China - Songliao Plain Agricultural Development Project

Document of The World Bank Report No: 24996 IMPLEMENTATION COMPLETION REPORT (IDA-25710) ON A CREDIT IN THE AMOUNT OF SDR148.5 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR A SONGLIAO PLAIN AGRICULTURAL DEVELOPMENT PROJECT January 30, 2003  CURRENCY EQUIVALENTS (Exchange Rate Effective Decemberz 2002) Currency Unit = Yuan Y 1.00 = US$ 0.12 US$ I = Y 8.3 FISCAL YEAR January I December 31 ABBREVIATIONS AND ACRONYMS ADP Agriculture Development Project ASSP Agricultural Support Services Project BOF Bureau of Finance EDMC External Debt Management Center ERR Economic Rate of Return FAO/CP Food and Agriculture Organization/Cooperative Program FHH Female-Headed Households FIRR Financial Internal Rate of Return FRCP Fourth Rural Credit Project FRR Financial Rate of Retum ICR Implementation Completion Report MTR Mid-Term Review NPV Net Present Value PMO Project Management Office PPMO Provincial Project Management Office PSR Project Status Report QAG Quality Assurance Group SAR Staff Appraisal Report SCF Standard Conversion Factor TA Technical Assistance WF Women's Federation Vice President: Jemal-ud-din Kassum, EAP Country Manager/Director: Yukon Huang, EACCF Sector Manager/Director: Mark D. Wilson, EASRD Task Team Leader/Task Manager: Pawan G. Patil, EASRD  CHINA SONGLIAO PLAIN ADP CONTENTS Page No. 1. Project Data 1 2. Pnncipal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 6 5. Major Factors Affecting Implementation and Outcome 13 6. Sustainability 15 7. Bank and Borrower Performance 15 8. Lessons Learned 18 9. Partner Comments 18 10. Additional Information 18 Annex 1. Key Performance Indicators/Log Frame Matrix 19 Annex 2. Project Costs and Financing 23 Annex 3. Economic Costs and Benefits 25 Annex 4. Bank Inputs 27 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 28 Annex 6. Ratings of Bank and Borrower Performance 29 Annex 7. List of Supporting Documents 30 Annex 8. Lessons Learned from Gender Mainstreaming 31 Annex 9. Project Impacts as Seen Through the Eyes of Project Beneficiaries 33   Project ID: P003593 Project Name: Songliao Plain Agricultural Development Project Team Leader: Pawan G. Patil TL Unit: EASRD ICR Type: Core ICR Report Date: January 30, 2003 1. Project Data Name: Songliao Plain Agricultural Development Project L/C/TFNumber: IDA-25710 Country/Department: CHINA Region: East Asia and Pacific Region Sector/subsector: Agricultural marketing and trade (30%); Animal production (27%); Crops (20%); Irrigation and drainage (20%); Central government administration (3%) KEY DATES Original Revised/Actual PCD: 12/17/1991 Effective: 06/15/1994 06/15/1994 Appraisal: 06/14/1993 MTR: 10/31/1996 10/31/1996 Approval: 02/24/1994 Closing: 12/31/2001 06/30/2002 Borrower/lImplementing Agency: People's Republic of China/Liaoning and Jilin Project Management Offices Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Gautam S. Kaji Country Manager: Yukon Huang Shahid Javed Burki - Department Director Sector Manager: Mark D. Wilson Joseph Goldberg - Division Chief Team Leader at ICR: Pawan G. Patil Rapeepun Jaisaard ICR Primary Author: Pawan G. Patil 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=Neghgible) Outcome: S Sustainability: L 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 major objective of the project was to assist Liaoning and Jilin Provinces in their agricultural development plans, which aimed to increase agricultural production, farmers' incomes and rural employment by boosting the productivity and marketability of agricultural, horticultural, livestock, aquacultural and agro-industrial products in 40 counties in Liaoning and Jilin Provinces. Specifically, the project aimed to (a) improve productivity of existing low-yield farmland by expanding irrigation and drainage facilities; (b) develop unutilized wastelands for rice production; (c) introduce soil and water conservation in potentially productive areas; (d) develop marginal highlands for fruit production; (e) provide important farn inputs, agricultural support services, training and technical assistance opportunity; (f) develop inter-tidal areas for aquaculture production; (g) support livestock production processing and support services; (h) expand agro-processing activities utilizing available raw materials; and (i) strengthen research, extension and environmental protection programs. The project also sought to target women farmers as beneficiaries by supporting small livestock production. such as that of geese, rabbit and pigs. These objectives were in line with the Government's long term strategies and policies for the agricultural sector as formulated in the early nineties which sought to increase production to meet the requirements as a direct result of population growth, and to increase income and employment in rural areas. The objective was also consistent with the Government's objectives for livestock and aquaculture development, which focused on increasing production for domestic consumption, increasing exports to earn foreign exchange, and to provide additional sources of income for rural peoples. The Bank had a distinct comparative advantage in this sector, having financed 33 operations in