Announcement of Improved Incomes by Developing Water Resources in the Yangtze River Basin in China on April 28, 1995

The World Bank East Asia & Pacific Region 1818 H Street, NW Washington, DC 20433. USA Press Release no. 95/35 EAP Contact: Rachel McColgan-Mohamed (202) 458-0358 fax (202) 522-3405 Developing Water Resources to Improve Incomes in the Yangtze River Basin Washington, April 28, 1995- Water resources, which are critical for raising agricultural production and incomes, will be further developed in China's Yangtze River Basin following the World Bank Executive Board's approval of the first comprehensive operation in this sector earlier this week. The Yangtze River Basin Project will be implemented over six years at a cost of US$550 milliork of which the World Bank Group will finance US$210 million. " This project represents the most comprehensive involvement the Bank has had in China's water resources to date. Although not designed as a poverty project, the beneficiaries are mainly rural dwellers with low incomes and many live in absolute poverty areas, " Richard Redinger, the project's Task Manager, said. Agriculture plays a key role in China's economy, providing a livelihood for some 200 million farm families. China's farmland accounts for just 7 percent of the world's arable land, but feeds 22 percent of the world's total population. The sector accounted for 19 percent of GDP in a country which has seen economic growth average 9 percent a year over the past decade. China's recent impressive economic growth, however, masks growing regional and urban disparities: rural net income per capita in 1992 was $90, compared to a disposable after-tax income of $210 for urban households. One way to narrow this gap is by increasing production efficiency per unit area. Water resources provide one of the simplest and most effective means of increasing agricultural output- the productivity of irrigated land averages about twice that of rain-fed land and is especially important for high- value crops like fruits and vegetables. Although China has vast water resources, they are distributed unevenly. water shortages are commonplace in the north and west of the country, while in the south, utilization is still less than 20 percent of potential supply. Agriculture Sector Lending, FY82-94 (US$mn) Although China's irrigated area 4800 - 4493 has expanded from about 49 0 s 4384 307 million acres to nearly 124 million 4000 3 acres since 1949, many of the 320 o 3 o s M Illiirrigation systems were built to 2400Bank Agriculture loans to China very rudimentary designs due to MBank total Agriculture loans lack of resources. This has 1600 95 60175resulted in their gradual 800 7 0 degradation, which is manifested S Is * Is oin such problems as waterlogged 0 1982 1984 1986 1988 1990 1992 1993 1994 fields (due to irrigation without adequate drainage), excessive salinization, and low system efficiencies. Archives/Records Center, H 61-001 ( 1) Averting Floods The Yangtze River, the largest in China and the third longest in the world, is central to China's water supply. The Yangtze River basin in which it sits is home to some 350 million people. The basin and its major rivers are subject to seasonal flooding, and flood control works-such as regulating reservoirs in upper catchments, river dikes and flood retention basins-have been constructed in areas susceptible to this natural disaster. Although cities such as Beijing and Guangzhou are protected from 100-year flooding, the threat of 40- to 50-year floods remains for the majority, and 5-7 year flood protection is common in the project area. Part of the middle Yangtze is suspended up to 33 feet above the surrounding countryside, creating the potential for catastrophic floods over large areas. Over 450 million people throughout China live under constant risk of flooding. The project has four main objectives which will be achieved through a number of components divided between the two provinces of Hubei and Hunan: > to raise agricultural production and incomes; > to mitigate the risk of flood, > to introduce a more cost-effective system for operation and maintenance of irrigation and drainage schemes; > to promote institutional reform and strengthening and improve planning and environmental monitoring. Hubei * essential repair and rehabilitation works to upgrade four existing irrigation schemes; * improvement of flood control over 830,000 acres and drainage facilities for some 69,000 acres; * non-water projects on aquaculture, forestry, grassland development and soil improvement; * institutional strengthening. Hunan * completion of two partly-constructed irrigation systems; * construction of the Jiangya Multipurpose Dam mainly for flood control and power in the Lishui River Basin; * technical support and research to improve design and management of Dongting Lake drainage facilities; * institutional development for establishment of the Lishui Hydro and Power Corporation. Hubei Components Hunan Components 6% 7% 9% 6 7 Jlangya Dam 0 Irrigation A Research & Inst U Aquaculture building o Forestry O Tleshan 0 Grasslands/l.stock 0 Uuduzhal M Soil improvement 72% . Total cost for Hunan - $377 mn Total cost for Hubel - $174.8 mn World Bank Group loan - $80 mn (45%) World Bank Group loan -$130 mn 2 The successful implementation of such a comprehensive program depends on the strengthening of provincial departments which oversee development, maintenance and revenue collection in the water resources sector. Upgrading their capacity in planning and design will be a central focus of the components allocated for institutional capacity building, supplemented by study tours and new equipment. Farmer Participation Encouraged The project's innovative features include: * self-financing irrigation and drainage districts, based on direct famer participation * establishment of the Lishui Hydro and Power Corporation as a model for comprehensive river basin management including environmental protection In addition, a number of non-water resources sub-projects have also been incorporated, including: * aquaculture component which would improve production in 24 counties and cities through investments to improve small lakes and farn ponds. Included in this subproject are the construction of five fish hatcheries and one turtle hatchery. * cattle and grasslands improvement sub-project to improve grasslands for cattle breeding * forresy sub-project to fund 41,310 acres of protective, timber and economic forestry * soil improvement sub-project to develop the local fertilizer supply industry The $US210 million loan is made up of $100 million equivalent with 20 years' maturity, including 5 years of grace, at the Bank's standard variable interest rate, and $110 million equivalent on standard International Development Association (the Bank's concessional lending arm) terms with 35 years' maturity. 4## 3