China - Guangdong Agricultural Development Project and Earthquake Reconstruction Program

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 19492 IMPLEMENTATION COMPLETION REPORT CHINA GUANGDONG AGRICULTURAL DEVELOPMENT PROJECT AND EARTHQUAKE RECONSTRUCTION PROGRAM (CREDIT 2307-CHA) June 30, 1999 Rural Development and Natural Resources Sector Unit East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Yuan (Y) 1991 $1 = Y 5.32 1992 $1 = Y 5.42 1993 $1 = Y 5.73 1994 $1 = Y 8.50 1995 $1 = Y 8.30 1996 $1 = Y 8.30 1997 $1 = Y 8.30 1998 $1 = Y 8.30 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS AC Agricultural Commission ADP Agricultural Development Project ERR Economic Rate of Return FRR Financial Rate of Return ICB International Competitive Bidding ICR Implementation Completion Report IDA International Development Association MTR Mid-term Review NPV Net Present Value O&M Operations and Maintenance PFD Provincial Financial Department PMO Project Management Office SAR Staff Appraisal Report SEZ Special Economic Zone Vice President Jean-Michel Severino, EAPVP Sector Manager Geoffrey Fox, EASRD Country Director Yukon Huang, EACCF Task Manager Zhengxuan Zhu, Agricultural Specialist, EACCF  .. FOR OFFICLAL USE ONLY CONTENTS PRLEFACE ...................................................... iii EVALUATION SUMMARY ...................................................... iv PART I: PROJECT IMPLEMENTATION ASSESSMENT ........................1 A. Background ......................................................l1 B. Project Objectives and Description ......................................................1l C. Achievement of Project Objectives ........................................................2 D. Major Factors Affecting the Project .......................................................6 E. Project Sustainability ........................................................7 F. IDA Performance .......................................................8 G. Borrower Performance ................................................................. 9 H. Assessment of Outcome ........................................................9 I. Future Operations ........................................................9 J. Key Lessons Learned ...................................................... 10 PART II: Statistical Tables ...................................................... 12 Table 1: Summary of Assessments ...................................................... 12 Table 2: Related Bank Group Loans/Credits ............................................ 13 Table 3: Project Timetable ...................................................... 14 Table 4: Loan/Credit Disbursement: Cumulative Estimate and Actual ... 14 Table 5: Key Indicators for Project Implementation ................................ 15 Table 6: Key Indicators for Project Operations ........................................ 18 Table 7: Studies Included in Project ...................................................... 19 Table 8A: Project Costs ....................................................... 21 Table 8B: Project Financing ...................................................... 21 Table 9: Economic Costs and Benefits ..................................................... 22 Table 10: Status of Legal Covenants ...................................................... 23 Table 11: Compliance with Operational Manual Statements .................... 26 Table 12: Bank Resources: Staff Inputs ................................................... 26 Table 13: Bank Resources: Missions ....................................................... 27 Annex A: Borrower's Contribution to the ICR ............................................ 28 Annex B: ICR Mission's Aide Memoire ....................................................... 41 This document has a restricted distribution and may be used by recipients only in the performance of teir official duties. Its contents may not otherwise be disclosed withiout World Blank authorization.  iii IMPLEMENTATION COMPLETION REPORT CHINA GUANGDONG AGRICULTURAL DEVELOPMENT PROJECT AND EARTHQUAKE RECONSTRUCTION PROGRAM (CREDIT 2307-CHA) PREFACE This is the Implementation Completion Report (ICR) for the Guangdong Agricultural Development Project and Earthquake Reconstruction Program, Credit 230'70-CHA. The IDA Credit for this project in the amount of SDR 121.7 million ($162 million) was approved on November 5, 1991 and made effective on March 27, 1992. Apart from SDR 50.63 million, which was transferred to an Inner Mongolia and Yunnan Earthquake Reconstruction Program, as was agreed by the Government of China and IDA. during the mid-term review (separate ICR -Report no. 19470 will be submitted by the 'Urban Development Sector Unit to the Bank Group), all of the credit was disbursed. The last disbursement took place on May 29, 1998. The ICR was prepared by an IDA mission' that visited the project area in January 1999. The Borrower had prepared an evaluation of the project's execution and extensive supporting documentation, which provided the basis for the report. In addition, the ICR is based on materials in the project file and the results of field visits combined with extensive discussions with the project staff in Guangdong Province. 1 Zhengxuan Zhu (Mission Leader, EACCF ), Qun Li (Operations Officer, EASRD), Kaiping Zhang( Agriculture Specialist, consultant), Andrew Kaelin (Fisheries Specialist, consultant) and Enjiang Cheng (Agroprocessing Specialist, consultant).  iv CHINA GUANGDONG AGRICULTURAL DEVELOPMENT PROJECT AND EARTHQUAKE RECONSTRUCTION PROGRAM (CREDIT 2307-CHA) EVALUATION SUMMARY Project Objectives and Description 1. The main objectives of the project were to assist the Borrower and Guangdong Province to (a) increase fish production in 100-200 m depth of the Northern Continental Shelf of the South China Sea, relieving pressure on near-coastal resources; (b) develop land unsuitable for agriculture, coastal mud flats and shallow water areas for aquaculture; (c) increase fruit production on sloping land; (d) bring new land in the Pearl River Delta into agricultural production; (e) provide modern agroindustrial facilities for handling and processing; and (f) alleviate poverty in limestone mountain areas. 2. The project components included: (a) marine fisheries--provision of 86 fishing vessels; (b) aquaculture--construction of ponds and cages and improvement of support facilities; (c) fruit production--improvement and establishment of litchi, longan and pornelo orchards; (d) sugarcane and vegetable production--land reclamation works; (e) agroindustries--construction and equipping of facilities; (f) limestone mountain poverty alleviation--program of sub-loans, infrastructure and studies; and (g) institutional development-- research, training, study tours and consultants' services. 3. The overall project objective was consistent with the development priorities of the Guangdong Government. The project comprised components that addressed several conLstraints to productivity in each subsector: replacement of outdated, limited-range fishing vessels to increase the volume of catches, while shifting fishing efforts from the overexploited shallow coastal waters to the relatively underexploited deeper offshore areas; land reclamation with the multiple purposes of expanding the agricultural area, improving navigation and increasing drainage capacity; fruit tree expansion and rehabilitation, taking advantage of the province's subtropical climate, to increase production while utilizing hilly lands with limited alternative uses; introduction of erosion control measures to reduce siltation in the delta's network of estuaries; and generation of additional income for farmers in mountainous areas. Implementation Experience and Results 4. Major Revisions. The following major changes took place during project implementation. (a) Marine Capture Fishery: the number of vessels was reduced from 86 to 28. Auxiliary facilities such as the cold storage and wharf were also reduced  v accordingly. Such adjustment was in line with the fisheries resource situation, and hence more realistic; (b) Land Reclamation: the Modaomen development area of Zhuha was replaced by Zhongshan Municipality, and the crop area was adjusted accordingly from 6,446 ha to 4,998 ha, since Zhuhai was rezoned as a commercial development area, and agricultural development activities were discontinued; (c) Qingyuan Poverty Reduction: investment in the expansion of the Yingde Sugar Plant was replaced by 1,500 ha of off- season snow pea planting, because the expansion was funded by the government; and (d) Construction of two agroprocessing plants was canceled due to market changes. 5. Attainment of Project Objectives. The project substantially achieved the objectives of agricultural growth in Guangdong Province. As a result of satisfactory performance of most subcomporents--marine fishery, aquaculture, land reclamation, fruit development, Qingyuan poverty alleviation--and the partial agroprocessing component, the economic rate of return (ERR) of each component has been reestimated at 19.6, 16.7, 20.7, 26.7, 18.5, and 11.2 percent, respectively. The overall ERR for the project as a whole has been estimated at 22.2 percent, somewhat below the appraisal estimate of 28 percent due to increased capital construction costs for the land reclamation, fruit development and Qingyuan poverty alleviation components and reduced benefits for the aquaculture (shrimp disease) and agroprocessing (market change) components. In addition to production growth, the project gained good social and environment benefits. It also contributed to the technology advancement and management capacity enhancement of the project management offices at various levels. 6. Project Cost. The total project cost at appraisal was estimated at $303.79 million. As a result of substantial adjustment and devaluation of the Renminbi (at the time of appraisal, $1=Y 5.32, which was adjusted to $1=Y 8.3), the actual total project cost at project completion was $242.16 million, of which 42.7 percent was financed by the IDA credit (53.3 percent at appraisal). It was agreed during the mid-term review that the unused portion of the credit would be transferred to an Earthquake Rehabilitation Program in Inner Mongolia and Yunnan, which was later increased by the refund mentioned in para. 22 of the main text, making the total transfer SDR 50.63 million, representing about 41 percent of the credit amount. 7. Major Factors Affecting the Project. Among the major factors affecting the project, some were beyond the control of the government, or the implementing agency, such as natural disasters, market changes and the unexpected fast economic development of Guangdong. Others were related to fund shortage, management problems and government regulatory policy on banking and financing. 8. Sustainability. Sustainability of the investments and improvements made by the project is assessed as likely. However, close and continued attention by the provincial government will be required to: (a) fund operation and maintenance (O&M) adequately through appropriate channels; (b) create new market channels, instead of waiting for outsiders to collect the products; hence the information systems need to be established and improved; (c) establish reliable sources for fish fingerlings to reduce dependence on captured wild ones. For this purpose, a more aggressive program of hatchery support facilities should be considered; (d) promote the household responsibility system in  vi agricultural production; (e) continue efforts in research and proven technology transfer; (f) vary structure adjustment, to reduce risks caused by market changes. 9. IDA and Borrower's Relationship. In general, the relationship between IDA and the Borrower was good. A lot of good suggestions both during the project preparation and implementation stages with regard to the project concept, the project design, and technical issues were appreciated and accepted by the Borrower. The Borrower did a good job on project feasibility studies of the various components, and conducted successfully the appraisal of the Qingyuan Poverty Reduction Component under the guidance of IDA. It cooperated well with IDA missions. The case of misallocation of project funds was handled effectively by both sides. 10. Assessment of Project Outcome. The project's overall outcome is viewed as satisfactory, since the most important objectives of agricultural growth and development, and poverty alleviation are achieved with a relatively high degree of sustainability. The overall ERR at completion is estimated at 22.2 percent, which is impressive though somrewhat below the appraisal estimate, in view of the difficulties the project faced throughout the project implementation, including natural disasters of various kinds and market changes, etc. Overall the project has a fairly strong development impact through the provision of scarce investment funds for the expansion of agricultural production. The project is not viewed as highly satisfactory, because of the delay in commissioning of some of the agroprocessing production and the need for the Borrower to refund some of thae credit to IDA. Future Operations and Key Lessons Learned 11. Future Operations. For those works completed successfully, the main focus will be shifted to O&M of the completed works. Further improvements are under consideration, such as variety adjustment to maximize profits and to minimize the risks; and replacement of low-value fish species with high-value ones. Technology advancement would continue to play an important role in the future operations and a market strategy would be formed. While doing so, fund sources, organization and maniagement, technology applied, and monitoring indicators would be clearly defined. For those subcomponents that did not do well during project implementation, an action plani would be worked out, indicating ways to improve the performance, especially with planits under the agroprocessing component, such as closure or regrouping the assets and liabilities, with the purpose of revitalizing those potential successors and avoiding further losses. 12. Key Lessons Learned. The main lessons learned are: (a) keep the project design simple; (b) ensure proper institutional arrangements are in place for complex projects; (c) allow flexibility in project design and activities adjustment; (d) ensure procurement arrangements are in line with project design and planning; (e) encourage proven techmology transfer; (D involve the private sector in agroprocessing; (g) ensure beneficiary participation; and (h) plan the replication of project activities.  1 CHINA GUANGDONG AGRICULTURAL DEVELOPMENT PROJECT AND EARTHQUAKE RECONSTRUCTION PROGRAM (CREDIT 2307-CHA) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. Background i. To support the Government's decentralization efforts, the World Bank Group assisted a number of provinces with a series of agricultural development projects in the late 1980s and early 1990s. Guangdong was selected as one of them for the following reasons: * Guangdong Province entered a period of rapid economic growth after the economic reforms conmmenced in 1978. Among the initial four Special Economic Zones (SEZs), three were located in the Province (Shenzhen, Zhuhai and Shantou). The total production value of the Province in 1989 reached 54.9 billion yuan and per capita income of the rural population reached 955 yuan. Nevertheless, there was still 10 percent of the population whose income was far below the provincial average, and the national average. - Guangdong determined to continue to position itself as a forerunner of an export-oriented economy with little or no control on prices and the market mechanism. In addition to the development of the Pearl River Delta area, additional efforts were promised to be made to develop interior regions, particularly the mountainous areas where relative poverty was still prevalent. 