China - Red Soils Area Development Project

DasmmN of The World Bank FOR OFFICAL USE ONLV, CA /.X>3- C'fI'@ Report No. 6072-CRA STAFF APPRAISAL REPORT CHINA RED SOILS AREA DEVELOPMENT PROJECT August 1, 1986 Projects Department East Asia and Pacific Regional Office This document has 8 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.  CURRENCY EQUIVALENT Currency Unit - Yuan (Y) US$1.00 Y 3.2 Y 1.00 US$0.31 (As of April 1, 1986) FISCAL YEAR January 1 to December 31 WEIGHTS AND MEASURES 1 meter (m) - 3.28 feet (ft) 1 kilometer (km) - 0.62 miles 1 hectare (ha) - 2.47 acres 1 ton (t) - 1,000 kg = 2,205 pounds 1 kilogram (kg) - 2.2 pounds PRINCIPAL ABBREVIATIONS AND ACRONYMS USED ABC - Agricultural Bank of China ADC - Agricultural Development Corporation HH - households HP - horsepower ICB - International Competitive Bidding IS - International Shopping JCC - Joint Coordinating Committee kV - kilovolt kVA - kilovolt-amps kW -- kilowatt MAAF - Ministry of Agriculture, Animal Husbandry and Fisheries MJS - Management Information System m - cubic meter M m - million cubic meter PCC - Project Coordination Committee PMO - Project Management Office PO - Project Office SDR - Special Drawing Right SOE - Statement of Expenditure sq m - square meter sq km - square kilometer  OR OFfCI&L USE ONY CHIA RED SOILS AREA DEVELOPMENT PROJECT Credit and Prolect Sumary Borrower: People's Republic of China Beneficiaries: Jiangxi and Fujian Provincial Governments Amount: SDR 34 million (US$40 million equivalent) Terms: Standard Relending Terms: GOC procedures for agriculture sector; currently 20 years including 5 years of grace at 4% p.a. interest. Provinces bear the foreign exchange risk. Project Description: The project would develop for cash crop and livestock production by individual households about 27,000 ha of underutilized land in red soil areas of Jiangxi and FuJian provinces. It would support integrated and diversified development including land terracing, contour planting, irrigation and drainage; estab- lishment of orchards, ramie, feed grains, fodder, and woodlots; and rehabilitation of tea plantations. It would provide purebred stock for dairy and pig breed- ing farms. The project would provide farm, construc- tion and transport machinery and construction of processing facilities for most project products. It would expand and upgrade rural infrastructure inclu- ding rural electrification, roads and bridges; sup- port -construction of farm buildings; and provide technical assistance and training to existing manage- ment and extension institutions. A pilot program of research and demonstration on less favorable sites would be included in order to increase che demonstra- tion value for 10 million ha of upland red soils in south China. At full development, the annual value of the projeot's incremental output would be about US$74 million, including oranges, ramie fiber, milk, pork, timber, and tea. Project land development would generate about 41,000 full-time jobs. The project faces no significant technical, marketing, or organi s'onal risks. This docunwt has a nstiedtditibution and ay be -used by recipients ony i the prformne Of th offmc dutis Its contents may not otherwise be discled without WoaM Oank auth_ltion.  Estimated Costs la: Local Foreign Total (USM million) .. Land Development 20.6 1.1 21.7 Infrastructure Improvement 7.7 3.4 11.1 Buildings 5.8 4.8 10.6 Machinery and Vehicles 4.8 4.8 Crop Establishment 22.1 12.3 34.4 Livestock Breeding 2.7 2.6 5.3 Agroprocessing 2.2 1.4 3.6 Research, Training and Office Equipment 0.1 0.8 0.9 Pilot Project 0.6 0.1 0.6 Training and Technical Assistance 1.6 0.7 2.3 Base Cost 63.4 31.9 95.3 Physical Contingency 3.0 1.3 4.3 Price Contingency 15.3 7.3 22.6 Total Prolect Cost / 81.7 40.5 122.2 Financing Plan: IDA 0.0 40.0 40.0 central government 3.3 0.5 3.8 Local governments 16.1 0.0 16.1 Agricultural Bank of China 27.8 0.0 27.8 Participating farms 34.5 0.0 34.5 Total 81.7 40.5 122.2 Estimated Disbursement: IDA FY 1987 1988 1989 1990 1991 1992 -- (US$ million) -- Annual 4.0 10.0 12.0 10.4 3.2 0.8 Cumulative 4.0 14.0 25.6 36.0 39.2 40.0 Rate of Return: 290 La Based on an exchange rate of Y3.2 - US$1. Shortly before negotiations, a devaluation led to a new rate of Y3.7 - US$1. At this rate, the total project costs would be Y411 million (US$ 111 million) and both the foreign exchange component and the IDA Credit would be 36% of project costs. Adjustment of economic costs and benefits to reflect the new exchange rate would leave the project's economic rates of return unchanged. aE Project is exempt from taxes and duties.  CHINA RED- SOILS AREA DEVEWPKENT PROJECT STAFF APPRAISAL REPORT Table of contents Page No. I. BACKGR,OUND .......................... .1 ...... Introduction .... .. . ......... ................. I The Agricultural Sector ............. . .. .. .... . 1 Sectoral Objectives snd Bank Leding ... 2 Project Formulation and Rational . . 