Production Incremental production ('000 tons) ('000 tons) Beef 230 305 75 184 293 WiTl 44 51 6 14 28 Poultry meat 52 75 20 48 77 Egg. 428 589 123 312 444 Pork 717 934 174 424 576 Mutton/Goat 44 51 5 13 26 Total 1,515 2,005 403 995 1,444 Sou: Am11 Table 4.  -46 - B. AARKErS 5.10 There should be litfle difficulty in finding markets for the incremet production of the project, since domestic demand for food and raw material is rising steadily due to increasing population and income. The demand for the individual commodities produced by the project will be generally favorable. In fact, k is expected that most of the incremental crop and livestock production of the project would be consumed In the project areas or in nearby towns, except part of the lean pork, which would be exported. Since incremental production under the project would be sold In twelve provinces, and amounts to less than one half of one percent of the national production of grains and oil crops, the existing market channels could be used without constraint or significant impact on market prices. The situation of the crops and livestock markets is as follows: 5.11 Crops. China exceeded its grain production record of 1984 in 1989's harvest of 408 million tons and 446 million tons in 1990. Nevertheless, China has been an importer of wheat, rice and cotton. It imported about 11 million tons of wheat, 0.5 million tons of paddy and 60,000 tons of cotton in 1991. The incremental production of the project, about 1.I million tons, would be used to meet the project areas' increased requirements due to population and livestock growth and as inputs for agroindustrial products. Any surplus above these needs would be sold to deficit areas in China. 5.12 The national market situation in cotton has been one of excess demand in recent years. At present the country's teffile industry is operating weU below capacity, mainly due to lack of raw materis. While total national production has increased o.ver the last several years, it has not kept pace with textile industry demand, fueled in part by large, heretofore rapidly expanding textile exports. Total demand for cotton is expected to be 5 million tons in 1991, with production only of 4.54.8 million tons in 1990/91. The project's incremental production of cotton of 61,000 tons would be about 1.3 percent of national production and would supply provincial textle industries, which are experiencing a severe shortage of raw materias, due to their inability to import sufficient quantities from other provinces or from abroad. Peanuts, soybeans and rapeseed from the project would supply oil processors in the project provinces. 5.13 iUvestodck Products. Beef, mutton and goat meat produced under the project would mainly supply domestic markets. Domestic demand for red meat has been growing, and there would be no problem in the domestic absorption of an incremental 197,300 tons of beef, mutton and goat meat (2 percent of national production). Lean pork would normally have export markets in Hong Kong, Singapore and Macao, but if they should prove weak, it could also be sold in the domestic market in major cities, where it would also command a premium price. Broiler producton under the project would command high prices and be attractive to the marketing corporations operating in project areas, which have networks of collection points, prcesing facilities and urban marketing channels. Most production would be sold to these corporations, but any surplus would be saleable in local markets. Eggs would supply local markets or food processing factories. Milk would be sold as fresh milk or to processors. C. !RICES 5.14 China's agricultura price policy over the past decade has focused on adjustig procurement prices of goods marketed through the state-run system and reducing the number of goods subject to state monopoly purchase. While lifting price controls, the Government has  -47 - encouraged a more open markeing system for may goods by easing restctions on both private and public interprovincial trade In agrictiural commodities and sanctioning the establihment of free retail and wholesale markets. The sum total of these measures has been the creation of a more diverse and competitive commercial envronment in agriculture. During the last decade, fremarket agricutural trade has increed substantially, and producer prices for grain, vegetables, fruit, meat and aquatic products have more than doubled. Consumers, both rural and urban, have also benfitted from the wider availability and higher quality of farm products. 