China - Seeds Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 5348-CRA STAFF APPRAISAL REPORT CH'INA SEEDS PROJECT March 18, 1985 Projects Department East Asia and Pacific Regional Office This document has a restricted distribution and mav be used by recipients onlv in the performance of their official duties. Its c-ontents ma% not otherwiise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit - Yuan (Y) US$1.00 = Y 2.8 (January 1985) Y 1.00 = US$0.36 Fiscal Year January 1 - December 31 Weights and Measures 1 meter (m) = 3.28 feet 1 kilometer (kin) 0.62 miles 1 heccare (ha) = 2.47 acres 15 mu 1 kilogram (kg) = 2.2 pounds 1 ton (t) = 1,000 kg 2,205 pounds -I.NCIPA_L ABBRE'LITIONS AND ACRONYMS USED ABC - Agricultural 3ank of China AITC - Agriculture, Industry and Trade Corporation BSF - Bureau of State Farms CAAS - Chinese Academy of Agricultural Sciences CIAT - Interna;ional Center 'or Tropi.-al Agriculture CITMYT - incernationaL Maize and Wheat improvement Cencer CIP - international Potato Center CNT'C - China National Technical Import Corporation GVAO - Gross Value of AgricuLturai Output rRR! - InEernat ona. Rice Research Institute MAAF - Ministry of Agriculture, Animal Husbandry and Fisheries MOF - Ministry of Linance NSC - National Seed Corporation PBSF - Provincial Bureau of State Farms PCB - People's Construction Bank PMO - Project Management Office PRS - Production Responsibility System tpn - Tons per hour  FOR OFFICIAL USE ONLY GLOSSARY Variety: A subdivision of a plant kind which is distinct, uniform and stable when reproduced. Hybrid: First generation of a cross produced by controlling pollination and by combining two or more inbred lines, one inbred or single cross with an open pollinated variety, or two selected clones, seed lines, varieties or species, e.g., hybrid rice. Certified Seed: Seed produced in compliance with regulations and in confor- mity with standards established by the MAAF (NSC), usually comprising four seed classes: breeder seed; basic seed; stock seed; and certified seed intended for crop production. Breeder Seed: Seed from first step in multiplication process usually produced under supervision of originating breeder; source for production of subsequent classes of seed. Basic Seed (Foundation Seed): A class of certified seed which is the progeny of breeder seed. Stock Seed: A class of certified seed, usually the progency of basic seed used as source for production of certified seed or commercial seed. Production Seed: General term applied to seed intended for crop production as opposed to seed production; commercial seed is common synonym. Seed Company: Unit or agency at the different levels of government involved in the seed production and supply system. Companies at the provincial levels and above are primarily involved in planning, allocation of production, supervision and certification; units below the provincial level (e.g., county or municipality) produce, process, store and market the seed. Quality Assurance: Refers to positive and systematic procedures installed and actions taken by management of a seed company to attain and maintain established seed quality standards; often referred to as internal quality control. Quality Control: Refers to controls and regulations established by an external or independent agency, i.e., agency not directly involved in seed production, for the production, processing and marketing of seed; seed certification has the central role in quality control. 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.  CHINA SEEDS PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. BACKGROUND .........1...................................... 1 Introduction ....... ................................................ 1 The Agricultural Sector ..... ................ 1 Bank Group Lending for Agriculture .................... 4 II. THE SEED INDUSTRY IN CHINA ............................... 5 Background ......... .................................... 5 Institutions ........................................... 6 Seed Processing Methods ........ . . . .................. ......... . 9 Seed Production and'Distribution ...................... 9 Seed Prices ...................... ..................... 11 Support Services ............................... 0 ...................... ll Project Formulation and Rationale ..................... 13 III. THE PROJECT ................................. .... ..................... 14 Project Description ....... ............ ................ 14 Detailed Features .. ......... ...... . . . . ..................... . 15 Status of Project Preparation ................. 19 Implementation Schedule ............................... 19 Cost Estimates . .......... ..... ..... .................. . 19 Financing ............................................. 21 Procurement ........................................... 