3 II. THE PROJECT AREA . ... ...................... ............. 4 Locationscn.......... 4 Climate ...... ....................... 4 Topography . . 5 Soils and Land Use . . Infrastructure and Support Services. 6 III. THE PROJECT . . . .......................................... . 8 Project Description ........................... . ..... 8 Detailed Features .................................... . . 9- Water Supply, Demand and Quality. . 15 Status of Project Preparation .... 15 Implementation Schedule ....16 Cost Estimates . ... 16 Financing . . . ........... 16 Procurement ....17 Disbursement .....19 Accounts and Audits . .......... 20 Envirozmental Effects ....20 TV. PROJECT ORGANIZATION AND NANAGGFENT .20 Project Organization .20 Execution of Project W o... 23 Management Information System . .23 Financial Nanagement. ....... 24 This report is based on the findings of a preparation mission to China in June 1985 and an appraisal mission In September 1985. Members of the preparation mission were T.B. Wiens, R. Deshpande, W. Panton (IDA), A. Brown, and H. H. Cheng (Consultants). the appraisal mission comprised T.B. Wiens, K. Abmed, R. Deshpandk, S. Salman, M. Walshe, E. Zuckerman (IDA), C. Cronberg and R. Koo (Consltants). Ms. P. Harrell (Consultant) also contributed to the report.  ii V. PRODUCTION. PROCESSING. MARKETING. AND PRICES .......... 25 Production ................................-*...... 25 Processing and Marketing ............................ 28 Prices .............................................. 30 VI. BENEFITS, JUSTIFICATION AND RISKS . . 30 Benefits ................................... 30 Farm Incomes ..... ................................ 30 Employment .......................................... 31 Project Charges ..................................,. 31 ADC Cash Flows ....................................... i ..32 Economic. Analysis ................................... 32 Project Risks .......................... 34 VII. AGREEMENTS REACHED AND RECOMMENDATION ................. 34 TABLES IN THE TEXT 3.1 Project Farming Units 11 3.2 Cost Summary 17 3.3 Procurement Arrangements 18 6.1 Summary of Rate of Return Analysis 33 ANNEXES 1. Background Data climate Project Area Statistics 2. Cost Data Project Cost Summary Project.Expenditure Schedule Expected Price Increase Estimated Disbursement Schedule Proposed Allocation of Credit Proceeds Cost Estimates: Land Development Irrigation Electrification Roads, Bridges and Culverts Building Construction Area and Cost Cost Estimate: Machinery and Vehicles Crop Establishment Costs: Jiangxi and Fujian Cost Estimates: Research, Training and Office Equipment 'Training and Technical Assistance Agroprocessing Fixed Capital Investments 3. Inputs, Production and Prices Sample Crop Irrigation Water Requirements Incremental Production with Project Border Prices of Major Products and Inputs Fresh Milk Border Price Calculation Selected Conversion Factors for Inputs  4. Financial and Economic Benefits Cash Flow Models for Specialized Household Parmers. Seasonal and Total Labor Requirements With Project Rent and Cost Recovery - Financial Returns to Agroprocessing Sources and Uses of Funds: Jiangxi and Northern Fujian ADCs Economic Benefits and Costs Sensitivity Analysis 5. Documents Available in Project Files LIST OF FIGURES 1. Implementation Schedule 2. Organization for Project Implementation 3. Flow of IDA Funds MAPS IBRD 19407R, IBRD 19408R, AND TBRD 19409R  CHIA RED SOILS AREA DEVELOPMENT PROJECT I. MCKGROUND Introduction 1.01 The Government of China has requested Bank Group assistance in financing an area development project in the red soils areas of Jiangxi and Fujian provinces. The project would develop for cash crop and livestock production a gross area of about 27,000 ha of underuti- lized land in six counties and two state farms in eastern Jiangxi and five counties and two municipalities in western Fujian. The initial proposal, presented by the Ministry of Agriculture, 4,nimal Husbandry and Fisheries (NAAF) in February 1984, was confined to an area in Jiangxi Province. The project scope was enlarged to include a conti- guous area of Fujian Province following a visit by an Identification Mission in July 1984. The project area was visited by a Preappraisal Mission in June 1985, and the project was appraised in October 1985. The Agricultural Sector. 