People's Republic of China - Nature Reserves Management Project

GLOBAL ENVIRONMENT FACILITY People's Republic of China Nature Reserves Management Project Project Document May 1995 THE WORLD BANK  GEF Documentation The Global Environment Facility (GEF) assists developing countries to protect the global environment in four areas: global warming. pollution of international waters,, destruction of biodiversity, and depletion of the ozone laye&r. The GEF is jointly implemented bythe United Nations Development Programme. the United Nations Environment Programme, and the World Bank. GEF Project Documents - identified by a green band - provide extended project- specific information. The implementing agency responsible for each project is identified by its logo on the cover of the document. Global Environment Coordination Division Environment Department World Bank 1818 H Street, NW Washington. DC 20433 Telephone: (202) 473-1816 Fax: (202) 522-3256  Report No. 14013-CHA People's Republic of China Nature Reserves Management Project Project Document May 1995 Agriculture Operations Division Country Department II East Asia and Pacific Regional Office  CURRENCY EQUIVALENTS (As of February 1, 1995) Currency Unit = Yuan (Y) $1.00 = Y 8.50 Y 1.00 = $0.11 FISCAL YEAR January I - December 31 WEIGHTS AND MEASURES 1 cubic meter (m3) = 35.31 cubic feet 1 hectare (ha) = 15 mu 1 ton (t) = 1,000 kg = 2,205 pounds 1 kilogram (kg) = 2.2 pounds ACRONYMS AND ABBREVIATIONS BAP - Biodiversity Action Plan Commission CAS - Chinese Academy of Sciences NAP - National Afforestation Project CDA - Course Development Advisor NEPA - National Environmental CIG - community investment grant Protection Agency CITES - Convention on International NGO - non-governmental organization Trade of Endangered Species NR - nature reserve CRMP - community resource management NRMIS - nature reserve management plan information system DFP - Department of Forest Protection NRMP - Nature Reserves Management DNR - Division of Nature Reserves Project EA - environmental assessment NRTT - nature reserve training team FAO - Food and Agricultural ONR - Office of Nature Reserves Organization of the United PMC - World Bank Loan Project Nations Management Center (MFO) FRDPP - Forest Resources Development PMO - Project Management Office andProtection Project PRA - participatory rural appraisal GEF - Global Environment Facility spp - species GET - Global Environment Trust Fund TA - technical assistance GIS - geographic information system TAG - Technical Assistance Group GOC - Government of China UNDP - United Nations Development ha - hectare Programme ICF - International Crane Foundation UNESCO-MAB - United Nations Educational, IUCN - International Union for the Scientific, and Cultural Conservation of Nature (or Organization, Man and Biosphere World Conservation Union) Reserve kg - kilogram WCMC - World Conservation Monitoring km - kilometer Centre m - meter WCS - Wildlife Conservation Society M&E - monitoring and evaluation WWF - World Wide Fund for Nature MF - Management Forum YPFD - Yunnan Provincial Forestry MFO - Ministry of Forestry Department mm - millimeter MOF - Ministry of Finance MRL - Mountain, Rivers, and Lake  PART I: PROJECT SUMMARY  I  CHINA NATURE RESERVES MANAGEMENT PROJECT Grant and Project Summary Grantee: People's Republic of China Beneficiaries: Five nature reserve areas in Yunnan, Jiangxi, Fujian, Shaanxi, and Hubei Provinces; the Changqing Forestry Bureau in Shaanxi Province; the Forestry Department of Yunnan Province; and the Ministry of Forestry Amount: SDR 12 million (US$17.9 million equivalent) Terms: Grant Financing Plan: Local Foreign Total ------- US$ million ------ GET Grant 11.1 6.8 17.9 Central Govt. 2.4 0.0 2.4 Provincial Govt. 1.6 0.0 1.6 Beneficiaries 1.7 0.0 1.7 TOTAL 16.8 68 23.6 Povertv Cater: Not Applicable Economic Rate of Return: Not Applicable Project Identification Number: CN-GE-3402  i  CHINA NATURE RESERVES MANAGEMENT PROJECT 1. Background. China, rich in biological diversity, contains about ten percent of the world's plants, mammals, birds, reptiles, and amphibians. However, over the past few decades, increasing population pressures and development activities have eroded China's biodiversity resources. The combination of a large population (estimated at 1.185 billion people in 1993 with an annual growth rate of 1.2 percent) and limited land resources has led to extensive loss of habitats to agricultural production, logging, fuelwood collection, and livestock grazing. The Chinese Academy of Sciences reports that about 200 plant species are believed to have become extinct and an estimated 5,000 species endangered in recent years due to human activity. 2. In recognition of these problems, the Government has significantly strengthened the policy framework for environmental protection in general and biodiversity conservation in particular. New Environmental Protection and Wildlife Conservation Laws were promulgated in 1989, which facilitated development of a comprehensive system of nature reserves and rationalized categories of protection for endangered wildlife. China has also become increasingly visible in international efforts, with the ratification of the RAMSAR (Wetland) Convention in 1992 and the Convention on Biological Diversity in 1993. These policy changes have been accompanied by increased emphasis on sector planning and management. A national nature conservation strategy was produced in 1987. A National Environment Protection Action Plan (NEAP) was recently approved that includes a chapter on objectives and priorities in biodiversity. Finally, the government recently completed a Biodiversity Conservation Action Plan (BAP), with support from the Global Environment Facility (GEF) Pre-Investment Facility (PRIF), that was approved by the State Commission on Environmental Protection in early-1994. The BAP reviews the present status of biological diversity and conservation efforts in China and sets out a comprehensive program of investment, policy reform, and technical assistance requirements to strengthen national biodiversity management and conservation. All of the project activities proposed under the GEF project have been reviewed and identified as priority measures in the BAP and NEAP. 3. As in many other countries, biodiversity protection in China has focused on the establishment of nature reserves. There has been a dramatic expansion of protected areas over the past four years and more than 700 nature reserves are now established, with a total area of approximately 56 million hectares covering some 5.5 percent of the country. The Ministry of Forestry (MFO) has jurisdiction over two-thirds of the reserves. Despite a strong commitment to biodiversity conservation, MFO's staff levels, management budgets, and training and performance standards have not kept pace with reserve expansion. Few areas are protected or managed effectively, and if current trends continue, biological diversity in many critical reserves will diminish dramatically. The main constraints include a weak guard force, excessive emphasis on capital-intensive infrastructure development, inadequate recurrent budgetary support, and an inadequately structured management system. 4. The proposed Nature Reserves Management Project (NRMP) is associated with the World Bank Forest Resource Development and Protection Project (FRDPP). FRDPP was approved by the Executive Directors in June 1994, with a total project cost (excluding NRMP) of $333 million and IDA financing equivalent to $200 million. NRMP was not approved at that time as the GEF I replenishment was not yet effective. The combined FRDPP/NRMP project is designed to introduce a new sectoral approach to sustainable resource planning and management in forestry. For the first time in China, the  -2 - combined project addresses resource use in all four of the main forest types in China (timber plantations, watershed protection forests, natural forests, and nature reserves) and presents an integrated package of investment, policy reform, and technical assistance requirements designed to improve the efficiency and productivity of the sector as a whole. This comprehensive sectoral focus not only capitalizes on the critical economic and environmental linkages among different forest areas and land uses but also integrates national and global benefits into sector planning and management. This approach is an important step away from the Government's current ad hoc and unprioritized investment program in forestry. The FRDPP/NRMP project is a direct outgrowth of the Bank's Country Assistance Strategy scheduled for presentation to the Board in June 1995, as it supports income enhancement and sustainable environmental development in poor, remote areas across China. 