China - Sichuan Agricultural Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 205 83-CHA IMPLEMENTATION COMPLETION REPORT (24110) ON A CREDIT IN THE AMOUNT OF SDR 107.7 MILLION TO THE PEOPLES REPUBLIC OF CHINA FOR A SICHUAN AGRICULTURAL DEVELOPMENT PROJECT June 23, 2000 Rural Development and Natural Resources Sector Unit East Asia and Pacific Region |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.l  CURRENCY EQUIVALENTS (Exchange Rate Effective As of April 2000) Currency Unit = Yuan (Y) I Yuan = US$ 0.12 US$ 1.00 = Yuan 8.28 FISCAL YEAR Government: January 1 - December 31 ABBREVIATIONS AND ACRONYMS ABC Agricultural Bank of China ACWF All China Women's Federation BAC Branch Arterial canal CAS Country Assistance Strategy ERR Economic Rate of Return FAO/CP FAO/World Bank Cooperative Programme ICB International Competitive Bidding ICR Implementation Completion Report IDA International Development Association IMO Irrigation Management Office MTR Mid-Term Review NCB National Competitive Bidding NPK Nitrogen, Phosphorus and Potash Fertiliser NPV Net Present Value OD Operational Directive OP Operational Manual O&M Operation and Maintenance QAG Quality Assurance Group PLG Project Leading Group PMO Project Management Office PPMO Provincial Project Management Office SAR Staff Appraisal Report SP Shengzhong Project (Irrigation Scheme) SIDD Self-financing Irrigation and Drainage District TCG Technical Consultation Group WB The World Bank WP Wudu Project (Irrigation Scheme) YP Yangjiaba Project (Irrigation Scheme) Vice President: Jemal-ud-din-Kassum, EAPVP Country Manager/Director: Yukon Huang, EACCF Sector Manager/Director: Geoffrey B. Fox, EASRD Task Team Leader/Task Manager: John Stemp/Zhong Tong, EASRD  FOR OFFICIAL USE ONLY PEOPLES REPUBLIC OF CHINA SICHUAN AGRICULTURAL DEVELOPMENT PROJECT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 1 4. Achievement of Objective and Outputs 3 5. Major Factors Affecting Implementation and Outcome 10 6. Sustainability 11 7. Bank and Borrower Performance 12 8. Lessons Learned 13 9. Partner Comments 15 10. Additional Information 15 Annex 1. Key Performance Indicators/Log Frame Matrix 16 Annex 2. Project Costs and Financing 19 Annex 3. Economic Costs and Benefits 21 Annex 4. Bank Inputs 22 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 23 Annex 6. Ratings of Bank and Borrower Performance 24 Annex 7. List of Supporting Documents 25 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.   Project ID: P003561 Project Name: SICHUAN ADP Team Leader: John G. Stemp TL Unit: EASRD ICR Type: Core ICR Report Date: June 23, 2000 1. Project Data Name: SICHUAN ADP I/C/TFNumber: 24110 Country/Department: CHINA Region: East Asia and Pacific Region Sector/subsector: Al - Irrigation & Drainage; AM - Agro-Industry & Marketing; AP - Perennial Crops; VM - Natural Resources Management KEY DATES Original Revised/Actual PCD: 06/28/90 Effective: 10/01/91 10/09/92 Appraisal: 11/05/91 MTR: 03/01/95 03/10/96 Approval: 07/07/92 Closing: 12/31/99 12/31/99 Borrower/Implementing Agency: Peoples Republic of China/Sichuan Province Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum A. Karaosmanoglu Country Manager: Yukon Huang Shahid Javed Burki Sector Manager: Geoffrey B. Fox Joseph Goldberg Team Leader at ICR: Zhong Tong Hoonae Kim ICR Primary Author. John Weatherhogg (FAO) 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: HL Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The project objectives were: * to increase productivity of existing crops, especially rice, by increasing the land under irrigation and by providing a more reliable water supply for drought protection;  * to provide a complementary package of integrated agricultural inputs, support services, adaptive research, training and technical assistance; * to develop operational and maintenance plans and establish policies for the proposed irrigation systems, including the collecting of water charges for full recovery of cperation and maintenance cost; * to expand soil conservation measures and reduce soil and water losses t:o reduce long-term siltation of major rivers, maintain soil fertility, and improve productivity of already eroded areas; * to expand agro-processing activities utilizing locally available raw materials; and * to increase farmers' incomes in selected poor and remote areas where they are less than 50 percent of the national average, with particular emphasis on helping women. The above project objectives were clear and well understood by the implementing agencies. The projects objectives were fully in line with central and provincial policies and strategies as well as the Bank's Country Assistance Strategy. The project had been officially proposed in 1987, some four years before appraisal and the intervening period had given adequate time for a careful assessment of project objectives and the design of appropriate components for their achievement. Design, however, was in the style referred to in China as 'comprehensive agricultural development' with four main components, but no fewer than 24 sub-components covering 26 counties of Nanchong, Mianyang and Guangyuan prefectures in the north and Qianjiang prefecture, originally in the south east corner of Sichuan, but since 1997 under the administration of the Chongqing Autonomous City. This degree of complexity and wide area coverage was highly demanding of project management. The project was identified, prepared and appraised over the period 1987 to 1991 with loan negotiation in April 1992 and credit effectiveness in October 1992. Total project costs were estimated at US$287.6 million, including an IDA credit of US$147 million (SDR 107.7 million). 3.2 Revised Objective: The project's objectives remained unchanged throughout the extended implementation period. The project development objective is to remove key constraints to agricultural productivity in selected poor areas of Sichuan Province and Chongqing Municipality. Outputs to achieve this objective are: (a) Increased reliability and productivity of existing crops through provision of a mrore reliable water supply, and strengthened agricultural supporting services. (b) Expanded soil conservation to improve productivity of already eroded areas, including stabilized soil fertility, increased year round soil cover and reduced river siltation. (c) Increased farmer income through sustainable sericulture and livestock production activities in selected poor and remote areas, with particular emphasis helping poor rural women. (d) Modernized existing agroprocessing facilities and introduction of new technologies, including improved treatment of wastes, and management methods more responsive to market demand rather than raw material supply. 3.3 Original Components: The project had the following components: (a) Irrigation. Design, construction and initiation of operations of the irrigation conveyance systems for the intermediate development phases of three irrigation schemes; the Shengzhong Project (SP), the Wudu Project (WP) and the Yangjiaba Project (YP), and provision of agric.ultural support services within the areas served. -2 -  (b) Soil Conservation. Establishment of two soil conservation demonstration areas and planting paulonia, Chinese toon, other fast growing trees, gall, Chinese alpine rush, and medicinal plants. (c) Income generation. Production of mulberry and silk cocoon with expansion of supporting services, rehabilitation of tea gardens and establishment of livestock production bases for goats, geese and rabbits, combined with planting pastures. (d) Processing. Rehabilitation and expansion of two paper mills and establishment of a rabbit hair spinning mill as well as gallnut, goat and geese processing plants. The components were generally well related to achieving the project's objectives. Although the project had a fairly high degree of complexity and a project area covering some 60,000 km it proved to be within the capacity of the implementing agency. Overall direction was vested in a Project Leading Group (PLG) at the province with subsidiary PLGs at prefectural and county levels. A similar hierarchical structure was developed for Project Management Offices (PMO). Lead responsibility for the multi-agency PMOs rested with the Planning Commission. In general these arrangements worked well, the only significant difficulty being the ability of the more poverty affected prefectures and counties to raise the necessary counterpart finance required. In a similar way the requirement of full cost recovery for soil conservation works undertaken by poor farmers in resource poor locations also led to difficulties. 