agricultural development amounting to $4.4 billion prior to this project. Moreover, design of the project was able to draw on experience from other Bank-financed provincial Agriculture Development Projects (ADPs), the first of which was financed in 1987. With many southeastem Provinces benefiting from Bank-financed agriculture projects, the Government's priorities in the early 1990s was to focus on China's northeastern Provinces. The Project was therefore formulated in two northeastern provinces, Liaoning Province and Jilin Province and emphasized effective use of existing natural resources to increase and diversify agricultural production and processing in response to market demands, which would lead to expanding opportunities for on-farm and off-farm income generation and employment Other Bank-financed agriculture development type projects from which lessons learned were applied to the design of this investment, included the Fourth Rural Credit Project (FRCP) and the Agricultural Support Services Project (ASSP). 3.2 Revised Objective: The original project objectives remained unchanged. However, in May 2001 the Credit was reallocated to improve the poverty impact in animal husbandry in Jilin Province. It had become clear that the poorest yet capable households were not usually the recipients of project loans. The project beneficiaries tended to be those households who had the means to pay back the project loan prior to their participation in the project. Many more had the means to pay back from the gains made from participating in the project The reallocation targeted these beneficiaries. As a result, approximately $5 million in small loans since 2001 have been distributed to hundreds of truly poor households. 3.3 Original Components: The project was designed to specifically address key constraints limiting agricultural productivity in the project area, including soil salinity and water logging, wind and sandstorm damage, shortage and poor quality of irrigation water, inadequate crop diversification, poor inputs and feed quality, limited availability - 2-  of extension services and weak linkages between agricultural production, processing and marketing activities. The project also worked toward introducing envirornental standards in the designs of agro-processing plants, developing monitoring systems to ensure compliance and good environmental protection practices. As mentioned earlier, the design drew on the Bank's extensive experience in integrated rural development projects in China, and the lessons leamed from this experience was expected to help the project address these major constraints. Specifically, the project was designed to include the following nine components: (a) Irrigation and Drainage (US$29.3 million, 9.5 percent of total base costs). The objective of this component was to reclaim wasteland for irrigated paddy cultivation, convert low-yield corn areas into irrigated wheat, develop saline-alkaline land for production of flax for seeds, and solve water logging problems by financing investment in construction and improvement of low-lift surface irrigation and drainage networks and installing pumping stations and sinking wells to provide additional water. Planned sub-components included: (i) the reclamation of 6,200 hectares of saline-alkaline wasteland for paddy cultivation in seven counties in Liaoning Province; (ii) the conversion of 21,300 hectares of low-yielding and sand erosion susceptible land from dryland corn to irrigated wheat in ten counties in Liaoning Province; (iii) the construction of the Song Qi irrigation scheme in Jilin Province which included 2,660 hectares of newly irrigated land and rehabilitation of 930 hectares; (iv) the construction of the Song Po irrigation scheme which brought approximately 4,500 hectares under irrigation; (v) the financing of a dam safety initiative for Fengman Reservoir which supplies water to the Song Qi and Song Po irrigation schemes; (vi) conversion of over 2,000 hectares of rain fed dry-land corn to irrigated wheat in Liaoning Province's Fuyu County using ground water reserves; and (vii) the improvement of 11,500 hectares of drainage poor and waterlogged areas in Jilin Province's Nong An County. (b) Soil and Water Conservation (US$4.0 million, 1.5 percent). The objective of this component was to implement engineering and biological measures to conserve soil and water in 11 micro watersheds located in Shuangyang County of Changchun Prefecture, Jilin Province. Planned activities included building check dams, gully protectors, interceptor channels and associated cross-drainage structures. Other planned activities included planting larch, poplar and fruit trees. In order to provide adequate water for the growth and maintenance of these trees, catchment areas to create small reservoirs and deep tube-wells were to be built. (c) Field Crop Development (US$21.6 million, 7.0 percent). The objective of this component was to diversify agricultural crops from corn to wheat and paddy. Planned activities included fertilizer purchase, crop development, medicinal herb plantations, revolving fund activities, and research and training. Approximately 14,000 tons of incremental fertilizer in Liaoning