1.02 Agriculture in China, including crops, livestock, forestry and fisheries, provides sustenance to over one billion people, is the source of income for some 190 million farm families, and accounts for about 35% of the country's GDP. Only about 100 million of China's 960 million ha are arable. Farming systems are intensive, with large inputs of labor, chemical and organic fertilizers and water. Nearly half the arable land is irrigated. Food grains occupy about 70% of the cropland and account for about one-third of total agricultural output. This intensive farming system allows China to meet the basic food requirements of its population (about 22% of the world's total) from less than 8S of the world's arable land. 1.03 Major changes in farm policies since 1979, most importantly a shift from collective to family farming and major increases in farm prices, have led to rapid growth and diversification in agricultural production. The system of contracting out production to small-scale family farms has given farmers more flexibility in determining what crops to grow, how much to produce and where to market their output. Results have been dramatic: production increased by 10% per year over the period 1980-85 in comparison with an average of 3S per year in the preceding 23 years. Grain output reached a record 407 million tons in 1984, 34% greater than in 1978, despite a reduction in the area sown with grains. In 1985, responding to growing surplus stocks, the Government began a new phase of reform, replacing compulsory procure- ment quotas with voluntary contracts, adjusting procurement prices and greatly enlarging the role of the market. These measures contributed to a decline in grain and cotton area and output as farmers increa- singly shifted-productio.s into livestock and other industrial crops. As the current reforms are extended, the challenge to China's agri- culture will be to maintain an adequate growth rate while continuing to- improve consumption patterns. In terms of the average Chinese diet, Chinese planners project a rapid increase in the demand for  2 fruits, vegetables, meat, poultry, fish, and dairy products with a corresponding decrease in the share of direct grain consumption. 1.04 Red Soils Area. China's "red soils areas", so named be- cause of their clharacteristic red or yellow subsoil colors, lie south of the Yangtze River and cover two million sq km, or 21% of China's surface area, in tl provinces. Favorable climatic and rainfall condi- tions give the area potential for producing many elements of a more diversified agriculture. The lowland areas of the south with their alluvial soils and extensive dike and irrigation systems are properly devoted primarily to paddy rice cultivation. Development of animal husbandry is constrained by shortages of feed and poor transportation links to the surplus feed producing areas of the northeast. There- fore, the Government in recent years has given increased attention to formulation of a strategy for development of some 10 million ha of underutilized land in the uplands and adjoining hills and mountains where conditions are favorable for establishment of orchards and other tree crops, feed crop cultivation, pastures, and commercial forest plantations. These upland red soils areas have been deforested and subjected to continuous firewood collection, communal grazing, or non- intensive farming which has resulted in considerable soil erosion. Large and concentrated tracts of uncultivated red soils are found in Yunnan Province, mainly in remote, mountainous terrain, and on Hainan Island, where they are suitable for tropical tree crops; other large tracts, which are economical to develop, are located in Jiangxi and Hunan Provinces, with smaller and scattered tracts iR eight other provinces, including Fujian Province. 1.05 Throughout the red soils area, most of the land of modest slope has been terraced for production of paddy rice, field crops or fruit, and much steeper land has also been terraced for production of tea or other tree crops. However, yields on some eight million ha are very low for want of fertility improvements, erosion protection and irrigation, and present Government policy is to withdraw the steeper unterraced slopes and hilltops from crop cultivation, for planting to forest or pasture. Something like 2-3 million ha of idle land with slopes in the range 5-20O, including about 650,000 ha in Jiangxi alone, can be economically opened for cultivation if proper soil improvement and conservation measures are taken. Terracing, crop rota- tions involving legumes, applications of organic manures and chemical fertilizers, including micronutrients and lime in extreme cases of soil degradation, are among the required measures. Sectoral Oblectives and Bank-Lending. - - 1.06 The Government's long-term objectives in the agricultural sector are to (a) to- increase and diversify the production of food, feed and industrial crops to meet requirements created by population and income growth, and (b) to raise incomes and employment opportuni- ties in rural areAs. Given China's shortage of arable land (.1 ha per capita), development planners have focussed on the need to increase the productivity of existing cropped areas and develop efficiently the remaining unutilized land. Steps are algo being taken to stabilize food grain 'utput at the 1983 level, increase production and quality of animal feed, livestock, fruit, fish, and industrial crops, and  -3e expand agro-processing activities so as to raise the Value added in the farm sector. Improved producer incentives include: (a) contract systems whicb permit household-level management within both collective and state-owned farm sectors; (b) continued expansion of the market; (c) adjustment of producer prices; and (d) establishment of private, public and mixed enterprises in rural agro-processing, transport and commerce. 