China - Southwest Poverty Reduction Project

Document of The World Bank FOR OFFICLAL USE ONLY Report No. P-6545-CHA MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO TLHE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO $47.5 MILLION AND A PROPOSED CREDIT OF SDR 128.6 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A SOUTHWEST POVERTY REDUCTION PROJECT MAY 18, 1995 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 EQUIVALENTS (as of December 1994) Currency Unit = Yuan (Y) Y 1.00 = $0.115 $1.00 = Y 8.70 WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet 1 kilometer (km) = 0.62 miles 1 hectare (ha) = 15 mu 1 ton (t) = 1,000 kg = 2,204 pounds ABBREVIATIONS AND ACRONYMS 8-7 Plan - National Seven-Year Plan for Poverty Reduction (1994-2000) LGPR - Leading Group for Poverty Reduction PADO - Poor Area Development Office PLG - Project Leading Group PMO - Project Management Office TVE - Township and Village Enterprise FISCAL YEAR January 1 - December 31  FOR OFFICIAL USE ONLY CHNA SOUTHWEST POVERTY REDUCTION PROJECT LOAN/CREDIT AND PROJECT SUIMMARY Borrower: People's Republic of China Beneficiaries: Provincial and County Governments of Guangxi, Guizhou and Yunnan; Beihai, Nanning and Fangcheng Municipalities; and the Central Government's Leading Group for Poverty Reduction Poverty: Program of Targeted Interventions Amount: Loan: $47.5 million equivalent Credit: SDR 128.6 million ($200 million equivalent) Terms: Loan: 20 years, including 5 years of grace, at the Bank's standard variable interest rate. Credit: IDA standard terms with 35 years' maturity. Commitment Fee: Loan: 0.75 percent on undisbursed loan balances, beginning 60 days after signing, less any waiver Credit: 0.50 percent on undisbursed loan balances, beginning 60 days after signing, less any waiver Onlending Terms: Loan: 20 years, including 5 years of grace, onlent from the Borrower through the provinces to the project enterprises at interest rates no less than the prevailing rates for Agricultural Development Bank of China loans for similar purposes Credit: 20 years, including 6 years of grace, at 2.00 percent annual interest rate Financing Plan: See Schedule A Economic Rate of Return: 36 percent overall Staff Appraisal Report: Report No. 13968-CHA Map: IBRD No. 26524 Project ID Number: CN-PA-3639 This document has a restricted distribution and may be used by recipients only in the perfonnance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN AND A PROPOSED CREDIT TO THE PEOPLE'S REPUBLIC OF CHINA FOR A SOUTHWEST POVERTY REDUCTION PROJECT 1. I submit for your approval the following memorandum and recommendation on a proposed loan of $47.5 million and a proposed credit of SDR 128.6 million ($200 million equivalent) to the People's Republic of China to help finance a Southwest Poverty Reduction Project. The loan would be at the Bank's standard variable interest rate, with a maturity of 20 years, including 5 years of grace. The credit would be on standard IDA terms with 35 years' maturity. The proceeds of the loan would be onlent to project entities at rates no less than the prevailing rates for Agricultural Development Bank of China loans for similar purposes with repayment in 20 years, including 5 years of grace. The proceeds of the credit would be onlent to the provincial and county governments of Guangxi, Guizhou and Yunnan and the central government's Leading Group for Poverty Reduction (LGPR) for 20 years, including 6 years of grace, with interest at 2.0 percent per year. The foreign exchange risk would be borne by the provinces of Guangxi, Guizhou and Yunnan for their respective components. 2. Sector Background. Broad participation in reform-driven rural economic growth brought about a tremendous reduction in absolute poverty in China from roughly 270 million poor in 1978 to about 100 million in 1985, or from one third to less than one tenth of total population. Despite continued rapid overall economic growth and strong government commitment to poverty reduction, the proportion of total population living in absolute poverty has declined only slightly since 1985. Most of China's remaining absolute poor are now concentrated in remote resource-deficient rural areas-primarily in upland regions of the interior provinces of northern, northwestern and southwestern China -where they typically comprise entire communities. The very poorest households in these communities are those further disadvantaged by high dependency ratios, ill health and other difficulties. Minority peoples are heavily overrepresented among the rural poor. Although the absolute poor have land use rights, as do all of China's rural population, in most cases the land itself is of such low quality that even subsistence levels of crop production are generally not possible. Achieving simple productivity gains on these rainfed uplands, through increased application of fertilizer, better seed and other modern inputs, has proven problematic, and the number of the absolute poor now exceeds the carrying capacity of the land. Furthermore, since these are in many cases some of China's most ecologically fragile lands, the poor are often both the perpetrators and victims of upland environmental destruction.  