China - Tarim Basin Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 9338-CHA . , ,, / /1,e ',!. '' ,.. s:,! STAFF APPRAISAL REPORT CHINA TARIM BASIN PROJECT JULY 31, 1991 Agriculture Operations Division Country Department III Asia Regional Office 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.  CURRENCY EQUIVALENT (As of May 20, 1991) Currency Unit - Yuan (Y) US$1.00 Y5.22 Y 1.00 US$0.192 FISCAL YEAR January 1 to December 31 WEIGHTS AND MEASURES 1 meter (m) 3.28 feet (ft) 1 cubic meter 35.31 cubic feet 1 kilometer (km) 0.62 miles 1 hectare (ha) 15 mu 1 ton (t) 1,000 kg - 2,205 pounds 1 kilogram (kg) 2.2 pounds PRINCIPAL ABBREVIATIONS AND ACRONYMS USED AI - Artificial Insemination AHB - Animal Husbandry Bureau ABC - Agricultural Bank of China BPEU - Bureau Project Executing Units CATEC - County Agricultural Technical Extension Center CNTIC,ITC - China National Technical Import Corporation DCA - Development Credit Agreement EIA - Environmental Impact Assessment FD - Finance Division bcm - billion cubic meters GVAO - Gross Value of Agricultural Output GWh - gigawatt hours ICB - International Competitive Bidding kW - kilowatt LCB - Local Competitive Bidding LG - Leading Group LS - Long Staple Cotton MCM - million cubic meter MOF - Ministry of Finance MS - Medium Staple Cotton MW - Megawatt (1000 kW) MWR - Ministry of Water Resources NEPA - National Environmental Protection Agency PMO - Project Management Office PA - Project Agreement PPC - Project Coordinating Committee ppm - parts per million RCC - Rural Credit Cooperatives SOE - Statement of Expenditure TBMB - Tarim Basin Management Bureau YHPC - Ye He Power Company XWCB - Xinjiang Water Conservancy Bureau  FOR OMCUIL USE ONLY guma CURDLIT UDPlkOJICT SU3ONARY Bgrrower: People's Republic of China BoneL jbau: Xinjiang Uygur Autonomous Region 8EgUU1: SDR 93.8 amllion (US$12S millLon equivalent) Te=s:i Standard, with 35 years maturity Onlonding Tarm: From Ministry of Finance to Regional Government for 20 years including 5 years of grace with Interest at 4.3 percent per annum. The foreign exchange risk will be borne by the Regional Government. Onlending rates to productive enterprises will be no less than Agricultural Bank of China charges for loans of similar purposes and terms. Obiectives and Dpas1aujn: The proposed project will alleviate poverty in several of the poorest counties with a predominant minority population in Xinjiang Region by increasing crop and livestock production and productivity. The project will: (1) rehabilitate and upgrade irrigation and drainage facilities in Yerqiang and Weigan oases through constructlon of canal lining, drainage canals, diversion structures, tubewells and onfarm works for about 120,000 ha of low yielding land and 80,000 ha. of reclaimed areas of desert wasteland; (2) construct a small hydro-power station (21MW) on the Yerqiang River and lnter-connecting transmission grid to expand the electrical generating and transmission capacities; (3) finance the improvoemnt and expansion of the agricultural extension system at county and township levels; seed processing, distribution and multiplication systems; farm mechanization centers; hail suppression system, and research in cotton; (4) finance the expansion of livestock services in breed improvement, veterinary and feed development services, improved research and training and development of mixed crop/livestock farms; and (5) finance an ecosystem restoration component designed to recover some of the natural forest along the Tarim River which borders the Taklimakan desert to prevent expansion of the desert. BenefLtas .4 Auk. At full development, the project would produce incremental annual produotlon of 273,000 tons of grdLn valued at US$42 million, 74,400 tons of llnt cotton valued at tUS8R0.5 mlllion, and 249,000 tons of vegetables, logmes and other rro"a valued at US$48.0 million. The total value of incremental agricultural output, including tree crops and livestock, will be US$192.0 million. Hydropower investments would produce annually 151 GWH valued at US$10.4 million. The economic rate of return for the project as a whole is 34%. Average per capita incomes would increase from about US$96 This document has a restricted dist. ution and may be used by recipients only in the performance |of their oficial duties. Its contents may not otherwise be disclosed without World Bank authorization.  - ii - to US$187. These income increases would be signifLcant in reducing the income imbalance of some 137,700 of the poorest families on small farms or on salLnized, low fertility lands. The project would also generate employment opportunities of about 136,000 person-years during the construction period and 135,000 person- years of regular employment after project completion. Other unquantifiable benefits of the project include: Improved town water supplies; environmental improvements from protection of the ecology along the Tarim River, which will prevent desert encroachment into majOr highways and irrigation areas; improved soil fertility, due to improved cropping systems and cropping with animal husbandry. No major risks are foreseen. Estimated Cost: Local Forelg Total --- (US $ million)---- Yerqiang Irrigation/drainage 28.9 18.8 47.7 Weigan Irrigation/drainage 35.2 24.2 59.4 Hydropower Component 6.5 13.0 19.5 Agriculture Services 14.0 14.5 28.5 Livestock Services 6.1 4.1 10.2 Eco-system restoration 2.1 2.5 4.6 Base cost\a 92.8 77.1 169.9 Physical contingencies 9.1 7.2 16.3 Price contingencies 19.7 6.2 25.9 Total Proiect Cost 121.6 90.5 212.1 Financing Plan: Local Foreign Total ---------(US $ million)---------- Central, Regional and Prefecture Govts. 38.7 11.8 50.5 County/Townships and farmers 24.4 12.2 36.6 IDA 58.5 66.5 125.0 Total 121.0 90.5 212.1 Estimated Disbursements: BEank/IDA FY\b IM12 1993 1924 1995 129i 1229 ------JXD---(US$ million)------------ Annual 10.0 22.5 37.0 24.0 24.0 7.5 Cumulative 10.0 32.5 69.5 93.5 117.5 125.0 Economic 8ate of Return: Yerqiang Sub-project 36%; Weigan Sub-project 33%; and Overall Project 34%. \a Project is exempt from taxes \b Includes US$ 7.5 million retroactive financing for expenditures made between January 1, 1991 and the signing of the Development Credit Agreament.  BAD ASIN MRD=C STAIN ARASAL REPORT Table of Contents PROJRCT R . . . . . . . . : . . . . . . . . . . . . . . . . il I. B[pN A. Introduction ...................... . . B. Xinjiang Region ........... . . . . . . . . . .. . C. The Xinjiang Agricultural Development Project . . . . . . . . 4 D. Rationale for IDA Involvement ..... . . . . . . . . . . . 4 II. THE PROJECT AREA. . . . . . . . . . . . . . . . . . . . . . . . 4 A. Location and Population ...... . . . .. . . .. . . . . 4 B. Climate, Topography, and Soils . . . . . . . . . . . . . . . 5 C. Transport, Energy and Power Facilities . . . . . . . . . . . 6 D. Water Resources and Ecology ................ . 7 E. Irrigation ........................ . 8 F. Drainage ................... . . . . . .. 9 C. Agriculture ....................... . 10 H. Agricultural Inputs and Credit . . . . . . . . . . . . . . . 14 I. Rural Incomes and Poverty Alleviation . . . . . . . . . . . . 15 III., THEZCT ........................ . 17 A. Project Objectives .17 B. Project Description .17 C. Detailed Features .17 D. Status of Preparation .28 E. Implementation Schedule .28 F. Cost Estimates . . . . . . . . . . . . . . . . . . . . . . . 28 G. Financing .29 H. Procurement .29 I. Disbursements .31 J. Accounts and Audits .33 K. Environmental Effects .33 rAis report is based on the findino of a pr-wppraisal dosslon in April 1990 omosed of Messrsls. D. Ouaaratnam (MisLion Chief), Di M., S. Trambath (IDA), P. Judd, Jian PIng, S. Larsen, B. LudvI; 3. Kasterton, S. Shea ed sn Veishen (Consultants)i and an appraima. mLssion October 1990 coeposed of D. Gunaratnam (Mission Chief), W. Ochs, S. Tr_bath, R. VLk (IDA), H. Ch_n-, P. Judd, Jiang Ping, T. Krauss, S. Larsen, D. Basterton and Shang Weishun (Consultants). The poor reviewers inludeds Mesrs/lk. H. Ziaa, B. Plusquellec (AGURPS), 3 Albinson, U. E1- aUmbaU (AST), S. Sho (ASTIN). The Divlsion Chief is J. Goldberg (ASUG) end the Department Director ts Shahid Javed Sudd (ASSUR).  . iv^ IV. DIZATi ANIND . . . . . . . . . . . . . . . . . 34 A. Project Organization . . . . . . . . . . . . . . . . . . . . 34 B. Management and Staffing of PO . . . . . . . . . . . . . . . 36 C. Financial Arrangements . . . . . . . . . . . . . . . . . . . 36 D. Supporting Services for Agriculture and Animal Husbandry . . 37 E. Operation and Maintenance of Irri&ation . . . . . . . . . . . 38 F. Project Launch Workshop ....... .......... . . 39 G. Project Monitoring and EvaluatLon . . . . . . . . . . . . . . 39 V. PRODUCION MARKETING AND PRIC. . . . . . . . . . . . . . . 40 A. Production. . . ........ 40 B. Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 C. Prices . . . . . . . . . . . . . . . . . . . . . . . 43 VI. BNITS JUSTIICATION A SKS. . . . . . . . . . . . . . 46 A. Benefits .46 B. Employment and Incomes .47 C. Cost Recovery . . . . . . . . . . . . . . . . . . . . . . . . 48 D. Women in Development .48 E. Financial and Economic Analysis . . . . . . . . . . . . . . . 