3.4 Revised Components: At the mid-term review in 1996 there was some adjustment of the project components. The most significant change was to drop the proposals for rehabilitation and extension of the paper mill in Mianyang prefecture and use the funds so released (US$15.8 million) for further development of the Wudu irrigation scheme. Other changes included a reduction of US$1 million funding to the Shengzhong irrigation scheme where development had moved ahead fast and local raising of funds had been more successful than originally planned; marginal increased expenditure (US$0.4 million) on the Yangjiaba irrigation scheme; small increases in the investments for the Shizhu rabbit hair spinning mill and the Xiushan goose processing plant; and dropping of the stone terracing on farmers' land as part of the soil conservation component. 3.5 Quality at Entry: The rating of the project at completion is satisfactory, since the project was fully in line with the Govemment policies and strategy, targeted at one-third of the poverty counties in Sichuan. The project included the financing of a small resettlement component for 157 families displaced as a result of construction of a dam, associated with the Yangjiaba scheme but not included in the project. This was undertaken in conformity with OD 4.20. The project also included establishment of a dam safety panel in line with OP 4.37 and regular environmental monitoring in accordance with Bank guidelines including OP 4.01. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The project has successfully achieved its objectives. Performance in project implementation is generally uniformly successful, but shows some variation from highly successful performance for much of the irrigation system construction, to more marginally satisfactory in the soil conservation component. Implementation performance of the agro-processing component has been successful, although the Pengshui pulp and paper mill investments cannot be at present considered satisfactory. The project objectives and achievements were completely in line with the Government's Ninth Five Year Plan (1996-2000) and with the Country Assistance Strategy (CAS of February 25, 1997) with emphasis on poverty reduction. - 3 -  4.2 Outputs by components: Irrigation Component Net irrigated area developed of some 155,290 ha (against 135,200 ha envisaged at appraisal), represents about 7 percent of the total for Sichuan. In future a further 105,300 ' ha are expected to benefit from the conveyance systems constructed by the project. The Shenzhong, Wudu and Yangjiaba subprojects covering 12 counties within the relatively poor prefectures of Nanchong, Mianyang and Guangyuan have been successfully completed. Also all three schemes provides raw water for domestic and industrial uses.2 Incremental irrigated area in each of the three areas and cost per incremental hectare are set out in the following table. Incremental Area and Cost per Ha. Irrigation Schemes Incremental Area (Ha) Cost er Ha in US$ SAR Estimate At Completion SAR Estimate At Completion Shenazhong Project 70,000 73.340 983 1,100 Wudu Project 61,500 78,200 1,895 2,129 Yangiiaba Project 3,700 3,750 1,524 2,267 Total 135200 155,290 _- Total cost for the irrigation component at completion exceeds the original SAR estimates by Y982 million or 95 percent, or in US dollar terms exceeds by US$64.6 million or 33.8 percent, as shown in the following table: Cost of the Irrigation Component Irrigation Schemes SAR Estimate At Cornletion SAR Estimate At Completion RMB Million US$ Million Shengzhong Project 370.10 594.97 68.79 80.67 I Wudu Project 627.16 1,353.04 116.57 _ 166.50 YangiabaProect 30.33 61.60 5.64 8.50 Total 1,028 2,010 191 255.7 The cost increases are due to the 20,090 ha larger area developed for irrigation than originally planned, higher labor and material prices, inflation, floods in 1998 which damaged parts of the Wudu scheme, delayed procurement of civil works contracts and materials, construction problems encountered during implementation because of geology of the region, inclusion of drainage works, and inadequate provision for physical contingencies (only 10%) at appraisal. Design of the three irrigation conveyance systems is gravity flow with some pumping in mountainous terrain of varying geology. The complexity of the designs and engineering required is impressive. Due to the hilly and sometimes mountainous topography there are more than 170 km of tunnels and over 12 km of aqueducts/siphons down to the branch canal level. Both the Shengzhong and Wudu schemes include pumping covering respectively about 14% and 30% of the incremental irrigated area developed.? The hydraulic and structural designs are based on standards without calculation of optimized designs and although they are generally adequate and appropriate to the local conditions, will require heavy maintenance. With the benefit of hindsight perhaps more could have been done to explore design options, maximize gravity irrigation area and analyze more closely both the geological situation and possible difficulties for construction as well as the costs and benefits of canal lining and pumped irrigation. About 20% of farm and sub-farm ditches serve for both irrigation and drainage. This has the big advantage of saving scarce cropland, but means that the water has to be lifted for irrigation, either by means of a gate, or by blocking off the ditch, or by pumping, or manually. - 4 -  Construction by labor-intensive methods is of good quality and quality testing was regularly carried out during construction. Procurement was generally satisfactory, except for two international competitive bidding (ICB) and a package of five national competitive bidding contracts (NCB) for the Wudu sub-project, where delays in review, amendment and their approval by the Bank delayed the Wudu sub-component by two years. Comparison of experience between Shengzhong and Wudu shows that the former, which relied mainly on contracts giving total responsibility for machinery and material supply generally had fewer problems and less price escalation in individual contracts than was the case in Wudu, where, in some cases equipment and materials were purchased by the project and provided to the contractor. Implementation was generally carried out on schedule, except for the difficulties in the Wudu sub-project due to delays in awarding contracts and the 1998 floods. Following the latter, and at the recommendation of the Bank, increased cross-drainage structures were built. A notable feature of the project has been the excellent coordination between the completion of construction of irrigation infrastructure and its immediate exploitation for irrigated agriculture. Irrigation system operation and maintenance (O&M) is already well developed, although at present the road infrastructure is poor and access to the canals often difficult. Project financed training included workshops on irrigation O&M, hydraulic survey, design, supervision and management, as well as domestic and overseas study tours. Agricultural support services. The project successfully strengthened support services in 12 counties under the three irrigation schemes by 3 county and 109 township