Province and 14,400 tons of incremental fertilizer for Jilin were planned for purchase. The fertilizer was to be used in irrigated paddy and wheat cultivation over the five-year project implementation period. The plan was for the project to purchase fertilizer inputs and sell to farmers. Moreover, a revolvingfund was to be established with sales proceeds and used to procure agricultural inputs and experiment with growing high value crops in green houses. To facilitate the preparation of large pieces of land within limited periods, the project planned to support farmer groups and associations in purchasing tractors and farm implements. In addition, this component aimed to provide seeds, fertilizer, storage facilities, training and transportation to support the cultivation of eight species of medicinal plants on 1,333 ha in Kazuo county. It also was to support the development of about 992 ha of seed production base for flax in Qian An county. (d) Orchard Development (US$30.3 million, 9.8 percent). The objective of this component was to enhance orchard development in the region by financing the planting of high value fruit trees. In Liaoning, the project planned to provide financing for new orchards and improvement of the existing orchards - 3 -  covering a total area of 15,400 hectares. The principle fruit trees included Apple-pears, and Apricots. The component also consisted of financing the purchase of farm inputs such as budded plants, urea, DAP, agro-chemicals, and hired labor; the construction of irrigation facilities, and the acquisition of small machinery and tools. It also planned training of farmers and technicians. In Jilin, the project was to finance the establishment of 5,000 ha of new Apple-Pear plantations; and inputs and services. It also planned the purchase of 10 vehicles and 15-hp tractors. Funds were also to be provided for training one person in each participating family for two days two times a year for five years; and in training county, township and village technicians at Jilin Agricultural University. (e) Livestock Development (US$59.2 million, 19.2 percent). The objective of this component was to increase the production of farm animals. Several activities that were to be financed included (i) cattle fattening. In Liaoning, the project would finance the purchase and fattening of about 33,060 cattle annually by 6,612 households in 10 counties. Credit was also to be provided for the construction of a cattle sheds, feed storage facilities and a green silage pits; (ii) cattle breeding. In Liaoning, the project would finance approximately 6,720 breeding cows to an estimated 2,240 households in Kangping, Dengta and Yixian counties. A total of 747 farmers selected across the participating counties/cities were to receive three in-calf heifers or second-calving cows in the first year. Thereafter, 747 farmers were to join the scheme both in the second and third years. The activity also included financing for animal-health costs; (iii) cattle breeding and fattening. In both provinces, a total of 13,500 smallholder families from eight counties were to be provided with credit to purchase approximately 40,500 pregnant heifers or second-calving cows, construction materials for cattle sheds, feed stores, green silage pits. They were also to be provided working capital to cover operating costs during the first year; (iv) feedlots. In Siping prefecture (Jilin), the project would finance 180 feedlot units, each managed by a group of 5-6 farmers to fatten 30 cattle in a 180-day fattening period and turn out 60 fattened cattle per year; (v) sheep breeding. Approximately 5,000 farmers from four villages in Changling and 1,000 households in Fuxin were to be provided with 25 ewes, construction of the sheep and a green silage pits and working capital to cover the feeding, breeding and health costs for the first year of operation. These farmers were to build up flocks of 80 ewes by the ninth year and stabilize at that level; (vi) additional activities under this component included rabbit production, nucleus rabbit stud, deer stud, deer production, goose breeding and fattening, and pig fattening. (f) Livestock Processing (US$32.1 milion, 10.4 percent). The objective of this component was to provide facilities to process livestock purchased from farmers financed to breed and raise livestock as per the previous component This component was envisaged to finance the construction of cattle, sheep, goose, rabbit and deer abattoirs. Specifically, this component financed (i) the rehabilitation of one 30,000 head per year cattle abattoir and a 600-ton cold storage in Changtu County, Liaoning Province on the site of an existing but rundown slaughter house; (ii) the construction of one new 50,000 head per year cattle abattoir in Dehui County, Jilin Province with a fully imported production line; (iii) the reconstruction of the existing cattle abattoir at Shuangliao to its full 50,000 head per year capacity using locally funded equipment; (iv) a new 500,000 head per year sheep abattoir and a 1,500-ton cold store in Changling to service the sheep breeders in the project area; and (v) support services such as artificial insemination, feed quality control, pasture