China - Aquaculture Improvement Project

Report No. PID9796 Project Name China-Aquaculture Improvement Project Region East Asia and Pacific Region Sector Fisheries & Aquaculture Project ID CNPE69949 Borrower(s) PEOPLES REPUBLIC OF CHINA Implementing Agency Address MINISTRY OF AGRICULTURE Foreign Economic Cooperation Center, MOA, Beijing 100026 China Contact Person: Mr. Zhou Qijiang, Deputy General Director Tel: (86-10) 6500-3314 Fax: (86-10) 6419-4574 Email: moafesc@mx.cei.gov.cn Environment Category A Date PID Prepared December 22, 2000 Projected Appraisal Date June 4, 2001 Projected Board Date November 6, 2001 1. Country and Sector Background With China being the world leader in aquaculture by producing more than 60t of the total world yields that now contribute to over 25t of global fish production, the Government has recognized that high quality seed for aquaculture is required to maintain that production and food supply level for the country's populace. The quality of seed in agriculture as well as aquaculture (hatchlings, fry, fingerlings, etc.) is critical for efficient and profitable food production. Proper management of seed production has been recognized in China as a crucial element in sustaining and improving food production efficiency. Toward this objective, the Chinese Government has initiated a program for Good Quality Seed Development. The program constitutes components proposed at the State government as well as the Provincial level, including the Master Plan of National China Aquatic Product Seed Systems. The Government has further recognized the urgency of immediate and direct technical intervention into aquaculture seed production, for its aquaculture industry is facing serious consequences from years of neglecting this critical element in the production cycle. For aquaculture , the Government's main strategy is now to introduce and implement a program to reverse the previous trend and to move improve the genetic base of Chinese aquaculture, knowing that it may take several years up to a decade to remedy this deficiency. This strategy is complemented by the objective of promoting high quality development and production of the more common species cultured in the country and higher-valued species to meet the rising demand for these products, resulting from the increasing purchasing power of consumers. Moreover, to improve profits and efficiency of the industry, the post harvest management of the aquatic products, including market and processing plant hygiene, need to be upgraded and expanded with losses reduced; and marketing options and channels need to be increased and diversified to  increase the benefits of production to the producer and consumer by increasing and decreasing prices, respectively. 2. Objectives The project would support the Government's objectives of 1) increase production efficiency of aquaculture through improved broodstock management and seed quality, (2) diversify indigenous aquatic species cultured in response to market demand, (3) diversify and strengthen post harvest and marketing channels to increase benefits to producers and consumers, and (4) strengthen institutions by increasing technical capacity for high quality seed production, post-harvest management, disease control, and environmental management. 3. Rationale for Bank's Involvement Bank support brings with it in particular technical assistance through preparation on market analysis and forecasting and selective breeding programs. Moreover, Bank assistance also introduces good business planning practices and financial analysis methods that can help the Government and involved enterprises to consider and design investments for the aquaculture sector in particular. The project essentially would function as a catalyst through the introduction of new technologies for broodstock and post harvest management of aquatic products in selected areas that would improve the overall economic efficiency and environmental impact of the industry. The project would further provide access to loans with a long-term repayment period that is most beneficial for investments planned under the project. Long-term loans are note easily obtained from the financing institutions in the country. The Bank has also had broad experience in aquaculture through involvement in a number of projects as noted in Section 2 immediately above for the inland sector and additional experience from other projects that largely involved marine aquaculture. In addition, the Bank brings experience from other aquaculture projects from other countries to this project, though aquaculture development in China very much overshadows that of most countries. 4. Description The project would be implemented in Inner Mongolia Autonomous Region, Ningxia Hui Autonomous Region, Shaanxi Province, Sichuan Province, and Anhui Province. In four of the provinces regions, the project would be implemented in the vicinity of ethnic minorities, including Hui people (Ningxia Hui and Shaanxi), Mongolians (Inner Mongolia), and Yi people (Sichuan). For the most part, the project areas are located in the interior, more impoverished parts of the country. The investments in these areas would not only result in the introduction of improved technologies and filling in gaps in development of the industry but would also provide employment opportunities to poor rural households. The following components would vary in terms of the degree to which they are required and to what scale each would be taken up in the respective provinces or regions. The selection is based upon provincial/regional priorities and needs.A. Freshwater Fish Broodstock and Seed Improvement: To make available high quality brood and seed stock of selected and mostly indigenous aquatic species cultivated in the country. For this component, about 38 investments have been identified in the five provinces/regions, including 5 pilot investments for improving broodstock quality. Specific activities could include:Establishment, Expansion and/or Renovation of Hatcheries for Propagation of High Quality Seed: To propagate high quality -2 -  stocks of cultured species in the project Provinces and Autonomous Regions, this sub-component would include the production of seed of high value indigenous species with good market demand and not commonly produced at present and the introduction of improved brood. It would also support development of seed production in northern Provinces/Regions to strengthen local self-reliance on fish seed supply, thereby reducing or eliminating imports from the south that are often unreliable and can spread disease. This sub-component would be implemented in all project provinces/regions with the species selected for culture varying among them. The selection has been based on consideration of the under-exploited and high value species mostly endemic to the project provinces and regions. The production of some tropical species presently cultivated in the northern/provinces regions will be increased; however, these