China - Mid-Yangtze Agricultural Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 16632 IMPLEMENTATION COMPLETION REPORT CHINA MID-YANGTZE AGRICULTURAL DEVELOPMENT PROJECT (CREDIT 2172-CHA) June 3. 1997 Rural and Social Development Division China and Mongolia Department East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the perfornance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency UJnit = Yuan (Y) 1989 (appraisal) $1=Y 3.76 1990 $1 =Y 4.78 1991 $1=Y 5.32 1992 $1 =Y 5.53 1993 $1 =Y 5.76 1994 $ 1 =Y 8.60 1995 $1 =Y 8.50 1996 $1=Y 8.30 FISCAL YEAR January I - December 31 WEIGHTS AND MEASURES I meter(m) = 3.28 feet(ft) I kilometer(km) 0.62 miles(mi) I square meter(m2) = 10.76 square feet(ft2) 1 square kilometer (km 2 0.4 square miles(mi2) 2 I hectare(ha)=0.01 km = 2.47 acres(ac)= 15 mu 2 I mu = 666.7 m = 0.0667 ha ABBREVIATIONS AND ACRONYMS CFDC - County Fruit Development Corporation FDC - Fruit Development Corporation JPMO - Joint Project Management Office ICB - International Competitive Bidding IDA - International Development Association LIB - Limited International Bidding MACHIMPEX - China National Machinery Import Export Corporation MOA - Ministry of Agriculture NCB - National Competitive Bidding PMO - Project Management Office PPMO - Provincial Project Management Office SAR - Staff Appraisal Report SOE - Statement of Expenses STC - Scientific and Technical Committee Vice President Jean-Michel Severino, EAP Director Nicholas C. Hope, EA2 Division Chief Joseph Goldberg, EA2RS Staff Member Rapeepun Jaisaard, Sr. Agriculture Economist, EA2RS  FOR OFFICIAL USE ONLY CONTENTS PREFACE . iii EVALUATION SUMMARY ................................................. iv PART 1: IMPLEMENTATION ASSESSMENT .....................................1 A. Project Objectives ..................................................l B. Results and Implementation Experience ..................................................2 C. Project Impact ..................................................6 D. Major Factors Affecting The Project ..................................................9 E. Project Sustainability ................................................. 10 F. IDA Performance ................... ................................................................................ 11 G. Borrower Performance ................... 12 H. Assessment of Outcome ................... 13 I. Future Operation ................... 13 J. Key Lessons Learned ................... 14 PART II: STATISTICAL TABLES ........................... 15 Table 1: Summary of Assessments .15 Table 2: Related Bank Loans/Credits .16 Table 3: Project Timetable .16 Table 4: Loan/Credit Disbursement: Cumulative Estimate and Actual .16 Table 5: Key Indicators for Project Implementation .17 Table 6: Key Indicators For Project Operations .20 Table 7: Studies Included in Project .23 Table 8A: Key Indicators For Project Operations ............................................... 24 Table 8B: Project Costs in $ Million ............................................... 25 Table 8C: Project Financing ............................................... 26 Table 9: Economic Costs and Benefits ............................................... 27 Table 10: Status of Legal Covenants ............................................... 28 Table 11: Compliance with Operational Manual Statements ...................................... 29 Table 12: Bank Resources: Staff Inputs ............................................... 29 Table 13: Bank Resources: Missions ............................................... 30 Table 14: Role of Women in Project ............................................... 30 ANNEX A: ICR MISSION'S AIDE MEMOIRE ................................................. 31 ANNEX B: BORROWER'S CONTRIBUTION TO THE ICR .. 38 A. Project Objectives ................................................. 38 B. Implementation Experience and Outcome ................................................. 39 C. Key Lessons Learned and Future Operation ................................................. 40 ANNEX C: PHOTOGRAPHS OF PROJECT AREAS .............................................. 42 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.   - 11i - IMPLEMENTATION COMPLETION REPORT CHINA MID-YANGTZE AGRICULTURAL DEVELOPMENT PROJECT (CREDIT 2172-CHA) PREFACE This is the Implementatior. Completion Report (ICR) for the Mid-Yangtze Agricultural Development Project in China, for which a credit in the amount of SDR 48.6 million ($64 million equivalent) was approved on August 8, 1990 and made effective on December 4, 1990. The credit was closed on December 31, 1996. It was fully disbursed and the last disbursement took place on April 16, 1997. The ICR was prepared by Rapeepun Jaisaard, Task Manager, EA2RS with the assistance of Zhong Tong (Consultant) and Arlene Reyes (EA2RS). The draft was reviewed by Messrs. Joseph Goldberg, Chief, EA2RS and Yo Kimura, Project Advisor, EA2DR. The borrower provided comments which are included in Annex B to the 1CR. Preparation of the ICR was completed following the Bank ICR mission and is based on materials from the project files and meetings with the project staff in the field. The borrower contributed with views and data requested, its own evaluation of the project's execution and comments on the draft ICR.   - Iv - CHINA MID-YANGTZE AGRICULTURAL DEVELOPMENT PROJECT (CREDIT 2172-CHA) EVALUATION SUMMARY Project Objectives 1. Project objectives were to in( .ease the amount, productivity and marketability of fruit production in low income areas of Sichuan, Hubei and Chongqing and thus increase incomes and alleviate poverty. The project aimed to accomplish this by structuring production to satisfy domestic and export demand for quality, variety and seasonality and by stimulating the development of effective marketing institutions. Specifically, the objectives were to: (a) develop 11,986 ha of new orchards on then uncultivated hilly slopes and rehabilitate 2,473 ha of existing orchards (approximately 80 percent of the planted area was to be citrus and 20 percent lychees, longans, pears, loquats, plums, yellow peaches and kiwi); (b) increase the provincial agriculture bureaus' ability to identify, propagate and distribute healthy, disease-free planting material, to institutionalize virus indexing and budwood registration programs, and to provide technical assistance for research and extension programs and training for managerial and technical staff in all aspects of fruit development and marketing; (c) establish commercially independent Fruit Development Corporations (FDCs) to market quality fruit in local, distant and export markets by introducing modern postharvest techniques and investing in packing and storage facilities; and (d) provide a demonlstration model for fruit production that would be applied in other areas. 2. These project objectives were in line with the Central and Provincial Government strategies of making efficient use of availablc human, land and water resources and diversifying the incomes of rural people through production of high-value crops. 'I'hese objectives were clearly spelled out in the project documentation and supported by project staff and beneficiaries. They reflected the Government's implementation capacity and were consistent with both the Government's regional development strategy and the Bank's Country Assistance Strategy at the time of project preparation. Implementation Results and Experience 3. The project has achieved its objectives of introducing new technologies in the development of wasteland along the Yangtze river into high-quality orchards. It set advanced technological standards for land development and lhorticultural practices, thereby producing high fruit yields and quality and consequently large benefits for farmers. The project achieved all its physical targets and produced results even higher than the ambitious SAR estimates. The FRRs for orange varieties ranged from 25-35 percent in new orchards to 38-55 percent for rehabilitated ones, typically higher by  - v - several percent than the SAR estimates. Participating farmers acquired more land and earned additional income, initially from intercrops, then from the new orchards, or by doubling or tripling yield in rehabilitated orchards. 4. Total expenditure at project completion was Y 869.6 million, 20 percent more than estimated at appraisal due to high inflation in China after 1990. However, due to devaluation of the yuan against the dollar during implementation, total project cost, when calculated in dollars, was $6 million less than the SAR estimates. The delay in credit approval owing to political events in 1989 delayed the start of land development, seedling production and planting of fruit trees and resulted in slow initial disbursement. However, disbursement rates caught up with the SAR time line beiore project completion. The total amount disbursed was $69 million, an amount higher than the original $64 million equivalent credit due to the depreciation of the dol]ar against the SDR. The project closed on December 3 1, 1996, after a one year extension. 5. IDA's performance in project identification, preparation and appraisal was satisfactory. IDA played a catalytic role in pooling international and domestic research experience. It helped the government to successfully develop a project that met its objectives. IDA's performance during supervision is viewed as highly satisfactory in helping the Project Management Offices (PMOs) resolve implementation problems and providing technical advice at each step of project implementation. The performance of the borrower was highly satisfactory with strong support from central, provincial and local governments. The project was well managed, and the farmers were enthusiastic, hardworking and in many cases creative. The project's components were for the most part implemented in line with the agreed implementation arrangements, and appropriate actions were taken to solve problems as they occurred. The supervisory role of the project's Scientific and Technical Committee (STC) contributed greatly to the high technical standards adopted by all the orchards. The borrower complied promptly and completely with the covenants prescribed in the legal agreements. Summary of Findings, Plans for Future Operations, and Key Lessons Learned 6. Overall Finding. The project's overall outcome is considered highly satisfactory. It achieved its objectives and did it with a high degree of sustainability. The most significant accomplishments were the introduction of new technologies, varieties and management systems. The technologies enabled the establishment of a budwood registration program and virus-free zones, high orchard horticultural standards, more productive varieties by top-grafting, and improved fruit quality by enhanced postharvest treatment. The availability of varieties that mature at different times allows an extended harvesting period. Better irrigation, inputs and management have had tremendous effects on yield, production and quality. The project packing plants grade, clean, wax and label the fruit to make it ready for up-scale markets and exports. The overall economic rate of return of the project is very high; at 40 percent it is even higher than the already high appraisal estimate of 34 percent.  - vi - 7. Project Impact. The project successfully increased income and employment for participating households and workers. It doubled the per capital income of about 300,000 farm families and provided job opportunities for about 130,000 workers during construction and implementation. Hlarvesting and postharvest activities have provided and (will increasingly provide) job opportunities in botlh orchards and packing houses, where 30 percent of the workers are women. The project has already played a large demonstration role in the development of the Three (Gorges area and in the integration of fruit production, processing and marketing. Large numbers of nonproject farmers now use virus-free seedlings from the project nurseries and sell fruit through the project's FDCs. It appears that the hectarage of new orchards developed by farmers outside the project area amounts to four to five times that in project orchards. The demonstration effect for rehabilitated orchards is about three times the area of the project's rehabilitated orchards. The project already has significant impacts in alleviating poverty, reducing soil erosion and generating linkage benefits. 8. Sustainability. The policy environment provided by the central and local governments has been and continues to be favorable to the sustainability of the project. Sichuan and Hubei Provinces and Chongqing Municipality all have demonstrated strong commitment. They have developed operation plans in consultation with the prefecture and county governmlents that would: (a) maintain the l'MOs and the FDCs, with some modifications in the distribution of staff among fLnlctions; (b) continue to pay the salaries of the fruit production technicians who are training farmers; and (c) provide operational budgets for the PMOs and the FDCs until they become self-sustaining. Since the majority of orchards are owned and operated by farmers, the actual work of orchard maintenance rests with them. Institutions and markets developed under the project continue to provide them with strong incentives to maintain orchard quality and productivity in order to earn additional income. UJnderlying future operations is the fact that the market demand for quality fruit is strong, in line with expectations during project preparation. 