development and livestock extension. Moreover, this component supported extension programs in participating counties in both provinces, financed livestock research on different topics such as comparison of different grassland improvement techniques, and evaluated the performance and quality of different beef cattle crosses. (g) Aquaculture Development (US$20.4 million, 6.6 percent). The objective of this component was to assist the aquaculture sector in production for both domestic consumption and for export. This component envisaged the financing of the following activities: (i) shrimp culture rehabilitation over 13,000 hectares of ponds in Dawa County, upgrading of pumping stations and mechanical excavation of existing ponds to a -4 -  depth of three meters; (ii) establishment of 725 hectares of bay scallop culture; (iii) hard and short-neck clam culture over 13,350 hectares of intertidal areas along the coast in five counties; (iv) construction of a river crab hatchery and culture over 134 hectares; (v) shellfish hatchery construction capable of producing 200 million scallop seeds per year; (vi) construction of two fully equipped freezing and cold storage plants in Suizhong and Jinxian, and rehabilitate the existing cold store in Xincheng to international standards; (vii) development of a program of local training to strengthen the skills of farm technicians, managers, hatchery operators, farmers, and fish processing technicians; and (viii) provisions for a laboratory and analytical equipment, field observation and monitoring equipment, microcomputers, and office equipment and vehicles to enable the Bureau of Aquatic Products, Marine Research Institute and extension services to function more effectively and conduct regular monitoring of the environment, particularly in the project areas. (h) Agro-Processing (US$106.5 million, 34.5 percent). The project envisaged the financing of 14 agro-processing subprojects (8 in Liaoning and 6 in Jilin), including an apple juice processing plant, protein processing plant, pectase processing plant, hawthorn processing plant, mushroom processing plant, furfural processing plant, paper mill, oil processing plant, alcohol manufacturing plant, rice straw paper mill, leather tannery, gelatin processing plant, textile mill, and modified starch plant. Bank funds would cover expenditures for land purchase, construction of buildings, purchase of equipment, vehicles and development and implementation of training programs. Incremental working capital for each subproject was financed as was investments to mitigate environmental problems such as wastewater and effluent treatment All subprojects were designed to generate significant value-added benefits from purchase of nearby project beneficiary produced products and to generate off-farm employment in the project areas. (r) Institutional Support/Project Management (US$5.3 million, 1.7 percent). A project management structure was designed with implementation responsibility for the Governments of participating provinces, guiding and supervising the work of the implementing unit directly below it. Specifically, the project aimed to strengthen the PPMOs, provide training and technical assistance (TA), and support environmental protection programs and those institutions responsible for monitoring the environment. This component was envisaged to finance (i) the construction of the PPMOs in Liaoning and Jilin Provinces, equipping them with furniture, teaching equipment and vehicles; (ii) training for 510 personnel for short periods in project-related subjects, including engineering management, financial administration, accounting, auditing, material procurement, loan assessment and project appraisal. Overseas training and study tours were also planned for 50 project staff; and (iii) environmental monitoring programs for environmental monitoring in Bo Sea, pesticide management, and effluent management. 3.4 Revised Components: There was no revision of components. However, because of implementation logistics of the agro-processing and livestock processing components, the financing for these two components were combined into a single component called "Agro-Processing Component". Almost all of the originally pre-identified agro-industrial units to be financed were dropped. Moreover, for the purposes of the ICR, and for ease of explanation and comparison to project at entry, the description of each component remains as originally envisaged with only combined project financing and disbursement reflected throughout. Moreover, in May 2001 the Jilin PPMO requested that available funds from the Bank credit be used to complete agro-processing activities, expand agro-processing units that had demonstrated commercial success, and expand high income generating livestock breeding and production activities. The rationale for expansion of the processing units was based on the excellent benefit flows from the factories that had commenced production. The rationale for expanding livestock activities was two fold: (i) to enlarge the scale of two very successful activities, cow breeding and pig raising; (ii) to better target the poorest households in each proposed project village who may have not had the opportunity to participate in the - 5-  project thus far. In November 2001, the Bank reviewed, appraised, and approved each proposal submitted by the PPMO for expansion. 