agro-technical extension centers and ten seed companies. With research support these have provided effective extension and input supply services to farmers. Total cost of the component, estimated at Y64.5 million at appraisal in fact increased to Y90.9 million, of which roughly half was for purchase of fertilizer and agro-chemicals. The main reasons for the cost increase were higher prices of imported materials and equipment, due to devaluation of the Yuan, general domestic inflation and increase in labor and service costs. " The impact of both improved irrigation and support services has resulted in increased crop yields, outputs and cropping intensities that meet full development appraisal expectations. The main change in the farming system has been to bring into double cropping about 30% of land which was previously kept fallow in the May-September period to conserve water for the subsequent paddy crop. As a result overall cropping intensity has increased from 188% pre-project to in excess of the appraisal estimate of 210%. Crop yields have also substantially increased since 1992 and are currently not far below those achieved on research stationsS virtually all the paddy and rape grown are hybrid and standards of husbandry are generally excellent. There are no identified constraints to input supply and extension is well informed and effective. All farmers use chemical fertilizers and substantial amounts of compost. & Net farm income per capita is estimated to have increased by over 100% in surveyed counties since project inception2' and with assured water supply production risks have greatly diminished. Marginal additional investment in equipment could significantly improve training quality and retums to investment made in buildings, which at present are generally poorly equipped and without modem audio-visual aides. Overall the technical aspects of agricultural production appear excellent except for some seed impurity in wheat populations, probably due to farmers retaining home grown seed for too many years. Extension needs to correct this. Fertilizer and crop chemical imports were about half appraisal expectations due to increase in cost and falling ABC interest rates which made borrowing from the revolving fund unattractive to farmers. Soil conservation component. The main aspect of the component was establishment of a 120 km demonstration area in Guangyuan prefecture and another 45 km in Qianjiang. It aimed at developing an expanded menu of technological options for land management, training a cadre of technical - 5 -  staff and setting up a revolving fund. Re-afforestation/grassing of un-cultivated hillsides and planting various tree species on contours within arable areas have been successful, exceed SAR expectations and have developed into replicable models. However, physical conservation works have been scaled down, especially small conservation works and terracing in Qianjiang. Clearly the cost of land terracing and small conservation works models tested have not proved affordable,; farmers have difficulty repaying loans and as a result the revolving fund is not operational. The lower cost earth terrace model ' combined with a cash tree crop planting on the contour, tested in Chaotin showed most promise as a replicable option. A soil conservation training center has been developed in Guangyuan and a substantial training program of staff and farmers completed. The Center could be significantly improved by modest investment in more modem audio-visual training aides. Agricultural research. The Mianyang Agricultural Research Institute's breeding work for its' mandated crops is impressive. Adoption of research output is quick and significant, for example over 80% of wheat and paddy is planted to new Mianyang series varieties. The Institute has significant income from seed multiplication and sales to seed companies and with a virtual monopoly on hybrid seed production it is able to repay project loans and to finance its' operations. Other research disciplines with less opportunities to generate income have not been able to make full use of research loans available under the project. Of the Y2.2 million provided under the project, only Y1.2 million is reported utilized with research on sericulture, livestock and soil conservation most affected. SAR research allocation was equivalent to about 3% of the total cost of the agricultural services component. Actual expenditure was aboul 1%. By any standards both research allocations and expenditures are very low. In the current situation where irrigation water is no longer a constraint, where land is fully utilized and where farmers are already exploiting easily available gains from NPK fertilizatilon, future growth will have to be technology/research led. It will have to be more focused on fine tuning crop and livestock husbandry, improved production efficiency and product quality and on diversification to higher value crop and livestock enterprises. This will require greater investment in areas of research that cannot derive short term income to repay loans. As the current funding mechanism for research under World Bank loans is not conducive to support future research priorities that are not readily self financing there will be a need to employ more flexible on-lending terms. Income generation. The project's impact on poverty alleviation through support to sericulture, goat, rabbit and goose keeping, and tea rehabilitation has been significant. The beneficial effect, particularly on women's income was noted by the ACWF. The project has successfully developed the supporting infrastructure such as hacheries and specialized rearing households for sericulture and breeding farms/training centers for angora rabbits, goats and geese. These type of enterprises which can provide lighter employment and addition income are popular so long as sale prices remain attractive. Due to steady reduction in ABC's interest rates the poverty alleviation revolving fund has not latterly been very popular. Agro-processing component. Overall the agro-processing component in Qianj iang prefecture has been successfully implemented. Total investment cost of Y194.6 million is 117% of ithe MTR estimate. The recurrent difficulty of raising adequate counterpart funds has been resolved by linding commercial partners for all the enterprises except the Pengshui paper mill. The Shizhu wool mill designed to absorb the angora rabbit wool produces a range of cashmere, silk and wool blended yams and operated at more than 85% capacity in 1999. The factory is run as a Limited Company and is a good example of WB investment in small industry. Similarly, the Xiushan goose products plant operated at slightly above design capacity in 1999, has formed a joint venture with a local partner and appears to be in a satisfactory financial condition. Limited additional finance is required to add a sorting tower for the feathers. The Youyang tannic acid -6 -  plant has suffered from the marked decline in tannic acid prices, but is currently operating with a small profit margin. Further modest investment is required to increase evaporator capacity and convert the air heater from electricity to steam. In view of the fluctuation in price of tannic acid it is recommended that the plant should diversify 40% of its capacity into other products. The Youyang abattoir is operating at an acceptable level throughout and at a profit. However the steelwork supplied is of obsolete specification and not stainless and modest investment is required to replace the latter and provide stainless steel tables and barrows. The Pengshui pulp and paper mill has major problems, including design for a paper quality which has become unprofitable, lack of raw material, an incomplete and inadequate effluent treatment plant, dilapidated or inadequate equipment and lack of working capital and a commercial partner. Some Y107 million have been invested in the mill and