Completion Report - Asian Development Bank · Team members E. Arcillas, Senior Operations...

Completion Report

Project Number: 38662-013 Loan Number: 2607 Grant Numbers: 0188 and 0189 August 2017

People’s Republic of China: Shanxi Integrated

Agricultural Development Project This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency unit – yuan (CNY)

At Appraisal At Project Completion 15 November 2009 29 June 2017

CNY1.00 = $0.1465 $0.1470 $1.00 = CNY6.8263 CNY6.8016

ABBREVIATIONS

ADB – Asian Development Bank EIRR – economic internal rate of return FIRR – financial internal rate of return MOF – Ministry of Finance PIU – project implementation unit PMO – project management office PRC – People’s Republic of China SFD – Shanxi Finance Department

NOTE

In this report, "$" refers to United States dollars.

Vice-President S. Groff, Operations 2 Director General A. Konishi, East Asia Department (EARD) Director Q. Zhang, Environment, Natural Resources and Agriculture Division,

EARD Team leader S. Robertson, Natural Resources and Agriculture Specialist, EARD Team members E. Arcillas, Senior Operations Assistant, EARD C. Carreon, Operations Officer, EARD F. Radstake, Principal Environment Specialist, EARD N. Sapkota, Senior Social Development Specialist, EARD S. Tirmizi, Water Resources Specialist, EARD T. Ueda, Principal Natural Resources and Agriculture Economist,

Southeast Asia Department

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1

A. Relevance of Design and Formulation 1 B. Project Outputs 2 C. Project Costs 3 D. Disbursements 3 E. Project Schedule 3 F. Implementation Arrangements 4 G. Conditions and Covenants 5 H. Related Grant Assistance 5 I. Consultant Recruitment and Procurement 6 J. Performance of Consultants, Contractors, and Suppliers 6 K. Performance of the Borrower and the Executing Agency 6 L. Performance of the Asian Development Bank 7

III. EVALUATION OF DESIGN AND IMPLEMENTATION 7 A. Relevance 7 B. Effectiveness in Achieving Outcome 8 C. Efficiency in Achieving Outcome and Outputs 9 D. Preliminary Assessment of Sustainability 10 E. Impact 11

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons 13 C. Recommendations 14

APPENDIXES 1. Project Design and Monitoring Framework 16 2. Distribution of Project Activities 26 3. Project Investment and Financing 28 4. Planned and Actual Implementation 29 5. Physical Progress 31 6. Status of Compliance with Loan and Grant Covenants 32 7. Grant Reports 45 8. Procurement Packages for ADB Financing 51 9. Economic and Financial Reevaluation 52 10. Environmental Management 59 11. Poverty Reduction and Social Dimensions 62 12. Gender Equality 72

BASIC DATA

A. Loan and Grant Identification 1. Country 2. Loan Grant Numbers 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number

People’s Republic of China 2607 0188 and 0189 Shanxi Integrated Agricultural Development People’s Republic of China Shanxi Provincial Government $100 million 1648

B. Loan Data 1. Appraisal – Date started – Date completed 2. Loan Negotiations – Date started – Date completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In loan agreement – Actual – Number of extensions 6. Closing Date – In loan agreement – Actual – Number of extensions 7. Terms of Loan – Interest rate – Maturity (number of years) – Grace period (number of years) 8. Cofinancing (WFPF – 0188) – Approval – Date of financing agreement – Date of effectiveness – Closing date in financing agreement – Actual closing date – Number of extensions 9. Cofinancing (GDCF – 0189) – Approval – Date of financing agreement – Date of effectiveness – Closing date in financing agreement – Actual closing date – Number of extensions

18 April 2008 25 April 2008 16 November 2009 17 November 2009 16 December 2009 17 June 2010 15 September 2010 9 September 2010 None 30 June 2016 6 September 2016 None LIBOR + 0.60% 26 years 6 years 16 December 2009 30 June 2010 25 October 2010 30 June 2012 10 March 2014 2 16 Dec 2009 30 June 2010 25 October 2010 30 June 2012 17 June 2014 2

ii

10. Disbursements a. Dates – loan

Initial Disbursement

16 December 2010

Final Disbursement

2 December 2015

Time Interval

60.4 months

Effective Date

9 September 2010

Original Closing Date

30 June 2016

Time Interval

69.7 months

b. Dates – WFPF grant


23 March 2012

Final Disbursement

9 December 2013

Time Interval

20.87 months

Effective Date

25 October 2010


30 June 2012

Time Interval

20.47 months

c. Dates – GDCF grant


8 December 2011

Final Disbursement

19 December 2013

Time Interval

24.73 months

Effective Date

25 October 2010


30 June 2012

Time Interval

20.47 months

d. Amount ($ million)

Category

Original

Allocation

Last Revised Allocation

Amount

Canceled

Net Amount

Available

Amount

Disbursed

Undisbursed

Balance

A. ADB Loan 01 Vehicles 1.03 1.03 0.00 1.03 1.03 0.00 02 Capacity building and training

0.30 0.26 0.00 0.26 0.26 0.00

03A Credit –agro- enterprises, equipment

1.81 0.39 0.00 0.39 0.39 0.00

03B Credit –agro- enterprises, CW

0.28 0.09 0.00 0.09 0.09 0.00

03C Credit –on-farm processing

0.49 0.94 0.00 0.94 0.94 0.0

03D Credit – livestock raising

46.63 55.46 0.00 55.46 55.46 0.00

03E Credit – Chinese herbs

0.53 0.28 0.00 0.28 0.28 0.00

iii

Category

Original

Allocation

Last Revised Allocation

Amount

Canceled

Net Amount Available

Amount

Disbursed

Undisbursed

Balance

03F Credit – dry and fresh fruits, asparagus, poplars

32.32 18.30 0.00 18.30 18.30 0.00

03G Credit – arched canopy greenhouses

4.52 7.65 0.00 7.65 7.65 0.00

03H Credit – sunshine greenhouse, prickly ash & dryland farming

12.09 15.60 0.000 15.60 15.60 0.00

99 Imprest account

0.00 0.00

Subtotal A 100.00 100.00 0.00 100.00 100.00 0.00

B. WFPF Grant

01 – Consulting services

0.20 0.18 0.00 0.18 0.18 0.00

02 – Equipment 0.16 0.16 0.00 0.16 0.16 0.00 03 – Training, workshops, conferences

0.06 0.12 0.00 0.12 0.12 0.00

04 – Misc adm and support costs

0.01 0.02 0.00 0.02 0.02 0.00

05 – Printing and dissemination

0.01 0.02 0.00 0.02 0.02 0.00

06 – Unallocated

0.06 0.000 0.00 0.000 0.000 0.00

Subtotal B 0.50 0.50 0.00 0.50 0.50 0.00

C. GDCF Grant

01 – Consulting services

0.06 0.06 0.00 0.06 0.06 0.00

02 – Equipment 0.01 0.00 0.00 0.00 0.00 0.00 03 – Training, seminars, conferences

0.01 0.02 0.00 0.02 0.02 0.00

04 – Revolving Credit Fund

0.09 0.11 0.00 0.11 0.11 0.00

05 – Misc adm and support costs

0.01 0.00 0.00 0.00 0.00 0.00

06 - Unallocated

0.01 0.00 0.00 0.00 0.00 0.00

Subtotal C 0.19 0.19 0.00 0.19 0.19 0.00 GDCF = Gender and Development Cooperation Fund, LIBOR = London interbank offered rate, WFPF = Multi-Donor Trust Fund under the Water Financing Partnership Facility. 11. Local Costs (Financed) - Amount ($) 0 - Percent of local costs 0 - Percent of Total Cost 0

iv

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual

Foreign exchange cost 100.70 100.69 Local currency cost 88.61 100.63 Total 189.31 201.32

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual

Implementation Costs Borrower financed 87.28 98.78 ADB financed 100.00 100.00 Other external financing – WFPF Other external financing – GDCF

0.50 0.20

0.50 0.19

Total 187.98 199.47

IDC Costs Borrower financed 1.33 1.85 ADB financed Other external financing – WFPF Other external financing – GDCF

Total 1.33 1.85

ADB = Asian Development Bank, GDCF = Gender and Development Cooperation Fund, IDC = interest during construction, WFPF = Multi-Donor Trust Fund under the Water Financing Partnership Facility.

3. Cost Breakdown by Project Component ($ million)

Component Appraisal Estimate Actual

A. Base Cost 1. Transition to high-value production 173.16 188.51 2. Strengthening of farmer–market links 5.44 5.26 3. Capacity building and training 3.59 3.48 4. Project management 5.01 1.40 5. Climate change adaptation through groundwater

management 0.55

6. Women’s economic empowerment 0.27 Subtotal (A) 187.20 199.47 B. Contingencies 0.78 0.00 C. Financing Charges during Implementation 1.33 1.85

Total (A+B+C) 189.31 201.32

v

4. Project Schedule

Item Appraisal Estimate Actual

Date of contract with consultants WFPF GDCF

Q3 2010 to Q1 2012 Q3 2010 to Q1 2012

Q4 2010 to Q1 2014 Q4 2010 to Q3 2012

Subloans to farmers Q3 2010 to Q4 2015 Q3 2010 to Q4 2015 Vehicle procurement Q3 2010 to Q3 2010 Q3 2011 to Q2 2013

5. Project Performance Report Ratings

Implementation Period

Ratings

Development Objectives

Implementation Progress

From 9 September 2010 to 31 December 2010 Satisfactory Satisfactory From 1 January 2011 to 31 December 2011 On track On track From 1 January 2012 to 31 December 2012 On track On track From 1 January 2013 to 31 December 2013 On track On track From 1 January 2014 to 31 December 2014 On track On track From 1 January 2015 to 31 December 2015 On track On track From 1 January 2016 to 6 September 2016 On track On track

D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Members

Loan inception 14–21 Sep 2010

4 17 a, c, d, e

Loan review 18–25 Oct 2011

4 21 a, c, d, f

Midterm review 5–11 Mar 2013

2 12 a, f

Loan review 1–5 Dec 2014

3 9 a, b, f

Loan review 18–22 Apr 2016

2 8 b, f

Project completion review 21–27 Mar 2017

2 2 b, e

a = senior natural resources economist, b = natural resources and agriculture specialist, c = principal environment specialist, d = social development specialist, e = water resources specialist, f = project analyst. .

I. PROJECT DESCRIPTION

1. Shanxi Province in the northern People’s Republic of China (PRC) has only about 3.8 million hectares of dependable arable land, of modest quality and productivity, for its 23 million rural population. Low rainfall, high evaporation, frequent natural disasters, and soil erosion lead to instability in agricultural production. Although the implementation of the national reform and opening-up policy since 1980 has improved the agricultural service system, farmer’s technical capacity, and women’s economic participation, the nature of extensive and scattered small-scale agriculture has not changed significantly. Most farmers continue traditional agricultural practices—growing mainly wheat and maize (corn)—that generate low incomes and require extensive use of water and agrochemicals. Similarly, the patterns of free-range livestock grazing and untreated disposal of animal waste adds to soil and water pollution. This agricultural system is unsustainable and damaging to the environment, and keeps most farmers in poverty. Most farmers also remain largely unorganized and cannot take full advantage of market and rural finance opportunities. In addition, women’s participation remains marginal, and their social and economic rights are usually ignored. 2. One of the main constraints to converting traditional farming to high-value farming is access to formal credit. The agricultural lending institutions have (i) a limited range of products, (ii) inadequate experience with long-term lending, and (iii) weak capacity to assess credit risk. These constraints, coupled with the absence of market-led interest rates, result in market failure, and the inability of agro-enterprises and farmers to access formal financial services. 3. The Shanxi Integrated Agricultural Development Project, approved by the Asian Development Bank (ADB) in 2009, was expected to reduce rural poverty and develop a sustainable agriculture sector in 26 counties of Shanxi Province.1 The intended outcome was to increase farm productivity and create higher household incomes from high-value agricultural production by adopting appropriate and environmentally sound technologies and practices, value addition through processing, efficient market access, and improved food quality and safety in the project area. The project had four outputs: (i) transition to high-value production; (ii) strengthening farmer–market links; (iii) capacity building and training; and (iv) project management.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

4. The project helped the Government of the PRC implement its poverty reduction program of building rural areas by supporting agro-enterprises and farmers to develop sustainable production bases and improve access to markets. It supported the Government of Shanxi Province in strengthening the abilities of municipal and county governments to carry out capacity building so as to expand agricultural value chains, add value to agricultural products, and increase farmer incomes through the “enterprise + production base + farmer” model. The central government’s long-term development goal at the time of appraisal was to achieve a better balance between urban and rural incomes, geographic regions, economic and social development, and between an increasingly market-oriented economy and environmentally sustainable economic growth. ADB’s operations in the PRC supported this strategy by focusing on (i) helping achieve equitable growth, (ii) making markets work better, (iii) improving the environment, and (iv)

1 ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Loan and

Administration of Grants to the People’s Republic of China for the Shanxi Integrated Agricultural Development Project. Manila.