3.5 Quality at Entry: The project design predates the existence of the Quality Assurance Group (QAG), and as a result, there is no official assessment of the project's quality at entry. Nevertheless, the ICR finds the quality at entry to be satisfactory. As mentioned earlier, the project objectives were consistent with Government priorities and met the critical needs of China's agricultural sector, particularly those for northeast China. Some noteworthy and unique features: * Since the implementing agencies had the required administrative, financial, and technical capacity, the quality of project design was generally adequate to meet the project's principle objective. During preparation of the project, major risk factors and lessons learned from other earlier agricultural projects in China were considered and incorporated into the project design. In addition, during project preparation, pre-appraisal and appraisal, the Bank brought in relevant expertise to strengthen the implementation of activities. * This project is unlike many other early 1990s Bank financed projects in China since the initial project design specifically targeted women's participation as one of its core objectives, thereby attempting to mainstream gender throughout the project components and the project cycle. * During preparation and pre-appraisal missions, the Bank and FAO discarded the less consistent sub-projects, which could not be eliminated by the PPMOs due to local political pressure. Thus the initial 100 plus processing sub-projects where eventually reduced to about twelve. Likewise, poor-quality proposals (about 75 factory proposals) were discarded as being irrelevant to the project, or unacceptable technologies, or too poorly conceived to be useful. Better quality proposals that were relevant to the project were worked on by the local design teams and international experts to bring them up to standards. Even with this intervention, only a minority of agro-processing units are operational today. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The bulk of project activities were completed two years prior to project close and the project's objectives and outputs were substantially achieved. The one year project extension was used to encourage the deepening of poverty targeting and expansion of those activities that had a proven track record of increasing agricultural on and off farm incomes. As a result of the government's policies and the Bank financed project, the rural landscape has transformed into a highly efficient and diversified agricultural base since project launch. Agricultural production and productivity in these two provinces has increased considerably, with over 700,000 farm families directly benefiting from the project and another two million households benefiting indirectly from the project. The agro-processing component is responsible for direct employment of over 5,600 non-farm jobs and livestock processing plants annually purchase livestock from project households raising cattle, geese, sheep, and deer. Household survey data and focus group discussions suggest that the economic and social benefits of the project in both provinces were substantial. The project resulted in the improvement of rural economy and raised the quality and output of the agricultural and livestock products. Many farmers have been lifted out of poverty because of their engagement in crop diversification and "sustainable system fanning", which includes household engagement in agriculture and livestock simultaneously, instead of engaging and specializing in only one activity, as was the case before the project. As a result of a "systems" approach, - 6 -  the waste products of crops was used to feed livestock, and the waste product of livestock was used to fertilize crops. Contracts were established between project households raising livestock and those project financed livestock slaughtering houses. As a result, project households had a ready market for their livestock. With the advent of irrigation through the construction of the Song Qi and Song Po irrigation schemes, the cropping pattem changed from predominantly low value maize to entirely high value paddy with yields increasing by over two tons per hectare on those irrigated lands where irrigation was rehabilitated. Moreover, because of more efficient pumping, the water supply improved and the cost of electricity for pumping was reduced. Overall, output value of project financed activities has increased by over 2.9 billion Yuan per year. This includes an annual contribution of 60 million Yuan from the irrigation and drainage component, 270 million Yuan from the environment protection components, 150 million Yuan from the orchard component, 900 million Yuan from the livestock component and 1,500 million Yuan from the operational agro-processing units. In particular, conversion of over 21,500 ha land from dryland corn to irrigated paddy and wheat has diversified on-farm incomes. Per capita income of project beneficiary households grew an average of 8 