China - Northern Irrigation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 17996 IMPLEMENTATION COMPLETION REPORT CHINA NORTHERN IRRIGATION PROJECT (CREDIT 1885-CHA) June 2, 1998 Rural Development and Natural Resources Sector Unit East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Yuan (Y) Y 1.00 = US$0.121 (1998) 1987 (Appraisal) US$1 = Y 3,71 1988 US$1 = Y 3.71 1989 US$1 = Y 3.71 1990 US$1 = Y 4.72 1991 US$1 = Y 5.22 1992 US$1 = Y 5.38 1993 US$1 = Y 5.45 1994 US$1 = Y 8.70 1995 US$1 = Y 8.31 1996 US$1 = Y 8.30 1997 US$1 = Y 8.27 1998 US$1 = Y 8.27 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS ERR - Economic Rate of Return ICB - International Competitive Bidding ICR - Implementation Completion Report NCB - National Competitive Bidding O&M - Operation and Maintenance PMO - Project Management Office SAR - Staff Appraisal Report VHF - Very High Frequency Vice President Jean-Michel Severino, EAPVP Sector Manager Geoffrey Fox, EASRD Country Director Yukon Huang, EACCF Task Manager Lang S. Tay, Consultant, EASRD  . . . FOR OFFICIAL USE ONLY - 111 - CONTENTS PREFACE ........................................... iv EVALUATION SUMMARY ............................................v PART I: PROJECT IMPLEMENTATION ASSESSMENT ..................................9 A. Project Objectives and Description ............................................9 B. Achievement of Project Objectives ........................................... 10 C. Project Impact ........................................... 17 D. Major Factors Affecting the Project ........................................... 18 E. Project Sustainability ..........................: 19 F. IDA Performance ......................... 20 G. Borrower Performance ......................... 20 H. Future Operation ......................... 20 I. Assessment of Outcome ......................... 21 J. Key Lessons Learned ......................... 21 PART II: STATISTICAL TABLES ......................... 23 Table 1: Summary of Assessments ...................................................... 23 Table 2: Related Bank Group Loans/Credits ................................................. 24 Table 3: Project Timetable ...................................................... 25 Table 4: Loan/Credit Disbursement: Cumulative Estimate and Actual ........ 25 Table 5a: Key Indicators for Project Implementation ..................................... 26 Table 5b: Key Indicators for Project Implementation ..................................... 27 Table 6a: Key Indicators for Project Operations ............................................. 28 Table 6b: Key Indicators For Project Operations ............................................ 29 Table 7: Studies Included in Project ...................................................... 30 Table 8a: Project Costs ...................................................... 31 Table 8b: Project Financing ...................................................... 32 Table 9: Economic Costs and Benefits ...................................................... 33 Table 10: Status of Legal Covenants ...................................................... 34 Table 11: Compliance with Operational Manual Statements .......................... 35 Table 12: IDA Resources: Staff Inputs (All Components) .............................. 35 Table 13: IDA Resources: Missions ...................................................... 35 ANNEX A: BORROWER'S CONTRIBUTION TO THE ICR ............................ 37 ANNEX B: ICR MISSION'S AIDE MEMOIRE .................................................... 38 ANNEX C: BORROWER'S COMMENTS ...................................................... 46 This document has a restricted distribution and may be used by recipients only in the perforanance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - iv - IMPLEMENTATION COMPLETION REPORT CHINA NORTHERN IRRIGATION PROJECT CREDIT 1885-CHA PREFACE This is the Implementation Completion Report (ICR) for the Northern Irrigation Development Project in China, for which a credit in the amount of SDR 72.7 million (US$103 million equivalent) was approved on March 22, 1988 and made effective on January 9, 1989. The credit was closed on December 31, 1997, 22 months beyond the date originally envisioned, as a result of delays with project procurement. The credit was completely disbursed and the final credit disbursement took place on March 30, 1998. The ICR was prepared by missions comprising Lang S. Tay (Task Manager) and Qun Li (Consultant Economist) of Rural Development and Natural Resources Sector Unit (EASRD), East Asia and Pacific Region. The Report was reviewed by Richard Scobey, China Country Coordinator, EASRD and Geoffrey Fox, Sector Manager, EASRD. The Borrower provided comments, which are included as Annexes A and C to the ICR. Preparation of the ICR was completed following the various IDA ICR missions, and is based on materials in the project files and meetings with project staff in the field. The Borrower contributed