Project Name China-Western
Poverty Reduction Project
Region East
Asia & Pacific Regional Off
Sector A-
Crops and Livestock, AI - Irrigation & Drainage; AM - Agro-Industry
& Marketing; TR - Rural Roads; VR - Resettlement; WR - Rural
Water Supply & Sanitation
Project
CNPA46564
Borrower(s)
People's Republic of China
Implementing Agency:
Leading Group for Poverty Reduction and Prov.
Govts. of Gansu and Qinghai, and Inner
Mongolia Autonomous Region Leading Group for
Poverty Reduction for the State Council
No. 14 Xiaoying Road, Chaoyang District
Beijing, 100101
P.R. China
Telephone: 010 64960256; 64914443 - 2141
Fax: 010 64920134
Environment Category B
Date PID Prepared
March 25, 1998
Project Appraisal
October 31, 1998
Projected Board Date March
30, 1999
Available
Project Documents
Background
1. Country and Sector Background
Main Sector Issues: Since the start of the reform program in 1978,
the rural sector, which harbors the large majority of China's
poor, has witnessed significant development and growth. The
introduction of the household responsibility system coupled with
the liberalization of agricultural prices and marketing during
1978-1984 unleashed rapid agricultural growth and rises in rural
income. However, this growth pattern led to rising
income disparities between the resource poor interior and western
regions on the one hand, and the more affluent and rapidly growing
coastal areas on the other (China 2020 -Sharing Rising Incomes,
World Bank, 1997). In the mid-1980s, the slowdown in
rural growth and the growing demand for labor in the east, triggered
the migration of rural labor to the coastal industrial growth
centers. Government estimates of absolute poverty incidence show
a significant drop from 270 million in 1978 to about 60 million
in 1997. The remaining absolute poor, comprising largely minority
nationalities, reside in mostly remote and inaccessible upland
areas with poor natural resource endowments and high population
pressure (China: Strategies for Reducing Poverty in the 1990s,
World Bank, 1992). Degraded lands, comparatively unfavorable
agro-ecological environment, low precipitation with recurrent
droughts, fragmented and uneconomic land holdings combined with
low level of human resource and institutional development constrain
the prospects for increased agricultural
productivity and incomes in the upland areas. This adverse environment
is manifested in chronic poverty among the target population.
Government Strategy: In 1994, China launched a far reaching poverty
reduction strategy under the 8-7 Plan. The geographic
targets for the 8-7 Plan are the 592 designated poverty counties
located in inaccessible mountainous and semi-arid areas in the
central and western parts of China. The Plan's objective is to
eliminate extreme poverty among 80 million poor within seven years
by raising per capita income to RMB 500 (in constant 1990 prices). To
achieve this objective the state, local governments, communities
and charities, with assistance from external aid agencies, would
collaborate in, inter alia : i) creating suitable conditions
for agricultural development and promoting related investments
in off-farm income generating activities; ii) improving rural
infrastructure including roads, village electrification and rural
water supply; and iii) investing in basic social services including
education and health with a view to reaching universal coverage
by the year
2000. Toward this end, various instruments including
the targeted integrated rural development Southwest Poverty Reduction
Project (SWPRP) and Qinba Mountains Poverty Reduction Project
(QMPRP), voluntary resettlement on newly irrigated lands (Gansu's
Hexi Corridor), redeployment of surplus labor in non-agricultural
activities (labor mobility), etc. are being implemented with encouraging
results.
Impact of Government Strategy: The impact of the 8-7 Plan has
been monumental. The number of poor has fallen from 80 million
in 1994 to about 58 million in 1997. In September 1996, a jointly
organized conference by the CPC Central Committee and the State
Council reviewed the implementation progress of the 8-7 Plan.
The principal decisions passed by the conference include: i) the
reconfirmation of China's determination to meet the basic food
and clothing requirements of every citizen by the close of the
20th century; ii) establishing the rural poor household
as the focal point for designing poverty reduction interventions;
iii) raising the annual funding of the 8-7 Plan to
RMB 20 billion with obligatory local counterpart funds equivalent
to 30-50 percent of the Poverty Fund allocation; iv) assigning
responsibility to the developed coastal and other cities and provinces
to assist poor provinces; v) introducing policy incentives for
enterprise investors in poor counties including tax exemption,
and reduction or exemption of agricultural tax and the special
tax for poor households with inadequate food; and vi) adopting
the domestic and foreign assisted integrated rural development
approaches to poverty reduction as references for formulating
projects. These decisions mark another milestone for
China's stride toward reduction of absolute poverty.