2. The Bank Group became familiar with Guangdong through its involvement in the Rubber Development Project (Cr. 1417/SF 005-CHA), which covered the two provinces of Guangdong and Hainan. Other agricultural development projects (ADPs) of a similar nature financed by the Bank Group include the provinces of Jiangxi, Sichuan, Shaanxi, Hebei, Henan and Shandong. B. Project Objectives and Description 3. The objectives of the project were to: (a) increase fish production in the area beyond 100 m depth of the Northern Continental Shelf of the South China Sea, while relieving pressure on near-coastal resources; (b) develop land unsuitable for agriculture, coastal mud flats and shallow water areas for aquaculture; (c) increase production of  2 fruits on sloping land; (d) bring new land into agricultural production and improve river flow conditions in the Pearl River Delta; (e) provide modem agroindustrial facilities for handling and processing; and (f) formulate and implement a poverty alleviation package focused on the limestone mountain areas of the province. 4. The project had the following components: (a) marine capture fisheries--provision of 86 fishing vessels (66 steel trawlers, 14 refrigerated steel trawlers, and 6 wooden purse seiners) and support facilities, including five cold stores/ice plants and one wharf; (b) aquaculture--construction of 2,538 ha of brackish water fish ponds, 734 ha of freshwater fish ponds, 330 ha of shrimp ponds, 440 ha of oyster cultivation area, 11,000 net cages for marine and freshwater fish culture and support facilities, including three feed mills and two hatcheries; (c) agriculture--improvement of 10,700 ha of recently planted litchi, longan, and pomelo orchards and establishment of 3,282 ha of new litchi and longan orchards on uncultivated sloping land; (d) land reclamation works, including seadikes, land leveling, drainage and related infrastructure for the improvement/expansion of 6,446 ha of sugarcane; (e) agroindustry--establishment/expansion of facilities to produce frozen fruits and vegetables, canned fish, yogurt drink, fruit juice, candied fruits and jams, dried fruit and fruit pulp, instant noodles, health foods, feed additives and rosin derivatives; and (f) limestone mountain poverty component--construction of an off- season vegetable production base in Yanshan County with a cold store; mulberry development in Qingxin County with a silk plant, fish culture, and development of sugarcane production including expansion of the existing Yingde Sugar Plant. 5. The overall project objective set at the time of appraisal was consistent with the development priorities of Guangdong Government and its Eighth Five-Year Development Plan (1991-95). The project comprised components that addressed several constraints to productivity in each subsector: replacement of outdated, limited-range fishing vessels to increase the volume of catches, while shifting the fishing effort from the overexploited shallow coastal waters to the relatively underexploited deeper offshore areas; land reclamation with the multiple-purposes of expanding agricultural area, improving navigation and increasing drainage capacity; fruit tree expansion and rehabilitation, taking advantage of the province's subtropical climate, to increase production while utilizing hilly land with limited alternative uses; introduction of erosion control measures to reduce siltation in the delta's network of estuaries; and generation of additional income for farmers in mountainous areas. It was also in line with the Bank Group's country assistance strategy for the agricultural sector. C. Achievement of Project Objectives 6. General. The project substantially achieved the objectives of agricultural growth in Guangdong Province. As a result of satisfactory performance of most subcomponents-- marine fishery, aquaculture, land reclamation, fruit development, Qingyuan poverty alleviation--and the partial agroprocessing component, the economic rate of return (ERR) of each component has been reestimated at 19.6, 16.7, 20.7, 26.7, 18.5, and 11.2 percent, respectively. The ERR for the project as a whole has been estimated at 22.2 percent, slightly below the appraisal estimate of 28 percent due to increased capital construction  3 costs for the land reclamation, fruit development and Qingyuan poverty alleviation components and reduced benefits for the aquaculture (shrimp disease) and agroprocessing (market change) components. 7. Physical Results. The project was generally successful in achieving its physical targets which were revised during project implementation and at the project mid-term review (MTR). The main revised targets are as follows: * Marine Capture Fishery: The number of vessels was reduced from 86 to 28. The cold stores were reduced accordingly from five to one and the wharf was canceled. This was because the original proposal was too ambitious. At the time when the project was prepared, Guangdong proposed procurement of 200 fishing vessels. It agreed to reduce to 86 after repeated discussions with the Bank missions. Nevertheless, the Bank team thought it might still be too ambitious in view of the resource conditions of the South China Sea. Hence prudent procurement arrangement was made: the whole procurement be done in three batches with only 28 vessels under the first batch. It was also decided that the second and the third batches would not start until the procured first batch vessels were operational well and the fish resources proved to be sufficient. Therefore such adjustment represented a more realistic target. The reduction was also caused by limited interest of fishing enterprises and fishermen in steel vessels. * Land Reclamation: the Modaomen development area of Zhuhai was replaced by Zhongshan Municipality, and the crop area was adjusted accordingly from 6,446 ha to 4,998 ha. This is because Zhuhai was rezoned as a commercial development area and agricultural development activities were discontinued. - Qingyuan Poverty Reduction: Investment in the expansion of the Yingde Sugar Plant was replaced by 1,500 ha of off-season vegetables. This is because (1) the expansion of the plant was funded by the local government as a local industrial development project; and (2) the project objective of improving farmers' income could be more directly met by fully utilizing the climate advantage of Qingyuan with a high-value, off-season vegetable. * The Shenzhen Feed Additive Plant and Shenzhen Foodstuff Processing Factory were canceled due to market changes. 8. In terms of physical targets, the project has to date fully achieved its plarnned/revised targets, and in some cases exceeded them, for the marine fishery, land reclamation, fruit development, Qingyuan poverty alleviation and agroprocessing comrrponents, and partially for the aquaculture component. At credit closing, 28 fish vessels (22 trawler and 6 wooden purse seines) were in operation. The new and improved litchi, longan and pomelo orchards were established on an area of 13,977 ha. The land reclamation and improvement affected a total of about 4,945 ha. Ten agroprocessing plants were constructed. All the above completed physical targets are 100 percent of the  4 SAR and MTR estimates. The poverty alleviation component in Qingyuan county exceeded appraisal estimates substantially for off-season vegetables (135 percent of SAR estimates). In the Qingyuan poverty area, 1,600 ha of mulberry, 2,857 ha of off-season vegetables, 606 ha of freshwater fish ponds, and 2,600 ha of sugarcane have been established. Most of the targets under the aquaculture component were also achieved, with the exception of the fish and shrimp pond construction, which was about 607 ha less than the appraisal. This was mainly caused by a shrimp disease that started nationwide in 1993 and the sea dike consolidation, leaving less investment for pond construction. 9. Project Cost. The total project cost at appraisal was $303.79 million. As a result of substantial adjustment and devaluation of the Renminbi (at the time of appraisal, $1 =Y 5.32, which was adjusted to $1=Y 8.3), the actual total project cost at project completion was $242.16 million, of which 42.7 percent was financed by the IDA credit (53.3 percent at appraisal). It was agreed during the MTR that the unused portion of the credit would be transferred to an Earthquake Rehabilitation Program in Inner Mongolia and Yunnan, which was later increased by the refund mentioned in para. 22, making the total transfer SDR 50.63 million, representing 41 percent of the credit amount. 10. Agricultural Benefits. The investment in the two agricultural components (land reclamation and fruit development) has brought significant benefits in terms of increased agricultural yields and production. The total cost of the two agricultural components was about $132.4 million or 55 percent of total project costs, compared to the SAR estimate of $120.7 million. In the land reclamation component, the area completed and yields for sugarcane, lotus and banana currently achieved in the project area have equaled or exceeded the appraisal estimates of yields at full development. The total annual output increased during the project period (in 1998) by 273,479 tons for sugarcane, 26,325 tons for lotus, 17,951 tons for banana, and 952 tons for fish. As for the fruit development component, although the unit yields for longan and litchi achieved to date (initial year in 1998) are only about 27 to 55 percent of the full development targets, they show a promising increasing trend toward achieving the SAR-projected yields and are likely to be reached ahead of the appraisal schedule at full development year, mainly due to the large role played by science and technology. Fruit tree outputs increased substantially in 1998 by 33,000 tons for litchi, 8,100 tons for longan, and 40,500 tons for pomelo. Table 6 shows the area cultivated, yields and production achieved for each component. 11. Marine Culture and Aquaculture Benefits. Likewise, most of the production targets of the marine capture and aquaculture components were achieved; some exceeded the appraisal estimates. Marine capture is now possible in relatively unexploited waters, or in the 100 m depth of the Northern Continental Shelf of the South China Sea. The project developed freshwater and brackish water fish and shrimp ponds on 2,627.1 ha, oyster ponds on 440 ha, and built 11,000 freshwater and marine net cages. The cost of the marine culture and aquaculture components amounted to $57.4 million or 24 percent of the total project costs, compared to the SAR estimate of $124.72 million (costs were reduced due to the revised physical targets during the project MTR). The yields and production of fish and oyster were reported to be satisfactory, generally exceeding appraisal estimates. Again, shrimp is an exception, as its yields and production were  5 seriously affected by the shrimp disease. The financial impact of the shrimp disease problem has been substantial, but the high returns on specialty fish production have compensated for the losses, at least in economic terms. The ERRs were reestimated and range from 11.3 percent for shrimp ponds in Shanwei to 23.4 percent for freshwater net cages in Jiangmen. 12. Agroprocessing Benefits. The operation of the agroprocessing plants is marginally satisfactory compared with the other components of the project. The total cost of this comrLponent (10 plants) was $27.7 million or 11 percent of the total project cost. This corrmpares to an appraisal estimate of 12 plants for a total cost of $35.8 million (costs were reduced due to the revised physical targets and reduced lending from the local bank). All agroprocessing facilities were fully constructed as designed and approved by the Bank Group. However, among the 10 completed plants, some of the plants experienced significant initial problems with raw materials availability, changing market conditions and inadequate working capital. This led to delays in commissioning, and some plants have yet to reach their designed output levels. To date, all but two agroprocessing plants have been commissioned and are operational. (Two are operating well and the outputs exceed the appraisal target. Six are operational but the output targets have yet to be reached.) The other two agroprocessing plants are not operational but are expected to find alternate use and start operation in 1999-2000. Great efforts are required to overcome the problems described above. The consolidated ERR for the agroprocessing component amounted to 11.4 percent, lower than the estimated ERR at appraisal, mainly due to the problems described above. 13. Poverty Reduction. The project has effectively reduced the incidence of poverty for the 57,933 household beneficiaries under the Qingyuan poverty alleviation conmponent. Annual production increased by about 0.39 million tons for off-season vegetables, 0.2 million tons for sugarcane, and 4,231 tons for fish in the Qingyuan poverty area. In 1998 cash income reached 15,000 Yuan/ha for sugarcane, 20,000 Yuan/ha for lotus and 27,000 Yuan/ha for banana producers. The production gains from high-value cash crops have helped to raise the income level of the farmers. Among the 57,933 household beneficiaries, 27,748 graduated from the poverty group, with the average per capita income reaching 1,000-1,200 Yuan. Per capita income of the households engaging in fish culture and fruit production was raised to 1,000 Yuan and 2,000-5,000 Yuan respectively, in 1998. Over 90 percent of the project farmers built new houses and basically achieved subsistence level of food production. 14. Technology Advancement. Technology advancement was stressed, especially under fruit and sugarcane development. In total, 37 (35 for fruit and 2 for sugarcane) research themes were carried out and most proven technologies were applied through the training program under the project. As a result, fruit bearing of both longan and litchi was advanced; product quality was improved, hence market competitiveness was enhanced. The sales price of the project longan at present is much higher than those produced by the nonproject areas, and even higher than that of Thailand; and the unit production of pomelo reached 20.62 tons per ha in 1998, representing a 114 percent  6 increase over that of the preproject stage. Sugarcane production during the first year reached 90 tons/ha and increased to 120 tons the third year, which was quite high. 15. Social and Environment Benefits. The project enabled better use of sloping land through fruit development, and promoted environmental improvement: vegetation in the project area was raised from 30 percent before the project to over 80 percent at present; the silt inflow into the Pearl River in the Meizhou project area was reduced from 0.7 kg/m3 in 1991 to 0.41 kg/m3 in 1995 when construction was completed; soil and water erosion was reduced from 4,510 tons/km2 to 2,210 tons/km2. Tidal land development was accelerated through aquaculture. With this project, Guangdong carried out for the first time an annual fisheries resource survey and, based on this, a fisheries management plan was formulated, thus contributing to the prevention of overfishing. Implementation of the fruit and land reclamation components enabled creation of additional job opportunities. Induced by large economic gains, enthusiasm of the project surrounding areas also arose, which was especially obvious in fruit production. 