it is essential that an attempt is made to realize some benefit, either through quite substantial further investment, or through at least rehabilitating and operating the paper making line using purchased pulp. Technical assistance, monitoring and evaluation. Regular assessment of the effect of the project on the environment by the Sichuan Research and Monitoring Institute of Environmental Protection has been satisfactory. Assistance was provided in project design and preparation by domestic design institutes. However, due to budget constraints no attempt was made to retain a senior irrigation engineering consultant to review the design proposals and to attempt optimization of designs. Similarly project monitoring and evaluation (M&E) relied largely on normal seasonal statistical crop surveys and monitoring by project staff, rather than contracting M&E studies to a suitable agency. Economic Rate of Return (ERR)/Net Present Value (NPV). The ERR for the whole project is re-estimated at 25%, compare to 26% at appraisal (see annex 3). ERR for irrigation component is recalculated at 29%, slightly higher that the appraisal estimated of 24%. ERRs for other three component did reach the target estimated at appraisal, which contributed to the lower ERR for the whole project. The NPV for the whole project at a 12% discount rate is estimated at Y2.3 billion. Financial impact. The financial analysis shows that for the irrigation areas and income generating activities family incomes with the project have exceeded those made at appraisal, revalued in 2000 prices, as shown in the following table. Incomes from Irri_ated Agriculture and Income Generating Activities (Yuan) SAR ICR W/O, in With, in With, With, in ICR With/ 1992 Y 1992 Y in 2000 2000 Y SAR With Irrig. Shenezhon- 1.220 2.023 2.165 2,530 117 Irrig. Wudu 1.438 2.458 2.630 2,750 105 Irrig. Yangiiaba 1.588 2.591 2.772 2.905 105 Goat raising - 1112 1.190 1.779 149 Rabbit raisin .1.54 11%620 22 125 Geese raising - 357 379 400 106 Sericulture 56 366 392 554 141 Financial rates of return of the three irrigation schemes range from 16% for Yangjiaba to 28% for Wudu, averaging 25%. Of the other components Soil Conservation, including toon and paulonia planting, fast growing trees, Chinese medicine, alpine rush and gallnut planting show an average financial rate of return of 29% and Income Generating Activities 25%. The overall financial rate of return of the agro-processing - 7-  component of 9% is significantly lower that the 17% projected at appraisal, mainly due to the lack of any presently measurable benefits from the Penshui Paper mill and lower than expected returns from the other sub-components, with the exception of the Shizhu Spinning Mill. The latter in fact has a re-estimated financial rate of return of 29%, significantly above the 19% projected at appraisal Institutional Development Impact Project impact on institutional development has been positive and substantial. Staff at all levels in the concerned bureaus have acquired valuable experience in project planning and implementation. The PLG included representatives from the Planning Commission and the bureaus of Finance, Water Conservancy, Agriculture, Animal Husbandry, Environment, Light Industry and Textiles as well as the Silk Corporation, domestic banks and the All China Women's Federation (ACWF). Specific project financing was directed at the Water Conservancy, Agriculture and Animal Husbandry Bureaus in order to strengthen their operating capacity and their ability to provide services to farners. This support has been highly successful, although as described above more remains to be done, particular in regard to provision of a]ppropriate equipment to the training facilities. Creation of Irrigation Management Offices (IMOs) for each scheme, responsible for O&M down to the trunk ditch level has been very positive in improving budgeting, revenue collection and coordination of the work program. U The Shengzhong project = 46,700 ha; and The Wudu project = 58,600 ha. 2/ 3 TFhe Shengzhong project provides 60 -70 million m of water for domestic/industrial use annually, Wudu some 200,000 m3 per day and Yangjiaba 10,000m per day. In addition many communities in the scheme areas draw their water from ponds fed by the system or from the canals themselves. 3/ Further details of the engineering of the three schemes are given in the Project File, namely in Document 2: Irrigation Component, and in the draft ICR prepared by the Sichuan Provincial Agricultural Development PMO (October 1999). 4/ Further details in the Project File, Document 3: Agricultural Support Services and Soil Conservation, and in the drafti ICR by the project staff referred to in the previous footnote. 5/ Yields at Mianyang Research Station: Paddy: 9 t/ha; Wheat 6 t/ha; Corn 6.5 t/ha. 6/ Up to 22 tons of mostly rice straw based compost per ha. 7/ For example in Jiang You County per capita income per annum increased from Y753 in 1992 to Y2,450 in 1999 and in Zitong from Y560 to Y1441 over the same period. 8/ For example stone terracing cost of Y 600 per Mu. and of drainage/stilling basin/ pond development costing Y 270 per Mu. 9/ Cost Y120 per Mu for works and Y290 for tree saplings. 10/ ABC's interest rate is reported to have been progressively reduced eight times from almost 11% to currently about 3%. 4.3 Net Present Value/Economic rate of return: The ERR for the whole project is re-estimated at 25%, compared to 26% at appralisal (see Annex 3). ERR for the investments in irrigation are recalculated at 29%, slightly higher than the appraisal estimate of 24%. The NPV for the whole project at a 12% discount rate is estimated at Y2.3 billion. 4.4 Financial rate of return: The financial analysis shows that for the irrigation areas and income generating activities per capita with the project have exceeded those made at appraisal, revalued in 2000 prices, as shown in the following table. - 8 -  Incomes from Irrigated Agriculture and Income Generating Activities (Yuan) SAR ICR % I W/O, in With, in With, With, in ICR With/ 1992 Y 1992 Y in 2000 2000 Y SAR With Y Irrig. Shengzhong 1 220 2023 2_2165 2.530 _ 117 Irrig. Wudu 1.438 2,458 I2630 2750_ 105 Irriz. Yanaiiaba 1,588 2.591 ~2772 _ 2.905 105 Goat raising -_ 111 9 llgo_i779 149 Rabbit raising 1 514_ _1i620 2.027 125 Geese raising - 357 379 400 106 Sericulture 56 366 _ 392 554 141 Financial rates of return of the three irrigation schemes range from 16% for Yangjiaba to 28% for Wudu, averaging 25%. Of the other components Soil Conservation, including toon and paulonia planting, fast growing trees, Chinese medicine, alpine rush and gallnut planting show an average financial rate of return of 29% and Income Generating Activities 25%. The overall financial rate of return of the agro-processing component of 9% is significantly lower that the 17% projected at appraisal, mainly due to the lack of any presently measurable benefits from the Penshui Paper mill and lower than expected returns from the other sub-components, with the exception of the Shizhu Spinning Mill. The latter in fact has a re-estimated financial rate of return of 29%, significantly above the 19% projected at appraisal. 