2

supporting regional cooperation in the Asia and Pacific region.2 The project sought to enhance sustainable economic growth by promoting agricultural production bases and products and developing agricultural value chains. It helped directly to increase farmers’ incomes. 5. In line with ADB’s Operational Plan for Sustainable Food Security in Asia and the Pacific, the project pursued a holistic approach—strengthening inclusive food and agricultural value chains that enable integration of production, processing, markets, and distribution networks; and promoting greater farm and nonfarm job creation, higher incomes, and better living standards for the poor, women, and other vulnerable groups.3 6. The project design was appropriate to the intended project outcome, as was the use of project preparatory technical assistance to help prepare it.4 The technical assistance helped the provincial government (i) review, assess, and decide on cost-effective agricultural production bases and value chain development measures; and (ii) formulate an improved and integrated agricultural development investment project with environmental and social assessments that were consistent with ADB’s policies and guidelines. It provided all the inputs needed to prepare the project for ADB financing. Stakeholders were consulted during the project’s preparation and implementation to determine its scope and implementation arrangements. 7. The project’s expected impact at appraisal remained relevant at completion. Its design and monitoring framework is in Appendix 1, along with the achievements at completion against the framework’s targets and indicators.

B. Project Outputs

8. Output 1: Transition to high-value production. The output was to establish perennial, annual, and livestock production bases, and it was successfully delivered. As of the end of 2016, 39,829 households had completed their subprojects, featuring especially efficient perennial cultivation (walnuts, dates, apples, pears, prickly ashes, asparagus, fast-growing poplars, and Chinese herbs) totaling 6,968.01 hectares and engaging 21,106 households; annual crops amounting to 756.27 hectares and engaging 9,282 households; and breeding of livestock involving 9,218 households. 9. Output 2: Strengthening of farmer–market links. The output promoted the links between farmers, markets, and enterprises to increase production and add value to agricultural products. Processing and storage facilities were established, featuring 223 date-drying units and expanding the on-site processing capacity and quality of agricultural products. A 2,000-ton thermostatic storehouse was completed by Qinzhou Millet Company, which boosted its capacity to provide the market with higher-quality produce. A total of 14,861 farmer households (37.3%) signed a product buyback contract with various enterprises, and 9,161 farmer households (23%) signed loan guarantee and technical service contracts with enterprises. 10. Output 3: Capacity building and training. Project capacity building and training were provided: 39,829 project farmer households participated in technical training or agricultural demonstrations. 328 farmer households in Lishi, Pingshun, Qixian, and Xi’xian counties received a subsidy for installing drip-irrigation systems, and 6,500 farmers were trained in water-saving techniques. After receiving training, Daning and Liulin counties set up 20 women’s groups and

2 ADB. 2008. Country Partnership Strategy: People’s Republic of China, 2008–2010. Manila. 3 ADB. 2009. Operational Plan for Sustainable Food Security in Asia and the Pacific. Manila. 4 ADB. 2007. Technical Assistance to the People’s Republic of China for Preparing the Central and Southern Shanxi

Integrated Agricultural Development Project. Manila.

3

cooperatives and dispensed microcredit worth $86,000 to four villages, benefiting 117 households and enabling 294 women to be trained. 11. Output 4: Project management. The project established project management offices (PMOs) at provincial, municipal, and county levels; these were well staffed and equipped. The municipal and county PMOs set up and managed project performance monitoring systems to track project progress and financial performance, and manage loan withdrawals and disbursements. Detailed information on the project’s achievements is in Appendix 2. C. Project Costs

12. At appraisal, the project cost was estimated to be equivalent to $189.31 million—comprising $100.7 million or 53.2% in foreign exchange and $88.61 million or 46.8% in local currency. Of this, $100 million was to be covered by an ADB loan (52.8%), $700,000 by ADB grants (0.4%), $26.56 million by government funds (14.0%), and $62.05 million by farmers, agro-enterprises, and farmer associations (32.8%). At loan closing, the project cost amounted to $201.32 million—$100.69 million in foreign exchange (50.1%) and $100.63 million equivalent in local currency (49.9%). Of this, $100 million was covered by the ADB loan (50.13%), $693,000 by ADB grants (0.34%), $20.57 million by government funds (10.12%), and $80.06 million by farmers, agro-enterprises, and farmer associations (39.41%). The full $100 million ADB loan approved was used. The actual project cost was higher than the estimate at appraisal mainly because the yuan appreciated against the United States dollar during implementation. The loan proceeds were reallocated to meet the actual disbursements in June 2016. Details on project investment and financing are in Appendix 3.

D. Disbursements

13. Of the $100 million approved, $100 million in loan proceeds were disbursed from December 2010 to December 2015 (para. 14). Of this, $1.03 million was for vehicles, $98.71 million for credit to agro-enterprises and farmers, and $0.26 million for capacity building and training. The last withdrawal application for liquidation of the imprest account was submitted in April 2016. The loan was fully disbursed and the loan account was closed on 6 September 2016. Of the approved grant of $500,000 (G0188-PRC), $499,980.04 was disbursed from March 2012 to December 2013. Of the approved grant of $195,000 (G0189-PRC), $193,616.74 was disbursed from December 2011 to December 2013. 14. The loan proceeds were all withdrawn using the imprest fund procedure. The provincial government reported no problems with the procedure. It submitted the withdrawal application for the initial advance to the imprest account, amounting to $7 million and based on a 6-month estimate of expenditures, to ADB in December 2010. The advance was fully liquidated in September 2016. 15. Disbursements suffered no institutional or capacity-related issues but were initially slowed by implementation delays (para. 19).

E. Project Schedule

16. The project was approved on 16 December 2009. The loan and project agreements were signed on 17 June 2010, and the loan became effective on 9 September 2010. The original loan closing date was 30 June 2016 but the loan actually closed on 6 September 2016. The project and loan schedule was arranged along four principles. First, subprojects that would bring benefits

4

in a short time were fast-tracked, their implementation periods were shortened, and their loan funds disbursed at the earliest possible time. Second, for subprojects that demanded large labor inputs by farmers, loan funds were disbursed in alignment with farmers’ annual arrangement for labor inputs, i.e., small amounts were disbursed at the start and at the end, and large amounts in the middle of implementation. Third, agro-enterprise subprojects were reimbursed within the first year of project implementation, and the annual crops and livestock breeding within the 5-year implementation period. Finally, for perennial crops like walnuts and dates, which may yield benefits only after a long period, disbursements were arranged at the earliest possible time so that farmers could benefit as early as possible. 17. The planned and actual implementation schedule is in Appendix 4, and a summary of the project’s physical progress is in Appendix 5. Implementation was slow at the beginning of the project while the provincial and local PMOs prepared (i) standard templates for onlending agreements between counties and farmers and enterprises, and (ii) guidelines for the collateral guarantee required for onlending. Once these procedures were completed, the project progressed in a timely manner.

F. Implementation Arrangements

18. The project was carried out in a highly satisfactory manner, using the implementation arrangements that were made at appraisal, and remained unchanged. The provincial government was the executing agency, in charge of the coordination and supervision of all project implementation activities through the project leading group.5 The provincial PMO was set up in the Shanxi Poverty Alleviation and Development Office in Taiyuan. It (i) organized, coordinated, and guided related departments in project municipalities and counties for effective implementation of the project; (ii) prepared an annual work program and budget; (iii) organized procurement; (iv) maintained consolidated accounts, including developing a project performance management system to track all financial transactions with sub-borrowers; (v) prepared and submitted to ADB withdrawal applications and statements of expenditure through the Shanxi Finance Department (SFD); (vi) monitored physical and financial progress, including benefit flows to intended beneficiaries, and submitted reports to the provincial government and ADB; and (vii) liaised with the provincial government through the SFD for reporting to the Ministry of Finance (MOF) and ADB. The PMO regularly reported on project progress and issues to the project leading group. The project leading group met whenever important issues needed discussion and resolution, which was about once a year. The municipal and county project implementation units (PIU) were responsible for the day-to-day implementation of all project activities and set up their own local project leading groups.6 19. The SFD was responsible for managing, monitoring, maintaining, and reconciling the imprest account established for the project and the two grant projects. Withdrawal applications were prepared by municipality or county finance bureaus and submitted to the PMO for consolidation before submission to the SFD. The SFD submitted the withdrawal applications to

5 The provincial project leading group was headed by the vice governor of Shanxi; the deputy director general of the

Shanxi Provincial Development and Reform Commission, the deputy director general of the SFD, and the director general of the Shanxi Poverty Alleviation and Development Office were the deputy group leaders. Group representatives included the Provincial Department of Water Resources, Department of Agriculture, Department of Land Resources, Department of Forestry, Department of Auditing, Department of Environmental Protection, and the Provincial Women’s Federation.

6 These comprised members from the respective Development and Reform Commission, Finance Bureau, Poverty Alleviation and Development Office, Water Resources Bureau, Agricultural Bureau, Forestry Bureau, Environmental Protection Bureau, and Auditing Bureau. The municipal and county PMOs were guided by the provincial leading group and the provincial PMO.

5

ADB for disbursements. On behalf of the national government (the borrower), MOF relent the ADB loan proceeds to the SFD, which received them on behalf of the provincial government. The SFD onlent the loan proceeds to the five municipal finance bureaus of the participating local governments implementing the project. All institutions involved in the project fulfilled the required functions and responsibilities for financial management. 20. Safeguards. The project did not require land acquisition and resettlement and was classified as category C. The expansion of agricultural production and processing took place on existing lands or lands belonging to the project beneficiaries. The project also did not have any impact on ethnic minorities or indigenous peoples. ADB classified the project as category B for environment. Environmental analysis was carried out in accordance with national environmental regulations and ADB’s Environment Policy (2002) and Environmental Assessment Guidelines (2003). The provincial PMO, in cooperation with municipal and county PMOs, monitored compliance with the PRC’s environmental regulations during construction and operation. From 2011, the PMO submitted five annual environmental monitoring reports with extensive ambient environmental quality data, which focused on the domestic reporting requirements. The reports were relatively weak in analytic assessments and the performance of contractors regarding environmental protection. No complaints were received. Details on the environmental management are in Appendix 10.

G. Conditions and Covenants

21. All governments involved complied fully and in a timely manner with all but one of the loan covenants, and complied fully with the project and grant covenants (Appendix 6). The exception was partial compliance with the covenant on insurance obligation. The review found that the municipalities, counties, and subloan borrowers did take out and maintain insurance of project facilities when insurance products were available and doing so was reasonable. In instances where insurance was not taken out, it was found that (i) the small-scale activities made it not feasible to acquire insurance since the cost of insurance exceeded the risk and value (ii) unavailability of insurance products in the market for some agricultural activities made it impossible to comply with this covenant, (iii) and partial compliance with the insurance covenant did not delay or affect implementation of the project.

H. Related Grant Assistance

22. The project included two demonstration subprojects funded by grants—G0188-PRC: Climate Change Adaptation through Groundwater Management and G0189-PRC: Shanxi Province Rural Women Economic Empowerment. Reports on the grants are in Appendix 7. 23. Climate Change Adaptation through Groundwater Management. The Multi-Donor Trust Fund under the Water Financing Partnership Facility provided grant cofinancing equivalent to $500,000.7 The provincial government contributed $100,000 equivalent in kind. The grant supported consulting services, water-saving equipment for irrigation and groundwater monitoring, training and workshops, and reporting. It successfully achieved the expected outcome and delivered the expected outputs: (i) demonstration of more productive, efficient, and economical irrigation techniques; and (ii) stronger groundwater governance through effective implementation of national and provincial regulations and capacity building.