with views and data requested, its own evaluation of project's execution, and comments on the draft ICR.  v - CHINA NORTHERN IRRIGATION PROJECT CREDIT 1885-CHA EVALUATION SUMMARY Project Objectives 1. The main objectives of the project were to increase the efficiency and profitability of agricultural production in Inner Mongolia Autonomous Region and to alleviate absolute poverty in Ningxia Hui Autonomous Region. These objectives were achieved through: (a) rehabilitation and completion of irrigation and drainage facilities on 210,000 hectares (ha) of existing low-yielding cropland in Hetao Irrigation Area of Inner Mongolia, complemented by agricultural support services of production inputs and extension services; and (b) upgrading and completing irrigation and drainage works on existing 22,000 ha and developing new irrigated land of 14,200 ha in Ningxia, and land settlement of 11,000 poor families on the newly developed irrigated land, complete with infrastructure and basic social services. 2. The Hetao Component in Inner Mongolia consisted of improvement of 210,000 ha of irrigated area through canal/drain system construction and improvement, including construction of canal structures, canal lining, pumping stations and provision of machinery and equipment for improved operation and maintenance. The component also included agricultural support inputs and strengthened extension services, staff training and technical assistance to strengthen soil and water management. 3. The Yinnan Component in Ningxia consisted of construction and improvement of a total of 36,200 ha of irrigation area through canal system construction and improvement, provision of machinery and equipment for improved system operation and maintenance, and staff training and technical assistance to upgrade technical and management skills. The component also included resettlement of 11,000 poor farm households on 14,200 ha of newly developed irrigated land, complete with basic infrastructure and social services, and a prefeasibility study for the development of Yinbei Irrigation Area covering some 130,000 ha of existing cultivated land and another 100,000 ha for potential irrigation development and land settlement. Implementation Experience and Results 4. The two project components(Hetao and Yinnan) were successfully completed. The Yinnan Component, completed on schedule, exceeded its original physical targets, especially the improvement and development of irrigation areas and the resettlement of  - V1- poor farm families on the newly irrigated land. The Hetao Component, substantially completed by the end of 1994, was extended for two years to complete some of its outstanding on-farm work and the installation of a water management monitoring system on the Trunk Canal. Due to inflation and progressive depreciation of the Yuan against the US dollar, the total project cost on completion was 17.3 percent or Y 170.4 million higher than the SAR estimate of Y 983.1 million. However, expressed in US dollars, the total project cost was 9.2 percent or US$21.6 million lower than the original SAR estimated cost of US$243.3 million. Counterpart funding for the project was somewhat constrained initially, and continued to be a minor problem for several years. However, overall, counterpart funding was considered satisfactory. 5. On irrigation improvement and development, both components completed their respective physical construction and achieved the target areas. The Hetao Component completed improvement of the proposed 210,000 ha under eight main canal command areas, including improvement of the 230-km Trunk Canal and the 202-km Trunk Drain and construction of a new 100 cubic meter per second (m3/s) drainage pumping station at the downstream end of the Trunk Drain. The Yinnan Component completed improvement and development of a total of 36,253 ha, 100.1 percent of SAR estimate, of irrigation areas (14,351 ha new and 21,902 ha improvement) in the four project irrigation areas. Many of the work quantities have exceeded the SAR estimates. 6. IDA's performance in project preparation, supervision and management was considered adequate and satisfactory. This was partly facilitated by the Borrower's adequate project preparation and well-managed implementation and partly by continuity of IDA staff in the project preparation and supervision. Both the regional governments also took great interest and commitment in their respective project components. In particular, Ningxia implemented successfully the resettlement program of 11,287 poor households on the newly developed irrigated land as a long-term regional government intervention to reduce absolute poverty among the poor residing in the arid mountainous areas. Summary of Findings, Future Operations, and Key Lessons Learned 7. Overall Finding. The project's overall outcome is "Satisfactory" with the Yinnan Component rated as "Highly Satisfactory" and Hetao Component as "Satisfactory" due to the latter two-year delay in completing the