16. Covenants. Covenants focused on (a) establishment of a special account and revolving fund for fishing vessels, sugarcane production and agroindustries; (b) environmental aspects (particularly effluent control); (c) marine fish resources management and monitoring; (d) ownership transfer of fishing vessels; and (e) project auditing and reporting. The covenants that are not complied with related to agroprocessing. D. Major Factors Affecting the Project Factors Not Generally Subject to Government Control 17. Natural Disasters. Natural disasters are among the main factors affecting performance. The frost and flood in 1992-93 in Meizhou damaged about 63 percent of the improved orchard and some 60,200 seedlings died; part of the pomelo orchard was washed away. Additional funds were spent on rehabilitation activities. Other natural disasters include the severe typhoon in 1993 in Zhongshan, the nationwide shrimp disease that started in 1993 and the most serious flood in 50 years happened in 1994 in Qingyuan, all had serious impacts on project implementation, either increasing the project cost, delaying the implementation, or reducing the physical targets. 18. Market Change. Market change had serious adverse effects on many project activities. The silk knitting plant under the Qingyuan poverty alleviation component is a typical example. Silk production was in its peak stage when the project was prepared. However, dramatic market changes took place two years after in 1994, resulting in a drop in silk cocoon purchasing prices; and silk processing was thus affected. The completed silk knitting plant is not in operation today. 19. Unexpected Fast Economic Development. Fast economic development, which was unexpected at the time of project preparation, led to the revision of project activities. Soon after the project started its implementation, Zhuhai was rezoned as the commercial  7 area,, As a result, Zhuhai's land reclamation activity had no other choice but to be replaced by Zhongshan. Similarly, Guangzhou-Qingyuan Highway was constructed by the provincial government, which enabled transportation of fresh vegetables from Qingyuan to Guangzhou in two hours; hence the cold storage constructed under Qingyuan poverty reduction component became unnecessary. Factors Generally Subject to Government Control 20. Shortage of Working Capital. Shortages of working capital delayed implementation of some of the agroprocessing plants. Usually such funds were borrowed by the plants from the local banks. However, total lending by the local banks to the project activities was only 37.4 percent of the appraisal estimate. The reduced lending was related to the overheated economy in China in 1993, and the macro policy changes the following year, especially with respect to banking and financing. Facitors Generally Subject to Implementing Agency Control 21. Project Management Change of project management from the Provincial Agricultural Commission during project preparation to the provincial Department of Finance at the beginning of project implementation had caused some managerial problems of the project in the initial years: technical support from the line agencies was weakened, and misuse of procured materials was discovered. 22. Refund and Reallocation. As a result of misuse of procured materials mentioned in the above paragraph, IDA asked the project office to refund in 1996 a total of $10,166,350.41. Eight municipalities were involved in such refund and covered areas of fruit development, land reclamation and aquaculture. The procured steel through International Competitive Bidding (ICB) was exchanged for other materials used by cage construction, water pipes and wires; part of the chemical fertilizer was sold to the local input supply cooperative for purposes of receiving the same amount of fertilizer the folloawing year. The Bank Group was not consulted nor informed of such exchanges. The government of China (GOC) and IDA agreed during the MTR to reallocate some SDR 50.63 million to an Earthquake Rehabilitation Program in Yunnan and Inner Mongolia. 23. Overinvestment In Land and Buildings. Overinvestment in land and buildings by many agroprocessing plants, induced by the overheated economy in 1993, further deteriorated the funding shortage problem of the agroprocessing plants. E. Project Sustainability 24. Sustainability of the investments and improvements made by the project is assessed as likely. (a) Overall, good arrangements have been made for handover of the components for operation and maintenance (O&M) and management to the responsible agencies. (b) Facilities under the project were generally built to high design and construction standards, and should be able to operate efficiently. (c) During  8 implementation, the Project Management Office (PMO) promoted effective training and employment based on qualifications for management and staff for the various facilities, which should enable efficient operation. (d) Many project components are able to maintain high levels of income, which is a great incentive to the farmers to continue the work. (e) Experience gained under the project, especially that of the fruit development and land reclamation components, is highly replicable and is being used elsewhere. (f) The Government has a strong commitment to continue to provide strong financial support to activities like land reclamation and poverty alleviation, which would otherwise be barely sustainable. 25. Although project sustainability prospects are in general good, close and continued attention by the provincial government will be required to: (a) fund O&M adequat'nly through appropriate channels; (b) establish and improve the information system to have new market channels; (c) ensure reliable sources for fish fingerlings to reduce dependence on captured wild ones. For this purpose, a more aggressive program of hatchery support facilities should be considered; (d) promote the household responsibility system in agricultural production; (e) continue efforts in research and proven technology transfer; (f) diversify the economy to reduce risks caused by market changes; (g) formulate a sound action plan to overcome the difficulties/problems the processing plants are facing. 26. Regarding the above issues for project sustainability, project management has expressed its strong endorsement and commitment. F. IDA Performance 27. IDA performance in the identification, preparation and appraisal of the project was detailed and is viewed as satisfactory. Overall, IDA performance was appreciated by the provincial government, especially with regard to the conduct of the marine fisheries resource survey, formulation of the annual fisheries resource monitoring plan, and sea dike safety. The procurement package prepared by the IDA mission for the Zhongshan land reclamation was very much appreciated, as it enabled Zhongshan, which had a late startup, to catch up with others and complete the work in a timely manner. 28. IDA performance in project supervision was satisfactory. Nine supervision missions were undertaken in five years till 1997, when the physical project works were completed, with generally two missions per year before 1995 and once per year both in 1996 and 1997. The supervision missions made significant contributions to (a) help improve of the management skills and competence of PMO staff, to enable them to follow strictly IDA procedures and rules; (b) resolve technical issues; (c) advise on design and scope changes, to better meet the local conditions and the market need. In most cases, the advice provided by the supervision missions had a positive influence on the project. Many project agencies realized the importance of the supervision recommendations and most of them were carried out. A special supervision mission was sent to the field in 1996 when the misuse of procured materials was discovered and special account was banned.  9 G. Borrower Performance 29. The performance of the project implementing agencies, the provincial PMO, in conjlanction with PMOs of the line agencies, as well as the municipal and county PMOs and the related development corporations, was generally satisfactory with the main exception of the above described case of misappropriation of procured materials. These agencies prepared several comprehensive feasibility studies for the project, which covered many of the technical and institutional factors. The provincial PMO also successfully prepared the appraisal report for Qingyuan poverty alleviation component, which was highly appreciated by IDA. Early on during project implementation, the Provincial PMO was shifted from the Agricultural Commission to the Provincial Finance Bureau. Performance during the transition period were less than satisfactory, but links with the technical agencies was improved after the supervision missions pointed out the problem. Such link was strong especially at the municipal/county level. Project staff at all levels were generally committed to the project objectives and demonstrated project ownership. The project components were for the most part implemented in line with the agreed implementation arrangements and most of the changes to designs were addressed as they occurred. Strong financial support was given by the Borrower. The government cournterpart fund was greatly increased from $12 million at the time of appraisal to $44.2 million at project completion, to allow for fulfillment of set targets. The Borrower was cooperative with the IDA missions and followed recommendations of the supervision missions. Project accounts were audited in a timely manner, and in general the audit reports were received by IDA on time. A special audit was carried out at the request of IDA. However, supervision of and guidance to the agroprocessing component were inadequate. H. Assessment of Outcome 30. The project's overall outcome is viewed as satisfactory, since the most important objectives of agricultural growth and development, and poverty alleviation were achieved with a relatively high degree of sustainability. The overall ERR at completion is estimated at 22.2 percent, which is impressive, though somewhat below the appraisal estimate in view of the difficulties the project faced throughout the project implementation, including the natural disasters of various kinds and market changes, etc. Overall the project had a fairly strong development impact through the provision of scarce investment funds for the expansion of agricultural production. The project is not viewed as highly satisfactory because of delay in some of the agroprocessing commissioning and the need for the Borrower to refund some of the credit to IDA. I. Future Operations 31. The Provincial PMO will be maintained and will continue to work closely with line agencies to help solve problems and issues arising from project operation.  10 32. The mechanism that integrates scientific research, training and production would be continued in fruit production and marketing strategies would be worked out. 33. Diversified crop production on the reclaimed land would be the major focus in future, for purposes of reducing risks to the minimum, while ensuring maximum profitability. Panyu has already adopted a multicropping structure of sugarcane, lotus and fish rearing. In the future, improved varieties would be used. Zhongshan is creating a program to establish a high-yielding banana orchard. In addition, sea dike safety monitoring would be strengthened. Such work would be carried out by the land reclamation companies, who have the necessary staff and technology and will continue to receive financial support from the governnent. 34. A plan is being worked out for the installation of an on-board icemaker, or the use of supply boats, so as to bring the role of the steel vessels into full play. 35. With regard to the agroprocessing component, a special action plan needs to be worked out by the provincial PMO, in consultation with municipal PMOs and the relevant plants, which should describe in detail the necessary steps to overcome the problems/difficulties encountered by each plant, such as closure or reorganization of assets and liabilities, etc. Qingyuan is working out a plan to sell the silk plant by auction. It is also considering making alternative use of the cold storage, to be open to the public and to store a variety of products. J. Key Lessons Learned 36. Simpler Project Design. It would be better if simpler project design would be considered in the future. This was quite a complex project, which covered almost all aspects of agriculture. The Qingyuan poverty reduction component is in fact an integrated regional agricultural development project by itself. The complexity of the project design required enormous inputs of both IDA and the Borrower during design and supervision, to cover the full range of skills required by the project. 37. Involvement of the Private Sector in Agroprocessing. In principle, IDA should limit its finance in agroprocessing plants. If it is financed, it is vital to have private sector involvement for purposes of supplying adequate counterpart funds and technology, management transfer and use of their existing marketing channels. Similarly, adequate working capital must be assured at appraisal. Adoption of international standards of technology and adequate management training should receive attention. 38. Proper Institutional Setup. For a complex project, while keeping the PMO in a nonsector agency, to play an overall coordination role, technical support of the line agencies is essential, in aspects of providing technical support and being responsible for implementing the line components. Key persons of PMO should remain relatively stable during the whole process of project implementation.  11 39. Proven Technology Transfer. A problem frequently encountered by other projects was difficult transfer of proven technology due to financial constraints. However, this was not an issue in this project, thanks to the strong financial support of the financial departments at various levels. Such transfer has promoted success of the fruit development component. 40. Retaining Flexibility In Project Activities. Experience of this project has shown that success of a project is only achieved if flexibility is provided in adjusting the project activities based on changing conditions. Marine capture was successful because of target adjustment; the silk knitting plant was unsuccessful because no adjustment was made, even when the market changed and there was no potential for improvement. 