China - Jiangxi Integrated Agricultural Development Project

Report No. PID10231 Project Name China-Jiangxi Integrated Agricultural ... @ Development Project Region East Asia and Pacific Region Sector Irrigation & Drainage; Agro-Industry & Marketing; Other Agriculture; Institutional Development Project ID CNPE65463 Borrower(s) PRC Implementing Agency Address JIANGXI PROVINCIAL PLANNING AND DEVELOPMENT COMMISSION Jiangxi Provincial Agriculture Foreign Fund Utilizing Office Address: 12 FL. Provincial Planning Commission Building, West 2 Road, Provincial Government Compound, Nanchang 330046, China Contact Person: Mr. Yuan, Jin Mu Tel: +86-791-6211815 Fax: +86-791-6212873 Email:JAFFO@public.nc.jx.cn Environment Category B Date PID Prepared November 28, 2001 Projected Appraisal Date December 28, 2001 Projected Board Date May 28, 2002 1. Country and Sector Background In the last two decades, China has not only ensured food grain security for its large and still growing population, but also achieved impressive growth in agriculture and the rural sector. Many elements regarded critical to rural development, such as upgrading of marginal lands, investment in the water sector, and agricultural research and technology have contributed to the substantial gains. However, the growth in agriculture and the rural sector has slowed in recent years and faces a considerable challenge in achieving further development.Sustainable stable growth in agriculture and ensuring food security has been one of the key areas of the Government's development plans. In the latest development plan, the Tenth Five Year Plan, there has been a shift in the focus from quantity of food supply towards cost effectiveness, larger diversity and quality of agricultural products. With growing income in China and the country's strive for World Trade Organization (WTO) membership, it is acknowledged that any sustainable approach to agricultural and rural development needs to be towards meeting consumers demand. With increasing income levels in the urban areas, consumer demand is becoming increasingly sophisticated requiring a higher variety of products and a distinctively  higher quality of products at competitive costs. Responding to the changed needs, the Government's focus is shifting towards its regulatory responsibilities and on removing the remaining policy, administrative and regulatory constraints that are preventing the emergence of full incorporation of socialistic market principles. In addition, to be successful, it has to target public sector investments for creating and/or nurturing the necessary market institutions which enable private entrepreneurs to make their resource allocation and marketing decisions based on undistorted and transparent price signals. 2. Objectives The development objective of the proposed project is to improve the livelihood of the farmers in the project areas through establishment of integrated, sustainable and market driven agricultural production systems focusing on productivity and high quality agricultural output. 3. Rationale for Bank's Involvement Bank support for the proposed project is justified through its mandate to lend for development-oriented activities with a strong element of public goods, such as basic infrastructure, public information systems, training, extension, and research. Provision of these kinds of basic services in Jiangxi will provide a firm foundation for future agricultural sector investments by the private sector as well as improve the utilization of scarce public resources creating a basis for increased government revenues for future development.The project approach is consistent with the recently revised rural development strategy of the Ministry of Agriculture and with the Bank's rural strategy for China initiating the second generation of agricultural and rural development projects in the country. The proposed project would support activities for the medium and long-term growth of the agriculture sector as opposed to simple revenue generating activities. The Bank's extensive experience would add value to the Borrower's efforts to provide an enabling environment for future economic growth in Jiangxi while accelerating the transition process of its agricultural sector into a modern social market economy. In particular supporting the: (i) institutionalizing reforms necessary for sustainable use of water resources; (ii) introducing new production and processing technologies; and (iii) promoting better production management and providing knowledge of commercial agriculture production and marketing to enable producers to respond to market demand. 