IMPLEMENTATION COMPLETION REPORT CHINA …documents.worldbank.org/curated/en/790371468261868980/pdf/multi...- Iv - CHINA MID-YANGTZE AGRICULTURAL DEVELOPMENT PROJECT (CREDIT 2172-CHA)

Document ofThe World Bank

FOR OFFICIAL USE ONLY

Report No. 16632

IMPLEMENTATION COMPLETION REPORT

CHINA

MID-YANGTZE AGRICULTURAL DEVELOPMENT PROJECT

(CREDIT 2172-CHA)

June 3. 1997

Rural and Social Development DivisionChina and Mongolia DepartmentEast Asia and Pacific Regional Office

This document has a restricted distribution and may be used by recipients only in theperfornance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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CURRENCY EQUIVALENTSCurrency UJnit = Yuan (Y)

1989 (appraisal) $1=Y 3.761990 $1 =Y 4.781991 $1=Y 5.321992 $1 =Y 5.531993 $1 =Y 5.761994 $ 1 =Y 8.601995 $1 =Y 8.501996 $1=Y 8.30

FISCAL YEARJanuary I - December 31

WEIGHTS AND MEASURESI meter(m) = 3.28 feet(ft)I kilometer(km) 0.62 miles(mi)I square meter(m2 ) = 10.76 square feet(ft2)1 square kilometer (km 2 0.4 square miles(mi2 )

2I hectare(ha)=0.01 km = 2.47 acres(ac)= 15 mu2I mu = 666.7 m = 0.0667 ha

ABBREVIATIONS AND ACRONYMS

CFDC - County Fruit Development CorporationFDC - Fruit Development CorporationJPMO - Joint Project Management OfficeICB - International Competitive BiddingIDA - International Development AssociationLIB - Limited International BiddingMACHIMPEX - China National Machinery Import Export CorporationMOA - Ministry of AgricultureNCB - National Competitive BiddingPMO - Project Management OfficePPMO - Provincial Project Management OfficeSAR - Staff Appraisal ReportSOE - Statement of ExpensesSTC - Scientific and Technical Committee

Vice President Jean-Michel Severino, EAPDirector Nicholas C. Hope, EA2Division Chief Joseph Goldberg, EA2RSStaff Member Rapeepun Jaisaard, Sr. Agriculture Economist,

EA2RS

FOR OFFICIAL USE ONLYCONTENTS

PREFACE . iii

EVALUATION SUMMARY ................................................. iv

PART 1: IMPLEMENTATION ASSESSMENT ..................................... 1A. Project Objectives .................................................. lB. Results and Implementation Experience .................................................. 2C. Project Impact .................................................. 6D. Major Factors Affecting The Project .................................................. 9E. Project Sustainability ................................................. 10F. IDA Performance ................... ................................................................................ 11G. Borrower Performance ................... 12H. Assessment of Outcome ................... 13I. Future Operation ................... 13J. Key Lessons Learned ................... 14

PART II: STATISTICAL TABLES ........................... 15Table 1: Summary of Assessments .15Table 2: Related Bank Loans/Credits .16Table 3: Project Timetable .16Table 4: Loan/Credit Disbursement: Cumulative Estimate and Actual .16Table 5: Key Indicators for Project Implementation .17Table 6: Key Indicators For Project Operations .20Table 7: Studies Included in Project .23Table 8A: Key Indicators For Project Operations ............................................... 24Table 8B: Project Costs in $ Million ............................................... 25Table 8C: Project Financing ............................................... 26Table 9: Economic Costs and Benefits ............................................... 27Table 10: Status of Legal Covenants ............................................... 28Table 11: Compliance with Operational Manual Statements ...................................... 29Table 12: Bank Resources: Staff Inputs ............................................... 29Table 13: Bank Resources: Missions ............................................... 30Table 14: Role of Women in Project ............................................... 30

ANNEX A: ICR MISSION'S AIDE MEMOIRE ................................................. 31

ANNEX B: BORROWER'S CONTRIBUTION TO THE ICR .. 38A. Project Objectives ................................................. 38B. Implementation Experience and Outcome ................................................. 39C. Key Lessons Learned and Future Operation ................................................. 40

ANNEX C: PHOTOGRAPHS OF PROJECT AREAS .............................................. 42

This document has a restricted distribution and may be used by recipients only in theperformance of their official duties. Its contents may not otherwise be disclosed withoutWorld Bank authorization.

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IMPLEMENTATION COMPLETION REPORT

CHINA


(CREDIT 2172-CHA)

PREFACE

This is the Implementatior. Completion Report (ICR) for the Mid-YangtzeAgricultural Development Project in China, for which a credit in the amount of SDR 48.6million ($64 million equivalent) was approved on August 8, 1990 and made effective onDecember 4, 1990.

The credit was closed on December 31, 1996. It was fully disbursed and the lastdisbursement took place on April 16, 1997.

The ICR was prepared by Rapeepun Jaisaard, Task Manager, EA2RS with theassistance of Zhong Tong (Consultant) and Arlene Reyes (EA2RS). The draft wasreviewed by Messrs. Joseph Goldberg, Chief, EA2RS and Yo Kimura, Project Advisor,EA2DR. The borrower provided comments which are included in Annex B to the 1CR.

Preparation of the ICR was completed following the Bank ICR mission and isbased on materials from the project files and meetings with the project staff in the field.The borrower contributed with views and data requested, its own evaluation of theproject's execution and comments on the draft ICR.

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CHINA


(CREDIT 2172-CHA)

EVALUATION SUMMARY

Project Objectives

1. Project objectives were to in( .ease the amount, productivity and marketability offruit production in low income areas of Sichuan, Hubei and Chongqing and thus increaseincomes and alleviate poverty. The project aimed to accomplish this by structuringproduction to satisfy domestic and export demand for quality, variety and seasonality andby stimulating the development of effective marketing institutions. Specifically, theobjectives were to: (a) develop 11,986 ha of new orchards on then uncultivated hillyslopes and rehabilitate 2,473 ha of existing orchards (approximately 80 percent of theplanted area was to be citrus and 20 percent lychees, longans, pears, loquats, plums,yellow peaches and kiwi); (b) increase the provincial agriculture bureaus' ability toidentify, propagate and distribute healthy, disease-free planting material, toinstitutionalize virus indexing and budwood registration programs, and to providetechnical assistance for research and extension programs and training for managerial andtechnical staff in all aspects of fruit development and marketing; (c) establishcommercially independent Fruit Development Corporations (FDCs) to market qualityfruit in local, distant and export markets by introducing modern postharvest techniquesand investing in packing and storage facilities; and (d) provide a demonlstration model forfruit production that would be applied in other areas.

2. These project objectives were in line with the Central and Provincial Governmentstrategies of making efficient use of availablc human, land and water resources anddiversifying the incomes of rural people through production of high-value crops. 'I'heseobjectives were clearly spelled out in the project documentation and supported by projectstaff and beneficiaries. They reflected the Government's implementation capacity andwere consistent with both the Government's regional development strategy and the Bank'sCountry Assistance Strategy at the time of project preparation.

Implementation Results and Experience

3. The project has achieved its objectives of introducing new technologies in thedevelopment of wasteland along the Yangtze river into high-quality orchards. It setadvanced technological standards for land development and lhorticultural practices,thereby producing high fruit yields and quality and consequently large benefits forfarmers. The project achieved all its physical targets and produced results even higherthan the ambitious SAR estimates. The FRRs for orange varieties ranged from 25-35percent in new orchards to 38-55 percent for rehabilitated ones, typically higher by

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several percent than the SAR estimates. Participating farmers acquired more land andearned additional income, initially from intercrops, then from the new orchards, or bydoubling or tripling yield in rehabilitated orchards.

4. Total expenditure at project completion was Y 869.6 million, 20 percent morethan estimated at appraisal due to high inflation in China after 1990. However, due todevaluation of the yuan against the dollar during implementation, total project cost, whencalculated in dollars, was $6 million less than the SAR estimates. The delay in creditapproval owing to political events in 1989 delayed the start of land development, seedlingproduction and planting of fruit trees and resulted in slow initial disbursement. However,disbursement rates caught up with the SAR time line beiore project completion. The totalamount disbursed was $69 million, an amount higher than the original $64 millionequivalent credit due to the depreciation of the dol]ar against the SDR. The projectclosed on December 3 1, 1996, after a one year extension.

5. IDA's performance in project identification, preparation and appraisal wassatisfactory. IDA played a catalytic role in pooling international and domestic researchexperience. It helped the government to successfully develop a project that met itsobjectives. IDA's performance during supervision is viewed as highly satisfactory inhelping the Project Management Offices (PMOs) resolve implementation problems andproviding technical advice at each step of project implementation. The performance ofthe borrower was highly satisfactory with strong support from central, provincial andlocal governments. The project was well managed, and the farmers were enthusiastic,hardworking and in many cases creative. The project's components were for the mostpart implemented in line with the agreed implementation arrangements, and appropriateactions were taken to solve problems as they occurred. The supervisory role of theproject's Scientific and Technical Committee (STC) contributed greatly to the hightechnical standards adopted by all the orchards. The borrower complied promptly andcompletely with the covenants prescribed in the legal agreements.

Summary of Findings, Plans for Future Operations, and Key Lessons Learned

6. Overall Finding. The project's overall outcome is considered highly satisfactory.It achieved its objectives and did it with a high degree of sustainability. The mostsignificant accomplishments were the introduction of new technologies, varieties andmanagement systems. The technologies enabled the establishment of a budwoodregistration program and virus-free zones, high orchard horticultural standards, moreproductive varieties by top-grafting, and improved fruit quality by enhanced postharvesttreatment. The availability of varieties that mature at different times allows an extendedharvesting period. Better irrigation, inputs and management have had tremendous effectson yield, production and quality. The project packing plants grade, clean, wax and labelthe fruit to make it ready for up-scale markets and exports. The overall economic rate ofreturn of the project is very high; at 40 percent it is even higher than the already highappraisal estimate of 34 percent.

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7. Project Impact. The project successfully increased income and employment forparticipating households and workers. It doubled the per capital income of about 300,000farm families and provided job opportunities for about 130,000 workers duringconstruction and implementation. Hlarvesting and postharvest activities have providedand (will increasingly provide) job opportunities in botlh orchards and packing houses,where 30 percent of the workers are women. The project has already played a largedemonstration role in the development of the Three (Gorges area and in the integration offruit production, processing and marketing. Large numbers of nonproject farmers nowuse virus-free seedlings from the project nurseries and sell fruit through the project'sFDCs. It appears that the hectarage of new orchards developed by farmers outside theproject area amounts to four to five times that in project orchards. The demonstrationeffect for rehabilitated orchards is about three times the area of the project's rehabilitatedorchards. The project already has significant impacts in alleviating poverty, reducing soilerosion and generating linkage benefits.

8. Sustainability. The policy environment provided by the central and localgovernments has been and continues to be favorable to the sustainability of the project.Sichuan and Hubei Provinces and Chongqing Municipality all have demonstrated strongcommitment. They have developed operation plans in consultation with the prefectureand county governmlents that would: (a) maintain the l'MOs and the FDCs, with somemodifications in the distribution of staff among fLnlctions; (b) continue to pay the salariesof the fruit production technicians who are training farmers; and (c) provide operationalbudgets for the PMOs and the FDCs until they become self-sustaining. Since themajority of orchards are owned and operated by farmers, the actual work of orchardmaintenance rests with them. Institutions and markets developed under the projectcontinue to provide them with strong incentives to maintain orchard quality andproductivity in order to earn additional income. UJnderlying future operations is the factthat the market demand for quality fruit is strong, in line with expectations during projectpreparation.