percent per year, with per capita income rising from 1,000 Yuan to 2,300 Yuan (in real terms) over the almost ten year project implementation period. Status of Women and Female Participation. The project resulted in improving women's access to on-farm and off-farm project activities, and therefore their status in society. According to an assessment of gender impacts conducted at the end of the project (see Annex 8 for a summary of the study findings), as household income increased from project activities, the quality of life of women in particular, improved significantly. Moreover, the technical capability of women to implement project activities improved through their attendance of training workshops organized by provincial and county PMOs. Specifically, women participated in training for pesticide application, prevention of livestock disease, fertilizer application and fruit tree care. Finally, women's decision-making power over the family budget improved significantly as a result of increases in income from project activities. Finally, over 500,000 people were trained in some technical skill necessary to implement the project. Remarkably, approximately 50 percent were women (see Section 4.5 for a discussion on the evolving nature of female empowerment). Environmental Impacts. The environment has improved as a result of the project in the following ways, (i) irrigation and drainage works construction greatly reduced the frequency of the natural disasters, such as drought and flood; it has also prevented soil erosion; improved the soil structure; and increased the soil fertility. For example, Wazhonggao and Huajia Drainage Improvement Schemes resulted in improving cropping patterns and greater use of inputs due to farmers having confidence that their crops would not be destroyed by floods; reducing crop losses and damage to houses and other infrastructure due to flooding; (ii) channels and dams were built to protect trees. The coverage of plantation increased, and the ecological environment of 11 valleys of the semi-mountainous areas are reported to have improved; (iii) the orchard component increased the vegetation of barren hills, thereby reducing soil erosion; and, (iv) excrement of cattle, sheep, deer and geese were used as organic fertilizers to increase the output of crops and to improve soil conditions. Finally, each Bank-financed agro-processing unit was required to construct an effluent treatment facility in compliance with state environmental protection standards. 4.2 Outputs by components: (a) Irrigation and Drainage (US$40.1 million, 9.6 percent of expenditures). The component is rated highly satisfactory due to its generating significantly higher yields from higher value crops, and due to the corresponding socio-economic benefits gained by thousands of poor households. Achievements of physical targets is high and incomes have more than doubled among project beneficiary households. The component reclaimed over 6,200 hectares of saline-alkaline wasteland, converted over 21,000 hectares of dryland corn - 7 -  to irrigated wheat in ten counties, constructed the Song-Qi and Song-Po irrigation schemes, bringing over 3,590 and 4,500 hectares under irrigation, respectively, financed a dam safety initiative for Fengman Reservoir, and improved over 11,500 hectares of poorly drained and waterlogged areas. A majority of the irrigation investment went to run of the river irrigation systems. However, tube wells were also financed with corresponding pumping stations. One concern not adequately addressed, however, is the long-term sustainability of the ground water supply. Some key outcomes and outputs that merit further detail are outlined below: * Irrigation: The contribution of the Song Qi and Song Po irrigation schemes have transformed the rural agricultural landscape significantly, even beyond the project area. Moreover, these two schemes and those project staff responsible for managing the implementation of this component have been formally recognized by the Provincial Government for their outstanding contribution to agricultural development. All 3,590 hectares identified in the SAR as the target area under the Song Qi scheme are receiving irrigated water. Productive output of rice has increased from 5.25 tons to 7.5 tons per hectare, and per capita income among beneficiary households has increased by over 100 percent, lifting several thousand individuals out of poverty over the course of the project. Similarly, the Song Po irrigation scheme exceeded its SAR coverage target of 4,500 hectares. The productive capacity of irrigated rice in this area has increased by 300 kilograms per hectare per crop, with income rises of approximately 844 Yuan. Moreover, training was received by 45 technicians, 120 farmer technicians and 2,230 beneficiary farmers. * Drainage: The Wazhonggao and Huajian drainage improvement subcomponent in Nong An was successfully completed in 1996-97 to serve an area of 5,200 ha at Huajia and 6,500 ha at Wazhonggao. Finally, the Fuyu (Song Yuan) groundwater irrigation scheme has had tremendous impact on productivity and income. Before the improvement, the output of corn per hectare was approximately 5,000 kilos at 0.8 