9. Future Operation. The future operation of the project will need to concentrate on orchard maintenance, postharvest processing and marketing. The PMOs will continue to be responsible for: (a) production management to make sure that production standards are maintained; (b) technical training for orchard maintenance; (c) disease and pest monitoring, control and forecasting; (d) advice to farmers on fertilizer type and application and on irrigation timing, frequency and volume; (e) maintenance of standard technologies and tools for fruit picking; (f) information gathering for production projection; (g) maintenance of project facilities such as irrigation facilities and roads; (h) collection of project household data for conducting future performance audits of the project; and (i) in cooperation with Bureaus of Finance at each level, recovery of the Credit plus interest in line with on-lending agreements. The County FDCs will continue to be responsible for (a) reliably providing necessary inputs to project farmers, (b) operating packing lines installed under the project, and (c) assisting farmers in marketing their products. The performance of the County FDCs will depend on their ability to develop marketing channels and procure farmers' production, their ability to  - vii - develop short, medium and long-term marketing strategies and their success in establishing direct linkages with large domestic and overseas wholesalers. 10. Lessons Learned. The key lessons learned from the project include the following: (a) Strong research and scientific bases drawn from domestic and international experience and the involvement of a science and technical committee have been essential to the success of this project. (b) Active roles of Ministry of Agriculture, provincial and local governments and research institutes in carrying out central government policy and cooperation among them contributed to the smooth implementation and success of the Project. (c) Staff in the implementation agencies should be drawn from technical e areaus familiar with the technical details of the operation. (d) Participation of farmers with a sense of ownership from the beginning made a big difference in how the project was implemented. (e) Adequate and timely allocation of counterpart funds according to schedule is a prerequisite for smooth project implementation. Finally, (f) more supervision missions should have been budgeted, particularly with the object of assisting the Provincial PMOs with procurement and disbursement problems, and earlier TA for marketing is needed to start marketing off on a strong footing.  - 1 - CHINA MID-YANGTZE AGRICULTURAL DEVELOPMENT PROJECT (CREDIT 2172-CHA) PART I: IMPLEMENTATION ASSESSMENT A. PROJECT OBJECTIVES 1. The project objectives w.re to increase the amount, productivity, and marketability of fruit production in low income areas of Sichuan and Hubei Provinces and in Chongqing Municipality and thus increase incomes and alleviate poverty. The project aimed to accomplish this by structuring production so as to satisfy domestic and export demand for quality, variety and seasonality and by stimulating the development of effective marketing institutions. The project objectives were in line with the Central and Provincial Government strategies of making efficient use of available human, land and water resources and diversifying the incomes of rural people through production of high- value crops. 2. The specific objectives of the project were to: (a) develop 11,986 ha of new orchards on then uncultivated hilly slopes and rehabilitate 2,473 ha of existing orchards (approximately 80 percent of the planted area was to be citrus and 20 percent lychees, longans, pears, loquats, plums, yellow peaches, and kiwi); (b) increase the provincial agriculture bureau's ability to identify, propagate and distribute healthy, disease-free planting material, to institutionalize virus indexing and budwood registration programs, and to provide technical assistance for research and extension programs and training for managerial and technical staff in all aspects of fruit development and marketing; (c) establish commercially independent Fruit Development Corporations (FDCs) to market quality fruit in local, distant and export markets by introducing modem postharvest techniques through investing in packing and storage facilities; and (d) provide a replica model for fruit production in other areas. 3. The project was designed to provide demonstration models for the development of hilly waste lands into orchards. The major emphases were on: (a) setting high technological standards (in land development and horticultural techniques); (b) increasing yield and quality of fruit (varieties, cultural practices and irrigation); and (c) maximizing benefits to farmers (emphasis on fresh fruit production, extension of harvest season, and  - 2 - strengthening of postharvest activities and marketing). This design was clearly spelled out in the project documentation and supported by project staff and beneficiaries. The objectives reflected the Government's implementation capacity and were consistent with both the Government's regional development strategy and the Bank's Country Assistance Strategy at the time of project preparation. B. RESULTS AND IMPLEMENTATION EXPERIENCE 4. Physical Results. The project has achieved its physical targets for nursery and mother-tree-garden development, orchard development, orchard rehabilitation and construction of postharvesting and t' iining facilities. According to the Key Indicators for Project Implementation table, the project has developed 77.5 ha of nursery and 120 ha of mother-tree gardens, rehabilitated 2,473 ha of existing low-yield orchards and developed 11,986 ha of new orchards. In nursery development, Sichuan used polyhouse nurseries instead of the open-field nurseries used in Hubei and Chongqing and built 60 polyhouses on 4 ha or land. The seedlings from polyhouse nurseries are stronger and double the size of the ones from the open field nurseries. In total, the development of new orchards was 100 percent of the SAR estimate, but in reaching this overall total, the new citrus orchards were 103 percent of the SAR target and those of other fruits 87 percent, largely due to the substitution of plantings of navel and mandarin oranges for those of other fruits in response to market demand and climatic suitability. Within other fruits, there was also some shift - from lychee to longan hectarage. Overall, 11,986 ha of new orchards and 2,473 ha of existing orchards (the latter also 100 percent of the SAR estimates) were developed. 5. The project built 935 km of orchard-access roads (105 percent of SAR estimates), 773 km for the new orchards and 162 km for the rehabilitated ones. These improved the accessibility of the orchards and, thus, lowered transport costs for inputs and outputs and increased fruit quality. The project also constructed irrigation ponds, reservoirs, pump houses, irrigation facilities and electrical facilities. The deviation in the numbers of diesel pumps and electric pumps from the SAR estimates was due to the adjustment of the irrigation facilities during the mid-term review (para. 34). The construction of a small orchard house (200 m2) in each orchard for storage. an orchard office and temporary sleeping quarters for technicians were also added during the mid-term evaluation. 6. Training centers cum county project management offices (1,000m2) were constructed and equipped with office equipment and training facilities in 33 project counties, one prefecture and one in Hubei Province. Fruit packing lines and houses (300- 500m2), warehouses (500m2) and ventilated storage facilities (500m2) were also constructed in thirteen of them. All project counties were provided with several pickups and 5-ton trucks each for distributing inputs and transporting fruit. Two barges were procured for water transportation.  -3 - Implementation Experience 7. General. The project was implemented by the Provincial Project Management Offices (PPMOs) of Sichuan, Hubei and Chongqing Municipality and coordinated by a Joint Project Management Office (JPMO) at the Ministry of Agriculture (MOA) in Beijing. Under the PPMOs, there are county PMOs in all 33 project counties. Fruit Development Corporations (FDCs) were set up at provincial and county levels. A Scientific and Technical Committee (STC) was appointed to provide overall technical advice and coordinate project scientific work with MOA and research institutes. 8. Strengthening Research atid Development. The project assisted Sichuan Provincial Fruit Research Institute, Central China Agricultural University in Hubei and the Chinese Academy of Agricultural Sciences in Chongqing in setting up virus-indexing programs and providing temperature controlled greenhouses, laboratory equipment, training and technical assistance. These institutes had provided technical bases for the development of the nurseries under the project. 9. Scientific and Technical Committee. The STC was composed of eminent scientists and technical specialists from several research institutes in the areas of fruit development, virus indexing and budwood registration. It played an important role in (a) setting technical standards for orchard establishment and rehabilitation, (b) developing criteria for site selection and management, (c) reviewing irrigation layout and orchard design, (d) inspecting and approving work at completion, (e) reviewing research proposals, and (f) advising the PMOs and FDCs on technical matters. 10. Fruit Development Corporations (FDCs). A few of the project counties had existing FDCs, and these were strengthened. In the others and at the provincial level, new FDCs were established under the project. The county FDCs assisted the farmers in orchard development and provided necessary inputs They were (and continue to be) responsible for packing lines installed under the project to provide farmers with enhanced packing, storage and transportation services. They also assist farmers in marketing their products. The provincial FDCs have very limited roles at the moment; their roles may expand when the orchards reach full production, if they are able to provide county FDCs with valuable export services. 11. Nurseries, Mother-Tree Gardens and Varieties. A nursery and a mother-tree garden were set up in each project county to ensure the availability of high quality virus- free seedlings for project farmers. The project promoted several new varieties developed by research institutes and tested them in the project areas for suitability to local conditions. The new varieties are superior in quality and also mature at different times during the year. Sweet orange (jincheng) has several superior qualities compared to the traditional red tangerine variety-thicker skin-making it easy to transport without damage, larger size, greater sweetness and lack of seeds. It is also an early maturing variety (early to late October) and can therefore capture the early market and command a higher price. Several navel varieties (bonanza, navelina, robertson and newhall) have  - 4 - been successfully grown in the project area. Navels are high value because of their quality, storability and transportability. The fruit is a mid maturing variety (between mid- November and early December) and can also be stored for several months for marketing during the spring festival. Mandarin oranges, promoted mainly in the Hubei project areas come in three varieties, which mature at slightly different times: from early September to November. Valencia is a summer orange which matures from April to May. 12. There are also superior varieties of'other fruits, such as the Sha Tian pomelo in Changshou, which was chosen by MOA as the best one for the area. There are also nurseries producing the superior seedlings of lychee, longan and yellow peach developed by the Luzhou Horticulture Research Institute. Overall, the project nurseries provided several million seedlings to project farmers. The project nurseries are operated as independent entities on a commercial basis. 13. New Orchards. The project developed 245 new orchards on marginal hilly land located in the 33 project counties along the Yangtze River. There were several stages in land development, site selection, survey, design, terracing and soil improvement. The site selection criteria were followed satisfactorily. In a few cases near the Three Gorges in Hubei, orchards were established on slopes of more than 30 degrees due to the desire to establish orchards in some counties with limited available land. In these cases, the cost of land development was higher than others. After early-on mission comments, site selection criteria were strictly followed in later sites. 14. In the areas with rocky ledges, explosives were used to break up the rock. Rocks and rock slabs were then used for making terraces according to project standards. Supervision missions made several suggestions for correction of certain deficiencies, and these were made. In order to develop soil in these rocky terraces, farmers dug trenches one meter deep and one meter wide and filled them with green and pig manure, rapeseed cake, lime and compound fertilizer. Green manure and bean crops were planted in this presoil, which was left to mature for a year, and then planted with seedlings from the project's nursery in a one-meter-deep hole filled with green manure and other fertilizers. 