9. Future Operation. The future operation of the project will need to concentrateon orchard maintenance, postharvest processing and marketing. The PMOs will continueto be responsible for: (a) production management to make sure that production standardsare maintained; (b) technical training for orchard maintenance; (c) disease and pestmonitoring, control and forecasting; (d) advice to farmers on fertilizer type andapplication and on irrigation timing, frequency and volume; (e) maintenance of standardtechnologies and tools for fruit picking; (f) information gathering for productionprojection; (g) maintenance of project facilities such as irrigation facilities and roads;(h) collection of project household data for conducting future performance audits of theproject; and (i) in cooperation with Bureaus of Finance at each level, recovery of theCredit plus interest in line with on-lending agreements. The County FDCs will continueto be responsible for (a) reliably providing necessary inputs to project farmers,(b) operating packing lines installed under the project, and (c) assisting farmers inmarketing their products. The performance of the County FDCs will depend on theirability to develop marketing channels and procure farmers' production, their ability to

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develop short, medium and long-term marketing strategies and their success inestablishing direct linkages with large domestic and overseas wholesalers.

10. Lessons Learned. The key lessons learned from the project include thefollowing: (a) Strong research and scientific bases drawn from domestic andinternational experience and the involvement of a science and technical committee havebeen essential to the success of this project. (b) Active roles of Ministry of Agriculture,provincial and local governments and research institutes in carrying out centralgovernment policy and cooperation among them contributed to the smoothimplementation and success of the Project. (c) Staff in the implementation agenciesshould be drawn from technical e areaus familiar with the technical details of theoperation. (d) Participation of farmers with a sense of ownership from the beginningmade a big difference in how the project was implemented. (e) Adequate and timelyallocation of counterpart funds according to schedule is a prerequisite for smooth projectimplementation. Finally, (f) more supervision missions should have been budgeted,particularly with the object of assisting the Provincial PMOs with procurement anddisbursement problems, and earlier TA for marketing is needed to start marketing off on astrong footing.

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CHINA


(CREDIT 2172-CHA)

PART I: IMPLEMENTATION ASSESSMENT

A. PROJECT OBJECTIVES

1. The project objectives w.re to increase the amount, productivity, andmarketability of fruit production in low income areas of Sichuan and Hubei Provincesand in Chongqing Municipality and thus increase incomes and alleviate poverty. Theproject aimed to accomplish this by structuring production so as to satisfy domestic andexport demand for quality, variety and seasonality and by stimulating the development ofeffective marketing institutions. The project objectives were in line with the Central andProvincial Government strategies of making efficient use of available human, land andwater resources and diversifying the incomes of rural people through production of high-value crops.

2. The specific objectives of the project were to:

(a) develop 11,986 ha of new orchards on then uncultivated hilly slopes andrehabilitate 2,473 ha of existing orchards (approximately 80 percent of theplanted area was to be citrus and 20 percent lychees, longans, pears,loquats, plums, yellow peaches, and kiwi);

(b) increase the provincial agriculture bureau's ability to identify, propagateand distribute healthy, disease-free planting material, to institutionalizevirus indexing and budwood registration programs, and to providetechnical assistance for research and extension programs and training formanagerial and technical staff in all aspects of fruit development andmarketing;

(c) establish commercially independent Fruit Development Corporations(FDCs) to market quality fruit in local, distant and export markets byintroducing modem postharvest techniques through investing in packingand storage facilities; and

(d) provide a replica model for fruit production in other areas.

3. The project was designed to provide demonstration models for the development ofhilly waste lands into orchards. The major emphases were on: (a) setting hightechnological standards (in land development and horticultural techniques); (b) increasingyield and quality of fruit (varieties, cultural practices and irrigation); and (c) maximizingbenefits to farmers (emphasis on fresh fruit production, extension of harvest season, and

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strengthening of postharvest activities and marketing). This design was clearly spelledout in the project documentation and supported by project staff and beneficiaries. Theobjectives reflected the Government's implementation capacity and were consistent withboth the Government's regional development strategy and the Bank's Country AssistanceStrategy at the time of project preparation.

B. RESULTS AND IMPLEMENTATION EXPERIENCE

4. Physical Results. The project has achieved its physical targets for nursery andmother-tree-garden development, orchard development, orchard rehabilitation andconstruction of postharvesting and t' iining facilities. According to the Key Indicators forProject Implementation table, the project has developed 77.5 ha of nursery and 120 ha ofmother-tree gardens, rehabilitated 2,473 ha of existing low-yield orchards and developed11,986 ha of new orchards. In nursery development, Sichuan used polyhouse nurseriesinstead of the open-field nurseries used in Hubei and Chongqing and built 60 polyhouseson 4 ha or land. The seedlings from polyhouse nurseries are stronger and double the sizeof the ones from the open field nurseries. In total, the development of new orchards was100 percent of the SAR estimate, but in reaching this overall total, the new citrusorchards were 103 percent of the SAR target and those of other fruits 87 percent, largelydue to the substitution of plantings of navel and mandarin oranges for those of other fruitsin response to market demand and climatic suitability. Within other fruits, there was alsosome shift - from lychee to longan hectarage. Overall, 11,986 ha of new orchards and2,473 ha of existing orchards (the latter also 100 percent of the SAR estimates) weredeveloped.

5. The project built 935 km of orchard-access roads (105 percent of SAR estimates),773 km for the new orchards and 162 km for the rehabilitated ones. These improved theaccessibility of the orchards and, thus, lowered transport costs for inputs and outputs andincreased fruit quality. The project also constructed irrigation ponds, reservoirs, pumphouses, irrigation facilities and electrical facilities. The deviation in the numbers ofdiesel pumps and electric pumps from the SAR estimates was due to the adjustment ofthe irrigation facilities during the mid-term review (para. 34). The construction of a smallorchard house (200 m2) in each orchard for storage. an orchard office and temporarysleeping quarters for technicians were also added during the mid-term evaluation.

6. Training centers cum county project management offices (1,000m2) wereconstructed and equipped with office equipment and training facilities in 33 projectcounties, one prefecture and one in Hubei Province. Fruit packing lines and houses (300-500m2), warehouses (500m2 ) and ventilated storage facilities (500m2) were alsoconstructed in thirteen of them. All project counties were provided with several pickupsand 5-ton trucks each for distributing inputs and transporting fruit. Two barges wereprocured for water transportation.

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Implementation Experience

7. General. The project was implemented by the Provincial Project ManagementOffices (PPMOs) of Sichuan, Hubei and Chongqing Municipality and coordinated by aJoint Project Management Office (JPMO) at the Ministry of Agriculture (MOA) inBeijing. Under the PPMOs, there are county PMOs in all 33 project counties. FruitDevelopment Corporations (FDCs) were set up at provincial and county levels. AScientific and Technical Committee (STC) was appointed to provide overall technicaladvice and coordinate project scientific work with MOA and research institutes.

8. Strengthening Research atid Development. The project assisted SichuanProvincial Fruit Research Institute, Central China Agricultural University in Hubei andthe Chinese Academy of Agricultural Sciences in Chongqing in setting up virus-indexingprograms and providing temperature controlled greenhouses, laboratory equipment,training and technical assistance. These institutes had provided technical bases for thedevelopment of the nurseries under the project.

9. Scientific and Technical Committee. The STC was composed of eminentscientists and technical specialists from several research institutes in the areas of fruitdevelopment, virus indexing and budwood registration. It played an important role in(a) setting technical standards for orchard establishment and rehabilitation, (b) developingcriteria for site selection and management, (c) reviewing irrigation layout and orcharddesign, (d) inspecting and approving work at completion, (e) reviewing researchproposals, and (f) advising the PMOs and FDCs on technical matters.

10. Fruit Development Corporations (FDCs). A few of the project counties hadexisting FDCs, and these were strengthened. In the others and at the provincial level,new FDCs were established under the project. The county FDCs assisted the farmers inorchard development and provided necessary inputs They were (and continue to be)responsible for packing lines installed under the project to provide farmers with enhancedpacking, storage and transportation services. They also assist farmers in marketing theirproducts. The provincial FDCs have very limited roles at the moment; their roles mayexpand when the orchards reach full production, if they are able to provide county FDCswith valuable export services.

11. Nurseries, Mother-Tree Gardens and Varieties. A nursery and a mother-treegarden were set up in each project county to ensure the availability of high quality virus-free seedlings for project farmers. The project promoted several new varieties developedby research institutes and tested them in the project areas for suitability to localconditions. The new varieties are superior in quality and also mature at different timesduring the year. Sweet orange (jincheng) has several superior qualities compared to thetraditional red tangerine variety-thicker skin-making it easy to transport withoutdamage, larger size, greater sweetness and lack of seeds. It is also an early maturingvariety (early to late October) and can therefore capture the early market and command ahigher price. Several navel varieties (bonanza, navelina, robertson and newhall) have

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been successfully grown in the project area. Navels are high value because of theirquality, storability and transportability. The fruit is a mid maturing variety (between mid-November and early December) and can also be stored for several months for marketingduring the spring festival. Mandarin oranges, promoted mainly in the Hubei project areascome in three varieties, which mature at slightly different times: from early September toNovember. Valencia is a summer orange which matures from April to May.

12. There are also superior varieties of'other fruits, such as the Sha Tian pomelo inChangshou, which was chosen by MOA as the best one for the area. There are alsonurseries producing the superior seedlings of lychee, longan and yellow peach developedby the Luzhou Horticulture Research Institute. Overall, the project nurseries providedseveral million seedlings to project farmers. The project nurseries are operated asindependent entities on a commercial basis.

13. New Orchards. The project developed 245 new orchards on marginal hilly landlocated in the 33 project counties along the Yangtze River. There were several stages inland development, site selection, survey, design, terracing and soil improvement. Thesite selection criteria were followed satisfactorily. In a few cases near the Three Gorgesin Hubei, orchards were established on slopes of more than 30 degrees due to the desireto establish orchards in some counties with limited available land. In these cases, the costof land development was higher than others. After early-on mission comments, siteselection criteria were strictly followed in later sites.

14. In the areas with rocky ledges, explosives were used to break up the rock. Rocksand rock slabs were then used for making terraces according to project standards.Supervision missions made several suggestions for correction of certain deficiencies, andthese were made. In order to develop soil in these rocky terraces, farmers dug trenchesone meter deep and one meter wide and filled them with green and pig manure, rapeseedcake, lime and compound fertilizer. Green manure and bean crops were planted in thispresoil, which was left to mature for a year, and then planted with seedlings from theproject's nursery in a one-meter-deep hole filled with green manure and other fertilizers.

15. Almost all the project sites were located on sloping land. Irrigation ponds(reservoirs) were therefore able to be built on the hills above the orchards. Water isprovided to the orchards in two ways. It is either pumped uphill to the high levelreservoir from a low lying water source using a stationary electric or diesel pump locatedin a small pump house or a portable diesel pump or a water source above the orchard iscaptured and then distributed downhill through a distribution network (pipes or openditches). Field irrigation is carried out by hand-held-hoses or, in a small number of cases,by sprinklers. Irrigation design was a key element in the project, because effectiveirrigation is essential for consistent high yields and high fruit quality. The design alsoincorporated an appropriate drainage system to prevent terrace erosion.

16. Rehabilitated Orchards. Under the project 2,473 ha of existing orchards wererehabilitated. Soil improvement, better irrigation and improved budwood were the key

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elements in raising the productivity of the rehabilitated orchards. For soil improvement,the project provided explosives to blast rock, labor to dig trenches, and green manure,fertilizer and soil amendment to fill the trenches and place around the trees. Irrigationponds, pumps and pipes were installed. Some orchards were equipped with sprinklersystems. It took the existing orchards one or at most two years to improve the soil, buildirrigation facilities and top-graft the existing trees with new improved varieties. Themajority of the orchards were completely rehabilitated in 1992, with the remaining fewcompleted in 1993.