7 Financing partners: the governments of Australia, Austria, Norway, Spain, and Switzerland. Administered by ADB.

6

24. Shanxi Province Rural Women Economic Empowerment. The Gender and Development Cooperation Fund provided grant cofinancing equivalent to $195,000. 8 The provincial government contributed $90,000 equivalent in kind. The grant supported consulting services and a microcredit revolving fund. The grant aimed to increase opportunities for women to participate in economic activities, and to promote gender equality through lending support to women’s production groups and by strengthening their capacities. It successfully achieved the expected outcome and delivered the expected outputs: (i) capacity building for women’s production groups and rural banking groups with 294 women trained; (ii) providing microfinance to 20 women’s production groups benefiting 117 households; and (iii) strengthening the capacity of local government agencies, including the All China Women’s Federation and county PMOs, to support women’s economic empowerment. I. Consultant Recruitment and Procurement

25. At loan closing, the ADB-financed contracts comprised (i) two goods contracts awarded through national competitive bidding for the procurement of 36 vehicles, 34 special-purpose vehicles, and two refrigerated vehicles. All were procured in accordance with ADB’s Procurement Guidelines (2006, as amended from time to time) and on time. The cumulative contract awards amounted to $1.31 million. The summary of procurement and consulting services is in Appendix 8. 26. ADB financed only the consulting services provided under the associated grants (para. 22)—e.g., an international water specialist (66 person-days), national irrigation specialist (264 person-days), and national groundwater specialist (176 person-days). All were recruited in a timely manner. The PMO engaged experts using its own funds to provide capacity building and training for project-supported farmers, cooperatives, and enterprises as well as technical agency staff and PMOs. J. Performance of Consultants, Contractors, and Suppliers

27. The performance of all suppliers of equipment and vehicles is rated satisfactory. The suppliers delivered the equipment and vehicles based on contract specifications and provided related installation services. The performance of the agencies and experts engaged by the PMO using its own funds was also highly satisfactory (para. 28). The performance of consultants engaged for the grants was deemed satisfactory. The consultants successfully carried out their tasks in accordance with their respective terms of reference and achieved expected results on time. K. Performance of the Borrower and the Executing Agency

28. The borrower, represented by MOF, fulfilled its responsibilities, including the submission of official requests to ADB for ADB loan reallocation. The PMO established by the provincial government (the executing agency) successfully managed the project in the five municipalities and 26 counties. The PMO had prior experience with a foreign-funded (World Bank) project and had further developed its project management capacity through training. The provincial government, through the project leading group, provided support to the project by enabling close cooperation and coordination between the departments involved, and timely provision of counterpart funds and technical support. The performance of the borrower and the executing agency is rated highly satisfactory.

8 Financing partners: the governments of Australia, Canada, Denmark, Ireland, and Norway. Administered by ADB.

7

L. Performance of the Asian Development Bank

29. ADB’s performance is rated satisfactory. It carried out six missions that dealt with issues during implementation: an inception mission, three loan review missions, a midterm review mission, and a project completion review mission. In its completion report, the PMO stated that ADB had greatly assisted the provincial government in managing the project and in providing technical specialist support for the two grant subprojects. The PMO also noted the frequent replacement of project officers—three changes during processing and two changes during implementation—which they felt affected the project’s continuity. ADB concurs that the frequent changes during project processing were not ideal; however, it provided stable, timely, and effective support during implementation. The PMO’s completion report did not rate ADB’s performance.

III. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance

30. Overall, the project is rated highly relevant, and its expected impact to reduce rural poverty and develop a sustainable agriculture sector in 26 counties of Shanxi Province remains highly relevant at completion. The project’s intended outcomes—increased farm productivity and household incomes thanks to high-value agricultural production, strengthened farmer–market links, and improved food quality and safety in the project counties—were strategically aligned with the PRC’s development priorities. It strongly supported the implementation of the PRC’s Eleventh Five-Year Plan, 2006–2010 to achieve greater balance between urban and rural incomes, geographic regions, economic and social development, and between an increasingly market-oriented economy and environmentally sustainable economic growth. By promoting sustainable agricultural development in 11 poverty counties and 12 counties on the PRC’s priority list for treatment of accelerated soil erosion, the project also aided the national government in implementing its Policy Document on Modern Agriculture of 2007 and the New Socialist Countryside Policy to redress the slow rate of rural income growth and poor socioeconomic conditions of the PRC's rural population of 750 million. The project closely converged with ADB’s country and sector strategies at the time, especially emphasizing the pillars of environmental sustainability, rural development, and equitable and inclusive growth as outlined in the country partnership strategy for the PRC. It was also in line with ADB’s strategy in the PRC for a more efficient utilization of natural resources by strengthening agricultural value chains and adding value to agricultural products by promoting best practices, capacity development, and techniques and technologies suited to livestock, fruits and nuts, greenhouse vegetables, and grains. 31. The project remains highly relevant to the present PRC development priorities and ADB country and corporate strategies. The project is in line with the National Agricultural Sustainable Development Plan, 2015–20309 and the State Council No. 1 Documents released in 2016 and 2017, which both promote agriculture reform and modernization. The project is also relevant to the priorities of the current (2016–2020) country partnership strategy for the PRC in support of inclusive economic growth and rural development, and to ADB’s Operational Plan for Agriculture and Natural Resources, which promotes greater productivity and stronger efficiency in resource use, agribusiness development, and enhanced food safety and quality.10 Since the provincial

9 Released by the Ministry of Agriculture, National Development and Reform Commission, Ministry of Science and

Technology, Ministry of Finance, Ministry of Land Resources, Ministry of Environmental Protection, Ministry of Water Resources, and State Forestry Administration on 20 May 2015.

10 ADB. 2015. Operational Plan for Agriculture and Natural Resources: Promoting Sustainable Food Security in Asia and the Pacific in 2015–2020. Manila

8

government continues to onlend the funds, revolving the already repaid loans with new loans to different farmers, the relevance of the project remains timely and convincing. 32. The project design was appropriate for achieving the intended outcomes. No major change of scope occurred; minor changes in scope were inevitable, mainly attributed to prolonged project processing, a lower exchange rate, and unforeseen changes in local government programs. 11 Lessons from previous projects were applied to the project design, including establishing strict criteria for selecting agro-enterprises, ensuring viability of proposed investments, and providing adequate capacity building to farmer and support agencies. Project activities responded well to challenges faced by project beneficiaries—limited access to rural finance and no realization of market opportunities—and did not duplicate the work of other development partners. Innovations in water-saving technologies and transformative effects such as access to rural finance with favorable terms for farmers (low interest, long tenor) were given attention to in the project design. Relevant indicators and targets at various levels were laid down and lend themselves well to measurement.

B. Effectiveness in Achieving Outcome

33. Overall, the project was effective in achieving the expected outcome (or purpose), which was the realization of increased and sustainable farm productivity and higher incomes achieved though perennial and/or annual crops and livestock production and processing in the project counties of Shanxi Province. The project adopted an integrated approach to agricultural development to optimize Shanxi's land and water resources, reduce poverty, and improve farm productivity and incomes. 34. The outcome-specific performance target—increase in incomes of about 25% for about 48,040 project households—was substantially met, with at least a 25% increase in incomes for about 39,829 project households. Two of the three target indicators were met, pertaining to improved market access and opportunities for households and enhanced employment opportunities. The third target indicator for expanded production was met for annual crops and livestock expansion. As for perennial crops, only the performance targets for asparagus, Chinese herbs, and fast-growing poplars were achieved. Although the other crops received more acreage for growth, they fell short of the yield target because of the nature of perennial crops, which had not yet reached their full fruit-bearing maturity. It is estimated that the performance targets for the remaining perennial crops will be achieved, if not overachieved, by 2018 at the latest, when perennial crops reach full fruit-bearing maturity. The outputs relating to stronger farmer–market links, capacity building and training, and project management contributed to achieving the outcome. Although behind schedule, and with some minor adjustments to initial targets, the transition to high-value production was made and also contributed to achieving the outcome.

35. The output-specific performance targets—yield of annual, perennial, and livestock production increased by 20%—were mostly met (>80%) and exceeded for certain activities. The targets for production activities were revised during the midterm review of the project when farmers shifted their interest to crops more heavily favored by the market; demand for these crops would stimulate market prices and yield positive returns. Livestock, especially broiler and layer chickens, pigs, mutton, cashmere goats, as well as greenhouse crops, Chinese medicinal herbs,

11 ADB. 2014. Minor Change in Scope and Reallocation of Loan Proceeds: Shanxi Integrated Agriculture Development

Project. Manila; ADB. 2013. Minor Change in Implementation Arrangement and Reallocation of Grant Proceeds: Climate Change Adaptation through Groundwater Management. Manila; and ADB. 2013. Minor Change in Implementation Arrangement and Reallocation of Grant Proceeds: Shanxi Province Rural Women Economic Empowerment. Manila.

9

and poplar trees all experienced a significant increase in demand and all exceeded their performance targets. The responsiveness of the project to market demand as well as farmer demand helped drive the transition to high-value agricultural production and contributed to the overall success. The project did not meet its target under output 2—expanding agro-processing operations of five agro-enterprises. It only supported one agro-enterprise in expanding its cold storage. The other four completed their cold storage expansion outside of the project, saying that the delay in project start-up was not conducive to their business. 36. Safeguard conditions. The project safeguard plans and monitoring reports were adequate, disclosed on time, and executed on time.12 Safeguard monitoring was adequate and timely. No negative environmental or social impacts resulted from the project, and positive results were achieved in some cases. No unresolved safeguard issues exist, and emphasis was given on maximizing benefits to the poor and women. The project revised its performance target during the midterm review, increasing the target for employment (from 10,900 to 17,900 people employed) with the actual achievement exceeded this target with18,000 people employed. The project also resulted in positive environmental and social benefits from activities such as livestock-waste management, an initial key environmental safeguard issue for close monitoring. In line with the PRC’s shift away from using chemical fertilizers toward promoting organic agriculture, the treated livestock manure was repurposed into organic fertilizers and became an additional source of income. 37. Gender equality. The project gender action plan was implemented satisfactorily. The project addressed gender issues and implemented relevant measures at a number of levels, including applying gender equity criteria for selection of project counties and activities, gender awareness, women empowerment, employment, and others. The planned gender targets and achievements are in Appendix 12.

C. Efficiency in Achieving Outcome and Outputs

38. The financial internal rates of return (FIRRs) for the farming systems and the economic internal rate of return (EIRR) for the overall project have been recalculated using information provided in the provincial government’s project completion report and supporting spreadsheets, supplemented with information gathered in the field (Appendix 9). For representative production models, the FIRRs are estimated at between 3.8% and 19.4% for perennial crops; 8.2% and 18.3% for annual crops; 8.6% and 15.3% for livestock; 10.7% for on-farm processing; and 14.2% for agro-processing models. Lower rates of return were achieved for certain models such as perennial crops of lotus (3.8%) and asparagus (6.2% and 8.6%), which is consistent with the decision at the midterm review to shift the focus away from these models. The higher rates of return were achieved by the perennial tree crops, greenhouse annual crops, and cattle-fattening models. The FIRRs for most models range between 9.7% and 19.4%, well above the prevailing interest rate on loans of 7.2%. Table A9.1 shows disaggregated FIRR results by model. As shown in Table A9.2, most subprojects remain robust against negative movements in revenues and operating costs. The financial reevaluation indicates that the 37 subprojects that were sampled are financially viable, even though the FIRRs are lower than at appraisal, which can be attributed to the changes in value of inputs and outputs.

39. The EIRR for the project as a whole has been estimated at 12.8%, based on the benefits from the farm production models. The EIRRs by sample subprojects range from 14.5% to 27.3% for perennial crops; 16.8% to 22.6% for annual crops; 13.2% to 21.7% for livestock; 12.3 for on-

12 Environmental monitoring reports were not disclosed, since this was not yet required for category B projects.

10

farm processing; and 14.7% for agro-processing (Table A9.3). As the EIRRs are higher than the economic cost of capital of 12%, it can be concluded that the project was economically viable both in its individual activities and as a whole at completion. Similar to the FIRRs, the EIRRs at completion are significantly lower than those at appraisal because of relative changes in economic income and economic costs. The project activities also generated wider economic benefits than incremental agricultural production—including training, and rural infrastructure rehabilitation or construction, environmental awareness, environmental policy implementation, and capacity development—and these estimated EIRRs are conservative. The project is rated highly efficient in achieving the intended outcome and outputs. D. Preliminary Assessment of Sustainability

40. The project is rated most likely sustainable. The executing agency and implementing agencies continue to work toward the further development of sustainable agriculture and value-chain development in Shanxi Province, effectively using the project’s microfinance arrangements and the techniques for agricultural production and processing. Only limited risks to institutional sustainability are expected. Subloan arrangements for farming households and agro-enterprises provided under the project continue to be appropriately maintained by the respective poverty alleviation and development offices, county finance bureaus, and PIUs. Revolving loan funds to communities extend project benefits past completion and to beneficiaries beyond the already achieved 39,829 households and one agro-enterprise. The loan amount will continue to be revolved until the provincial government has repaid the loan to ADB. In regard to financial sustainability, household incomes have increased at least threefold and are expected to keep increasing as crops come to full bearing maturity; communities can cover operation and maintenance costs for greenhouses and shared infrastructure from their annual profits. 41. The social mechanism of cooperation and collective management of farming areas, shared infrastructure, and produce sale that were introduced to project cooperatives remains intact and underpins the project’s social sustainability. Project interventions designed at the agro-enterprise level were also sustainable in nature and promise to provide long-term benefits. For instance, the expansion of the temperature-controlled storage at Qinzhou Millet Company paved the way for the company’s long-term development. Aside from production, processing, and marketing of millet, the enterprise has set up a millet flour processing line, which has created new employment and income opportunities for farmers in the community. Farming and livestock production and processing techniques disseminated through project training continue to be practiced in project areas. In Zhangzhuang Village of Linyi County, capacity building in greenhouse production of jujubes proves to continue to provide benefits, not only to project farmer households, but also to other farmer households who have joined the cooperative after seeing increased yield, early maturity, and higher incomes of project farming households. The Zhangzhuang Cooperative has now grown to 200 households managing over 1,000 mu,13 as members practice farming, irrigation, pruning, and sorting techniques taught under the project and sell their dates under the project-supported brand “Lin Special Jujube” to third-party buyers across and outside the PRC. The project’s likely medium- to long-term effects on natural resource management, pollution, biodiversity, and climate are expected to be positive, and environmental sustainability is considered high. Because of project activities, positive externalities in the form of climate-smart agriculture, use of green and organic fertilizers, proper waste management and recycling, and better soil management are already being realized. 42. Regular training provided by poverty alleviation and development offices and local PIUs—in agricultural value-chain development, waste management, organic certification, and water-

13 A mu is a Chinese unit of measurement (1 mu = 666.67 square meters).

11

saving technologies to increase the capacity of farming and livestock cooperatives and enterprises—enhances the likelihood of project sustainability. Project management activities such as managing subloans and external monitoring and evaluation of socioeconomic and environmental impacts helped the provincial PMO and PIUs to shift from a purely agronomic approach to the development of the agriculture sector to an approach that integrates social, economic, environmental, and market factors.