1.07 The Bank's strategy for lending in the agriculture sector has supported these efforts. Lending to date has focussed primarily on land development (North China Plain [Cr. 1261-CHA], Heilongjiang Land Reclamation (Ln. 2261-CHA/Cr. 1347-CHAJ, Rubber Development, [Cr. 1417-CHA/SF 5-CHAJ) and strengthening agricultural support services (Agricultural Training and Research [Cr 1297-CHA}, the Second Agri- cultural Research Project (Cr. 1516-0-CHA), and Rural Credit I [Cr. 1462-CHA] and II (Cr. 1642-CHAJ, and the Seeds Project (Cr. 1577- CHA]). Future lending is expected to include support for specia- lized product subsectors and area development, along with upgrading of support service activities. Projects of the specialized product subsector type include the Forestry Development Project (Cr. 1605- CHA), the Freshwater Fisheries Project (Cr. 1689-CHA ), and proposed livestock and agro-processing projects. The area development ap- proach, which generally targets difficult development problems, com- bines in a single project assistance to land development and support services previously the subject of separate projects. It responds to central and local Government emphasis on increasing farm incomes through diversification into higher valued agricultural activities even in areas where staple crop production can be increased. It is appropriate for most of China, including poverty areas lacking infra- structure and services as well as areas where much basic infrastruc- ture is already in place and further productivity growth requires upgrading of physical works and support services. It takes advantage of the close integration of governrental functions at the local level in China, which facilitates inter-agency cooperation. The Pishihang- Chaohu Area Development Project (In. 2479/Cr. 1606-CHA) was the first of this type, and the proposed Red Soils Area Development Project would be the second. Further projects of this type include proposed assistance in developing the arid regions of Gansu and Xinjiang Pro- vinces. The lending program will continue to support repeater pro- jects in subsectors which are large and diverse--e.g., livestock, agro-processing--or in subsectors which support the development of small-scale, family farming--e.g., rural credit. Implementation of ongoing. Bank Group financed projects in the agriculture sector is on -.schedule. Notable features of all the projects are the high standard- of management at the central, provincial and county levels and the enthusiastic participation of the collectives and farmers. Project Formulation and Rationale 1.08 Development of the hilly and mountainous red soil areas would contribute to the Government's objective of diversifying agri- cultural production by: a) enlarging the area devoted to fruit, legumes, and industrial crops; b) helping to meet the southern shor- tage of feedstuffs, at the same time as relieving the burden on the transport system imposed by internal and external trade in feedgrains;  -4, and c) supplementing or replacing high-cost suburban p;oduction of livestock, notably of dairy cattle and lean breeds of pig, thus freeing high valued suburban land.for more profitable uses. It would also enlarge employment opportunities and narrow income differentials between advanced lowland areas and impoverished hilly and mountainous areas within the soutk. 1.09 The major rationale for Bank support is that the project is a well-prepared and innovative demonstration of environmentally-sound, comorehensive technical and organizational approaches to land develop- ment, and has applications elsewhere in China. The land development scheme, featuring broad terracing along the contours, well-designed irrigation and drainage systems, protective afforestation, and inte- gration of chemical and organic means of soil improvement, combines techniques individually proven in earlier Chinese trials. The sites selected are those most economical to develop; however, the inclusion of less favorable sites in a pilot program would increase the demon- stration value for other red soils areas. The project has benefited during the preparation process from significant input from Bank staff and consultants. This is also the first Bank-supported agricultural project in China which would: (a) fully integrate land development, raw material production and processing; (b) introduce new approaches to China's dairy industry, such as reliance on household dairy farming and emphasis on use of low-cost forage and distribution of liquid milk products; (e) be managed by Agricultural Development Corporations (ADCs) as the executing agencies for