17. Yield and Production. The actual yield profiles for the new orchards in Hubeiand Chongqing are similar to those estimated in the SAR. Yield in some counties inSichuan is somewhat higher due to healthier-than-expected seedlings from the polyhousenurseries and good orchard management. Fruit production in the rehabilitated orchardscommenced on a limited scale between 1992 to 1995. In 1996 citrus production reached73,000 tons (43,500 tons from new orchards and 29,500 tons from rehabilitated orchards).Of this 35,200 tons was jincheng, 15,000 tons valencia, 11,500 tons navel, 10,600 tonsmandarin and 700 toons pomelo). It is expected that in the full production year of 2005,project production will exceed 300,000 tons. Production of other fruits in 1996 was4,600 tons for new orchards and 1,70 tons for rehabilitated ones. It is expected that in thefull production year of 2005. the project's production of other fruit will be about 42.000tons.

18. Financial Rate of Return (FRR). Financial rates of returns were recalculatedusing actual costs to project completion and 1996 constant prices. They were uniformlyvery high across all project activities and generally higher than SAR estimates. TheFRRs for orange varieties ranged from 25-35 percent in new orchards, higher by severalpercent than the SAR estimates. For instance, the major variety, sweet orange, with aFRR of 27 percent, was 3 percent higher than the appraisal estimate. Pomelo was the starperformer (34 percent compared to 18 percent at appraisal in Sichuan and 46 percent ascompared to 19 percent at appraisal in Chongqing). I The FRRs for rehabilitated orchardsare even higher than those for new orchards, ranging from 38-55 percent, generallysomewhat higher than at appraisal. The FRR for nurseries and mother-tree gardensranged from 29 to 56 percent, also significantly higher than at appraisal.

19. Training and Technical Assistance. Training was divided into internationaltraining and study tours and domestic training. The project has managed technicaltraining well, both international and domestic. Several workshops were carried out usingexpatriate TA and domestic experts in the areas of virus indexing and budwoodregistration. Domestic training was conducted for 6,200 technicians, who later trained33,400 farmers in the project areas. In all, there were 200 classes for land development(6,000 farmers), six classes for nursery and mother-tree garden management (260farmers), 79 classes for planting and irrigation (1,065 farmers), about 600 classes for tree

'Although pomelos were a small component in the project, the demonstration effect has been very large.

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maintenance, harvesting and postharvesting (26,000 farmers) and 50 classes for projectmanagement (2,300 staff). Each year, there was an annual conference where experts andproject staff from county PMOs and technical bureaus discussed project problems andshared their experiences. Several study tours were conducted in groups of about six toten persons in Thailand, USA, Spain, Australia, Israel and 1long Kong for orchardmanagement, irrigation management, postharvest treatment and marketing. Four-weekoverseas training was carried out for fruit cultivation techniques and disease and pestprotection. The actual numbers of persons receiving domestic and international trainingwere higher than SAR goals by 61 percent and 51 percent, respectively.

20. Procurement. Procurement otarted off slowly but proceeded as planned, and thedelivery of contracts was satisfactory. ICB procurement was centrally coordinated at theJPMO, but the contracts were signed with the user provinces. The bid documentpreparation, bid invitations, bid evaluation and contract awards were carried out by theChinese National Machinery Import and Export Corporation (MACHIMPEX) incooperation with the JPMO and the provincial and county PMO procurement units. Thebulk of fertilizers, chemicals, other inputs; steel, cement, wood, galvanized pipes, pumps,transformers, motors, processing lines, barges, and trucks--a total of 43 contracts valuedat approximately $53.4 million-was procured through ICB. There were six LIBcontracts-for laboratory and office equipment-valued at $6.6 million. Some pipes andsmall irrigation equipment valued at $1 9.0 million were procured under nationalcompetitive bidding (NCB). The remaining materials, tools and equipment, wherecontracts values were too small to justify ICB or NCB-valued at $6.1 million--wereprocured through direct shopping. All of the equipment procured met technicalspecifications, with significant delays in some cases, liowever. NCB procurements weredone according to the MOF standards. Ex-post review of NCB contracts below $200,000was carried out during the first few supervisions, and( a few contracts and SOE recordswere sampled and reviewed during later ones.

21. Disbursement. Despite the slow initial startup of the project, disbursementpercentages caught up with the SAR estimates before project completion. Disbursementwas 13 percent behind the SAR schedule in June 1992, but the gap narrowed to 4 percentof target in 1995, and disbursement closely followed the SAR estimates for the final twoyears of implementation. The last IDA credit disbursement was on April 16, 1997following loan closing on December 3 1, 1996. Project expenditures were estimated to be$136.9 million. The total amount disbursed was $69 million, higher than the originalcredit amount of $64 million equivalent due to the depreciation of the dollar against theSDR. SDR 48.6 million ($69.02 million) was fully disbursed.

C. PROJECT IMPACT

22. Increasing Income and Employment. The project has been very successful inincreasing income and generating employment for participating households and workers.

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The majority of orchards are collectively owned by village households.2 Orchards rangefrom 20 to 50 ha and are typically shared by 100- 150 farm households, who provide laborand other local inputs for land development, tree planting and maintenance. Eachhousehold has an average of 3-5 mu of orchard land in addition to their existing low landplots that they use for grain production. Income generated from new orchards is inaddition to the family income from other activities. For the new orchards, theirincremental income was initially from intercrops, with net revenue from Y 3,200 toY 10.000 per ha. After four years. when the orange trees start bearing fruits, income fromintercrops gradually declines and income from oranges increases. In 1995 net incomewas Y 13,000 per ha of sweet orangez and Y 26,000 per ha of the navel variety.

23. Incremental income from rehabilitating orchards comes from doubling or triplingthe yield and substituting better varieties for the original onles. Generally, therehabilitated orchards have top-grafted the existing red tangerine trees with sweet ornavel oranges. After four years, per capita incomiie in the project villages averagedapproximately Y 3,000. T he increase in income and standard of living is quite evident inthe villages adjacent to rehabilitated orchards. MIany project farmers in these villageshave built new houses from income received irom the orchards.

24. The project has provided income generating activities for participating farmfamilies and reduced surplus labor on farms. In addition, the project has provided jobopportunities for about 130,000 workers during construction and implementation.Harvesting and postharvest activities have provided and (will increasingly provide) jobopportunities in both orchards and packing houses, where 30 percent of the workers arewomen.

25. Poverty Reduction. Base line survey data slhow that 300,000 farm families in theproject area have benefited from the project. In 1990, the average rural per capita incomebefore the project in Sichuan, Chongqing and Hubei project counties was Y 240, Y 305and Y 374, respectively. By 1995, due to the project the net per capita income (inconstant 1990 prices) increased to Y 561, Y 610 and Y 773. respectively, a doubling ofincome in constant terms.

26. Disseminating Research Results. The project has had an impact throughdisseminating research and experimental results to farmers through the provision ofsuitable varieties of high quality seedlings and the provision of new cultural practices.The nurseries not only provide seedlings to project farmers but also to farmers outside theproject areas. The project has set up a budwood registration program and establishedvirus-free zones. Only registered budwood could be propagated in the project area. Top-grafting technology has been successfully adopted in the project area. This gives farmers

2Some orchards are owned by the CFDCs and operated commercially with contracted mangers who receiveincentive bonuses based on production and sales.

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the ability to respond to market changes with new and better varieties, which they canproduce within two years.

27. Government Recognition The project was designated by MOA and by theprovincial governments as an excellent example of horticulture development. Severalorchard managements have received governmental awards. Project technicians providetraining not only to project staff and farmers but also to nonproject government staff andfarmers outside the project area. During the implementation period, the project area hasreceived more than a dozen state leaders such as Premier Li Peng, and Vice Premiers ZhuRongji and Jiang Chunyun. The project has also been visited by more than 1,000 studygroups, in total of about 20,000 peorie. The leaders were looking for a successful modelfor land development, especially for the resettlement of farmers from the Three Gorgesarea. The project area has already resettled 2,500 families displaced by the Three GorgesDam.

28. Demonstration Impacts. The project already has had tremendous demonstrationeffects. Large numbers of nonproject farmers now use technologies developed under theproject, including virus-free seedlings from the project nurseries. It appears that thehectarage of new orchards developed by farmers outside the project area amounts to fourto five times that in project orchards. The demonstration effect for rehabilitated orchardsis about three times the area of project orchards. The poverty-alleviation impact of thesedemonstration effects should be very substantial, since many of the orchards are locatedin poor and remote areas, where options to raise incomes have in the past been verylimited.

29. Integration of Production, Processing and Marketing. The project has playeda demonstrative role in realizing the integration of production, processing and marketing.It has demonstrated that quality starts from production and is reinforced by effectivepostharvest treatment. It has started a new era of more sophisticated marketing. Theproject packing plants pay farmers differently by grade, then clean, wax and label thefruit to make it ready for up-scale markets and exports. Some packing houses store themfor festive seasons and higher prices. With different varieties harvested at different timesof the year, citrus becomes available for marketing all year around.

30. Reduction of Soil Erosion. The project has reduced soil erosion by promotingthe terracing of hilly land and by introducing vetiver grass to stabilize the soil. Thismethod of land development has been adopted in several locations along the Yangtze andin the Three Gorges area. Reduction in soil erosion was reported in all project counties.In an extreme example, the Jiangan County water conservancy bureau reported thateroded acreage had been reduced from 48 percent in 1990 to 13 percent in 1995.

31. Other Socioeconomic Benefits. Project investments have turned wasteland areasinto productive assets and have brought water, electricity and access roads to manyhighland villages. These have produced a substantial general development impact in thevillages, reducing the burden of carrying drinking water by women, and in some cases,

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providing additional village income through the stocking of irrigation pumping pondswith fish. The requirement for manure induced significant additional pig production inproject villages. These development benefits are large but undocumented.

D. MAJOR FACTORS AFFECTING TIIE PROJECT

32. Implementation Schedule. According to the SAR, the project was to be carriedout over a period of five and a half years, from June 1989 to December 1994 and closedin December 1995. The project was delayed due to the Chinese domestic disturbances ofJune 1989 and the Bank's subsequent decision to hold project processing. The projectwas finally negotiated in March 19' J, signed on August 29, 1990 and made effective onDecember 4, 1990, 18 months delay in all. The delay in credit approval affected the startof land development, seedling production and planting of fruit trees. The cost ofmaterials and labor was increased due to the unexpectedly high inflation rate, resulting inhigher costs for works. The project's closing was initially scheduled for December 31,1995 but was granted a one-year extension to December 31. 1996.

33. Shortage of Counterpart Funds. The majority of project sites are located inpoor counties with weak financial status. The lack of- adequate counterpart funds fromcounty governments affected implementation progress, especially during 1992, resultingin slow development of orchards and construction of irrigation ponds and facilities.Several meetings were held with local governments, which were eventually persuaded toallocate the necessary scarce resources.

34. Adjustment in the Design of Irrigation Facilities. Some adjustments in thedesign of irrigation layout and facilities were made during the Mid-Term Review. TheSAR model called for irrigation ponds on hilltops and uphill pumping by stationary pumpstations. After site selection, there were a number of orchards where gravity irrigationcould be practiced from up-hill water sources, removing the need for investment in pondsand pumps. In another proposal for adjustment, Sichuan proposed the use of mobilediesel pumps, which had been successfully experimented with in the project area. Thesediesel pumps can be moved from place to place in an orchard to give overall coverageand can carry water from small water sources to either hand held hoses or sprinklers (3 or4 to a pump). These modifications were reviewed and approved. The irrigation designwas changed so that 50 percent of the orchards were built in accordance with the SARmodel, 20 percent designed around uphill capture of water and 30 percent on mobilediesel pumps. These modifications saved some funds, which were allocated for orchardhouses.

