China - Heilongjiang Dairy Project

Page 1 INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE Report No.: AC710 Date ISDS Prepared/Updated: March 23, 2004 I. BASIC INFORMATION A. Basic Project Data Country: China Project ID: P086629 Project Name: CN - Heilongjiang Dairy Project Task Team Leader: Mohamed N. Benali Estimated Appraisal Date: December 15, 2004 Estimated Board Date: May 31, 2005 Managing Unit: EASRD Lending Instrument: Specific Investment Loan Sector: Animal production (75%);Agricultural extension and research (15%);Crops (10%) Theme: Other rural development (P);Rural services and infrastructure (P);Technology diffusion (S) Safeguard Policies Specialists in the task team: Loan/Credit amount ($m.): IBRD: 100 Other financing amounts by source: Borrower and beneficiaries 120 ($m) B. Project Objectives [from section 3 of PCN] 1. The proposed project would have two key development objectives. The first objective would be to increase the income and number of farming households engaged in dairy production in selected areas of Heilongjiang province. The second objective would be to improve the genetic potential and management of the dairy herd in Heilongjiang. The proposed project will be designed to include as many smallholders as feasible to increase its poverty reduction impact. C. Project Description [from section 4 of PCN] 2. Initially, the local project team proposed a concept under which only large dairy parks (area of 2 or more hectares, surrounded by a brick wall enclosing a milking station, feed storage and processing facilities and about fifty cow sheds where 500 to 1500 dairy cows are kept) would be set up and operated exclusively by large private sector companies (dragonheads), where individual dairy farmers would rent space (a shed) to raise between 20 and 100 dairy cows. This approach was rejected because: (i) it would not have targeted the smallholders and the poor who should be the primary beneficiaries of Bank assistance; and (ii) the potential negative environmental impact that these very large dairies could have had. The initial project concept also proposed the creation of 15 dairy breeding farms, exclusively owned and operated by private sector companies. This alternative was also rejected because: (i) the proposed breeding farms by themselves would have had only a marginal impact on improving the genetic potential of the Heilongjiang herd; and (ii) financing assets for private sector enterprises that do not have a public goods element and do not positively impact the income and livelihood of significant numbers of dairy households would not be within the mandate of the World Bank. 3. In view of the above, it is proposed that the HDP focus on: (i) helping about 10,000 households increase their income by engaging in dairying activities or by increasing their milking herd and production; and (ii) improving the genetic potential of the Heilongjiang dairy herd. The later would be achieved by creating a few dairy breeding farms, importing superior semen and embryos and most importantly by setting up a dairy herd performance recording and selection program to help select and propagate genetically superior animals. The HDP would be a five-year specific lending operation and would finance the following two project components: a. Household Dairy Production Component (estimated cost US$190 million). Under this component, the project would finance the construction of civil works, the import of dairy cattle, and the purchasing and installation of equipment for about 90 dairy parks, each with a group of 50 households owning up to 10 Page 2 dairy cows each. The Project would also finance dairy cows, sheds and dairy equipment to assist more than 5,000 individual households engage in dairy production or increase the size and productivity of their existing herds. It is expected that dairy parks infrastructure would be owned by local government or by private sector enterprises. The Task Team is discussing with the Borrower the feasibility of organizing smallholders into dairy producers associations and/or shareholding companies in order for them to own and operate their own parks and associated equipment (milking station, milk transport equipment, etc.). b. Dairy Breed Improvement Component ( estimated cost US$10 million). Under this public goods component aimed at improving the genetic base of the dairy herd in Heilongjiang province, the Project would finance the establishment of a sustainable dairy cow genetic improvement program. The constituents of this program would include civil works, equipment and capacity building for a central milk testing station, a herd performance recording system, data input, analytical and household reporting and genetic evaluation systems, a young bull rearing station and reserve semen collection and storage facility. The Project would also finance the import of about 70 bulls and 300,000 doses of semen to bridge a short-term semen supply gap. D. Project location (if known) 4. The Project would be implemented within the