3. About 25 million of China's remaining absolute poor reside in the remote upland areas of the southwestern provinces of Guangxi, Guizhou and Yunnan. Absent meaningful levels of agricultural growth and rural enterprise development during the 1980s, per capita output of grain and subsistence foods did not increase, and off-farm employment opportunities have little more than kept pace with population growth. The provision of social services also stagnated in these areas, and education achievement and health status remains deplorable. At least half of the boys in the poorest towns and villages and, particularly in some minority areas, nearly all of the girls do not attend school and will not achieve literacy. Infant mortality rates in the poorest townships and villages exceed 10 percent, and are about triple the national average. Incidence of several infectious and endemic diseases, including tuberculosis and iodine deficiency disorders, are also prevalent in these areas. About half of children in households at or below the absolute poverty line are at least mildly malnourished (stunted), and iron, vitamin A, and other micronutrient deficiencies remain a severe problem. As many as 90 percent of poor children suffer chronic intestinal worm infection. 4. Labor market liberalization in China, spurred by strong economic growth and reduced constraints to internal travel and change of residency, has led to unprecedented labor mobility by at least 70 million migrants in a total rural labor force of 440 million. For those who have been able to participate in the local and interprovincial migration for employment process, the income rewards have been substantial, due to the enormous wage rate differential for low-skill levels. However, the absolute poor in upland areas have not been able to fully take part in the labor migration process due to (a) labor market imperfections such as the lack of labor market information, (b) the poor's paucity of even rudimentary knowledge and skills required for obtaining employment in growth pole areas, and (c) inadequate financial resources to cover the initial expenses of a job search. 5. The government's poverty reduction program was established in 1986 and is coordinated by the State Council's LGPR and the central and provincial Poor Area Development Offices (PADO). LGPR is the principal advocate of China's rural poor, and in 1994 issued a new National Seven-Year Plan for Poverty Reduction (8-7 Plan) to achieve further reductions in poverty. The 8-7 Plan recognizes that the transition and significant reduction of absolute poverty, from large numbers of poor spread widely across the countryside in the late 1970s to pockets of poverty in remote resource-deficient areas by the mid-1980s, makes it easier and fiscally less burdensome to target increased development and social services assistance to the remaining absolute poor. In near complete agreement with the World Bank's 1992 report China: Strategies for Reducing Poverty in the 1990s, the 8-7 Plan calls for: (a) institution building and policy reform, including a strengthening of the institutions responsible for implementing explicit poverty alleviation projects and programs, the establishment of an independent and objective poverty monitoring system, the concentration of available funding in the poorest counties (a number of relatively well-off counties and provinces will be "graduated" from the poverty reduction program);  -3- (b) greater investment in the development of human capital, including more central government funding for health, nutrition, education, and relief services in the poorest areas; (c) promotion of labor mobility strategies to encourage the organized flow of low-skill labor from the poor areas to growth pole areas; and (d) continued investment in poor-area agricultural, rural enterprise, road and other rural infrastructure development projects. 