5. Lessons Learned. Since the proposed project would be the first Bank Group or GEF investment in biodiversity in China, it draws on project experience from other countries under the GEF Pilot Phase and from NGOs in China. The key lessons include: (a) the importance of a national strategic framework for biodiversity investments; (b) the need to build in financial sustainability and long-term commitment from the government; (c) the need to involve local people in design and implementation; and (d) the key role of macroeconomic and sector policies in establishing an appropriate incentive framework for resource conservation. It also draws on the implementation experience of the GEF PRIF in China over the past two years, particularly the importance of twinning domestic and international technical assistance to ensure effective transfer of new ideas and technologies. Similarly, the project draws on related lessons from the 1991 Board paper on forestry, the 1991 Operations Evaluation Department report on forestry, and the 1994 Board paper on forestry project implementation: (a) the importance of integrating the management of protected and unprotected natural forest areas into regional forest management plans; (b) the importance of developing restructuring programs for inefficient state forestry enterprises; and (c) the need to expand the protected area system and improve management technologies for forests with high biodiversity and environmental services values. Finally, the community participation program supported under the project incorporates lessons learned from several on-going pilot activities in China managed by NGOs and the government, particularly (a) the importance of integrating local villagers into the assessment of community needs through participatory rural appraisal techniques; and (b) the need to establish clear, mutually agreed contracts that identify the respective rights and responsibilities of reserve staff and local communities in resource use within reserves. 6. Rationale for GEF Financing. The proposed project meets the eligibility criteria and program priorities agreed at the recent Conference of the Parties to the Convention on Biological Diversity, as follows. The project strengthens conservation, management, and sustainable use of ecosys- tems and habitats that have been identified as national priorities by the government in the BAP and NEAP; increases the involvement of local communities in the planning and management of nature reserves, addressing in particular the social and economic requirements of poor households in poverty areas; introduces a new, innovative economic incentive program to reduce biodiversity land-use conflicts in critical habitats that involves enterprise restructuring and job redeployment; builds institutional capacity for preparation of conservation plans and implementation of sustainable land-use programs; develops new research mechanisms and priorities to encourage scientific excellence and facilitate international exchange; expands the role of local and international NGOs in sector planning and management; and promotes conservation of endemic species, such as the Giant Panda and other plants and animals unique to China. GEF involvement in the development of FRDPP/NRMP has made possible a combined approach to resource use in the four main forest types in China that integrates national and global benefits into sector planning and management. Without GEF funding, MFO would continue to maintain a minimum level of reserve protection and management, with little community involvement, on the basis of ad hoc, unprioritized investment programs in the forestry sector.  - 3 - 7. Project Objectives. The main objective is to enhance biodiversity conservation through innovative approaches to organization, planning, skills development, information management, and the integration of local communities into reserve management. The main focus will be on developing skills, human resources, and systems for improving protection and management at the field level. 8. Project Description. The proposed project would comprise five components. 9. The Nature Reserves Component (34 percent of total costs) would develop more effective management and protection systems in five pilot reserve areas of international significance that have been identified as top biodiversity priorities in the BAP: Xishuangbanna, a cluster of five sub-reserves in southwest Yunnan Province; Poyang Lake, China's most important wetland site in Jiangxi Province; Wuyishan, the highest and richest peak in southeast China straddling the borders of Fujian and Jiangxi Provinces; Qinling mountains of Shaanxi Province, consisting of four reserves (Foping, Niubeiliang, Zhouzhi, and Taibaishan) and their surrounding natural forest areas where healthy populations of giant pandas still reside; and Shennongiia, an area of very rich pristine forest in Hubei Province. The key investment activities include: (a) preparation and implementation of new management plans; (b) strengthening of field-level protection through financing of guard posts, new communications systems, field kits and other miscellaneous equipment: and (c) expanding the role of local communities living within and adjacent to nature reserve sites in the planning and management of reserves. 10. The sub-component on community involvement, which will create new incentive structures for long-term sustainable use of biodiversity resources, will support four activities. First, project officials will review the objectives and design of the project with the stakeholders, raise awareness about the scope for co-management, and solicit community interest in participation. Second, the project will provide training in participatory rural appraisal (PRA) techniques and other participatory and advocacy skills to local communities. Third, stakeholder committees will be formed at each reserve to work with project officials in conducting PRAs, collecting and analyzing data on resource use, and identifying and ranking community problems and needs. Fourth, stakeholder committees and project officials will prepare Community Resource Management Plans and Co-Management Contracts that identify the respective roles and responsibilities in resource use in reserves. The project will support the implementation of these plans and contracts through: (a) establishment of a new community investment grants program to support non-consumptive economic activities consistent with sustainable resource use; (b) development of new education programs to strengthen public awareness and environmental education; (c) introduction of a variety of community outreach programs such as summer nature camps; and (d) detailed monitoring and evaluation to ensure equitable and effective implementation and to facilitate adjustments over the life of the project . 11. The Enterprise Restructuring Component (34 percent of total costs) would introduce a pilot program for resolving biodiversity land-use conflicts adjacent to the Qinling Reserve Group. Two state-owned forest farms under the Changqing Forestry Bureau have aggressively harvested timber outside the reserve boundaries over the past two decades, which has significantly reduced the forest cover and degraded a small but important corridor for the movement of Giant Pandas. The component would introduce more sustainable management of this area through development of a restructuring program for the enterprise based on a significant reduction in harvesting and the transfer of workers to more environmentally sustainable employment. This program -- the first of its kind in China -- is expected to establish a model for sustainable land-use management and enterprise restructuring that would be disseminated to other protected areas in China.  - 4 - 12. The following policy reforms and investment requirements would be supported. First, the entire area would be legally designated as a national level nature reserve, with a core zone of 11,000 ha and an experimental zone of 19,000 ha. The core zone would comprise the main panda habitat and all harvesting, road construction, and other human interventions would be prohibited there (the government has already stopped all these activities as of December 1, 1993 in preparation of the project). The project would support a variety of protection activities for the core zone. The experimental zone would be managed on a sustainable basis. The farms would still be permitted to harvest timber in this area, but the following new conditions would apply: (a) the annual cut would not exceed the mean annual growth of the forest; and (b) new silvicultural management practices would be introduced to maintain biodiversity values. The project would support improved management of the experimental zone through preparation of a management plan, reforestation of degraded areas, and training and technical assistance in improved silvicultural management techniques. Second, the labor force of the forest farms would be restructured in line with the revised cutting program, with the 1,193 redundant workers redeployed to more conserva- tion-oriented economic activities in the project area or terminated with a relocation package. The project would finance (a) sub-loans to develop employment opportunities for 1,043 redundant workers at existing and new enterprises; and (b) relocation packages for 150 redundant workers that would comprise specific expenditures related to worker and family relocation costs, worker retraining and placement costs, and livelihood development. 13. The Capacity Building Component (20 percent of total costs) would strengthen technical and managerial skills in biodiversity through development of a national training team that would provide about 900 person months of training at the national, provincial, and reserve levels. It would also enhance the organizational capacity of the Division of Nature Reserves (DNR) in MFO through: (a) preparation of a national conservation plan; (b) financing of computers, office equipment, and related TA; and (c) preparation of a series of policy studies related to biodiversity conservation. Finally, it would strengthen the Office of Nature Reserves (ONR) of the Forestry Department in Yunnan Province (YPFD), which contains the largest diversity of species in China, through preparation of a provincial conservation plan and development of a provincial geographic information system. The Management Information System Component (8 percent of total costs) would support improved management decision making through: (a) investment in computers, software, climatic recording equipment, and other scientific and office equipment; (b) TA in database structure, data analysis and information management; and (c) development of a comprehensive monitoring and evaluation program for NRMP. The Research Component (4 percent of total costs) would strengthen existing national research initiatives through: (a) financing of research infrastructure and equipment in the five reserve areas; and (b) establishment of a new national small-scale competitive research grants program. 