June 1, 1999
A. Sector Background
The absolute poor in rural China, comprised disproportionately of minority nationalities, reside mainly in remote and inaccessible upland areas, where the endowment of natural resources is poor and population pressures high (China: Strategies for Reducing Poverty in the 1990s, World Bank, 1992). Government estimates of the incidence of absolute poverty demonstrate a significant drop, from 270 million people in 1978 to about 60 million people in 1997. However, China's growth pattern has 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). An unfavorable agro-ecological environment, degraded lands, low precipitation with recurrent droughts, fragmented and uneconomic land holdings combined with slow human resource and institutional development, constrain the prospects for increased agricultural productivity and income in the upland areas.
In 1994, China launched a far-reaching poverty reduction strategy under the 8-7 Plan, which targets 592 designated poverty counties located in inaccessible mountainous and semi-arid areas in the central and western parts of China. Its objective is to raise per capita incomes to Yuan 500 (in constant 1990 prices)(1) for about 80 million poor living in abject poverty, within seven years. To achieve this objective, the Plan calls for close collaboration among the state, local governments, communities and charities, with assistance from external aid agencies, aimed at: i) creating suitable conditions for agricultural development and promoting related investments in off-farm income generating activities; ii) improving basic rural infrastructure such as roads, village electrification and rural water supply; and iii) investing in basic social services including education and health. Toward this end, a number of initiatives are being implemented with promising results, including Bank-assisted targeted rural development projects- Southwest Poverty Reduction Project (SWPRP) and Qinba Mountains Poverty Reduction Project (Qinba), voluntary settlement on newly irrigated land (Gansu-Hexi Corridor Project), redeployment of surplus labor to non- agricultural activities (labor mobility), etc.
B. Project Development Objective
The objective of the Western Poverty Reduction Project (the Project) is to reduce the incidence of absolute poverty in remote and inaccessible villages of Gansu and Qinghai Provinces and Inner Mongolia Autonomous Region. The Project will empower poor households in the selected poor counties to raise their incomes, through increased grain and livestock production sufficient to meet the basic needs of food and clothing and, in many cases, also generate a marketable surplus to improve living standards. Establishment of alternative income generation activities in poor rural areas, improvement of rural infrastructure and enhanced access to basic social services such as health and education will also increase the living standards of poor rural households. The Project's objective fully reflects the expectations and aspirations of the target population, as reflected in the Social Assessments.
C. Stakeholder Participation and Consultation
To promote stakeholder participation during Project implementation, the social assessment work facilitated extensive interaction between all stakeholders and beneficiaries. A wide range of stakeholders were consulted, from farmers and herders on the ground, community leaders and religious elders, to administrators at all levels. These consultations were launched at the stage of project identification with technical inputs from the Bank on the links between Social Assessments (SA) and participatory approach on one hand and project design and implementation on the other. Project design at the village and household level is flexible: farmers and herders are actively encouraged to select and modify the household development models.
To ensure that the aspirations of the poorest farmers, the primary beneficiaries, are fully reflected in the Project design, the SA conducted comprehensive sample surveys in each Project county and prepared case studies in a number of villages. These surveys included detailed investigations of the physical resource base, farming, herding, income sources, household composition, community organization, cultural preferences, and farmers/herders' strategies for coping with poverty. Special emphasis has been given to women's participation in the Project design, preparation and implementation.
D. Project Components
To achieve its development objective, the Project will support:
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implementing these under a single management structure and establishing systems to monitor and evaluate the impact of the Project on poverty reduction, voluntary settlement, labor mobility, and environment and to disseminate the results.
E. Project Costs and Financing Plan
The Project cost estimate, including contingencies, is presented in Table 1. The front-end fee, estimated at US$0.6 million, will be financed under the Bank loan. Project financing sources are presented in Table 2.
Table 1 - Estimated Project Costs
| Component | Cost (US$ Million) |
| Land and Household Development | 141.0 |
| Irrigation and Land Improvement | 86.3 |
| Rural Infrastructure | 28.7 |
| Rural Enterprises | 13.6 |
| Labor Mobility (Gansu) | 15.7 |
| Voluntary Settlement (Qinghai) | 6.5 |
| Social Sectors | 8.7 |
| Institutional Development and Project Management | 10.6 |
| Front-End Fee | 0.6 |
| Total | 311.7 |
Table 2 - Project Financing Plan
| Sources | Financing (US$ Million) |
| Government | 123.7 |
| IBRD | 60.0 |
| IDA | 100.0 |
| Beneficiaries | 28.0 |
| Total | 311.7 |
F. Project Benefits
The Project, by creating employment and income generating opportunities, will benefit an estimated 1.7 million people living in absolute poverty (674,000 persons in 167,000 families in Inner Mongolia; 930,000 persons in 197,000 families in Gansu; and 61,800 persons in 13,600 families in Qinghai), including minority nationalities, residing in 3,700 remote and inaccessible villages of Qinghai, Gansu and Inner Mongolia. Food grains, cash crops, fruits, wood, forages, meat and wool constitute the primary Project outputs.
A survey of selected Project counties indicates that an average household produces adequate food grain supplies for about six months. For the remaining six months, most households borrow from relatives or better-off neighbors to supplement the limited welfare ration provided by local governments.