E. Impact

43. Poverty reduction and development impacts. The project’s development impacts are rated highly satisfactory. There is clear evidence that the project has positive development impacts that exceed the expectations expressed in the report and recommendation of the President (footnote 1). Agricultural value-chain development, value addition to farming and livestock products, and the livelihood of poor farmers have increased in all 26 counties of the five municipalities Changzi, Jinzhong, Linfen, Luliang, and Yuncheng (Appendix 11). The impact performance targets were (i) rural poverty incidence decreases by 30%; and (ii) 30% of farmers and 50% of agro-enterprises adopt modern, and environmentally sound technologies for higher-value products. Over the duration of the project, the rural poverty rate declined by an aggregate 45%, from 16.7% (1.27 million of a rural population of 7.63 million) in 2006 to 9.20% in 2016. The project, in conjunction with government-initiated interventions to reduce poverty and stimulate the rural economy, achieved a significant decrease in rural poverty. Of the farmers and agro-enterprises supported by the project, all have adopted modern and environmentally sound technologies that resulted in higher-value products. Examples of such positive impacts are: (i) sustainable management of waste, both agricultural and plastic, in common farming areas and greenhouses; (ii) spin-off of secondary businesses by livestock cooperatives who collect and sell their organic manure, directly or through a broker, to farming households; and (iii) application for and receipt of organic certification by a number of farming cooperatives who phased out synthetic fertilizers and pesticides and improved food safety thanks to project training. 44. The project has contributed to provincial socioeconomic development, poverty reduction, and community development in the project area. 11 of the 29 project counties are poverty counties; county beneficiaries have seen considerable poverty impacts in the form of increased farm incomes. The PMO income survey, which compared pre-project incomes in 2010 and after-project incomes in 2016 for project beneficiary and non-beneficiary households found that (i) before the project, the project beneficiaries were mainly poor and had below-average incomes; (ii) during the project, per capita net income of beneficiary households grew by 116%, exceeding the 17% gain experienced by the control group outside of the project area; and (iii) after the project, the income structure of beneficiary households had improved, i.e., the share of income derived from agriculture had increased and that of outside labor had fallen, indicating substantial benefit from less out-migration within project villages. Details are in Appendix 11. 45. The project not only generated employment for county farming households but also success in its activities—for instance, the realization of sustained benefits resulted in migrant workers returning, which in turn led to significant social and economic impacts in the project area. Also, 14,861 farmer households (37.3% of total project households) signed product buyback contracts with enterprises, and 9,161 households (23%) signed loan guarantee and technical service contracts with enterprises. The consistent availability of selling channels and contracts with third-party companies or brokers in project villages gives the project households secure avenues for income, stable prices for their produce, and stronger links to markets. Several cooperatives—such as Special Jujube Cooperative in Zhangzhuang Village (Linyi County, Yuncheng Municipality)—are selling their dates in and outside the PRC, e.g., the United States

12

of America. Higher income coupled with increased production capacity and stronger technical skills have helped vulnerable and poor households move and remain out of poverty. 46. Gender impacts. Training on gender awareness provided to project management staff, leaders of township and village committees, and women household members helped increase women's participation in project activities, related meetings, and decision-making. In project farming and livestock cooperatives, women are equal and active participants, be it in greenhouse production, pruning of dates, or rearing of chickens and pigs, among other jobs. The project, through the associated empowerment grant (para. 24), gave rural women economic clout through access to subloans, and training in agricultural enterprise techniques and financial management. Women elected their own fund leaders and managers, and became more active and vocal in community matters. The revolving microcredit funds are still operational and continue to disburse loans and provide training to women, and support market links. Economic empowerment of women extended to social empowerment, an increase in confidence, and validation of their own abilities (Appendix 7). 47. Environmental benefits and impacts. The project generated significant environmental benefits by helping farmers adopt modern agricultural technologies and sustainable practices. The expansion of high-value perennial and annual crops has reduced soil erosion in sloped areas, improved water-use efficiency, reduced the use of agrochemicals in favor of green and organic fertilizers, and produced high-quality and safer products. 48. The annual water savings are estimated to total about 3.8 million cubic meters. Fertilizer use is expected to fall by about 2,300 tons per annum. Water savings mean more food using less water—in the four counties covered by the associated groundwater management grant (para. 23), farming cooperatives have cut the water used for irrigation by half, while their yield of cucumbers increased by 15%–20%. The same grant allowed 328 farmer households in Lishi, Pingshun, Qixian, and Xi’xian, the four project counties, to receive subsidies for installing drip-irrigation systems and directly and indirectly provided 6,500 person-times of water-saving training.14 It is expected that the experiences in the four counties will be replicated in other counties and provinces.15 49. Livestock activities yielded benefits by encouraging farmers to collectively manage their herds in larger facilities, improve hygienic conditions in living areas, and reduce soil degradation by limiting free-range grazing. Livestock waste, a major source of nonpoint source pollution in soil and water, is being disposed of safely across most project areas (mostly by composting, less frequently through biogas digesters). The increase in waste production was mitigated by adopting adequate treatment and disposal procedures taught in training provided by the project; in many cases, agricultural waste has been treated, dried, and sold to an intermediary, who in turn sells it to farming households. 50. The overall environmental impacts of the project were localized and temporary. None of the subproject reported any significant environmental impact, or noncompliance with the safeguard documents. No complaints were received. Findings during selected field visits confirmed that impacts were limited to localized and temporary impacts.

14 F. van Steenbergen et al. 2017. Agricultural Production and Groundwater Conservation: Examples of Good Practices

in Shanxi Province, People’s Republic of China. Manila. 15 An active exchange of experiences between officials from Shanxi and Shandong provinces has taken place as part

of project activities in both provinces.

13

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

51. The project is rated highly successful overall based on its ratings under the four core evaluation criteria following the methodology provided in the Guidelines for the Evaluation of Public Sector Operations.16 It was rated highly relevant because the intended project outcomes were fully aligned with country development priorities and ADB country and corporate strategies, and because the project was soundly designed with innovative technologies and transformative effects. The four outputs together adequately achieved the intended outcome: increasing farm productivity and household incomes. Output 1 enabled the transition to high-value production with measures to boost productivity and encourage the production of perennial and annual crops as well as adoption of suitable and environmentally sound technologies and practices for crops, livestock rearing, and waste management. Output 2 strengthened farmer–market links by expanding on-farm processing capacity as well as processing and participation in production bases by agro-enterprises. Output 3 improved agricultural practices and food quality and safety through capacity building and training of farmers, farmer associations, women production groups, and technical support agencies in high-value production and processing. Output 4 was instrumental in establishing provincial and local government project management systems and strengthening domestic management and monitoring systems. The design of the project fostered the provision of loans to farmers and enterprises on favorable terms (low interest, long tenor) and helped broaden access to rural finance. 52. The project is rated effective based on its achievement of the intended outcome and the substantial achievement of the output targets. It was rated highly efficient given its positive FIRRs and EIRRs, high efficiency as an investment, and efficient implementation process. The project’s rating of most likely sustainable takes into account the sound capacity and institutional stability of the executing and implementing agencies and the Shanxi Poverty Alleviation and Development Office, the absence of adverse environmental and social impacts, and the expected continuous benefits to rural areas through higher incomes and employment creation. Since the project continues revolving the loan funds to support similar agricultural production activities, the project activities will be sustainable. B. Lessons

53. Avoid delays in project processing. The long project preparation phase from 2005 to 2010 was complicated by ADB and domestic processing procedures, which stretched the provincial government’s resources. The start-up delay meant that some agro-processing enterprises lost interest in the project and ended their participation. Significant benefit can be found in promoting value chain development by linking enterprises to poor farmers; however, market responsiveness should be of high priority and requires timely start-up of activities to allow enterprises to capture market advantage and avoid hindering their business development. 54. Optimize project management. To strengthen project management, it is vital to (i) clearly define the roles and responsibilities of members of the project leading group to intensify interdepartmental cooperation; and (ii) make efforts to minimize replacement of staff to ensure continuity in project management experience and smoother implementation. 55. Project preparation is important. A key element of the project’s success was the preparation of templates for the production base construction contract, the loan guarantee

16 ADB. 2016. Guidelines for the Evaluation of Public Sector Operations. Manila.

14

contract, and the onlending contract, which standardized the implementation of activities across the project. Although the process took time to prepare in the first year of implementation, once completed, it was easy to implement and resulted in timely project completion. 56. Access to rural finance is transformative. The project achieved its objective to increase rural incomes through improved agriculture production by giving loans to poor rural households, which allowed them to invest in perennial, annual, and livestock production. These loans were suitable for poor rural farmers because they had lower interest rates and longer tenors than the loans typically available at commercial banks. They were more in line with the return on investments that can be achieved from agricultural production systems, and allowed the poor households to repay them without undue stress. All households that took out loans used the funds for the purpose intended and repaid the loans. Giving the poor access to finance can enable them to seize opportunities to increase their incomes and improve their livelihoods.

57. Technical support and training are crucial elements. Access to technical training was the most appreciated aspect of the project after access to loans. The training provided those who took out loans with the skills, knowledge, and capacity to apply good agriculture practices and use latest technologies such as water-efficient irrigation systems and integrated pest management, all of which resulted in high-quality produce. Farmers were confident to manage their production systems with the new skills they learned and could access the follow-up technical support provided.

58. Establishing market links benefits the poor. Awareness about markets and access to market information meant the farmers could make informed trading decisions. Additional benefit was gained when individual farmers linked up with agro-enterprises through guaranteed buyback schemes. Farmers could benefit from higher prices than those available in the open market and now have a secured income source based on buyback contracts. Agro-enterprises benefited from access to commodities that were of the required quality and strengthened their resource base. The “enterprise + production base + farmer” model that was applied in this project was successful and demonstrated that market links can be mutually beneficial.

C. Recommendations

1. Project Related

59. Future monitoring. To ensure the project’s sustainability, it is recommended that the provincial government and/or local governments continue to monitor related activities over the long term. This is particularly important because the counties continue to revolve the project loan funds to additional rural households and enterprises, which may deepen the project’s intended outcome and outputs. 60. Covenants. The loan covenants (including all covenants under Article IV Particular Covenants) and project agreements were fully complied with in a timely manner and remain relevant to the project. The insurance covenant should be approached in a practical manner and, where appropriate and of benefit, households should be encouraged to take out insurance for their activities whenever available. For instance, insurance for female breeding pigs, which have a high economic value, was seen to be beneficial. However, insuring small-scale and low-cost activities is not viable. 61. Further actions or follow-ups. The project was closed successfully and requires no further extension. However, it is recommended to (i) continue to revolve the loan funds because demand is strong and access to rural finance for farmers can be further expanded; (ii) further

15

promote agricultural value chains by working with enterprises and agribusinesses to boost cooperation and expand business opportunities; (iii) further strengthen waste management, including recycling of plastic and other synthetic waste; (iv) provide capacity building for cooperatives and enterprises to attain organic certification; and (v) improve the design of agri-insurance products to serve as risk management tools. 62. Timing of the project performance evaluation report. It is recommended that a performance evaluation review be conducted in 2021 or later, allowing at least 5 years from the physical completion of the project. This is necessary to properly evaluate the project’s effect on increasing agricultural productivity as well as yield income, given the time required for tree crops to reach production maturity, and to have enough accumulated statistical data to assess the effect on poverty reduction.