6. Lessons Learned from Previous Bank Group Operations. The Bank's experience with a large number of multisectoral rural-development-cum-poverty-alleviation projects has not been entirely successful in terms of impact or sustainability. An extensive review by the Bank's Operations and Evaluation Department (OED) of two decades of Bank experience with rural development projects documents that the complexity of project implementation and problems with institutional coordination have been the principal causes of mixed results. Recognizing that these institutional difficulties are inherent to multisectoral projects, the OED analysis favors the approach of "implementing separate project components in different ministries as though they were separate projects, but with a coordinating unit located in a nonsector ministry such as Planning or the President's Office" and emphasizes the importance of long-term institution building. The OED report also highlights the importance of (a) strong government commitment to the project and a favorable macroeconomic environment, (b) relying primarily on locally proven technical innovations (the results of research and trials were often not available in time to have an impact on concurrent projects), (c) retaining flexibility in program design during implementation, (d) supplementing the Bank's own inputs, during design and supervision, to cover the full range of skills required by a multisectoral project, (e) a comprehensive monitoring and evaluation process, and (f) full community participation. These lessons are fully reflected in the design of the proposed project. In particular, LGPR, which is a nonsectoral office of the State Council, would be responsible for coordinating project design and monitoring implementation. The project also enjoys strong government support and a favorable macroeconomic environment, relies primarily on an integrated package of proven technologies, and would establish a comprehensive monitoring and evaluation process. Community participation has been achieved through a process of detailed consultation in upland communities involving village leaders, a sample of the poorest households, village teachers, health practitioners and other members of the community. During project preparation, an independent field investigation in Guangxi and Guizhou by a cultural anthropologist led to suggestions regarding health, education and labor mobility component design and implementation, and these were incorporated into specific component activities. Nongovemmental organization staff also participated in project preparation missions and advised on community participation in project design and implementation. 7. The proposed project also builds on lessons from recent Bank loans to China in the health, education, agriculture and rural infrastructure sectors. For social services, specific lessons include the importance of increasing access to existing rural facilities,  - 4 - improving the skills of teachers and health providers, establishing reliable financing mechanisms, and upgrading bilingual education in minority areas. In agriculture, the experience of earlier Bank-supported projects suggests the need for greater emphasis on crop diversification and marketing in order to avoid the risk of oversupply, and to enhance sustainability by assigning responsibility for project management to existing institutions (suitably strengthened). Since the Bank has very little experience with labor mobility projects, the project builds on lessons from the Chinese Ministry of Labor's recent experience in this area, ongoing rural research work, and a wide range of counterpart and village interviews. 8. Project Objectives. The primary objectives of the project are to: (a) demonstrate the effectiveness of a focused rural development project approach to poverty reduction, (b) facilitate a "market-friendly" increase in labor mobility from the poor areas to better off rural and rapidly growing urban areas, (c) upgrade poverty monitoring at the national and local levels, and (d) significantly reduce absolute poverty in 35 of the very poorest counties in southwestern China. 