41. Beneficiary Participation. Beneficiaries played an active role in project activities and the authorities involved cooperated closely with each other during the implementation of the project, which is the basis of the project success.  12 PART II: STATISTICAL TABLES TABLE 1: SUMMARY OF ASSESSMENTS A: Achievement of objectives Substantial Partial Negligible Not Applicable Microeconomic policies x Sector policies x Financial objectives x Institutional development x Physical objectives x Poverty reduction x Gender issues x Other social objectives x Environmental objectives x Public sector management x Private sector development x Other (specify) x B. Project Sustainability Likely Unlikely Uncertain x C. Bank Performance Highly Satisfactory Satisfactory Deficient Identification x Preparation assistance x Appraisal x Supervision x D. Borrower Performance Highly Satisfactory Satisfactory Deficient Preparation x Implementation x Covenant compliance x E. Assessment of outcome Highly Satisfactory Satisfactory Unsatisfactory Highly Unsatisfactory Project Overall x  13 TABLE 2: RELATED BANK GROUP LOANS/CREDITS Loan/Credit No. No. and Title Purpose Year of Status Approval Preceding Operations: 1. Rabber Development Rubber Development in Guangdong and Hainan FY 84 Completed (Cr. 1417/SF 005-CHA) Provinces 2. Gansu Agricultural Development Irrigation and Agricultural Development FY 88 Completed (Cr. 1 793/Ln.2812-CHA) 3. 'Shaanxi Agricultural Development Irrigation and Agricultural Development FY 89 Completed (Cr. I 997-CHA) 4. Hebei Agricultural Development Irrigation and Agricultural Development FY 90 Completed (Cr.2159-CHA) Following Operations: 5. Second Red Soils Area Development Watershed management FY 94 To be completed (Cr.'2563-CHA) 06/2001 6. Y angtze Basin Water Resources Irrigation and Area Development FY 95 To be completed (Cr.2710/Ln.2874-CHA) 12/2001 7. Ciansu Hexi Corridor Irrigation and Land Development, and FY 96 To be completed (Ln. 4028/Cr.2870-CHA) Settlement 12/2006 8. Sustainable Coastal Development Coastal Zone Management; Marine Fisheries; FY 98 To be completed (Ln.4322-CHA) Shrimp Rehabilitation and Product Quality 12/2004 Control  14 TABLE 3: PROJECT TIMETABLE Steps in project cycle Date planned Date actual Identification 10/88 10/88 preparation 03/89 03/89 Preappraisal 06/90 06/90 Appraisal 01/91 02/91 Negotiations 03/91 09/91 Board presentation 07/91 11/91 Signing 12/91 Effectiveness 03/92 Project Completion 01/98 /a Loan/Credit closing 12/98 /b a/ Project completion of Guangdong ADP was in December 1996. However Yunnan and Inner Mongolia Earthquake Rehabilitation was not completed until December 1998. b/ Last disbursement of Guangdong ADP was May 29, 1998. However last disbursement of Yunnan and Inner Mongolia Earthquake was January 1999. TABLE 4: LOAN/CREDIT DISBURSEMENT: CUMULATIVE ESTIMATE AND ACTUAL ($ million) FY 92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 Appraisal estimate 15.0 35.0 65.0 100.0 135.0 155.0 160.0 162.0 Actual 31.2 55.5 100.5 100.3 103.4 103.5 Actual as % of estimate 89 85.31 100.52 74.33 66.69 64.66 Date of last disbursement 5/29/98 Note: Last disbursement of Guangdong ADP was May 28, 1998. However last disbursement of Yunnan and Inner Mongolia Earthquake was January 1999.  15 TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION ItemtDescription Unit AR Estimate Mid-term Completed at project Completed as % of SARtMid- Adjustment closing term estinate A. Marine fisheries 1. Fish vessels in operation Steel pair trawler boat 66.0 22.0 22.0 100.0 Wood purse seiner boat 6.0 6.0 6.0 100.0 2. Support facilities Cold stores/ice plant in operation no 5.0 1.0 1.0 100.0 B. Aquaculture 1. Brackish water ponds a. Jiangmen-Fenghuojiao see dikes 000, cum. 124.1 124.1 170.3 137.2 pond development ha 528.0 528.0 386.4 73.2 cold stores no 1.0 1.0 1.0 100.0 b. liangmnen-Yanan seadikes 000, cum. 121.3 121.3 108.1 89.1 pond development ha 528.0 528.0 436.4 82.7 cold stores no 1.0 1.0 1.0 100.0 c. Zhuhai-Qiao sea dikes 000, cum. 251.0 843.0 843.0 100.0 pond development ha 150.0 150.0 150.0 100.0 cold stores no 1.0 1.0 1.0 100.0 d. Zhuhai-Xiazha see dikes 000, cum. 143.7 287.4 287.4 100.0 pond development ha 528.0 528.0 153.3 29.0 cold stores no 1.0 1.0 1.0 100.0 2. Freshwater ponds a. Shantou pond development ha 400.0 400.0 400.0 100.0 b. Zhaoqing pond development ha 334.0 100.0 100.0 100.0 c. iiangmen-Lile-Mazongsha pond development ha NA 534.0 390.0 73.0 d. Jianggmen-Lile-polder pond development ha NA 293.3 293.3 100.0 e. Iiiangmen-Heshan pond development ha NA 110.0 110.0 100.0 3. Marine net cages a.. Huizhou sea dikes 000, cum. 257.0 257.0 257.0 100.0 cage constructed no 4200.0 4200.0 4200.0 100.0 cold stores in operation no 1.0 1.0 1.0 100.0 offices sqm. 647.0 647.0 647.0 100.0 b. Shantou cage constructed no 1000.0 1000.0 1000.0 100.0 c. Chaozhou cage constructed no 500.0 500.0 500.0 100.0 :. Zhuhai cage constructed no 2300.0 2300.0 2300.0 100.0 4. Freshwater cages-jieyang cage constructed no 3000.0 3000.0 3000.0 100.0 5 Shrimp ponds-Shanwei sea dikes 000, cum. 30.6 30.6 30.6 100.0 pond development ha 330.0 208.0 208.0 100.0 6. Oyster beds-Sbanwei offices sqm. 400.0 400.0 400.0 100.0 area cultivated ha 440.0 440.0 440.0 100.0 7. Shanwei-Hatcheries facility completed Y'000 1986.3 1986.3 1286.5 64.8 8. Jiangmen-Feedmills facility completed Y'000 3211.6 3211.6 3500.0 109.0  16 ItemtDescription Unit SAR Estimate Mid-term Completed at project Completed as % of SAR/Mid- Adjustment closing term estimate C. Agriculture-orchard development 1. Orchardestablishment Maoming-litehi ha 1000.0 1000.0 1000.0 100.0 Maoming-Longan ha 600.0 600.0 600.0 100.0 Meizhou.longan ha 550.0 550.0 550.0 100.0 Guangzhou-litchi ha 1130.0 1130.0 1130.0 100.0 2. Orchard improvement Maoming-litchi ha 4667.0 4667.0 4667.0 100.0 Maoming-Longan ha 330.0 330.0 330.0 100.0 Meizhou-longan ha 850.0 850.0 850.0 100.0 Meizhou-pomelo ha 2000.0 2000.0 2000.0 100.0 Guangzhou-litchi ha 2850.0 2850.0 2850.0 100.0 3. Collection centers, warehouses construction completed no 4.0 4.0 4.0 100.0 D. Agiculture-land reclamation 1. Panyu-new sea dikes completed m 37290.0 37290.0 37290.0 100.0 land development ha 2928.0 2928.0 2928.0 100.0 area reclamed ha 3659.3 3659.3 3659.3 100.0 2. Panyu-improved sea dikes completed m 14830.0 14830.0 14830.0 100.0 landdevelopment ha 1539.0 1539.0 1539.0 100.0 areareclamed ha 1923.4 1923.4 1923.4 100.0 3. Zhongsban-new sea dikes conpleted m NA 13305.0 13220.0 99.4 land development ha NA 531.8 531.8 100.0 area reelarned ha NA 478.7 478.7 100.0 E. Agroindustry 1. Guangzhou Fruittvegetable freezing building completed sqm. 27000.0 26668.0 26668.0 100.0 equipmentprocured Y'OOO 20027.5 20027.5 27003.8 134.8 2. Lufeng candied fruit building completed sqm. 5000.0 equipmentprocured Y'000 3419.0 3419.0 9639.2 281.9 3, Shenzhen fruit beverage buildingcompleted sqm. 15000.0 15000.0 15000.0 100.0 equipmentprocured Y'000 13946.0 14983.0 15245.3 101.8 4. Qingyuan Spice building completed sqm. 10000.0 10000.0 10000.0 100.0 equipmentprocured Y'000 2652.0 2652.0 6891.0 259.8 5. Shenzhen fruit vegetable refrigerating building completed sqm. 17000.0 17000.0 17000.0 100.0 equipmentprocured Y'000 9417.0 7708.0 14813.7 192.2 6. Shenzhen yogurt building completed sqm. 20000.0 6670.0 6670.0 100.0 equipment procured Y'000 9342.0 6399.0 9262.6 144.8 7.Shenzhen health food building completed sqm. 7000.0 3000.0 3000.0 100.0 equipmentpmcured Y'000 3101.0 13621.0 24981.9 183.4 8. Zhuhai canned fish building completed sqm. equipment procured Y'000 4393.0 4393.0 13323.0 303.3 9. Maoming Logan processing building completed sqm. 4000.0 4000.0 4000.0 100.0 equipmentprocured Y'000 1407.0 2260.0 2260.0 100.0 10. Meizhou Logan processing building completed sqm. 5400.0 5400.0 5400.0 100.0 equipmentproeured Y'OOO 774.0 1541.2 1541.2 100.0  17 Item/Description Unit SAR Estimate Mid-term Completed at project Completed as % of SAR/Mid- Adjustment closing term estimate F. :Poverty Alleviation 1. Off-season vegetable off-season vegetable ha NA 1000.0 1357.0 135.7 2. Cold stores area sqm. NA 4000.0 4000.0 100.0 equipmentprocured Y'000 NA 817.8 2710.1 331.4 3. Freshwater ponds pond development ha NA 606.0 606.0 100.0 4. Sugarcane sugarcane plantation ha NA 3000.0 2600.0 86.7 5. Off-season snow peas off-season snow peas ha NA 1000.0 1500.0 150.0 G. Training, Research, and TA I. Marine fisheries localtraining Y'000 2220.0 1223.7 1115.0 91.1 overseas study tours Y'000 3330.0 364.6 695.5 190.8 2. Aquaculture local training Y'000 2900.0 941.2 32.5 overseas study tours Y'000 730.0 793.0 108.6 3. Agriculture-orchard local training Y'000 2630.0 6765.8 257.3 overseas study tours Y'000 3950.0 599.8 15.2 4. land reclamation local training Y'000 860.0 730.0 84.9 overseas study tours Yt000 290.0 185.0 63.8 5. Agroindustry local training Y'000 820.0 580.0 70.7 overseas study tours Y7000 1240.0 539.4 43.5 6. Poverty alleviation local training Y'000 NA 1185.8 1354.5 114.2 overseas study tours Y'000 NA 544.9 230.0 42.2  18 TABLE 6: KEY INDICATORS FOR PROJECT OPERATIONS Item Description SAR Estimate (bt Full Dev. Actual for Year 1998 of Actual/SAR area Yield area Yield area Yield no/ha ton no/ha ton % % Marine Fish Steel Pair trawler 66.0 650.0 22.0 830.0 33.3 127.7 Wood Purse seiner 6.0 490.0 6.0 869.5 100.0 177.4 Aquaculture Shrimp 300.0 3.2 208.3 0.9 69.4 27.0 Oyster 440.0 2.0 440.0 4.8 100.0 240.0 Freshwater fish 734.0 6.3 1293.0 5.8 176.2 92.8 Freshwater cages 3000.0 0.8 3000.0 0.8 100.0 112.3 Brackish water (HS) 3000.0 0.8 303.0 3.3 10.1 439.3 Brackishwater(LS) 1332.0 5.3 822.8 4.8 61.8 91.4 Marine cages 8000.0 0.1 8000.0 0.1 100.0 98.6 Agriculture Fruit Maoming litchi (new) 1000.0 7.2 1000.0 3.7 100.0 51.4 Maoming litchi (improved) 4667.0 7.2 4667.0 4.5 100.0 62.5 Maoming Longan (new) 600.0 15.0 600.0 4.5 100.0 30.0 Maoming Longan (improved) 330.0 15.0 330.0 6.0 100.0 40.0 Meizhou Longan (new) 550.0 15.0 550.0 4.9 100.0 32.7 Meizhou Longan (improved) 850.0 15.0 850.0 4.5 100.0 30.0 Meizhou Pomelo (improved) 2000.0 20.3 2000.0 20.3 100.0 100.0 Guangzhou Litchi (new) 130.0 7.2 1130.0 3.7 869.2 51.4 Guangzhou Litchi (improved) 2850.0 7.2 2850.0 4.5 100.0 62.5 Land reclamation Panyu - new reclamation sugarcane 2927.0 120.0 976.0 123.0 33.3 102.5 lotus 797.0 27.0 NA NA aquaculture 1154.0 825.0 NA NA Panyu - improvement sugarcane 1539.0 120.0 1321.0 123.0 85.8 102.5 lotus 0.0 0.0 218.0 27.0 NA NA vegetable 1474.0 22.5 NA NA NA NA Zhongshan land reclamation -banana 479.0 37.5 479.0 37.5 100.0 100.0 Agroindustry Guangzhou frozen fruit& vegetables 50000.0 3494.7 7.0 Lufeng fruits food 1000.0 0.0 0.0 Shenzhen Juice drink 10000.0 10500.0 105.0 Qingyuan spice factory 700.0 550.0 78.6 Shenzben frozen fruit &vegetables 3100.0 594.0 19.2 Shenzhen yogurt drink 5600.0 992.0 17.7 Shenzben Health food 40.0 2555.0 6387.5 Zhuhai canned fishery 3000.0 0.0 0.0 Maoming Longan processing 5150.0 218.7 4.2 Meizhou Longan processing 1827.0 105.0 5.7 Qingyuan poverty alleviation Off-season vegetable 2000.0 13.1 2857.0 13.7 142.9 104.5 Sugarcane.- local 2200.0 75.0 2200.0 75.0 100.0 100.0 Sugarcane - resettlement 800.0 75.0 400.0 75.0 50.0 100.0 Freshwater Ponds 606.0 7.0 606.0 7.0 100.0 100.0  19 TABLE 7: STUDIES lNCLUDED IN PROJECr Coxxonent/Studv Study Centent Status Results Agiicultire Guanghou Litchi stable and high yield As title continuing The pilot area study is being continued. vaiety selection and breeding As title continuing The pilot area study is being continued. quick growing and early bearing As title continuing The pilot area study is being continued. flower reservation and fruit beaing As tide continuing The pilot area study is being continued. prorntion diuease and insect prevention and As title continuing The pilot area study is being continued. treatrent fresh reservation storage As title continuing The pilot area study is being continued. MeizhouLongan flower and fruit reservation To study the high yielding cornpleted The research result has been applied in the field, which has helped increase crop yield ev, n production every year To study the high yield every cotrpleted The research has successfully ensured good production year every year, as for otherwise production vaiy from year to year. feltilizing technology To study the optiiurn conpleted The research result is applied in the field fertilization arnunt, tinre and nethodology pcpulaizing ne pesticide To study the best pesticide and conpeted The research result is applied in the field apply nrethodology irect prevention by hostbea To study the anunt of conpleted will extended in a gradual way pesticide used and protection of environn-ent iniegrated prevention and featrnent To study the anmunt of conipleted The research result is applied in the field of insect and disease pesticide used and protection of environnent prcessing research To reduce pressure for fresh conpleted The research result has started to be used in production fruit and value added of products drough deep processing MeiiiouPonelo flower reservation and fruit bearing Prevention of fruit drop and conpleted The research result has been applied in the field, which prormtion prom>te production has helped increase crop yield breeding of seedless ponrelo To study quality enhancenent continuing through reduction of seed fertilizing technology To study the optinurnanmunt, conpleted The research result has been applied in the field. tinre and nethodology of fertilization e)tension of new pesticides To study the optinwmn cornpleted The research result has been applied in the field. pesticides and application rethodology integruted prevention and treatirent To reduce application of corrpleted The research result has been applied in the field. of insect and disease pesticides and protect environn ent fresh reservation To study the best fresh conrpleted The research result has been applied in the field. reservation itemand to in-prove storage ne.thodology trKnitoring indicators for orchard To trace conypietion of various conpleted Such research has prorrted irnagenrent in a scientific nmiagenent orchard indicators way.  20 conpxxl/wdy Sbf yCaatt saUis Resuts B1wffr idcTaal a ewicr To3s=viehesvwbdhsitbest cwiieted Thetelss y xsflyldpedirrpvvefdefidd of ie mDidiees thloadlcnitioaPsio conrativ eqx w fra vandyof To stcy l: r-ido bdseWM caxtrled The I1 udi has yilclpd iin txove defield fixilizationmedodles manf offerilizrapphiedand puroction copyield egaticns for o ;rmx of iset and TosAuyftptirrurnpiiddo cTlded findt q onnpapgde atfication*bbyl -g i&ons foir sstowQuM ntegptedpvn and teant of To redu the we ofpeides and1 riesaded redx et we ofpsiiddes anto i rn efie t and disese topiin awruneflit oerirt on floww and fnxt bemn pmm%plvtupofbudad o Xded pxmrUig oflt uofhe andreicngfixit dW P-cnl rix4fiurdw fies frnit stcan As title conleted As tite protesirgieirh div-igLitdcpcdzts omleted di % gLthdcppcxts .irmamon paED ftpigpdrg drded Ihs Wped-pmpovclarsg W olo newvariety xion T es had plf The src astled Irwvanety has prmtdriu dcxi fthlocal 03alitins faftilization copnins To stud the relatons bweA= crxrroled has inprved pdirton in fth fiedd armt of ftilizer appliedand copyidd ieulatons for o;urm of int and Tomsthepimmoirrpeicidde =Oid fin ott oxnp plcie appic aft time by kring slsses aplicrati- for by kwig re st forinm tocori rece regaci0s for isc oomtsce uited emiionand tntof reduettuse ofpesliddsatdto cm oed rei=dthue uofpesticies andxto gainmnwdmmeffed isec a disease gainnmnirnneffict cmxnstonfioeafrut bg prnIngspiit upofbudanld