15. Almost all the project sites were located on sloping land. Irrigation ponds (reservoirs) were therefore able to be built on the hills above the orchards. Water is provided to the orchards in two ways. It is either pumped uphill to the high level reservoir from a low lying water source using a stationary electric or diesel pump located in a small pump house or a portable diesel pump or a water source above the orchard is captured and then distributed downhill through a distribution network (pipes or open ditches). Field irrigation is carried out by hand-held-hoses or, in a small number of cases, by sprinklers. Irrigation design was a key element in the project, because effective irrigation is essential for consistent high yields and high fruit quality. The design also incorporated an appropriate drainage system to prevent terrace erosion. 16. Rehabilitated Orchards. Under the project 2,473 ha of existing orchards were rehabilitated. Soil improvement, better irrigation and improved budwood were the key  - 5 - elements in raising the productivity of the rehabilitated orchards. For soil improvement, the project provided explosives to blast rock, labor to dig trenches, and green manure, fertilizer and soil amendment to fill the trenches and place around the trees. Irrigation ponds, pumps and pipes were installed. Some orchards were equipped with sprinkler systems. It took the existing orchards one or at most two years to improve the soil, build irrigation facilities and top-graft the existing trees with new improved varieties. The majority of the orchards were completely rehabilitated in 1992, with the remaining few completed in 1993. 17. Yield and Production. The actual yield profiles for the new orchards in Hubei and Chongqing are similar to those estimated in the SAR. Yield in some counties in Sichuan is somewhat higher due to healthier-than-expected seedlings from the polyhouse nurseries and good orchard management. Fruit production in the rehabilitated orchards commenced on a limited scale between 1992 to 1995. In 1996 citrus production reached 73,000 tons (43,500 tons from new orchards and 29,500 tons from rehabilitated orchards). Of this 35,200 tons was jincheng, 15,000 tons valencia, 11,500 tons navel, 10,600 tons mandarin and 700 toons pomelo). It is expected that in the full production year of 2005, project production will exceed 300,000 tons. Production of other fruits in 1996 was 4,600 tons for new orchards and 1,70 tons for rehabilitated ones. It is expected that in the full production year of 2005. the project's production of other fruit will be about 42.000 tons. 18. Financial Rate of Return (FRR). Financial rates of returns were recalculated using actual costs to project completion and 1996 constant prices. They were uniformly very high across all project activities and generally higher than SAR estimates. The FRRs for orange varieties ranged from 25-35 percent in new orchards, higher by several percent than the SAR estimates. For instance, the major variety, sweet orange, with a FRR of 27 percent, was 3 percent higher than the appraisal estimate. Pomelo was the star performer (34 percent compared to 18 percent at appraisal in Sichuan and 46 percent as compared to 19 percent at appraisal in Chongqing). I The FRRs for rehabilitated orchards are even higher than those for new orchards, ranging from 38-55 percent, generally somewhat higher than at appraisal. The FRR for nurseries and mother-tree gardens ranged from 29 to 56 percent, also significantly higher than at appraisal. 19. Training and Technical Assistance. Training was divided into international training and study tours and domestic training. The project has managed technical training well, both international and domestic. Several workshops were carried out using expatriate TA and domestic experts in the areas of virus indexing and budwood registration. Domestic training was conducted for 6,200 technicians, who later trained 33,400 farmers in the project areas. In all, there were 200 classes for land development (6,000 farmers), six classes for nursery and mother-tree garden management (260 farmers), 79 classes for planting and irrigation (1,065 farmers), about 600 classes for tree 'Although pomelos were a small component in the project, the demonstration effect has been very large.  - 6 - maintenance, harvesting and postharvesting (26,000 farmers) and 50 classes for project management (2,300 staff). Each year, there was an annual conference where experts and project staff from county PMOs and technical bureaus discussed project problems and shared their experiences. Several study tours were conducted in groups of about six to ten persons in Thailand, USA, Spain, Australia, Israel and 1long Kong for orchard management, irrigation management, postharvest treatment and marketing. Four-week overseas training was carried out for fruit cultivation techniques and disease and pest protection. The actual numbers of persons receiving domestic and international training were higher than SAR goals by 61 percent and 51 percent, respectively. 20. Procurement. Procurement otarted off slowly but proceeded as planned, and the delivery of contracts was satisfactory. ICB procurement was centrally coordinated at the JPMO, but the contracts were signed with the user provinces. The bid document preparation, bid invitations, bid evaluation and contract awards were carried out by the Chinese National Machinery Import and Export Corporation (MACHIMPEX) in cooperation with the JPMO and the provincial and county PMO procurement units. The bulk of fertilizers, chemicals, other inputs; steel, cement, wood, galvanized pipes, pumps, transformers, motors, processing lines, barges, and trucks--a total of 43 contracts valued at approximately $53.4 million-was procured through ICB. There were six LIB contracts-for laboratory and office equipment-valued at $6.6 million. Some pipes and small irrigation equipment valued at $1 9.0 million were procured under national competitive bidding (NCB). The remaining materials, tools and equipment, where contracts values were too small to justify ICB or NCB-valued at $6.1 million--were procured through direct shopping. All of the equipment procured met technical specifications, with significant delays in some cases, liowever. NCB procurements were done according to the MOF standards. Ex-post review of NCB contracts below $200,000 was carried out during the first few supervisions, and( a few contracts and SOE records were sampled and reviewed during later ones. 21. Disbursement. Despite the slow initial startup of the project, disbursement percentages caught up with the SAR estimates before project completion. Disbursement was 13 percent behind the SAR schedule in June 1992, but the gap narrowed to 4 percent of target in 1995, and disbursement closely followed the SAR estimates for the final two years of implementation. The last IDA credit disbursement was on April 16, 1997 following loan closing on December 3 1, 1996. Project expenditures were estimated to be $136.9 million. The total amount disbursed was $69 million, higher than the original credit amount of $64 million equivalent due to the depreciation of the dollar against the SDR. SDR 48.6 million ($69.02 million) was fully disbursed. C. PROJECT IMPACT 22. Increasing Income and Employment. The project has been very successful in increasing income and generating employment for participating households and workers.  - 7 - The majority of orchards are collectively owned by village households.2 Orchards range from 20 to 50 ha and are typically shared by 100- 150 farm households, who provide labor and other local inputs for land development, tree planting and maintenance. Each household has an average of 3-5 mu of orchard land in addition to their existing low land plots that they use for grain production. Income generated from new orchards is in addition to the family income from other activities. For the new orchards, their incremental income was initially from intercrops, with net revenue from Y 3,200 to Y 10.000 per ha. After four years. when the orange trees start bearing fruits, income from intercrops gradually declines and income from oranges increases. In 1995 net income was Y 13,000 per ha of sweet orangez and Y 26,000 per ha of the navel variety. 23. Incremental income from rehabilitating orchards comes from doubling or tripling the yield and substituting better varieties for the original onles. Generally, the rehabilitated orchards have top-grafted the existing red tangerine trees with sweet or navel oranges. After four years, per capita incomiie in the project villages averaged approximately Y 3,000. T he increase in income and standard of living is quite evident in the villages adjacent to rehabilitated orchards. MIany project farmers in these villages have built new houses from income received irom the orchards. 24. The project has provided income generating activities for participating farm families and reduced surplus labor on farms. In addition, the project has provided job opportunities for about 130,000 workers during construction and implementation. Harvesting and postharvest activities have provided and (will increasingly provide) job opportunities in both orchards and packing houses, where 30 percent of the workers are women. 25. Poverty Reduction. Base line survey data slhow that 300,000 farm families in the project area have benefited from the project. In 1990, the average rural per capita income before the project in Sichuan, Chongqing and Hubei project counties was Y 240, Y 305 and Y 374, respectively. By 1995, due to the project the net per capita income (in constant 1990 prices) increased to Y 561, Y 610 and Y 773. respectively, a doubling of income in constant terms. 26. Disseminating Research Results. The project has had an impact through disseminating research and experimental results to farmers through the provision of suitable varieties of high quality seedlings and the provision of new cultural practices. The nurseries not only provide seedlings to project farmers but also to farmers outside the project areas. The project has set up a budwood registration program and established virus-free zones. Only registered budwood could be propagated in the project area. Top- grafting technology has been successfully adopted in the project area. This gives farmers 2Some orchards are owned by the CFDCs and operated commercially with contracted mangers who receive incentive bonuses based on production and sales.  - 8 - the ability to respond to market changes with new and better varieties, which they can produce within two years. 27. Government Recognition The project was designated by MOA and by the provincial governments as an excellent example of horticulture development. Several orchard managements have received governmental awards. Project technicians provide training not only to project staff and farmers but also to nonproject government staff and farmers outside the project area. During the implementation period, the project area has received more than a dozen state leaders such as Premier Li Peng, and Vice Premiers Zhu Rongji and Jiang Chunyun. The project has also been visited by more than 1,000 study groups, in total of about 20,000 peorie. The leaders were looking for a successful model for land development, especially for the resettlement of farmers from the Three Gorges area. The project area has already resettled 2,500 families displaced by the Three Gorges Dam. 28. Demonstration Impacts. The project already has had tremendous demonstration effects. Large numbers of nonproject farmers now use technologies developed under the project, including virus-free seedlings from the project nurseries. It appears that the hectarage of new orchards developed by farmers outside the project area amounts to four to five times that in project orchards. The demonstration effect for rehabilitated orchards is about three times the area of project orchards. The poverty-alleviation impact of these demonstration effects should be very substantial, since many of the orchards are located in poor and remote areas, where options to raise incomes have in the past been very limited. 29. Integration of Production, Processing and Marketing. The project has played a demonstrative role in realizing the integration of production, processing and marketing. It has demonstrated that quality starts from production and is reinforced by effective postharvest treatment. It has started a new era of more sophisticated marketing. The project packing plants pay farmers differently by grade, then clean, wax and label the fruit to make it ready for up-scale markets and exports. Some packing houses store them for festive seasons and higher prices. With different varieties harvested at different times of the year, citrus becomes available for marketing all year around. 30. Reduction of Soil Erosion. The project has reduced soil erosion by promoting the terracing of hilly land and by introducing vetiver grass to stabilize the soil. This method of land development has been adopted in several locations along the Yangtze and in the Three Gorges area. Reduction in soil erosion was reported in all project counties. In an extreme example, the Jiangan County water conservancy bureau reported that eroded acreage had been reduced from 48 percent in 1990 to 13 percent in 1995. 