Yuan/kilo. However, after the improvement, per hectare irrigated wheat yielded 7,500 kilos at 2.0 yuan/kilo. Similarly, outputs under Conversion sub-projects include construction of 570 deep wells (including 120 electric wells), 450 diesel wells, and 874 shallow wells; 215 km power lines for transmission and distribution; and 600 pump houses. Output under wheat project included: 2153 wells including 976 electric wells, 977 diesel wells and 200 other types of wells; 644 well houses; and 780 km power lines for transmission and distribution. In addition, 21,920 person-days of training was given to technicians at the County, Township and Village level, including 4,012 person-days of training for female technicians. (b) Soil and Water Conservegion (US$5.9 million, 1.4 percent). The component is rated satisfactory since it adequately implemented engineering and biological measures to conserve soil and water in 11 micro sheds in Shuangyang County of Changchun Prefecture, Jilin Province. The component financed the building over one dozen check dams, gully protectors, interceptor channels and associated cross-drainage structures. Biological measures consisted of planting several thousand hectares of larch, poplar and fruit trees. In order to provide adequate water for the growth and maintenance of these trees, several dozen catchment areas were built to create small reservoirs and deep tube-wells were drilled. (c) Field Crop Development (UJ$60a9 million, 14. 7perceat). This component is rated highly satisfactory since crops were adequately diversified from com to irrigated wheat and paddy, and high value cash crops growing within greenhouses. Each sub-component, fertilizer purchase, crop development, medicinal herb cultivation, vegetable greenhouses (and other revolving fund activities), and research & training outputs far exceeded planned investments. -8 -  * Fertilizer: Over 28,000 tons of fertilizer was purchased for irrigated paddy and wheat cultivation and several thousand farmers gained access to this input whereas before the project they had limited access to high nutrient fertilizer. * Crop Development: The project developed unproductive saline and alkaline soil into productive land with irrigation facilities, improved seeds and fertilizer. This activity involved 57,718 households (230,872 beneficiaries) in 6 Cities, 11 Counties, 88 Townships and 525 Villages. Total output from project-financed investments exceeded 42,643 tons of paddy, 68,300 tons of wheat, 34,700 tons of corn, 6,836 tons of soybean and 94,400 tons of high value vegetables. * Medicinal Herbs: The development of 1,333 hectares of Chinese Medicinal Herbs was completed in 1998. The project sites were located in six Townships and 72 Villages and involved over 20,000 farm households. A medicinal herb processing plant was also set up to provide production inputs and a market linkages to farmers. * Vegetable Greenhouses: Approximately 18,300 greenhouses were constructed, covering 1,236 ha of land to grow high value cash crops such as cucumbers, leeks, tomatoes, egg plants, and other vegetables. The total project production of vegetables was 45,885 tons which provided an average net income of Y5,700 per greenhouse. The project was located in 106 villages and involved over 4,913 households. Moreover, 913 technicians and 9,650 farmers were trained. * Research and Training: Four special studies were financed, Integrated Pest Management of Wheat, Pest Control for Rice, Groundwater Assessment and Water Balance, and Typical Design of Tubewell Irrigation. Moreover, 39,143 person-days of training were administered to technicians, of which 5,923 person-days was for training female technicians. There was also 117,822 person-days of farmer training, of which 40,059 person-days were for female farmers. (d) Orchard Development (US$34.4 million, 8.3 percent). This component is rated satisfactory. High value fruit trees were planted across both Liaoning and Jilin Provinces. In Liaoning Province, sub-component activities covered seven Counties and three State Farms in Jinzhou, Chaoyang and Huludao in westem Liaoning and Haicheng City in southern Liaoning. Over 250,000 apple trees were planted over 3,000 hectares and accomplishing 100 percent of the SAR target; 270,000 apple trees were grafted covering 4,658 hectares, and over 1,240 hectares of existing apple orchard were rehabilitated. Over 289,000 pear trees were planted covering over 3,000 hectares of land and 1,000 ha of existing pear orchards were rehabilitated; Over 160,000 Yinbai apricot trees were planted in the project area covering over 2,000 hectares, 4,726 Dabian apricot trees were planted covering 2,740 hectares. Finally, one nursery was established on an eleven hectare tract of land. In Jilin Province, this subcomponent was designed to plant approximately 5,000 hectares of apple-pear. At project completion, over 8,000 hectares of apple-pear were actually planted with over 4.8 million trees, achieving 130 percent of the SAR original plan. In total, 10 vehicles and 15-hp tractors were also purchased. (e) Livestock Development (US$88.0 million, 21.2 percent). This component is rated satisfactory and project outputs far exceeded the planned SAR outputs. In