the provincial governments, (d) attempt nearly complete cost recovery through lending at interest to farmers; (e) be coordinated by an interprovincial commission, with minimal central government supervision; and (f) be fully based on specialized household farm management. II. THE PROJECT AREA Location 2.01 The proposed project area is in northern Jiangxi and north- western Fujian provinces, on the northern fringe of the red soils region of southeast China. It covers parts of six counties (Jinxian, Dongxiang, Guixi, Jinxi, Linchuan and-Chongren), and two state farms (Provincial Breeding Stock Farm and Red Star Breeding Stock Farm) in Jiangxi and five counties (Guangze, Chong'an, Pucheng, Jianyang and Jian'ou) and two municipalities (Nanping and Shaowu) in Fujian. The project would-cover -a gross area of 27,523 ha at 72 sites in Jiangxi, with cultivable areas at each site ranging in size from 8 to 3,075 ha; and 62 sites in Fujian ranging from 24 to 200 ha (Annex 1 and IBRD Maps 19407-09). Climate 2.02 Located between 27 and 29 degrees north latitude, the pro-- ject area has a sub-tropical monsoonal climate with hot humid summers and mild winters. The frost-free period at most project sites is around 270 days. Annual rainfall averages about 1,600-1,900 mm, with the main rains falling in March through June. High evaporation of  1,200-1,600 mm, concentrated in late summer-early autumn together with occasional droughts require irrlgation mainly during the July-Septem- ber period for satisfactory crop yields. Topography 2.03 The Jiangxi project sites are typically located in gently sloping uplands between mountainous red soils areas and the intensively-developed, alluvial valleys and plains which characterize much of the northern part of the province. Elevation varies between 50 and 80 m above sea level. Reportedly, about 650,000 ha of such land remains to be developed in Jiangxi alone. 2.04 The Fujian project area Is more hilly and mountainous, with annual crop cultivation confined to the floors and lower sides of narrow, flat bottomed valleys at heights of up to 250 m above sea level. Sites selected in Fujian are widely scattered due to the limited availability of potential agricultural land with suitable slope. Those with slopes of up to 20 degrees, which represent a reasonable limit for agriculture, would be terraced for annual and tree crops, and 20-25 degrees to forests. Soils and Land Use 2.05 The red soils areas of China comprise an extensive zone-- about one-fifth of the Chinese mainland--of mostly steep and mountain- ous land interspersed-with.gently sloping or flat bottomed valleys and plains of variable width, situated in the sub-tropical to tropical south and southeast. The term 'red soils" refers to a complex soil pattern which includes soils of varying depth, slope, physical condi- tion and fertility whose most visible unifying feature is their color, which varies from crimson to brick red to yellow, depending on the nature of the parent materials and local climatic conditions. 2.06 These soils are variously classified, in scientific usage, as laterites, latosols, lateritic red earths, red earths, and yellow earths, or,- in the most modern terminology, as oxisols or ultisols. They are characterized chemically by their acid (low pH) condition and a relatively low nutrient status resulting from continuous leaching under the heavy rainfall typical of the regions where they occur. The soils are usually deep and well structur_d, except where erosion, either natural or man-induced, has truncated or otherwise impoverished the soil profile. Except in the very steepest or high altitude situa- -tions, red soils are suitable for a wide range of tropieal and sub- tropical crops, especially deep rooting perennials, or for forestry. In the most gently sloping areas, or on artificially terraced lands, annual field cropping can also be practiced. 2.07 The red soil zone in China is unusual compared to similar soils in southeast Asia and elsewhere because of the many centuries of exploitation to which it has been subjected. During this long period the original forest cover of broad-leaved evergreens has been largely replaced either by sparse pine, bamboo, shrubs and grasses at higher elevations or, in the valleys and lower slopes, by permanent agricul- ture. In the course of.this transformation those soils which have not  -6 been carefully husbanded have undergone a slow decline in fertility. Concerns about the adverse eicological situation coupled with rising population pressures have led in recent decades to the introduction of rehabilitation programs aimed at protective reforestation in the steeper and higher areas, and the introduction of improved sustained yield agricultural systems to replace the spasmodic and exhaustive traditional systems on the agriculturally suitable lands at lower elevation. The techniques being used to rehabilitate these marginal lands include irrigation, drainage and terracing combined with modern conservation farming techniques and supported by improved seeds, fer- tilizers (especially organics) and other inputs. 