31. Other Socioeconomic Benefits. Project investments have turned wasteland areas into productive assets and have brought water, electricity and access roads to many highland villages. These have produced a substantial general development impact in the villages, reducing the burden of carrying drinking water by women, and in some cases,  - 9 - providing additional village income through the stocking of irrigation pumping ponds with fish. The requirement for manure induced significant additional pig production in project villages. These development benefits are large but undocumented. D. MAJOR FACTORS AFFECTING TIIE PROJECT 32. Implementation Schedule. According to the SAR, the project was to be carried out over a period of five and a half years, from June 1989 to December 1994 and closed in December 1995. The project was delayed due to the Chinese domestic disturbances of June 1989 and the Bank's subsequent decision to hold project processing. The project was finally negotiated in March 19' J, signed on August 29, 1990 and made effective on December 4, 1990, 18 months delay in all. The delay in credit approval affected the start of land development, seedling production and planting of fruit trees. The cost of materials and labor was increased due to the unexpectedly high inflation rate, resulting in higher costs for works. The project's closing was initially scheduled for December 31, 1995 but was granted a one-year extension to December 31. 1996. 33. Shortage of Counterpart Funds. The majority of project sites are located in poor counties with weak financial status. The lack of- adequate counterpart funds from county governments affected implementation progress, especially during 1992, resulting in slow development of orchards and construction of irrigation ponds and facilities. Several meetings were held with local governments, which were eventually persuaded to allocate the necessary scarce resources. 34. Adjustment in the Design of Irrigation Facilities. Some adjustments in the design of irrigation layout and facilities were made during the Mid-Term Review. The SAR model called for irrigation ponds on hilltops and uphill pumping by stationary pump stations. After site selection, there were a number of orchards where gravity irrigation could be practiced from up-hill water sources, removing the need for investment in ponds and pumps. In another proposal for adjustment, Sichuan proposed the use of mobile diesel pumps, which had been successfully experimented with in the project area. These diesel pumps can be moved from place to place in an orchard to give overall coverage and can carry water from small water sources to either hand held hoses or sprinklers (3 or 4 to a pump). These modifications were reviewed and approved. The irrigation design was changed so that 50 percent of the orchards were built in accordance with the SAR model, 20 percent designed around uphill capture of water and 30 percent on mobile diesel pumps. These modifications saved some funds, which were allocated for orchard houses. 35. ICB Procurement For Irrigation Equipment The irrigation equipment procured through ICB caused about a year's delay in orchard planting, because together the domestic bureaucratic review and approval and the Bank's review were a lengthy process. There were further harmful delays due to the slow delivery of irrigation equipment to the scattered project-site locations, resulting in some young seedlings not receiving irrigation water during the hot, dry months of June-August. Since no foreign  - 10- supplier submitted bids in the first procurement, NCB was later used to procure irrigation equipment. The NCB procurements were done smoothly, and equipment was delivered by 1995. Planting of trees and installation of irrigation facilities was finally completed in June 1995. 36. Credit Allocation. The reallocation of funds from equipment, materials and supplies to works was approved in September 1994. Two factors increased the requirement for disbursement for works. These were higher-than-programmed cost of materials and labor due to unexpectedly high inflation and fact that NCB works contracts, which were used more than anticipated at appraisal, typically included materials that would not have been included if tht works had been done by force account as originally planned. If done by force account, the materials would have been paid through the materials category. The use of NCB contracts, therefore, necessitated a technical reallocation of funds as follows: for Sichuan, SDR 3.64 million from category 2 to category 1; for Hubei, SDR 2.17 million from category 5 to category 4 and for Chongqing SDR0.15 million from category 8 to category 7. An increase was also granted in the percentage of expenditure to be financed for work categories from 40 to 50 percent. 37. Cost Overrun. Total expenditure at project completion was Y 869.6 million (Sichuan Y 402.3 million, Chongqing Y 168.5 million and Hubei 298.8 million), which is Y 151.4 million (20 percent) more that the Y 718 million estimated at appraisal. The high inflation in China after 1990 caused substantial price increases in construction and labor wages. This resulted in higher contract awards after 1990. The county governments and farmers increased their contributions to cover the additional cost. However, due to devaluation of the yuan against the dollar during the years of project implementation, total project cost, when calculated in dollars was only $130.8 million, $6 million lesser than the SAR estimates. E. PROJECT SUSTAINABILITY 38. The policy environment of the central and local governments has been and continues to be favorable to the sustainability of the project. The project has demonstrated the utility of government policies for the development of the Three Gorges area. Aside from the construction of the Three Gorges Dam, these were to plant high- value fruit trees to diversify production and to pay special attention to the control of soil erosion. MOA has drafted a new strategy paper for the commercialization of fruit production throughout the country by the year 2010 based on this experience. 39. Sichuan and Hubei Provinces and Chongqing Municipality all have a strong commitment to ensure sustainability of the project. They realize that, even though the project is at completion, their responsibility continues. The new orchards will continue to need to be maintained at a high-quality level until they reach full production. Farmers continue to need training in tree maintenance, harvesting and postharvest technologies. For this reason, there is a need to provide strong technical support to farmers. Farmers  - Il - will also continue to require timely and reliable provision of input supplies and CFDC processing and marketing services. Thus, it will be necessary to retain qualified, trained staff in the CFDCs. 40. The provincial and municipal governments have developed operation plans in consultation with the prefecture and county governments; these plans became effective early this year. Under the plans, the governments would: (a) maintain the PMOs and the FDCs, with some modifications in the distribution of staff among functions (more staff for marketing in the FDCs and fewer for statistics and planning in the PMOs); (b) cancel the Project Leading Group and the STC but assign their facilitative role to the Agriculture Bureau, which will coordinate technical assistance to be available when needed; (c) continue to pay the salaries of the fruit production technicians who are giving instruction to farmers; and (d) provide operational budgets for the PMOs and the FDCs until they become self-sustaining. 41. Since the majority of orchards are owned and operated by farmers, the actual work of orchard maintenance rests with them. There are high incentives to maintain the orchards in order to earn additional income. Farmers in the rehabilitated orchards under the project have typically contracted with technicians to give them advice and training on a regular basis and have compensated them. The orchards owned by the CFDCs are operated commercially, with contract mangers who receive incentive bonuses based on production and sales. The market demand for quality fruit is strong, as expected during project preparation. F. IDA PERFORMANCE 42. IDA's perfornance in project identification, preparation and appraisal was satisfactory. The borrower appreciated "the Bank's conscientious work, scientific attitude, full preparation and clear-cut mind for the goal which satisfied people in the project area." (from borrower ICR). Project preparation was based on the feasibility studies of Sichuan, Hubei and Chongqing, which contained general objectives approved by the State Council. The mission's main goals during project preparation were to introduce new technologies, varieties and management systems in developing a project for this poor area. IDA's role was a catalyst to pool international and domestic experience. The project has benefited greatly from research results from China, Spain and the USA. It also benefited from the experience of advanced countries in commercial citrus postharvest and marketing operations. During project preparation, alternative designs to include food processing options (i.e., juice, jams and preserves) were thoroughly investigated but rejected due to excess capacity in China of such processing plants and the urgent need to establish high-quality fresh-fruit markets. Appraisal was carried out with a full team of specialists, and agronomic, financial and economic viability were fully evaluated. 43. In all, IDA carried out seven supervision missions of the project since 1990, at least one each year. These missions visited project sites and farmers in inaccessible  - 12 - areas, reviewed implementation progress, helped to resolve implementation problems and provided technical advice at each step of project implementation. During the first three years, the supervision missions contained, among others, irrigation engineers and horticulturists to review the layout and design of the orchards and irrigation facilities and to observe the establishment of nursery and orchard planting practices. After Year 4 the mission contained an agroprocessing specialist to inspect the packing lines and provide recommendations on plant layout, processing techniques and effluent treatment. During the final year, a marketing specialist was in the mission to assist CFDCs to plan for marketing. 44. Supervision missions made significant contributions in the following areas: (a) improvement in horticultural standards of both seedlings and cultural practices, establishment of engineering standards for terracing, drainage and irrigation ("creating a high tide for striving for excellent engineering work"-borrower ICR); (b) assistance to the PMOs in solving the problem of insufficient counterpart funds and working capital; (c) education of CFDC managers in how to commercialize their management and operations; (d) stimulation of the FDCs to plan for accessing export markets; and (e) help in arranging for TA and study tours. A Mid-Term Review was also conducted to consider the reallocation of the remaining Credit and to assess the time needed to complete the project. G. BORROWER PERFORMANCE 45. The borrower actively participated in the project from identification through implementation. Specialists from the Ministry of Agriculture (MOA) carried out studies, set technical standards and gave guidance on technical issues. MOA carried out its own supervisions in cooperation with provincial staff and also participated in IDA supervision missions. Overall, the project received strong political and financial support from provincial and local governments at all levels 46. The performance of the project management offices (PMOs) was also highly satisfactory. The project has been well managed, under the leadership of the JPMO with good cooperation from the PMOs and the FDCs at all levels. Project farmers were enthusiastic, hardworking and in many cases creative. Project staff are competent, well trained, and committed to the project objectives. The project components were for the most part implemented in line with the agreed implementation arrangements and appropriate actions were taken to solve problems as they occurred. The supervisory role of the project's STC contributed greatly to the high technical standards adopted by all the orchards (the "4 Highs" motto of the project was developed). The coordinating role of the JPMO in procurement, disbursement, monitoring and evaluation, file management and liaison with IDA contributed to the smooth implementation of the project. 47. The borrower complied promptly and completely with the covenants prescribed in the legal agreements. Half-yearly progress reports, audited project accounts, together with the audit reports, were also regularly produced and received generally on time. The  - 13 - project has a comprehensive record-keeping system, with all SOE receipts and contracts kept in an orderly fashion. H. ASSESSMENT OF OUTCOME 48. The project's overall outcome is considered highly satisfactory. The project has achieved its objectives with a high degree of sustainability. The overall economic rate of return is very high at 40 percent, even higher than the already high appraisal estimate of 34 percent. The project has already played a large demonstration role in the development of the Three Gorges area into fruit orchards. 