ci#ded pr.ingsplit upofbudand Ainguit d&T tmfion rdnigfruitdup fleshfixitsthage As title cTrOled Astitle pDoessingredi divjigLitchprodius cuied divngLitdchpruxds PovatyAMadon Hhyieldingexpnrt for &w- M-- efdff t cudtItivat-n cpded appliedint efidd dough use of pastic mllch nWeds wiFff vious soil typs rtng ofinuved varidy ofCI Astitle Corplded agiedinft field * cietoshirnpdrs Shm chidnotcarried ottet oisrites asplazd The ugies elatoadby the Poviwisal lemutt of AquflcPtifi1ct  21 TABLE 8A: PROJECT COSTS ($ million) Item and SAREstinate Actual Completion Description Local Foreign Total Local Foreign Total (US$ million) (US$ rmillion) Marine Fisheries 5.65 44.63 50.28 0.84 13.29 14.13 Aquaculture 49.01 1220 61.20 37.81 5.44 43.25 Agriculture Friit Developnuet 37.20 25.73 62.93 44.54 29.81 74.35 Lan1 Reclarmtion 39.74 6.35 46.09 58.01 0.02 58.03 Agroindustries 16.01 15.30 31.31 13.29 14.46 27.75 PovertyAlleviation 19.21 0.33 19.54 18.47 6.18 24.65 Baso Cost 166.82 104.54 271.35 172.96 69.20 24216 Physical Contingency 9.46 5.34 14.80 Price Contingency 11.18 6.45 17.64 TOTAL COST 187.46 116.33 303.79 172.96 69.20 242.16 TABLE 8B: PROJECI FINANC ING ($ million) Sources Estinated at Appraisal Estn-te at Closing Local Foreign Total Local Foreign Total BarndIDA 45.7 116.3 162.0 34.3 69.2 103.5 Provincial, Municipal and County Governtnrets 12.0 0.0 12.0 44.2 0.0 44.2 Self -aised finds 53.0 0.0 53.0 65.8 0.0 65.8 Don estic Banks 76.6 0.0 76.6 28.7 0.0 28.7 Tobl Project 187.5 116.3 303.8 173.0 69.2 242.2  22 TABLE 9: ECONOMIC COSTS AND BENEFITS ProjecttComponent Appraisal estimate ICR estimate FIRR (%) EIRR (%) NPV F-IRR (%) EIRR (%) Econ. NPV (Y min) (Y min) Marine fishery Wooden purse seiners 30.0 2S 0 NA 14.6 25.9 5994.8 Steel pair trawlers 24.0 220 NA 12.1 18.8 26935.9 Marine cold store Moming cold storage 24,0 25.0 NA 10.9 17.1 1897.8 Aquaculture Mainenetcage(Huizhoou) 470 52.0 NA 10.5 15.5 8564.5 Marine net cage (HuizhoouZhuhai,ShantouChaozhou) NA NA NA 10.9 18.4 21564.8 Freshwaternetcage(Jieyang) 46.0 50.0 NA 150 23.4 12142.1 Freshwatenpond(Zhaoqing) 17.0 23.0 NA 14.7 22.5 4134.1 Freshwater pond (Zhaoqing,Shantou,Jiangmnen) NA NA NA 13.9 21.8 50226.8 Brackishwater-highsalinity(Xiazha,Qiao) 19.0 22.0 NA 12.9 11.8 11025.1 Braclcishwater-low salinity (Jiangmen) 36.0 38.0 NA 14.3 16.6 29286.7 Shrimp (Shanwei) 35.0 39 0 NA 9.4 11.3 1649.5 Oyster(Shanwei) 27.0 27.0 NA 13.1 17.7 10910.0 Agriculture Land reclamation Panyu-new 16.0 19 0 NA 16.3 15.4 108947 7 Panyu-improvement 36.0 38.0 NA 45.3 75.4 130504.2 Panyu-total NA NA NA 21.0 20.8 239425.6 Zhongshan NA NA NA 16.6 19.6 26912.0 Fruit trees Guangzhou-litchi 29.0 28.0 NA 19.8 25.3 231930.9 Maonming-litchi 25.0 27.0 NA 18.6 24.7 496610.2 Maoming-longan 19.0 20.0 NA 237 31.7 249093.6 Meizhou-longan 25.0 26.0 NA 28.4 35.0 319233.9 Meizhou-pomelo 37.0 390 NA 16.1 22.3 115355.4 Agroprocessing Guangzhou Xintan frozen veg/fruit\a 15.0 21.0 NA (5.0) (8.1) (40850.8) Shanwei lufeng candied fruit\b 17.0 19.0 NA NA NA NA Shenzhen frozen fruit and vegetable 23.0 27.0 NA 5.1 5.5 (5945.7) Shenzhen Huolibao yoghurt drink 25.0 28.0 NA 0.3 12.2 3677.5 Shenzhen Sbenbao natural fruit drink 24.0 31.0 NA 11.4 23.0 23690.7 Shenzhen spiruline natural medicine 18.0 27.0 NA 12.0 21.2 31785.2 Zhuhai fish cannery\b 23.0 31.0 NA NA NA NA QingyuanLianshanrosin&perfurmery 34.0 36.0 NA 9.1 12.7 19175 Matoning longan drying\a 29.0 37.0 NA 0.9 7.3 (955.8) Meizhou longan drying 2S.0 36.0 NA 5.4 11.4 322.6 Qingy.an poverty alleviation Off-seasonvegetable NA NA NA 11.7 21.1 35134.5 Sugarcane (local, reseolemest) NA NA NA 21.0 26.0 22092.1 Freshwater ponds NA NA NA 8.8 11.6 4119.0 Projectasawhole 25.0 20.0 NA 17.1 22.2 1947550.0 \a Due to the markt changes, raw materials availability and inadequate working capital, the agroprosessing benefits accrued were less than the original estimates at appraisal for some Plal&ne plants delayied in commissioning and benefits accrued were much lens than the original estimates at VPRlitgroprosessing plants are not operational but are expected to start operation in 1999-2000 \c: The detailed analysis are contained in project files and will be available upon request.  23 TABLE 10: STATUS OF LEGAL COVENANTS Agreement Section Covenant Type Present Original Revised Deseription of Covenant Comments Status fulfillment fulfliment date date Credit 1.02 (a) 13 c "project Municipalities" means Guangzhou, Chaozhou and Jieyang split Huizhou, Jianngmen, Maoming, Meizhou, from Shantou Qingyuan, Shantou, Shanwei, Shenzhen, Yangjiang, Zhangjiang, Zhaoqing, and Zhuhai and other as agreed between the Borrower and IDA. Credit 2.02 (b) I c 6/30/92 6/30/92 government to open and maintain in USS Special Guangdong Development Account in a bank and on tenms and conditions Bank chosen (use of special satisfactory to IDA account was banned in 1996 and not reopened) Credit 4.01 (b) 2, 9 c Audit report of Special Account to be sent to IDA Audit reports received from within six months of fiscal year end (Jane 30) 92-97. A special audit received in June 1996. Project Schedule 2 10 c Guangdong shall maintain sea dikes at Haifeng, Part B Lufeng, and Chenghai in accordance with (Aquaculture) appropriate engineering standards Project Schedale 2 6 c All pesticides shall have been approved by IDA Part C Seq. I Schedule 2 6 c Storage, handling, disuibution of pesticides to be Part D Seq.2 consistent with guidelines satisfactory to IDA Project Schedule 2 10 nc Enterprise Financial Operations guidelines a standardized debt-equity Part D Seq. I acceptable to IDA, including debt-equity ratio no ratio report was submitted greater than 5:1 every year by the accountant and was audited by the Audit Bureau. Project Schedule 2 6 c Rural designs for effilent teatnent to be approved Part D Seq.2 by relevant municipal EPB price to beginming plant construction. Project Schedule 2 6 c Bureaus to maintain a system to monitor effluent Part D Seq.3 Project Schedule 2 6 c Effiuents to be adequately treated before disposal Part D Seq.4 Schedule 2 12 nc Second stage expansion of Guanzhou Frozen Fruit civil works for second phase Part D Seq.5 and vegetable plant after IDA acceptance of completed feasibility study and profitable operation and full capacity utilization and evidence of export potential Projec t Schedule 2 10 ad 6/30/92 Detailed implementation program to be provided to Part E Seq. I IDA Project Schedule 2 9 nc Training study tours and research to be cartied out Part F seq.5 in accordance with program agreed with IDA Project Schedule 2 12 c Project leading groups at provincial, municipal & Part G Seq.6 county levels with composition and represntation acceptable to IDA  24 Agreement Section Covenant Type Present Origimal Revised Description of Covenant Comments Status fulfillment fulfllment date date Project Schedule 2 1 2 cd PMO at provincial level and PO under BAP and BA Part G Seq.7 & at each municipality and county with functions & responsibilities acceptable to IDA and with adequate numbers of competent staff. Project Schedule 2 1 2 c PMO to prepare and fumish to IDA by December Part G Seq.8 15 each yeas detailed work plan and report on work schedule and financing arrangements Project Schedule 2 6 c Environmental action plan to be implemented Part G Seq.9 Project Schedule 2 10 c quality control of sea dikes Part G Seq.9 Project Schedule 2 6 c AD project activities to confomi to environmental Part G Seq. 10 standard and guidelines Project Schedule 2 9 c Satisfactory arrangements for monitoring settlement Pearl River Resources Part G Seq. 11 of sea dikes and raise them as necessary; cause Commission appointed technical quality of sea dike construction and monitoring procedures to be examined and evaluated by independent experts acceptable to IDA Project Schedule 2 9 cd l1231/92 Annual survey of fisheries resources Part A (Marine fisheries) Project Schedule 2 9 cd Annual update offisheries assessment Fisheries Resources Part A (Marine assessment for 1994 based on fisheries) monitoring program Project Schedule 2 9 cd Resource assessment to be provided to IDA report provided in 1994 Past (a) Project Schedule 2, A 12 cd 6/30/93 Preparation of fisheries management plan by June completed May 1995 seq4 30, 1993 Project Schedule 2, 9 c Procurement ofadditional vessels after first lot second lot cancelled Part A seq 5 subject to price approval of IDA on basis of resource assessment. Project Schedule 2 9 c Vessel maintenance and service schedule to be The schedule was worked out Part ASeq.6 fumished to IDA after delivery of vessels by relevant municipalities, which submitted to IDA in both 1993 and 1994. Project Scbedule 2 9 c Retirement of about 500 fishing vessels beginning The provincial government Part A.seq.7 in 1992 and place crews in other forns of had worked out new employment regulations conceming retirement of old fishing vessels, to Tealize negative growth. Till now, about 1000 fishing vessels have retired. The crews are engaged either in marine culture or other occupations.  25 Agreessent Section Covenant Type Present Original Revised Description of Covenant Comments Status fulfilment fulfiment date date Project Schedule 2 9 nyd transfer of ownernsip of vessels to beneficiaries Part A seq.8 upon full repayment of cost Project 2.02 (a) 12 c Interest at a rate no less than ABCs prevailing interest rate for similar loans for similar purpose Project 2.02 (b) 12 nc Credit risk is to be borne by project municipalities ABC not involved in project, and ABC to be poid management fee on funds covenant has been amended. disbursed and repaid Project 2.02 (c) 5 cp Finance Bureaus to establish and maintain Agroindustry subproject not revolving funds for fishing vessels, sugarcane fully operational, finance production and agroindustries on terms and Bureaus provided working conditions satisfactory to IDA capital for boats Project 3.01 (B) 9 c 6/3W94 Audit report of project accounts to be provided to Audit reports received from IDA within six months of fiscal year end (6/30) 92-97. Project Schedule 2 6 c Storage, handling, distribution of such pesticides to Part B seq.2 be consistent with guidelines satisfactory to IDA Project Schedule 2 6 c Bureaus to maintain a system to monitor effluents Part d seq.3 Project Schedule 2 6 c Mffluents to be adequately treated before disposal Part d seq.4 Project schedule 2 part 5, 10 c Annual plan to be submitted by December 1 E seq.2 Project Schedule 2 c Subloan conditions Part B seq.3 Project Schedule 2 c Appraisal and approval by financial intermediary the appraisal was done by Part E seq.4 acceptable to IDA provincial PMO, which was regarded as excellent by the Bank Project Schedule 2 nyd Transfer of ownership of vsels to beneficiaries Part A seq.8 upon full repayment of cost Stalus Covenant CIMas C - Complied with I 5 Accounts/audit NC - Not complied with 2 = Financial performance/revenue generation from beneficiaries CP - Compliance with partially 3 = Flow and uUlization of project funds CD - Compliance after Delay 4 = Counterpart funding NYD - Not yet Due 5 = Management aspects of the project or of its executing agency 6 = Environmental covenants 7 = Involuntary resetilement 8 = Indigenous people 9 = Monitorlng, review and reporting 10 u Implementation 11 = Sectoral or cross-sectoral budgetary or other resource allocation 12 = Sectoral or cross-sectorat regulatory/institutional action 13 = others  26 TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS No specific provision of the operational manual statements was involved during project implementation. TABLE 12: IDA RESOURCES: STAFF INPUTS (ALL COMPONENTS) Planned Revised Actual Stage of Project Cycle weeks US$'000 weeks US$'000 weeks US$'000 Preparation to Appraisal n.a. n.a. n.a. n.a. 170.20 176.80 Appraisal n.a. n.a. n.a. n.a. 58.40 182.60 Negotiation to Board Approval n.a. n.a. n.a. n.a. 7.50 26.50 Supervision 52.00 169.30 42.50 115.90 124.60 419.60 Completion 11.80 53.10 11.80 53.10 17.00 46.20 TOTAL 63.80 222.40 54.30 169.00 377.70 851.70  27 TABLE 13: IDA RESOURCES: Performance rating/b Stage of project cycle Month/year Number of Days in field Specialized staff Imp]. status Dev. Type of problem persons skills represented/a objectives ID Mission through appraisal 10/18 18 65 FTM, A, AG, E, EG, _ _ ES, MR, AQ, SB, NA Appraisal through Board approval 01/91 7 26 FTM, E, A,AQ, EG, _ _ AG, MR Supervision 1 03/92 3 16 FTM, AG,EG I I No major problem Supervi.3ion 2 10/92 6 6 FTM, A, EG, MR, 3 2 PMO move to the AQ, AG Provincial Finance, technical support from line agencies was questioned Supervision 3 04/93 1 2 FTM 3 2 PMO was strengthened, however technical support from line agencies was still inadequate Supervision 4 12193 6 10 FTM, A, EG, AG, 3 2 Due to rezoning of Zhuhai, AG, AQ projert activities had to be revised. Supervision 5 05/94 2 3 FTM, E S S Slow disbursement Supenvsion 6 11194 3 25 FTM, AQ, SB S S Severe floods damaged some of the project works. Supervision 7 09/95 7 7 FTM, A, AQ, AG, S S Fund shortage of ES, NA, S agroprocessing plants, cuasing delay of the component Superision 6 01/96 2 12 FTM, AU U S Mis-use ofprocured fertilizer and steel Supervision 9 04/97 3 7 FTM EG, AQ S S No major problem with the exception of delay in agroprocessing Superision/ICR 01/99 5 10 TM,AQ,A,AG,E S S No major problem la FTM = forner Task Manager, A = Agriculture AG = Agroprocessing, E = Economist, EG = Engineer, ES = Environmental sociologist, MR = Marine Resources,AQ = Aquaculturist, SB = Ship buildiag NA = Naval Architect, S = Support Staff, AU = Auditor /b 1: ILighly satisfactory, 2: satisfactory; 3: unsatisfactory; S: satisfactory; U: unsatisfactory  28 ANNEX A: BORROWER'S CONTRIBUTION TO THE ICR (April 1999) 1. Project Objectives 1.1 To increase fish production beyond the 100m depth of the Northern Continental Shelf of the South China Sea, meanwhile relieving pressures on near coastal resources; 1.2 To develop land unsuitable for agriculture, coastal mud flats and shallow water areas for aquaculture; 1.3 To increase production of fruits on sloping land; 1.4 To bring new land into agricultural production and improve river flow conditions in the Pearl River Delta; 1.5 To provide modern agroindustrial facilities for handling and processing; 1.6 To formulate and implement a poverty alleviation package focused on the limestone mountain areas of the province. 2. Project Background 2.1.1 Guangdong agriculture entered a period of rapid growth after the economic reforms. However, the benefits of rapid agricultural development have not been evenly spread through the province. In particular, farmers in the mountain areas in the northeast continue to be poor and annual income was substantially below the provincial and national averages. The province has to fully utilize its available land resources and to develop the hilly and low-lying land. The management of fruits planted on a large scale at the end of 1980s needs to be strengthened and improved in order to increase production capacity. 75% of the fishing vessels in the province were small boats below 20hp, mainly operating within 100m depth of the offshore. 2.2 The project consists of six components: marine capture fisheries, aquaculture, agriculture, agroindustry and limestone mountain poverty alleviation. They are mainly located within 16 municipalities and 42 counties in the province. 