2.08 Soil quality has been a major consideration in project site selection, which was conducted with the aid of large scale (1:5,000) soil maps. Depth and texture of soil were the most important selec- tion criteria along with other site characteristics including gentle- ness of slope and uniformity of terrain; proximity to irrigation sources; and reasonable accessibility to existing infrastructure (roads, electric power). Project sites are presently idle lands sparsely covered by coarse grass and scattered shrubs subjected to occasional communal grazing of draft animals and coll6ction of brush and grasses for fuel. Sites in Jiangxi are usually large in area and many plots would be distant from existing villages in the bottomlands, whereas the Fujian sites are typically small and easily accessible to adjacent residential centers of paddy rice farmers. Infrastructure and Support Services 2.09 Irrigation Facilities. The Jiangxi and Fujian project sites lie in the watersheds on either side of the Wuyi Mountains. Runoff from a large number of rivers and streams is collected in hundreds of mostly small-scale reservoirs and ponds, which presently feed into irrigation systems to service the needs of lowland paddy rice cultivation. Total storags volume is about 187 M m in ths Jiangxi project area, aid 345 M m in Fujian, of which about 20 m in Jiangxi and 17 N m can be used to supply the needs of project development, and additional amounts can be realized by raising some existing small dams. Vith the construction of canals and pumping stations, sufficient irrigation water can be delivered to project sites which are mostly on high ground. 2.10 Rural Power -nd Transport. The provincial power grids serve the project area and towns and most villages have access to electric power. However, many of the project sites are remote and isolated,. and have not yet been connected to the provincial grid. 2.11 The project area lies on a trunk rail line connecting the two provincial capitals of Nanchang (Jiangxi) and Fuzhou (Fujian), which each have populations of over one million. China's main north- south rail line also cuts across the Jiangxi project area, and lies within a few kilometers of many project sites. The project sites are mainly clustered along paved or gravel roads linking county towns and townships, short access roads would need to be constructed or upgraded to facilitate communications.  -7- 2.12 Research. Extension and Training. The Jiangxi and Fujian project counties have a complete institutional structure for research, extension and training which in the past has been notably effective in channeling improved technology and research results to farmers. Howe- ver, the recent shift to a farming system -cganized around individual households rather than collectives has p. .ced additional demands on extension workers, who lack the training and equipment required to support development of fruit culture, ramie and dairy farming on a scale new to the project area. At tiq grass roots level, each county typically has an agroextension station, industrial crop station,- vete- rinary and seed stations, and simple soil laboratory. Staffing of these institutions totals 746 technically-trained personnel in Jiangxi and 767 in Fujian, of which 368 and 173 respectively are classified as college degree holders in agronomy, animal husbandry and agricultural engineering. - 2.13 Support exists for training of existing and new staff. New graduates can be supplied by the Jiangxi Agricultural University, located outside Nanchang, Fujian Agricultural University, near Fuzhou, and Jianyang Prefectural Agricultural College, as well as a number of agricultural middle schools and secondary-level technical schools in each project area. Training courses in Jiangxi can also draw on staff of the Horticultural Research Institute of the provincial Academy of Agricultural Sciences, the provincial Forage Experimental Station, Veterinary Research Institute, Ramie Research Insitute, and the Fuzhou Prefecture (Jiangxi) Agricultural Research Institute; in Fujian, on the Jianyang Prefecture Agricultural Research Institute, a Forestry Institute, Citrus Research Institute and several other specialized institutes in the project area. 2.14 Since 1963, the Red Soils Research Institute, located in Jinxian County (Jiangxi project area), has been responsible for basic research on red soils improvement in Jiangxi Province. With a staff of 50 researchers, 120 laboratory technicians and a well-equipped analytical laboratory, the Institute has carried out soils surveys and studied agronomic techniques for production of paddy rice, and upland annual and perennial crops on red soils. The Institute has recently augmented its staff and enlarged the scope of its research program to study forage and fruit crops as well as suitable paddy-upland crop rotation systems. It would be responsible for the pilot research program for management of marginal red soils under the project. 