21 Disbursements ............. ............................ 23 Accounts and Audits ................................... 23 Project Management and Implementation .............. 23 IV. MARKETS, PRICES A-ND BENEFITS ............................. 25 Market Prospects ................... ................... 25 Prices ................................................ 26 Production Benefits ............ .. ..-..... 28 This report is based on the findings of a pre-appraisal mission comprising W.P. Ting and C. Ku (IDA), J.C. Delouche, P. Harrell and A. Piazza (consuLtants) in May 1984; and an appraisal mission comprising W.P. Ting (IDA), J.C. DeLouche and A. Piazza (consultants) in August 1984.  Page No. Demonstration Effects and Other Benefits .... .......... 31 Financial Analysis .................................... 31 Economic Analysis ....... ......................... *.. ........ . 32 Risks ... . . . .............. 33 Environmental Effects ..... o........................... 33 V. AGREEMENTS REACHED AND RECOMMENDATIONS ................... 34 TABLES IN TEXT 3.1 Cost Summary * ............................................... 20 3.2 Annual Price Increase ...... ................................ 20 3.3 Financing Plan ........................... o ................. 21 3.4 Procurement Profile ....... .................................. 22 4.1 Current and Future National Seed Production and Utilization.. 27 4.2 Seed Production Costs and Retail Prices ..o .................. 29 4.3 Current and Future Seed Output . . . .30 4.A Economic Rates of Return ........ o........................... 33 ANNEXES 1. Cost Estimates Project Cost Summary Schedule of Expenditures Expected Price Increases Estimated Disbursement Schedule Cost Summary by Institution Buildings Seed Farm Development Seed Processing Equipment Laboratory and Office Equipment Farm Implements and Machinery Vehicles MateriaLs Overseas and Local Training and Study Tours Technical Assistance 2. Project Institutions Locations 5f Project Institutions Seed Center Staff 3. Area Sown to Improved Varieties 4. Seed Drying, Processing and Storage 5. Economic Analysis Typical Variable Costs (Financial) for Seed Processing Typical Variable Costs (Economic) for Seed Processing Economic Prices for Traded Goods Economic Costs and Benefits 6. Selected Documents and Data Available in the Project File  - iii- LIST OF FIGURES 1. Organizational Structure of the Ministry of Agriculture, Animal Husbandry and Fisheries 12. Representative Organizational Structure of Local Seed Companies/Farms 3. State Farms Administrative Structure 4. Representative Organizational Structure for Local State Farms Bureaus/AITC 5. Organization for Project Implementation 6. Seed Production Calendar 7. Project Implementation Schedule MAP IBRD 18548 - Locations of Project Institutions  CHINA SEEDS PROJECT Credit and Project Summary Borrower: People's Republic of China Amount: SDR 41.7 million (US$40 million equivalent) Terms: In support of the Government's seed industry development program, the project would modernize facilities at 18 seed production, processing and distribution centers in 12 provinces and two autonomous regions. It would also strengthen operations of the National Seed Corporation (NSC), the central agency under the Ministry of Agriculture, Animal Husbandry and Fisheries (MAAF) which is responsible for developing a comprehensive seed quality assurance and control system. The project would contribute to increased production of high quality seed for major food and cash crops and serve as a model for planned construction over the next two decades of over 300 modern seed centers throughout China. Principal features of the proposed project would be construction of processing and storage facilities, laboratories, offices, and staff housing for the 18 centers; improvement of farm roads and irriga- tion works at seed center farm sites; and provision of pre- cleaning, drying, processing, testing, analytical and farm equip- ment. The project would also include a technical assistance and training component designed to facilitate access by China's seed industry to advanced seed techntlogy, modern quality assurance and control systems, and improved management methods available within the international community. The project faces no major technicaL risks since it involves proven seed processing technology that has been in regular operation in other parts of the world. Any uncertainty regarding overall coordination of project activities would be offset by the fact that the central Project Management Office would include, in addition to NSC staff, representatives from the Bureau of State Farms and the North China Plain Project Office, both of which have had previous experience in implementing Bank projects.  Estimated Costs: Local Foreign Total ----- US$ mln ------------