14. The project cost is estimated at $23.6 million, with a foreign exchange component of $6.8 million (29 percent of total costs). The Global Environment Trust Fund grant would finance $17.9 million in incremental costs (76 percent of total costs). To facilitate early start-up activities of the project, retroactive financing of up to $500,000 equivalent is proposed for expenditures made after Sep- tember 1, 1994 for priority planning and training requirements. A breakdown of project costs and the financing plan are shown in Schedule A. Procurement methods, disbursement amounts, and the disburse- ment schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in China are given in Schedules C and D, respectively. 15. Project Implementation. The proposed project would be implemented by MFO on the basis of Project Implementation Rules (PIR) to be agreed with the Bank Group. A ministerial-level Leading Group would set principles and policies, approve the overall implementation plan, and coordinate inter- ministerial discussions. The actual day-to-day management would be jointly carried out by the DNR and  - 5 - the World Bank Project Loan Management Center (PMC) in MFO, which coordinates all Bank-assisted forestry projects in China. DNR would be responsible for all technical management, including management plans, monitoring and evaluation, and training and TA. The PMC would handle financing, procurement, disbursement, accounting, auditing, and administrative activities. The same division of responsibilities would occur at all project provincial forestry departments, where existing project management offices (PMO), under PMC, would work closely with the Offices of Nature Reserves (ONR), under DNR. Many of the tasks done at the provincial level would devolve to the nature reserves at the end of the second year of the project, when nature reserve staff have had sufficient training and their capacity has been strengthened. Local communities will participate in project implementation through stakeholder committees and co-management contracts, which will permit a wide range of options for community involvement that reflect the specific conditions of each nature reserve area. 16. Community and NGO Involvement. The project has provided for extensive involvement of local communities and non-governmental organizations (NGOs) in preparation and implementation. Group and household interviews were conducted in each of the nature reserve areas as part of preparation, which provided detailed information on local needs, natural resource use and conflicts, and economic activities. Socio-economic profiles of the communities were prepared that formed the basis for the co-management program. Similarly, representatives from a variety of local and international NGOs participated in the design and preparation of the project. Their continued involvement in the project will be ensured through a bi-annual meeting designed to enhance cooperation and coordination among the many NGOs and international donors involved in biodiversity conservation in China. 17. Project Sustainability. Institutional sustainability is addressed through the strong emphasis on capacity building in the project, particularly the development of: (a) improved organizational management structures at the national and reserve levels; (b) a new national in-service training program; and (c) a new management information system. Financial sustainability is addressed through: (a) a high level of cost-sharing, including increasing recurrent budgetary allocations from county and provincial governments for project activities during the life of the project; (b) policy studies that will review the appropriate level of visitor fees and charges at reserves; and (c) government assurance to continue meeting all recurrent operating costs after the project. 18. Agreed Actions. The following are the main assurances obtained at negotiations: (a) nature reserve management plans, incorporating time-bound implementation schedules, descriptions of any civil works required, and environmental assessments carried out in accordance with guidelines acceptable to the Bank Group, will be prepared and furnished to the Bank Group for comment for the Shennongjia Nature Reserve and the five Qinling Nature Reserves by December 31, 1996, and for Wuyishan, Poyang Lake, and Xishuangbanna Nature Reserves by December 31, 1997; and thereafter implemented taking into account the comments of the Bank Group; (b) the Community Investment Grant Program and Small Grants Research Program will operate in accordance with guidelines acceptable to the Bank Group; (c) any involuntary resettlement of persons arising under the project would be carried out in accordance with procedures and principles satisfactory to the Bank Group; (d) sub-loans under the Changqing Restructuring Component will be made only to enterprises that generate a financial rate of return of at least 10 percent, are demonstrated to be technically feasible on the basis of a feasibility study approved by the Bank Group, and are shown to have no adverse environmental impact on the basis of an environ- mental assessment carried out in accordance with guidelines acceptable to the Bank Group; (e) sub-loans will be extended for a maturity of not more than twelve years, including not more than four years of grace, and accrue interest at 4 percent per year; (f) the relocation package under the Changqing Restructuring Component will only finance costs from a list of expenditure items acceptable to the Bank  -6 - Group; and (g) a baseline survey to determine the cost and composition of each relocation package will be carried out in accordance with terms of reference and timing acceptable to the Bank Group. 19. The issuance of PIR acceptable to the Bank Group and the provision of written acceptances of the PIR from all project provinces would be a condition of effectiveness. The project would also include the following conditions of disbursement: (a) if any resettlement is expected as a result of the corridor development in Wuyishan, the completion of a resettlement action plan satisfactory to the Bank Group will be a condition of disbursement for the corridor development; (b) State Council designation of the Changqing forestry area as a national-level nature reserve, and the completion of a relocation report acceptable to the Bank Group will be conditions of disbursement for the relocation program under the Changqing Restructuring Component; and (c) State Council designation of the Changqing forestry area as a national-level nature reserve, and the provision of sub-loans in accordance with the agreed procedures and terms and conditions will be conditions of disbursement for the job creation program under the Changqing Restructuring Component. 20. Environmental Aspects. The project is expected to have a positive environmental impact through the improved management and protection of approximately 625,000 hectares within the five pilot reserve sites, and the introduction of new land use and conservation measures on an additional 100,000 ha of contiguous biodiversity landscapes. However, the project may support some activities with potentially adverse minor impacts, such as small-scale civil works construction in nature reserves and development of new enterprises as part of the Changqing restructuring program. Therefore, individual environmental assessments (EA) carried out in accordance with guidelines acceptable to the Bank Group will be prepared under the project for all nature reserve management plans and for all enterprise investments under the Enterprise Restructuring Component. 21. Social Aspects. The project may involve the resettlement of 25-35 households as part of the program to establish a protected corridor linking two core areas within Wuyishan. However, the specific number of resettled households, if any, will not be known until the exact size and shape of the corridor is determined during the preparation of the nature reserve management plan, which will be carried out in the second year of the project. As reviewed in para. 19, the completion of a resettlement plan acceptable to the Bank Group will be a condition of disbursement for the corridor development in Wuyishan. No other involuntary resettlement is expected under the project; the EAs for the Changqing enterprises will confirm that no land acquisition will be involved in the development of new enterprises. 22. Since a few of the project areas contain important historical or religious sites, the EAs for nature reserves will pay particular attention to the impact of project activities on cultural property and the development of sound mitigation measures to ensure adequate protection. In addition, the project will closely monitor the needs of ethnic minorities living within or adjacent to project areas (notably in Xishuangbanna in Yunnan Province). In particular, the terms-of-reference for EAs, nature reserve management plans, and tourism development plans will require detailed review of minority issues to ensure that they are not adversely affected by project activities and that the social and economic benefits they receive are consistent with their cultural preferences. Minorities will participate directly in the design and implementation of project activities through stakeholders committees, Community Resource Management Plans, and Co-Management Contracts. 