4.5 Institutional development impact: Project impact on institutional development has been positive and substantial, Staff at all levels in the concerned bureaus have acquired valuable experience in project planning and implementation. The PLG included representatives from the Planning Commission and the bureau of Finance, Water Conservancy, Agriculture, Animal Husbandry, Environment, Light Industry and Textiles as well as the Silk Corporation, domestic banks and the All China Women's Federation (ACWF). Specific project financing was directed at the Water Conservancy, Agriculture and Animal Husbandry Bureau in order to strengthen their operating capacity and their ability to provide services to farmers. This support has been highly successful, although as described above more remains to be done, particular in regard to provision of appropriate equipment to the training facilities. Creation of Irrigation Management Offices (IMOs) for each scheme. responsible for O&M down to the trunk ditch level has been very positive in improving budgeting, revenue collection and coordination of the work program. Economic Impact. The project brought great economic benefits to the project areas. The total incremental irrigation areas reached to 158,700 ha, grain production increased by 10,960,000 tons and total output value was Y5,183,560,000. The incremental timber was 25,500 mi, herbal medicines 7,370 tons, firewood 12,277 tons, Chinese alpine rush 29,080 tons, paulownia and toon wood reserves 583,400 m gallnut 3,645 tons, tea 8,930 tons, and the output value was Y171,630,000, The farm households raised 1,543,600 heads of goats, 3,310,000 birds of white geese, 4,134,000 heads of long hair rabbit, which produced 1,213.4 tons of rabbit wool, and 35,825.54 tons of fresh cocoon, and incremental output value is Y946,200,000. Most of agro-processing plants are in operation, the total output value is Y271,940,000. Social Impact. The implementation of the project created 650,000 jobs for the project area, including 350,000 jobs for women. The project greatly extended the opportunities of employment, income generation -9-  and poverty alleviation for the beneficiaries under the project. Droughts have been thoroughly eliminated, forest coverage increased, soil conservation capacity and ecological environment improved, agro-technical service facilities established, the advanced agro-technologies extended, advanced foreign productive and managerial experiences introduced and adopted, agro-processing capacity raised, product market rapidly developed, as the result the income of beneficiaries under the project significantly increased. The sampling shows that the implementation of the project made the annual average per capita grain output increased by 122 kg, and income by Y504. The annual average per capital income increase for 10% households under the income-generation components was over Y1,000. The project has made 4,670,000 people break away from poverty. The coverage of poverty in the project area has been reduced from 3 3.01% at appraisal to 7.5% at present. Environmental Impact. The vegetation coverage has been raised. Through the construction of soil conservation, forestry and income generation components, the vegetation coverage in the project area has been raised from the pre-project 10.8% to 46% in 1998, an increase of 35.2 percenlage points. Soil erosion has been reduced. The measured data indicates that in the 2 soil conservation demonstration areas, the soil 2 ~~~~~~2 erosion modules decreased from 5,336 t/'kM.y to 3,162 t/km .y; the area of soil erosion was reduced from 2 2 165 km to 29.8 km . The quality of water in the project area remains good. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency. Irrigation canals were several times damaged by floods, which resulted in increased construction costs. Beneficiaries in the soil conservation areas were less enthusiastic than expected. They found that the works proposed on their farms, which included stone-facing of terraces, had a high investment, relative to their means and slow and rather modest returns. This resulted in modifying the component to a lower cost soil conservation prescription. Devaluation of the Yuan relative to the US dollar also presented problems, in particular in the case of delays in purchase of imported equipment where eventual buying at a significantly higher price in Yuan terms than originally anticipated placed a considerable strain on the raising of the necessary counterpart finance. Rapid changes in both export and local markets also created considerable difficulties for the processing components. In particular the growth in production of synthetic tannic acid resulted in a sharp fall in the value of the natural product and rapid changes in demand towards higher quality papers effectively rendered the Pengshui pulp and paper mill obsolete before it was able to start production. 5.2 Factors generally subject to government control: Government compliance with covenants was satisfactory, but raising and allocation of counterpart funds was sometimes difficult for the poorer prefectures and counties. The organization and administrative arrangements made for the project with PLGs and PMOs at each level from province to county, further supported by a Technical Consultation Group (TCG) at each level worked well and was a major factor in successful project implementation. The resulting close inter-departmental cooperaticin was further strengthened by involvement of the domestic banks, that provided a part of the counterpart finance and has enabled greater flexibility in raising of counterpart funds. Insistence on full cost recovery of on-farm works in soil conservation in poor areas resulted in a lower level of uptake by farmers than originally expected. Although full cost recovery is generally a healthy and sensible provision it may not always be reasonable in the case of poor farmers in resource poor areas. In a similar fashion the project funds disbursed for research development were less than expected since such funding was given lower priority as the research institutes were unlikely to be able to repay. Adequate financing of research is essenti.al if agriculture is to continue its growth in productivity. - 10 -  5.3 Factors generally subject to implementing agency control: Implementation agency performance was generally excellent and contributed strongly to successful implementation of the project. Tendering procedures were mainly handled in a timely and expeditious manner. With the benefit of hindsight it appears that in some instances the project management's desire to contain costs led to false economies. For example, (a) hiring highly skilled consultant specialists to review the irrigation proposals and optimize designs could well have resulted in cost savings; (b) involvement of high level specialists, deeper analysis of market prospects and early identification of commercial partners would have enabled the agro-processing components to get off to an earlier and surer start; and (c) expenditures on monitoring and evaluation have been too meager to provide project management with adequate information for efficient implementation and direction of the project. 5.4 Costs andfinancing: Total project cost at completion is estimated at US$339.5 million or about 118% of the appraisal estimate of US$287.6 million. Most of the cost overrun was due to increased cost of construction of the irrigation works, despite the significant depreciation of the Yuan.- The higher than expected costs created some difficulties for the prefectural and county governments, particularly the poorer ones, whose fund raising abilities were already stretched by the project. The entire IDA credit of SDR107.7 million (US$152.5 million)- has been disbursed. ,,, f rom Yuan 5.82 per US$ in 1992 to Yuan 8.28 per US$ in 1999. 121 At SAR the SDR 107.7 million credit was equivalent to US$147 million. 6. Sustainability 6.1 Rationale for sustainability rating: Project sustainability is highly likely. Government commitment to the project continues to be high and policies for rural development aimed at increasing farm incomes and living standards have priority. Financial analysis shows that the project has already had a very significant impact in improving farm incomes and these benefits are likely to be maintained or increased in the future. In addition to the financial benefits the project also has social benefits, particularly in income generating activities to provide additional income to women and environmental benefits, which have been confimned by monitoring financed by the project. Good arrangements are already in place for operation and maintenance of the irrigation systems and the majority of farmers pay water charges which cover the full cost of O&M.