9. Rationale for Bank Involvement. The proposed project is consistent with the Country Assistance Strategy discussed by the Board in August 1993 and the one that will be discussed by the Board on June 1, 1995, in that it directly addresses two of the Bank's top operational priorities in China, viz., poverty reduction and environmental protection. Through the Bank's report on poverty in China (para. 5) and the "International Conference on Poverty Issues in China" (held in Beijing immediately after the public release of that report), close collaboration with the Chinese government has been established and the Bank has played an active role in the development of the new national strategy for reducing absolute poverty in the 1990s. Bank participation in the project will greatly assist the operationalization of the Government's 8-7 Plan and it is expected that, if successful, the Bank-supported project will become the prototype for extension to the remainder of China's poor areas and the overall poverty reduction program. Bank involvement in the project (a) will also play a catalytic function in the establishment of an independent, national-level poverty monitoring system, and (b) is helping to focus the project's land and farmer development component toward the development and provision of an integrated package of environmentally sound and farmer-determined technologies for more productive upland agriculture. 10. Concept and Description. The proposed Southwest Poverty Reduction Project would be a focused, participatory, multisectoral attack on absolute poverty in an extremely resource-deficient area-covering the worst affected upland areas of Guangxi, Guizhou and Yunnan in southwest China-where previous single-sector actions have not led to sustainable reductions in poverty. Key components of the project are: (a) land and farmer development (30 percent of project costs), using menus of crop and livestock activities to increase upland agricultural productivity and reverse the trend of environmental degradation through (i) extension of improved agriculture and smallholder livestock management techniques and inputs, (ii) establishment of tree crop nurseries and extension (for high-  - 5 - altitude and red-soil varieties), (iii) intensification of staple crop production on the modest amount of available flat land, (iv) terracing for improved water and soil conservation, and (v) the incorporation of provincial research institute findings; (b) off-farm employment (45 percent of project costs), through (i) a voluntary system of enhanced rural labor mobility for the upland absolute poor, supported by skills training, a computerized demand-driven placement system emphasizing local markets, monitoring of worker safety, prevention and resolution of abuses, and provision of financial resources to cover initial job search costs; (ii) support for township and village enterprises (TVE) consisting of investment credit for labor-intensive commercially viable agroprocessing, mineral, service and handicraft industries with strong backward linkages to poor households and environmental safeguards meeting national standards; and (iii) the Guangxi municipal employment development subcomponent, which would support a poverty reduction enterprise development zone for labor-intensive industries, unsubsidized low-cost housing schemes (including slum improvement and dormitory construction for migrant workers), mariculture, agriculture, and fast-growing tree plantations in Guangxi's Beihai, Nanning and Fangcheng municipalities; (c) social services and rural infrastructure (22 percent of project costs), through (i) upgrading township and village health clinics and primary schools and the training of health workers and teachers, (ii) the development of mechanisms to insure sustainable access to these social services by the absolute poor, and (iii) the construction of rural roads, safe drinking water supply systems, small-scale irrigation, drainage, biogas, and rural electrification; and (d) institution building and poverty monitoring (3 percent of project cost), by (i) improving LGPR's and PADOs' capabilities in poverty project design and implementation, procurement, accounting, and monitoring and evaluation; and (ii) establishing an objective poverty monitoring system by using improved survey instruments to provide a credible and comprehensive poverty profile for the project areas, analyze the accuracy of the targeting of benefits to the absolute poor, and measure and evaluate the impact of the project's individual components. 