Project Name China-Gansu Hexi Corridor Project
Region East Asia and Pacific
Sector Agriculture
Project ID CNPA3594
Implementing Agencies Gansu Provincial Government
Mr. Liu Maoxing, Project Director
Gansu World Bank Projects Implementation Office
Gansu Bureau of Finance
340 West Dong Gang Road
Lanzhou 730000, Gansu Province, China
Telex: 72148
Fax: 86-931-841-8285
Tel: 931-882-0288
Date PID Prepared July 8, 1994
Projected Board Date July 1996
Available Project Documents
Country/Sector Background
1. China's agriculture feeds a population of about 1.2 billion. Land resources are scarce (about 0.1 ha per capita). Water resources,
although abundant in the south, are scarce in the north and northwest, limiting expansion and development of agriculture. Agricultural reform, begun in 1978, has helped to reduce incidence of rural poverty by about 170 million people, from 270 million to about 100 million people by 1985. However, since 1985 there has been only a small decline in the incidence of absolute poverty. The earlier gains in rural incomes have come mainly from areas endowed with favorable natural resources, whereas the mountainous regions of southwest and northwest China remain poor due to harsh natural elements. China's poverty reduction strategy is now focused on raising incomes and living standards of people in these poor regions through investment in agriculture and land development, rural works and enterprises, and basic social services.
2. Gansu Province, located in the northwest region, is deficit in food grain production. Over the last two decades the province had to import grain to feed its increasing population, especially those in the upland areas of central and southeast Gansu where the harsh climate and marginal land and water resources cannot sustain an increasing population. The province is reported to have four million people living
below the absolute poverty line. Although some progress have been achieved under the centrally-funded poverty reduction programs of the "Two Xi" Commission to-date (the two Xis refer to Dingxi Prefecture and Hexi Corridor), much more needs to be done. Hexi Corridor in the northwest region of the province, with its favorable climate and better resources, offers a long-term solution to reducing the province's
deficit in food grain and poverty incidence for some 200,000 poor people.
3. Government Strategy Gansu Government's strategy is to develop comprehensive irrigated agriculture in Hexi Corridor (Shule River Basin) where climate, land and water resources are more favorable for sustained agricultural production. The newly developed irrigated land would be settled progressively by farmers emigrated from very poor upland areas in central and southeast Gansu, thereby alleviating their current absolute poverty and providing them with a firm base for economic enhancement within three years of settlement. The Government also plans to ultimately develop the project area into a grain and commodity base which would support rural enterprises and provide additional job opportunities.
Project Objectives
4. The primary objectives of the project are: (a) to increase agricultural production, especially grain production to ease annual
local deficits in food grains; (b) to raise incomes and standards of living for 200,000 persons now living under absolute poverty through
voluntary emigration and settlement on newly developed irrigated land; and (c) to reverse degradation of central and eastern Gansu uplands where resources have been over-exploited and to enhance and protect environments in the proposed settlement areas for sustainable use.
Rationale for Bank Involvement
5. The project would directly address two of the Bank's top operational priorities in China - poverty alleviation, and environmental
enhancement and protection. The project is in line with the strategy jointly developed by the government and the Bank for reducing absolute poverty in the 1990s. Close collaboration was established resulting from the 1992 sector study "China: Strategies for Reducing Poverty in the 1990s" and the "International Conference on Poverty Issues in China" held in Beijing, November 1992. Bank participation in the project will play a key role in developing a prototype large-scale settlement project integrated with irrigated agriculture in the Hexi Corridor of western Gansu Province where large tracts of potential land exist for similar future development. In addition, Bank involvement would provide access to the Bank Group's experience and technologies in development of irrigated agriculture for arid regions, settlement planning and management, and environmental enhancement and protection.
Project Concept and Design
6. The project concept is based on the rational use of available natural resources for agricultural development to reduce incidence of
poverty in Gansu. Emigration of the absolute poor to settle in Hexi Corridor is the only viable solution to raise the economic well being of
poor people in central and south-east Gansu where over-exploitation of the marginal land and water resources is fast degrading the already
fragile eco-system. On the other hand, Shule River Basin in Hexi Corridor, with better potential for development (in terms of
availability of better water and land resources), is vastly under-developed. Irrigation is a pre-requisite in this arid region. Presently, the annual runoff from Shule River is under utilized. The proposed Changma Dam at its upper reaches would regulate and store the
flow for irrigation of its downstream alluvial plain which can be economically developed for agriculture and settlement. A study carried
out by the Demography Research Institute of Northwest China, Lanzhou University concluded that it is feasible to settle 200,000 people in the project area in stages and the settlement should be rationalized with progress of irrigation works, availability of reclaimed land for
cultivation and fuel-energy sources (primary or alternative) for heating and domestic use. A preliminary settlement plan has been prepared,
showing emigrating counties and in-migration areas with the estimated number of people.