48 F. Risks .. ....................... . 51 VIl. &USEMS REACHED AN REGOE!DATIONS . . . . . . . . . 51 Tables in Text 2.1 Hail Storm Damage in the Project Area . . . . . . . . . . . . . . 6 2.2 Present Planted Areas, Yield and Production . . . . . . . . . . . 11 2.3 Per Capita Incomes in the Project Prefectures 1988 . . . . . . . 16 3.0 Water Balance for Yerqiang Rlver Basin . . . . . . . . . . . . . 18 3.1 Project Cost Summary. .................... . 29 3.2 Financing Arrangements for Project . . . . . . . . . . . . . . . 30 3.3 Proposed Procurement Arrangements .... . . . . . . . . . . . . 32 5.1 Crop Area Yields and Productlon ................ . 41 6.0 Summary of Financial Analyisi . . 449 6.1 Summary of Results of Economic Analysis . . . . . . . . . . . . . 50 I. Project Area Statistics 2. Cost Estimates and 7. -ancing 3. Economic Analysis 4. Procurement Lists 5. Summary of Environmental Impact Assessment 6. Techni*al Assistance, Training and Consultant Services 7. Water Balance Analysis for Yerqiang and Weigan Basins 8, Irrigation Water Fees and Cashflow Analysis for Basin and County Offices 9. Bank Supervision Missions and Implementation Schedule 10. Selected Documents and Data Available in Project Files  -V CHARTS 1. Project Management Organization 2. Xinjiang Water Conservancy Bureau Orga.iization 3. Xinjiang Agriculture Bureau Organization 4. Xinjiang Animal Husbandry Bureau Organization 5. Kashgar Water Conservancy Bureau Organization 6. Akesu Water Conservancy Bureau Organization 7. Yerqiang Management Office Organization 8. Shache County Water Conservancy Bureau 9. Tarim Basin Management Office Organization 10-14. Layout of Irrigation and Drainage Infrastructure 15. Implementation Schedule M.gI 1. IBRD Map No. 22308R Yerqiang Irrigation Scheme 2. IBRD Map No. 22309R Weigan Irrigation Scheme 3. IBRD Map No. 22550R Tarim Eco-restoration Component  TARIM BASIN PROJECT I. A. lrut_ 1.1 The Government of China has requested IDA assistance in financing a project to ir.rove irrigation and drainage facilities in Xinjiang Uygur Autonomous Region. The project's objective is to boost rural incomes in one of the poorest parts of China through selective agricultural investments. The investments are to expand the irrigated area, raise crop yields, diversify into cotton and livestock production, strengthen farming systems, and introduce new, high-yielding crop varieties and integrated pest management. The project would also provide new water supply systems for areas suffering from insufficient supplies of clean water and would ensure the release of additional water for areas located downstream. The latter is important in preserving existing irrigated areas and natural forests which act as barriers to desertification. Project activities will encompass nine counties in southern Xinjiang Tarim Basin, and would bring direct benefits in the form of improved incomes, employment opportunities and health to the 1.9 million people living in the area (32% of the basin's population). B. Xinianu Reagion 1.2 Background. The Xinjiang Uygur Autonomous Region is China's largest province, about four times the size of France. It occupies one-sixth of the country's land area (1.6 million km2), but is sparsely populated (9 persons/kmn). The region is located about 3,000 km northwest of Beijing and is bordered by Mongolia, the Soviet Union, Afghanistan, Pakistan, and India. Internally it borders with Xizang (Tibet), Qinghai, and Gansu (see Map 22308R). The region is almost entirely surrounded by high mountains. It is separated from Xizang to the south by the soaring Kunlun Mountains. The Tianshan Mountain Ranges extend from east to west across the region dividing it in half, with the Junggar Basin to the north and the Taklimakan desert and Tarim Basin to the south. The project is located in the Tarim Basin, which is dominated by the Taklimakan desert -- the second largeist desert in the world (320,000 kW2). The basin is fringed by six large oases, two of which have been selected for development under the project. 1.3 The Xinjiang region has an arid to semi-arid continental climate with low to insignificant precipitation except in the mountains, and large seasonal and diurnal temperature ranges. Average annual precipitation varies considerably, from less than 20 mm in the deserts to 600 mm in the mountains. There is plenty of snow in the Altay Mountains in the north but no snow in the southern part of the Tarim Basin, where rainfall is low (50 mm annually) and irrigation is required for crop production. Daytime temperatures in the summer (April to September) reach 40