23. Proiect Benefits. The project would generate the following benefits: (a) a wide variety of environmental benefits, including increased protection of rare biodiversity, improved water catchment protection (all five reserve areas drain into major river systems), and increased carbon sequestration from afforestation activities; (b) employment opportunities for low-income households involved in community  - 7 - management of reserves and the Changqing restructuring program (the incidence of absolute rural poverty is much greater in project areas than throughout the rest of the provinces as a result of limited access to productive land and limited off-farm income near nature reserves); and (c) strengthening of human resources and sector institutions, which would raise the overall productivity of resource use in the sector. Most importantly, the project would provide new models for improved nature reserve management, human resource development, and resolution of land-use conflicts that could be disseminated to other parts of China facing similar threats to biodiversity conservation. 24. Risks. There are few technical risks, in view of the government's commitment to biodiversity conservation and excellent track record in managing complicated World Bank investment programs in forestry. The main risks include: (a) weak institutional capacity in DNR, which has been addressed by a comprehensive capacity building program comprising appointment of additional staff, new training programs, and TA; (b) delays in the recruitment of key experts under the TA program in the areas of management planning and community development, which has been addressed through agreement of a time-bound TA plan and advanced preparation of terms of reference; (c) inadequate participation of local communities in reserve management, which will be closely reviewed under the project's monitoring and evaluation program and supervised by Bank missions; and (d) inadequate provision of local counterpart funding during implementation, which has been addressed through an understanding that the failure of any county or provincial governments to provide local funds on a timely basis would result in the exclusion of the nature reserves under their jurisdiction in continued involvement in the project.  Schedule A CHINA NATURE RESERVES MANAGEMENT PROJECr Estimated Coms and Pinancin Pbln (S million) LocW Foreip Total Estimated Pmiect Cost Nature Reserves Component 4.7 2.5 7.2 Enterprise Resructuing Component 6.1 1.5 7.6 Capcity Building Componet 2.7 1.7 4.4 Mmge nt Informtion Systemn Component 1.1 0.5 1.6 Research Compoonet 0.7 0.1 0.8 Biase C ost 1S 3 u U& Physical contingencies 0.7 0.3 1.0 Prico ontincies 0.8 0.2 1.0 Tiotal Pmioct Cost16868 , Fiacn Plan GET Grant 11.1 6.8 17.9 Govenmnt LS Q,Q S2 Total J 8  -9 - Schedule B CHINA NATURE RESERVES MANAGEMENT PROJECT Summary of Proposed Procurement Arrangements ($ thousand) ' Procurement Method Total Project Element ICB NCB Other2 N.A. Costs 1. Works 1. 1 Nature Reserves: Infrastructure 1,258.1 1,258.1 (1,258.1) (1,258.1) 1.2 Nature Reserves: Other 540.6 540.6 (540.6) (540.6) 1.3 Changqing Enterprise Construction 2,063.3 515.8 2,579.1 (1,721.2) (0.0) (1,721.2) Total Works 3,862.0 515.8 4,377.8 (3,519.9) (0.0) (3,519.9) 2. Goods 2.1 Vehicles 893.5 297.6 88.4 1,279.5 (893.5) (297.6) (88.4) (1,279.5) 2.2 Office Equipment 302.7 177.4 121.1 601.2 (302.7) (177.4) (121.1) (601.2) 2.3 Field/Research Equipment 143.3 417.7 561.0 (143.3) (417.7) (561.0) 2.4 Changqing Enterprise Equipment 515.8 825.3 722.2 515.8 2,579.1 (412.6) (660.2) (577.8) (0.0) (1,650.6) Total Goods 1,712.0 1,443.6 1,349.4 515.8 5,020.8 (1,608.8) (1,278.5) (1,205.0) (0-0) (4,092.3) 3. Services 3.1 Consultancies 5,241.4 5,241.4 (5,241.4) (5,241.4) 3.2 Training and Study Tours 3,011.0 3,011.0 (3,011.0) (3,011.0) 3.3 Research Services 565,5 565.5 (565.5) (565.5) Total Technical Assistance 8,817.9 8,817.9 (8,817.9) (8,817.9) 4. Other 4.1 Recurrent Operating Expenses 439.3 3,666.1 4,105.4 (439.3) (0.0) (439.3) 4.2 Changqing Relocation Packages 1,200.0 1,200.0 (960.0) (960.0) 4.3 Community Investment Grants 121.2 121.2 (72.7) (72.7) Total Other 1,760.5 3,666.1 5,426.6 (1,472.0) (0.0) (1,472.0) TOTAL 1,712.0 1,443.6 15,789.8 4,697.7 23,643.1 (1,608.8) (1,278.5) (15,014.8) (0.0) (17,902.1) ' Figures in parentheses represent the amounts financed by the GET grant, including contingencies. 2 Other procurement methods include direct recruitment of labor, force account, national and international shopping, direct purchase, and consultancy services.  - 10- Schedule B CHINA NATURE RESERVES MANAGEMENT PROJECT Disbursements Category Amount of credit % of expenditures ($ thousand) to be financed (1) Civil Works (a) For Biodiversity Corridor in Wuyishan 350.0 85% (b) All Other Civil Works 1,448.7 85% (2) Goods 2,441.7 100% of foreign expenditures, 100% of local expenditures, and 75 % of local expenditures for other items procured locally (3) Community Investment Grants 72.7 60% (4) Sub-Loans for Changqing Enterprises 3,371.8 80% (5) Relocation Packages for Changqing Enterprises 960.0 80% (6) Operating Costs 439.3 100% (7) Consultants' Services, Research Services, Training, and Study Tours 8,817.9 100% otal 17.902.1 Estimated Disbursements ($ million) Bank Group FY 1996 1997 1998 1999 2000 2001 2002 Annual 2.6 5.7 4.3 2.2 1.5 1.2 0.4 Cumulative 2.6 8.3 12.6 14.8 16.3 17.5 17.9  - 11 - Schedule C CHINA NATURE RESERVES MANAGEMENT PROJECT Timetable of KeX Project Processing Events Step Timing (a) Time taken to prepare the project: 25 months, April 1992 - December 1994 (b) Prepared by: MFO (with GEF PRIF-funded assistance of local and foreign consultants) and IDA (c) First Bank mission: April 1992 (d) Appraisal mission departure: September 1994 (e) Negotiations: March 1995 (f) Planned date of effectiveness: September 1995 (g) List of relevant PCRs and PPARs: None The Bank project team was led by Richard Scobey (Economist/Task Manager) and Susan Shen (Ecologist/Technical Advisor) and included Scott McCormick (Sociologist, Consultant), Lindsay Saunders (Resource Economist, Consul- tant), and Zhou Weiguo (Operations Officer, Consultant). Joseph Goldberg, Chief of EA2AG, and Nicholas C. Hope, Director of EA2, provided managerial oversight. The peer reviewers were Agi Kiss (AF2EA) and Scott Guggenheim (EA3RS). The outside experts who participated in the GEF Technical Review Panel were James Harris (International Crane Foundation) and Janice Alcorn (USAID/WWF/WRI Biodiversity Support Program).  - 12 - Schedule D Page 1 of 3 STATUS OF BANK GROUP OPERATIONS IN THE PEOPLE'S REPUBLIC OF CHINA A. STATEMENT OF BANK LOANS AND IDA CREDITS (As of March 31, 1995) Loan/ Amount (USS million) Credit Bor- (net of cancellations) Number FY rower Purpose Bank IDA Undisb.(a) 34 Loans and 42 credits have been fully disbursed. 3,124.3 2,702.0 - Of which SECAL: 2967/1932 88 PRC Rural Sector Adj. 200.0 93.2 - 2678/1680 86 PRC Third Railway 160.0 (70.0)(b) 3.3 2723/1713 86 PRC Rural Health & Preventive Med. 15.0 65.0 11.4 1764 87 PRC Xinjiang Agricultural Dev. - 70.0 0.1 2794/1779 87 PRC Shanghai Sewerage 45.0 (100.0)(b) 4.1 2811/1792 87 PRC Beijing-Tianjin-Tanggu Expressway 25.0 125.0 7.8 2812/1793 87 PRC Gansu Provincial Dev. (20.0)(b) 150.5 13.3 1835 87 PRC Planning Support & Special Studies - 20.7 2.4 2852 87 PRC Wujing Thermal Power 190.0 - 8.1 2877/1845 88 PRC Huangpu Port 63.0 (25.0)(b) 6.0 1885 88 PRC Northern Irrigation - 103.0 7.6 2943 88 PRC Pharmaceuticals 127.0 - 0.4 2951/1917 88 PRC Sichuan Highway 75.0 (50.0)(b) 12.3 2955 88 PRC Beilungang II 165.0 - 21.4 2958 88 PRC Phosphate Dev. 62.7 - 4.9 2968 88 PRC Railway IV 200.0 - 6.2 1984 89 PRC Jiangxi Provincial Highway - 61.0 0.8 1997 89 PRC Shaanxi Agricultural Dev. - 106.0 13.6 2006 89 PRC Textbook Development - 57.0 0.3 2009 89 PRC Integrated Reg. Health - 52.0 13.5 3006 89 PRC Ningbo & Shanghai Ports 76.4 - 7.1 3007 89 PRC Xiamen Port 36.0 - 1.3 3022 89 PRC Tianjin Light Industry 154.0 - 39.0 3060/2014 89 PRC Inner Mongolia Railway 70.0 (80.0)(b) 6.0 3066 89 PRC Hubei Phosphate 137.0 29.1 3073/2025 89 PRC Shandong Prov. Highway 60.0 (50.0)(b) 21.8 3075 89 PRC Fifth Industrial Credit 300.0 - 0.3 2097 90 PRC Jiangxi Agric. Dev. - 60.0 1.3 2114 90 PRC Vocational & Tech. Educ. - 50.0 2.9 2145 90 PRC National Afforestation - 300.0 71.9 2159 90 PRC Hebei Agricultural Dev. - 150.0 45.5 2172 91 PRC Mid-Yangtze Agricultural Dev. - 64.0 13.6 3265/2182 91 PRC Rural Credit IV 75.0 200.0 23.4 3274/2186 91 PRC. Rural Indust Tech (SPARK) 50.0 64.3 22.5 3286/2201 91 PRC Medium-Sized Cities Dev. 79.4 52.9 35.3 2210 91 PRC Key Studies Development - 131.2 35.5 2219 91 PRC Liaoning Urban Infrastructure - 77.8 9.5 3316/2226 91 PRC Jiangsu Provl. Transport 100.0 (53.6)(b) 24.5 2242 91 PRC Henan Agricul. Dev. - 110.0 65.0 3337/2256 91 PRC Irrig. Agricul. Intensif. 147.1 187.9 94.3 3387 92 PRC Ertan Hydroelectric 380.0 32.2 2294 92 PRC Tarim Basin - 125.0 59.1 2296 92 PRC Shanghai Metro Transport - 60.0 17.7 3406 92 PRC RaiLways V 330.0 - 85.2 3412/2305 92 PRC Daguangba Multipurpose 30.0 37.0 10.2 2307 92 PRC Guangdong ADP - 162.0 109.0 3415/2312 92 PRC Beijing Environment 45.0 80.0 76.6 2317 92 PRC Infectious and Endemic Disease Cont - 129.6 111.1 3433 92 PRC Yanshi Thermal Power 180.0 - 23.4 2336 92 PRC Rural Water Supply and Sanitation - 110.0 70.0 2339 92 PRC Educ. Development in Poor Provs. - 130.0 70.9 3443 92 PRC Regional Cement Industry 82.7 - 26.6  - 13 - Schedule D Page 2 of 3 Loan/ Amount (USS million) Credit Bar- (net of cancellations) Number FY rower Purpose Bank IDA Undisb.