49. At full production, the project will produce 303,000 tons of citrus and 42,000 tons of other fruits. At present, marketing is done collectively by farmers and through CFDCs. The demand for quality oranges is high and all production has been and is expected to continue to be sold after harvesting. The CFDCs which manage rehabilitated orchards have already typically developed diversified distribution channels (institutions, wholesalers) and initiated timely promotional and marketing campaigns through the media, trade fairs, advertising on packages and missions to Hong Kong. Oranges from the project area are sold in large Chinese cities and exported to Russia, Canada and Hong Kong. 50. A possible risk concerns the next five years, when orchards from nonproject farmers are in full production. At this time the higher volume of citrus production may affect prices and the markets. The CFDCs are aware of this possibility and are working on establishing marketing networks and seeking to achieve early positions in quality product markets. The risk will be minimized if the quality is maintained, since competition will be smallest in the highest-quality markets. I. FUTURE OPERATION 51. The future operation of the project will need to concentrate on orchard maintenance, postharvest processing and marketing of the fruit. The provincial governments have produced operation plans that specify the continued responsibilities of the PMOs and FDCs in the project. The PMOs will continue to be responsible for: (a) production management to make sure that production standards are maintained; (b) technical training for orchard maintenance; (c) disease and pest monitoring, control and forecasting; (d) advice to farmers on fertilizer type and application and on irrigation timing, frequency and volume; (e) maintenance of standard technologies and tools for fruit picking; (f) information gathering for production projection; (g) maintenance of project facilities such as irrigation facilities and roads; (h) collection of project household data for conducting future performance audits of the project; and (i) in cooperation with Bureau of Finance at each level, recovery of the Credit plus interest according to the onlending agreements. 52. The CFDCs will continue to (a) reliably provide necessary inputs to project farmers, (b) operate packing lines installed under the project to provide farmers with  - 14- quality enhanced packing, storage and transportation services, and (c) assist farmers in marketing their products. The success of the CFDCs will depend on their ability to develop marketing channels and procure farmers' production, their ability to develop short, medium and long-term marketing strategies and establish direct linkages with large domestic and overseas wholesalers. CFDC managers have started in this direction and have already had some success. However, they require more training to acquire stronger marketing and management skills and to develop specialized marketing management strategies and financial mechanisms. J. KEY LESSONS LEARNED 53. The project design to provide demonstration models for the development of waste hilly lands into orchards has proved highly satisfactory The key lessons learned from the project are summarized below: (a) Strong research and scientific bases drawn from domestic and international experience and the involvement of a science and technical committee have been essential to the success of this project. This project aspect is being used in the development of similar new projects in China. (b) Active roles of MOA, provincial and local governments and research institutes in carrying out central government policy and cooperation among these institutions contributed to smooth implementation and the success of the project. (c) Staff in the implementation agencies should be drawn from technical bureaus familiar with the technical details of the operation. (d) Participation of farmers with a sense of ownership from the beginning made a big difference in how the project was implemented. (e) Adequate and timely allocation of counterpart funds is a prerequisite to smooth implementation of a project according to schedule; the lack of counterpart funds inevitably leads to implementation delay and increases in project cost. (f) More supervision missions should have been budgeted, in particular to assist the PPMOs with procurement and disbursement problems. Continued TA for marketing is needed to get marketing on a strong footing.  - 15 - PART II: STATISTICAL TABLES TABLE 1: SUMMARY OF ASSESSMENTS A. Achievement of Objectives Substantial Plartial Negligible Not Applicable Macroeconomic 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 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 Hlighly Satisfactory Satisfactory Deficient Preparation X Implementation X Covenant compliance X Operation (if applicable) X E. Assessment of Outcome Highly Satisfactory Satisfactory Unsatisfactory Highly Unsatisfactory x  - 16- TABLE 2: RELATED BANK LOANS/CREDITS Loan/Credit Title Purpose Year of Status Approval Preceding Operations Shandong ADP The purpose of the project was to 1989 Completed (Credit 201 7-CHA) assist in accelerating development of coastal fisheries. intensify crop and livestock production and to help alleviate poverty Second Red Soils Area Development l'he project aims to increase 1994 On-going Project production and productivity over (Credit 2563-CHA) the "red soils" area of Southern China. The project support water conservation, rural electrification, roads and irrigation, livestock and aquaculture, agroprocessing, research and extension TABLE 3: PROJECT TIMETABLE Steps in project cycle Date planned Date actual Identification November 1987 November 1987 Preappraisal February 1989 February 1989 Appraisal June 1989 June1989 Negotiations October 1989 March 1990 Board presentation December 1989 August 9, 1990 Signing August 29, 1990 Effectiveness November 27, 1990 December 4, 1990 Project completion December 31, 1994 December 31, 1995 Loan closing December 31, 1995 December 31, 1996 TABLE 4: LOAN/CREDIT DISBURSEMENT: CUMUlLATIVE ESTIMATE AND ACTUAL ($ million) FY91 FY92 FY93 FY94 FY95 FY96 Appraisal estimate 13 31 53 61 64 64 Actual 8.9 19.1 37.1 50.6 59.5 69.0 Actual as % of adjusted estimate 68% 59% 70% 83% 93% 107.8% Date of final disbursement April 16,1997  - 17 - TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION Project Key Implementation Indicators in Unit Estimated Actual Component SAR/President's Report Orchard Establishment 1. New Orchards Sichuan Mother-tree Garden ha 24 24 Polyhouse Nursery (60 houses) ha 4 4 Citrus ha 4,624 4,624 Sweet Orange ha 1,794 1,794 Valencia ha 1,110 1,100 Navel ha 1,530 1,530 Mandarin ha 100 100 Pomelo ha 100 100 Other Fruit ha 1,176 1,176 Lychee ha 900 754 Longan ha 94 240 Plum ha 66 66 Loquat ha 116 116 Total Orchards ha 5,800 5,800 Chonegine Mother-tree Garden ha 26 26 Open Field Nursery ha 35 35 Citrus ha 2,060 2,060 Sweet Orange ha 1,260 1,260 Valencia ha 540 540 Navel ha 60 60 Pomelo ha 200 200 Yellow Peaches ha 260 260 Total Orchards ha 2,320 2,320 Hiiubi Mother-tree Garden ha 70 70 Open Field Nursery ha 38.5 38.5 Citrus ha 2,699 2,994.7 Sweet Orange ha 966 708.4 Valencia ha 433 270 Navel ha 800 1,262.7 Mandarin ha 500 753.6 Other Fruit ha 1,167 871.4 Yellow Peaches ha 567 311.7 Loquat ha 200 40 Plum ha 67 120 Pear ha 200 356.7 Kiwi ha 133 43 Total Orchards ha 3,866 3,866.1 II. Rehabilitated Orchards Sichuan Citrus ha 500 500 Sweet Orange ha 140 140 Valencia ha 220 220 Navel ha 140 140 Total Orchards ha 500 500 Chongqing Citrus ha 240 240 Valencia ha 240 240  - 18 - Project Key Implementation Indicators in Unit Estimated Actual Component SAR/President's Report Yellow Peaches ha 100 100 Total Orchards ha 340 340 Hubei Citrus ha 1,633 1,633 Sweet Orange ha 1,633 1,633 Total Orchards ha 1,633 1,633 Irrigation/l 1. New Orchards Sichuan Diesel Pump, HlHH & Sprinklers ha 580 1,740 Electric Drip ha 20 Electric Pump, HHH & Sprinklers ha 5,200 2,320 Gravity Irrigation ha 1,740 Subtotal ha 5,800 5,800 Chongqing Diesel Pump, HHH ha 1,846 1,924 Electric Drip ha 10 Electric Pump, Mini Sprinkler ha 464 248 Gravity Irrigation ha 209.3 Subtotal ha 2,320 2,381 Hubei Diesel Pump, HHH ha 386 486 Electric Pump, HHH ha 2,800 2,800 Electric Pump, Sprinkler ha 580 580 Subtotal ha 3,766 3,866 11. Rehabilitated Orchards Sichuan Diesel Pump, HHH & Sprinklers ha 50 160 Electric Pump, HHH & Sprinklers ha 450 450 Subtotal ha 500 610 Chongqing Diesel Pump, HHH ha 192 265 Electric Pump, Mini Sprinkler ha 48 20 Subtotal ha 240 285 Hubei Diesel Pump, HHH ha 163 163 Electric Pump, HHH ha 1,225 1,225 Electric Pump, Sprinkler ha 245 245 Subtotal ha 1,633 1,633 111. Vetiver Planting Sichuan Nursery ha I I Planting Out ha 10 10 Chongqing Nursery ha I I Planting Out ha 10 12 Hubei Nursery ha I 1 Planting Out ha 10 10 Road 1. New Orchards Sichuan km 145 162  - 19 - Project Key Implementation Indicators in Unit Estimated Actual Component SAR/President's Report Chongqing km 162 175 Hubei km 436 436 Subtotal km 743 773 11. Rehabilitated Orchards Sichuan km 145 162 Total km 888 935 Packing and Storage Facilities/2 Sichuan Install of Packing Lines-3t unit 15 7 Install of Packing Lines-5t unit 2 Construction for 3t lines unit 15 7 Construction for 5t lines unit 2 Storage Construction 500m2 3 3 Chongqing Install of Packing Lines-3t unit I I Install of Packing Lines-5t Unlit I I Construction for 3t lines unit I I Construction for 5t lines unit I I Storage Construction 500m2 8 8 Hubei install of Packing Lines-3t unit 4 4 Construction for 3t lines unit 4 4 Storage Construction 8000m2 1 1 NVotes: I. Electric drip irrigation was replaced by gravity irrigation during mid-term adjustment. 2. Sichuan dropped 5-ton packing line during mid-term adjustment.  - 20 - TABLE 6: KEY INDICATORS FOR PROJECT OPERATIONS Key Implementation Indicators in SAR Estimated Actual SAR/President's Report ERR Total Project 34.4 40.2 1. ERR 1. New Orchards 32.1 36.8 Citrus 32.0 38.0 -Sweet Orange 28.4 33.6 -Valencia 33.8 31.8 -Navel 39.5 46.7 -Mandarin 25.9 38.3 -Pomelo 24.6 27.4 Other Fruit 34.2 28.9 -Longan 22.1 29.0 -Lychee 29.5 33.2 -Loquat 22.1 22.4 -Yellow Peach 44.8 27.2 -Pear 26.5 26.6 -Plum 33.4 33.1 -Kiwi 37.0 28.8 2. Rehabilitated Orchards 48.7 53.3 -Sweet Orange 45.2 48.5 -Valencia 54.8 56.7 -Navel 62.7 89.5 -Yellow Peach 62.2 60.1 lI. FRR Sichuan 1. New Orchards a. Nursery -Polyhouse Nursery 15.0 42.3 -Mother Tree Garden 31.0 35.7 b. Citrus -Sweet Orange 24.0 26.6 -Valencia 23.0 25.3 -Navel 34.0 32.8 -Mandarin 23.0 26.6 -Pomelo 18.0 33.5 c. Other Fruits -Lychee 23.0 30.8 -Longan 21.0 30.0 -Plum 27.0 20.4 -Loquat 24.0 23.4 2. Rehabilitated Orchards -Sweet Orange 40.0 41.5 -Valencia 34.0 40.0 -Navel 56.0 55.5  - 21 - Key Implementation Indicators in SAR Estimated Actual SAR/President's Report Chongqing 1. New Orchards a. Nursery -Open Field Nursery 45.0 56.4 -Mother Tree Garden 30.0 40.2 b. Citrus -Sweet Orange 25.0 25.9 -Valencia 25.0 28.9 -Navel 36.0 35.4 -Pomelo 19.0 37.5 c. Other Fruits -Yellow Peach 33.0 26.1 2. Rehabilitated Orchards -Valencia 47.0 44.3 -Yellow Peaches 71.0 40.0 Hubei I . New Orchards a. Nursery -Open Field Nursery 59.0 54.2 -Mother Tree Garden 31.0 29.1 b. Citrus -Sweet Orange 25.0 26.2 -Valencia 24.0 34.1 -Navel 35.0 34.5 -Mandarin 24.0 28.7 c. Other Fruits -Plum 28.0 27.0 -Loquat 24.0 27.5 -Yellow Peach 34.0 21.1 -Pear 26.0 26.2 -Kiwi 21.0 29.0 2. Rehabilitated Orchards -Sweet Orange 35.0 38.1 III. Yield/Production ton/ha/ton Sichuan 1. New Orchards a. Citrus -Sweet Orange 30/53,820 30/53,820 -Valencia 27/29,700 27/29,700 -Navel 24/36,720 24/36,720 -Mandarin 27/2,700 27/2,700 -Pomelo 22.5/2,250 22.5/2,250 b. Other Fruits -Lychee 11.25/10,125 15/11,310 -Longan 11.25/1,058 15/3,600  - 22 - Key Implementation Indicators in SAR Estimated Actual SAR/President's Report -Plum 24/1,584 24/1,584 -Loquat 15/1,740 18/2,088 2. Rehabilitated Orchards/2 -Sweet Orange 17/2,380 17/2,380 -Valencia 11/2,420 14/3,080 -Navel 16/2,240 16.5/2,310 Chongqing I. New Orchards a. Citrus -Sweet Orange 30/37,800 31/39,060 -Valencia 27/14.580 30/16,200 -Navel 24/1,440 27/1,620 -Pomelo 22.5/4,500 25/5,000 b. Other Fruits -Yellow Peaches 22.5/5,850 25/6,500 2. Rehabilitated Orchards -Valencia 11/4,080 24/5,760 -Yellow Peaches 15.3/1,530 22/2,200 Hubei I. New Orchards a. Citrus -Sweet Orange 30/28,980 30/21,252 -Valencia 27/11,691 27/7,290 -Navel 24/19,200 25/3 1,568 -Mandarin 27/13,500 35/26,376 b. Other Fruits -Plum 24/1,608 24/2,880 -Loquat 15/3,000 15/600 -Yellow Peaches 22.5/12,758 22.5/7,013 -Pears 37.5/7,500 37.5/13,376 -Kiwi 22.5/2,993 15/645 2. Rehabilitated Orchards/2 -Sweet Orange 17/27,761 17/27,761  - 23 - TABLE 7: STUDIES INCLUDED IN PROJECT During the project implementation, Sichuan, Hubei and Chongqing conducted a variety of studies related to orchard practice in the project, based on the Bank supervision missions recommendations. All studies were financed by the government in each . Those studies have been done by the universities and research institutes at provincial, prefecture, and county levels in the project provinces/municipality. Most of the studies received awards from the various levels of the governments. The primary research topics are following: Study Research Institute Status 1. Technology of Soil Improvement for New Sichuan Academy of Ag. Completed Orchards Sciences 2. Technology of Management and Sichuan Academy Completed Application for Citrus Moisture of Ag. Sciences 3rd Award 3. Technology of Fast-growing Seedling of Luzhou Hlorticulture Institute Completed Longan (Lychee) 2nd Award 4. Trial and Demonstration on Early Maturing Northwest Agriculture Completed and High-yield of Navel Young Tree University 3rd Award 5. Research on Technique and Application of Sichuan Academy of Ag. Completed Storage and Reserve of Freshness for Sweet Sciences Horticul. Institute Orange 6. Technology and Application of Orange Northwest Agricul. University Completed Postharvest Treatment 7. Research on Rotten Pathology of Navel and Sichuan Agricultural Completed Prevention Method University 3rd Award 8. Tree Early Mature and High-yield of Lychee Luzhou Horticulture Institute Completed (Longan) 9. Research and Experiment of Navel Young SC Academy of Ag. Sciences, Completed Tree for Early Maturing and High-yield Horti. Institute 10. Low-grafting to Citrus Fruit Trees for High Hlubei Yichang Horticul. Completed Yield Institute 2nd Award 11. Technology on High Yield of Citrus Hubei Zhicheng & Zigui Completed Counties' Ag. Institutes Ist Award. 