11. Project Implementation. LGPR and its World Bank Project Office have principal responsibility for project design and implementation. At the provincial level, Project Leading Groups (PLGs) have been set up to (a) mobilize institutional, technical and financial resources and support for the preparation and implementation of the project and (b) provide a critical coordination and monitoring function. In addition, provincial Project Management Offices (PMOs), comprising PADO staff and an increasing number of specialized staff from outside the LGPR system, have been established to ensure effective and timely preparation and implementation of the project. It has also been agreed that,  - 6 - under the general supervision of the provincial PMOs, the provincial Education, Health, and Labor bureaus would play leading roles in the implementation of the social services and labor mobility components. At the county level, PMOs have been established and have played the lead role in organizing the preparation of the county and subproject feasibility studies. Working closely with the several technical bureaus directly involved in the project and with the township governments and their offices at the administrative village level, the county PMOs would also take the lead role in coordinating project implementation. County PLGs have been set up to secure coordination among the technical bureaus. 12. Project Cost and Financing. The estimated project cost totals $486.4 million equivalent, with a foreign exchange component of $145.9 million equivalent (30 percent). The Bank Group would finance $47.5 million equivalent and SDR 128.6 million ($200 million equivalent), covering all of the foreign exchange costs and about 30 percent of local costs. To allow rapid start-up of work under the project's social services, labor mobility, land and farmer development, and institution-building components, retroactive financing of up to $24.75 million has been recommended to cover expenditures for these items incurred between January 1, 1995 and the date of signing of the Loan and Credit Agreements. A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement, and the disbursement 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. A map is also attached. The Staff Appraisal Report, No. 13968-CHA dated May 18, 1995, is being distributed separately. 13. Project Sustainability. Based on the development of improved extension services, the selection of a wide range of appropriate crop varieties and livestock breeds, and the improvement of research capabilities that will support project activities, the land and farmer development component is likely to be sustainable. Activities supporting off- farm employment will be sustainable through (a) the emphasis on labor mobility cost- recovery, (b) TVE selection based on commercial viability, and (c) the provision of training to county and provincial Labor Bureau staff. Improved education and health services will be sustainable since the increases in household income levels brought about through the project will be sufficient to allow for the gradual phase-out of the initial subsidies for the recurrent costs under the social services component. Institutional sustainability is addressed through a comprehensive program of technical assistance, training, and study tours to strengthen existing capacity and ensure development of long- term capabilities. The ability to monitor poverty is sustainable, and will increase over time through the development of enhanced survey instruments. 14. Agreed Actions. The principal assurances agreed with the Borrower at negotiations were that: (a) tuition fees would be provided for approximately 90,000 children per year, and cooperative health care funds would be established and adequately funded in all project villages, (b) project farmers would receive exclusive land use rights for a term of not less than 50 years for wastelands and other lands they plant to perennial crops under the project, (c) labor mobility would be undertaken only on a strictly voluntary basis, and that an adequate monitoring and reporting system, focusing on fair treatment of  - 7 - workers and workplace safety, would be finalized and implemented; and (d) to achieve the necessary flexibility in project design and implementation, a full mid-term review would be undertaken in 1997. In addition, Beihai, Nanning and Fangcheng municipalities would obtain commitments from all participating project enterprises that at least 70 percent of the full-time jobs created in those enterprises would be provided to the absolute poor from the project's upland counties. 15. Environmental Aspects. This is a Category B project and, overall, the project is expected to have a favorable environmental impact. In particular, the land and farmer development component focuses on improving productivity through reversing upland environmental destruction. Potential minor environmental issues arise from changes in land use practices, the development of small-scale enterprises, and the construction of rural roads and other small-scale rural infrastructure. The labor mobility component also raises several social issues. LGPR has commissioned an Environmental Management and Mitigation Plan that identifies environmental issues and defines necessary mitigation measures. These necessary mitigation measures comprise known and proven engineering and technical solutions, and are covenanted under the project. In addition, the labor mobility component has been subjected to careful social and anthropological review, and an effective monitoring system would be established under the project to guarantee migrant workers' rights and job safety. 