5.15 For the future, the Government has confirmed its commitment to achieving a more market-oriented economy. This is demonstrated by the recent price reforms in major sectors such as energy, transport and agriculture. Further adjustments in the grain pricing system will be aimed to reduce the subsidization of urban consumets by farmers and provide incentives to increase production. By the end of 1992, urban ration and farm procurement pries for tLe major grains will have been essentially equalized. 5.16 Grain and oilseeds are priced variously-at procurement prices set by the government, at prices negotiated with state entities and at prices determined in free markets. The procurement prices for major commodities are set based on national price policy and were stable from 1980-88 but since then increased substantially.l/ These increases brought the procurement prices of wheat, maize and oilseeds close to world prices netted back to the farm level. Japonica rice is the only main grain which is now underpriced, given supply and demand in China. In other cases, official grain prices are also close to domestic negotiated prices and market prices. 5.17 Cotton lint is the only commodity under the project which is stl subject to 100 percent state contract purchase at prices announced annually by the government, with armers required to produce (as a condition of their free long-term land leases) according to producdon quotas. The price of cotton was fixed at Y 2.9/kg from 1984 to 1988. This low price was primarily responsible for a decline in national cotton production. Ihe procurement price increased to Y 4.7/kg in 1989 and Y 6.01kg in 1990. Together wih nonprice incentives, such as subsidized fertilier and fuel, these prces have resulted in a substial increase in production in recent years. Meat prices are not regulated and free to vary with the market. 5.18 The input and output prices used in crop budgets for financial analysis are presented in Annex 11, Table S. For economic analysis, World Bank commodity price projections have been used to calculate the farm gate value of paddy, maize, wheat, soybeans and peanuts. Detailed calculations can be found in An 11, Table 6. I/ For isac, the pUrCmDt price of paddy increased by 37 percet in 1989 and dht of wheat by 25 perct in 1991 (to be used for 1992 winter wheat).  -48 - 6 BENEFITS, JUSTIFICATION AND RISKS A. BENEnm AD JUIrMCAION 6.1 Project inteventions would resut in stronger agrictural InstUtions and more effective agricultural services at all administative levels. At the national level, the project would benefit a sizeable portion of the couny's 200 million farm families tbrough (a) better coordon of MOA agriculuual actvities, through improved information exchange, technology transer and policy formulation; (b) stengthened NAIEC support to provinc and lower level etension services (technical assistance, information exchmge and training in extension metodology); (c) modernized CABMS facilities for prwvidig in-saevice educadon to extension workers and farmer technicians; (d) ehaced DAH capability to support and give tedcnical direction to AHVSCs tiroughout the country; (e) upgraded breeding facilites and production of vaccines, phamaticas and bioproducts hfrough selected investments; (t) more effective protection from importd animal and plant pests and disses and better services for agricultura exporter through strengtiened quarantine services; and (g) Improved reguation and quality control of fertlizer, pesticides, seed, feed, pha cals and bio-products. 6.2 At the provincial and lower levels, roximay 5.6 million farm housholds (m 1,680 townshius within 112 project counties) would directly benefit from the project through (a) stronger extension centers with trained staff who would have wel-defined fumctions and responsibilides, would be equipped with improved research, training and com cation facilities and would be able to respond more effectively to demand from farmers; (b) better farming-systems research and research-ension linkage; (c) newly established or strengthened farmer associations to provide farmers an opportunity to voice and help orgae input supply and marketing services, and (d) competitive commercial input-supply, seed and animal health services. Thtse interventions at the township level, and also the corresponding ones at the higer county, prefecur/municipal and provincia levels would provide models for restructuring the crop and livestock extension services in nonpt tin provinces, prefectures/municipalities and counties. 