4. Description The proposed project has three main components: (i) Irrigation and Drainage; (ii) Farm Production Improvement; and (iii) Market Systems Development. In addition, Project Management, Monitoring and Evaluation is treated as a separate component. Irrigation and Drainage Component: The component would include: (i) rehabilitation of existing irrigation works including diversion weirs; main and secondary canals and drains, canal and drainage structures; and pumping stations (works and goods); (ii) construction of tertiary (on-farm) irrigation and drainage systems (works and goods); and (iii) construction of access and farm roads (works). On the institutional development side, the component would support the establishment of Self Financed Irrigation and Drainage Development (SIDD) systems and Water User's Associations (WUA) for the irrigation command areas upgraded under the project to ensure more efficient and sustainable use of land and water - 2-  resources for irrigated agriculture (technical assistance). Farm Production Improvement Component. The component is to support improved (i.e. higher value) agricultural production based on irrigated and drained land, including: (a) irrigated field crops; (b) livestock (pigs, chickens, ducks, geese); (c) small-scale on-farm fish production; and (d) upland crops. The component would be targeted to the farmers who benefit from the Irrigation and Drainage Component, and it would include the following sub-components: (i) soil fertility improvement; (ii) farm production support, (iii) training and extension, and (iv) support to women farmers. Market Systems Development Component: The component would include: (i) provision of marketing advice; (ii) promotion of farmers' marketing groups; (iii) support to agro-enterprises; (iv) agricultural product markets; and (v) "marketing assistance grants" including strategic market studies, promotion of the adoption and use of quality standards, and improvements to market information systems. Project Management, Monitoring and Evaluation: The component would include: (i) strengthening of the provincial Project Management Office (PMO) (goods and training); (ii) establishment of PMOs at prefecture, county and township levels (goods and training); (iii) training of project management and monitoring staff; (iv) development of a monitoring and evaluation system that includes environmental and social indicators (technical assistance and training); and (v) establishment of community advisory/participation groups (technical assistance and training). 5. Financing Total ( US$m) Borrower US $33.7 million, IBRD US $100 million, Beneficiaries US $22.24 million Total Project Cost 155.94 million 6. Implementation The proposed project would be executed by the Provincial Planning and Development Commission (under the State Planning and Development Commission) under which the Provincial Project Management Office (PPMO) is located. Project Management Structure. A Project Leading Group (PLG), Project Management Offices (PMOs) and technical committees at all levels (province, counties and townships) would be established. The integrated approach of the proposed project would be reflected in the project management, in which the various stakeholders, including the beneficiaries, various government levels, private sector and civil society, would participate. 7. Sustainability The overall success of the proposed project depends upon a continuing stable macro-economic environment and political commitment to private sector development. Whereas continuing liberalization of markets and international trade are critical for country's accession to the WTO, possible devaluation of local currency, which it can trigger, may hinder the borrower's ability to raise sufficient level of counterpart funds and - 3 -  serve its loan obligations. On the other hand, future liberalization of financial markets (e.g. commercial interest rates) may improve farmers and agricultural producers access to credit resources.Several factors are critical to project sustainability: (i) institutional sustainability is important, and is being pursued by building consensus on the project design among a wide range of stakeholders and adopting a participatory process. Most of the implementing institutions are at the local level and only strong participation of all stakeholders during planning and implementation can bring long-term sustainability to project investments; (ii) selection of irrigation areas would be based on financial incentives for farmers to participate. The selection of irrigation sites would be based on the potential for increased crop yield arising from reliable water supply and better maintenance; (iii) a high level of ownership of the planning and implementation process by project beneficiaries is critical for the project success. For example, the sustainability of the investments into productive infrastructure (e.g. irrigation, drainage, etc.) depend upon the functioning of the relevant resource users associations, being able to generate revenues for operation and maintenance and organize members to contribute labor. 8. Lessons learned from past operations in the country/sector The proposed project would benefit from the Bank's extensive experience in agriculture and rural development in China and other countries around the world. More generally, the proposed project would build on lessons learned from, among others, the Jiangxi Agricultural Development Project, the Red Soils Projects, the Yangtze Basin Water Resources Project and the Songliao Plain Agricultural Development Project. A key lesson from Bank financed projects in general is that commitment by governments and the active participation of beneficiaries and stakeholders (village, township and county governments) in project implementation ensures smooth implementation, success and sustainability of the project. The nature of the proposed project requires in particular that it is driven by entrepreneurial individuals in