2. Objectives
The objective of the proposed Western Poverty Reduction Project
(WPRP) is to alleviate chronic poverty for the absolute poor living
in remote and inaccessible villages of Gansu and Qinghai Provinces
and Inner Mongolia Autonomous Region (hereinafter referred to
as Project Provinces-PPs). The project would enable
poor households in the target areas to raise their incomes through
increasing grain and livestock production sufficient to meet their
basic food and clothing needs, and in many cases, generate marketable
surplus to improve their living standards. Simultaneously, access
to health and education services would be improved for the poorest
households. This
development objective has emerged from the expectations and aspirations
of the target population. To achieve this objective, the project
would finance: i) environmentally sustainable crop and livestock
development; ii) irrigation development; iii) rural infrastructure
including rural roads, rural water supply and village electrification;
iv) small scale rural enterprises; v) voluntary resettlement (Qinghai);
vi) labor mobility (Gansu); vii) social sectors-education and
health; and v) institutional capacity building and staff development.
Key performance indicators to monitor the overall CAS objective,
the project's development objective, project outputs and components
are presented in Annex 1. Verifiable indicators including percent
of population below the national poverty line, infant and maternal
mortality and morbidity rates, crop and livestock yield increases,
per capita grain production, school enrollment, isits to health
centers, jobs created, etc. would be quantified and agreed with
the PPs.
3. Rationale for Bank's Involvement
The Bank's intervention in and support to the proposed project
has the following value added:
i) The Chinese recognize the Bank's expertise as a valuable asset
in the formulation of a multi-sectoral project to effectively
address poverty in the most difficult environments. The
early success from SWPRP have convinced the Chinese that the Bank
is a dependable partner in their struggle to fight poverty and
the proposed project responds to their priority need. A prime
example of Client Responsiveness.
ii) Public Sector institutions are vertically organized to deliver
services. The Bank's intervention in poverty reduction operations
would prove to the Government that public sector institutions
can also be effective when services are needed and delivered horizontally.
The proposed project would enhance horizontal effectiveness by
seeking service agreements between PMOs and line agencies.
iii) The Bank's assistance often leverages additional domestic
resources for the poor counties. The Bank's exposure in Qinghai
has been limited to a few operations in social sectors and this
will be the first major, possibly the last operation (due to IDA
phase out) in Qinghai.
iv) The technical knowledge being transferred during project preparation
such as establishing a sound project design strategy, introducing
market tests to justify project outputs, developing transparent
targeting mechanism, introducing the highest environmental impact
assessment standards, training project staff in new project cost
and benefit estimate and analysis methodologies are the benefits
gained by the PPs.
v) The project is also introducing new design features: a) rigorous
selection of project components; b) focusing on household level
food and raw material processing and scaling down TVEs; c) adopting
standards and implementation arrangements from on-going bank-assisted
operations--roads, rural water supply, education and health; and
d) piloting a program approach in one county in Inner Mongolia.
Lessons from these new features and pilot may form the basis for
future investment planning and financing.
4. Description
The project's development objective would be achieved through
the financing of: i) environmentally sustainable crop and livestock
development; ii) irrigation and land development; iii) rural infrastructure
including priority rural roads, rural water supply and village
electrification; iv) selected small scale rural enterprises; v)
voluntary resettlement (Qinghai); vi) labor mobility (Gansu);
vii) social sectors-education and health; and viii) institutional
capacity building and staff development. The Qinghai component
includes a major voluntary resettlement scheme for an estimated
100,000 poor people currently living in marginal, eroded and mountainous
areas of eastern Qinghai. About 26,700 ha of suitable land with
adequate water resources has been identified in central Qinghai.
The voluntary resettlement
program is being modeled after the ongoing Gansu Hexi Corridor
Project. In Inner Mongolia and Gansu, the project components,
suitably modified, replicate the successful project designs of
SWPRP and QMPRP.
Items to be financed under the project include:
i) Crop and Livestock: provision of agricultural inputs-seeds,
fertilizer, insecticides, plastic mulches, breeding/fattening
stock etc.; upgrading crop and livestock support services in Qinghai
ii) Irrigation Development: construction of a 40 m dam and renovation
of an existing 8 m dam; construction of an irrigation
and drainage (wells) system on 26,500 ha in Qinghai; construction
of small scale individual household-based irrigation cisterns
to harvest rain water-in Gansu and IM
iii) Rural Infrastructure: construction of Class IV and farm roads
to provide access to remote villages; construction of community
drinking water supply and connection to households; and construction
of electric power lines to villages.
iv) Rural Enterprises: provision of credit to establish
household-based and rural enterprises for construction of food
and fiber processing facilities based on pre-defined appraisal
criteria.
v) Voluntary Resettlement (Qinghai): start-up cost of resettlement
including grants to volunteer settlers for transport, housing,
fuel, and initial subsistence expenses .
vi) Labor Mobility: support to Gansu's labor bureau
to improve the management and referral services, and training
of workers.
vii) Social Sectors: construction and upgrading of
basic education and health facilities in Qinghai's resettlement
area; and construction of selected basic health clinics in Gansu
and IM;
viii) Institutional & Staff Dev't: strengthening
PMOs in Project Counties, and work stations in townships and village
committees; support to FCPMC to co-ordinate implementation and
manage common activities--supervision, progress reporting, appointment
of consultants; developing Monitoring, Evaluation and Dissemination
(MED) system; and staff training.