- Adequate arrangements have also been made taking care of the soil conservation and tree planting activities financed by the project. And in agro-processing all the units, except the Pengshui pulp and paper mill, have found commercial partners. -13/ In the case of the Wudu scheme the water charges collected cover all operating costs except Water Conservancy Bureau staff salaries. 6.2 Transition arrangement to regular operations: Arrangements have already been made for responsibility for the various components to be handed over to the relevant bureau or commercial entity for operation. Detailed operation plans have already been prepared for the irrigation and agricultural support services components and are under preparation for the other project components. In the future steadily more attention will be required to further improve water management, particularly through water-saving technology in pumped irrigation areas and to still tighter -11 -  linkages between water charge payments and responsibilities for scheme O&M - perhaps through the Self-financing Irrigation and Drainage Districts (SIDD) concept. 7. Bank and Borrower Performance Bank 7. 1 Lending: Through identification, preparation and appraisal, Bank performance was generally satisfactory. However, with the benefit of hindsight the experience of implementation shows that the initial plans for irrigation infrastructure construction were inadequately developed for the complex and challenging development of all three schemes. Greater attention could have been given to finalization of designs including insistence on more test results and ultimately a larger allowance made for physical contingencies. The possibility of risk of technical difficulties in irrigation scheme development was not recognized at appraisal. Other aspects of project preparation, including technical, financial and institutional concerns were generally well covered. The agro-processing components have proven difficult to implement. In retrospect it would obviously have been desirable for the partnerships finally developed with commercial entities to have been encouraged, or perhaps made a condition, much earlier in implementation - if possible during the planning phase. 7.2 Supervision: Project supervision by the Bank was regular, appropriately staffed and generally constructive and supportive of project implementation. The project launch workshop was not as. successful as it should have been in informing project staff on Bank procedures for agreeing contracts and submission of requests for reimbursement. In order for staff to be well briefed consideration could be given to a longer period for the workshop duration. 7.3 Overall Bank performance: The overall Bank performance was satisfactory. Project objectives were relevant to the country's needs and Government and Bank development priorities and strategy; project preparation and appraisal were sensible and mostly pragmatic; and project supervision was sensitive, supportive and eflective. Borrower 7.4 Preparation: Project design was undertaken by the local teams and design institutes. The project was officially proposed in 1987 and there was therefore adequate time for developing a sound design. Experience of implementation has shown that the initial plans and cost estimates underestimated the difficulties of construction in the scheme areas, all three of which include a significant portion of scattered hill areas. Project scope in terms of overall size and number of components was ambitious. Total local finding required and the difficulties in establishing the agro-processing enterprises were both underestimated. 7.5 Government implementation performance: Government commitment and support for the project has been good and consistent throughout implementation. Difficulties in raising local counterpart finance, particularly from relatively poor prefectures and counties and strains imposed by inflation were successfully overcome. Government has also shown flexibility in involving domestic banks in order to overcome funding constraints and in allowing more extended cost recovery terms for poor areas embarking on soil conservation works which produce only modest financial benefits. The government decision to split off Chongqing - including the Qianjiang prefecture - from Sichuan and to give it autonomous zone status was a further challenge to project management, albeit one successfully overcome. - 12 -  7.6 Implementing Agency: The institutional arrangements for project implementation have worked well. Close coordination between the participating bureaus has been good and the timeliness of agricultural development following availability of irrigation has been excellent. Raising and applying counterpart funds has generally been satisfactory, particularly in view of the difficulties experienced by poorer prefectures and counties, as well as the problem of rapid inflation. Arrangements made for future project operation and maintenance are satisfactory and regulations for operation and maintenance of the irrigation infrastructure are excellent. Although overall performance of the implementing agency is rated satisfactory, and in many aspects is highly satisfactory there have been some weaknesses, particularly in regard to false economies. In particular these are the reluctance to spend project funds on non-directly productive activities, from which cost recovery is difficult or impossible, namely technical assistance in complex irrigation system design, research, and monitoring and evaluation (M&E). Both of the latter two aspects are essential for the further future development of agriculture in Sichuan and good M&E is an essential tool for efficient project implementation and management. 7.7 Overall Borrower performance: The overall performance was satisfactory since the Government continued to support the project throughout the implementation period. All covenants were complied with in a timely manner. 8. Lessons Learned Lessons learned based on the review of the ICR mission are as follows: (a) Strong, stable and consistent management is the basis for successful project implementation (b) Close attention to development of sound plans for O&M from preparation onwards can be of great benefit during project operation. (c) Where conveyance systems are complex the independent review of designs and optimization of designs can provide significant cost savings. (d) Use of contractors on contracts giving the contractor responsibility for machinery and material supply can have significant advantages in cost and timeliness over contracts in which the project purchases equipment and materials separately and there are cost escalation clauses in the contract. (e) Project staff should receive more substantial training in contract management, ICB and WB procurement procedures at or before project commencement if delays in implementation are to be minimized. (f) Sustainable revolving funds cannot be operated successfully or be sustained if their lending rates are not competitive with mainstream credit institutions. Having divergent credit systems and lending rates for the same product in the same location is also a questionable approach meriting further consideration in future operations. (g) Current on-lending arrangements to prefectures, counties and townships for research and training activities that have limited revenue generating potentials and under which full development costs and interest charges are repayable, can constrain implementation of important research activities (e.g. - 13 -  livestock and land management) and impact on training efficiency as training centers are unable to invest in modem equipments. (h) Similarly adequate funding and priority has to be given to monitoring and evaluation if project management is to have good information