35. ICB Procurement For Irrigation Equipment The irrigation equipmentprocured through ICB caused about a year's delay in orchard planting, because togetherthe domestic bureaucratic review and approval and the Bank's review were a lengthyprocess. There were further harmful delays due to the slow delivery of irrigationequipment to the scattered project-site locations, resulting in some young seedlings notreceiving irrigation water during the hot, dry months of June-August. Since no foreign

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supplier submitted bids in the first procurement, NCB was later used to procure irrigationequipment. The NCB procurements were done smoothly, and equipment was deliveredby 1995. Planting of trees and installation of irrigation facilities was finally completed inJune 1995.

36. Credit Allocation. The reallocation of funds from equipment, materials andsupplies to works was approved in September 1994. Two factors increased therequirement for disbursement for works. These were higher-than-programmed cost ofmaterials and labor due to unexpectedly high inflation and fact that NCB works contracts,which were used more than anticipated at appraisal, typically included materials thatwould not have been included if tht works had been done by force account as originallyplanned. If done by force account, the materials would have been paid through thematerials category. The use of NCB contracts, therefore, necessitated a technicalreallocation of funds as follows: for Sichuan, SDR 3.64 million from category 2 tocategory 1; for Hubei, SDR 2.17 million from category 5 to category 4 and forChongqing SDR0.15 million from category 8 to category 7. An increase was alsogranted in the percentage of expenditure to be financed for work categories from 40 to 50percent.

37. Cost Overrun. Total expenditure at project completion was Y 869.6 million(Sichuan Y 402.3 million, Chongqing Y 168.5 million and Hubei 298.8 million), which isY 151.4 million (20 percent) more that the Y 718 million estimated at appraisal. Thehigh inflation in China after 1990 caused substantial price increases in construction andlabor wages. This resulted in higher contract awards after 1990. The countygovernments and farmers increased their contributions to cover the additional cost.However, due to devaluation of the yuan against the dollar during the years of projectimplementation, total project cost, when calculated in dollars was only $130.8 million, $6million lesser than the SAR estimates.

E. PROJECT SUSTAINABILITY

38. The policy environment of the central and local governments has been andcontinues to be favorable to the sustainability of the project. The project hasdemonstrated the utility of government policies for the development of the Three Gorgesarea. Aside from the construction of the Three Gorges Dam, these were to plant high-value fruit trees to diversify production and to pay special attention to the control of soilerosion. MOA has drafted a new strategy paper for the commercialization of fruitproduction throughout the country by the year 2010 based on this experience.

39. Sichuan and Hubei Provinces and Chongqing Municipality all have a strongcommitment to ensure sustainability of the project. They realize that, even though theproject is at completion, their responsibility continues. The new orchards will continue toneed to be maintained at a high-quality level until they reach full production. Farmerscontinue to need training in tree maintenance, harvesting and postharvest technologies.For this reason, there is a need to provide strong technical support to farmers. Farmers

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will also continue to require timely and reliable provision of input supplies and CFDCprocessing and marketing services. Thus, it will be necessary to retain qualified, trainedstaff in the CFDCs.

40. The provincial and municipal governments have developed operation plans inconsultation with the prefecture and county governments; these plans became effectiveearly this year. Under the plans, the governments would: (a) maintain the PMOs and theFDCs, with some modifications in the distribution of staff among functions (more stafffor marketing in the FDCs and fewer for statistics and planning in the PMOs); (b) cancelthe Project Leading Group and the STC but assign their facilitative role to the AgricultureBureau, which will coordinate technical assistance to be available when needed;(c) continue to pay the salaries of the fruit production technicians who are givinginstruction to farmers; and (d) provide operational budgets for the PMOs and the FDCsuntil they become self-sustaining.

41. Since the majority of orchards are owned and operated by farmers, the actualwork of orchard maintenance rests with them. There are high incentives to maintain theorchards in order to earn additional income. Farmers in the rehabilitated orchards underthe project have typically contracted with technicians to give them advice and training ona regular basis and have compensated them. The orchards owned by the CFDCs areoperated commercially, with contract mangers who receive incentive bonuses based onproduction and sales. The market demand for quality fruit is strong, as expected duringproject preparation.

F. IDA PERFORMANCE

42. IDA's perfornance in project identification, preparation and appraisal wassatisfactory. The borrower appreciated "the Bank's conscientious work, scientificattitude, full preparation and clear-cut mind for the goal which satisfied people in theproject area." (from borrower ICR). Project preparation was based on the feasibilitystudies of Sichuan, Hubei and Chongqing, which contained general objectives approvedby the State Council. The mission's main goals during project preparation were tointroduce new technologies, varieties and management systems in developing a projectfor this poor area. IDA's role was a catalyst to pool international and domesticexperience. The project has benefited greatly from research results from China, Spainand the USA. It also benefited from the experience of advanced countries in commercialcitrus postharvest and marketing operations. During project preparation, alternativedesigns to include food processing options (i.e., juice, jams and preserves) werethoroughly investigated but rejected due to excess capacity in China of such processingplants and the urgent need to establish high-quality fresh-fruit markets. Appraisal wascarried out with a full team of specialists, and agronomic, financial and economicviability were fully evaluated.

43. In all, IDA carried out seven supervision missions of the project since 1990, atleast one each year. These missions visited project sites and farmers in inaccessible

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areas, reviewed implementation progress, helped to resolve implementation problems andprovided technical advice at each step of project implementation. During the first threeyears, the supervision missions contained, among others, irrigation engineers andhorticulturists to review the layout and design of the orchards and irrigation facilities andto observe the establishment of nursery and orchard planting practices. After Year 4 themission contained an agroprocessing specialist to inspect the packing lines and providerecommendations on plant layout, processing techniques and effluent treatment. Duringthe final year, a marketing specialist was in the mission to assist CFDCs to plan formarketing.

44. Supervision missions made significant contributions in the following areas:(a) improvement in horticultural standards of both seedlings and cultural practices,establishment of engineering standards for terracing, drainage and irrigation ("creating ahigh tide for striving for excellent engineering work"-borrower ICR); (b) assistance tothe PMOs in solving the problem of insufficient counterpart funds and working capital;(c) education of CFDC managers in how to commercialize their management andoperations; (d) stimulation of the FDCs to plan for accessing export markets; and (e) helpin arranging for TA and study tours. A Mid-Term Review was also conducted toconsider the reallocation of the remaining Credit and to assess the time needed tocomplete the project.

G. BORROWER PERFORMANCE

45. The borrower actively participated in the project from identification throughimplementation. Specialists from the Ministry of Agriculture (MOA) carried out studies,set technical standards and gave guidance on technical issues. MOA carried out its ownsupervisions in cooperation with provincial staff and also participated in IDA supervisionmissions. Overall, the project received strong political and financial support fromprovincial and local governments at all levels

46. The performance of the project management offices (PMOs) was also highlysatisfactory. The project has been well managed, under the leadership of the JPMO withgood cooperation from the PMOs and the FDCs at all levels. Project farmers wereenthusiastic, hardworking and in many cases creative. Project staff are competent, welltrained, and committed to the project objectives. The project components were for themost part implemented in line with the agreed implementation arrangements andappropriate actions were taken to solve problems as they occurred. The supervisory roleof the project's STC contributed greatly to the high technical standards adopted by all theorchards (the "4 Highs" motto of the project was developed). The coordinating role ofthe JPMO in procurement, disbursement, monitoring and evaluation, file managementand liaison with IDA contributed to the smooth implementation of the project.

47. The borrower complied promptly and completely with the covenants prescribed inthe legal agreements. Half-yearly progress reports, audited project accounts, togetherwith the audit reports, were also regularly produced and received generally on time. The

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project has a comprehensive record-keeping system, with all SOE receipts and contractskept in an orderly fashion.

H. ASSESSMENT OF OUTCOME

48. The project's overall outcome is considered highly satisfactory. The project hasachieved its objectives with a high degree of sustainability. The overall economic rate ofreturn is very high at 40 percent, even higher than the already high appraisal estimate of34 percent. The project has already played a large demonstration role in the developmentof the Three Gorges area into fruit orchards.

49. At full production, the project will produce 303,000 tons of citrus and 42,000 tonsof other fruits. At present, marketing is done collectively by farmers and throughCFDCs. The demand for quality oranges is high and all production has been and isexpected to continue to be sold after harvesting. The CFDCs which manage rehabilitatedorchards have already typically developed diversified distribution channels (institutions,wholesalers) and initiated timely promotional and marketing campaigns through themedia, trade fairs, advertising on packages and missions to Hong Kong. Oranges fromthe project area are sold in large Chinese cities and exported to Russia, Canada and HongKong.

50. A possible risk concerns the next five years, when orchards from nonprojectfarmers are in full production. At this time the higher volume of citrus production mayaffect prices and the markets. The CFDCs are aware of this possibility and are workingon establishing marketing networks and seeking to achieve early positions in qualityproduct markets. The risk will be minimized if the quality is maintained, sincecompetition will be smallest in the highest-quality markets.

I. FUTURE OPERATION

51. The future operation of the project will need to concentrate on orchardmaintenance, postharvest processing and marketing of the fruit. The provincialgovernments have produced operation plans that specify the continued responsibilities ofthe PMOs and FDCs in the project. The PMOs will continue to be responsible for:(a) production management to make sure that production standards are maintained;(b) technical training for orchard maintenance; (c) disease and pest monitoring, controland forecasting; (d) advice to farmers on fertilizer type and application and on irrigationtiming, frequency and volume; (e) maintenance of standard technologies and tools forfruit picking; (f) information gathering for production projection; (g) maintenance ofproject facilities such as irrigation facilities and roads; (h) collection of project householddata for conducting future performance audits of the project; and (i) in cooperation withBureau of Finance at each level, recovery of the Credit plus interest according to theonlending agreements.

52. The CFDCs will continue to (a) reliably provide necessary inputs to projectfarmers, (b) operate packing lines installed under the project to provide farmers with

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quality enhanced packing, storage and transportation services, and (c) assist farmers inmarketing their products. The success of the CFDCs will depend on their ability todevelop marketing channels and procure farmers' production, their ability to developshort, medium and long-term marketing strategies and establish direct linkages with largedomestic and overseas wholesalers. CFDC managers have started in this direction andhave already had some success. However, they require more training to acquire strongermarketing and management skills and to develop specialized marketing managementstrategies and financial mechanisms.

J. KEY LESSONS LEARNED

53. The project design to provide demonstration models for the development of wastehilly lands into orchards has proved highly satisfactory The key lessons learned from theproject are summarized below:

(a) Strong research and scientific bases drawn from domestic andinternational experience and the involvement of a science and technicalcommittee have been essential to the success of this project. This projectaspect is being used in the development of similar new projects in China.

(b) Active roles of MOA, provincial and local governments and researchinstitutes in carrying out central government policy and cooperationamong these institutions contributed to smooth implementation and thesuccess of the project.

(c) Staff in the implementation agencies should be drawn from technicalbureaus familiar with the technical details of the operation.

(d) Participation of farmers with a sense of ownership from the beginningmade a big difference in how the project was implemented.

(e) Adequate and timely allocation of counterpart funds is a prerequisite tosmooth implementation of a project according to schedule; the lack ofcounterpart funds inevitably leads to implementation delay and increasesin project cost.

(f) More supervision missions should have been budgeted, in particular toassist the PPMOs with procurement and disbursement problems.Continued TA for marketing is needed to get marketing on a strongfooting.