16. Project Benefits. The project would significantly reduce absolute poverty in 35 of the very poorest counties in southwestern China by increasing the incomes and productivity and improving the health and educational status of about 2.8 million upland smallholders. It would also demonstrate the effectiveness of a comprehensive rural development project approach to poverty reduction, stabilize or even reverse the environmental destruction of upland areas, upgrade poverty monitoring at the national and local levels, and encourage greater local community participation by enabling households to make key decisions during implementation. Project components with quantifiable benefits, including the land and farmer development, labor mobility, and TVE development activities, have an overall estimated rate of return of 36 percent. 17. Risks. The project addresses problems of chronic absolute poverty and natural resource degradation in an area where previous single-sector interventions have not led to sustainable reductions in poverty. The greatest strength of the project-its focused multisectoral rural development approach--comes at the inherent cost of greater than average complexity and greater difficulties in implementation. This risk was acknowledged prior to the outset of project preparation, and has been effectively countered by (a) the project's unique organizational and management structure, which features an existing, relatively powerful national network of committed antipoverty agencies, (b) a strong institution and implementation capacity-building program, and (c) the full involvement of the beneficiaries and village communities in the design and implementation of the project. In addition, the project relies on an integrated package of proven technologies and interventions. County-level governments, where leadership required for effective implementation is more sustainable due to the local importance of the project, have extensive experience with these technologies and interventions.  - 8 - 18. Individual components also face specific risks. The land and farmer development component faces a risk of slower-than-expected adoption of improved farming techniques, which would result in a slower rate of economic and environmental benefits. However, the project's package of improved farming techniques would (a) require only limited cash inputs, (b) be integrated with existing farming practices and be supported by stronger extension services, and (c) be introduced, in some cases, on a pilot basis. The labor mobility and TVE components face three risks: (a) inadequate institutional coordination, (b) sudden market changes, and (c) insufficient worker safety monitoring. A pilot phase, and the participation of the All-China Women's Federation on a consultative body of key government agencies, would address these problems effectively. Most TVE products are intended for use in growing local and provincial markets, minimizing commercial risks. 19. Recommendation. I am satisfied that the proposed loan and credit would comply with the Articles of Agreement of the Bank and the Association and recommend that the Executive Directors approve the proposed loan and credit. Richard H. Frank President ad interim Washington, D.C. May 18, 1995 Attachments  - 9 - Schedule A CHINA SOUTHWEST POVERTY REDUCTION PROJECT EsMATED COSTS AND FINANCNG PLAN ($ million) Local Foreign Total Estimated Project Cost Social Services 31.8 13.6 45.4 Labor Mobility 31.7 13.6 45.3 Rural Infrastructure 27.3 11.7 39.0 Land & Farmer Development 78.4 33.6 111.9 TVE Development 37.8 16.2 53.9 Institution Building 4.4 1.9 6.3 Project & Poverty Monitoring 3.9 1.7 5.5 Guangxi Employment Development 47.2 20.2 67.4 Base Cost 262.4 112.5 374.9 Physical contingencies 14.0 6.0 20.0 Price contingencies 64.0 27.4 91.5 Total Project Cost 340.5 145.9 486.4 Financing Plan Central Government 50.0 0.0 50.0 Provincial/Local Governments 188.9 0.0 188.9 IBRD/IDA 101.6 145.9 247.5 Total 340.5 145.9 486.4   - 10 - Schedule B Page 1 CHINA SOUTHWEST POVERTY REDUCTION PROJECT SUMMARY OF PROPOSED PROCUREMENT ARRANGEMENTS /a ($ million) Procurement Method ICB NCB Other/b NBGFIc Total