5. Financing
Total
( US$m)
Government 174
IBRD 60
IDA
100
Total Project Cost 334
6. Implementation
China is deepening its decentralized development strategy by delegating
responsibilities to the lowest levels of quasi-government structure--Village
Committees, while maintaining the policy, institutional and financial
support from the central, provincial and local governments. The
project would utilize existing institutions suitably strengthened,
as appropriate, to cater to the special conditions in the PPs.
A four-tier implementation arrangements is proposed:
i) At the national level, the State Council's Leading Group for
Poverty Reduction (LGPR) and its Secretariat, the Foreign Capital
Management Center (FCPMC), are the supreme bodies entrusted to
coordinate the Government's 8-7 Plan. FCPMC has successfully
led the preparation of the SWPRP and QMPRP and continues to play
a key role in the implementation of these operations. For the
proposed project, the FCPMC would avail its project preparation
and implementation and monitoring expertise to the PPs and would
provide a quality
control service. FCPMC would review all draft project
documents prior to submission to the Bank. They would also be
responsible for project supervision and reporting, providing support
to Gansu's labor mobility component, and recruiting the monitoring
and evaluation consultants. FCPMC, assisted by an qualified Procurment
Agency would also manage ICB procurement. The PPs would sign service
agreements with FCPMC defining their specific tasks and estimated
costs.
ii) At the provincial level, a Poverty Leading Group (PPLG), headed
by a provincial Vice Governor has the overall responsibility for
poverty reduction. Comprising provincial
functional agencies, the PPLG approves annual work plans and annual
resource allocations to poverty counties and ensures the co-ordination
of line agencies. Each PP has a Poverty Alleviation and Development
Office (PADO) serving as the Secretariat of the PPLG. With
assistance from line agencies, PADOs are responsible for the execution
of targeted provincial poverty reduction operations, monitor the
program and liaise with the LGPR. The three PADOs have
established dedicated Project Management Offices (PMO) with technical
staff co-opted from the line agencies to better co-ordinate implementation
of multi-sectoral project. PMOs would also
sign service agreements with the line agencies for specific project
related tasks. Procurement Agents would be appointed to administer
works and goods procurement. PMOs would maintain consolidated
county project accounts for annual audits. The PADOs
financial management system for the proposed project would be
reviewed during project preparation.
iii) At the county level, Poverty Leading Groups (CPLG) comprising
line agencies and chaired by a county magistrate, are established
to oversee the poverty reduction program. Executive
powers are vested in the County Project Management Office (CPMO),
responsible for preparing the county's poverty reduction plan,
implementing projects, co-ordinating the activities of the line
agencies, providing technical support to township work stations
and village committees, monitoring physical and financial progress,
and reporting to PADOs. In Qinghai, each county would establish
a Resettlement Office to implement the Resettlement Action Plan
(RAP) and manage the selection and transfer of the settlers. The
CPMOs would sign local contracts for works also maintain separate
project accounts.
iv) At the village level, project beneficiaries would be organized
by Village Implementation Units (VIUs) to participate in all aspects
of the
project. The VIUs, with technical support on new agricultural
practices and technologies from Township Work Stations (TWS),
will be responsible for project implementation at the village
level. The VIUs will announce a set of eligible investments
to the villagers to choose from for funding. Due to
limited credit facilities available to villagers, the VIUs will
arrange the delivery and distribution of agricultural input packages
to the project villagers. The All China Women's Federation
(ACWF), as members of the VIUs would assist in promoting female
participation in the project. Villagers would also
be mobilized for local infrastructure works.
7. Sustainability
Sustainability of project benefits would be assured by:
Stakeholders Commitment: The central, provincial and
county governments have demonstrated strong commitment to poverty
reduction. The central government continues to transfer
over RMB 20 billion annually to poor provinces for poverty reduction
programs. To match the central government resources, the provinces
also mobilize substantial amounts dedicated to poverty programs.
Beneficiary participation in the identification, design, preparation
and implementation of the project would also ensure project sustainability.
Lessons from SWPRP suggest that villagers are contributing a significant
share of project costs--cash and kind--for school, health center,
road and water supply construction. Following completion
of rural infrastructure, the beneficiaries would take over the
operation and maintenance of the new assets.