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PART II: STATISTICAL TABLES

TABLE 1: SUMMARY OF ASSESSMENTS

A. Achievement of Objectives Substantial Plartial Negligible Not Applicable

Macroeconomic policies XSector policies XFinancial objectives XInstitutional development XPhysical objectives XPoverty reduction XGender issues XOther social objectives XEnvironmental objectives XPublic sector management XPrivate sector development X

B. Project Sustainability Likely Unlikely Uncertain

x

C. Bank Performance Highly Satisfactory Satisfactory Deficient

Identification XPreparation assistance XAppraisal XSupervision X

D. Borrower Performance Hlighly Satisfactory Satisfactory Deficient

Preparation XImplementation XCovenant compliance XOperation (if applicable) X

E. Assessment of Outcome Highly Satisfactory Satisfactory Unsatisfactory HighlyUnsatisfactory

x

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TABLE 2: RELATED BANK LOANS/CREDITS

Loan/Credit Title Purpose Year of StatusApproval

Preceding Operations

Shandong ADP The purpose of the project was to 1989 Completed(Credit 201 7-CHA) assist in accelerating development

of coastal fisheries. intensify cropand livestock production and tohelp alleviate poverty

Second Red Soils Area Development l'he project aims to increase 1994 On-goingProject production and productivity over

(Credit 2563-CHA) the "red soils" area of SouthernChina. The project support waterconservation, rural electrification,roads and irrigation, livestock andaquaculture, agroprocessing,research and extension

TABLE 3: PROJECT TIMETABLE

Steps in project cycle Date planned Date actual

Identification November 1987 November 1987Preappraisal February 1989 February 1989Appraisal June 1989 June1989Negotiations October 1989 March 1990Board presentation December 1989 August 9, 1990Signing August 29, 1990Effectiveness November 27, 1990 December 4, 1990Project completion December 31, 1994 December 31, 1995Loan closing December 31, 1995 December 31, 1996

TABLE 4: LOAN/CREDIT DISBURSEMENT: CUMUlLATIVE ESTIMATE AND ACTUAL

($ million)

FY91 FY92 FY93 FY94 FY95 FY96

Appraisal estimate 13 31 53 61 64 64Actual 8.9 19.1 37.1 50.6 59.5 69.0Actual as % of adjusted estimate 68% 59% 70% 83% 93% 107.8%Date of final disbursement April 16,1997

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TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION

Project Key Implementation Indicators in Unit Estimated ActualComponent SAR/President's Report

Orchard Establishment1. New OrchardsSichuan Mother-tree Garden ha 24 24

Polyhouse Nursery (60 houses) ha 4 4Citrus ha 4,624 4,624Sweet Orange ha 1,794 1,794Valencia ha 1,110 1,100Navel ha 1,530 1,530Mandarin ha 100 100Pomelo ha 100 100Other Fruit ha 1,176 1,176Lychee ha 900 754Longan ha 94 240Plum ha 66 66Loquat ha 116 116

Total Orchards ha 5,800 5,800

Chonegine Mother-tree Garden ha 26 26Open Field Nursery ha 35 35

Citrus ha 2,060 2,060Sweet Orange ha 1,260 1,260Valencia ha 540 540Navel ha 60 60Pomelo ha 200 200

Yellow Peaches ha 260 260

Total Orchards ha 2,320 2,320

Hiiubi Mother-tree Garden ha 70 70Open Field Nursery ha 38.5 38.5Citrus ha 2,699 2,994.7Sweet Orange ha 966 708.4Valencia ha 433 270Navel ha 800 1,262.7Mandarin ha 500 753.6Other Fruit ha 1,167 871.4Yellow Peaches ha 567 311.7Loquat ha 200 40Plum ha 67 120Pear ha 200 356.7Kiwi ha 133 43

Total Orchards ha 3,866 3,866.1

II. Rehabilitated Orchards

Sichuan Citrus ha 500 500Sweet Orange ha 140 140Valencia ha 220 220Navel ha 140 140

Total Orchards ha 500 500

Chongqing Citrus ha 240 240Valencia ha 240 240

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Yellow Peaches ha 100 100Total Orchards ha 340 340

Hubei Citrus ha 1,633 1,633Sweet Orange ha 1,633 1,633Total Orchards ha 1,633 1,633

Irrigation/l1. New OrchardsSichuan Diesel Pump, HlHH & Sprinklers ha 580 1,740

Electric Drip ha 20Electric Pump, HHH & Sprinklers ha 5,200 2,320Gravity Irrigation ha 1,740

Subtotal ha 5,800 5,800

Chongqing Diesel Pump, HHH ha 1,846 1,924Electric Drip ha 10Electric Pump, Mini Sprinkler ha 464 248Gravity Irrigation ha 209.3


Hubei Diesel Pump, HHH ha 386 486Electric Pump, HHH ha 2,800 2,800Electric Pump, Sprinkler ha 580 580


11. Rehabilitated OrchardsSichuan Diesel Pump, HHH & Sprinklers ha 50 160

Electric Pump, HHH & Sprinklers ha 450 450

Subtotal ha 500 610

Chongqing Diesel Pump, HHH ha 192 265Electric Pump, Mini Sprinkler ha 48 20

Subtotal ha 240 285

Hubei Diesel Pump, HHH ha 163 163Electric Pump, HHH ha 1,225 1,225Electric Pump, Sprinkler ha 245 245


111. Vetiver PlantingSichuan Nursery ha I I

Planting Out ha 10 10

Chongqing Nursery ha I IPlanting Out ha 10 12

Hubei Nursery ha I 1Planting Out ha 10 10

Road1. New OrchardsSichuan km 145 162

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Chongqing km 162 175

Hubei km 436 436

Subtotal km 743 773

11. Rehabilitated OrchardsSichuan km 145 162

Total km 888 935

Packing and Storage Facilities/2Sichuan Install of Packing Lines-3t unit 15 7

Install of Packing Lines-5t unit 2Construction for 3t lines unit 15 7Construction for 5t lines unit 2Storage Construction 500m2 3 3

Chongqing Install of Packing Lines-3t unit I IInstall of Packing Lines-5t Unlit I IConstruction for 3t lines unit I IConstruction for 5t lines unit I IStorage Construction 500m2 8 8

Hubei install of Packing Lines-3t unit 4 4Construction for 3t lines unit 4 4Storage Construction 8000m2 1 1

NVotes: I. Electric drip irrigation was replaced by gravity irrigation during mid-term adjustment.2. Sichuan dropped 5-ton packing line during mid-term adjustment.

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TABLE 6: KEY INDICATORS FOR PROJECT OPERATIONS

Key Implementation Indicators in SAR Estimated ActualSAR/President's Report

ERR Total Project 34.4 40.2

1. ERR1. New Orchards 32.1 36.8

Citrus 32.0 38.0-Sweet Orange 28.4 33.6-Valencia 33.8 31.8-Navel 39.5 46.7-Mandarin 25.9 38.3-Pomelo 24.6 27.4

Other Fruit 34.2 28.9-Longan 22.1 29.0-Lychee 29.5 33.2-Loquat 22.1 22.4-Yellow Peach 44.8 27.2-Pear 26.5 26.6-Plum 33.4 33.1-Kiwi 37.0 28.8

2. Rehabilitated Orchards 48.7 53.3-Sweet Orange 45.2 48.5-Valencia 54.8 56.7-Navel 62.7 89.5-Yellow Peach 62.2 60.1

lI. FRRSichuan1. New Orchardsa. Nursery

-Polyhouse Nursery 15.0 42.3-Mother Tree Garden 31.0 35.7

b. Citrus-Sweet Orange 24.0 26.6-Valencia 23.0 25.3-Navel 34.0 32.8-Mandarin 23.0 26.6-Pomelo 18.0 33.5

c. Other Fruits-Lychee 23.0 30.8-Longan 21.0 30.0-Plum 27.0 20.4-Loquat 24.0 23.4

2. Rehabilitated Orchards-Sweet Orange 40.0 41.5-Valencia 34.0 40.0-Navel 56.0 55.5

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Chongqing1. New Orchardsa. Nursery

-Open Field Nursery 45.0 56.4-Mother Tree Garden 30.0 40.2

b. Citrus-Sweet Orange 25.0 25.9-Valencia 25.0 28.9-Navel 36.0 35.4-Pomelo 19.0 37.5

c. Other Fruits-Yellow Peach 33.0 26.1

2. Rehabilitated Orchards-Valencia 47.0 44.3-Yellow Peaches 71.0 40.0

HubeiI . New Orchardsa. Nursery

-Open Field Nursery 59.0 54.2-Mother Tree Garden 31.0 29.1

b. Citrus-Sweet Orange 25.0 26.2-Valencia 24.0 34.1-Navel 35.0 34.5-Mandarin 24.0 28.7

c. Other Fruits-Plum 28.0 27.0-Loquat 24.0 27.5-Yellow Peach 34.0 21.1-Pear 26.0 26.2-Kiwi 21.0 29.0

2. Rehabilitated Orchards-Sweet Orange 35.0 38.1

III. Yield/Production ton/ha/tonSichuan1. New Orchardsa. Citrus

-Sweet Orange 30/53,820 30/53,820-Valencia 27/29,700 27/29,700-Navel 24/36,720 24/36,720-Mandarin 27/2,700 27/2,700-Pomelo 22.5/2,250 22.5/2,250

b. Other Fruits-Lychee 11.25/10,125 15/11,310-Longan 11.25/1,058 15/3,600

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-Plum 24/1,584 24/1,584-Loquat 15/1,740 18/2,088

2. Rehabilitated Orchards/2-Sweet Orange 17/2,380 17/2,380-Valencia 11/2,420 14/3,080-Navel 16/2,240 16.5/2,310

ChongqingI. New Orchardsa. Citrus

-Sweet Orange 30/37,800 31/39,060-Valencia 27/14.580 30/16,200-Navel 24/1,440 27/1,620-Pomelo 22.5/4,500 25/5,000

b. Other Fruits-Yellow Peaches 22.5/5,850 25/6,500

2. Rehabilitated Orchards-Valencia 11/4,080 24/5,760-Yellow Peaches 15.3/1,530 22/2,200

HubeiI. New Orchardsa. Citrus

-Sweet Orange 30/28,980 30/21,252-Valencia 27/11,691 27/7,290-Navel 24/19,200 25/3 1,568-Mandarin 27/13,500 35/26,376

b. Other Fruits-Plum 24/1,608 24/2,880-Loquat 15/3,000 15/600-Yellow Peaches 22.5/12,758 22.5/7,013-Pears 37.5/7,500 37.5/13,376-Kiwi 22.5/2,993 15/645

2. Rehabilitated Orchards/2-Sweet Orange 17/27,761 17/27,761

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TABLE 7: STUDIES INCLUDED IN PROJECT

During the project implementation, Sichuan, Hubei and Chongqing conducted a variety of studiesrelated to orchard practice in the project, based on the Bank supervision missions recommendations. Allstudies were financed by the government in each . Those studies have been done by the universities andresearch institutes at provincial, prefecture, and county levels in the project provinces/municipality. Mostof the studies received awards from the various levels of the governments. The primary research topics arefollowing:

Study Research Institute Status

1. Technology of Soil Improvement for New Sichuan Academy of Ag. CompletedOrchards Sciences

2. Technology of Management and Sichuan Academy CompletedApplication for Citrus Moisture of Ag. Sciences 3rd Award

3. Technology of Fast-growing Seedling of Luzhou Hlorticulture Institute CompletedLongan (Lychee) 2nd Award

4. Trial and Demonstration on Early Maturing Northwest Agriculture Completedand High-yield of Navel Young Tree University 3rd Award