12. Support Technology on "Ten Thousand Mu" HIubei Provincial Completed of High-yield and High-quality of Citrus Horticulture Institute 2nd Award 13. Extension of High-Yield Technology on "Fifty Hubei Provincial Horticulture Completed Thousand Mu" of Citrus Institute 2nd Award 14. Feasibility Study of Mid-Yangtze ADP Chongqing 3rd Award 15. Terracing on Slopping Land Chongqing Completed 16. Breeding of Virus-free Seedling Chongqing 2nd Award 17. Extension of Technology on Intercropping of Chongqing Completed 3rd Waternelon in Orchards Award 18. Extension of Top-grafting Technology for Chongqing Completed 1st Rehabilitated Orchards Award 19. Extension of Planting Density Technology Chongqing Completed  - 24 - TABLE 8A: KEY INDICATORS FOR PROJECT OPERATIONS (Yuan million) Item SAR Estimated Actual/Latest Estimated Local Foreign Total Local Foreign Total Cost Cost Cost Cost A. Sichuan Province 1. Nursery and Mother Tree Gardens 1.3 1.0 2.3 2.7 2.0 4.7 2. Orchard Establishment 120.1 90.0 210.1 173.2 130.9 304.1 3. Orchard Rehabilitation 7.3 7.3 14.6 9.8 8.0 17.8 4. Postharvesting Facilities 12.1 17.7 29.8 15.4 24.2 39.6 5. Institutional Support 4.6 7.8 12.4 8.8 27.3 36.1 Subtotal Sichuan Province 145.4 123.8 269.2 209.9 192.4 402.3 B. Chongqing Municipality 1. Nursery and Mother Tree Gardens 1.5 1.2 2.7 2.4 1.4 3.8 2. Orchard Establishment 46.6 36.8 83.4 66.9 51.3 118.2 3. Orchard Rehabilitation 3.1 4.7 7.8 6.3 5.5 11.8 4. Postharvesting Facilities 6.1 5.4 11.5 4.2 6.0 10.2 5. Institutional Support 2.1 2.8 4.9 10.2 14.3 24.5 Subtotal Chongqing Municipality 59.4 50.9 110.3 90.0 78.5 168.5 C. Hubei Province 1. Nursery and Mother Tree Gardens 2.6 2.0 4.6 5.3 5.8 11.1 2. Orchard Establishment 73.1 58.4 131.5 87.4 96.4 183.8 3. Orchard Rehabilitation 14.5 20.3 34.8 19.7 36.5 56.2 4. Postharvesting Facilities 6.8 6.1 12.9 11.6 13.6 25.2 5. Institutional Support 3.2 3.4 6.6 9.7 12.8 22.5 Subtotal Hubei Province 100.2 90.2 190.4 133.7 165.1 298.8 Bast Cost 305.0 264.9 569.9 433.6 436.0 869.6 Physical Contingency 6.6 7.4 14.0 Price Contingency 71.7 62.6 134.3 Total Project Costs 383.3 334.9 718.2 433.6 436.0 869.6  - 25 - TABLE 8B: PROJECT COSTS IN $ MILLION Item SAR Estimated Actual/Latest Estimated Local Foreign Total Local Foreign Total Cost Cost Cost Cost A. Sichuan Province 1. Nursery and Mother Tree Gardens 0.3 0.2 0.5 0.4 0.3 0.7 2. Orchard Establishment 25.4 19.1 44.5 26.2 19.8 46.0 3. Orchard Rehabilitation 1.5 1.5 3.0 1.5 1.2 2.7 4. Postharvesting Facilities 2.6 3.7 6.3 2.3 3.7 6.0 5. Institutional Support 1.0 1.7 2.7 1.3 4.1 5.4 Subtotal Sichuan Province 30,8 26.2 57.0 31.7 29.1 60.8 B. Chongqing Municipality 1. Nursery and Mother Tree Gardens 0.3 0.3 0.6 0.3 0.3 0.6 2. Orchard Establishment 9.9 7.8 17.7 10.6 8.8 19.4 3. Orchard Rehabilitation 0.7 1.0 1.7 1.0 1.0 2.0 4. Postharvesting Facilities 1.3 1.1 2.4 0.5 0.9 1.4 5. Institutional Support 0.4 0.6 1.0 2.2 1.1 3.3 Subtotal Chongqing Municipality 12.6 10.8 23.4 14.6 12.1 26.7 C. Hubei Province 1. Nursery and Mother Tree Gardens 0.5 0.4 0.9 0.8 0.8 1.6 2. Orchard Establishment 15.5 12.4 27.9 12.7 14.0 26.7 3. Orchard Rehabilitation 3.1 4.3 7.4 2.8 5.3 8.1 4. Postharvesting Facilities 1.4 1.3 2.7 1.7 2.0 3.7 5. Institutional Support 0.7 0.7 1.4 1.4 1.8 3.2 Subtotal Hubei Province 21.2 19.1 40.3 19.4 23.9 43.3 Bast Cost 64.6 56.1 120.7 65.7 65.1 130.8 Physical Contingency 1.4 1.6 3.0 Price Contingency 7.1 6.1 13.2 Total Project Costs 73.1 63.8 136.9 65.7 65.1 130.8  - 26 - TABLE 8C: PROJECT FINANCING ($ million) Item/Description SAR Estimate Actual on Closing Local Foreign Total Local Foreign Total 1. Sichuan IDA 11.8 18.4 30.2 31.0 31.0 Provincial Government 24.6 2.1 2.1 Prefecture Government 0.8 0.8 County Government 6.0 6.0 Agricul. Bank of China 0.2 0.2 Beneficiaries 14.0 19.2 19.2 Subtotal 11.8 18.4 68.8 28.3 31.0 59.3 11. Hubei IDA 8.6 13.3 21.9 23.9 23.9 Provincial Government 16.9 16.9 1.1 1.1 Prefecture Government County Government 6.0 6.0 Agricul. Bank of China 0.5 0.5 Beneficiaries 9.6 9.6 10.4 10.4 Subtotal 35.1 13.3 48.4 18.0 23.9 41.9 111. Chongqing IDA 4.7 7.2 11.9 14.9 14.9 Municipality Governmenlt 3.6 3.6 2.3 2.3 Prefecture Government County Government 5.6 5.6 4.3 4.3 Agricul. Bank of China Beneficiaries 6.3 6.3 8.8 8.8 Subtotal 20.2 7.2 27.4 15.4 14.9 30.3  - 27 - TABLE 9: ECONOMIC COSTS AND BENEFITS (1996 Yuan million) Net Present Value (NPV) at 12% Economic Rate of Return (ERR) SAR Estimate ICR Estimatc SAR Estimate ICR Estimate Project as a whole 1,322.2 1,624.4 34.4 40.2 New Orchards 1,084.6 1,290.5 32.1 36.8 Citrus 877.2 1,180.6 32.0 38.0 Other Fruit 207.2 109.9 34.2 29.0 Rehabilitated Orchards 237.6 357.5 48.7 53.3  - 28 - TABLE 10: STATUS OF LEGAL COVENANTS Agreement Section Covenant Present Original Revised Description of covenant Comments Type Status fulfillment fulfillment date date Credit 2.02b I C Govemment to open and A special account was maintain special account opened and maintained by ABC Project Article III I NYD Fumish Audit Report by Audit Report for 1996 is 3.01 (bii) June 30 of each year. expected by June 1997 Responsibility acceptable to IDA Project Schedule 2 6 C Project activities comply The PEPBs have 1(a) with environmental reviewed and approved standards acceptable to all project components IDA Project Schedule 2 6 C 12/31/1990 Monitoring effluents The monitoring plan was 1(b) from agroprocessing proposed in 1990. facilities be established Construction of effluent by December 1990 treatment plants was completed. Project Schedule 2 9 C Agrochemicals be All fertilizers and I (c) approved by IDA pesticides procured under the project were reviewed by IDA Project Schedule 2 9 C Annual training program IDA provided assistance 2 be submitted to IDA by in arranging several Deeember 31 of each study tours and reviewed year and overseas domestic and overseas training and TA be training programs approved by IDA Project Schedule 2 2 C Corporations be operated Fruit Development 3 as financially Corporations under the independent entities and project were financially managed by competent independent and have staff with experience competently staffed. acceptable to IDA Covenant Class: Status: I = Accounts/audits 8 = Indigenous people C = covenant complied with 2 = Financial performance/revenue 9 = Monitoring, review, and reporting CD = complied with after delay generation from beneficiaries 10 = Project implementation not CP = complied with partially 3 = Flow and utilization of project covered by categories 1-9 NYD= not yet due funds 11 = Sectoral or cross-sectoral 4 = Counterpart funding budgetary or other resources 5 = Management aspects of the allocation project or executing agency 12 = Sectoral or cross-sectoral policy/ 6 = Environmental covenants regulatory/institutional action 7 = Involuntary resettlement 13 = Other  - 29 - TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS There was no significant lack of compliance with an applicable Bank Operational Manual Statement (OD or OP/BP) TABLE 12: BANK RESOURCES: STAFF INPIJTS Planned Revised Actual Stage of Project Cycle Weeks $ Weeks $ Weeks $ Preparation to Appraisal NA NA No change No change 80.3 220,800 Appraisal " " " " 22.2 67,300 Negotiations through " " " " 12.2 38,400 Board approval Supervision " " " " 82.5 288,500 Completion " 4.4 24,400 Total 201.6 639,400  - 30 - TABLE 13: BANK RESOURCES: MISSIONS Performance rating Lb Stage of project Month/ Number of Days Specialized staff Imple- Devel- T ype of cycle year persons in field skills represented La mentation opment problems status objectives Identification 10/87 4 17 A,AE,EN,E S S Preparation 10/88 7 24 A, AE,IA,AI, OS, S S Preappraisal 3/89 5 19 A,AE,IA,MKT.OS S S Appraisal/ 6/89 3 15 AE,AGOS S S Supervision 1 10/90 4 9 A,IA,M&E,OS I I Deferred Board Presentation Supervision 2 7/91 3 8 A,AE,IA I I Counterpart funds Supervision 3 5/92 2 13 A,lA I I Lower Disbursement Supervision 4 11/93 3 16 IA,AE,EN I I Procurement delay Supervision 5 8/94 1 3 AE S HS Mid-term review Supervision 6 9/95 4 9 AE,IE,AI,IA S HSS Working capital Supervision 7 5/96 3 7 IE,AI,OS IIS IIS Completion 3/97 4 17 AE,AI,OS OIS IIS /a A: Agriculturalist; AE: Agricultural Economist; Al: Agro-Industrial Specialist; E: Economist; EN: Engineer; IA: Irrigation Engineer IE: Irrigation Economist; OS: Operations Specialist; M & E: Monitoring & Evaluation; MKT: Marketing /b Performance Ratings: I = problem free or minor problems. 2 = moderate problems, 3 = major problems, FIS = highly satisfactory, S = satisfactory TABLE 14: ROLE OF WOMEN IN PROJECT Subproject Women Engaged in Participating Women Training Period Project (%) Number Participating in (Person month) training (%) Sichuan 52 109,200 54 86,496 Hubei 65 20,150 62 128,682 Chongqing 54 33,777 56 62,496 Note: Mid-Yangtze Agricultural Development Project has 303,000 persons participating in the project implementation, of which 210,000 persons in Sichuan, 31,000 persons in Hubei and 62,000 persons in Chongqing. The project offered a variety of domestic training in various subjects related to the project implementation and orchard technique and management.  - 31 - ANNEX A: ICR MISSION'S AIDE MEMOIRE Introduction 1. A Bank ICR mission for the above project visited project sites in Hubei and Sichuan Provinces and Chongqing Municipality from February 27 to March 12, 1997 to evaluate the status of the project at c ampletion and to review the project implementation plan after its completion. The mission was composed of Mr. Gue (Agroprocessing Specialist), Ms. Varkay (Marketing Specialist), Ms. Tong (Agricultural Economist) and Ms. Jaisaard (mission leader). The mission visited project orchards, wholesale and retail markets, and farmers in Zhicheng and Xingshan in Hubei, Wanxian, Kaixian and Fengia in Sichuan, and Choushou and Jiangjin in Chongqing. Several meetings were held in Wuhan, Chongqing and Chengdu with staff from the project management offices, officials from government offices, and managers of Fruit Development Corporations. Meetings were also held in Chengdu with project staff from Yibin, Luzhou and Changning Counties, which the mission did not visit during this trip. The mission would like to express its sincere thanks and appreciation to all government officials and project staff for their assistance and hospitality during the mission's visit. Project Status at Completion 2. Status. The project has been implemented exceptionally well and has achieved its physical targets for orchard development, orchard rehabilitation and construction of postharvesting, and training facilities. The project has been well-managed, with good cooperation among the Fruit Development Corporations (FDCs), the Project Management Offices (PMOs) and farmers. All project orchards adopted high technical standards, which were set by the Ministry of Agriculture (MOA). in cooperation with several fruit research institutes, and coordinated by the project's Scientific and Technical Committee. The orchards under the project have a very high visual impact for quality and technical standard and can be singled out from a distance from among neighboring orchards. In the new orchards, the trees are growing vigorously, and some of them have started bearing fruit. Several new citrus varieties with different maturing dates were top-grafted on the existing trees or planted in the new orchards. The rehabilitated existing orchards demonstrate clear evidence of success. Trees in these orchards have been top-grafted to better varieties and the yields have more than tripled. The project has been designated by the Central and by the Provincial Governments as an excellent example of horticulture development. The orchards are used for technical study tours, and project staff on occasion provide training to nonproject staff and farmers from outside the project areas. 3. Farmers have already benefited significantly from the orchards. In the new orchards, they have been receiving income from intercropping between the young citrus  - 32 - trees and recently from initial fruit production. The income increases are even more evident in villages adjacent to rehabilitated orchards, where many project farmers have built new houses from income received from these orchards. 