2. General

63. Access to rural finance for farmers. Providing access to finance for the poor and rural households can support livelihood development. Expanding access to finance and building capacity of rural financial institutions to enable them to offer affordable and tenable loans to the rural poor is crucial. 64. Value chain development approach. Significant increases in income and rural employment can be achieved through the value chain development approach. ADB, through the Agriculture, Rural Development and Food Security Thematic Group’s value chain development working group, should highlight results and successful approaches for information sharing and uptake of good practices in future projects. This includes the promotion of mutually beneficial cooperation between enterprises, cooperatives, and farmers. 65. Capacity building and training. Training is as important as access to finance. Providing knowledge on markets and business development, as well as technical skills, can help farmers manage their products and market strategies and avoid negative impacts from fluctuating markets. These additional skills contribute to a project’s overall objective and are more likely to support sustainable results. 66. Strong local project ownership. From project design to processing, through to implementation, and monitoring and evaluation, commitment from project executing and implementing agencies is vital for the success of a project. Responsiveness is needed to adjust project activities to fluctuating beneficiary and market demands, manage project cost variations arising from inflation or changes in activities, and ensure that project impact and objectives can still be achieved.

16 Appendix 1

PROJECT DESIGN AND MONITORING FRAMEWORK Design Summary

Performance Targets/Indicators

Adjustmentsa Achievements Data Sources/Reporting

Mechanisms

Assumptions And Risks

Impact

Rural poverty reduced and a sustainable agriculture sector developed in 26 counties of Shanxi

Compared with 2009, by 2020 Rural poverty incidence decreased by 30% 30% of farmers and 50% of agro-enterprises adopt modern, environmentally-sound technologies for higher-value products

No change

No change

Prior to the compilation of the feasibility report (in 2006), the population totaled 7.63 million, including 1.27 million low-income people (16.7%) in the project area. In 6 years of implementation, the project contributed to the development of hundreds and thousands of farmers directly and indirectly, in addition to government promotion and support of poverty alleviation. So far, the poverty incidence has fallen to 9.2%, a reduction of more than 40 percentage points since the pre-project-implementation stage. 100% of participating farmers and agro-enterprises adopted modern, environmentally-sound technologies for higher-value products

Provincial and county statistical yearbooks and reports Project progress and performance reports

Assumption

Enabling finance sector policies and technical support by the government Risks

Significant fall in agricultural commodity prices Disputes between agro-enterprises and labor, or agro-enterprises and farmers Farmers willing to adopt modern production technology and practices

Outcome

Sustainable and higher farm productivity and increased income achieved in perennial and annual crops, and livestock production and processing in the project counties

By the end of the project in 2016, 25% increase in income of about 66,000 project households through Expanded production for (i) perennial crops over 13,850 ha by 46,000 HHs, (ii) annual crops over 1,100 ha by 9,700 HHs, (iii) livestock by 9,400 HHs, and (iv) on-farm processing and

By the end of the project in 2016, 25% increase in income for about 48,040 project HHs through the following measures: Expanded production for: (i) perennial crops over 7,831 ha by 26,512 HHs; (ii) annual crops over 1,357 ha by 12,503 HHs; (iii) livestock by 8,752 HHs; and (iv) 273 on-farm

By the end of December 2016, increase in income for about 39,829 project HHs through project implementation. Because most perennial crops have not yet entered full productive age, only annual crops and livestock raising accomplished the aim of increasing income by 25%. By the end of December 2016, (i) 6,968.01 ha by 21,106 HHs completed for perennial crops, with investment of CNY325.11 million; (ii) 756.27 ha by 9,282 HHs for annual crops, with investment of CNY255.65 million; (iii) 9,218 HHs involved in

Provincial and county statistical yearbooks and reports Project review mission and PCR Reports on benefit monitoring

Assumptions

Environmentally sustainable production models available at reasonable cost supported by government agencies Public sector policies and investments complement project activities Effective technical support by government agencies Risks

Significant fall in output prices Disputes between agro-enterprises and labor, or agro-

Appendix 1 17

Design Summary



Mechanisms


storage activities for 1,040 HHs.

Improved market access and opportunities for project HHs.

Enhanced employment opportunities in agricultural production and processing for 10,900 person-years including 40% or more for women.

processing and storage.

Improved market access and opportunities for project HHs. Enhanced employment opportunities in agricultural production and processing for 17,900 person-years, including 45% or more for women.

livestock raising with investment of CNY606.41 million; (iv) 223 units of baking rooms for red jujube with investment of CNY12.41 million. Farmers’ market access is improved through project construction, support to on-farm processing by agro-enterprises, and improvement in product quality and market links.

The project provided jobs for over 18,000 people every year. Based on a selective survey of project HHs in 2015, 47.39% women participated in project activities, which also boosted agricultural production and women’s employment rates.

enterprises and farmers Farmers willing to adopt modern production technology and practices

Outputs 1. Transition to high-value production by 2015

a. Increased

productivity and production of perennial crops

Average yield of perennial and annual crops and livestock increased by 20%, and the following production targets achieved against the 2009 baseline: 16,500 tons of walnuts

24,000 tons of red jujube

100,000 tons of apples

Average yield of perennial and annual crops and livestock increased by 20%, and the following production targets achieved against the baseline: 14,012 tons of walnuts

10,805 tons of red jujube

49,815 tons of apples

Better agricultural techniques and training to farmers helped increase average production by 20%, according to the monitoring. The following subprojects did not meet the targets as they had not yet entered full productive age: 4,255.2 ha by 12,880 HHs with investment of CNY173.31 million and a yield of 9,298 tons 808.33 ha by 1,782 HHs with investment of CNY32.79 million and a yield of 6,180 tons 869.87 ha by 2,778 HHs with investment of


Assumptions

Farmers respond favorably to appropriate crop production technologies and practices Finance sector reforms are carried out to provide rural finance on a wider scale Risks

Domestic and international prices for green and dry fruits significantly fall Effective measures are taken to prevent and control outbreaks of pests and diseases

18 Appendix 1

Design Summary



Mechanisms


16,000 tons of crispy pears

1,100 tons of prickly ash

10,000 tons of asparagus

1,100 m3 of poplar trees

13,133 tons of crispy pears

1,160 tons of prickly ash

978 tons of asparagus

4,344 m3 of poplar trees

CNY47.55 million and a yield of 28,438 tons 328.33 ha by 985 HHs with investment of CNY22.89 million and a yield of 8,666 tons 1,677 greenhouses by 890 HHs built for prickly ash leaves with investment of CNY 28.6527 million and a yield of 839 tons prickly ash leaves 108.67 ha by 326 HHs with investment of CNY3.67 million, and a yield of 948 tons asparagus 241.34 ha by 724 HHs with investment of CNY 9.81 million, with a cut of 60 ha and a yield of 4,500 m3

b. Increased productivity and production of annual crops

Average yield of annual crops increased by 20%, and the following production targets achieved against the 2009 baseline: 880 tons of yellow millet 126 tons of herbal medicine 21 tons of medicinal herbs

Average yield of annual crops increased by 20%, and the following production targets achieved against the baseline: 2,500 tons of yellow millet

69 tons of Chinese medicinal herbs (rainfed)

322 tons of Chinese medicinal herbs (irrigated)

32 ha by 120 HHs with investment of CNY0.74 million with a yield of about 144 tons and income of CNY1 million over 46.67 ha by 148 HHs with investment of CNY 0.87 million, yield of more than 950 tons and net income of more than CNY4.6 million 197.67 ha by 593 HHs with investment of CNY5.56 million, a yield of more than 5,700 tons and net income of more than CNY16 million


Risks

Domestic and international prices for green and dry fruits significantly fall Effective measures are taken to prevent and control outbreaks of pests and diseases

Appendix 1 19

Design Summary



Mechanisms


70,000 tons of vegetables in greenhouses

96,578 tons of vegetables in greenhouses (including arch-canopy greenhouse and irrigated lotus)

10,864 greenhouses for vegetables by 9,162 HHs with investment of CNY253.88 million with a yield of about 90,106 tons and net income of more than CNY241.54 million

c. Increased livestock productivity and production by adopting appropriate rearing and waste management measures and technologies

4,700 sows and 75,000 fattened piglets 140,000 saleable piglets

5,800 cows for breeding and 4,300 fattened calves

36,000 cattle for sale 14,000 ewes, 15,500 mutton sheep 36,700 cashmere wool-producing goats and 11,000 kg of cashmere wool 28,000 tons eggs

2,469 sows and 66,150 fattened piglets 171,804 saleable piglets 6,076 cows for breeding and 13,660 fattened calves

32,887 cattle for sale 27,460 ewes, 35,698 mutton sheep, 50,801 saleable mutton sheep 3,970 cashmere goats (ewes), 10,322 cashmere wool-producing goats, and 3,097 kg cashmere wool 30,340 tons eggs

1,068 HHs involved in sow breeding with investment of CNY50.54 million and a stock of 3,204 sows; 2,169 HHs involved in fattening piglets with investment of CNY92.99 million and a stock of 65,070 fattened pigs 181,404 saleable piglets

1,330 HHs involved in rearing cows for breeding with investment of CNY46.09 million and a stock of 5,320; 1,356 HHs for fattened calves with investment of CNY114.84 million and a stock of 13,560 31,110 cattle for sale 1,437 HHs for mutton sheep breeding with investment of CNY80.29 and a stock of 28,740 ewes and 37,362 mutton sheep, annual 53,169 saleable mutton sheep 724 HHs for cashmere goats with investment of CNY41.92 million with a stock of 7,240 ewes and 18,824 cashmere goats, annual yield of wool of 5,645 kg 597 HHs involved, total investment of CNY85.29 million, for a yield of about


Assumptions

Farmers respond favorably to appropriate crop production technologies and practices Financial sector reforms are carried out to provide rural finance on a wider scale Risk

Effective measures taken to prevent outbreak of disease epidemics

20 Appendix 1

Design Summary



Mechanisms


3 million chickens All livestock waste is safely disposed of

12.3 million chickens All livestock waste is safely disposed of

30,693 tons of eggs 537 HHs involved with investment of CNY94.45 million; 12.27 million chickens sold Sample survey shows that for livestock waste, 81.95% of HHs adopted composting method, 12.05% adopted biogas technology, and the rest adopted other safe disposal methods.

2. Strengthening of farmer–market links by 2012

a. Expanded on-farm processing capacity

100 units of 24-ton capacity drying rooms constructed and operating Four household cold storage warehouses constructed and operating

273 units of 24-ton capacity baking rooms constructed and operational

223 units of baking rooms for red jujube constructed and operational, with investment of CNY12.41 million


Assumption

Farmer households are willing and able to work together as groups and coordinate use of on-farm processing facilities Risk

Markets remain responsive to dried and processed fruits

b. Expanded market outlets through increased agro-enterprise processing capacity

Cold storage and processing capacity of five agro-enterprises expanded

Cold storage and processing capacity of 1 agro-enterprise expanded

2,000 tons constant temperature storage for Qinzhou Yellow Millet Company completed

Annual reports of participating enterprises PMO progress reports Project review mission and PCR

Assumptions

Agro-enterprises remain interested in participating Chinese processed products continue to satisfy customers and comply with international standards Risk

Food scares surrounding Chinese food export may negatively affect demand

c. Expanded market outlets through increased agro-enterprise participation in production bases

Market access of 20,000 (30% of the 66,000 participating) HHs expanded through buyback contracts with 19 agro-enterprises Credit guarantees and technical service provided to

Market access expanded for 14,400 HHs (30% of the participating 48,040 HHs) through buyback contracts with 19 agro-enterprises

HHs to receive credit guarantees and technical

14,861 HHs (37.3% of project HHs) signed the buyback contracts with 32 agro-enterprises and cooperatives

9,161 HHs (23% of project HHs) signed loan guarantee or


Assumptions

Agro-enterprises remain interested to participate Farmers willing to sign buyback contracts Risk

Farmers and agro-enterprises comply with contracts

Appendix 1 21

Design Summary



Mechanisms


participating HHs by 19 agro-enterprises

service by 19 agro-enterprises

technical service contracts with agro-enterprises and cooperatives

3. Capacity building and training by 2012

a. Farmer households trained in sustainable production and marketing skills

All project HHs participate in training courses, workshops, and/or farm demonstrations

All project HHs participate in training courses, workshops, and/or farm demonstrations

39,829 HHs participated in technical training and agricultural demonstrations, an accumulative total of 0.26 million person-times

Assumptions

Farmers remain interested in adopting high-value production systems and water-saving techniques, and willing to participate in on-farm demonstrations Women's groups are interested in cooperative activities

b. Training and equipment provided to demonstrate water-saving techniques

150 HHs receive training and subsidies to install drip-irrigation systems in eight target counties; another 5,000 HHs trained in water conservation

328 HHs receive training and subsidies to install drip-irrigation systems in 4 target counties; another 6,500 HHs trained in water conservation

328 HHs received training and subsidies to install drip-irrigation systems in 4 target counties; another 6,500 HHs trained in water conservation

c. Women's production groups organized, trained, and extended microfinance

20 women's groups established and trained; $100,000 provided to establish revolving funds for microfinance in four target villages

20 women's groups set up and trained for microcredit co-guarantees and cooperatives; $86,000 in microfinance provided to 4 target villages, 117 HHs to benefit, and 294 women trained

20 women's groups set up and trained for microcredit co-guarantees and cooperatives; $86,000 for microfinance provided in 4 target villages, 117 HHs benefited, and 294 person-times trained

Risk

Farmers and women willing to take on added responsibilities and adhere to rules of the demonstration activities

d. Farmer associations strengthened

Five pilot farmer associations strengthened through support for organization, facilities, equipment, and training

Five pilot farmer associations strengthened through support for organization, facilities, equipment, and training (206 person-times)

Five pilot farmer associations strengthened through support for organization, facilities, equipment, and training; investment of CNY 2.7752 million completed; and 206 person-times trained

Assumption

Farmers willing to organize themselves in associations Risk

Willingness of associations and groups to take on added responsibilities

e. Farmer groups formed and strengthened

Farmer HHs organized in groups to receive support in organization, marketing, and technical skills

Farmer HHs organized in groups to receive support in organization, marketing, and technical skills

Training on establishment of groups and operational means was conducted for farmer cooperatives Specialized cooperatives, 6 training events, 590 persons; farmers or cooperatives were organized to take part in 4 domestic study tour, 320 persons.