2.15 Planting Material and Seeds. Both provinces have nurseries capable of supplying seedlings for the first two years of mandarin orange plantings, along with budwood for grafts: 'in Jiangxi, the Provincial Shuangjin Mandarin Orange Experiment Station, Binjiang Primary Nursery, Nanfeng Orange Research Institute, Juchuan County Nursery, and Provincial Fruit Tree Research Institute; and in Fujian, the Jianyang Agricultural Research Institute, and several privately- managed nurseries. The provincial Seed Companies can supply seed for root stock plantings in nurseries established under the project. Seedlings of camphor, China fir, 4asson pine, and other tree varieties can be supplied from existing nurseries maintained by county and local governments, such as (in Jiangxi) the Jinxian County Dagongling Tree Farm. Seed for ramie nurseries can be procured from the Baste Fiber  Institute of the Chinese Academy of Agricultural Sciences and the Jiangxi Yichuan Ramie Research Institute sand seedlings for renewal of tea plantings in Fujian from the Chong'an County Tea Farm and local nurseries. 2.16 Livestock Breeding. The Jiangxi Provincial Livestock Breeding Farm, located near Nanchang Municipality, and the Red Star Farm, located in the heart of the Jiangxi project area, maintain nucleus herds of Holstein dairy cattle presently totalling about 1,600 cows. The former also supplies south China dairy farms with frozen semen for artifical insemination. Both farms are a source of seed for fodder crops. Although these farms have been increasing their herds, they could market up to 400-500 heifers per year. The veterinarians and other specialists on the staff of these farms are capable of providing the technical support for development of household dairying on surrounding farms. A number of small county-run farms and many private households in the project area presently maintain sows and boars for breeding, although mainly of local pig varieties which dress out at only 40% lean meat. The Jiangxi project area has conducted a program of crossing leaner, imported varieties with favored local breeds, to the extent that about 30% of pigs marketed are now cross- breds. Dongxiang County, in the Jiangxi project area, maintains a breeding farm with some 87 breeding sows and boars of Yorkshire, Large White, and Duroc parentage. III. THE PROJECT Project DescriRtion 3.01 The main objective of the proposed project would be to demonstrase efficient methods of developing the productive potential of presently unutilized land in the red soil areas of south China. The project would introduce cultivation of cash crops and livestock production under individual household management in six counties and two state farms-in Jiangxi Province and five counties and two munici- palities in Fujian Province, and Improve infrastructure and support services in these areas. The main features of the project are: a) development of a gross area of about 27,000 ha of idle land, through terracing, contour planting, on-farm irrigation and drainage, and construction of farm access roads; b) civil works to improve or extend existing infrastructure, including enlargement of small reservoirs, canal construc- tion, installation of pumping stations and sprinkler-irri-- gation systems, rural electrification, road and bridge con- struction; c) construction of housing, schools and clinics, administrative buildings, warehouses, laboratories and extension stations, and livestock sheds;  -9- d) provision of construction and farm machinery as well as trucks and other vehicles required for land development, support services and management; e) establishment of orchards, ramie, feed grains, fodder crops, and woodlots as well as rehabilitation of 2,400 ha of low yield tea plantation, including provision of fertilizer and seed or seedlings; f) provision of purebred stock and feed for dairy and pig breeding farms and specialized households; g) rehabilitation or new construction of processing factories for ramie, dairy products, and feed premix, and cold storage and packing facilities for fruit; h) provision of research, training and office equipment to upgrade and enlarge the existing extension system as well as training and management institutions; i) a pilot program of research and demonstration to be condutc- ted on areas of more marginal red soils;- J) domestic and overseas training, study tours, and technical assistance to project management organizations and the staff of agrotechnical service agencies. Detailed Features 3.02 Land Development. The land to be developed in Jiangxi consists in large part of a few large tracts of uncultivated red soils with less than 10 degrees slope; and in Fujian it consists of the lower portions of hills with slope ranging up to 20 degrees at nume- rous sites. Land preparation would be carried out in Jiangxi by format-ion of 12-meter wide terraces along the contours mainly with mechanized or animal-drawn equipment or by contour plowing with light tractors where slopes are under 5 degrees. Three-meter wide contour. terracing would be carried out with labor-intensive techniques mainly- in Fujian where slopes range from 10-20 degrees. Topsoil would be preserved by moving it prior to terracing and later replacing it. Slopes greater than 20 degrees would be cleared of brush and planted to trees but otherwise undisturbed. 