species cannot survive in the project areas under outdoor winter conditions, thus minimizing risks to indigenous populations. Some areas will be expanding the production of the species more commonly available in the country and where there is a high demand for these species.Extension of Improved and More Efficient Hatchery and Broodstock Management Methods: To improve the efficiency of fish hatchery operation, including broodstock management and disease control. The improved broodstock and seed management would include the application of the selective (comprehensive applied) breeding method. The improved hatchery management activities will address the serious problem of degradation in the quality of parent fish stocks that has led to slower fish growith, feed conversion efficiency, and disease resistence. This reduction in quality has resulted from decades of not addressing the problems that can arise from inbreeding. The second is to The method would be used to improve one or more of the following characteristics: increasing fish growth rates, market appearance desirability, disease resistance, and growth/ feed conversion efficiencies. These methods would also be applied to the production of seed for grow-out.B. Freshwater Aquaculture Production: To increase the production of high quality fish and aquatic products largely through rehabilitation and expansion of existing production facilities. Facilities would be developed for the production of high-value, indigenous species that at present have a high consumer demand and are uncommon. For this component that includes mostly finfish and crabs, about 32 investments have been identified in the five provinces/regions. The seed for this production would be derived for the most part from hatcgeries that would be improved or newly constructed under the above component. C. Support to Processing and Marketing of Fisheries Products and Fish Feed Production. To upgrade and in some instances expand fish processing and marketing infrastructure to meet international quality and processing standards to assure high market attractiveness for project commodities. Specific activities would include:Introduction and Implementation of Hazard Analysis at Critical Control Points (HACCP) Procedures to existing processing plants and wholesale marketing centers; andFish Feed Production Capacity would be increased in some project areas.D. Institutional Strengthening. Training and technical assistance would be provided to improve the capacity for:Broodstock Management, Aquaculture Planning, Market Assessment, and Business Management; Analysis of Broodstock and Seed Quality, Methods to Improve Quality and Related Growth Characteristics of Freshwater Fishes; Source, Production Facility and Effluent Water Quality Monitoring and Assessment;Fish Disease Diagnosis, Control, and Treatment;Application of HACCP Procedures for Marketing and Processing of Freshwater Fishes; and Existing and New Fish Farmers - 3 -  Associations to Function as Support Organizations for Technical Extension and Marketing and for Financing Identified Research. 5. Financing Total ( US$m) Total Project Cost 100 6. Implementation The Central Project Management Office (PMO) is located in the Foreign Economic Cooperation Center in the Ministry of Agriculture. It is responsible for coordinating the work of various participating provinces. It also functions as a quality control body through providing guidance to them and supervising their work. At the Provincial/Regional-, Municipal- and County-levels, Project Leading Groups have been set up. Such Groups are comprised of all project related agencies, including the Finance Bureaus, the Development and Planning Committees, the Environment Protection Bureaus and the Commodity Inspection Bureaus, etc. They decide major policy issues of project preparation and implementation and coordinate the work of various agencies. In addition, PMOs have been established either in existing Fisheries, Agriculture, or Water Conservancy Bureaus. They are responsible for the daily routine work. 7. Sustainability For the most part, once the project is implemented there is little risks with regard to the operation of the components being sustained. In aquaculture as in most agriculture, there is always the chance of a significant disease affecting financial performance. However, in the case of this aquaculture project, should a disease affect a particular species, this species may in most instances be replaced by another. Also, a comprehensive market analysis is being conducted as part of project preparation with the purpose of forecasting trends for the species planned to be cultured. 8. Lessons learned from past operations in the country/sector One of the more critical lessons learned in designing an aquaculture project of this kind in China concerns a proper assessment of the market demand for the products generated, particularly for high valued species for increases in production could be significant under the project and in parallel developments. Directly related to the production factor is the need to have adequate marketing opportunities established that increase competition for the products generated to help assure the producer receives the best price. To complement this, post harvest facilities for wholesale or processing should be available to reduce spoilage and losses in revenue. 9. Program of Targeted Intervention (PTI) N 10. Environment Aspects (including any public consultation) Issues There are essentially three environmental issues that are being addressed under the proposed project. These include the quality and availability of source water, the management of effluents from production and to a lesser extent from processing and wholesale market facilities, and the escape of hatchery produced seed. As part of the feasibility study for each project component, the available quality and quantity of source water will be analyzed to determine that whether it -4 -  meets national standards for fisheries and aquaculture as part of the evaluation process. Effluents from production facilities will be directed to irrigation systems where the nutrient content would benefit agriculture. With regard to potential fish losses, farm sites and hatcheries will be selected in areas with reduced risk and flooding and measures will be taken to minimize the chance of escape of fish from farms as part of the standard design work to minimize fish losses. Also, monitoring program would be established to evaluate changes in the genetic composition of populations of the fish species cultured in relation to those local populations that may already be composed of large numbers of escapees from aquaculture in some project areas. 11. Contact Point: Task Manager Ronald D. Zweig The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: (202) 458-2174 Fax: (202) 522-1674 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. This PID was processed by the InfoShop during the week ending December 29, 2000. - 5 -