22 Appendix 1

Design Summary



Mechanisms


2,600 people took part in training on GAP production technology, production quality monitoring, production certification, GAP standards, reasonable pesticide and fertilizer application, water-saving irrigation technique, planting and cultivation associations and farmer links.

f. Government technical service agencies strengthened

PMO and provincial, municipal, and county technical service agency staff trained: 1,250 person-months training in livestock production, water-saving irrigation and water balance monitoring, integrated pest management, environmental monitoring, participatory approaches, and gender awareness Farmer training manuals developed and disseminated

1,218 person-months of training of staff from PMO, PIU, and technical departments Farmer training manuals developed and disseminated

7,932 person-times received training in livestock and crop production (livestock: 1,300 person-times, crop production 6,082 person-times, and management training: 550 person-times)

3 practical manuals for farmers compiled and distributed


Assumptions

Provincial, municipal, and county government agencies willing and interested in learning new skills in modern farming practices Adequate financial resources and budgets are made available on time for effective technical support operations

4. Project Management by 2015

a. Effective project management capacity established and strengthened

b. PPMS

established

PMO with 12 staff and each PIU with 5 staff established and operational by Q1 2010; adequate budgetary resources allocated; office equipment and vehicles procured by Q3 2010 International and domestic study tours for 80 project staff conducted

PMO with 12 staff and each PIUs with 5 staff established and operational by Q4 2009; adequate budgetary resources allocated; office equipment and vehicles procured by 2012 Overseas and domestic study tours for 72 project staff conducted

The required staff at three levels established and operational by Q4 2009; office equipment procured, and all vehicles procured by the end of June 2013

6 international study tours conducted for total of 56 staff, and 10 domestic study tours conducted for total of 153 staff


Assumption

Adequate financial resources and budgets are made available on time for effective technical support operations

Appendix 1 23

Design Summary



Mechanisms


Consulting services provided: 120 person-months to support PMO and PIUs 25 person-months for water-saving climate change adaptation 20 person-months to support women's economic empowerment initiatives

Provincial, municipal, and county staff training

The workload of supporting staff amounts to 120 person-months in the PMO and PIM/PIUs: (i) monitoring progress under the project framework; (ii) training for provincial, municipal, and county staff; (iii) developing the capacity of practical technology use, project implementation, water conservation and techniques; (iv) assessing the economic, social, environmental, and ecological aspects under the project; (v) checking for acceptance of completed work; and (vi) monitoring and assessing the safety of environment and products. 23 person-months for water-saving climate change adaptation 20 person-months to support women's economic empowerment initiatives

A cumulative total of 6,420 person-times b of consultants was employed for support services, of which 800 persons-times for monitoring progress under the project framework; 1,400 for training working staff at provincial, municipal, and county level; 1,400 for improving the capacity of practical technology, project implementation and water conservation techniques capacity; 400 for assessing economic, social, environmental, and ecological evaluation; 1,100 for checking the acceptance of completed work; 440 for monitoring and assessing the safety of environment and products; 460 for project management, project adjustment, and project auditing; 200 for the completion and evaluation, 400 for finance auditing 23 person-months of experts were employed for water conservancy project according to the requirements of contract; 20 person-months for women’s economic empowerment project

72 person-months in financial management 15 person-months in procurement procedures

A total of 3,244 persons participate in training on project financial management, procurement, reimbursement, monitoring and

A total of 6,130 b person-times at provincial, municipal, and county levels participated in project training, of which 3,050 on financial management, reimbursement,

24 Appendix 1

Design Summary



Mechanisms


40 person-months in establishment and operation of a PPMS

supervision of civil works

management software, and financial statement and audit; 900 on procurement and engineering supervision; 850 in monitoring and project management work meeting; 350 on performance evaluation; and 1,000 in annual work meeting.

Activities and Milestones Achievements

Transition to high-value production

1.a Perennial crops established extending credit: 1.a.1 4,684 ha of walnut orchards by 2015 1.a.2 1,136 ha of apple orchards by 2015 1.a.3 337 ha of pear orchards by 2015 1.a.4 926 ha of Chinese date plantations by 2015 1.a.5 2,319 glasshouses for prickly ash by 2013 1.a.6 109 ha of asparagus by 2014 1.a.7 241 ha of poplar plantations by 2013

1.a.8 245 ha of Chinese herbal medicinal plants established and in production by 2012

Transition to high-value production

1.a Perennial crops established extending credit: 1.a.1 4,255 ha of walnut orchards by project completion 1.a.2 869.87 ha of apple orchards by project completion 1.a.3 328.33 ha of pear orchards by project completion 1.a.4 808.33 ha of Chinese date plantations by project

completion 1.a.5 1,677 glasshouses for prickly ash by project

completion 1.a.6 108.67 ha of asparagus by project completion 1.a.7 241.34 ha of poplar plantations by project

completion 1.a.8 244.34 ha of Chinese herbal medicinal plants

established and in production by project completion

1.b Annual crops in operation and/or production extending credit by 2013:

1.b.1 12,025 sunshine vegetable greenhouses 1.b.2 96,578 tons of vegetables from greenhouses 1.b.3 555 ha of open-grown yellow millet

1.b Annual crops in operation and/or production extending credit by project completion: 1.b.1 10,864 sunshine vegetable greenhouses 1.b.2 90,106 tons of vegetables from greenhouses 1.b.3 32 ha of open-grown yellow millet

1.c Livestock units established and in operation extending credit by 2013:

1.c.1 2,469 breeding pigs 1.c.2 66,150 pigs for fattening 1.c.3 6,076 breeding cattle 1.c.4 13,660 cattle for fattening 1.c.5 3,000,000 broiler chickens 1.c.6 30,340 tons of eggs from layer chickens 1.c.7 27,460 units breeding sheep 1.c.8 14,292 cashmere goats

1.c Livestock established and operating with a credit line by project completion:

1.c.1 3,204 breeding pigs 1.c.2 65,070 pigs for fattening 1.c.3 5,320 breeding cattle 1.c.4 13,560 cattle for fattening 1.c.5 12.27 million broiler chickens 1.c.6 30,693 tons of eggs from layer chickens 1.c.7 28,740 breeding sheep 1.c.8 26,062 cashmere goats

Strengthening farmer–market links

2.a. Expanding on-farm processing operations extending credit by 2012:

2.a.1 100 units of 24-ton capacity drying rooms built 2.a.2 4 units of 150-ton capacity cold storage built

Strengthening farmer–market links

2.a. Expanding on-farm processing operations with access to creditby project completion:

2.a.1 223 units of 24-ton capacity drying rooms built 2.a.2 2,000-ton cold storage built

2.b. Expanding agro-processing operations: 2.b.1 Project area survey of farmer–market links completed

and best practice established by 2011 2.b.2 Cold storage and processing outlets expanded by

2011: 2.b.2.a Cold storage of Huarong Fruit Company

expanded by 1,000 tons 2.b.2.b Cold storage of Longlang Fruit Company

expanded by 600 tons 2.b.2.c Cold storage of Qinzhou Company expanded

by 2,000 tons 2.b.2.d Processing capacity of Xintai Company

expanded by 12,000 tons

2.b. Expanding agro-processing operations: 2.b.1 Project area survey of farmer–market links

completed and best practice established by 2012 2.b.2 Cold storage and processing outlets expanded by

project completion: 2.b.2.a cancelled 2.b.2.b cancelled 2.b.2.c Cold storage of Qinzhou Company

expanded by 2,000 tons 2.b.2.d cancelled 2.b.2.e cancelled

Appendix 1 25

Design Summary



Mechanisms


2.b.2.e Cold storage of Zeyu Company expanded by 1,000 tons

2.c Expanding production bases and credit guarantees: 19 agro-enterprises participate in buyback, credit guarantee,

and technical service contracts with 20,000 households by 2013

2.c Expanding production bases and credit guarantees: 32 agro-enterprises participated in buyback, credit

guarantee, and technical service contracts with 24,022 households (60.3% of project households)

Capacity building and training

3.a Farmer training and demonstration activities 3.a.1 278,200 farmers trained by 2012 3.a.2 Subsidy provided to 328 households for installing drip

irrigation by Q4 2011 3.a.3 6,500 farmers trained in water conservation techniques

by Q4 2011 3.a.4 100 staff trained in groundwater monitoring and

management by Q4 2011 3.a.5 140 women organized in 20 production groups in four

villages by Q1 2011 3.a.6 Training of participating women and 20 agency staff

carried out by Q1 2011 3.a.7 Microfinance cooperatives established and $86,000

disbursed by Q2 2011

Capacity building and training

3.a Farmer training and demonstration activities 3.a.1 260,000 people from 39,829 households trained 3.a.2 Subsidy provided to 328 households for installing

drip irrigation 3.a.3 6,500 households trained in water conservation

techniques 3.a.4 1,500 staff trained in groundwater monitoring and

management 3.a.5 294 women organized in 20 production groups in

four villages 3.a.6 Training of participating women and 20 agency staff

carried out 3.a.7 Microfinance cooperatives established and $86,000

disbursed in the first round

3.b Capacity building of farmer associations 3.b.1 Strengthening of five pilot farmer associations through support for organization, facilities, equipment, and training; completed by 2010

3.b Capacity building of farmer associations 3.b.1 Strengthening of five pilot farmer associations through support for organization, facilities, equipment, and training; completed

3.c. Capacity building of technical agencies 3.c.1 1,250 person-months of training in (a) livestock

production, (b) water-saving irrigation systems and water balance monitoring, (c) integrated pest management, (d) environmental monitoring, (e) participatory approaches, and (f) gender awareness completed by 2012

3.c. Capacity building of technical agencies 3.c.1 7,932 person-months of training in (a) livestock

production, (b) water-saving irrigation systems and water balance monitoring, (c) integrated pest management, (d) environmental monitoring, (e) participatory approaches, and (f) gender awareness completed

Project Management

33 vehicles, 134 computers and accessories, including 78 printers, 36 photocopiers, 36 projectors, and 68 cameras procured by Q3 2010

Project Management

33 vehicles, 2 refrigerated trucks, 134 computers and accessories, including 78 printers, 36 photocopiers, 36 projectors, and 68 cameras procured

Inputs ($ million) Achievements ($ million)

ADB

Water Financing Partnership Facility

Gender and Development Fund

Government

Farmers

Agro-enterprises

Farmer Associations

100.00 0.50 0.20 26.56 59.33 2.46 0.26

ADB

Water Financing Partnership Facility

Gender and Development Fund

Government

Farmers

Agro-enterprises

Farmer associations

100.00 0.50 0.19 20.57 78.80 1.21 0.05

Total Financing 189.31 Total Financing 201.32

ADB = Asian Development Bank, GAP = good agricultural practice, ha = hectare, HH = household, kg = kilogram, m3 = cubic meter, PCR = project completion report, PIU = project implementation unit, PMO = project management office, PPMS = project performance management system, Q = quarter. a ADB. 2014. Minor Change in Scope and Reallocation of Loan Proceeds: Shanxi Integrated Agriculture Development Project. Manila.