Liaoning Province, approximately 22,000 households in 6 prefectures and 13 counties participated in this component. In total 6,633 farm households participated in cattle fattening and at project close, 274,000 cattle were fattened and marketed; 3,365 farm households participated in breeding 16,300 cows, of which 4,000 were marketed as beef cows, another 4,000 as young cows for sale, and the remaining for dairy; over 1,000 farm households participated in sheep breeding and fattening. In total, the project produced over 30,000 mature ewes and a total of 140,000 -9-  sheep were marketed and 1,090 tons of wool was produced; 148 farm households participated in raising 890 deer and over 2.5 tons of pilose antlers were produced and sold; over 9,000 families produced 765,000 commercial geese for market annually; and, 2,925 households were engaged in rabbit breeding which produced millions of rabbits. In Jilin Province, approximately 43,486 farmer beneficiaries participated in these activities of which 23,889 or 56 percent were women. 25,831 households participated in cattle breeding and by the end of the project, more than 104,955 cattle had been sold to slaughter; sheep breeding produced over 500,000 sheep of which 200,000 were sold for slaughter; 1,200 deer raising households produced 9,000 deer and 2,700 kilos of antlers for sale; 7,560 farmers raised geese, of which 83 percent were women; 3,375 households participated in pig-raising activities and over 300,000 were sold to slaughter. () Livestock Processing (Please see component H and explanation in Section 3.4). This component is rated marginally satisfactory, but could become satisfactory as a result of private sector joint-venture partners now investing in these plants. In total, five livestock processing plants were either newly constructed or rehabilitated under the project, including a geese slaughterhouse, a sheep slaughterhouse and three beef cattle slaughterhouses. Of the five, two are not yet operational due to County counterpart financing problems. Of the remaining three operational plants, one has ceased operation as a result of a dispute between the owners, De Hui County authorities and project farmers. Once these issues are resolved (which is likely) due to significant demand for untainted meat (no hoof and mouth disease, etc) both within and outside China, the processing plants will be able to slaughter and export thousands of tons of meat annually to overseas markets, thereby also further increasing income to farm households supported by the project to breed and fatten livestock purchased by these slaughterhouses. (g) Aquaculture Development (US$26.8 million, 6.4 percent). This component is rated satisfactory. Under this component, all planned sub-projects, with the exception of shrimp culture have been completed since 1996. (i) Planned shrimp farm development was halted due to the threat of aquatic disease; (ii) Approximately 9,138 rafts of scallops were developed, (iii) one scallop hatchery was constructed, 10,700 hectares of hard clams were developed, 6,333 hectares of short-neck clam cultivation was developed, (iv) 733 hectares of mature river crab and 400 hectares of river bottom crabs were developed, a river crab hatchery was constructed, and annual research was conducted on the environmental condition of Liaodong Bay; (v) a shellfish hatchery was constructed; (vi) two cold storage plants were constructed; and (vii) provisions for a laboratory and analytical equipment, field observation and monitoring equipment, microcomputers, and office equipment and vehicles to enable the Bureau of Aquatic Products, Marine Research Institute and extension services to function more effectively and conduct regular monitoring of the environment, particularly in the project areas were developed. (l) Agro-Processing (US$154.3 million, 37.1 percent). This component combined the originally conceived livestock processing component in the SAR. This component is rated satisfactory for Jilin province, but unsatisfactory for Liaoning and overall. Only one of eight Bank-financed agro-processing plants are currently operational in Liaoning Province, whereas four of six plants are operational in Jilin Province. Of the five operational plants, Liaoyuan Textile Mill, Lishu Alcohol Plant, and Da'an Gelatine Mill can be regarded as fully successful. Yushu Modified Starch Mill is likely to be fully functioning sometime in mid-2003. Those operational plants are in strong financial positions under excellent management and well defined export markets. Moreover, those operational plants have transformed from state owned enterprises to semi-private joint-venture partnerships between the County and private sector entity. - 10-  (i) Institutional Support/Project Management (US$5.0 million, 1.2 percent). This component is rated satisfactory. All project management buildings were constructed, 31 vehicles purchased, 34 computers purchased and 480 person-days of overseas training was achieved. Please refer to the discussion of the borrower's performance in Section 7. 4.3 Net Present Value/Economic rate of return: The economic rate of return (ERR) for the project as whole is estimated at 22 percent (NPV is 1A2 billion Yuan;