Cost Land Acquisition - - - 12.1 12.1 (0.0) Civil Works - 70.0 50.9 - 120.9 (24.3) (10.6) (34.9) Crop Establishment - - 74.7 - 74.7 (14.7) (14.7) Livestock Maintenance - - 15.6 - 15.6 (3.1) (3.1) Equipment 4.3 27.1 18.0 - 49.4 (4.3) (20.3) (13.5) (38.1) Vehicles 11.9 - - - 11.9 (11.9) (11.9) Construction Materials 5.7 15.9 0.6 - 22.2 (5.7) (11.9) (0.5) (18.1) Agricultural Inputs 20.3 1.5 5.0 - 26.7 (20.3) (1.1) (3.7) (25.1) Breeding Stock - 28.5 4.9 - 33.4 (21.4) (3.7) (25.0) Tuition & Medical Assistance - - 17.0 3.3 20.3 (17.0) (17.0) Labor Training & Placement - - 51.2 - 51.2 (35.8) (35.8) Research, Training & TA - - 29.9 - 29.9 (21.4) (21.4) Others - - 4.6 13.4 18.0 (2.3) (2.3) Total 42.1 143.0 272.6 28.8 486.4 (42.1) (79.0) (126.4) (0.0 (247.5) /a Figures in parentheses are the respective amounts financed by the Bank Group. /b Includes small contracts, force account, international shopping, etc. /c Not financed by the Bank Group.  - 11 - Schedule B Page 2 DLSBURSEMENTS Amount of the Loan/ Percentage of Expenditure Category Credit Allocated to be Financed Works, Crop Establishment, and Livestock Maintenance 31.4 20% of total expenditure Works for the Guangxi Employment Development Subcomponent 21.3 55% of total expenditure Goods 115.4 100% of foreign expenditures; 100% of local expenditures (ex- factory), 75 % for goods procured locally Tuition Assistance and Medical Assistance 17.0 100% of total expenditures Labor Training & Placement 35.9 70% of total expenditures Training & Services 13.8 100% of total expenditures Research 7.7 50% of total expenditures Project Management 2.3 50% of total expenditures Unallocated 2.7 Total 247.5 ESTIMATED DISBURSEMENTS Bank/IDA FY 1996 1997 1998 1999 2000 2001 ---------------------------------($ million) ---------------------------------- Annual 25 49 50 49 50 25 Cumulative 25 74 124 173 223 248  - 12 - Schedule C CHINA SOUTHWEST POVERTY REDUCTION PROJECT TIMETABLE OF KEY PROJECT PROCESSING EVENTS (a) Time taken to prepare the project: 28 months (b) Prepared by: Central, Provincial and Local Governments, with the assistance of foreign and local consultants and the Bank Group (c) First Bank mission: July 1993 (d) Appraisal mission departure: November 1994 (e) Negotiations: April 1995 (f) Planned date of effectiveness: October 1995 (g) List of relevant PCRs and PPARs: Credit/Loan No. Project PCR Date PPAR No. Cr. 1733-CHA Red Soils I 02/24/93 12033 Cr. 2611-COL Health Services Integrated 09/30/94 n.a. Cr. 1244-NIC Second Education 12/01/83 n.a. This report is based on the findings of an identification, two preparation, a preappraisal, and an appraisal mission during the period July 1993 to December 1994. The report was prepared by: Messrs./Mmes. A. Piazza (Economist/Task Manager), P. Stott (Senior Municipal Engineer), J. Goldberg (Division Chief, Agriculture), J. Shi (Procurement; RMC), M. Goldberg (Microenterprise, Financial Institutions, and Labor Mobility), M. Bi (Economist), E. Liang (Economist), 0. Sacay (Financial Institutions), R. Zweig (Aquaculture), C. Saint-Pierre (Agronomist), R. Glencross (Agronomist), R. Yip (Public Health and Nutrition; CDC), C.L. Cheong (Engineer), N. Menzies (Resource Economist; Ford Foundation, Beijing), E. Leman (Urban Planner), K. Rippen (Urban Engineer), R. Weller (Anthropologist), L. Chen (Aquaculture), R. Chisholm (Soil Scientist), R. Staples (Economist; CARE Australia), and J. Remenyi (Financial Institutions). Ms. C. Lucas (Health Economist) participated in the preparation of the report in Washington. Peer reviewers are E. Jimenez (PRDPH), J. Socknat (ASTHR), H. Ribe (AF6HR), and H. Beemer (EA2HR). The preparation team gratefully acknowledges the strong support of a Japan: Policy and Human Resources Development Fund grant, without which the preparation of this complex and innovative project would have been extremely difficult. The Task Manager is Alan Piazza, the Division Chief is Joseph Goldberg, and the Department Director is Nicholas C. Hope.   - 13 - 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.Ca) 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  - 14 - Schedule D Page 2 of 3 Loan/ Amount (USS million) Credit Bor- (net of cancetlations) 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 II 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.  - 15 - 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 Comnitments 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   IBRD 26524 MONGOLIA - ,30 l ,/13 CHINA 112 30- Th,,> t '-G VDet, 7heb-undsholes.-olo-s.,enohm /SOUTHWEST POVERTY REDUCTION PROJECT 'nd ony odrer n hormot-on showon To Wohon _ re1 AC