design, preparation and implementation. In order to become viable and to be recognized as responsible organizations in their own right, including an appropriate legal status, establishment of new community based irrigation institutions need considerable and sustained long term support: (a) technically from the project and (b) from government institutions.An important lesson learnt from the 'Irrigated Agriculture Intensification Project is that compared to large-scale new irrigation areas, investment to improve and expand existing irrigation facilities for smaller irrigation unit areas, which are simple in design and compact for rapid implementation, is less costly in capital investment and project benefits could be accrued, county by county, in a relatively short period of time. The implementation experiences of current irrigation projects in China provides strong support for the formation of SIDDs. Lessons learned from other Bank-financed water projects in China show that full recovery of investments, operating and maintenance costs through water charges and irrigators' ownership is key issue in irrigation system design and sustainability. The project design should support the "user pays" principle, and user (farmer) participation should be explicitly built into project planning, implementation and operation and supported under the Project. The irrigation and drainage investments should go in parallel with institutional development support for the establishment of financially self sustainable SIDDs/ WUAs. Moreover, as reflected in the Implementation Completion Report (ICR) for the Sichuan - 4 -  Agricultural Development Project (ADP), the integration of infrastructure investments with parallel income generation initiatives such as orchard and vegetable crop and livestock development, where feasible exploiting market niches, provides a basis for high returns. Similarly, the ICR for the Henan ADP finds that the establishment of an integrated system that links production, processing and marketing is necessary for the optimum utilization of resources and maximum benefit and should be the preferred direction for future development for the agricultural sector. Therefore, it is important that investments into irrigation and drainage infrastructure go in parallel to farm productivity improvement activities. Furthermore, lessons learned indicate that reasons why some projects have achieved lower than expected returns to irrigation investments include, among other things, lower that expected response of crop yields; lack of diversification, i.e. the over-emphasis of the role of rice as one crop amongst many which can contribute to household incomes; and the difficulties experienced by farmers in adapting their traditional practices to new technology and technical packages. 9. Program of Targeted Intervention (PTI) N 10. Environment Aspects (including any public consultation) Issues Environmental Impact Assessment (EIA). The EIA has been carried out by an independent local institute (Jiangxi Provincial Environmental Protection Research Institute) who is certified to undertake environmental impact assessments according to Chinese regulations. A Bank contracted consultant has worked closely with the EIA team to advise them in their work. The EIA work is fully in line with the highly participatory preparation approach of the proposed project. Participation/Consultation. In order to seek local support, to increase transparency and accountability to the public, to reach consensus with various stakeholders, and to enhance ownership of the environmental management and the proposed project, participation of beneficiaries and other stakeholders was of crucial importance in the environmental assessment process. In order to keep all beneficiaries informed, the EIA Terms of Reference (TOR) were sent to the libraries within the affected communities for review and comment by the interested parties. Notices were issued and were put up on notice boards. News media including local newspapers, television and radio were also used extensively to inform all beneficiaries and potentially affected people within the areas of project impact about the planned environmental study, and their input was sought actively. A separate Beneficiary Participation Plan has been prepared in close cooperation with the EIA and established the means and mechanisms by which project beneficiaries would participate in a meaningful way in project implementation. All consultations were appropriately recorded. Training and capacity building are proposed as part of the project to enhance the Borrower's ability to implement the project in a participatory manner. The purpose of the Beneficiary Participation Plan is to describe in detail and formalize the consultation and participation process with affected groups. As such, it is a strategy for allowing stakeholders to influence and share control over the decisions and resources that affect them. The BPP should be viewed as a working document that is modified to reflect any changes in the project and/or in the economic, political, and social conditions.Anticipated Environmental Impacts. The environmental analysis of the proposed project indicates that the project would have no major direct negative impact on the natural environment. The overall - 5 -  objective and