for project operation. (i) Given the low resource status of farmers in the hilly areas of Guangyuan and Qianjiang replicable soil conservation models developed have to be low cost and affordable; whilst individually owned conservation works should continue to be at the cost of the beneficiary (to ensure ownership and sustainability the financing of communal/public environmental protection works such as waterway and river bank protection and un-cultivated mountain area re-vegetation could be under softer terms, possibly through an interest free cost sharing facility. (j) Returns from prevailing rain-fed farming systems in hill areas of Guangyuan and Qianjiang (dominantly wheat and corn) are unlikely to be adequate to cover costs of on-farm terrace improvement which is essential if erosion in cultivated areas is to be arrested. Therefore future programs to promote on farm terracing should be integrated with parallel income generation initiatives such as orchard and vegetable crop and livestock development, where feasible exploiting market niches offered by off-season production opportunities. (k) A positive lesson exemplified by the project is that as soon as irrigation developments were complete and incremental water made available; appropriate technologies were already on-stream from research, extension staff well trained with relevant technologies and farm inputs available at town and village levels when needed. With no weak links in the support supply chain, farmers were in a position to respond fast to the new situation and derive benefits quickly. It is also clear that in such circumstances that agricultural support services enjoy a higher degree of credibility amongst the farming community enhancing performance. (I) Several processing plants would have been more profitable in operation if their process technology and equipment standards had been updated during the project implementation lperiod. Any future projects involving agroprocessing should encourage regular review of technological standards and market requirements for products, and should make the necessary adjustments to the plant and equipment design, during project implementation. Future Operation Plan. Completion of project implementation is not the end but the very beginning of the project, so the government and the PMOs in the project area attached great importance to the post-implementation operation. The governments at provincial, prefecture (municipal) and county levels formulated special documents, which gave demands to the governments at lower levels that the high attention should be paid to the post-implementation operation. It was also demanded that separate operation and maintenance plans be made for each sub-component; the management institution be set up; personnel determined; overheads, necessary facilities and equipment guaranteed and the relevant policies be carried out, so as to ensure a smooth operation and better benefit output. The various relevant departments in charge of different components take major responsibility for the post-implementation operation of relevant sub-components. - 14 -  9. Partner Comments (a) Borrower/implementing agency: Opinions on the ICR: l. About the rating of the project output, we suggest it should be highly satisfactory comparing with others. 2. In the No. 30 item, the project character of large investment, a few components, wide project area, numerous project participants, many involving departments and difficult project management and coordination should be emphasized. The successful implementation of this project is really not easy to achieve. 3. In the No. 36 item, we suggest the sentence Performance in project implementation is generally uniformly successful should be Performance in project implementation is uniformly successful, the conservative word might be got rid of. 4. In the No. 51 item, about the sentence the ERR for the whole project is re-estimated as 25%, compared with 26% at appraisal. It is true that the ERR was 26% at appraisal, and it is 1% lower at completion. But please note that the FRR was 20.4% at appraisal, while it is 25.99% at completion. 5. For the Borrower's performance, we suggest that following sentence be added: the borrower does not only think highly of the direct economic benefit, but during the corporation with the Bank and the implementation of the project, also pay specific attention to training and establishing a project management team who know well the international practice, and this work is very successful. 6. The PMO staffs attitude of enthusiasm, responsibility and working in earnest, and their correct understanding and implementation of the management regulations, procedures, experience and the methods of the project financed by the Bank, make great contribution to the successful implementation of the project. Hope our suggestions could be adopted. (b) Cofinanciers: N/A (c) Other partners (NGOs/private sector): N/A 10. Additional Information N/A - 15-  Annex 1. Key Performance Indicators/Log Frame Matrix Qtoaedo acU ndlicat I . lntict ProeC SnAcRnAn rRaed at Mt,id Ac,ln atmst Estimaute . Term Revm Increase crop productivity, particularly Paddy yield Cropping Int. Paddy yield Cropping Int. paddy (frorto t/ha) (fromnto ON) (1999 tha) (1999 O) Shenqzhonq . 7.0- 8.5 188 - 211 7.8 267 Wudu 6.8 - 8.25 182 - 209 8.2 208 Yanaiiaba 5.9- 7.5 189-216 - 88.4 200 Provide reliable water supply for 135,200 151,900 155,290 irnigaton (ha) Provide agricultural inputs, services, As desaibed in Output - As described in Output research, training and TA Indicators, below Indicators, below Develop O&M plans and policies for the O&M plan to be developed. Satisfactory O&M plan in place. irrigation systems, inc. water charge Water charges to cover at least Water clharges cover full O&M, collecton. 1000/o 0f the O&M costs. exceot WCB salares in Wudu. Expand soil conservation and reduce As described in Output As below As described in Output soil and water losses. Indicators, below Indicators, below Expand agro-processing activities As described in Oulput As below As described in Output Indicators, below Indicators, below Increase farm incomes: NWthout project VWith project WthoLt project Wth project Y per famrily(a) Y per family Shesazhong T_i1.2 L 2.023 1,220 2,530 Aidu _1.438 2,458 1,530 2,750 Yanaiiaba 1588 2 2591 1.9B0 - 2,905 1j ifjm*In i1tr ___ _ _ _ __ _ _ __ _ _ __ _ _ _ _ _ _ __ _ _ _ _ _ _ _ ndiXator (b) pro SAR/PAD RevisedatMiid Actal. ats Fstimate TennRe_ew I inrialaSor omrxmneit- ChIlW odis Shenrzhona subproiect _____ I- inirgated area (ha) 70.000 _ 73.340 -Branch arterial canal (km) _ 109 101 101 Branch canal (km) 29 - 29 Subbranchcanal(km) 66 61.6 62 -Trunk canal (km) 285 265 265 -Farm ditch (km) 1,327 1.694 1,694 -Sub-farmn ditch (km) 1.298 1.055 1,055 - Inc. drained area (ha) 14,670 - Roads (km) 735 - roads alonc canals (km) - 235 - acoess roads (km) 500 - 16-  Wudu suborolect - Inc. irrigated area (ha) 61.500 78 200 78.200 - General arterial canal (km) 12 - 12 - Arterial canal (km) 70 - 7 - Branch arterial canal (km) 40 93.5 94 - Branch canal (km) 76 - 76 -Sub branch canal (km) 103 164 164 - Trunk canal (km) 398 504 504 - Farm ditch (km) 1,163 2.383 22383 - Sub-farm ditch (km) 714 2.125 2.125 - Inc. drained area (ha) 15.640 Yannilaba subproiect . - Inc. irriaated area (ha) 3.700 - 3.750 -Sub branch canal (km) 15 - 15 - Trunk canal (km) 36 - 39 - Farm ditch (km) 108 - 108 - Sub-farm ditch (km) 72 - 72 - Water suoolv pipe (km) 25 - 25 - Inc. drained area (ha) 750 KeY In,fictors (Annex 1) (continued) 7 A _nilhiral S i_pnrt Inputs: Potash fertilizer (tons) 28.000 20.000 20.000 Agrochemicals (tons) 240 172 172 Buildinas/Eouio: Seed company (no.) 11 11 11 County AoroTech Center (no.) 3 3 3 TownshiD Aa.Tech Center (no.) 109 109 109 3SoCil ConsePruai _0 _ _ _ _ _ _ __ i. Guanovuan Demonstration Area ____________ Ecological measures (ha) 11.530 11.530 11.530 Terracina (ha) 467 467 