6.3 A conservative approach to project benefits is taken here. The benefits of Institional strengthening in terms of incremental crop and livestock production at the naional level are not easy to quantify. Hence, attempts have been made to quantify benefits only in the project townships. Furthermore, since it is difficult to disaggregate results of an improved extension system, on the one hand, and of developments in irrigation, input supply, marketing and credit, on the other, only the benefits from incremental firmer adoption of improved practice (beyond a projected without-project baseline adoption scenario) are assumed to be the result of the project.  -49. 6.4 Three scenarios of diffent nmenntal adoption rates (par. 5.5 and 5.9) were used to quatfy projectbe vued at 1992 const prices. At fall development (PY 10), net remeal benefts for rps would be Y 384, Y 1,234 and Y 1,706 millo, rpectively, for Cop Scenarios 1,11 and m (&mu zI Table 2), and net inmenta beneft for lietock would be Y 607, Y 1,492, and Y 2,230 million, reectvely, for Livetock Scenarios I, I and m (Annel, Table 4). B. Er.TwMwr AND INCoML 6.5 Employnet. The main employmen effect of the project woud be a significant reducdon in seasonal undermploymet among rural labor in and aund the project are. Average incremena labor requrements for crop ification and incremental livestock production of typical farming systems would erage 30 to 50 petson-days per household per annum and could be handled mainly within the existig family structure. (in Heilongjiang and Sichuan, ication of pig and dairy production woudd requir aditional hired labor, which is amply avaiable from the underemployed labor pool twrghout ihe year In both provinces.) Besides on-farm employment, there would also be off-farm employment in handling, distributing andprocessingtheiremental outputoftheprojec Terewouldbesomeinementalpositions for extension staff which would be fDled by retrained existg employees and new recruitment of qualified femaes. 6.6 Ime and Povety Alleton. The net income of farm families who adopt improved or new tecnologies under the project would be increased subsntially. At foil development the project would double or triple the incoes of adoptees, depen on the technology level. Farm model analysis of project farmers in Hunan Provice (AnngdI Table 7) shows that net family income would increase from Y 877 ($160) to Y 1,815 ($333) with Improved exisdng technology or to Y 4,550 ($83!) with new technology. Per capita family income would increase from Y 237 ($43) to Y 490 ($90) or to Y 1,230 ($226) in the two cases. Farm model analysi for each provice is summized in AmexI1 1 Table 8. 6.7 Theproject woulddirecdy help to alleviate poverty ei of the counties in the project area that are classified by the govement as among the poorest In China (per capita income below Y 250 ($46), i.e., in Sichuan (Guangan and Lniong countes), Hebei (Qinglong and LInsou counties), Henan yang and Quehanm counties) and Lianiog (Yld an d Jiangchng County). An indicator of how much per capita income would increase in these counties with the project is the average for tthe respecdve provinces in the two technology cases: Sichuan from Y 328 ($60) to Y 518 ($95) or Y 727($133); Hebei from Y 359 ($66) to Y 698 ($128) or Y 1,658 ($304); Henan from Y 169 ($31) to Y 616 ($113) or Y 1,507 ($276); for Liaoning from Y 370 ($68) to Y 867 ($159) or Y 1,644 ($302). C. WOMEN IN LOPIEN 6.8 One of the main social beneft derived from the project is the genaion of employment opporunities for women. With the project, women would have access to new productive work in a whole range of actviies from crp and lvetock produci to proceing. Emphasis would be given to the participation of women in support services acities and project related training for women would be increased to specified tagets (up to 40 percent), from national to vfllage level. When conside candates for new staff andlor inservice taining, female candidates with similar q catons as males would be selected for professional  -so- development opportuniies. Project support units at the comunty and towhip levds would be expected to work from the cumnt level of about 10 percent women famer pardcipation in training courses toward the goal of 30-35 percent fmae participation in farmer traning courses by the end of the project. Aessment would be undertaken to determine whether there is a need to develop special training courses for women in speciaized areas as small-scale livesck production. Each project unit would also maintain records to monitor the number aM percent of women receiving all types of training, including degree, short-term and farmer training courses. D. COSr RICOvERY 6.9 Cost recovery for the extension services provided to the 5.6 mfllion farmers under the project would come from the taxes collected on their incremental crop and livestock