proposed design of the project suggest that the net environmental impact of the project, if successfully implemented, will be positive and that any negative environmental effects will not be irreversible or long-term.The proposed project would bring environmental benefits, through a more efficient use of natural resources. Most importantly, the rehabilitation and institutional reform of existing irrigation and drainage schemes would lead to more efficient use of water, which would reduce incidents of water logging and salinity threat. Other positive impacts are expected through the farm production improvement and marketing component, which would address issues like soil erosion, soil fertility, nutrient leaching, and promote environmentally sustainable agricultural production (including integrated pest management) and marketing practices.The most substantial negative environmental effects of the proposed project can be expected from a more intensive agriculture production, which might involve higher use of fertilizer, pesticides and herbicides. The proposed project in its design, will put strong emphasis on mitigating these effects by introducing more efficient application techniques to farmers. Most importantly, the proposed project would support integrated pest management, including: (a) managing pests (keeping them below economically damaging levels) rather than seeking to eradicate them; (b) relying, to the extent possible, on non chemical measures to keep pest populations low; and (c) selecting and applying pesticides, when they have to be used, in a way that minimizes adverse effects on beneficial organisms, humans, and the environment.Other potential negative impacts include a possible increase in the incidents of schistosomiasis within the project counties in the perimeter of the Poyang Lake and Yangtze River, and to a much smaller scale, noise or pollution of construction sites, increased transportation under the proposed project, and increased waste disposal on wholesale markets. To prevent or reduce the adverse direct and indirect environmental impact of the proposed project as identified in the EIA report, an Environmental Management Plan (EMP) has been developed to provide a plan to implement the identified monitoring and mitigation measures. The EMP also provides a budget estimate, manpower needs and training/capacity building requirements in order to ensure efficient implementation of the EMP.Social Aspects.The nature of the proposed project requires that it is highly community driven in design, preparation and implementation. This bottom-up approach was already initiated through initial PRAs carried out in July 1999. Moreover, beneficiaries need to be intimately involved in the design of the various project components and activities. Therefore, during later preparation, another round of PRAs, utilizing the fieldwork methods of cultural anthropology and a semi-structured questionnaire survey, were carried out as an integral part of a Social Assessment (SA) process. This approach of SA will continue during implementation. A Social Assessment (SA) process was established for this project to focus on issues that directly and indirectly impact the key stakeholders in the proposed project. The range of issues that have been addressed by the SA include, but are not limited to: (a) affordability concerns; (b) land security; (c) inclusion; (d) access to employment, credit, irrigated water, and land; and (e) social cohesion and community decision-making. In addition, a structured statistical baseline survey was carried out to assess the socio-economic situation of the targeted populations. The majority of the directly targeted beneficiaries of the proposed project are farm households which farm in poorly irrigated and drained areas and are primarily from the poorer strata of rural society. Their subsistence depends to a high degree - 6 -  on rice and other food produced on the approximately one mu of land they have per household member. Crop production is frequently complemented by animal husbandry activities such as raising pigs or chickens, and off-farm employment adds significantly to household income. The availability of effective drainage and irrigation is of crucial importance for the livelihood of these families, since it enables them to grow a second or even third crop, to reach higher yields, and to become engaged in the production of higher-value (cash) crops.Religious and Linguistic Composition. Followers of Chinese folk religion--that amalgam of Buddhism, Taoism and ancestor reverence--are prevalent among the population in the project areas. A small minority is Christian. The project areas in the north and central parts of Jiangxi speak the Gan dialect of Han Chinese, while most of those in the southern project counties speak Hakka, another Han Chinese dialect.Ethnic Composition. Over 99% of all residents in the directly affected project areas are Han nationality; only small numbers of the She, Yao, Li, and Hui minorities are resident there. The She, mostly recent migrants from Zhejiang Province to the east, live fairly dispersed throughout the project areas, and are basically acculturated to Han patterns. The Yao are mostly concentrated in the southeast of the province, in the counties abutting Guangdong, and have maintained both