4. The project has already had tremendous demonstration effects. Large numbers of nonproject farmers have used technologies developed under project and virus-free seedlings from the project's nurseries to develop their own land. It appears that new orchards developed by farmers outside the project area are of equal quality and, in total, amount to four to five times the project area. The demonstration effect for rehabilitated orchards is about three times the area of project orchards. Incremental farm income from these additional orchards is expectec, to be similar to the project orchards. The poverty alleviation impact should also be very substantial since many of the orchards are located in remote and poor areas where options to raise incomes are very limited. 5. The SAR physical targets have been achieved as planned in all project locations. In Sichuan, 4 ha of polyhouse nurseries, 24 ha of mother-tree gardens, 5,800 ha of new orchards, 500 ha of rehabilitated orchard and 324 km of access roads have been completed. In Chongqing, 35 ha of nurseries, 26 ha of mother-tree gardens, 2,320 ha of new orchards, 340 ha of rehabilitated orchards and 175 km of access roads have been completed. In Hubei, 39 ha of nurseries, 70 ha of mother-tree gardens, 3,866 ha of new orchards, 1,633 ha of rehabilitated orchards and 436 km of access roads have been completed. The physical accomplishments varied by county; however, when added up, they represent 100 percent of the targets. 6. Project Expenditures. Total expenditure at project completion was Y 869.6 million (Sichuan Y 402.3, Chongqing Y 168.5 and Hubei 298.8 million), which is Y 151.4 (20 percent) more than the Y 718.2 estimated at appraisal. However, due to the devaluation of yuan against dollar during the years of project implementation, total project cost, when calculated in dollars was $130.8 million, $6 million lesser than the SAR estimate. 7. Financing. IDA funds of SDR 48.6 million (equivalent to $64 million at appraisal) increased in its value to $69 million at completion. The increase in IDA dollar funds was allocated proportionally among the three project jurisdictions. County governments and farmers increased their contributions to cover the additional yuan cost resulting from the 20 percent yuan cost overrun. 8. Production. Project orchards commenced fruit production on a limited scale between 1992 and 1995. In 1996 production reached 73,000 tons (43,50 tons from new orchards and 29,50 tons from rehabilitated orchards). Of this, 35,20 tons was Jincheng, 11,50 tons navel, 15,00 tons Valencia, 10,60 tons manderin and 70 tons was pomelo. It is expected that in the full production year of 2005, the project's production will reach 300,00 tons. It is estimated that increased production by nonproject farmers in the project areas due to adoption of project seedlings and techniques will be another 150,00 tons by the same year.  - 33 - 9. Postharvest Facilities. Fruit packing stations have been constructed under the project at 13 locations, and equipped with 3 t/h washing, waxing, grading and packing lines procured by ICB from Roda of Italy. Orchard houses with small fruit storage areas and either large fruit stores with natural or forced ventilation or refrigerated cold stores have been constructed in all project counties. Harvesting knapsacks and plastic fruit crates have been provided under the project, and at seven locations, the FDCs have procured fork lift trucks. 10. The first year of citrus trading for most FDCs was 1996. Citrus fruit washing, waxing, grading and packing have been carried out at 10 of the 13 packing stations, with a total of 6,860 tons processed in 19)6, and contracts for about 9,000 tons of packed fruit have already been secured for 1997. Two additional packing lines are expected to start operation in 1997 as project citrus production levels increase in the counties involved. The stores and cold stores have also been used at most locations, albeit with relatively small stored volumes at present, and plastic crates have been extensively used between the orchards, stores and packing stations. Harvester knapsacks were procured in 1996, and the orchards have commenced using them. The 1996 throughput of packed fruit, mainly for export, is considered by the mission to be an excellent start for the first year of operation. 11. Issues Resolved. In line with earlier recommendations, the project has taken action to resolve the FDC operational issues that were raised by Bank supervision missions in 1995 and 1996 as follows: (a) The working capital requirements of the FDCs have been reestimated in line with current costs and prices. The PPMOs report that lending agencies have recently been providing adequate funds to the FDCs for working capital and that sufficient funds are available to increase fruit procurement and processing throughput. Thus, working capital is no longer a constraint for the FDCs. (b) Effluent treatment facilities (or connection to city sewage systems) have been completed at all operational packing stations. 12. The Changshou District in Chongqing Municipality has a washing, waxing, grading and packing line, which was procured and installed under the project, but the farmers in this District have opted to grow only pomelo in their orchards, and this fruit is not suited to the packing lines. The PMO has not been successful in finding an alternative location for the Changshou packing line, but this is not expected to be a long- term problem. Since processing requirements are growing annually at most FDCs, and some FDCs are already planning expansion of their processing requirements, they or project counties that were not provided with packing lines may be interested taking the equipment over the next two years. The Changshou unit needs to be properly protected against corrosion while waiting transfer to a new FDC, and the PMO has been requested  - 34 - to coat the metal parts with protective oil, such as Shell Ensis Fluid or WD40 (both available from car repair garages), and to have the building made watertight. 13. The earlier Bank missions recommended several remedial actions to reduce transport losses and to achieve lower levels of transit fruit damage. Some of these have been implemented. For instance, harvester knapsacks and plastic returnable trays have been procured by the project and used in some locations to reduce harvesting damage to the fruit. Some orchards have also made their own harvester knapsacks similar to those provided under the project. This practice needs to be more widely used in all project orchards. 14. Fruit should be cooled within 36 hours of harvesting to retain optimum condition during transportation. Orchard houses with ventilated storage rooms have now been completed at most orchard locations, and storage sheds with forced ventilation and project cold stores, have now been commissioned. This should help to reduce spoilage of fruits in transit to acceptable levels. Guidelines on fruit cooling and storage will be sent by the Bank mission to the Joint PMO (JPMO) for distribution to the FDCs. 15. Fruit should preferably be washed, waxed, and packed within 36 hours of harvesting to retain optimum fruit quality, even if the fruit is to be stored in a cool room or cold store. This is now being achieved in some FDCs, as the washing, waxing, grading and packing lines have been put into operation. However, some fruit is still graded and packed manually in the orchards, mainly for export to Russia. The FDCs are making progressively more use of the project packing lines, and untreated packed fruit is likely to be eliminated in the next two years, especially since Russian buyers are now also requiring fruit to be waxed. 16. When rough road transportation is expected, the fruit should be layered in the packing cases with soft cardboard interlayer sheets to protect it. The design of packing cases has now been finalized at some FDCs, and those seen at the packing sheds would be adequate to protect the fruit under mildly rough road conditions. Soft interlayers will, however, be necessary at other locations where road conditions remain very rough. 17. Fruit spoilage in rail wagons during test marketing was reported to be a serious problem in 1995 with 30 percent losses in transit from the packing centers to the metropolitan centers. The journey time was about 10 days in closed wagons with little ventilation. Losses have reportedly been reduced but remain at about 5 percent to 10 percent in some cases. There is little than can be done to improve this situation as the rail wagons and journey times are not within the control of the FDCs. The highway infrastructure in this region is rapidly improving, however, and within two years, rail transport may be significantly reduced in favor of fast road transport on the new highways. The Three Gorges Dam project will also significantly improve river transport from most project areas within the next ten years. Over a period of time, rail transport will probably no longer be a problem.  - 35 - 18. Fruit drying temperatures on the waxing machines, have been set higher than necessary at some locations, causing the surface of the waxed fruit to be warm when packed. Since most of the fruit is not being sent directly to cold stores, this reduces the keeping quality of the fruit. The FDCs have been advised to reduce the flow of wax at the spray heads; which should be just sufficient to fully wax the fruit, and to reduce the drying temperature; which should be just sufficient to dry the fruit. Excessive heating would thereby be avoided. Guidelines on the operation and maintenance of fruit packing lines will be sent by the Bank mission to the CPMO for distribution to the FDCs. 19. Financial Viability of Packing Lines. Some FDCs expressed concern that the break-even point on the packing lines and stores will take several years to achieve. A financial analysis was therefore carried out using actual investment costs, and current operational costs and selling prices. This indicates that processing 3,300 tons/year of citrus fruit would produce a FRR of 12 percent; 4,500 tons/year would produce a FRR of 20 percent. This is 1 10 to 150 days processing a year, and should be within the reach of the more active FDCs during the 1998 harvest season. One FDC is already confident of achieving more than 250 days processing per year at full production. 20. Fruit Quality Tests. Several of the FDCs that are processing navel oranges have reported that the keeping quality of the washed, waxed, graded and packed fruit is very limited, possibly due to fruit bruising. The PMO has been requested to carry out some controlled tests to establish the cause of this. During the tests the PMO will ensure: a) that harvesting technique is correct; b) that fruit is carried in knapsacks and plastic crates and transported to the packing plant without damage to the fruit; c) that fruit is processed within 36 hours of picking; d) that the temperatures are correctly set on the drying system and that waxed fruit is dry before packing; and e) that for each ton of fruit processed, one box of unprocessed fruit is hand packed and kept as a control sample during the testing period. If the processed fruit does not keep significantly better than the control sample, then the equipment manufacturers should be called in by the PMO to modify their process. 21. Packing Charges. The FDCs have started packing fruit for nonproject farmers, and have been charging very little for this service. The FDCs have been advised that packing costs are approximately Y 580 per ton packed, excluding packing cases, at plants where lesser than 2,000 tons/year is being processed. This decreases to Y 420 per ton packed at full operating capacity of around 6,500 tons/year. Charges for this service should be increased to ensure a small profit on this operation: 22. Fork Lift Trucks. The 1995 supervision mission recommended that the petrol fork lift trucks procured by Sichuan PPMO for their fruit packing stations should be changed for electric trucks of a smaller capacity. The exhaust fumes and large physical size of the present units make them unsuitable for operation in the enclosed and confined spaces of the packing stations. The PMO has not yet found suitable electric replacements, but is actively following up this matter.  - 36 - Marketing 23. County FDCs (CFDCs) were set up under the project to carry out initial orchard development, to provide quality enhanced packing, storage and transportation services and to assist farmers in marketing their products. The CFDC staffs are composed of technicians and marketing personnel. The CFDC technicians are doing very well. They have been trained to carry out effective and comprehensive extension programs and undertake systematic training for farm managers and farmers. The marketing staffs are operating at an early processing stage and need further training in best marketing practices. 