water management monitoring system on the Trunk Canal. Both the components achieved the targets on irrigation area improvement and development, the main thrust of the project. However, the most significant result achieved was the resettlement of 11,287 poor households from the arid mountain areas in Ningxia on the newly developed 14,350 ha irrigated land. Absolute poverty prior to resettlement had been practically eradicated and replaced with higher incomes and a better quality of life. Agricultural production in both components had increased as projected, providing higher incomes to the project beneficiaries. The average income per capita increased by 264 percent from Y 576 to Y 2,097 in the Hetao Component. The average income for new settlers under the resettlement program of Ningxia Component  - vii - was even more remarkable at 352 percent from Y 325 to Y 1,469. The overall economic rate of return (ERR) for the project was 28.9 percent compared to 20 percent estimated at appraisal. 8. Project Impacts. The Ningxia Component has transformed some 14,350 ha of desert wasteland into sustainable irrigated cropland, served by a network of roads, 6 new townships and 30 settlement villages, supporting a population of about 54,384 people. The new settlement areas have become new centers of growth of rural economy and socioeconomic activities that, in turn, had provided indirect benefits to some 100,000 farmers residing in 17 adjoining township areas through the agricultural support services and social services completed under the project. The resettlement of poor households has also relieved pressure on the environmentally degraded land in the old villages where the settlers came from. With reduced population, the old villages could now manage the resource-poor land more rationally, with financial support remitted by the resettled farmers who have now more incomes. In the Hetao Component, the high water table levels, primary causes for waterlogging and secondary soil sanitation, have now been controlled and lowered, and the soil salinity progressively reduced through the comprehensive drainage system constructed and better irrigation management achieved. This has led to increasing productivity of the land in the project area as monitored by the 42 soil/water and 21 groundwater level monitoring stations. The potential increase in the salinity level in the Wuliangsuhai Lake will continue to be monitored for the long-term impact. The increased food crop production in the two component areas had provided substantial increase in crop residues and dry matters, which, in turn, spurred expansion of livestock and increased production of livestock products, providing additional income to project beneficiaries. 9. Sustainability. The project is "Likely Sustainable." The project was well- prepared and constructed to the desired designs and standards. An operation and maintenance (O&M) system for the completed works has also been in place. Agricultural production and yields have reached, or exceeded in some cases, the targets projected and would be sustained through the agricultural support services in place. The settlers in the new settlement areas are determined and dedicated to achieving a better standard of living. Finally, although the project has been completed, the two regional governments are committed to supporting the project through strong incentives for agricultural production and additional financial resources for infrastructure and social services. 10. Future Operations. Future operations prepared by both the regional governments include: (a) strengthening the township governments and village administrative units in the new settlement areas with available resources to guide and organize new settlers in large-scale agricultural production (Yinnan Component); (b) continuing promoting and disseminating new production technologies, based on the results of research and scientific studies, through extension, demonstrations, and contracting with farmers for maximum production and returns, including rationalizing cropping patterns geared to market demands (both components); (c) collecting irrigation water charges, with appropriate increases, from project beneficiaries to meet the full annual O&M costs (both  - viii - components); and (d) continuing the soil/water monitoring in the project area and the salinity level monitoring in the Wuliangsuhai Lake for their long-term impacts, and establishing the Wuliangsuhai Lake Basin Management Commission to exercise overall management of the water resources in the lake, including control of water pollution by urban centers and small local industries (Hetao Component). 