Project Description
7. The three main project components are:
(a) Irrigation and Drainage. The project would develop 54,600 ha of new irrigated cropland and improve 43,400 ha of existing areas complete with drainage and on-farm works. Major works include construction of a 54 meter high rock-filled Changma Dam on the main Shule River and about 390 km of main canal systems to serve three command areas - Changma, Shuangta and Huahai irrigation areas. About 500 tubewells will be constructed to complement surface irrigation where groundwater is available.
(b) Settlement. Some 200,000 people would be settled on the project's newly developed irrigated land in stages, with 1,000 people in Changma, 50,000 in Shuangta and ,000 in Huahai irrigation areas. In all, 16 new townships (including 5 new sub-farms) and 160 villages would be established complete with basic infrastructure and social services. Each village will accommodate 0 families with 1,0 people. Each person will be allotted 0.33 to 0.53 ha of land for crop cultivation. Each family will have 534 m2 for housing and 0.067 ha for orchard and cash crops.
(c) Agriculture. This component would comprise a comprehensive range of agricultural support services in technical extension, quality seeds development and supply, agricultural mechanization, livestock and aquaculture development and extension service, agro-forestry and irrigated pasture, small-scale agro-processing and rural enterprises.
Financing
8. The project would cost about US$300 million. The Bank Group would finance about 50% of the total project cost and the remaining 50% would be financed by counterpart funds to be provided by the central and local governments. The local government funding would be a shared responsibility between the province, city, county/township governments and project beneficiaries who will contribute labor for earthwork construction. Part of the central government funds would come from the poverty reduction program under the "Two Xi" Commission.
Implementation
9. The Gansu Provincial Planning Commission and the Bureau of Water Resources will be responsible for the overall project policy matters, funds mobilization and coordination of implementation agencies. The existing Gansu World Bank Projects Implementation Office (GPIO), established under the Bureau of Finance, will be responsible for financial management of project funds, procurement and disbursement, and liaison with the Bank. The Shule River Project Construction and Management Bureau will be established at Yumen City supported by project management offices in the project counties. The implementation period proposed is 13 years with substantial project completion scheduled by the 10th year. It is also proposed that the Bank loan/credit be phased over ten years.
Environmental Aspects
10. The Government has carried out a comprehensive environmental impact assessment of the project. The EIA has been reviewed and endorsed by the National Environmental Protection Agency (NEPA). The Bank has rated the project in Category A due to dam construction and large-scale land reclamation for irrigated agriculture. However, the project would also generate positive impacts due to afforestation and increase of vegetative cover in the project areas, and restoration of the degraded eco-system in central and eastern Gansu through emigration of poor farmers to be settled in Hexi Corridor. As both hosts and settlers would primarily be of Han (Chinese) ethnicity, few cultural or social problems are anticipated. The Bank would review the environmental impact assessment done in accordance with the provisions of OD 4.01during coming preparation missions and, if found satisfactory, would secure permission of the Government to release the EIA.
Project Benefits
11. The most significant and direct project benefit is raising incomes and standards of living for 200,000 people now living under absolute
poverty. At full development, per capita income is projected to increase from Y280 (1990) to Y1,400 for settlers in new irrigation areas, and from Y1,020 to Y1,540 for farmers in the existing irrigation areas improved under the project. These projected average per capita incomes are well above provincial averages for rural income. The incremental production of grain would ease the annual net grain deficit and import in Gansu, averaging about 0,000 tons a year with a maximum of 827,000 tons. The project area would be ultimately developed into a major grain and commercial crop base in Hexi Corridor. Emigrating and settling 200,000 people to Hexi Corridor would also save substantial
government expenditure in providing annual relief to the poor areas for food, clothing and fuel. Other intangible benefits include improvement of the degraded source area environment and the quality of life of the new settlers.
Sustainability
12. The project will be sustainable as Gansu has many years of experience in carrying out voluntary settlement in Hexi Corridor under
the "Two Xi" poverty reduction programs. The settlement would be systematically planned, implemented in stages and integrated with the
progress of irrigation works and availability of land for crop cultivation. Settlers would be prepared in advance to adapt themselves
to the new environments and given training in irrigated agriculture. Survey of the potential emigrants to Hexi Corridor shows good response and enthusiasm. The projected agricultural production is assured with the planned development of land and water resources as evidenced from existing cultivated areas provided with similar facilities. The risk of drought years exists but its effect can be reduced with supplementary use of available groundwater and through proper irrigation management. The likely risk confronting the project would be the lack of adequate counterpart funds which may delay project implementation. Provision of institutional strengthening and development would be included in the project to ensure operation, maintenance and management of completed works and production would be sustained.
Contact Point:
Public Information Center
The World Bank
1818 H Street N.W.
Washington D.C. 20433
Telephone No.: (202)458-5454
Fax No.: (202)522-1500
Note: This is information on an evolving project. Certain components may not necessarily be included in the final project.