5. Research on Technique and Application of Sichuan Academy of Ag. CompletedStorage and Reserve of Freshness for Sweet Sciences Horticul. InstituteOrange

6. Technology and Application of Orange Northwest Agricul. University CompletedPostharvest Treatment

7. Research on Rotten Pathology of Navel and Sichuan Agricultural CompletedPrevention Method University 3rd Award

8. Tree Early Mature and High-yield of Lychee Luzhou Horticulture Institute Completed(Longan)

9. Research and Experiment of Navel Young SC Academy of Ag. Sciences, CompletedTree for Early Maturing and High-yield Horti. Institute

10. Low-grafting to Citrus Fruit Trees for High Hlubei Yichang Horticul. CompletedYield Institute 2nd Award

11. Technology on High Yield of Citrus Hubei Zhicheng & Zigui CompletedCounties' Ag. Institutes Ist Award.

12. Support Technology on "Ten Thousand Mu" HIubei Provincial Completedof High-yield and High-quality of Citrus Horticulture Institute 2nd Award

13. Extension of High-Yield Technology on "Fifty Hubei Provincial Horticulture CompletedThousand Mu" of Citrus Institute 2nd Award

14. Feasibility Study of Mid-Yangtze ADP Chongqing 3rd Award15. Terracing on Slopping Land Chongqing Completed16. Breeding of Virus-free Seedling Chongqing 2nd Award17. Extension of Technology on Intercropping of Chongqing Completed 3rd

Waternelon in Orchards Award18. Extension of Top-grafting Technology for Chongqing Completed 1st

Rehabilitated Orchards Award19. Extension of Planting Density Technology Chongqing Completed

- 24 -

TABLE 8A: KEY INDICATORS FOR PROJECT OPERATIONS

(Yuan million)

Item SAR Estimated Actual/Latest EstimatedLocal Foreign Total Local Foreign TotalCost Cost Cost Cost

A. Sichuan Province

1. Nursery and Mother Tree Gardens 1.3 1.0 2.3 2.7 2.0 4.72. Orchard Establishment 120.1 90.0 210.1 173.2 130.9 304.13. Orchard Rehabilitation 7.3 7.3 14.6 9.8 8.0 17.84. Postharvesting Facilities 12.1 17.7 29.8 15.4 24.2 39.65. Institutional Support 4.6 7.8 12.4 8.8 27.3 36.1

Subtotal Sichuan Province 145.4 123.8 269.2 209.9 192.4 402.3

B. Chongqing Municipality


Subtotal Chongqing Municipality 59.4 50.9 110.3 90.0 78.5 168.5

C. Hubei Province


Subtotal Hubei Province 100.2 90.2 190.4 133.7 165.1 298.8

Bast Cost 305.0 264.9 569.9 433.6 436.0 869.6

Physical Contingency 6.6 7.4 14.0Price Contingency 71.7 62.6 134.3

Total Project Costs 383.3 334.9 718.2 433.6 436.0 869.6

- 25 -

TABLE 8B: PROJECT COSTS IN $ MILLION

Item SAR Estimated Actual/Latest EstimatedLocal Foreign Total Local Foreign TotalCost Cost Cost Cost

A. Sichuan Province


Subtotal Sichuan Province 30,8 26.2 57.0 31.7 29.1 60.8

B. Chongqing Municipality


Subtotal Chongqing Municipality 12.6 10.8 23.4 14.6 12.1 26.7

C. Hubei Province


Subtotal Hubei Province 21.2 19.1 40.3 19.4 23.9 43.3

Bast Cost 64.6 56.1 120.7 65.7 65.1 130.8

Physical Contingency 1.4 1.6 3.0Price Contingency 7.1 6.1 13.2

Total Project Costs 73.1 63.8 136.9 65.7 65.1 130.8

- 26 -

TABLE 8C: PROJECT FINANCING

($ million)

Item/Description SAR Estimate Actual on ClosingLocal Foreign Total Local Foreign Total

1. SichuanIDA 11.8 18.4 30.2 31.0 31.0Provincial Government 24.6 2.1 2.1Prefecture Government 0.8 0.8County Government 6.0 6.0Agricul. Bank of China 0.2 0.2Beneficiaries 14.0 19.2 19.2

Subtotal 11.8 18.4 68.8 28.3 31.0 59.3

11. HubeiIDA 8.6 13.3 21.9 23.9 23.9Provincial Government 16.9 16.9 1.1 1.1Prefecture GovernmentCounty Government 6.0 6.0Agricul. Bank of China 0.5 0.5Beneficiaries 9.6 9.6 10.4 10.4

Subtotal 35.1 13.3 48.4 18.0 23.9 41.9

111. ChongqingIDA 4.7 7.2 11.9 14.9 14.9Municipality Governmenlt 3.6 3.6 2.3 2.3Prefecture GovernmentCounty Government 5.6 5.6 4.3 4.3Agricul. Bank of ChinaBeneficiaries 6.3 6.3 8.8 8.8

Subtotal 20.2 7.2 27.4 15.4 14.9 30.3

- 27 -

TABLE 9: ECONOMIC COSTS AND BENEFITS

(1996 Yuan million)

Net Present Value (NPV) at 12% Economic Rate of Return (ERR)SAR Estimate ICR Estimatc SAR Estimate ICR Estimate

Project as a whole 1,322.2 1,624.4 34.4 40.2

New Orchards 1,084.6 1,290.5 32.1 36.8

Citrus 877.2 1,180.6 32.0 38.0

Other Fruit 207.2 109.9 34.2 29.0

Rehabilitated Orchards 237.6 357.5 48.7 53.3

- 28 -

TABLE 10: STATUS OF LEGAL COVENANTS

Agreement Section Covenant Present Original Revised Description of covenant CommentsType Status fulfillment fulfillment date

date

Credit 2.02b I C Govemment to open and A special account wasmaintain special account opened and maintained

by ABC

Project Article III I NYD Fumish Audit Report by Audit Report for 1996 is3.01 (bii) June 30 of each year. expected by June 1997

Responsibility acceptableto IDA

Project Schedule 2 6 C Project activities comply The PEPBs have1(a) with environmental reviewed and approved

standards acceptable to all project componentsIDA

Project Schedule 2 6 C 12/31/1990 Monitoring effluents The monitoring plan was1(b) from agroprocessing proposed in 1990.

facilities be established Construction of effluentby December 1990 treatment plants was

completed.

Project Schedule 2 9 C Agrochemicals be All fertilizers andI (c) approved by IDA pesticides procured under

the project werereviewed by IDA

Project Schedule 2 9 C Annual training program IDA provided assistance2 be submitted to IDA by in arranging several

Deeember 31 of each study tours and reviewedyear and overseas domestic and overseastraining and TA be training programsapproved by IDA

Project Schedule 2 2 C Corporations be operated Fruit Development3 as financially Corporations under the

independent entities and project were financiallymanaged by competent independent and havestaff with experience competently staffed.acceptable to IDA

Covenant Class: Status:I = Accounts/audits 8 = Indigenous people C = covenant complied with2 = Financial performance/revenue 9 = Monitoring, review, and reporting CD = complied with after delay

generation from beneficiaries 10 = Project implementation not CP = complied with partially3 = Flow and utilization of project covered by categories 1-9 NYD= not yet due

funds 11 = Sectoral or cross-sectoral4 = Counterpart funding budgetary or other resources5 = Management aspects of the allocation

project or executing agency 12 = Sectoral or cross-sectoral policy/6 = Environmental covenants regulatory/institutional action7 = Involuntary resettlement 13 = Other

- 29 -

TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS

There was no significant lack of compliance with an applicable Bank Operational ManualStatement (OD or OP/BP)

TABLE 12: BANK RESOURCES: STAFF INPIJTS

Planned Revised ActualStage of Project Cycle Weeks $ Weeks $ Weeks $

Preparation to Appraisal NA NA No change No change 80.3 220,800

Appraisal " " " " 22.2 67,300

Negotiations through " " " " 12.2 38,400Board approval

Supervision " " " " 82.5 288,500

Completion " 4.4 24,400

Total 201.6 639,400

- 30 -

TABLE 13: BANK RESOURCES: MISSIONS

Performance rating LbStage of project Month/ Number of Days Specialized staff Imple- Devel- T ype of

cycle year persons in field skills represented La mentation opment problemsstatus objectives

Identification 10/87 4 17 A,AE,EN,E S SPreparation 10/88 7 24 A, AE,IA,AI, OS, S SPreappraisal 3/89 5 19 A,AE,IA,MKT.OS S SAppraisal/ 6/89 3 15 AE,AGOS S SSupervision 1 10/90 4 9 A,IA,M&E,OS I I Deferred Board

PresentationSupervision 2 7/91 3 8 A,AE,IA I I Counterpart fundsSupervision 3 5/92 2 13 A,lA I I Lower

DisbursementSupervision 4 11/93 3 16 IA,AE,EN I I Procurement delaySupervision 5 8/94 1 3 AE S HS Mid-term reviewSupervision 6 9/95 4 9 AE,IE,AI,IA S HSS Working capitalSupervision 7 5/96 3 7 IE,AI,OS IIS IISCompletion 3/97 4 17 AE,AI,OS OIS IIS

/a A: Agriculturalist; AE: Agricultural Economist; Al: Agro-Industrial Specialist; E: Economist; EN: Engineer; IA: IrrigationEngineer IE: Irrigation Economist; OS: Operations Specialist; M & E: Monitoring & Evaluation; MKT: Marketing

/b Performance Ratings: I = problem free or minor problems. 2 = moderate problems, 3 = major problems, FIS = highlysatisfactory, S = satisfactory

TABLE 14: ROLE OF WOMEN IN PROJECT

Subproject Women Engaged in Participating Women Training PeriodProject (%) Number Participating in (Person month)

training (%)

Sichuan 52 109,200 54 86,496

Hubei 65 20,150 62 128,682

Chongqing 54 33,777 56 62,496

Note: Mid-Yangtze Agricultural Development Project has 303,000 persons participating in the projectimplementation, of which 210,000 persons in Sichuan, 31,000 persons in Hubei and 62,000persons in Chongqing. The project offered a variety of domestic training in various subjectsrelated to the project implementation and orchard technique and management.

- 31 -

ANNEX A: ICR MISSION'S AIDE MEMOIRE

Introduction

1. A Bank ICR mission for the above project visited project sites in Hubei andSichuan Provinces and Chongqing Municipality from February 27 to March 12, 1997 toevaluate the status of the project at c ampletion and to review the project implementationplan after its completion. The mission was composed of Mr. Gue (AgroprocessingSpecialist), Ms. Varkay (Marketing Specialist), Ms. Tong (Agricultural Economist) andMs. Jaisaard (mission leader). The mission visited project orchards, wholesale and retailmarkets, and farmers in Zhicheng and Xingshan in Hubei, Wanxian, Kaixian and Fengiain Sichuan, and Choushou and Jiangjin in Chongqing. Several meetings were held inWuhan, Chongqing and Chengdu with staff from the project management offices,officials from government offices, and managers of Fruit Development Corporations.Meetings were also held in Chengdu with project staff from Yibin, Luzhou andChangning Counties, which the mission did not visit during this trip. The mission wouldlike to express its sincere thanks and appreciation to all government officials and projectstaff for their assistance and hospitality during the mission's visit.