production. These taxes are estmated to be 5 percent and 6 percent of the incremenal net value of production. The cost recovery analysis in Annex t Table 9 shows that, at present tax rates, project charges (taxes) would not be sufficient to cover project costs. The annual recovery index would be only 12-16 percent (deped on the adoption scenario). It would rise to 16-25 percent, discounted over the period of full development, and to 26-103 percent, discounted over the project life. 6.10 The project would also institute cost recovery for services rendered to farmers as much as possible. Recurrent costs of crop and livestock extension would be partially recovered through contract systems involving frmer associations. Many project activities would also adopt appropriate pricing for products and services, such as seed, quality contol services, quarantine services, AHVSC services, and SPF vaccine and laboratory services, and would thus flly or pardally recover their costs. With the commercialization of seed companies, involving, among other things, the maintence of proper accounts, seed would be priced on the basis of production cost plus profit margin. The quality control laboratories would also charge the full cost of the services provided to the clients, who would be obliged to meet these costs. The Animal and Plant Quarantine Service is already largely self-financing and would charge the cost of improved services to importers and exporters. The township level AHVSCs are expected to run on commercial lines and obtain their financing from the ABC at prevailing rates. The SPF egg production unit would recover costs through a 30 percent increase in the pnie of improved vaccines, thus requiring only very limited project support. E. hIPACr ON GOVENMENT BUDT 6.11 The toal incremental recurrent budget required to keep project etension services operating at the same level of efficiency following the loan disbursement period is estimated at Y 85.9 mfllion ($15.8 million) per annum (1992 yua). Ihis represents about 1 percent of 1990 Government tax revenue from agriculture and 0.04 percent of recurrent expenditures allocated to all support services in the agricultural sector in 1990; it would be much lower in 1998. Of the Y 85.9 million, 47 percent or Y 40.1 million would be from county and township budgets. Ihe annual incremental recurrent budget requirements at the other administrative levels would be: Y 4.6 million for the national level, Y 17.8 million at the provincial level and Y 14 milion at the prefectural level. Ihe impact of these Iemental recurrent expenditures on the adminisative budgets at the various levels of government would be very small when dhivded among the large number of project jurisdictions (i.e., 112 counties and 1,680 townships).  -51 - F. FNANCIAL AND ECONOMIC ANALYSI 6.12 Thiandal Analyss. Farm-level faciaW bendefits are calcuated on the bass of the adoption of improved exisfig teology and new technology as both these are promoted under the project. Two crop budgets (one-ectare models) have been developed for all major crops and all project provinces. The first model assumes adoption of Improved existing technology; the second assumes adoption of new technology In addition or as substitution for it. In the first model yields would increase; in the second model there would also be benefits from cost reduction. Given the price and cost structures in each province, financial rates of return and net return per person day for all crops are substantial. Appendix 11, Table 10 shows the example of Hunm province; detailed crop budgets for other project provinces can be found in the project files (Amx 1I2). 6.13 Economic Analyss. Economic analyses have been carried out for crop and livestock components separately and for the project as a whole using the incremental project benefits of the three adoption scenarios described in Chapter 5 (i.e., only for the 5.6 million farmers directly benefitted). Project cosm include aU project investment and recurrent cosu, farm production costs and physical condngencies. Buildings are assumed to last 20 years, and vehicles and equipment would be replaced every 7 or 8 years. Training and local consultant costs would be reduced after project year 6 and continue at a moderate rate; other recurrent costs are assumed to coninue at the same level for the 20-year period as during project year 6. 