(a) 3462 92 PRC Zouxian Thermal Power 310.0 - 190.0 3471 92 PRC Zhejiang Provincial Highway 220.0 - 131.2 2387 92 PRC Tianjin Urban Devt. & Envir. - 100.0 74.7 2391 92 PRC Ship Waste Disposal - 15.0 17.1 2411 93 PRC Sichuan AgriculturaL Devt. - 147.0 98.0 3515 93 PRC Shuikou Hydroelectric 11 100.0 - 67.2 2423 93 PRC Financial Sector TA - 60.0 57.4 3530 93 PRC Guangdong Provincial Transport 240.0 - 165.5 3531 93 PRC Henan Provincial Transport 120.0 - 78.7 2447 93 PRC Ref. Inst'l and Preinvest. - 50.0 45.2 3552 93 PRC Shanghai Port Rest. and Devt. 150.0 - 125.1 2457 93 PRC Changchun Water Supply & Env. - 120.0 125.3 2462 93 PRC Agriculture Support Services - 115.0 99.0 3560/2463 93 PRC Taihu Basin Flood Control 100.0 100.0 135.5 2471 93 PRC Effective Teaching Services - 100.0 105.4 3572 93 PRC Tianjin Industry II 150.0 - 150.0 3582 93 PRC South Jiangsu Envir. Prot. 250.0 - 229.9 2475 93 PRC Zhejiang Multicities Devt. - 110.0 104.6 3581 93 PRC Railway VI 420.0 - 340.4 3606 93 PRC Tianhuangping Hydroelectric 300.0 - 277.5 3624/2518 93 PRC Grain Distribution 325.0 165.0 486.6 2522 93 PRC Environmental Tech. Assist. - 50.0 48.4 2539 94 PRC Rural Health Workers Devt. - 110.0 105.9 3652 94 PRC Shanghai Metro Transport II 150.0 - 60.0 3681 94 PRC Fujian Provincial Highways 140.0 - 121.9 3687 94 PRC Telecommunications 250.0 - 238.4 2563 94 PRC Second Red Soils Area Devt. - 150.0 146.2 2571 94 PRC Songliao Plain Agric. Devt. - 205.0 201.4 3711 94 PRC Shanghai Environment 160.0 - 155.0 3716 94 PRC Sichuan Gas Devt & Conservatn. 255.0 244.6 3718 94 PRC Yangzhou Thermal Power 350.0 - 335.5 3727 94 PRC Xiaolangdi MuLtipurpose 460.0 - 384.9 2605 94 PRC Xiaolangdi Resettlement - 110.0 109.0 2616 94 PRC Loess Plateau Watershed Devt. - 150.0 148.3 2623 94 PRC Forest Resource Devt. & Prot. - 200.0 206.5 3748 94 PRC National Highway 380.0 - 364.0 3773/2642 95 PRC Ent. Housing/Soc Sec Reform 275.0 75.0 349.6 3781 95 PRC Liaoning Environment . 110.0 - 103.0 3787 95 PRC Xinjiang Prov. Highways 150.0 - 150.0 2651 95 PRC Basic Ed for Poor/Minorities (c) - 100.0 107.7 3788 95 PRC Shenyang IndustriaL Reform (c) 175.0 - 175.0 2654 95 PRC Economic Law Reform - 10.0 10.4 2655 95 PRC Comp Maternal/Child Health - 90.0 92.3 3846 95 PRC Zhejiang Power Development (c) 400.0 - 400.0 3847 95 PRC Technology Development (c) 200.0 - 200.0 3848 95 PRC Sichuan Power Transmission (c) 270.0 270.0 Total 12,994.6 8,125.9 9,211.1 of which has been repaid 1,130.8 16.2 Total now held by Bank and IDA 11,863.8 8,109.7 Amount sold: Of which repaid - - Total Undisbursed 6,238.3 2,972.8 9,211.1 (a) As credits are denominated in SDRs (since IDA Replenishment VI), undisbursed SDR credit balances are converted to dollars at the current exchange rate between the dollar and the SDR. In some cases, therefore, the undisbursed balance indicates a dollar amount greater than the original principal credit amount expressed in dollars. (b) Credit fully disbursed. (c) Not yet effective.  - 14 - Schedule D Page 3 of 3 B. STATEMENT OF IFC INVESTMENTS (As of March 31, 1995) Invest- Type of Loan Equity Syndicate Total ment No. FY Borrower Business --------- (USS MilLion) ---------- 813/2178 85/ Guangzhou Auto AutomobiLe 15.0 4.5 - 19.5 86/91 974 87/88 China Investment Co. DFCs 3.0 - - 3.0 1020 88/ Shenzhen China Bicycle 17.5 3.4 - 20.9 92/94 Bicycles Co. Ltd. Manufacture 1066 89 Crown Electronics Electronics 15.0 - - 15.0 1119 89 Shenzhen Solar Electric 2.0 1.0 - 3.0 Light/Power 3423 93 Shenzhen PCCP Manufacturing 4.0 1.0 - 5.0 3150 93 Yantai Mitsubishi Cement Cement 28.7 2.0 - 30.7 3881 94 China Walden Mgt. Capital Mkts. - 7.5 - 7.5 4470 94 Dynamic Growth Fund Venture - 20.0 - 20.0 Capital 4534 95 Newbridge Inv. Securities Mk - 10.0 - 10.0 Financing Instit. 3746 95 Dalian Glass GLass 30.5 - 30.5 61.0 4755 95 Mantong Wanfu Food/ 7.9 3.4 10.2 21.5 Agribusiness Total Gross Commitments 123.6 52.8 40.7 217.1 Less cancellations, terminations, 28.5 - 10.2 38.7 repayments, write-offs, and sales Total Commitments now Held by IFC 95.1 52.8 30.5 178.4 Total Undisbursed 13.4 32.8 16.5 62.7 4/19/95 EA2DR  PART II: TECHNICAL ANNEX I   CHINA NATURE RESERVES MANAGEMENT PROJECT Contents 1 Background ............................................. 1 A. Biological Diversity . ..................................... 1 B. Nature Reserves in China .......... ....................... 2 C. Associated World Bank Project .............................. 3 D. Lessons Learned from Previous Bank Group Involvement .... ......... 4 2 The Project Area .......................................... 5 A. Shennongjia Nature Reserve ............................... 5 B. Qinling Nature Reserves Group ............................. 8 C. Xishuangbanna National Nature Reserve ........................ 13 D. Wuyishan Nature Reserve .......... ....................... 16 E. Poyang Lake Migratory Bird National Nature Reserve ............... 18 3 The Project ............................................. 20 A. Project Objectives . ..................................... 20 B. Detailed Project Description ............................... 20 4 Project Costs and Financing .......... ........................ 34 A. Project Costs .......................................... 34 B. Financing ............................................ 34 C. Procurement .......................................... 35 D. Disbursement .......................................... 36 5 Project Organization and Management ........................... 39 A. Organizational Structure and Responsibilities ..................... 39 B. Technical Assistance . ................................... 41 C. Involvement of NGOs and Local Communities .................... 41 D. Environmental Management ................................ 42 E. Financial Management ........... ........................ 43 F. Monitoring, Evaluation and Reporting ......................... 44 6 Benefits, Justification, Risks ................................. 46 A. Benefits ............................................. 46 B. Justification ............................................ 46 C. Risks .............................................. 46 7 Agreements ............................................. 48  TABLEs IN TEXT 1.1 Number of Known Species in China and the World .................... 1 2.1 Land Use in Shennongjia Nature Reserve .......................... 6 2.2 Socio-Economic Data for Shennongjia Nature Reserve .................. 7 2.3 Land Area of Qinling Nature Reserve Group ........................ 8 2.4 Species Diversity in Qinling Nature Reserve Group .................... 8 2.5 Population Data for Qinling Nature Reserve Group .................... 11 2.6 Land Area of Xishuangbanna Nature Reserve ........................ 13 2.7 Population Data for Xishuangbanna Nature Reserve .................... 14 2.8 Economic Output Data for Xishuangbanna Nature Reserve ................ 14 2.9 Economic Output Data for Wuyishan Nature Reserve ................... 17 2.10 Economic Output Data for Wuyishan Forestry District .................. 17 2.11 Land Use in Poyang Lake Nature Reserve .......................... 18 3.1 Training Course Outputs of NRTr ............................... 30 4.1 Project Financing ......................................... 34 4.2 Procurement Profile ........................................ 38 FIGURES 5.1 Organizational Responsibilities of PMC and DNR ..................... 40 5.2 Project Management Structure ................................. 40 ANNEXES 1. Outline of Nature Reserve Management Plans ........................ 51 2. Description of Co-Management Program in Nature Reserves .............. 52 3. Implementation Arrangements for Community Investment Grants Program ... ... 59 4. Implementation Arrangements for Changqing Enterprise Restructuring Program . .. 61 5. Outline of Conservation Plan for National Nature Reserve System ... ........ 65 6. Review of Biodiversity in Yunnan Province ......................... 66 7. Review of Training Needs and Programs in Nature Reserve Management ... ... 69 8. Implementation Arrangements for Small Grants Research Program ... ........ 71 9. Project Cost Tables ........................................ 72 10. Terms of Reference for Ministry of Forestry in Implementation ... ......... 77 11. Monitoring and Evaluation Program .............................. 80 12 Project Implementation Schedules ............................... 91 13. Technical Assistance Timetable ................................. 98 14. Summary Terms of Reference for Key Technical Assistance ............... 