11. Lessons Learned. The key lessons learned include: (a) poverty reduction through land settlement is a viable long-term intervention when planned and executed systematically; (b) successful land settlement requires careful selection of settlers based on well-informed process, suitable settlement sites, provision of essential basic infrastructure and social services, and government preferential policy incentives and support in the initial years of settlement; (c) appropriate cost recovery policy over a reasonable period from settlers will induce a sense of responsibility and obligation to succeed in the new environment; (d) water-saving technologies should be used in irrigation areas supplied with multistage pumping of water at a high cost so as to maximize the economic return and use of water; (e) consultant services provided jointly by foreign and local consultants were economical and efficient, as evident in the planning and design of the Hetao Trunk Canal Water Management Monitoring System; and (f) foreign exchange losses can be minimized by timing procurement of imported goods at the time when foreign exchange rates were stable.  -9 - CHINA NORTHERN IRRIGATION PROJECT (CREDIT 1885-CHA) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. PROJECT OBJECTIVES AND DESCRIPTION 1. The main objectives of the project were to increase the efficiency and profitability of agricultural production in Inner Mongolia Autonomous Region and to alleviate absolute poverty in Ningxia Hui Autonomous Region. These objectives were achieved through: (a) rehabilitation and completion of irrigation and drainage facilities on 210,000 hectares (ha) of existing low-yielding cropland in the Hetao Irrigation Area of Inner Mongolia, complemented by agricultural support services of agricultural inputs and extension services; and (b) upgrading and completing irrigation and drainage works on existing 22,000 ha and developing new irrigated land of 14,200 ha in Ningxia and land settlement of 11,000 poor families on the newly developed irrigated land complete with infrastructure and social services. 2. The main features of the project were as follows: o Hetao Component, Inner Mongolia. (a) Improvement of irrigation and drainage facilities serving 210,000 in four counties of the Hetao Irrigation Area through channel excavation, canal lining, replacement of old canal lining, bridges and control structures, and construction of pumping stations; (b) Improvement of irrigation system operation and maintenance (O&M) through provision of machinery and equipment; (c) Provision of agricultural support inputs and strengthened extension services; and (d) A training and technical assistance program designed to strengthen water management at all levels and to improve soil salinity control and management techniques. * Yinnan Component, Ningxia. (a) Construction and improvement of irrigation and drainage facilities on 36,200 ha in four irrigation areas through channel excavation and installation of control structures, pumping stations and power lines;  - 10- (b) Improvement of irrigation system operation and maintenance through provision of machinery and equipment; (c) Resettlement of 11,000 poor farm families on the newly developed 14,200 ha, including provision of building materials, agricultural inputs and machinery, water supply, electricity, and basic social services; (d) A feasibility study of irrigation and agricultural development in the Yinbei Area including preparation of a development plan to improve 130,000 ha of existing cultivated land and to extend irrigation and drainage facilities to an additional 100,000 ha; and (e) A training and technical assistance program designed to upgrade the technical and managerial skills of the Water Resources Bureau and the Project Management Office staff, and to train new settlers in irrigated agriculture. B. ACHIEVEMENT OF PROJECT OBJECTIVES General 3. The two project components (Hetao and Yinnan) were successfully completed, achieving the desired objectives and results. The Yinnan Component in Ningxia was completed as scheduled with some of the physical targets exceeding the original SAR estimates, especially the improvement and development of irrigation areas and the resettlement of poor farmn families on the newly developed irrigated land. The Hetao Component in Inner Mongolia was virtually completed by the end of 1994 except for some on-farm irrigation works and the Trunk Canal Water Management Monitoring System; the latter was delayed for nearly two years due to the complexity encountered in the procurement process (see para. 17). The total project cost at completion exceeded the original SAR estimates by Y 170.4 million or 17.3 percent expressed in local currency, and reduced by US$21.6 million or 9.2 percent expressed in US dollars due to depreciation of the Yuan against the US dollar over the project implementation period. A breakdown of the two components is as follows: PROJECT COST IN Y/US$ MILLION Y million US$ million SAR Estimate At Completion SAR Estimate At Completion Hetao Component 664.3 729.9 157.2 133.3 Yinnan Component 318.8 423.6 77.1 79.4 Total Project 983.1 1,153.5 234.3 212.7  - 11 - Tables 8A and 8B show the total project costs in Yuan and US dollars estimated at SAR and at completion. Physical Results 4. Irrigation and Drainage.