2.3 The initial steps of the project are divided into four stages: 2.3.1 Identification. The project was identified by IDA and China Government in 1988.  29 2.3.2 Preparation. FAO of CP have sent specialists mission both in March 1989 and February 1990 to assist Guangdong Provincial Government in preparing for the project. 2.3.3 Preappraisal . The Bank's Preappraisal Mission conducted field trips and preappraisal in project areas in May 1990. 2.3.4 Appraisal. In February 1991, the Mission of World Bank conducted appraisal of the project. 2.4 The Bank appraised that the total investmnent in the project accounts for $3,038 million, including 12,170 million SDR (equivalent $162 million) from IDA which makes up 53.3% of the total. 2.5 Credits from IDA are from MOF to Guangdong Province with repayment over 15 years, including 5 years of grace period. The annual interest rate is 6%, and annual commitment rate is 0.5%. 2.6 In February 1991, World Bank undertook negotiations with China in Washington. The Project Agreement and Development Credit Agreement were signed and adjusted in December 1991, officially effective in March 1992. 2.7 Allocation of Credits by IDA 2.7.1 In the course of project implementation, Guangdong has discussed about the credit adjustments with Bank's Project Monitoring Mission. Guangdong suggested transferring part of credits from marine fishery to civil works of aquaculture, which was approved by the Bank. 2.7.2 After several talks with Bank's Mission, residual credits resourcing from cancellation of some sector projects and changes of exchange rate were transferred to earthquake construction project. 2.7.3 The allocation of credits after adjustment is as follows: Item Appraisal Actual (1) Goods 84,670,000 31,888,130.24 (2) Works a: Office construction and orchards establishment 4,500,000 4,651,382.31 b. Others 19,960,000 26,340,920.68 (3) Consultants, Research, Overseas Training and Study Tours 1,330,000 221,393.43 (4) Poverty Alleviation in Qingyuan a. Works 1,960,000 5,789,339.43 b. Consultants, Research, Training 380,000 108,451.73 c. Goods 8,900,000 2,434,480.54 Total 121,700,000 71,434,098.36 Note: Unit: SDR  30 2.8 Adjustment during Project Implementation As approved by the Bank, the following projects have been adjusted: 2.8.1 Marine fishery Item Appraisal Adjustment Steel pair trawler 66 22 Refrigerated trawler 14 cancelled Huizhou, Jiangmen, Shantou Zhanjiang cold stores 1 for each cancelled Wharf cancelled 2.8.2 Aquaculture About 480 ha of brackish water ponds in Zhuhai-leizhu and 330 ha in Modaomen were transferred to Jiangmen-lidongwei 293.3 ha, Mazongsha 534 ha and Jiangmen- heshan 110 ha of freshwater ponds. 3. Project Results 3.1.1 Project Implementation Progress 3.1.2 Total Investment: Actual investment is $242.16 million, making up 80% of that at appraisal, among which: $103.46 million from IDA, $103.46 million supporting capitals self-raised by China. This big change in investment is mainly due to the adjustment in marine capture component. 3.1.3 The project began in March 1992, and was completed in June 1998. Construction plans were mostly completed, a large part of sector projects are operating well. 3.1.4 Credit Disbursement by IDA. Actual disbursement is 71.43 million SDR (equivalent to $10.346 million), and the last disbursement took place on May 29th, 1998. Please see table 4 for its comparison with appraisal report. 3.1.5 Procurement. China Technique Import & Export Cooperation China International Tendering Company, China National Instruments Import & Export Corporation International Tendering Company and Guangdong Machinery Import & Export Cooperation are authorized to invite bid. The total procurement of $59.41 million is completed, occupying 46% of that at appraisal. Please see Table 3 for detailed procurement package. 3.2 Project Actual Results 3.2.1 Marine fishery A. 28 fishing vessels are constructed, making up 100% of that at mid-term adjustment and 33% of that at appraisal, with 58 ones less than the 86 vessels at appraisal. There are mainly two reasons for the change: one is due to the changes of fishery resources in South China Sea. As the captured fish available decrease year by year, China updated its Marine Fishery Policy toward South China Sea in order to maintain the ecological sound cycle. It includes elimination of old vessels and limitation of new vessel. The quota for new vessel is deemed to decrease year by year and till the year of 1999 the construction of new vessels will fully stop and the index for fishery output will be zero. Another reason is due to the high expense of capture. As the cost  31 for marine capture increase year by year, fisherman's feeling for capture is hurt deeply. Thus, project unit proposed to cancel some vessels. B. 1 cold store is established, making up 100% of that at mid-term adjustment and 20% of that at appraisal, with 4 ones less than the 5 stores at appraisal; the planned one wharf is cancelled. Because cold store and wharf are supporting facility of vessels, it is natural that relative adjustments should be made as the fishing vessels have been reduced. 3.2.2 Aquaculture A. Brackish water ponds a. 1,126 ha of brackish water ponds are developed, reaching up 65% of that at mid-term adjustment and 44% of that at appraisal. Reasons for the decrease are as follows: 1) in Jiangmen-fenghuojiao, the base design for the pond is narrow and small at appraisal. In the course of implementation, it is found that the mud flat is too soft. Therefore, the original design was altered to solidify the base. As restricted by the local landform, the total area can not be expanded. Therefore, the enlargement of pond base brings the pond area much smaller. 2) In Jiangmen-yanan project area, Guangdong Agriculture Project encountered difficulties after mid-term adjustment. For a time, the agriculture account was blocked by the Bank, which affected the progress of disbursement. The project unit thus advanced not to continue the project. 3) As harassed by typhoon in Zhuhai-xiazha, sea dikes there were destroyed. More investment is used to repair and solidify the dike. But due to the slow domestic supporting fund, recovery progress for fishing pond is slow, and some of them are not ready until now. b. 1,409,000 m3 of sea dikes are constructed, reaching up 102% of that at mid- term appraisal and 152% of that at appraisal. c. 4 cold stores are established, reaching up 100% of that at mid-term appraisal (a cold store in Maodaomen was cancelled at mid-term appraisal) and 80% of that at appraisal. B. Freshwater ponds 1,293 ha of freshwater ponds are developed, making up 176% of that at appraisal. At mid-term appraisal, three new project areas (Jiangmen-lile- mazongsha, jiangmen-lidongwei and jiangmen-heshan) are designed, adding 937.3ha more project areas in total. Therefore, the final completion area is higher than that at appraisal. C. Shrimp culture a. 208 ha of shrimp ponds are developed, making up 100% of that at mid-term appraisal and 63% of that at appraisal. The original area for shrimp pond is 330ha, which are distributed into two project areas. Before mid-term appraisal, one project area (Meilong) is transferred to a new area (Xiaomo), no area changes have been made. However, due to shrimp disease in mid-term adjustment, the Bank denied the shrimp project and Xiaomo shrimp project area had to be cancelled. b. 30,600 m3 sea dikes are constructed, making up 100% of that at appraisal. D. Oyster culture 440 ha of oyster beds are completed, reaching up 100% of that at appraisal.  32 E. Marine net cages a. 8,000 marine net cages are constructed, making up 100% of that at appraisal. b. 257,000m3 sea dikes are constructed, making up 100% of that at appraisal. F. Freshwater net cages 3,000 net cages are constructed, making up 100% of that at appraisal. 3.2.3 Agriculture A. 2,130 ha of litchi are newly planted, making up 100% of that at appraisal. B. 1,150 ha of longan are newly planted, making up 100% of that at appraisal. C. 7,517 ha of litchi are improved, making up 100% of that at appraisal. D. 1,180 ha of longan are improved, making up 100% of that at appraisal. E. 2,000 ha of pomelo is improved, making up 100% of that at appraisal. 3.2.4 Land Reclamation 4,996 ha of land are developed, making up 100% of that at appraisal and 77% of that at appraisal. The adjustment is due to that Zhuhai-modaomen project unit proposed to cancel the project right at the beginning of the implementation. Therefore, mid-term appraisal added Zhongshan land-reclamation project (531.8ha). The total project area is reduced. 3.2.5 Agroprocessing Ten agroprocessing plants are established, making up 83% of that at appraisal. Due to some factors in identification and bidding, two plants are cancelled. 3.2.6 Poverty Alleviation A. 1,600 ha of mulberry are cultivated. B. 2,857 ha of vegetables are cultivated. C. 3,000 ha of sugarcane are cultivated. D. 606 ha of freshwater ponds are developed. E. 1 agroprocessing plant is established. 4. Achievement of Project Objectives 4.1 As an agricultural development project first undertaken by Guangdong Province with Bank Loans, the project has been invested on a large scale. It includes various components like marine fishery, aquaculture, agriculture, land reclamation, agroindustry and poverty alleviation. The project is carried out in 42 counties under 16 municipalities. The implementation of the project has contributed greatly to the economic growth in rural areas of Guangdong Province. 4.2 The implementation of the project benefits comprehensively the project areas by improving their infrastructure construction and developing overall utilization of resources. It allows the vessels to fish off-shore in relatively unexploited deep waters. By taking advantageous of subtropical climate in the area and developing those hilly land unsuitable for other plantation, it has increased fruit production through establishment and expansion of new fruit orchards. Development of coastal mud flats and low-lying land enlarge the supply of aquatic products. In the project, measures are taken to prevent soil erosion, which slows down the sedimentation at the outlet of the Pear River Delta, which creates more cultivated area. In poor rural  33 areas, the project also improved farmers' annual incomes and living conditions on the increase. 4.3 The implementation of marine fishery project has increased the capacity of fishing in deep-sea waters. The good equipment and safety function of project vessels have improved fishing efficiency and made fishing last longer. Fishing are capable in underutilized water deeper than lOOm. The annual capacity of fishing is 28,580t. 4.4 The aquaculture project not only makes use of low-lying land and coastal mud flats at coastal zone for aquaculture, it also undertakes net cage culture by use of aquatic freshwater and brackish water. The project has newly established the high standard 1,126 ha of brackish water ponds, 1,293 ha of freshwater ponds, 208 ha of shrimp ponds and 440 ha of oyster beds. About 8,000 marine net cages and 3,000 freshwater net cages are constructed along with supporting facilities. 4.5 The project of fruit plantation promotes production capacity of orchards through improvement of road infrastructure such as road and irrigation system, of production conditions and orchard management. The project has upgraded those which were originally low productive, including upgrading 7,517 ha of litchi, 1,180 ha of longan, 2,000 ha of pomelo. The project has increased high-quality litchi by 2,130 ha, longan by 1,150 ha. At orchard's full development, litchi has an annual production of 601,00t, longan 34,400t and pomelo 40,500t. Achievements have also been made on researches on high and steady capacity of fruit production, protection of flower and fruit from falling, prevention of insects, storage and refreshment of fruit. All above bring positive effects on future fruit production and development. 4.6 The project of land reclamation has increased the reclamation areas by 3,406.7 ha and strengthened 1,539 ha. Monitoring on sea dikes, establishment of new road and bridges, construction of facilities on water and power supply all guarantees the production's smooth-going in reclamation areas. In 1998, the reclamation land had 2,297 ha of sugarcane plantation with an output of 282,500 ton, 1,015 ha of lotus with an output of 27,405t, 478.7 ha of banana with an output of 17,95 1t, 1,154 ha of aquaculture with an output of 952t. 4.7 Most of the agroindustry project has been completed. The project has introduced a batch of advanced facilities and technological design. However, because of market changes and long construction period, there are only Guangzhou Frozen Fruit & Vegetable Plant, Shenzhen Yogurt Drink Plant, Shenzhen Spirulina Food Plant and Lianshan Rosin processing and Perfumery Plant and Meizhou Longan Drying Plant in operation at present. Their production capacities have not reached the designed level. Some of processing plants may go into operation this year, and some may have to be cancelled. The project can be said not reaching up to the construction objective. 4.8 The project of poverty alleviation provides 56,330 households poor farmers with productive capital. With the capital, 1,600 ha of mulberry trees have been planted  34 and silkworms are raised. Due to the price changes of silkworm cocoon, the scale of mulberry plantation and silkworm raising have been greatly reduced. About 2,857 ha of off-season vegetables and 2,200 ha of sugarcanes are planted; 606 ha of freshwater ponds and other supporting facilities are established. All these projects involve farmers with direct management. The project has also resettled farmers from bare living-condition and poor-cultivated limestone areas to suitable places, providing them with daily necessities and productive capital. At the same time, 400 ha of cultivated land (for sugarcane and rice farming) are developed to improve farmer's living standard. According to SAR, a small cold store and silk manufacturing factory are established to provide further processing services for local products. The implementation of the project had increased input in production, promoted productivity and improved management mode. The annual output of off- season vegetable is 39,100t, sugarcane is 165,000t, and aquatic products 5,000t. 4.9 To meet the requirement of different production stages, the project management staff, technicians, farmers and fisherman participating in the project have received training at municipal, county and township level. Good results have been achieved. The construction period has seen about 250,000 project management staff, farmers and fishermen in technical and managerial training. Materials on relevant techniques and daily management knowledge have been distributed, which helps to improve farmer's management knowledge in project areas. 4.10 The project has altogether sent 14 missions and 69 technicians and managerial staff to countries like U.S.A, Canada, Japan, Norway, Sweden, Thailand, Philippines, Holland, Australian, Brazil etc to study advanced techniques management and processing designs on marine fishery, aquaculture, plantation, land reclamation, agroprocessing etc. The study tours equipped a batch of managerial staff and technicians with advanced management skill and techniques. They play a key role in the implementation and later operation of the project, and will function more in future project utilizing foreign capitals. 