In Qinghai, benefits will accrue to the migrants in the 'move-in' area, the existing households in the 'move-in' area, and to families who remain behind in the 'move-out' counties and villages. In the case of the latter, out migration will reduce population pressures and contribute to arresting ecological degradation. Steep uplands previously cultivated will be returned to grass and forest land, thereby reducing soil erosion and increasing water conservation.
Rehabilitation of 85 percent and terracing of 15 percent of the land to be vacated will be financed by the Project counties. It is anticipated that many poor households who remain in the 'move-out' villages will be able to increase their per capita grain production through cultivating larger areas of the terraced land. County governments will face less demand on their limited resources for welfare assistance in times of food shortage. When fully implemented, the Project beneficiaries will meet basic needs of food and clothing and, in many cases, earn cash income from a marketable surplus and labor mobility.
The Project will also improve the overall education and health status of the target population by increasing primary school enrollment and enhancing completion rates, and reducing infant and maternal mortality and morbidity. Provision of safe rural water will also contribute to reduction of water borne diseases. Selected rural roads will provide access to social services and markets and promote investments in rural enterprises.
G. Implementation Arrangements
The Project will utilize existing institutions, strengthening them as appropriate, to cater to the special conditions in the Project Provinces. A five-tier implementation arrangement is proposed at the national level, the provincial level, the prefecture/league/municipal level, the county level, and at the village level. The three Project Provinces have established Project monitoring offices (PMO) at all levels. The PMOs, and the line agencies have signed memoranda of understanding specifying the institutional support arrangements with specific delivery schedules.
H. Procurement
All Bank procurement will be governed by "Guidelines: Procurement under IBRD
Loans and IDA Credits" (January 1995 revised in January, August 1996,
September 1997 and January 1999) and "Guidelines: Selection and Employment
of Consultants by World Bank Borrowers" (January 1997 revised September 1997
and January 1999). It is anticipated that procurement will include:
I. Project Monitoring and Evaluation Arrangements
The State Statistical Bureau, in collaboration with provincial Statistical Offices, will be responsible for developing and implementing the poverty impact monitoring, evaluation and dissemination system. Project progress monitoring is carried out by the PMOS. The Foreign Capital Project Management Center of the State Council's Leading Group for Poverty Reduction and Development will carry out independent supervision of the project. In addition, separate monitoring and independent review is going to be carried out for voluntary settlement, labor mobility, and environmental issues.
J. Social Aspects
Social Assessment documents were prepared for the three Project Provinces by Qinghai Plateau Geography Research Institute, and the Agricultural and Animal Husbandry Engineering Design Institute of the Agricultural and Animal Husbandry College, Inner Mongolia. The SAs for Gansu were prepared by local social scientists coordinated by the Western Poverty Reduction Project Gansu Project Office. A Voluntary Settlement Implementation Plan (VSIP) was prepared for Qinghai, which includes an Involuntary Resettlement Action Plan as an annex, prepared in accordance with OD 4.30 Involuntary Resettlement.
The Project also addresses the provisions of OD 4.20, Indigenous People by adoption of the VSIP, designed for predominantly minority nationalities in Qinghai, based on a detailed Social Assessment, and through a project design which reflects the concerns of minority nationalities in Gansu and Inner Mongolia. The Social Assessments were carried out in close coordination with the environmental assessment work, under the supervision of the Bank and in accordance with Bank practice. The social aspects of this Project are summarized in a separate document ("Social Aspects") which is included in the Project Appraisal Document (PAD) as Annex 9, and is also attached to this Project Information Document as an Annex.
K. Environmental Aspects
The proposed Project was reviewed and placed in World Bank environmental screening category "B" in accordance with the provisions of OD 4.0, Environmental Assessment, and taking account of past practice with classification of a large number of similar integrated agricultural development projects financed by the World Bank in China over the last 10 years. Consistent with relevant laws and regulations of the People's Republic of China and Operational Directive (OD) 4.01, Environmental Assessment of the World Bank, Environmental Impact Assessments (EIA) have been prepared for activities in Gansu, Inner Mongolia and Qinghai.
Review of the scope and proposed activities of the Project indicated that the potential impacts were not unusual or unprecedented in scope. Any limited adverse effects will be addressed through design, mitigation and/or monitoring measures. The land reclamation and improvement activities supported under the Project are of a kind that have been widely and successfully applied in other arid and semi-arid development projects in the Project Provinces/Regions and other Provinces/Regions in central and western China.
The mitigation measures and methods to be utilized are well known and established in China. No pesticides or herbicides will be procured under the Loan/Credit. In addition, the Project will support a management plan for the Balong Soak and training in regional land use planning for rural areas. The environmental aspects of this Project are summarized in a separate document ("Environmental Information Package") available in the Bank's Info Shop.
1 Yuan 1.00 = US $0.12 2 The Keri dam is an off-river regulating reservoir that will inundate approximately 128 hectares of extremely sparsely vegetated and unutilized desert land to an average depth of about 15 meters. As such, the environmental implications of its construction were determined to be insufficient to justify assigning the Project to Category A. NB: This is information on an evolving project. Certain activities and/or components may not be included in the final project.
More General Analysis on Poverty and Development
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