101 MAPS IBRD 26828 IBRD 26829 IBRD 26830 IBRD 26831 IBRD 26832  CHINA NATURE RESERVES MANAGEMENT PROJECT CHAPTER 1: BACKGROUND A. Biological Diversity 1.1 China is one of the top five countries Table 1.1: Numbers in the world in terms of the total variety of its of Known Species in biodiversity. The wealth of species is a result of China and the World China's large size, altitudinal, latitudinal and Taxa Spp In China Spp In Word Global % climatic variation and the great age of its terrestrial Mammals 499 4,000 12.5 continuity. Major ecosystems include tropical, Birds 1,186 9,040 13.1 subtropical, temperate, alpine and tundra forests, R grasslands and scrub ecosystems, swamps, cold Repts 376 6,300 6.0 deserts, hot stony and sandy deserts, steppe, Amphibians 279 4,184 70 meadowlands, savannas, great river systems, Fishes 2,804 19,056 12.1 temperate and tropical coastline, coral reefs and insects 40,000 751000 5.3 deep and shallow seas. Although incomplete, inventories of species from this vast range of habitats and geographical area indicate that China Pieridophytes 2,600 10,000 26.0 probably contains over 10 percent of all living Gymnnospernm 200 520 378 species on Earth (see Table 1.1). Angiosperms 25,000 220,000 11.4 1.2 To protect this vast biological Fngi 8,0(X 46,983 17.0 heritage, the People's Congress in 1956 requested Bacteria 500 3,060 16.3 that the Ministry of Forestry (MFO) and the Algae 5,000 26,900 18.6 Chinese Academy of Sciences identify areas in China that were appropriate as nature reserves. China's first nature reserve was established in Guangdong Province. Over the next nine years eighteen more reserves were added, bringing the total area protected to 650,000 ha. The pace slowed from 1966 to 1976, during the Cultural Revolution period. However, the passing of a revised Environment Protection Law (in 1989, after initial enactment in 1979) and a revised Forest Law (in 1985, after initial enactment in 1979) paved the way for a more comprehensive system of protected areas. Since then the pace of expansion has increased rapidly, with nearly 100 new reserves being established each year at the national, provincial and county levels. More than 700 nature reserves are now established, with a total area of approximately 56 million hectares covering some 5.5 percent of the country. The plan is to extend the system to 800 reserves totalling 6 percent of the country by the year 2000. 1.3 Within this nature reserve system, forty reserves or regions of very high biodiversity value have been assigned a priority rating of "A," signifying a site of global significanceY These 40 sites are 1' Existing reserves were ranked as part of a joint MFO and World Wide Fund for Nature Project in 1992. The ranking used criteria such as biodiversity value (based on endemism, species richness, diversity of habitat, presence of valuable species, size of the area, and uniqueness in protected area system), ecological viability, and potential for management success. Forty reserves of international significance and 100 of national importance were identified and a meeting, attended by nature reserve staff of all the provinces, was held in February 1992 to endorse the list.  - 2 - well distributed to cover the greatest possible spectrum of ecosystems in the country. However, the richest biological sites are concentrated in the tropical and sub-tropical zones in the south and southwest of China. The project focuses on five reserve areas in this region, which are all of international significance and identified as top biodiversity priorities in the BAP: Xishuangbanna, a cluster of five sub- reserves in southwest Yunnan Province; Poyang Lake, China's most important wetland site in Jiangxi Province; Wuyishan, the highest and richest peak in southeast China straddling the borders of Fujian and Jiangxi Provinces; Qinling mountains of Shaanxi Province, consisting of four reserves (Foping, Niubeiliang, Zhouzhi, and Taibaishan) and their surrounding natural forest areas where healthy populations of giant pandas still reside; and Shennongiia, an area of very rich pristine forest in Hubei Province. B. Nature Reserves in China 1.4 The nature reserve system in China permits several different types of land use, each involving different degrees of protection. Nature reserves are typically divided into a core zone area, which contains the most important biological diversity and is protected by comprehensive restrictions on human activity, and an experimental zone area, where people are allowed to reside and carry-out economic activities. Since local communities existed within the boundaries of most nature reserves prior to their establishment, the use of experimental zones allows villagers to continue to use reserve land as long as they do not undermine the biological diversity in the core zone. While a few nature reserves have developed buffer zones as a mechanism for strengthening protection outside reserve boundaries, the government has not generally relied on buffer zones in the national system. China does not follow the standard IUCN categories of protected land, such as natural parks, wildlife sanctuaries, etc. 1.5 Several different agencies are responsible for establishment and management of China's nature reserves: MFO manages about two-thirds of them, and the National Environmental Protection Agency (NEPA), the Ministry of Agriculture, the State Oceanography Administration, CAS, local governments, and other agencies administer the remainder. 1.6 Despite a strong commitment to biodiversity conservation, MFO's staff levels, management budgets, and training and performance standards have not kept pace with reserve expansion. Few areas are protected or managed effectively, and if current trends continue, biological diversity in many critical reserves will diminish dramatically. The main constraints include a weak guard force, excessive emphasis on capital-intensive infrastructure development, inadequate recurrent budgetary support, and an inadequately structured management system. 1.7 The guard force is generally ineffective because forest police seldom go into the forest and have no job security and limited allegiance. Guards who do go into the forest lack enforcement powers and incentives to apprehend law breakers. They often become unpopular in their villages if they become effective in their work. Monitoring and evaluation of the guards' work is inconsistent and ineffective. Guards who patrol rarely keep notes on what they observe; as a result, this information is not passed on to management divisions who need the information. Furthermore, guards lack the training, equipment, and transport to do their jobs; and guard stations are often located too far from the reserves for effective management. 1.8 Many nature reserves are based on a large degree of infrastructure development, relatively large staff levels, and centralized bureau locations. This results in less funds available for recurrent operating expenses for protection at the field level. Bureaus are located far from the reserves, usually  in towns, which improves access of staff to job related health care, education, and subsidized housing, but decreases access of the staff to the reserve. 1.9 Moreover, a number of management problems constrain the more efficient use of human and financial resources and contribute to unclear lines of authority. These include: * lack of long-term strategic plans on biodiversity conservation within the reserves and at the provincial levels; * insufficient staff with unclear roles and limited financial support in the Department of Forest Protection (especially the Division of Nature Reserves [DNR]) in MFO; * a poorly designed information system that is inconsistent at different locations, reflecting the lack of common principles and guidelines in conservation management; * poor communication between levels of institutions and among institutions actively involved in conservation issues; * ineffective management systems for operational planning, strategic planning, accounting and financial reporting, management information, and staff accountability; and * employee incentive structures that do not reward people for prosecuting law breakers, implementing improved management systems, developing innovative research ideas, or coordinating conservation/development activities among different agencies. C. Associated World Bank Project 1.10 The proposed Nature Reserves Management Project (NRMP) is associated with the World Bank Forest Resource Development and Protection Project (FRDPP). FRDPP was approved by the Executive Directors in June 1994, with a total project cost (excluding NRMP) of $333 million and IDA financing equivalent to $200 million. NRMP was not approved at that time as the GEF I replenishment was not yet effective. The combined FRDPP/NRMP project is designed to introduce a new sectoral approach to sustainable resource planning and management in forestry. For the first time in China, the combined project addresses resource use in all four of the main forest types in China (timber plantations, watershed protection forests, natural forests, and nature reserves) and presents an integrated package of investment, policy reform, and technical assistance requirements designed to improve the efficiency and productivity of the sector as a whole. This comprehensive sectoral focus not only capitalizes on the critical economic and environmental linkages among different forest areas and land uses but also integrates national and global benefits into sector planning and management. This approach is an important step away from the Government's current ad hoc and unprioritized investment program in forestry. The FRDPP/NRMP project is a direct outgrowth of the Bank's Country Assistance Strategy scheduled for presentation to the Board in June 1995, as it supports income enhancement and sustainable environmental development in poor, remote areas across China. 