China - Forestry Development in Poor Areas Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 36399 IMPLEMENTATION COMPLETION REPORT (IF-N0390 SCL-43250 TF-27155) ON A LOAN IN THE AMOUNT OF US$100 MILLION AND A CREDIT IN THE AMOUNT OF SDR 73 MILLION (US$100 MILLION EQUIVALENT) TO THE PEOPLE'S REPUBLIC OF CHINA FOR A FORESTRY DEVELOPMENT IN POOR AREAS PROJECT JUNE 27, 2006 Rural Development and Natural Resources Sector Unit East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (Exchange Rate Effective December 31, 2005) Currency Unit = Yuan (Y) Y 1.00 = US$ 0.12 US$ 1.00 = Y 8.07 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy CFA Community Forestry Assessment ERR Economic Rate of Return FDPA Forestry Development in Poor Areas Project FRDPP Forestry Resource Development and Protection Project FRR Financial Rate of Return GoC Government of China IDA International Development Association MOF Ministry of Finance NAP National Afforestation Project NDRC National Development and Reform Commission NFPP Natural Forest Protection Program NPV Net Present Value PAD Project Appraisal Document PMC Project Management Center PMO Project Management Office PRA Participatory Rural Approach SDR Special Drawing Right SFA State Forestry Administration TEATO Technical Extension and Training Office TVE Township and Village Enterprise Vice President: Jeffrey S. Gutman, EAPVP (Acting) Country Director David R. Dollar, EACCF Sector Manager Mark D. Wilson, EASRD Task Team Leader/Task Manager: Liu Jin, EASRD  CHINA FORESTRY DEVELOPMENT IN POOR AREAS PROJECT IMPLEMENTATION COMPLETION REPORT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 4 5. Major Factors Affecting Implementation and Outcome 11 6. Sustainability 13 7. Bank and Borrower Performance 14 8. Lessons Learned 16 9. Partner Comments 17 10. Additional Information 17 Annex 1. Key Performance Indicators/Log Frame Matrix 18 Annex 2. Project Costs and Financing 19 Annex 3. Economic Costs and Benefits 22 Annex 4. Bank Inputs 23 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 24 Annex 6. Ratings of Bank and Borrower Performance 25 Annex 7. List of Supporting Documents 26 Annex 8. Borrower's ICR 27  Project ID: P046952 Project Name: Forestry Development In Poor Areas Team Leader: Jin Liu TL Unit: EASRD ICR Type: Core ICR Report Date: June 27, 2006 1. Project Data Name: Forestry Development In Poor Areas L/C/TF Number: IF-N0390; SCL-43250; TF-27155 Country/Department: CHINA Region: East Asia and Pacific Region Sector/subsector: Forestry (86%); Micro- and SME finance (7%); Agricultural marketing and trade (4%); Irrigation and drainage (3%) Theme: Land administration and management (P); Rural markets (P); Small and medium enterprise support (P) KEY DATES Original Revised/Actual PCD: 01/24/1997 Effective: 12/16/1998 12/16/1998 Appraisal: 02/19/1998 MTR: 10/13/2001 10/13/2001 Approval: 05/21/1998 Closing: 12/31/2005 12/31/2005 Borrower/Implementing Agency: The People's Republic of China /The Ministry of Forestry Other Partners: STAFF Current At Appraisal Vice President: Jeffrey Gutman (acting) Jean-Michel Severino Country Director: David R. Dollar Yukon Huang Sector Manager: Mark D. Wilson Geoffrey B. Fox Team Leader at ICR: Liu Jin Richard Scobey ICR Primary Author: Albert Nyberg; Weiguo Zhou; Zong-cheng Lin 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: HL Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No  3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The Forestry Development in Poor Areas Project (FDPA) was designed to develop forest resources in poor areas of central and western China on a sustainable and participatory basis to support poverty reduction, forestry development and improved environmental management. China long has been a forest-poor country. The increasing gap between timber supply and demand is a key constraint to sustainable forestry development which in turn has led to a significant threat to biodiversity and natural forest protection. While the launch by the Government of China (GoC) of the Natural Forest Protection Program (NFPP) in 1998 was environmentally beneficial to China, it further widened the gap between timber supply and demand by imposing a nation-wide logging ban. The increase of forest resources is a priority in China's development strategy. Most poor areas are in the remote mountainous areas of central and western China, where agricultural land is extremely poor and forest resources are the most important production asset available, shifting the focus of afforestation activities from the more developed southern and coastal provinces to the poorer inland regions would not only contribute to the forestry development, but also support farmers' income generation, particularly for poor households, to contribute to poverty alleviation in these areas. The project objective reflected the government's development priorities and was highly consistent with the Bank's County Assistance Strategy (CAS) for China, which fits well within its goals of: (a) "Improving efficiency and sustainability of the use of natural resources" and (b) "reducing growing disparities and improve income in disadvantaged sectors and regions in China". The project objectives were clear and well understood by the participating provinces and county implementation agencies. 3.2 Revised Objective: The objectives remained unchanged throughout the project period. 3.3 Original Components: The primary focus of the project was timber and economic tree crop expansion, supported by strong technical services to develop new genetic materials, training for participants to extend new technologies and management experience on effective forest establishment and management, and the development of physical infrastructure. Additionally, credit for the development of small scale forestry product enterprises was provided. The project components are summarized below. The appraisal cost estimates included physical and price contingency provisions. (1) Timber Plantation (US$121.8 million, 33.5 percent of total project cost at appraisal). Although afforestation has continued for many years and nationwide forest coverage has increased, it remains low at about 18 percent. Deforestation and barren fragile lands have - 2 -  contributed to major flooding and erosion problems and many of these lands are not sufficiently productive to generate adequate income for the resident population. The primary objective of the project was to develop forestry resources to support poverty reduction and forestry development in the mountainous areas of twelve provinces in central and western China, where most of the designated poverty counties are located. This component financed the establishment of about 315,000 ha of timber plantation. The forestry resources were intended primarily to provide to construction timber and secondarily to provide pulpwood and mine pit-props. The main afforestation entities were to be individual households, groups of households, shareholding cooperative forest farms and village/township collective forest farms. The improved silvicultural management program initiated in the Forest Resource Development and Protection Project (FRDPP) were to be continued and the new research results were to be extended to the project planting activities. (2) Economic Forest Crops (US$135.2 million, 37.1 percent of total project cost at appraisal). This project component was designed to generate income for poor households in a shorter time period than would be generated from timber investments. It was designed to finance the establishment of about 230,000 ha of economic forest crops, comprising 110,000 ha of new/rehabilitated bamboo and 120,000 ha of fruit, nut and medicinal tree crops. The varieties/species selected were to be based on farmers' preferences