4.11 The project has achieved good social benefits. The implementation of the project makes full use of local labor powers. There are 358,213 persons involving directly in the production. Meanwhile, the project encourages the development of other local industries, such as services before or after production processes, which contributes to the increase of farmers' income. The project also sets a model in project areas, which helps to promote the local agricultural production up to high levels. hi general, the project contributes a lot to economic growth, market booming and poverty alleviation in project areas. 4.12 The project has a great impact on environment. The project has turned the original coastal mud flats and low-lying land into aquaculture area and cultivated land, which enlarges the plantation area and improves waterway conditions. Coverage on sloping land has increased, which benefits a lot on soil and water conservation, afforestation and environmental protection.  35 5. Factors Affecting the Project 5.1 As an organizing and coordinating agency for the whole project, Provincial PMO plays a key role in seeing to the project going smoothly. At the preparation stage, Provincial PMO was an affiliate of Provincial Agriculture Commission (AC). But as the project involves too many lines of business, a single line agency can not take the responsibility of the whole project's management. In order to manage the project efficiently, the responsibility should be taken by a comprehensive economic agency. Since the Planning Commission has shifted its function to macroeconomic planning, it left the responsibility to Provincial Financial Department (PDI). In 1991, Provincial Government decided to transfer the Provincial PMO to PFD, at the same time, Provincial Agriculture Project Office (under the AC) and Aquaculture Project Office are maintained. Together with Provincial PMO, these three offices take different duties to implement and manage the project. Practice has proved that the efficient management of Provincial PMO functions decisively in project implementation. 5.2 Efficient management of Project Offices (PO) at all levels ensures the success of project construction. Being standing agencies, the provincial, municipal and county POs put emphasis on project management. The PO lay out a series of regulations and managerial processes. At the beginning of the project in 1992, the Provincial PO established several rules and regulations on Guangdong's agriculture utilizing World Bank loans, such as Project Management Regulations, Finance Management Regulations and Accounting Measures, which provides procedures and references for the project implementation in a strict way. 5.3 Close cooperation and coordination among relevant trades and comprehensive management agencies guarantee the smooth-going of project construction. As a comprehensive agriculture development project, the project touches upon finance, planning, agriculture, aquaculture, Bank Of Agriculture (BOA), environmental and audit agencies. Leaders and specialists from these agencies participate actively and coordinate closely in the process of the project, which ensures the smooth implementation of the project. 5.4 Farmers' active participation is another factor of project success. In the course of project implementation, farmers in project areas show great enthusiasm toward the project. In particular, farmers in project items like agriculture, aquaculture and Qingyuan poverty alleviation actively and willingly raise supporting funds by many means, which contributes a great deal to the implementation of the project. After the construction of the project, farmers organize spontaneously various technique associations, providing planter and culturer with services before, in or after the production process. These associations play active roles in transferring knowledge, exchanging experiences, and providing information as well as circulation channels. 5.5 Technique assistance by foreign consultants guarantees the quality of key projects. After the project began, at the government expense (not included in the Bank's  36 disbursement), many specialists are invited to form a specialist group. At the same time, from the short list provided by the Bank, Dr. Staple, specialist in fishing management of marine resources from Australia, was chosen to join the group. He was invited to Guangdong to help formulate Guangdong Marine Fishery Management Plan (South China Sea fishing areas), and to provide consultative services in sector project of marine fishery. 5.6 The delay of supporting funds is a common problem in sector agroindustry project. Furthermore, the complicated procedures of procurement and long extension of time prolong the construction period, which affects the project's benefit. 5.7 As the first provincial project of Guangdong, lack of experience is a common problem to the staff from provincial levels to county levels. This is mostly reflected in the agriculture plantation project. 5.7.1 While translating the section 3.33 of SAR, the part that research projects should be approved by the Bank was missed out, which brings procedure problems for PMOs at different levels. The result is that the disbursed $ 650,306 for research project was refunded by the Bank. 5.7.2 As to the bidding and procurement for agriculture plantation goods, the procedure complies with the Bank's standard. But the distribution of procured goods adopted the way to meet the actual need for production. However, as the way was not addressed to and approved by the Bank, money was returned to the Bank for not abiding to regular procedures. The procured goods are chemical fertilizer and steel, with the former equivalent to $ 2,421,613.70 and the latter $3,506,049.11. 5.8 Natural disasters damage some sector projects. In 1994, the coastal zones of Guangdong were severely attacked by violent Typhoon 7. Brackish water aquaculture along the coastal zones was destroyed. The periphery of sea dikes in Zhuhai aquaculture project was damaged greatly and restoration of the construction increases project cost. In 1995, the coastal zones of Guangdong were attacked again by violent Typhoon. Maoming plantation, Jiangmen aquaculture and Qingyuan poverty alleviation areas were damaged once more. 5.9 Great changes are made during mid-term adjustment, which brings a big disparity between the actual completion and the appraisal. The biggest change took place on marine capture project, in which the 86 vessels are reduced to 28 ones. This is due to the change of fishery resources in South China Sea, and the increased cost has lowered fisherman's confidence in fishing. 6. Project Substantiality 6.1 Most of the sector project has realized returns on investment. The extension of operation will bring better benefits. To guarantee the completeness of facilities and develop the project further, Guangdong will go on laying emphasis on the management of post-stage project. Through these measures, best results are  37 achieved. As the market development of Guangdong is relatively quicker than other provinces in China, the government seldom interferes with economic performance of trades and industries in Guangdong Province. Economical means are employed to adjust economics. Project management undertakes exactly in the same way. The industries and farmers are responsible for their own operation and management. The government agencies (including project agencies at all levels) only provide assistance and consultative services at the later stage of the project. 6.2 It is basically self-managed projects by farmers in agriculture, aquaculture and Qingyuan Poverty alleviation, the government only offer technique service and services after production process. In view of China Agriculture Technique Popularization Law, technique popularization stations at municipal, county and township level should undertake researches, experiments, demonstrations and technical popularization and consultation services to assist farmers in their production. 6.3 Necessary assistance should be provided to marine fishery project in order to bring project unit into normal production. Project management agencies will go on formulating Guangdong Annual Fishery Management Plan (Annual Plan) so as to guide the production of project units. 6.4 Researches on operation status of agroindustry project will be undertaken. Provided by market economy, economic means will be adopted to recombine assets that have been improperly operated, so that the project can go on smoothly and obtain benefits. 7. The Bank's Performance 7.1 As a large investment involving various trades and fields in many municipalities and counties, the Bank has offered substantially assistance on fund, information, technique guidance, project management and operation means, which plays a key role in the smooth implementation of the project. 7.2 Due to market and local situation changes, adjustment has been made on project contents fixed at appraisal in project operation process approved by the Bank. Typical example is the implementation of sector marine fishery project. Since the project can be adapted timely to cater to the needs of market and the project, project units express common positive attitudes toward this. 7.3 Since the implementation of the project in 1992, about 9 missions, 41 persons in total from the Bank have come to project areas to monitor project operation and provide assistance and advice.  38 8. The Borrower's Performance 8.1 The Government of Guangdong Province is responsible for the overall implementation of the project. The Provincial Leading Group (PLG), being responsible for the coordination of activities among various agencies and trades involved, is chaired by the Standing Vice-Governor and assisted by representatives from Provincial Government (Vice-General Secretary), Guangdong Financial Department, the Provincial Planning Commission, Provincial Agricultural Department and Provincial Department of Aquatic Products. Directors from various agencies and trades consist of Group's members. The Provincial Project Management Office, being the standing agency directly under PLG, is in charge of project's implementation, management, procurement, monitoring, and coordination and services provision. As to project preparation, appraisal, operation and integration with agreement, the office has functioned a lot. 8.2 As a daily management agency of PLA, Provincial Financial Department ensures the overall implementation of the project, in particular with project's on-lending, recuperation and supporting funds raising. 8.3 Provincial Auditing Department is in charge of the auditing of the project. Advises are put forward timely on problems found in auditing, which helps a lot in project implementation. The Department also submits Auditing Reports to World Bank in time. 8.4 Provincial Agricultural Department, Provincial Department of Aquatic Products, and Bureau of Environmental Protection are respectively in charge of technical guidance, services and environmental monitoring. 8.5 Under the direction of PLA and Provincial PMO, PMOs at municipal and county levels are responsible for the overall operation of the project. They cooperate with other authorities concerned to help relevant project units in their work. 8.6 According to the Bank's Appraisal Report and fundamental management procedures in China, project construction unit selects design agency to undertake technique design and drafts annual work programs, then submits them to province and municipal authorities for approval. 8.7 Procurement lists are put forward by construction unit in view of project design. Provincial PMO gathers them and undertakes checks. Then after permission from China's relevant authorities and approval from the Bank, the procurement mode is established. Provincial PMO then delegates the procurement to tendering agency to organize procurement and appropriates the goods to construction unit as planned.  39 8.8 PMOs at various levels are in charge of daily monitoring and appraisal. They submit cascadely work progress to provincial PMO. Provincial PMO then submits progress report of project implementation to the Bank per half a year. 9. Project Evaluation 9.1 It is estimated that during a 15-year economical cycle, the project can gain a profit of RMB18,900 million. FIRR of the project is 30.2% and EIRR is 31.2%, basically reaching up the objectives at appraisal. 9.2 In general, the project is rightly selected. However, the implementation of marine fishery and agroindustry do not get desired results. It is proper to adjust marine fishing project at Mid-appraisal. Being a comprehensive developing program, the project's complicated design causes great difficulties in its implementation. Typically is the case with the aquaculture project. According to the original design, the Bank's disbursement rate for civil works in aquaculture is zero, money mainly comes from the 50% supporting funds submitted to the province by each vessel project city. While the vessels have to be constructed in three times, which lasts several years, the construction period for aquaculture is only 1-2 years, this affects greatly the disbursement for aquaculture. Practically, design in this way is not scientific and reasonable. Besides, the preparation period from identification to implementation extends too long. Till the implementation of the project, some factors like resources, production and market have changed, which damages the smooth implementation of the project. 9.3 With the efforts of project units and supports from provincial government, the project can be said to progress as planned. 10. Future Operations 10.1 After its implementation, the project will operate in accordance with market economy. In the light of the principle which assumes sole responsibility for one's own profits or losses, the industries and farmers will determine their own modes of operation and management. 10.2 PMOs at each level will be maintained. Apart from monitoring and evaluating later stage development of the project, they will assist and urge the repayment of the Bank's loans. 10.3 Provincial PMO will be maintained. It will continue to cooperate with each technique and trade authority and assist project units in solving non-operational problems that need government help. 11. Experiences and Lessons Learned  40 11.1 Devotion from government at each level is a key factor for project's success. Active participation of farmers and close cooperation between related agencies lay a solid foundation on the project's success. Fund from the Bank is an important assurance for the project. Financial support at each governmental level functions remarkably in the implementation of the project. 11.2 The issue of insufficient supporting capitals has postponed the construction period of some sector projects. The complicated procedures in procurement affected the project's progress. The long preparation period for appraisal has had great influence on agroprocessing projects. Due to market changes, these projects are operating with difficulties after their implementation. 