Project Status at Completion

2. Status. The project has been implemented exceptionally well and has achievedits physical targets for orchard development, orchard rehabilitation and construction ofpostharvesting, and training facilities. The project has been well-managed, with goodcooperation among the Fruit Development Corporations (FDCs), the Project ManagementOffices (PMOs) and farmers. All project orchards adopted high technical standards,which were set by the Ministry of Agriculture (MOA). in cooperation with several fruitresearch institutes, and coordinated by the project's Scientific and Technical Committee.The orchards under the project have a very high visual impact for quality and technicalstandard and can be singled out from a distance from among neighboring orchards. In thenew orchards, the trees are growing vigorously, and some of them have started bearingfruit. Several new citrus varieties with different maturing dates were top-grafted on theexisting trees or planted in the new orchards. The rehabilitated existing orchardsdemonstrate clear evidence of success. Trees in these orchards have been top-grafted tobetter varieties and the yields have more than tripled. The project has been designated bythe Central and by the Provincial Governments as an excellent example of horticulturedevelopment. The orchards are used for technical study tours, and project staff onoccasion provide training to nonproject staff and farmers from outside the project areas.

3. Farmers have already benefited significantly from the orchards. In the neworchards, they have been receiving income from intercropping between the young citrus

- 32 -

trees and recently from initial fruit production. The income increases are even moreevident in villages adjacent to rehabilitated orchards, where many project farmers havebuilt new houses from income received from these orchards.

4. The project has already had tremendous demonstration effects. Large numbers ofnonproject farmers have used technologies developed under project and virus-freeseedlings from the project's nurseries to develop their own land. It appears that neworchards developed by farmers outside the project area are of equal quality and, in total,amount to four to five times the project area. The demonstration effect for rehabilitatedorchards is about three times the area of project orchards. Incremental farm income fromthese additional orchards is expectec, to be similar to the project orchards. The povertyalleviation impact should also be very substantial since many of the orchards are locatedin remote and poor areas where options to raise incomes are very limited.

5. The SAR physical targets have been achieved as planned in all project locations.In Sichuan, 4 ha of polyhouse nurseries, 24 ha of mother-tree gardens, 5,800 ha of neworchards, 500 ha of rehabilitated orchard and 324 km of access roads have beencompleted. In Chongqing, 35 ha of nurseries, 26 ha of mother-tree gardens, 2,320 ha ofnew orchards, 340 ha of rehabilitated orchards and 175 km of access roads have beencompleted. In Hubei, 39 ha of nurseries, 70 ha of mother-tree gardens, 3,866 ha of neworchards, 1,633 ha of rehabilitated orchards and 436 km of access roads have beencompleted. The physical accomplishments varied by county; however, when added up,they represent 100 percent of the targets.

6. Project Expenditures. Total expenditure at project completion was Y 869.6million (Sichuan Y 402.3, Chongqing Y 168.5 and Hubei 298.8 million), which isY 151.4 (20 percent) more than the Y 718.2 estimated at appraisal. However, due to thedevaluation of yuan against dollar during the years of project implementation, totalproject cost, when calculated in dollars was $130.8 million, $6 million lesser than theSAR estimate.

7. Financing. IDA funds of SDR 48.6 million (equivalent to $64 million atappraisal) increased in its value to $69 million at completion. The increase in IDA dollarfunds was allocated proportionally among the three project jurisdictions. Countygovernments and farmers increased their contributions to cover the additional yuan costresulting from the 20 percent yuan cost overrun.

8. Production. Project orchards commenced fruit production on a limited scalebetween 1992 and 1995. In 1996 production reached 73,000 tons (43,50 tons from neworchards and 29,50 tons from rehabilitated orchards). Of this, 35,20 tons was Jincheng,11,50 tons navel, 15,00 tons Valencia, 10,60 tons manderin and 70 tons was pomelo. It isexpected that in the full production year of 2005, the project's production will reach300,00 tons. It is estimated that increased production by nonproject farmers in the projectareas due to adoption of project seedlings and techniques will be another 150,00 tons bythe same year.

- 33 -

9. Postharvest Facilities. Fruit packing stations have been constructed under theproject at 13 locations, and equipped with 3 t/h washing, waxing, grading and packinglines procured by ICB from Roda of Italy. Orchard houses with small fruit storage areasand either large fruit stores with natural or forced ventilation or refrigerated cold storeshave been constructed in all project counties. Harvesting knapsacks and plastic fruitcrates have been provided under the project, and at seven locations, the FDCs haveprocured fork lift trucks.

10. The first year of citrus trading for most FDCs was 1996. Citrus fruit washing,waxing, grading and packing have been carried out at 10 of the 13 packing stations, witha total of 6,860 tons processed in 19)6, and contracts for about 9,000 tons of packed fruithave already been secured for 1997. Two additional packing lines are expected to startoperation in 1997 as project citrus production levels increase in the counties involved.The stores and cold stores have also been used at most locations, albeit with relativelysmall stored volumes at present, and plastic crates have been extensively used betweenthe orchards, stores and packing stations. Harvester knapsacks were procured in 1996,and the orchards have commenced using them. The 1996 throughput of packed fruit,mainly for export, is considered by the mission to be an excellent start for the first year ofoperation.

11. Issues Resolved. In line with earlier recommendations, the project has takenaction to resolve the FDC operational issues that were raised by Bank supervisionmissions in 1995 and 1996 as follows:

(a) The working capital requirements of the FDCs have been reestimated inline with current costs and prices. The PPMOs report that lendingagencies have recently been providing adequate funds to the FDCs forworking capital and that sufficient funds are available to increase fruitprocurement and processing throughput. Thus, working capital is nolonger a constraint for the FDCs.

(b) Effluent treatment facilities (or connection to city sewage systems) havebeen completed at all operational packing stations.

12. The Changshou District in Chongqing Municipality has a washing, waxing,grading and packing line, which was procured and installed under the project, but thefarmers in this District have opted to grow only pomelo in their orchards, and this fruit isnot suited to the packing lines. The PMO has not been successful in finding analternative location for the Changshou packing line, but this is not expected to be a long-term problem. Since processing requirements are growing annually at most FDCs, andsome FDCs are already planning expansion of their processing requirements, they orproject counties that were not provided with packing lines may be interested taking theequipment over the next two years. The Changshou unit needs to be properly protectedagainst corrosion while waiting transfer to a new FDC, and the PMO has been requested

- 34 -

to coat the metal parts with protective oil, such as Shell Ensis Fluid or WD40 (bothavailable from car repair garages), and to have the building made watertight.

13. The earlier Bank missions recommended several remedial actions to reducetransport losses and to achieve lower levels of transit fruit damage. Some of these havebeen implemented. For instance, harvester knapsacks and plastic returnable trays havebeen procured by the project and used in some locations to reduce harvesting damage tothe fruit. Some orchards have also made their own harvester knapsacks similar to thoseprovided under the project. This practice needs to be more widely used in all projectorchards.

14. Fruit should be cooled within 36 hours of harvesting to retain optimum conditionduring transportation. Orchard houses with ventilated storage rooms have now beencompleted at most orchard locations, and storage sheds with forced ventilation andproject cold stores, have now been commissioned. This should help to reduce spoilage offruits in transit to acceptable levels. Guidelines on fruit cooling and storage will be sentby the Bank mission to the Joint PMO (JPMO) for distribution to the FDCs.

15. Fruit should preferably be washed, waxed, and packed within 36 hours ofharvesting to retain optimum fruit quality, even if the fruit is to be stored in a cool roomor cold store. This is now being achieved in some FDCs, as the washing, waxing,grading and packing lines have been put into operation. However, some fruit is stillgraded and packed manually in the orchards, mainly for export to Russia. The FDCs aremaking progressively more use of the project packing lines, and untreated packed fruit islikely to be eliminated in the next two years, especially since Russian buyers are now alsorequiring fruit to be waxed.

16. When rough road transportation is expected, the fruit should be layered in thepacking cases with soft cardboard interlayer sheets to protect it. The design of packingcases has now been finalized at some FDCs, and those seen at the packing sheds wouldbe adequate to protect the fruit under mildly rough road conditions. Soft interlayers will,however, be necessary at other locations where road conditions remain very rough.

17. Fruit spoilage in rail wagons during test marketing was reported to be a seriousproblem in 1995 with 30 percent losses in transit from the packing centers to themetropolitan centers. The journey time was about 10 days in closed wagons with littleventilation. Losses have reportedly been reduced but remain at about 5 percent to 10percent in some cases. There is little than can be done to improve this situation as the railwagons and journey times are not within the control of the FDCs. The highwayinfrastructure in this region is rapidly improving, however, and within two years, railtransport may be significantly reduced in favor of fast road transport on the newhighways. The Three Gorges Dam project will also significantly improve river transportfrom most project areas within the next ten years. Over a period of time, rail transportwill probably no longer be a problem.

- 35 -

18. Fruit drying temperatures on the waxing machines, have been set higher thannecessary at some locations, causing the surface of the waxed fruit to be warm whenpacked. Since most of the fruit is not being sent directly to cold stores, this reduces thekeeping quality of the fruit. The FDCs have been advised to reduce the flow of wax atthe spray heads; which should be just sufficient to fully wax the fruit, and to reduce thedrying temperature; which should be just sufficient to dry the fruit. Excessive heatingwould thereby be avoided. Guidelines on the operation and maintenance of fruit packinglines will be sent by the Bank mission to the CPMO for distribution to the FDCs.

19. Financial Viability of Packing Lines. Some FDCs expressed concern that thebreak-even point on the packing lines and stores will take several years to achieve. Afinancial analysis was therefore carried out using actual investment costs, and currentoperational costs and selling prices. This indicates that processing 3,300 tons/year ofcitrus fruit would produce a FRR of 12 percent; 4,500 tons/year would produce a FRR of20 percent. This is 1 10 to 150 days processing a year, and should be within the reach ofthe more active FDCs during the 1998 harvest season. One FDC is already confident ofachieving more than 250 days processing per year at full production.

20. Fruit Quality Tests. Several of the FDCs that are processing navel oranges havereported that the keeping quality of the washed, waxed, graded and packed fruit is verylimited, possibly due to fruit bruising. The PMO has been requested to carry out somecontrolled tests to establish the cause of this. During the tests the PMO will ensure:a) that harvesting technique is correct; b) that fruit is carried in knapsacks and plasticcrates and transported to the packing plant without damage to the fruit; c) that fruit isprocessed within 36 hours of picking; d) that the temperatures are correctly set on thedrying system and that waxed fruit is dry before packing; and e) that for each ton of fruitprocessed, one box of unprocessed fruit is hand packed and kept as a control sampleduring the testing period. If the processed fruit does not keep significantly better than thecontrol sample, then the equipment manufacturers should be called in by the PMO tomodify their process.

21. Packing Charges. The FDCs have started packing fruit for nonproject farmers,and have been charging very little for this service. The FDCs have been advised thatpacking costs are approximately Y 580 per ton packed, excluding packing cases, at plantswhere lesser than 2,000 tons/year is being processed. This decreases to Y 420 per tonpacked at full operating capacity of around 6,500 tons/year. Charges for this serviceshould be increased to ensure a small profit on this operation:

22. Fork Lift Trucks. The 1995 supervision mission recommended that the petrolfork lift trucks procured by Sichuan PPMO for their fruit packing stations should bechanged for electric trucks of a smaller capacity. The exhaust fumes and large physicalsize of the present units make them unsuitable for operation in the enclosed and confinedspaces of the packing stations. The PMO has not yet found suitable electricreplacements, but is actively following up this matter.

- 36 -

Marketing

23. County FDCs (CFDCs) were set up under the project to carry out initial orcharddevelopment, to provide quality enhanced packing, storage and transportation servicesand to assist farmers in marketing their products. The CFDC staffs are composed oftechnicians and marketing personnel. The CFDC technicians are doing very well. Theyhave been trained to carry out effective and comprehensive extension programs andundertake systematic training for farm managers and farmers. The marketing staffs areoperating at an early processing stage and need further training in best marketingpractices.