Appropriate O&M of the Irrigation System: In Qinghai,
the O&M of the irrigation system would require technical personnel.
The new settlers, coming from rainfed marginal agriculture production
system, would have to rely on the management of the provincial/county
water resources team and gradually take over the responsibility
for O&M. Full cost recovery of O&M would be levied.
Access to Production Credit: Sustainable project output
requires timely provision of inputs beyond the project implementation
period. Often, the high transaction cost of small scale
credit deters formal financial institutions from catering to scattered
and remote villages. However, lessons from lending
to the poor have demonstrated that the poor are credit worthy
with respectable repayment track records. The ADBC, the Rural
Credit Cooperatives and the Rural Cooperative Foundations, in
project townships would be identified to service
the project area farmers.
8. Lessons learned from past operations in the country/sector
The recent Quality Assurance Group Review of SWPRP and the Shanxi
Poverty Alleviation Project concluded that the strong commitment
of the central and provincial governments to integrated
poverty reduction is the key to the early success of the projects.
The recommendations for strengthening SWPRP design and implementation
include: i) flexibility in project design to allow
adjustments at mid-term, and phasing of project components; ii)
recognizing the long-term institutional implications of the project
including the roles of
the Central Poverty Leading Group, ministries and provincial agencies,
and sustainable agricultural financing source; iii) greater attention
to sectoral and sub-sectoral policy and institutional challenges
triggered by the project; and iv) the need for simplifying and
introducing flexibility in the Bank's procurement procedures.
The proposed project, while adopting the overall framework of
SWPRP has introduced new design features--selectivity in project
components, scaling down investment in TVE while promoting household
based investments in food and raw material processing; promoting
joint ventures for rural enterprises with sister cities and provinces
in the east; examining alternative mechanisms for sustainable
delivery of credit services to project beneficiaries; and exploring
simplified procurement arrangements.
9. Program of Targeted Intervention (PTI) Yes
10. Environment Aspects (including any public consultation)
Issues : The principal
environmental issues are associated with the Qinghai project and
include: land leveling and soil erosion; saline and sodic soils;
energy and timber supplies for settlers; livestock management;
and land compensation. Much of the proposed irrigation land in
Qinghai is hummocky and all of it will require extensive leveling.
This must be done in a manner that will not expose it to the erosive
forces of the spring winds. Land protection strategies for the
initial years of the project are being developed. For
the long-term, trees will be planted throughout the area to act
as windbreaks which will provide adequate protection. The adoption
of reduced tillage practices will also contribute significantly
to reduced soil losses. The soil in much of the area
Qinghai resettlement area is saline and a minor part of it is
likely to be sodic as well. The soil and groundwater
studies already undertaken define the spatial distribution of
the salinity problem and provide a design basis for reducing and
controlling salt concentrations in the soils and groundwater. Additional
work is required to define the severity and extent of the sodic
soils. In the long-run, the development of good water management
at the system level and at the field
level is the key to avoiding salt problems. Both Gansu
and Inner Mongolia still need to undertake appropriate soil and
establish monitoring procedures for salts for the areas in which
they intend to develop irrigation. The supply of energy for cooking
and heating and the demand for timber for construction purposes
in Qinghai must be addressed before resettlement occurs. In
the absence of adequate supplies there is potential for excessive
demand on local timber resources particularly in the adjacent
sensitive mountain areas. Livestock development will only be supported
where it is demonstrated that there are adequate feed supplies. In
Qinghai it is anticipated that all feed will be produced within
the resettlement area and that there will be no demand on external
pasture resources.
The following environmental issues would also be investigated:
plastic mulch disposal; application of reduced tillage practices
in Inner Mongolia and Gansu (they are already used in Qinghai);
the assessment of impacts of rural enterprises and ongoing monitoring
of compliance; and the design and installation of contour ditches
in Inner Mongolia.
11. Program Objective Categories (POC): Poverty Reduction
Contact Point:
The InfoShop
The World Bank
1818 H Street, N.W.
Washington, D.C. 20433
Telephone No. (202)458 5454
Fax No. (202) 522 1500
Task Manager
Petros Aklilu
The World Bank
1818 H Street, NW
Washington D.C 20433
Telephone: 202 458 7340
Fax: 202 522 1674
Note: This is information on an evolving project. Certain activities
and/or components may not be included in the final project.
Processed by the InfoShop week ending October 16, 1998.
ANNEX
Because this is a Category B project, it may be required that
the borrower prepare a separate EA report. If a separate
EA report is required, once it is prepared and submitted to the
Bank, in accordance with OP 4.01, Environmental Assessment, it
will be filed as an annex to the Public Information Document (PID)
.
If no separate EA report is required, the PID will not contain
an EA annex; the findings and recommendations of the EA will be
reflected in the body of the PID.