their residential segregation and their Yao cultural distinctiveness. There is one significant Yao village in the project area, Yaoshan, the local Yao are mainly engaged in hunting, timber felling, corn, potato and taro planting and the collection of mountain forest products. The proposed project is paying particular attention to this village by allocating funds for infrastructure and small-scale loans and by providing additional support with the help of the Provincial Women's Federation.Status of Women. The status of women in Jiangxi has improved considerably over the last decades. Today, most women actively participate in decision-making on major family matters. However, inequalities still exist. Women are generally less well educated than men and work in relatively low-paid positions. Due to seasonal out-migration of middle-aged men and younger (both male and female) workers, many farm households are headed by women and a large share of the farm work is carried out by women. This feminization of agriculture in Jiangxi means that women make up a very large part of the targeted beneficiaries of the project.Beneficiaries Attitude Towards Project. Through Participatory Rural Appraisals (PRAs), peasants and other key stakeholders have shaped the project from the concept stage onwards. The integrated nature of the project with a strong emphasis on irrigation and drainage infrastructure reflects the preferences of the great majority of farmers. The participatory approach of the project throughout preparation and implementation will contribute to improved project management and to addressing remaining concerns such as assuring the equity of the loan distribution process and the integrity of the financial administration of the project by local authorities, as well as operating and maintaining irrigation and drainage areas at a consistently high level of delivery. Safeguard IssuesCultural Property. No damage to cultural property is anticipated. A Cultural Heritage Desk Study was carried out by the Borrower. Based on the outcome of this study, a full Cultural Heritage survey was determined not to be needed for any project county or site. However, the study will be distributed to all implementing agencies to raise the awareness about risks to cultural heritage under the proposed project. Moreover, training will be provided to the construction teams for the rehabilitation and extension of irrigation and drainage sites to raise - 7 -  their awareness and teach them how to proceed in case any items with cultural heritage significance are found.Natural Habitats. Due to the proposed locations of the project, no impact is anticipated on natural habitats.Indigenous People. While the number of minorities in the project area is very small, some She, Li, Hui and Yao do reside there . Given this situation, a social assessment was carried out to learn more about and from these minorities and to recommend to the Borrower and the Bank as to whether a minorities-targeting development plan needed to be devised. It was determined that current conditions for the "She" nationality and the "Yao" nationality warranted such a Multi-Nationalities Development Plan (MNDP) as the appropriate approach for the application of OD 4.20 to the project to ensure that indigenous people benefit from development projects and to avoid or mitigate potentially adverse effects on indigenous people caused by Project activities. A draft MNDP has been submitted to the Bank for reviewInvoluntary Resettlement. Some project activities such as construction of roads, canals, and market places might make unavoidable the permanent or temporary acquisition of land that is used by individual farm households or communities. Although at the time of project pre-appraisal no such land acquisition (or any kind of involuntary resettlement) was identified, a Policy Framework for Resettlement and Land Acquisition has been prepared in case such resettlement or land acquisition would occur during project implementation. A draft Land Acquisition Framework has been submitted to the Bank for review.Safety of Dams. No construction nor rehabilitation of reservoirs will be funded under the project. However, about three-quarters of the irrigation districts tentatively included for rehabilitation and construction under the project are served by reservoirs. According to Chinese national regulations relating to dam safety and consistent with World Bank guidelines on Dam Safety, existing dams serving irrigation areas which will be rehabilitated under the project would be subject to safety review in accordance with procedures acceptable to the Bank if such dams exceed 15 meters in height or 2.5 million cubic meters in storage capacity. Eighty such dams are located in the project areas. Safety reviews shall be carried out prior to any irrigation rehabilitation and construction. Jiangxi Province has good knowledge in and capacity in implementing project in accordance with OP 4.37 as it has had a number of project including large-scale irrigation works that have triggered the policy. 11. Contact Point: Task Manager Sari S-derstr-m The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: 202 477 1234 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 - 8 -  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 Dec. 21, 2001 -9-