3.03 Land- development includes the excavation of lateral and sublateral itrigation channels and installation of structures at pro- ject sites. Structures would include offtakes, regulators, bed con- trols, drops, checks, crossings and lining of canals where steep gradients and permeable soils are encountered. Where slopes are gentle, three-meter wide farm roads would follow the canal banks; otherwise they would be constructed at regular intervals on a diagonal to the contours. Field drains would be constructed where necessary, feeding into the natural drainage system. 3.04 Project sites presently belong to township governments, and would be leased to farmers under 20-year renewable contracts. In  - 10 Jiangxi the sites would mostly be developed into complete farming communities, including housing and village schools and clinics; farm units of 1.6-2.8 ha would be contracted to farm families with an average of three laborers apiece for management as speciaUized farms. In Fujian, sites would be divided into smaller units ranging from 0.4 ha for tea to 7.0 ha for woodlots, and would be contracted for manage- ment to farmers residing in adjacent-villages (typically large fami- lies with an existing 0.6 ha in foodgrain and averaging 3.5 laborers per family). About 19,000 households with 61,000 family farm workers would receive land contracts. Each type of farm would be sized so that seasonal requirements for additional hired labor would be limited to no more than 1-2 months per year (Table 3.1). 3.05 Infrastructure Improvement. The land selected for develupment has access to existing sources of irrigation water, county roads, and the provincial power network. The civil works component would connect project sites to these facilities, provide for some upgrading, and construct the necessary delivery system. Within the Jiangxi project area, there are five medium and 94 small size reser- voirs as well as 598 ponIs accumulating surface runoff and providing a usable supply of 187 M m of water, some of which would be available to the project. In addition, 16 reservoirs would be enlarged by- raising the dams and improving the outlets and spillways and four new small reservoirs and ponds would be constructed to meet the added demands of the project (para. 3.18). In the Fujian psoject area, in addition to ample groundwater reserves, some 344 M m of water are provided by 176 rivers and streams and 1,215 small reservoirs and ponds, sufficient to meet project requirements without significant upgrading. Main and branch canals totalling 500 km in length would convey water from these sources to project sites. Most of the land lies above these canals, and numerous small electric pumps would need to be installed. Because of its gentler slopes, Jiangxi would rely mainly on furrow irrigation for on-farm delivery, whereas in Fujian simple sprinkler irrigation systems would be installed on some 1,850 ha of steeper sloping orchards and tea plantations. 3.06 The additional power requirements for irrigation, agropro- cessing and residential use would be met by installing 67 km of-35 kV lines, 349 km of 10 kV lines, and 225 km of 0.4 kV lines, along with enlargement of several substations and addition of 160 transformers. Power would be drawn from the provincial and local grids, except in the case of Linchuan County in Jiangxi, which would install a small hydropower station on an existing main canal to supplement existing hydropower and diesel plants. Project sites vould be linked to the existing network of paved county roads by adding or upgrading 232 km of all-weather, gravel roads. These would be designed and constructed to the Ministry of Communication's Grade IV standard, which is the grade appropriate for rural roads where traffic is less than 200 vehicles per day. Road embankments, generally 1.0-1.5 m high and 7.0- 8.5 m wide at base, would have a top width of 6.5-7 m. Bridges would be double lane with a width of 7 m. In addition, village access roads each averaging 2-3 km in length would be built of packed earth to similar dimensions.  -Table I1: PRoJECr FARMDG3 UNITS House- Type of Specialization holds Citrus Rauie Tea Rice Forest Forage Dairy, Pgs (no.) (ha) (ha) (ha) (ha) (ha) (ha) (head) (head) Citrus 5,935 1.0 0.25 0.12 8 Ramie 3,268 1.4 0.35 0.16 10 Dair-y 550 0.50 1.6 10 Pig Breeding 90 0.50 1.6 20 SuLbtaQ '4 a i9 &.575'3 WS P