1.11 The FRDPP/NRMP would comprise the following five components, in addition to the nature reserves program. The Intensively Managed Plantation Component would establish 620,000 hectares of plantations for timber, pulpwood, and pit props on barren or degraded land in sixteen provinces as the second phase of the improved plantation program initiated under the National Afforestation Project (NAP) (68 percent of total costs). The Multiple-Use Protection Forest Component would establish 280,000  - 4 - hectares of watershed protection forests in the middle and upper reaches of the Yangtze River basin in Sichuan and Hubei Provinces based on new silvicultural models and improved land-use planning (13 percent of total costs). The Planting Stock Development and Nursery Management Component would raise the quality of planting materials through introduction of improved genetic material and nursery management technologies, and support the production of the 2.1 billion seedlings required under the project (12 percent of total costs). The Research and Technology Transfer Component would streng- then the operational focus of research and extension through provision of technical assistance and operating support for eleven priority research programs, demonstration plantations, and extension activi- ties (1 percent of total costs). Finally, the Institutional Capacity Building Component would strengthen the capacity of forestry institutions through support for training and technical assistance, development of information management systems, development of a new private sector investment promotion agency, im- proved natural forest management, and policy studies (I percent of total costs). D. Lessons Learned From Previous Bank Group Involvement 1.12 Since the proposed project would be the first Bank Group or GEF investment in biodiversity in China, it draws on project experience from other countries under the GEF Pilot Phase and from NGOs in China. The key lessons include: (a) the importance of a national strategic framework for biodiversity investments; (b) the need to build in financial sustainability and long-term commitment from the government; (c) the need to involve local people in design and implementation; and (d) the key role of macroeconomic and sector policies in establishing an appropriate incentive framework for resource conservation. It also draws on the implementation experience of the GEF PRIF in China over the past two years, particularly the importance of twinning domestic and international technical assistance to ensure effective transfer of new ideas and technologies. Similarly, the project draws on related lessons from the 1991 Board paper on forestry, the 1991 Operations Evaluation Department report on forestry, and the 1994 Board paper on forestry project implementation: (a) the importance of integrating the management of protected and unprotected natural forest areas into regional forest management plans; (b) the importance of developing restructuring programs for inefficient state forestry enterprises; and (c) the need to expand the protected area system and improve management technologies for forests with high biodiversity and environmental services values. Finally, the community participation program supported under the project incorporates lessons learned from several on-going pilot activities in China managed by NGOs and the government, particularly (a) the importance of integrating local villagers into the assessment of community needs through participatory rural appraisal techniques, and (b) the need to establish clear, mutually agreed contracts that identify the respective rights and responsibilities of reserve staff and local communities in resource use within reserves.  - 5 - CHAPTER 2: 7WE PROJECT AREA A. Shennonglia Nature Reserve Project Area 2.1 Biophysical Characteristics. The project area in western Hubei Province consists of the 70,000 ha national nature reserve and about 100,000 ha of forested area outside of the nature reserve in the townships of Bancang, Changfang, Songluo and Chaoyang (a map of the project area is included in the back). The Shennongjia Nature Reserve comprises two blocks-one on the western and one on the eastern side of the Yichang to Muyuping road. Both the Shennongjia Nature Reserve and the larger Biodiversity Landscape Area of 100,000 ha are located within the Shennongjia Forestry District (about 325,000 ha). The entire forest cover of the Shennongjia Forestry District is 160,818 ha or 49 percent of the land area. The forest proportion in Shennongjia Nature Reserve is slightly higher at 53 percent and the adjacent Biodiversity Landscape Area is much higher at approximately 75 percent. 2.2 Biodiversity Importance. The mixed mesophytic forests of the Yangtze River valley contain biodiversity of great richness and global significance. These forest formations are far richer in species than any other temperate forest systems. For example, while the North American mixed mesophytic forests comprise 25 main species of 16 genera with a further 14 genera as occasional associates, the mixed mesophytic forests of China are much richer with 67 tree genera and some hundreds of species. These rich forests, however, have mostly been destroyed and only a few precious remnants remain. 2.3 The Shennongjia area is one of the largest surviving remnants of such forests. The high proportion of primitive and relict plants indicate that the area survived as a Pleistocene refuge during the temperate Ice Ages. Preliminary investigations record a total of 53 tree genera in this forest type or 80 percent of the generic richness of the Chinese mesophytic forests. Shennongjia has 53 out of China's 67 genera, while the United States has only 27 out of those 67 and only 3 genera not found in China. The reserve itself is also very rich in medicinal and useful plants and contains 32 nationally endangered plants as well as several local endemic species. The richest forests in Shennongjia are found at lowest altitude. However, this zone accounts for less than ten percent of the reserve area boundaries and continues to face heavy pressure from agriculture. The reserve contains 54 protected animals, including five of category I and 49 of category II. The most important animal in the reserve is the golden monkey, for which this reserve constitutes the extreme eastern limits of its range. Two butterflies Bhutanitis mansfieldi and Leuhdorfia chinensis are valuable rarities with potential for commercial rearing. 2.4 The area has a complete range of vegetation types. Sub-tropical mixed deciduous and evergreen forests occur below 800 m and deciduous warm temperate broadleaf forests between 800 and 1800 m. The lower parts of this range are composed of rich mixed mesophytic formations, and the higher elevations are of a colder temperate type with increasing proportions of conifers. Between 1800 and 2300 m, the forests are largely white pine (P. annandi) mixed with oaks, beech, maple, birch and poplar. From 2300-2600 m, the forests are largely fir (Abiesfargesii) mixed with pines and birch and with an understory dominated by arrow bamboo (Sinarundinaria nitida). The highest elevations are almost pure fir with an understory of rhododendron and arrow bamboo; however, in many areas, cutting of fir followed by fire has given rise to sub-alpine meadows of grasses (Arundinella hirta) and dense thickets of the arrow bamboo. 2.5 The fauna is comparatively less rich than the flora and comprises a slightly impoverished extension of the Himalayan/Sichuan highland fauna, with a few elements characteristic of Central China.  - 6 - Thus the area shares tiger, leopard, black bear, golden monkey, serow, goral, muskdeer, wolf and most birds with the Sichuan highlands but has lost giant panda, red panda, takin, sambar deer, eared pheasants, monal, blood pheasant and several other species. The presence of Reeve's Pheasant is an example of the small element of Central Chinese species in the area. 2.6 Villagers are allowed to farm land in the experimental zones of the reserve, located in the two northern valleys and southern valley of the larger western block and the southern valley of the eastern block. The nature reserve was logged as a production forest between 1970 and 1982, which has left an extensive network of forestry roads reaching almost all parts of the reserve. Most of the reserve has been seriously damaged by logging except some of the inaccessible and steep rugged areas of karst landscape. Vegetation recovery in the lower parts of the reserve is good and it appears that almost all plant species have survived and the forest is regenerating well. With reasonable protection from further cutting, these forests will retain almost all their original biodiversity. 2.7 O n th e upper slopes in the fir Table 2.1: Land-use in the Shennongjia Project Area zone, however, the forest Location Area (ha) % Forest % Scnrb % Rock % Agriculture % Grass % Other is regenerating very Shennon8iia 325,000 49 15 2 11 12 10 poorly. The survival Forestry Dist. rate of newly planted Nature Reserve 70,647 53 25 3 5 9 4 seedlings is poor and Biodiversity 100,000 75 10 3 4 5 3 periodic fires have furt- Landscape Area her hampered regenerat- ion and produced exten- sive grassy meadows and bamboo thickets. Under current management it is unlikely that this vegetation zone will recover. The density of bamboo thickets prevents tree regeneration and occasional fires destroy all young tree seedlings. Restoration of this zone to its original condition will require an active program of reforestation over a long time period. Table 2.1 provides land-use data for the reserve. 2.8 Socioeconomic Setting. The Shennongjia Forestry District has a resident population of 77,274 people in 21 towns, including 8,203 people in 17 villages residing within the reserve and 34,892 people living in 100,000 ha of the "biodiversity landscape area" adjacent to the reserve. Table 2.2 illustrates the population distribution and agricultural land use in the reserve. 