Reasons for adjustment were the appreciation of Chinese yuan against US dollar and an increased proportion of high cost activities (i.e. livestock rearing).

b Person-times are the number of people who have attended a training event. Source: Asian Development Bank.

26 Appendix 2

DISTRIBUTION OF PROJECT ACTIVITIES

No.

County

Component

Activity

Beneficiary Households

(no.)

Coverage

(ha/no.)

Appraisal

Actual

Appraisal

Actual

A. Jinzhong Municipality

1 Taigu Annual crops Vegetables in sunshine GH (F) 500

550

500

36.67 ha Vegetables in arch-canopy GH 1,350

801

1,350

53.4 ha

Livestock Mutton sheep

117

2,340 Support to AE Xintai Vegetable and Fruit

Processing Co. 4,800

1

2 Qi Xian Livestock Beef cattle 480

35

4,800

350 Annual crops Vegetables in arch-canopy GH 2,720

3,382

2,720

225.5 ha

Vegetables in sunshine GH (F)

500

33.3 ha 3 Pingyao Perennial crops Crispy pear production 190

55

Livestock Chickens (layers) 45

44

135,000

132,000 Chickens (broilers) 165

182

495,000

546,000

Support to AE Longlang Fruit Storage Co. 1,600

1

4 Yuchi Annual crops Vegetables in sunshine GH (F) 340

152

340

10.1 ha Vegetables in sunshine GH (H) 360

159

360

10.6 ha

Vegetables in arch-canopy GH

23

1.5 ha Livestock Pig fattening 490

469

14,700

14,070

Sow production 70

210

Mutton sheep

305

6,100 Support to AE Shanxi Zeyu Livestock Co. 2,900

1

B. Changzi Municipality

5 Qin Xian Annual crops Yellow millet 2,280

120

608

32 ha Livestock Beef cattle 270

269

2,700

2,690

Cow production 530

394

2,120

1,576 Pig fattening

229

6,870

Support to AE Qinzhou Yellow Millet Company 3,280

1

6 Pingshun Perennial crops Walnuts in hilly areas 840

1,081

280

280 ha Prickly ash 2,260

890

2,260

111.8 ha

Annual crops Vegetables in sunshine GH (H)

211

14.1 ha 7 Licheng Perennial crops Walnuts in hilly areas 3,000

2,772

1,000

961 ha

Annual crops Vegetables in sunshine GH (F)

79


170

6,600

5,100

Mutton sheep 200

4,000

C. Luliang Municipality

8 Zhongyang Perennial crops Walnuts in hilly areas 2,490

2,030

830

676.7 ha

Livestock Beef cattle 180

201

1,800

2,010 Sow production 260

175

780

525

9 Jiaokou Perennial crops Walnuts in hilly areas 2,000

1,038

450

345.9 ha Livestock Chickens (layers) 75

78

225,000

234,000

Cashmere goats 250

2,500

Pig fattening

295

8,850 10 Lishi Perennial crops Walnuts in hilly areas 5,440

4,066

1,520

1355.3 ha

Annual crops Vegetables in sunshine GH (H) 300

270

300

18 ha 11 Jiaocheng Annual crops Vegetables in sunshine GH (H) 320

100

320

6.7 ha


150

1,500

1,500 Cow production 870

885

3,480

3,540

12 Wenshui Perennial crops Crispy pear production 570

180

190

60 ha Household storage warehouse 40

4


386

4,000

3,860 Chickens (broilers) 30

51

90,000

153,000

13 Liulin Annual crops Vegetables in sunshine GH (H) 550

334

550

22.2 ha Vegetables in arch-canopy GH 580

241

580

16.1 ha

Livestock Sow production 120

180

360

540 Pig fattening 250

316

7,500

9,480

Cow production 50

51

200

204 Beef cattle 70

80

700

800

Appendix 2 27

No.

County

Component

Activity

Beneficiary Households

(no.)

Coverage

(ha/no.)

Appraisal

Actual

Appraisal

Actual

D. Linfen Municipality

14 Fenxi Perennial crops Walnuts in hilly areas 4,020

630

1,340

3,150 Livestock Chickens (broilers)

192

576,000

15 Hongdong Perennial crops Chinese dates (D) 1,590

406

530

135.3 ha Asparagus 450

246

150

82 ha

Water-saving lotus

181

60.1 ha Annual crops Vegetables in sunshine GH (F)

610

40.7 ha


115

2,550

1,150 Pig fattening 440

140

13,200

4,200

16 Xiangfen Perennial crops Chinese dates (D) 1,110

370

Table-quality apples 1,500

500

Annual crops Vegetables in sunshine GH (F)

398

26.5 ha Water-saving lotus

256

82.2 ha

17 Devt zone Annual crops Vegetables in sunshine GH (F) 400

40

400


140

13,050

4,200

18 Houma Perennial crops Asparagus 2,490

80

830

26.7 ha Livestock Sow production 640

386

1,920

1,158

Beef cattle

120

1,200 Mutton sheep

272

5,440

19 Daning Perennial crops Walnuts in hilly areas 1,200

242

400

80.7 ha Chinese dates (S) 585

195

Livestock Sow production 490

162

1,470

486 Mutton sheep 390

623

7,800

12,460

20 Yonghe Perennial crops Walnuts in hilly areas 750

667

250

223.6 ha Chinese dates (S) 1,230

200

410

66.7 ha

Date-drying units 100

223

100

223 Livestock Cashmere goats 250

235

2,500

2,350

21 Xixian Perennial crops Table-quality apples 900

700

300

233.3 ha Crispy pear production 615

805

205

268.3 ha

Annual crops Vegetables in sunshine GH (H)

34

2.3 ha Vegetables in arch-canopy GH

200

13.3 ha

Livestock Cashmere goats 220

489

2,200

4,890 Sow production

165

495

E. Yuncheng Municipality

22 Yanhu Perennial crops Poplar plantation 2,850

724

950

241.3 ha Chinese medicinal herbs 930

593

310

197.7 ha

Walnuts in hilly areas 354 123.3 ha Annual crops Vegetables in sunshine GH (F)

428

28.5 ha

23 Yongji Perennial crops Apples for processing 2,250

1,110

750

370 ha Annual crops Vegetables in sunshine GH (F)

213

14.2 ha

Livestock Chickens (broilers) 110

112

330,000

336,000 24 Linyi Perennial crops Chinese dates (D) 720

709

240

236.3 ha

Table-quality apples 720

548

240


170

5,100

5,100

Mutton sheep 120

120

2,400

2,400

25 Jinshan Perennial crops Chinese dates (S) 1,320

467

440

370 ha Livestock Chickens (layers) 320

280

960,000

840,000

26 Wanrong Perennial crops Table-quality apples 2,600

420

520

120.5 ha Asparagus 600

-

200

-

Chinese medicinal herbs 745

148

245


240

9,000

7,200

Chickens (layers) 60

195

18,000

585,000 Support to AE Huarong Fruit Co., Ltd. 3,500

1

AE = agro-enterprise, D = dense planting, F = flat area, GH = greenhouse, H = hilly area, ha = hectare, S = sparse planting. Source: Asian Development Bank.

28 Appendix 3

PROJECT INVESTMENT AND FINANCING

Table A3.1: Project Investment ($ million)

Component Appraisal Estimate Actual

A. Base Cost 1. Transition to high-value production

a. High-value perennial crop production 78.25 51.67 b. High-value annual crop production 23.17 40.47

c. Improvement of livestock production 71.74 96.37 2. Strengthening of farmer–market links

a. Expanding on-farm processing 1.06 1.97 b. Expanding agro-processing operations 4.18 2.16 c. Enhancing product quality and providing credit

guarantees 0.20 1.13

3. Capacity building and training a. Farmer training and demonstration activities 0.39 0.96 b. Capacity building of farmer associations 1.31 0.22 c. Capacity building of technical agencies 1.89 2.30

4. Project management 5.01 1.40 5. Climate change adaptation through groundwater

management 0.55

6. Women’s economic empowerment 0.27 Subtotal (A) 187.20 199.47 B. Contingencies 0.78 0.00 C. Financing Charges during Implementation 1.33 1.85

Total (A+B+C) 189.31 201.32

Source: Asian Development Bank.

Table A3.2: Project Financing ($ million)

Source Appraisal Actual

Total % Total %

Asian Development Bank 100.00 52.82 100.00 50.13 Water Financing Partnership Facility

0.50 0.26 0.50 0.25

Gender and Development Cooperation Fund

0.20 0.11 0.19 0.09

Local government 26.56 14.03 20.57 10.12 Farmers 59.33 31.34 78.80 38.78 Agro-enterprises 2.46 1.30 1.21 0.60 Farmer associations 0.26 0.14 0.05 0.03

Total 189.31 100.00 201.32 100.00 Source: Asian Development Bank.

Appendix 4 29

PLANNED AND ACTUAL IMPLMENTATION

Activity

1 Transition to High-Value Production

1a Perennial Crops

Walnut Flat Areas - 450 ha

Walnut Hilly Areas - 5,620 ha

Apple Table - 1,56 ha

Apple Processing - 750 ha

Pear - 450 ha

Chinese Date (Dense) - 1,140 ha

Chinese Date (Sparse) - 1,145 ha

Prickly Ash - 150 ha

Asparagus - 1,180 ha

Poplar - 950 ha

Chinese Herb (Rainfed) - 245 ha

Chinese Herb (Irrigated) - 310 ha

1b Annual Crops

Greenhouse (Flat Areas) - 1,240 greenhouses

Greenhouse (Hilly Areas) - 1,530 greenhouses

Tunnel - 4,650 greenhouses

Millet - 2,280 units of 4 mu each

1c Improving Livestock Production

Pig Breeding - 1,580 units

Pig Fattening - 2,305 units

Cattle Breeding - 1,450 units

Cattle Fattening - 1,805 units

Chicken Broiler - 305 units

Chicken Layer - 500 units

Sheep Breeding - 710 units

Goat (Cashmere) - 720 units

2 Strengthening of Farmer–Market Linkages

2a Expanding On-farm Processing

Date Drying - 100 units

Household Storage - 4 units

2b Expanding Agroprocessing Operations

Submission of f inancial due diligence of AEs by CFB to ADB

Sub-loan agreements betw een the concerned CFB and AEs

Huarong Fruit Company - 1,000 ton fruit storage capacity

Longlang Fruit Company - 600 ton fruit storage capacity

Qinzhou Yellow Millet Company - 2,000 ton millet storage capacity

Xintai Food Company - 12,000 ton vegetable pickling and storage capacity

Zenyu Livestock Development Company - 1,000 ton process meat storage

2c Enhancing Product Quality and Providing Credit Guarantees

20162014 20152010 2011 2012 2013

z

z

30 Appendix 4

ADB = Asian Development Bank, AE = agro-enterprise, CFB = county finance bureau, ha = hectare. Note: A mu is a Chinese unit of measurement (1 mu = 666.67 square meters). Source: Asian Development Bank.

Activity

3 Capacity Building and Training

3a Farmer Training and Demonstration Activities

Water Conservation Training for Farmers

Pilot Drip Irrigation Installed

Women Production Groups Established and Trained

Pilot Micro-credit Extended

Farmer Training

3b Capacity Building of Farmer Associations

Support to Association management

Member Training

3c Capacity Building of Technical Agencies

Technical Support Services and Demonstrations

Provincial Technical Training and Workshops

Municipal Technical Workshops

County Technical Training

4 Project Management

County Project Management

Municipal Project Management

County Project Management

Project Management Training and Workshops

Project Management Study Tours

Appraisal

Actual

2010 2011 2012 2013 2014 2015 2016

Appendix 5 31

PHYSICAL PROGRESS

Figure A5.1: Physical Progress of the Project

Source: Quarterly reports submitted from the project management office of the Government of Shanxi Province to the Asian Development Bank.

32 Appendix 6

STATUS OF COMPLIANCE WITH LOAN AND GRANT COVENANTS

Major Covenants Reference Status/Deadline of Compliance

Loan 2607-PRC: Shanxi Integrated Agricultural Development Project

1 Onlending between MOF and SPG The Borrower shall make the proceeds of the Loan available to SPG upon terms and conditions acceptable to ADB, which, except as ADB may otherwise agree, shall include (i) commitment charge and interest at the rate identical to those applied to the Loan; (ii) a repayment period including a grace period identical to those applied to the Loan; and (iii) SPG bearing the foreign exchange and interest rate variation risks.

LA Section 3.01(a)

Complied with (30 October 2010).

2 Onlending between SPG and municipalities The Borrower shall cause SPG to make the proceeds of the Loan available to the Participating Municipalities upon terms and conditions acceptable to ADB, which, except as ADB may otherwise agree, shall include (i) commitment charge and interest at the rate identical to those applied to the Loan; (ii) a repayment period including a grace period identical to those applied to the Loan; and (iii) each such Participating Municipality bearing the interest rate variation risks.