467 ii. Cianilang Demonstration Area Ecological measures (ha) 3.210 4.083 4.083 Terracing (ha) 133 33 33 iii. Paulonia and Toon planting (ha) 8.700 8.700 9.352 iv. Gallnut (ha) 6.006 6.0 6.000 6.000 v. Chinese medicine (ha) 2.667 2.667 3.200 vi. Alpine rush (ha) 1.800 1.800 1.800 vii. Fast arowino trees (ha) 6.667 6.667 6.922 4 Income Generation i. Silk: Mulberrv planting (ha) 7.675 7.675 7.675 Households (no.) 115.000 115.000 115.000 Breeding stations (no.) 7 7 7 Incubation rooms (no.) 9 9 9 Co-oD rearmn rooms (no.) 2 450 2.450 2.450 Tech. Serv. Station (no.) 117 117 117 Training Centers (no.) 8 8 8 ii. Tea rehab (ha) 2.333 2.333 2.333 iii. Goat raising (Youyang) Households (no.) 15.000 15.000 15.000 Trainina Centers (no.) 1 1 1 iv. Goat raising (Penashui) Households (no.) 6.100 6.100 6.100 Training Centers (no.) 1 1 1 v. Geese Raising (Xoushan).. Households (no.) 10.000 10.000 11 775 Trainina Centers (no.) 1 1 1 vi. Rabbit Raising (Shizhu) Households (no.) 5.000 5.000 5.000 Training Centers (no.) 1 I 1 - 17 -  5 AnoRvcemsina (c) _ i. Paper Mill(Mianyana)(t/p.a. capacity) 10,200 Cancelled _- ii. Paper Mill(Penashui)(tp.a. capacitv) 10200 10.200 10200(0D%o) iii.SDinnina Mill(Shizhu)(t/p.a. cap.) 300 300 300(>85%) iv.Gallnut(tannic acid Vl.a. caoacitv) 500 500 500(>100%) v. Abattoir(Youvana)(Beef head/o.a.) 7,000 7.000 7000(40%) (Goat head/p.a.) 60.000 60,000 60000(40%) vi.Goose proc.Xiushan)(head p.a.) 800,000 800,000 800,000(100%/o) (Goosemeat tp.a.) 1.900 1,900 1,900(100%) Ft Training i. Total Trainees (no.)(of which women) 333.783 - 405.727(201,593) ii. Total days (no.) (of which women) 1,715,589 1,838 828.289) (a) In 1992 prces. (b) Based on Table 1-1, Kev Indicators for Proiect Operations of the draft ICR prepared bv the Sichuan as sources of seednuts. (c) The fioures in brackets in the final column refer to present (Apdril 2000) use of installed caoacitv - 18 -  Annex 2. Project Costs and Financing Pro ect Cost by Component (in US$ million equivalent) Ap-W AsallLtt Pwcntage of .--n-a-t. Appl Project Cost 8y Component U$$ ailion U!S$ million Irrigation of which: 191.00 255.67 134 Shengzhong (App. US$68.79/80.67) 117 Wudu (App. US$116.57/166.50) 143 Yangjiaba (App. US$5.64/8.50) 151 Agriculture support 11.99 12.83 107 Soil conservation 17.63 20.97 119 Income generation 24.61 25.90 105 Agroprocessing 42.39 24.09 57 Total Baseline Cost 287.62 339.46 Physical Contingencies 0.84 Total Project Costs 287.62 339.46 Total Financing Required 287.62 339.46 Project Costs. by Procuremen Arrangements (Appraisal Estimate) (US$ million equivalent) Procurenwut Meth- E1pMdIt-we COtey K:B NB ' X -N..F. Total, Coot 1. Works 52.10 84.30 62.20 0.00 198.60 (0.00) (0.00) (0.00) (0.00) (0.00) 2. Goods 29.40 7.00 11.80 0.10 48.30 (0.00) (0.00) (0.00) (0.00) (0.00) 3. Services 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 4. Land Acquisition 0.00 0.00 0.00 12.80 12.80 (0.00) (0.00) (0.00) (0.00) (0.00) 5. Technical Assistance 0.00 0.00 3.80 0.00 3.80 (0.00) (0.00) (0.00) (0.00) (0.00) 6. Miscellaneous 0.00 0.00 0.00 24.10 24.10 (0.00) (0.00) (0.00) (0.00) (0.00) Total 81.50 91.30 77.80 37.00 287.60 (0.00) (0.00) (0.00) (0.00) (0.00) *Includes design, engineering, management, farm labour, working capital and constructions costs. - 19 -  Project Costs by Procurement Arrangements (Actual/Latest Estimate) US$ million equivalent) ed C Totl 1. Works 26.86 183.18 74.87 0.00 284.91 (0.00) (0.00) (0.00) (0.00) (0.00) 12. Goods 12.44 11.05 8.10 0.00 31.59 (0.00) (0.00) (0.00) (0.00) (0.00) 3. Services 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) 4. Land Acquisition 0.00 0.00 0.00 0.14 0.14 (0.00) (0.00) (0.00) (0.00) (0.00) 5. Technical Assistance 0.00 0.00 2.96 0.00 2.96 (0.00) (0.00) (0.00) (0.00) (0.00) 6. Miscellaneous 0.00 0.00 0.00 19.86 19.86 (0.00) (0.00) (0.00) (0.00) (0.00) Total 39.30 194.23 85.93 20.00 339.46 (0.00) (0.00) (0.00) (0.00) (0.00) - Includes design, engineering, management, farm labour, working capital and construction costs. Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. I Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local goverrnent units. Project Financing b Com onent (in US$ million e uivalent) 1 ff f; iAST WSUSUd~~~~~~~~~~~~~~erce nLtae of Apatsa Raul~~ G#~t. ~F. Bask Govt CoIl. Dank G~ovt ~CoP Irrigation of which 87.57 103A43 107.95 147.72 123.3 142.8 0.0 Shengzhong 29.06 39.73 35.64 45.03 122.6 113.3 0.0 Wudu 55.32 61.25 68.20 98.30 123.3 160.5 0.0 Vangjiaba 3.19 2.45 4.33 4.17 135.7 170.2 0.0 Agriculture support 8.34 3.65 8.21 4.62 98.4 126.6 0.0 Soil conservation 9.16 8.47 12.05 8.92 131.6 105.3 0.0 Income generation 13.25 11.36 16.85 9.05 127.2 79.7 0.0 Agroprocessing 22.69 19.70 14.34 9.75 63.2 49.5 0.0 TOTAL 140.77 146.85 158.34 181.12 112.5 123.3 0.0 * Includes central government, provincial/prefecture govts, county govts, local banks, special poverty alleviation funds, enterprises and farmers. - 20 -  Annex 3: Economic Costs and Benefits Cost Benefit Analysis ___________ Present Value of Flows Economi Analvsis Financial Arasi Appraisal Latest Appraisal Latest Appraisal Latest _Estma_es _Emates m_Esmats. ERR % ERR % IncomelHH/I lncomelHH FRR% FRR % I Yuan Yuan 1. lrniation 23.8 29.1_ N/A. N/A 20.6 24.6 = Sheolonaq 32.1 2C 2.164.6 2.530.0 28.1 19.0 Wudu 18.7 36. 2.630.1 2.750.0 15.8 28.2 jYanaiiaba 16.2 18. 2.772.4- 2,905.0 14.7 15.5 2. Soil Conservaion 24. 15. N/A. N/A 16.4 29.3 3. Income Generation 42.1 14 N/A. N/A 27.6 24.7 Goat Raisina 37.4 33. 1.189.8 1 779.0 32.2 30.0 Rabbit Raisina 36. 26.6 1.620.0 2.027.0 29.4 28.0 Silk & Mulberry 45 9. 392.1 554.0 27.0 13.0 Geese Raising 25.5 40.4 378.8 399.0 21.2 26.5 Tea Rehab. N/A. 8.7 N/A. N/A. 5.C 4.A Aro-Processinca 21.1 1 3 N/A. N/A 17.4 9.0 Paper Mill (PS) 19.7 N/A N/A. N/A 15.6 N/A _GallnutProcess 30 8 NIA NIA 26.4 5.0 Rabbt Hair Pro 32 N/A. N/A 18.7 29. Geese Process 26 1 - N/A N/A 21.1 10.2 lAbattoir 27.7 1c9 N/A. N/A 23.9 14.0 NPV (Econormic) In Billion Yuan 1. Irriaation 0.571 2.64 N/A. N/A 2. Soil Conservation N/A. 0.903 N/A. N/A. 4. A-aro-Processina N/A. 0.85g N/A. NIA Proiect NPV 0.8561< 2.1 N/A. N/A 20.4 1. 1.- AdJusted to 2000 pnoes. - 21 -  Annex 4. Bank Inputs (a) Missions: Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists, I FMS, etc.) Irrplementation Development Month/Year Count Specialty Progress Objective Identification/Preparation 06/90 N.A. N.A 9/90 6 Ec,A, E,S,AP, An FAO/CP 2/91 2 Ec,A FAO/CP 5/91 2 Ec,A Appraisal/Negotiation 07/92 6 Ec,A,E,Env,AP,FA Supervision 08/92 3 Ec,E,Pr 02/93 2 A,LRM S S 11/93 4 A,LRM,E,AP S S 05/94 4 A,LRM,E,AP S S 02/95 4 A,E,S,AP S S 02/96 3 A,E,AP S S 04/97 2 A,E S S 03/98 3 A,E,AP S S 04/99 3 A,E,AP S S 04/00 5 Ec,E,A,FA,AP S S ICR 04/00 5 Ec,E,A,FA,AP S S (a) Kev to specialised staff skills. A = Aqriculturalist AP = Agro-processing Specialist Ec = Economist LRM = Land Resources Management E = Irrigation Engineer Pr = Procurement Specialist FA = Financial Analvst Env = Environmental Specialist S = Soils Specialist (b) Staff- Stage of Project Cycle Actual/Latest Estimate No. Staff weeks USS (,00P)) . Identification/Preparation 236 236 Appraisal/Negotiation 178 1 ,78 Supervision 120 I_20 ICR 10 4_5 Total 544 5_ J9 Also includes Bank-financed and trust fund consultants. -22 -  Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating OMacro policies O H OSUOM O N * NA FSector Policies O H * SU OM O N O NA Physical OH *SUOM ON ONA X Financial O H *SUOM O N O NA Z Institutional Development 0 H O SU O M 0 N 0 NA OEnvironmental O H *SUOM O N O NA Social M Poverty Reduction O H *SUOM O N O NA Z Gender O H *SUOM O N O NA O Other (Please specify) F Private sector development 0 H 0 SU O M 0 N 0 NA X Public sector management 0 H 0 SU O M 0 N 0 NA a Other (Please specify) - 23 -  Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 61 Bank performance Rating [A Lending OHS OS OU OHU Z Supervision OHS OS OU OHU N Overall OHS OS OU O HU 6.2 Borrowerperformance Rating N Preparation OHS OS OU O HU