2.9 Most households residing within the reserve are agrarian. They cultivate corn, potatoes, and beans and supplement these food crops with the sale of honey and some medicinal herbs (such as Eucommia uimodes and Grynostemma pentaphyllum). Many keep a few animals, mostly pigs. Land for food production is scarce. Table 2.2 indicates that each person is allocated about 2 mu for food production. In the eastern section of the nature reserve, households appear to have, on the average, less land per capita. Each household also is allocated, by the village, an area for collecting and cutting fuelwood. Use rights for both the agricultural and forest areas are contracted with the village, generally for five years. However, the contracts have few limitations on the use of the resources and monitoring rarely occurs. In the eastern section of the reserve, firewood cannot be cut from the reserve's forests and households must now purchase their firewood. Some households have purchased locally made fuel-saving stoves in an effort to reduce their household consumption of firewood.  -7 - Table 2.2: Socio-Economic Data for Shennongia Nature Reserve Village Population Agricultural Land/capita Output/capita Per Capita Incomne Land (mu) (mu/capita) (in/capita) (yuan/cap.) Muyu 63 118.9 1.9 230.1 257.0 Xi gou 487 887.6 1.8 232.5 284.9 Lu' yuan 191 378.5 1.9 229.9 285.0 Qing shu 559 1216.2 2.2 232.5 162.9 Xiang shu he 456 892.7 1.9 232.5 182.7 Ping qian 557 1231.8 2.2 232.5 224.6 Huang bai qian 948 1920.0 2.0 232.5 121.1 Er ping chen 468 1438.7 3.1 231.4 218.5 Dong qi 558 1233.8 2.2 232.5 154.8 Luo jia ya 68 157.5 2.3 232.5 223.8 San he 286 1116.1 3.9 232.5 316.4 Ying yu he 326 1152.0 3.5 232.5 260.8 Dui wo shi 72 270.2 3.7 231.9 275.0 San gu shui 925 1143.7 1.2 232.5 175.0 Bang qiao he 957 1464.2 1.5 225.1 196.6 Lao shui he 874 1195.6 1.4 230.8 177.7 Dong be kou 408 564.3 1.4 232.5 204.6 2.10 The Shennongjia Forestry District and township governments provide limited incentives for sustainable resource use to villagers residing inside the reserve. For example, the township government grants households tax subsidies in return for their cooperation in adhering to certain regulations, such as the restriction on the cutting of firewood. Similarly, extension staff from the Shennongjia Forestry District and the townships periodically visit villages, but these staff lack skills in community needs assessment or community organization. 2.11 Resource Degradation. The following adverse impacts have occurred since Shennongjia was established in 1982: * selective cutting of the lowland broadleaf forests, resulting in few remaining large specimens; * the virtual removal of all fir forests in the higher altitudes; * burning of the open ridges, resulting in a change from forest ecosystem to an alpine grassland ecosystem in association with dense bamboo stands; * collection of plants and fuelwood; * reduced water holding capacity that increases downstream runoff and the prevalence of flooding; and  - 8 - agricultural encroachment in the northwest region of the reserve. 2.12 Increasing pressure on land and forest resources is due to increasing populations, low agricultural productivity and incomes, and unavailable alternative fuel sources to fuelwood. Population growth rates have not been precisely determined from township level data, but interviews conducted in villages during preparation suggest an annual rate of increase of 1.5 percent. Per capita incomes are very low, at 150 to 250 yuan per annum. Access to land will become an increasing issue for agricultural households. Already, fields are being cultivated on 30 percent to 40 percent slopes in the eastern portion of the reserve, with yields estimated as low as 75 kg/mu for parcels on the hills, due to poor soils and management practices. 2.13 Local communities have benefitted little from the establishment of the reserve, apart from road access, tax subsidies, and some increased telecommunication service. They have had limited input into reserve planning. Poaching does occur due to the limited income-generating activities in the area, the lack of an effective protection system, and the limited incentives to guards to catch poachers. B. Qinling Nature Reserves Project Area 2.14 Project Area. The Qinling group of reserves consists of 4 different Table 2.3: Land Area of Qinling Reserve Group nature reserves, one nature protection Protection Status Name of Area Percent station for Crested Ibis, and some adjacent Subreserve (ha) Forest Cover state forest farms (a map of the project National Reserve Foping 29,240 74 area is included at the back). The total project area amounts to about 218,000 ha National Reserve Taibai 56,325 88 as shown in Table 2.3. The Qinling National Reserve Zhouzhi 50,599 86 Reserve Group is an area of high species diversity, moderate endemism and par- National Reserve Nuibeiliang 16,500 80 ticularly high numbers of special keystone Protected Forest Corridor 12,000 70 species. Conditions vary greatly between the northern and southern faces of the Protection Station Nipponia 22,968 10 Qinling range. The reserves protect 44 Unprotected Changqing 29,906 na protected animal species, including 8 of category 1, 34 of category II, and 2 provincially protected species (the diversity of species is summarized in Table 2.4). The category I Table 2.4: Species Diversity in Qinling Reserve Group animals are giant panda, golden Location Mammals Birds Amphibians Reptiles Plants monkey, cloud leopard, leopard, Foping 49 162 11 19 1575 takin, black stork, crested ibis and golden eagle. The flora is rich in Taibshan 62 192 2272 single species genera, relict species, Zhouzhi 59 111 6 17 619 local endemics, and over 350 medi- Nuibeiliang 86 6 10 cinal plant species are also found. Qinling Reserves 70 194 11 19 2576 Many species of Rubus, Prunus, Wole Qinling 87 338 16 25 Ribes, Actinidia, Diospyros and Ana 3000 other relatives of fruit cultivars are found in the reserves.  - 9 - 2.15 Biophysical Conditions. The Foping Nature Reserve is quite small but encompasses a wide range of altitudinal zones of the southern face of the Qinling mountains. The highest ridges 2200-2904 m are rocky with light cover of fir trees and grassy meadows of Arundinella hirta. These are the summer feeding area of the takin, Budorcas taxicolor. These forests have not been officially designated as logging areas but nonetheless appear to have lost some trees. Between 1400 and 2200 m there is a zone of broadleaf deciduous forest dominated by oaks and chestnuts with pines and birch colonizers. This zone has been cut over by local farmers over the past century but is presently well stocked and regenerating well. The central valley still has a few farms, but the two outer rivers have no human settlements and the forest there is more undisturbed. Most Rhus trees have been tapped heavily for the valuable turpentine resin and many pine trees have also been overtapped for lac resin. In the main valley, the forests are mixed with many oaks, chestnuts and other warm temperate broadleaf trees, with two species of pine and opened areas being colonized by birch, aspen and willows. Below 1400 m down to the lowest part of the reserve at 980 m, the reserve becomes botanically richer with very mixed formations including several sub-tropical semi-evergreen species such as Lindera, Litsea, Cyclobalanopsis, Cinnamomum, Castanopsis, and Dalbergia. The bamboo understory is extensive, with seven species in the reserve dominated by Fargesia nitida above 2000 m and Bashaniafargesii below that altitude. These species are the main food of the giant panda that uses the Fargesia zone between June and September and the Bashania zone for the rest of the year. Both species showed some flowering and death in the 1980's but large areas of healthy bamboo remain. The flowering has caused a temporary disconnection of the Foping panda population from the neighboring Changqing population to the west but this is not a serious problem. The Foping panda population is estimated at about 60 animals. 2.16 The lowest altitude of the Niubeiliang Nature Reserve is about 1100 m and highest peaks are at 2571 and 2802 m. The lower slopes are well forested but the highest ridges are mostly covered in grass and scrub of birch, roses and willows. Upper valleys are clothed in forests of silver birch, red birch and pines with a few remaining firs, and lower slopes are dominated by oak (Quercus variabilis). The land contours are extremely steep and the scenery is spectacular. No one lives inside the reserve and there are only eight villages within 10 km of the boundary. Officials indicate that villagers are well educated about conservation and that there is little poaching. The extreme west end of the reserve, a large part of the south-east of the reserve, and the main ridge crest are said to be primary forests. The northern and southern flanks have been lightly logged but over twenty years ago. They appear in good condition and should support good wildlife populations. The main species of interest in the reserve is the golden takin (Budorcas taxicolor) of which there are estimated to be more than one hundred. A faunal inventory was conducted in 1981, but no species lists have yet been produced. However, it is clear that this area supports most of the rare fauna and flora of the high Qinling mountains. 2.17 The Niubeiliang Nature Reserve was only established in 1987 and has only eight staff. The total area is 16,500 ha divided among the three counties of Zuoshui, Changan and Ningshaan. The staff currently occupy temporary offices in the town of Zashuixian about 30 km from the reserve. Marker posts, boards and signs have been placed along 88 kilometers of reserve boundary. 2.18 Zhouzhi Nature Reserve. Zhouzhi Nature Reserve was established as a national level reserve for the protection of golden monkeys. It is located between 1070 33'^108