24. CFDC managers fall into two categories: (a) those managing rehabilitatedorchards and (b) those managing new orchards. The former have already typicallydeveloped diversified distribution channels (institutions, wholesalers) and initiated timelypromotional and marketing campaigns through the media, trade fairs, advertising onpackages and missions to Hong Kong. They would benefit from training in specializedmarketing management strategies (such as dual-brand management) and training infinancial mechanisms (particularly export-finance and insurance). CFDC managers ofnew orchards coming into production require training to acquire significantly strongergeneral marketing and management skills so that they can effectively develop marketchannels and procure farmer production. CFDCs will have to prove that they can developwider and more lucrative market networks than farmers themselves and thus give farmersan incentive to sell through them. CFDCs' present plans are to procure about 80 percentof farmers' production. Farmers are currently enjoying relatively high prices due todomestic scarcity of supply and can therefore choose to bypass the CFDC marketingchannel during the peak harvesting season. However, once production supplies increase -within the next three years-farmers will turn increasingly toward an existinginstitutional structures with proven market contracts for production absorption-be ittheir own CFDC, a larger wholesale market or a rival, more competitive CFDC.

25. CFDCs need to develop short, medium and long-term market strategies,establishing direct linkages with: (a) large domestic wholesalers servicing major urbanconsumer outlets and institutional buyers such as hotel chains; (b) regional retail chains inlarge cities (Wuhan, Chongqing, Shanghai, Guandong and Beijing), both domestic orforeign-owned; (c) trading corporations with overseas wholesale, institutional and retailnetworks; and (d) large overseas retails chains. Within this context, the mission hasintroduced the JPMO and the PPMOs to several international and domestic wholesalefood chains, which have expressed interest in the project's citrus production, andrequested them to actively follow up these contacts.

Operation Plans After Project Completion

26. The mission emphasized that governments at all levels need operation plans forthe next several years. The mission pointed it out that even though the project is atcompletion, the challenging work has just begun. The new orchards will continue to need

- 37 -

to be maintained at high quality until reaching full production. Farmers continue to needtraining in tree maintenance, harvesting, and postharvesting technologies. For thisreason, there is a continuing need to provide strong technical support to farmers. Farmerswill also continue to require timely and reliable provision of input supplies andprocessing and marketing services from the CFDCs. Thus, maintaining CFDCs withqualified trained staff will be necessary.

27. With these requirements in mind, the draft operation plans were provided by thegovernments of each jurisdiction. Under the plans, the governments would: (a) maintainthe PMOs and the FDCs, with some modifications in the distribution of staff amongfunctions (more staff for marketing in the FDCs and fewer for statistics and planning inthe PMOs); (b) cancel the Project Leading Group and STC but assign their facilitativerole to the Agricultural Bureau to coordinate technical assistance and to be called onwhen needed; (c) continue to pay the salaries of the fruit production technicians who aregiving instruction to farmers; and (d) provide operational budgets for the PMOs and forthe FDCs until they become self-sustaining.. The operation plans also specify the PMOs'responsibilities for production management, technical training, orchard maintenance,financial management, record keeping, file management, provision of marketinformation, environmental monitoring, and production of evaluation indicators andcollection of necessary data. Operation plans are necessary at lower levels as well. Themission discussed the county operation plans at each project site visited.

28. The mission reviewed the draft Implementation Completion Report (ICR)provided by the Joint Project Management Office (JPMO). The report is long and coveralmost all aspects of the project. However, we would like it to be strengthened in severalareas such as: (a) references to changes after the mid-term review; (b) procurementinformation; (c) project impact, especially the demonstration effect of the project in eachprovince; (d) inclusion of project management objectives, achievements, problemsencountered and resolved; and (e) expansion on the report section on lessons learned. Weare looking forward to the revised version of this report.

March 12, 1997

Chengdu, Sichuan

China

-38 - ANNEX B

ANNEX B: BORROWER'S CONTRIBUTION TO THE ICR

SUMMARY ASSESSMENT

1. The World Bank approved the Mid-Yangtze Agricultural Development Projectwith Credit No. "Cr. 2172 - CHA" on August 29, 1990. From the project preparation toimplementation until closing of accoants, the World Bank had made a great achievementin good scientific project design with some innovation and project implementation. TheBank's supervision missions have worked very closely with JPMO (under MOA) andPPMO (provincial/municipality level) to provide valuable recommendations to projectconstruction and assistant to solve problems during the project implementation.Specially, the World Bank made a proper adjustment during the mid-term review. Inaddition, after the project closed, the Bank is still concern about future operation,especially in fruit marketing.

A. PROJECT OBJECTIVES

2. The Objective was to make full use the natural resources, to improve ecologicalcondition in the upper and mid-Yangtze river areas, and to develop commercialproduction base of high-quality fruits with majority of orange (eighty percent). It alsoaimed to develop a demonstration model for applying virus-free seedling and registrationsystem in orchards. The project would promote rural economic development, andimprove the ecological condition along Yangtze River areas as well as increase incomefor low-income farmers.

3. The project included 33 counties (city) in Sichuan, Hubei and Chongqing City.The main features of the project were as follows:

(a) building 75.5 ha of virus-free seedling nurseries;

(b) building 120 ha of improved budwood (mother tree) garden;

(c) establishment of 11,986 ha of new orchards on the hilly waste land,rehabilitate 2,473 ha of low-yield orchards. All orchards were equippedwith irrigation facilities, access roads and orchard working house;

(d) introduce 23 postharvest treatment lines in major orange production areas;

(e) build 9,000 m2 of storage facilities;

- 39 - ANNEX B

2(f) build 33,900 m of training center to provide training in projectmanagement and orchard management, such as adapting scientific researchresults, marketing, and technical extension;

(g) supply communication facilities and other office equipment to strengthenthe marketing ability of the Fruit Development Corporations (FDCs) at alllevels;

4. The project expected to reach higher yield through virus-free seedling andadvanced orchard practice than traditional orchard management. The annual projectproduction from new orchards was c ipected to reach 256,880 tons of citrus and 48,215tons of other fruit (at full production in about 10 years). Incremental annual productionfrom rehabilitated orchards would be 40,340 tons of citrus. and 1,500 tons of other fruit.

B. IMPLEMENTATION EXPERIENCE AND OtUTCOME

5. All targets of the project have been reached at the project completion:

(a) Physical results: establishment of seedling nurseries, mother tree garden,and new orchards with complete set of irrigation facilities, roads andvarious construction work, have been completed by 100 percent.

(b) Financial results: the actual project investment costs were 5 percent lessthan the SAR estimate in US dollars, while they were 22.2 percent excessin RMB. The financial analysis indicated that FRR for new orchards ofcitrus, lychee, longan, pears and kiwi fruits in the two provinces and onecity was higher or equal to the SAR estimate, while FRR for new orchardsof plum and loquat in Hubei and yellow peaches in Chongqing and Hubeiwere slightly lower than the SAR expected.

(c) Economic analysis: ERR of the entire project was 41 percent (Sichuan40.4 percent, Chongqing 42 percent, Hubei 41 percent), of which ERR fornew orchards was 37 percent (Sichuan 37 percent, Chongqing 40 percentand Hubei 52 percent), all higher than the SAR estimate.

6. The project has already created good social benefits, which have shown in thefollowing two respects: first, a significant increase in beneficiaries' income has beenmade. According to the typical farmer household survey data, in 1995, the projecthouseholds with an annual net income of less than 500 yuan in 1990 increased theirincome by 16.2 times, while the nonproject households with same level of income onlyincreased by 1.5 times; poverty alleviation process with the project was speed up 14.7timers higher than otherwise. Most of project households make 1,000 yuan per year morethan before, it was 615 yuan on average in 1990 and increases to maximal 8,049 yuan in1995. Another social benefit of the project was the demonstration role of the projectmodels. Reclamation of hillsides and terracing for improving ecological environmentwas also showing the best performance in practice. 'I'he data provided by the Jiangan

-40 - ANNEX B

county indicated that the water and soil erosion was reduced from 48 percent in 1990 to13 percent in 1995.

The Key Factors Affecting the Project:

7. The major unfavorable factors affecting the project start up were: Due to reasonsbeyond the control by the project at that time, the World Bank postponed the approvaldate leading to delaying of the Bank's loan disbursement. The establishment of theseedling nursery for new orchards was therefore delayed too. The project costs increaseddue to the inflation; and the prices of part of the materials procured through ICB was abit higher than estimates. The arri /al of the materials was not on time, and causedconstruction slow down; the borrowers borne higher foreign currency risk due to adepreciation of the Chinese currency. In addition, high temperature, drought, flooding,low temperature and hails all hindered trees' growth, the flowering and fruit bearing.

8. However, with the governments' support and good coordination among varioussectors, the project management offices with qualified personnel effectively usemonitoring and evaluation system and technical assistance, plus an active participation ofthe beneficiaries, and the excellent supervision and instructions by the World BankMission, the project still made great progress and the unfavorable factors wereminimized.

C. KEY LESSONS LEARNED AND FUTURE OPERATION

9. The major experience drawn from successful implementation of the project is asfollowing:

(a) Government strong support: the governments at various level stronglysupported the project in terms of making favorable policies, providingcounterpart funding, coordinating among government departments.

(b) High technical standard of the project: a number of studies and research inorchard establishment and management were carried out under the project.These studies have been done by national, provincial, prefecture, andcounty research institutes and agricultural universities in Sichuan, Hubei,and Chongqing. Also, scientific and technical committees (STC) fromprovincial level to county level were established under the project. TheSTC was responsible for setting technical standard, providing technicaladvice and solve problems in the production practice. There is a completeset of regulation (including award and punishment) for orchardmanagement and project management.

(c) Effective project management: the PMO at all levels are functioning wellin monitoring and evaluation of the project, organizing training to PMOstaff, technicians, and farmers, and record keeping. In addition, the PMO

- 41- ANNEX B

made a good coordination with the World Bank supervision missions tomake suggestions and provide assistance to the orchards.

(d) The major risk of the project is the exchange rate in repayment of the loan,and natural disasters. The latter can be reduced through projectimplementation and technology. The former depends on the borrowers'adaptability in self development. But this common question is beyond theability of evaluation staff.

10. For the future operation, the various project offices in the projectprovinces/municipality have developed "Project Operation Plan" which includesoperation objectives, technical measures, management system, sales plan, marketdevelopment, fund preparation, personnel training, target monitoring and evaluationsystem, method and reporting (including full development evaluation arrangement). Theoperation plan made by the various project offices were all approved by their respectivegovernments. If the plan is carried out properly, it will be in good result.

l l. With a favorable policy environment and government support, and high technicalstandard of orchard management, the PMOs continue to be in charge of the projectoperation with a focus on orchard maintenance and fruit marketing. The project wouldhave sustainable development.

May 14, 1997

-42- ANNEX C

ANNEX C: PHOTOGRAPHS OF PROJECT AREAS

Land Before the Project

Land Terracing and Irrigation Pond (Reservoir)

-43- ANNEX C

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The Project's Happy Farmers

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MIN,

Yuan Liang, Rehabilitated Orchard

-44- ANNEX C

Top Grafting with Navel Orange

Navel in Season after 2 years

-45- ANNEX C

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MAC«777 t

. , New Orcha 'd

Hulog Ne Orchard

IMAGING

Report No.: 16632Type: ICR

Documents

IMPLEMENTATION COMPLETION REPORT CHINA …documents.worldbank.org/curated/en/790371468261868980/pdf/multi...- Iv - CHINA MID-YANGTZE AGRICULTURAL DEVELOPMENT PROJECT (CREDIT 2172-CHA)