6.14 World price projections or average export prices actually realized by China in 1992 were used to estimate constant farmgate economic prices for traded inputs and outputs. Economic prices for nontraded goods were estimated using conversion factors (Annex I1, Table 11). These conversion factors were estmated based on the analysis of the deviations of social opportunity costs from the actual financial prices prevailing in China, which are caused by taxes and price distortions. All economic values were converted to local currency at the prevailing official exchange rate of Y 5.45 to $1. Unskilled farm labor was valued at 66 percent of the prevailing average wage rate in the project areas. Based on the above, the results of the economic analysis are shown in AmegJj,1 Tables 12-14 and are summarized as follows: Scenario I II III rn in rn ~~En NPVB Crop 863.5 29.1 3,551.6 66.2 4,995.7 84.5 Livestock 195.5 15.9 1,339.9 30.7 2,484.5 41.2 Project 1,183.3 23.8 4,970.1 48.8 7,558.7 62.5 6.15 Despite loading all economic costs on the township-level interventions, the results of economic analysis show high rates of return for the project under all adoption scenarios. Under the least favorable scenario (10 percent incremental adoption rate over the sition without the project), ERRs for crops and livestock were 29 and 16 percent, respectively. Under the more favorable scenario (42 percent inremenl adopion rate), ERRs for crops and livestock were 85 and 41 percent, respectively. Scenario 1 (32 percent incremental adoption rate) would be the most likely, and gives ERR for crops and livestock of 66 and 31 percent, respectively, and 49 percen fo)r the project as a whole. If unquanied benefits (e.g., benefits deriving from improved extension services throughout China, not just in the project area) were measured and incrporated In the calculations, these economic rates would be sfill higher.  -52- 6.16 Sensitivity analyses have been caried out to identify the minimum adoption rates before the project becomes economically nonviable. At a discount rate of 12 percent, benefs of the crop component could be reduced by 53 percent before they equal costs; this translates to an adoption rate of Just 4.3 perceLt Lkewise, befis of the livestock component could be reduced by 25 percent befre they equal cost, tranatig to an adoption rae of 7.2 percent. The rests of the analyses confirm hat It would take well less than 10 percent of farm households (560,000 farm households) in the project area to adopt techology at the lowest level promoted under the project over and above the adopdon rate epected wilth the project, in order to justify the investment. G. RIsKS 6.17 The main project rskc is instituonal. The large number of organizations involved in implementing the project and the project's dependence on revised management methods, techniques and iformation systems makes Its implementation and supvision difficult, requiring motivated, sound management. In this rd, China has a good track record in handling complex projects, and implementation of the several componens would be organized through largely mdependent chamels. In addition, MOA will have many improvements in management in place or in process befbre loan approval. Project leading groups and project ffices/implementation units have been established at all levels and are fully operational. Apart from the technical advisory groups/paels, which advise the project on technical matters, specialized units for procurement, trainingflA and supervisiont/minioring have also been organized to coordinate project acdvities in each of these areas. The restructuing of the extension system and the Department of Animal Husbadry, already in progress, would integrate and streamine the services provided to farmers. Other project risks include the possibility that the technology being developed and intduced may not be targeted at the main production problems and may encounter acceptance problems by the farmers. This would be minimized through the project design, which is based on feedback from farmers and verified with farmer participation on farmers' fields. There is also the possibility that farmer incentves would be eroded in that inputs, especially ferlizer, would not be available in the quanities needed for the technology packages being promoted by the project. Ihese factors are beyond the scope of this project, but are being handled through preparation of a series of fertlizer industry projects and the proposed Grain Distribution and Marketing Project, initially at least with considerable success.  -53 - 7 AGREEMENT REACHEID AND RECOMMENDATION 7.1 At negotaons, asrances have boee obained from the Bortower that: (a) NATEC and DAH would be reorganized on the basis of an orgaizatonal stucture agreed with IlDA, to be completed by June 30, 1994 (para. 3.3); (b) FA activities would be caried out unler tem of reference and timing agreed wit IIA (par. 3.21); (c) a pilot program for commercializaion of the seed iustry would be submitted to IDA for review by July 1, 1994 and implmented thereafter as agreed with the Association (pam. 3.23); (d) by December 31, 1993, the Borrower would prepare and firnish to IDA a work plan to ensure tia ay quaranine procedures idenified to be inconsistent with best iernational practices wi1l be amended as agreed with IDA (para. 3.53); (e) all project loca and overse tg, study tours, adaptive research and extson programs, and tecnical asistn would be carried out in accordance with plans agreed with IDA, and the Project Mnagement Office would furnisb to IDA for review and approval anmial plans by September 30 of each year during project mplemeion (para. 3.73); (t) the Borrower would procure about 660 vehides required for the project in accordace with a plan acceptable to the Association and would firnish a draft plan to the Associadon no later than July 1, 1993 (pm. 3.82); (g) the Special Account would be audited by the State Audit Administaton, and the PMO and PPMOs would maintin consolidated accou of all components for annual audiing by indendent audtiors acceptable to IDA and the audited accounts together with the auditor's report would be submitted to IDA within six monts of the close of each financial year (para. 3.87); 0h) the project provinces would enter into Project Imp ion Agreemen (PIAs) with MOF and MOA, to ensure ht their project component is carried out, and credit funds would be onlent (par 4.4); (I) the PMO, PPMOs, and PIUs would be manined and adequately stffed with ualified persomel during the life of the project, with staff composition acceptale to IDA (pa. 4.4); and  -54 - 0) MOP would onlend the pordon of the IDA credit for provincial componen to the provinces under the PMAs, at an annual interst re of 4 percet, with a rpayment period of 20 years, inclusive of six yeas' grace period (para. 4.5); and (k) the PMO would underta a mid-em rWiew of the project jointy with IDA by December 31, 1995 (pia. 4.6). 7.2 Conclusion of all the Project Implemenon Agreements with participating province sactory to IDA and State Council approval of the Development Credit Agreement, would be conditions of credit effcdveness. 7.3 Subject to the above conditions, the proposed project would constite a suitable bass fbr an IDA credit of SDR 83.7 million ($115.0 miUlion equivalent) on standard IDA terms with 35 yeas matuity. he Borrower would be the People's Republic of China.  - 55 - ANNM Page 1 of 7 CIA AGRICULTURAL SUPPORT SERVICES PROJECT Basic Data on Prolect Provinces The Prolect Provinces 1. The basic features of the twelve provinces selected for implementation of the different field service components, viz. Beijing, Guangxi, Hebei, Heilongjiang, Henan, Hunan, Jiangsu, Jilin, Liaoning, Shaanxi, Shanghai and Sichuan are given below. Agiliuglitv 2. Beijing, capital of People's Republic of China and commnication center of politics and culture, is located in the North-west corner of Huabei plain, East longitude 115 25'- 117 30', North latitude 39 26'- 41 05', with 1,680,800 ha total area. Beijing is in charge of 4 urban districts, 6 near suburban districts, 9 far suburban counties (districts), 291 townships, and 4,129 villages, with 10,205,800 total population, and 1,861,220 farm laborers. 3. Beijing's geographical features are 55% mountain areas in Vest and North region, 39% plain areas in South-East region. Average precipitation is approximately 630 mm for the plain area, 11.6' average temperature, 180-200 days frost-free period, >10C accumulating temperature 4,1541C, and 2778 annual sunshine hours. 4. There are 415,870 ha. total cultivated area of which 74% is irrigated areas. According to the region, there are three kinds of cropping systems, two crops a year in plain area, three crops in two years in hilly area and one crop a year in North- West area. The main crop is grain with a multiple crop index of 142%; and production is 2,392,000 tons (1990). The factors which influence agricultural development are lack of funds; incomplete and weakness in basic facilities of the agrotechnical extension service system compared with agricultural machinery or water conservancy facilities; and low cultural level of farmers. Guangxi Zhuang Autonomous Re"ion 5. Guangxi covers a total area of 23.67 million ha. In 1989, there was a population of 41.5 million, of which agricultural population occupied 87t. The region is divided into 8 prefectures, 5 cities under its administration, 38 counties, 1,401 towns and 14,923 villages. It is topographically inclined from northwest toward southeast and surrounded by hilly areas. The mountain areas occupy 60.3% of its total area, the hilly land 16.9%, the plain (including basins) 20.8% and the rivers and reservoirs 2.0%. There is a 1,595-km-long coast line. Belonging to subtropical monsoon zone, Guangxi's average annual temperature is 17-22'C, its annual sunshine hours are 1,400-1,800 hrs., its frost-free period is 300-330 days and its average annual rainfall is 1,550.5 am (mainly in the period from May to August).  - 56 - Page 2 of 7 6. Guangxi's cultivated area is 2,578,000 ha, including 1,587,000 ha. of paddy field and 991,000 ha. of dry land. The main cropping system is based on two crops a year, with some areas producing only one crop and others, three crops a year. The multiple crop index is 190%. In 1989, Guangxi's total grain output reached 13,017,100 tons, including 11,323,810 tons of paddy rice and 1,222,300 tons of maize. The total output of raw sugarcane was 14,107,000 tons and that of oil crops, with peanut as the main content, was 230,150 tons. The major restricting factors for agricultural production, besides less cultivated land and effective irrigation area, are insufficient facilities for popularizing agricultural techniques, backward service means, lack of necessary audio-visual education, checking and testing equipments and communication means, and lack of systematical training for agricultural technical service staff, who are still unqualified for their works, and which delays acceptance of improved technology. Hebei Province 7. Hebei Province covers a land area of 188,000 km and has a population of 58.81 million persons of which 85% belong to rural households. Administratively, the province is subdivided into 18 prefectures, 140 counties, 3,369 townships and over 50,574 villages. About 37% of the province is in mountainous areas, 10% in the Bashang plateau, and only 30% occupies the plains. The climate is characterized by a cold winter with sparse snowfall, dry windy spring, rainy hot summer and cool autumn. The annual solar radiation is 2,450-3,100 hours, the annual average temperature is llC to 140C and the frost-free season is 80-205 days. The annual average precipitation totals 350-815 mm, most of it (65-80%) concentrated in summer. 8. The total cultivated area is 6.56 million ha, of which 554 is irrigated. The province is divided into two major cropping areas, a single cropping area comprising the northern and mountainous western parts and a double cropping area comprising the central and southern parts. The overall multiple cropping index is 134. The major crops produced are vheat (8.6 million tons), maize (7.7 million tons), cotton (536,000 tons) and oilseeds (559,900 tons). Constraints quoted by provincial officials as hindering increased agricultural production include: poor agro- technical extension systems due to lack of qualified and trained staff, especially at township level; lack of laboratory, training and extension equipment and vehicles; and inadequate or dilapidated seed processing facilities. Heilongjiang Province 9. Heilongjiang Province lies in the northeast part of China, extending from 43'25'N to 53-33', and between 121V11'E and 135005'E, extends 1,120 km from its southern to northern border and 930 km from its eastern to western border. The total area of the province amounts to 453,900 ki2; its topography features 37% plain areas, 36% hilly areas, 25% mountainous areas, and 3% river areas. The province has a 3-river plain in the northeast and Songnen Plain in the west, which is famous for its stretches of flat land and fertile soil and is considered one of the three largest black soil regions in the world. 10. Heilongjiang Province has a population of 34.42 million, of which 10.84 million is agricultural, accounting for 31.5%. The province has 10 municipalities and 4 prefectures, covering 15 cities, 53 counties and 1 minority autonomous county,  - 57 - Page 3 of 7 with 1,157 townships and 14,469 villages. 11. The cultivated land in Heilongjiang extends over 8.83 million ha and has 11 soil types, but black soil accounts for 58.5% of total cultivated land. The irrigated land comes to 170,000 ha, accounting for 2% of total cultivated land. Heilongjiang adopts one crop per annum system. Its staple crop production is grain, including wheat, corn, soybean and rice and its sown area accounts 86% of total sown area in Heilongjiang. In a normal year as 1989, the total grain production reached 16.689 million tons, including 2.317 million tons of rice, 3.673 million tons of wheat, 6.152 million tons of corn and 2.918 million tons of soybean. 12. Heilongjiang Province is one of the coldest provinces in China. The annual mean temperature is between -4-5