11.3 The sophisticated design process of the project leads the implementation of the project in a fix.  41 ANNEX B: ICR MISSION'S AIDE-MEMOIRE 1. A Bank Mission composed of Zhu Zhengxuan (EACCF), Li Qun (EASRD), Zhang Kaiping, Andrew Kaelin and Cheng Enjiang (Consultants) visited Guangdong Province from January 26 to February 6, 1999, to discuss implementation completion of the project. The Mission held discussions with PMOs at various levels, the relevant line agencies, the Provincial Auditing Bureau, as well as beneficiaries in Panyu, Maoming, Qingyuan, Shenzhen, Guangzhou, Zhuhai, Zhongshan, Jiangmeng and Zhaoqing. Site visits include land reclamation areas, fruit tree plantation, poverty alleviation component, steel vessel, fish culture and agroprocessing plants. A final wrap-up meeting with members of the Provincial PMO was held on February 6, 1999 in Guangzhou. 2. The Mission found that the PMO staff at all levels were well prepared for the review: The draft ICR of the Borrower was submitted to the Mission upon arrival, together with detailed tables necessary for financial and economic analysis. The Mission was particularly impressed by the PMO staff for their flexibility and willingness to accommodate the various random field visits at short notice. Therefore the mission would like to express its thanks to the provincial authorities for the courtesy, cooperation and hospitality extended to the Mission during its stay in Guangdong Province. 3. This draft Aide-Memoire summarises the findings and preliminary conclusions of the ICR mission and provides a basis for discussion at the final meeting in Guangzhou. In the light of these final discussions and as agreed between Government, IDA and the mission, the Aide-Memoire will be finalized and attached to the ICR. Major Findings of the Mission 4. Revisions during project implementations Following major revisions took place during mid-term review: * Marine Capture fishery: Number of vessels was reduced from 86 to 28. The cold storage was reduced accordingly from 5 to 1 and the wharf was cancelled, as this is a more realistic target. * Land Reclamation: the Modaomen development area of Zhuhai was replaced by Zhongshan Municipality, and the crop area was adjusted accordingly from 6,446 ha to 4,998 ha. This is because Zhuhai was rezoned as commercial development area, hence agricultural development activities discontinued. * Qingyuan Poverty Reduction: Investment to the expansion of Yingde Sugar Plant was replaced by 1,500 ha of off-season snow pea, as the expansion was invested by the government. * Shenzhen Feed Additive Plant and Shenzhen Foodstuff processing Factory were cancelled, due to market changes.  42 5. Project Implementation Overall, most physical targets for the components covering aquaculture, horticulture, land reclamation, agro-processing and poverty alleviation are full met or exceeded. The only exceptions are for the fish/shrimp pond construction under aquaculture component and sugarcane production under Qingyuan Poverty Alleviation Component. Area of pond construction was reduced because of occurrence of shrimp disease started nationwide in 1993 . The sugarcane area was lag behind the target because part of the land was used for rice production, so as to feed the settlers. Following table shows attainment of physical targets: Category Objectives Completed % of actual Revised Target Actual as against Revised SAR Fishing Vessels Steel Hull 22 22 100 Wooden Hull 6 6 100 Fish Culture Fish Ponds 2,538 ha 2,234 ha 92 Shrimp ponds 300 ha 208 ha 69 Oysters 440 ha 440 ha 100 Net cages 11,000 11,000 100 New orchards Lichi 2,130 ha 2,130 ha 100 Longan 1,180 ha 1,180 ha 100 Improved orchard Lichi 7,517 ha 7,517 ha 100 Longan 1,180 ha 1,180 ha 100 Pomelo 2,000 ha 2,000 ha 100 Land reclamation Panyu 4,462 ha 4,741 ha 106 Zhongshan 532 ha 532 ha 100 Processing plants 11 11 100 Poverty reduction Fish ponds 606 ha 606 ha 100 Off-season vegetables 1,000 ha 1,350 ha 135 Sugar cane 3,000 ha 2,200 ha 73 Mulberry 1,500 ha 1,600 ha 107 Snow Peas 1,500 ha 1,500 ha 100 Voluntary Resettlement 1,200 ha 1,200 ha 100 6. Project Operations In general, the project is operating well. According to the preliminary estimate, most of the yields and production achievement for various crop and fishes under marine capture fisheries, land reclamation and poverty alleviation components were met or exceeded the levels projected at appraisal. Fruit development succeeded well in the initial years: the fruit bearing is advanced, quality is greatly improved with the introduction of the improved varieties and market competition is quite  43 strong. Therefore the production targets are likely to be reached, or even ahead of schedule. Nevertheless, silk production under poverty alleviation component is experiencing great difficulty, due to market change. Cold storage under the same component is idle, as a result of infrastructure improvement (construction of Guangzhou- Qingyuan Highway enabled transportation of fresh vegetables just harvested to Guangzhou in a 2-3 hours). Operations of other activities under this component are satisfactory. Performance of Agroprocessing plants differs: two plants are doing well, with production targets exceeded, two are expected to be operational in 1999/2000, and seven are now operating but not at full capacity. Such delayed and low capacity operation are due to shortage of working capital, or market change. The managers are trying to overcome difficulties. 7. Project benefits The project gains good benefit, in addition to the agricultural production increase, which include: (a) strengthening of marine resources management; (b) proven technology transfer; (c) improvement of farmer's income; (d) environment improvement; (e) better utilization of the slope, tidal lands and expansion of farmn land; and (f) social benefits. 8. Project costs At the time of appraisal, the project cost was estimated as US$ 303.79 million. Substantial revision of the scope for marine capture fishery resulted in cost savings. In addition, about US$ 10,166.350.41 was asked to be refunded (details in Para. 10 ). It was agreed that both the saved cost and the refunds be transferred to a Earth Quake Rehabilitation Program in Yunnan and Inner Mongolia, totaling SDR 50.25 million, or 41% of the credit amount, making the actual cost of this project to US$ 242.16 million. Among which, 42.7% was IDA credit. The last disbursement took place on May 29, 1998. 9. Covenants Covenants were focused on (a) establishmnent of a special account and revolving fund for fishing vessels, sugarcane production and agroindustries; (b) environmental aspects (particularly effluent control); (c) marine fish resources management and monitoring; (d) ownership transfer of fishing vessels; (e) project auditing and reporting. The covenants which are not complied with relate to agroindustry. 10. Refund and Reallocation As a result of misuse of procured materials, a total of US$ 10,166,350.41 was asked to be returned to the IDA in 1996. 8 municipalities were involved in such refund and covered areas of fruit development, land reclamation and aquaculture. The procured steel through ICB was exchanged for other materials used by cage construction, water pipes and wires; part of the chemical fertilizer was sold to the local input supply cooperative for purpose of receiving the same amount of fertilizer the following year. The IDA was not consulted nor informed of such exchanges. The Government of China and IDA agreed during the MTR to reallocate some SDR 50.63 million to an Earthquake Rehabilitation Program in Yunnan and Inner Mongolia. 11. Project organizations The provincial Project Management Office was shifted from the Provincial Agricultural Commission during project preparation to the  44 provincial Department of Finance at the beginning of project implementation had caused some managerial problems in the initial years: technical support from the line agencies was weakened, and misuse of procured materials was discovered. At the strong recommendation of earlier supervision missions, links of PMO with line agencies was improved, especially at municipal/county levels. Many experienced project staff have remained stable and quite committed to the project objectives. Future Operations 12. The mission discussed with the Borrower the future operations, which is summarized as follows: (a) Emphasis be laid on O&M. Sea dykes safety should continue to receive close attention and disaster resistant capacity of the project works should be further enhanced; (b) For those activities which are unlikely sustainable, such as silk plant and the cold storage, an action plan , such as auction or alternative use of the facilities, would be worked out, for purpose of avoiding further losses. Likewise, an action plan would be worked out for plants under agro-processing component, indicating in detail the necessary steps to overcome problems/difficulties, such as closure or reorganization of assets and liabilities, etc.. (c) To maximize economic benefit, variety adjustment or diversified economy was considered by local governments, such as construction of high yielding banana orchard in Zhongshan, replacement of low value fish species by high value ones under the aquaculture component, for purpose of reducing market risks, or increase income; (d) The proven technology transfer would receive continued support from the government; (e) more aggressive hatchery program was considered to provide reliable sources of fish fingerlings and to make the aquaculture component real sustainable. While doing so, a plan should be worked out indicating fimding sources, organization arrangement, technology and monitoring indicators. Follow up 13. The mission will prepare an ICR report, which will be sent to the World Bank by Mid-March, 1999. The ICR includes a Part II section which presents a review of implementation performance and results from the Borrower's perspective. A guideline on the preparation of the part II is presented in the Attachment.  45 Attachment Detailed requirement for further preparing ICR 1. The mission received and discussed with the Borrower its draft ICR, and recommended the following areas while revising and finalizing the report: 2. Achievement of Project Objective and Project Impact. * Explanations should be provided if there are substantial changes with regard to the targets, objectives, activities under each component, and cost (such as orchard subproject). Causes for such changes, such as project design revisions, under estimate of physical quantities and base unit costs, changes in exchange rates, implementation delay, and performance of contractors; * Poverty alleviation and /or other social economic benefits should be addressed. This refers to, in particular, the improved livelihood of about 56,330 households in limestone mountainous and an additional 1,200 resettled households; the number of beneficiaries, incremental employment opportunity for farmers and the role of women in each component and the project as a whole. 3. Major Factors Affecting the Project. Any major issues or problems encountered, and their impacts on the project implementation should be addressed under this section. An assessment should be made, as to whether the procurement and disbursement were according to planned schedule. Clarification should be made for any delay. 4. Project Sustainability/Future Operation. Major factors affecting sustainability or future operations be discussed, such as continued government commitment and support; policy environment; institution/management effectiveness; economic, technical, financial, and environmental viability; social impact, local participation, and incentives for participants to sustain the project. The Mission found during its field visit that a lot of project areas have their future plan in mind, which should be put into the report. Section of experience and lessons learnt should also be strengthened. 5. In order to enable completion of the ICR report of the IDA, additional information is requested, which is as follows: 6. Complete project investment costs and benefit analyses for each component by finalizing: * The actual detailed investment costs by components, expenditure category, and year in Yuan and US$ based on actual investment costs from the annual financial and physical progress reports (including additional local costs for Marine Fisheries and Orchard Development components);  46 * The current farm-gate prices (1998) for all farm inputs and outputs in each component and area (the World Bank price projections or the actual export and import prices in Guangzhou should be used to estimate farm-gate prices in 1998 constant terms for traded inputs and outputs with domestic and international transport and handling); * The actual crop and farm budgets by year (to full development) for orchard development, land reclamation, and poverty alleviation subprojects and components: (i) detailed crop budgets should reflect actual scenarios for litchi, longan, pomelo, sugarcane, lotus roots, grain, vegetable, and mulberry production in each subproject area; (ii) projected yield should be the actual yield from 1992 to 1998, and the estimated yield (to full development) based on the experiences of the existing project in each sub-project area; and (iii) the amount applied of seed, fertilizer, and farm chemicals should be the actual average and the incremental level with optimal farm input applications (with/without project) in each area. * The actual fann budgets (per hector) by year (to full development) for brackish water and freshwater fish and shrimp ponds, and oyster beds components (detailed inputs and outputs should be included by different kinds of fish); . The actual area developed and sown by year (based on the actual phasing of investment expenditure in each component) in aquaculture, orchard development, land reclamation, and poverty alleviation sub-projects and components; * The actual cropping pattern and intensity for above area and components; * The actual developed new fishing vessels (wooden purse seines and steel trawlers), marine net cages and freshwater cages by year and areas with detailed outputs and inputs for each fishing vessel and cage in the South Chine Seas, Huizhou, Zhuhai, Chaozhou and Shantou area; and * The actual and projected financial statements for each agroprocessing plant with detailed outputs, operational and financial costs (all expenditures). 7. Formulating farm household survey data from sampling of predetermined areas selected for typical beneficiary families of pomelo, litchi, longan, sugarcane, lotus roots, grain, vegetable, and mulberry production household in Meizhou, Maomin, Panyu, and Qingyuan areas (especially for 1,200 voluntary resettled families and about 56,330 households in existing limestone mountains poverty area), including detailed income from crop and fruit production, sideline and others, and expenditures for investment and operation cost, taxes, and other charges with and without project.  47 8. Finalizing the summary tables on actual investment costs, procurement, disbursement and financing plan for the whole project according to the original estimates of the SAR and of the mid-term adjustment. 9. Complete summary tables of Key Indicators for project implementation and operation with the original estimates of the SAR and of the mid-term Review, and actual completion at the end of the 1998. 10. General: All tables using the original SAR figures should be carefully checked for consistency of items and figures used in the SAR