24. CFDC managers fall into two categories: (a) those managing rehabilitated orchards and (b) those managing new orchards. The former have already typically developed diversified distribution channels (institutions, wholesalers) and initiated timely promotional and marketing campaigns through the media, trade fairs, advertising on packages and missions to Hong Kong. They would benefit from training in specialized marketing management strategies (such as dual-brand management) and training in financial mechanisms (particularly export-finance and insurance). CFDC managers of new orchards coming into production require training to acquire significantly stronger general marketing and management skills so that they can effectively develop market channels and procure farmer production. CFDCs will have to prove that they can develop wider and more lucrative market networks than farmers themselves and thus give farmers an incentive to sell through them. CFDCs' present plans are to procure about 80 percent of farmers' production. Farmers are currently enjoying relatively high prices due to domestic scarcity of supply and can therefore choose to bypass the CFDC marketing channel during the peak harvesting season. However, once production supplies increase - within the next three years-farmers will turn increasingly toward an existing institutional structures with proven market contracts for production absorption-be it their own CFDC, a larger wholesale market or a rival, more competitive CFDC. 25. CFDCs need to develop short, medium and long-term market strategies, establishing direct linkages with: (a) large domestic wholesalers servicing major urban consumer outlets and institutional buyers such as hotel chains; (b) regional retail chains in large cities (Wuhan, Chongqing, Shanghai, Guandong and Beijing), both domestic or foreign-owned; (c) trading corporations with overseas wholesale, institutional and retail networks; and (d) large overseas retails chains. Within this context, the mission has introduced the JPMO and the PPMOs to several international and domestic wholesale food chains, which have expressed interest in the project's citrus production, and requested them to actively follow up these contacts. Operation Plans After Project Completion 26. The mission emphasized that governments at all levels need operation plans for the next several years. The mission pointed it out that even though the project is at completion, the challenging work has just begun. The new orchards will continue to need  - 37 - to be maintained at high quality until reaching full production. Farmers continue to need training in tree maintenance, harvesting, and postharvesting technologies. For this reason, there is a continuing need to provide strong technical support to farmers. Farmers will also continue to require timely and reliable provision of input supplies and processing and marketing services from the CFDCs. Thus, maintaining CFDCs with qualified trained staff will be necessary. 27. With these requirements in mind, the draft operation plans were provided by the governments of each jurisdiction. Under the plans, the governments would: (a) maintain the PMOs and the FDCs, with some modifications in the distribution of staff among functions (more staff for marketing in the FDCs and fewer for statistics and planning in the PMOs); (b) cancel the Project Leading Group and STC but assign their facilitative role to the Agricultural Bureau to coordinate technical assistance and to be called on when needed; (c) continue to pay the salaries of the fruit production technicians who are giving instruction to farmers; and (d) provide operational budgets for the PMOs and for the FDCs until they become self-sustaining.. The operation plans also specify the PMOs' responsibilities for production management, technical training, orchard maintenance, financial management, record keeping, file management, provision of market information, environmental monitoring, and production of evaluation indicators and collection of necessary data. Operation plans are necessary at lower levels as well. The mission discussed the county operation plans at each project site visited. 28. The mission reviewed the draft Implementation Completion Report (ICR) provided by the Joint Project Management Office (JPMO). The report is long and cover almost all aspects of the project. However, we would like it to be strengthened in several areas such as: (a) references to changes after the mid-term review; (b) procurement information; (c) project impact, especially the demonstration effect of the project in each province; (d) inclusion of project management objectives, achievements, problems encountered and resolved; and (e) expansion on the report section on lessons learned. We are looking forward to the revised version of this report. March 12, 1997 Chengdu, Sichuan China  -38 - ANNEX B ANNEX B: BORROWER'S CONTRIBUTION TO THE ICR SUMMARY ASSESSMENT 1. The World Bank approved the Mid-Yangtze Agricultural Development Project with Credit No. "Cr. 2172 - CHA" on August 29, 1990. From the project preparation to implementation until closing of accoants, the World Bank had made a great achievement in good scientific project design with some innovation and project implementation. The Bank's supervision missions have worked very closely with JPMO (under MOA) and PPMO (provincial/municipality level) to provide valuable recommendations to project construction and assistant to solve problems during the project implementation. Specially, the World Bank made a proper adjustment during the mid-term review. In addition, after the project closed, the Bank is still concern about future operation, especially in fruit marketing. A. PROJECT OBJECTIVES 2. The Objective was to make full use the natural resources, to improve ecological condition in the upper and mid-Yangtze river areas, and to develop commercial production base of high-quality fruits with majority of orange (eighty percent). It also aimed to develop a demonstration model for applying virus-free seedling and registration system in orchards. The project would promote rural economic development, and improve the ecological condition along Yangtze River areas as well as increase income for low-income farmers. 3. The project included 33 counties (city) in Sichuan, Hubei and Chongqing City. The main features of the project were as follows: (a) building 75.5 ha of virus-free seedling nurseries; (b) building 120 ha of improved budwood (mother tree) garden; (c) establishment of 11,986 ha of new orchards on the hilly waste land, rehabilitate 2,473 ha of low-yield orchards. All orchards were equipped with irrigation facilities, access roads and orchard working house; (d) introduce 23 postharvest treatment lines in major orange production areas; (e) build 9,000 m2 of storage facilities;  - 39 - ANNEX B 2 (f) build 33,900 m of training center to provide training in project management and orchard management, such as adapting scientific research results, marketing, and technical extension; (g) supply communication facilities and other office equipment to strengthen the marketing ability of the Fruit Development Corporations (FDCs) at all levels; 4. The project expected to reach higher yield through virus-free seedling and advanced orchard practice than traditional orchard management. The annual project production from new orchards was c ipected to reach 256,880 tons of citrus and 48,215 tons of other fruit (at full production in about 10 years). Incremental annual production from rehabilitated orchards would be 40,340 tons of citrus. and 1,500 tons of other fruit. B. IMPLEMENTATION EXPERIENCE AND OtUTCOME 5. All targets of the project have been reached at the project completion: (a) Physical results: establishment of seedling nurseries, mother tree garden, and new orchards with complete set of irrigation facilities, roads and various construction work, have been completed by 100 percent. (b) Financial results: the actual project investment costs were 5 percent less than the SAR estimate in US dollars, while they were 22.2 percent excess in RMB. The financial analysis indicated that FRR for new orchards of citrus, lychee, longan, pears and kiwi fruits in the two provinces and one city was higher or equal to the SAR estimate, while FRR for new orchards of plum and loquat in Hubei and yellow peaches in Chongqing and Hubei were slightly lower than the SAR expected. (c) Economic analysis: ERR of the entire project was 41 percent (Sichuan 40.4 percent, Chongqing 42 percent, Hubei 41 percent), of which ERR for new orchards was 37 percent (Sichuan 37 percent, Chongqing 40 percent and Hubei 52 percent), all higher than the SAR estimate. 6. The project has already created good social benefits, which have shown in the following two respects: first, a significant increase in beneficiaries' income has been made. According to the typical farmer household survey data, in 1995, the project households with an annual net income of less than 500 yuan in 1990 increased their income by 16.2 times, while the nonproject households with same level of income only increased by 1.5 times; poverty alleviation process with the project was speed up 14.7 timers higher than otherwise. Most of project households make 1,000 yuan per year more than before, it was 615 yuan on average in 1990 and increases to maximal 8,049 yuan in 1995. Another social benefit of the project was the demonstration role of the project models. Reclamation of hillsides and terracing for improving ecological environment was also showing the best performance in practice. 'I'he data provided by the Jiangan  -40 - ANNEX B county indicated that the water and soil erosion was reduced from 48 percent in 1990 to 13 percent in 1995. The Key Factors Affecting the Project: 7. The major unfavorable factors affecting the project start up were: Due to reasons beyond the control by the project at that time, the World Bank postponed the approval date leading to delaying of the Bank's loan disbursement. The establishment of the seedling nursery for new orchards was therefore delayed too. The project costs increased due to the inflation; and the prices of part of the materials procured through ICB was a bit higher than estimates. The arri /al of the materials was not on time, and caused construction slow down; the borrowers borne higher foreign currency risk due to a depreciation of the Chinese currency. In addition, high temperature, drought, flooding, low temperature and hails all hindered trees' growth, the flowering and fruit bearing. 8. However, with the governments' support and good coordination among various sectors, the project management offices with qualified personnel effectively use monitoring and evaluation system and technical assistance, plus an active participation of the beneficiaries, and the excellent supervision and instructions by the World Bank Mission, the project still made great progress and the unfavorable factors were minimized. C. KEY LESSONS LEARNED AND FUTURE OPERATION 9. The major experience drawn from successful implementation of the project is as following: (a) Government strong support: the governments at various level strongly supported the project in terms of making favorable policies, providing counterpart funding, coordinating among government departments. (b) High technical standard of the project: a number of studies and research in orchard establishment and management were carried out under the project. These studies have been done by national, provincial, prefecture, and county research institutes and agricultural universities in Sichuan, Hubei, and Chongqing. Also, scientific and technical committees (STC) from provincial level to county level were established under the project. The STC was responsible for setting technical standard, providing technical advice and solve problems in the production practice. There is a complete set of regulation (including award and punishment) for orchard management and project management. (c) Effective project management: the PMO at all levels are functioning well in monitoring and evaluation of the project, organizing training to PMO staff, technicians, and farmers, and record keeping. In addition, the PMO  - 41- ANNEX B made a good coordination with the World Bank supervision missions to make suggestions and provide assistance to the orchards. (d) The major risk of the project is the exchange rate in repayment of the loan, and natural disasters. The latter can be reduced through project implementation and technology. The former depends on the borrowers' adaptability in self development. But this common question is beyond the ability of evaluation staff. 10. For the future operation, the various project offices in the project provinces/municipality have developed "Project Operation Plan" which includes operation objectives, technical measures, management system, sales plan, market development, fund preparation, personnel training, target monitoring and evaluation system, method and reporting (including full development evaluation arrangement). The operation plan made by the various project offices were all approved by their respective governments. If the plan is carried out properly, it will be in good result. l l. With a favorable policy environment and government support, and high technical standard of orchard management, the PMOs continue to be in charge of the project operation with a focus on orchard maintenance and fruit marketing. The project would have sustainable development. May 14, 1997  -42- ANNEX C ANNEX C: PHOTOGRAPHS OF PROJECT AREAS Land Before the Project Land Terracing and Irrigation Pond (Reservoir)  -43- ANNEX C tN~~~~~~~~- Ad~~~- The Project's Happy Farmers ,ss"' , 4 MIN, Yuan Liang, Rehabilitated Orchard  -44- ANNEX C Top Grafting with Navel Orange Navel in Season after 2 years  -45- ANNEX C r~ ~~~ Fame' Ne Homew - MAC