LA Section 3.01(b)

Complied with (March 2011).

3 Onlending between municipalities and counties The Borrower shall cause, through SPG and the Participating Municipalities, to make the proceeds of the Loan available to the Participating Counties upon terms and conditions acceptable to ADB, which, except as ADB may otherwise agree, shall include (i) commitment charge and interest at the rate identical to those applied to the Loan; (ii) a repayment period including a grace period identical to those applied to the Loan; and (iii) each such Participating County bearing the interest rate variation risks.

LA, Section 3.01(c)

Complied with (March 2011).

4 Onlending between counties and subloan borrowers The Borrower shall, through SPG and the Municipalities, cause the Participating Counties to make subloans with the proceeds of the Loan the Sub-Borrowers for the Subprojects upon terms and conditions all as described in paragraph 13 in the Schedule to the Project Agreement.

LA Section 3.01(d)

Complied with.

5 Use of loan proceeds The Borrower shall ensure, through SPG, the Participating Municipalities and Participating Counties, that the Subloan Borrowers apply the proceeds of the Loan to the financing of expenditures on the Project in accordance with the provisions of this Loan Agreement and the Project Agreement.

LA Section 3.01(e)

Complied with.

6 Expenditure according to the allocation and withdrawal of loan proceeds The goods, works, and consulting services and other items of expenditure to be financed out of the proceeds of the Loan and the allocation of amounts of the Loan among different categories of such goods, works, and consulting services and other items of expenditure shall be in accordance with the provisions of Schedule 3 to this Loan Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and ADB.

LA Section 3.02

Complied with.

7 Particular Covenants (a) The Borrower shall cause SPG to carry out the Project with

due diligence and efficiency and in conformity with sound

LA Section 4.01

Complied with.

Appendix 6 33


administrative, financial, engineering, environmental and agro process and business practices

(b) In carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5 of the Loan Agreement and the Schedule of the Project Agreement

8 Counterpart funds The Borrower shall make available to SPG, promptly as needed and on terms and conditions acceptable to ADB, the funds, facilities, services, and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project.

LA Section 4.02

Complied with.

9 The Borrower shall ensure that the activities of its departments and agencies with respect to carrying out of the Project and operation of the Project Facilities are conducted and coordinated in accordance with sound administrative policies and procedures

LA Section 4.03

Complied with.

10 The Borrow shall take all action which shall be necessary on its part to enable SPG to perform its obligations under the Project Agreement, and shall not take or permit any action which would interfere with the performance of such obligations.

LA Section 4.04

Complied with.

11 SPG, the concerned Participating Municipalities, Participating Counties, and Subloan Borrowers shall make available, promptly as needed, the funds, facilities, services, equipment and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project. SPG, Participating Municipalities, and Participating Counties shall (a) provide the required counterpart fund for carrying out the Project implementation and capacity building activities, (b) cause the Farmers Subloan Borrowers to provide counterpart fund for completion of the Project activities; and (c) cause AEs to provide all counterpart funds necessary for the Project in a timely manner for completion of construction of and operation and maintenance of the Project facilities.

PA Section 2.02 PA Schedule

Complied with. Complied with.

12 Disbursement procedures Except as ADB may otherwise agree, the Loan proceeds for financing goods, works, and consulting services and other items shall be disbursed in accordance with ADB’s “Loan Disbursement Handbook” dated January 2007 (ADB’s Loan Disbursement Handbook), as amended from time to time.

LA Schedule 3

Complied with.

13 Imprest account: statement of expenditure Except as ADB may otherwise agree, the Borrower shall cause SFD to establish immediately after the Effective Date, an imprest account at a bank acceptable to ADB. The imprest account shall be established, managed, replenished, and liquidated in accordance with ADB's Loan Disbursement Handbook, and detailed arrangements agreed upon between the Borrower and ADB. The currency of the imprest account shall be the Dollar. The initial amount to be deposited into the imprest account shall not exceed the lower of (i) the estimated expenditure to be financed from the imprest account for the first six months of Project implementation, or (ii) the equivalent of 10 percent of the Loan amount.

LA Schedule 3

Complied with.

34 Appendix 6


The statement of expenditures (SOE) procedure may be used for reimbursement of eligible expenditures of the Project and to replenish or liquidate advances provided into the imprest account, in accordance with ADB's Loan Disbursement Handbook and detailed arrangements agreed upon between the Borrower and ADB. Any individual payment not exceeding $200,000 shall be replenished, liquidated, reimbursed using the SOE procedure.

Complied with.

14 Retroactive financing Withdrawals from the Loan Account may be made for reimbursement of reasonable expenditures incurred under the Project before the Effective Date, but not earlier than twelve (12) months before the date of this Loan Agreement in connection with the eligible expenditures of the Project, subject to a maximum amount equivalent to 20 percent of the Loan amount.

LA Schedule 3

Complied with.

15 Procurement of goods, works, and consulting services from loan proceeds All goods, works, and consulting services to be financed out of the proceeds of the Loan shall be subject to and governed by the Procurement Guidelines, and the Consulting Guidelines, respectively. All terms used and not otherwise defined in this Loan Agreement have the meanings provided in the Procurement Guidelines and/or the Consulting Guidelines, as applicable.

LA Schedule 4.A

Complied with.

16 Procurement for goods and works by loan proceeds Except as ADB may otherwise agree, Goods and Works shall only be procured on the basis of the methods of procurement set forth below: International Competitive Bidding National Competitive Bidding Shopping

The methods of procurement are subject to, among other things, the detailed arrangements and threshold values set forth in the Procurement Plan. The Borrower may only modify the methods of procurement or threshold values with the prior agreement of ADB, and modifications must be set out in updates to the Procurement Plan. National competitive bidding The Borrower and ADB shall ensure that, prior to the commencement of any procurement activity under national competitive bidding, the Borrower’s national competitive bidding procedures are consistent with the Procurement Guidelines. Any modifications or clarifications to such procedures agreed between the Borrower and ADB shall be set out in the Procurement Plan. Any subsequent change to the agreed modifications and clarifications shall become effective only after written approval of such change by the Borrower and ADB. Procurement out of credits to farmers and agro-enterprises In respect of the goods and works financed as credit to the farmers and AEs, procurement may be undertaken by the respective farmers and AEs in accordance with established private sector, or

LA Schedule 4.B

Complied with. Complied with. Complied with.

Appendix 6 35


commercial practices, which are acceptable to ADB. Such practices were reviewed and found acceptable during Project processing.

17 Recruitment of consulting services by counterpart funds The Borrower shall recruit the individual consultants for consulting services under the Project in accordance with procedures acceptable to ADB for recruiting individual consultants.

LA Schedule 4.C

Complied with.

18 Industrial or intellectual property rights The Borrower shall ensure that all Goods and Works procured (including without limitation all computer hardware, software, and systems, whether separately procured or incorporated within other goods and services procured) do not violate or infringe any industrial property or intellectual property right or claim of any third party. The Borrower shall ensure that all contracts for the procurement of Goods and Works contain appropriate representations, warranties and, if appropriate, indemnities from the contractor or supplier with respect to the matters referred to in subparagraph (a) of this paragraph. The Borrower shall ensure that all ADB-financed contracts with consultants contain appropriate representations, warranties and, if appropriate, indemnities from the consultants to ensure that the consulting services provided do not violate or infringe any industrial property or intellectual property right or claim of any third party.

LA Schedule 4.D

Complied with.

19 Implementation arrangements The EA shall be SPG, coordinating and supervising all implementation activities through the PLG, which, having been set up by SPG, is chaired by a vice governor of SPG, have the deputy secretary general of SPG, the deputy director of the Provincial Development and Reform Commission, deputy director of SFD, and director of PADO as vice chairpersons and comprise the deputy directors of the provincial Departments of Water Resources, Agriculture, Land and Resources, Forests, Audit, and Environmental Protection and the chairwoman of the provincial branch of ACWF, and vice mayors of the five Participating Municipalities as members. At each Participating Municipality or Participating County a leading group of the structure and composition similar to those of PLG shall be set up with the responsibilities and authority to supervise and guide the implementation of the Project activities in the municipality or county. The PMO set up at PADO shall bear direct responsibility to carry out the detailed Project implementation. The PMO shall, together with the Fund Administration Unit (Division of International Capital Management) of SFD, coordinate and oversee implementation of all activities on a day-to-day basis. The PMO shall (i) organize, coordinate, and guide related departments in project municipalities and counties for effective implementation of the Project; (ii) prepare annual work program and budget; (iii) organize procurement; (iv) maintain consolidated accounts, including PPMS to track all financial transactions with Subloan Borrowers; (v) prepare and submit to ADB

LA Schedule 5 (PA Schedule)

Complied with. Complied with. Complied with.

36 Appendix 6


withdrawal applications and SOEs through SFD; (vi) monitor physical and financial progress, including benefits flow to intended beneficiaries, and submit reports to the provincial government and ADB; and (vii) liaise with SPG through SFD for reporting to the Ministry of Finance of the Borrower and ADB. In each Participating Municipality and each Participating County a PIU shall be set up to assist the PMO. PIUs shall be responsible for day-to-day implementation of all project activities within the concerned municipality or county under the overall guidance of PMO. Based on assessment of the capacity in financial management by the Borrower and ADB, SPG shall select up to five qualified Participating Counties where the imprest accounts will be set up as pilot test for the purpose of providing advance funding to the Farmer Subloan Borrowers. Based on the successful performance of such arrangements, the same may be expanded to other Participating Counties upon approval of the Borrower. SEPD shall be responsible for monitoring compliance with national environmental standards, rules, and regulations. CFBs in Yuci district, Pingyao, Qin, Taigu, and Wanrong counties shall supervise the financing for the Subprojects undertaken by the AEs and monitoring AEs' Project implementation activities, operation and asset changes in such respective counties. EPBs and WRBs in the concerned Participating Municipalities or Participating Counties shall undertake the environmental monitoring of soil and water resources, and agrochemicals.

Complied with.

20 Procurement and consulting recruitments by counterpart funds In the carrying out of the Project, SPG, the concerned Participating Municipalities, Participating Counties, and Subloan Borrowers shall employ competent and qualified consultants and contractors, acceptable to ADB, to an extent and upon terms and conditions satisfactory to ADB

PA Section 2.03(b)

Complied with.

21 Procurement of works The Subloan Borrowers shall carry out the Project in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to ADB. SPG, the concerned Participating Municipality, Participating County or Subloan Borrower shall furnish to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.

PA Section 2.04

Complied with.

22 Insurance obligation The concerned Participating Municipalities, Participating Counties, and the Subloan Borrowers shall take out and maintain with responsible insurers, or make other arrangements satisfactory to ADB for, insurance of Project facilities to such extent and against such risks and in such amounts as shall be consistent with sound practice. Without limiting the generality of the foregoing, the concerned Participating Municipality, Participating County or Subloan Borrower undertakes to insure, or cause to be insured, the goods to be imported for the Project and to be financed out of the proceeds of the

PA Section 2.05(a) and (b)

Partially complied with.

Appendix 6 37


Loan against hazards incident to the acquisition, transportation, and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such goods.

23 Accounting SPG, the Participating Municipalities, the Participating Counties, and the Subloan Borrowers shall maintain records and accounts adequate to identify the goods, works, and consulting services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition

PA Section 2.06

Complied with.

24 Reporting. SPG, the Participating Municipalities, the Participating Counties, and the Subloan Borrowers shall furnish to ADB all such reports and information as ADB shall reasonably request concerning (i) the Loan and the expenditure of the proceeds thereof; (ii) the Goods and Works and other items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition relevant to the Project; and (v) any other matters relating to the purposes of the Loan. Without limiting the generality of the foregoing, SPG shall furnish to ADB brief quarterly reports and the detailed semi-annual reports. The quarterly reports shall provide a summary of progress and problems encountered based on the outputs of the PPMS and computerized Subloan management system, and activities planned for the next quarter. The detailed semi-annual reports shall provide analysis of the issues encountered and steps taken to ameliorate the situation. Promptly after physical completion of the Project, but in any event not later than three (3) months thereafter or such later date as ADB may agree for this purpose, SPG shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by SPG, the Participating Municipalities, the Participating Counties and the Subloan Borrowers of their respective obligations under this Project Agreement and the accomplishment of the purposes of the Loan.

PA Section 2.08(a), (b) and (c)

Complied with. Complied with. All required reports were submitted on a timely manner. Complied with.

25 Financial, accounting, and auditing requirements SPG and the AE Subloan Borrowers shall (i) maintain separate accounts for the Project and for its overall operations; (ii) have such accounts and related financial statements (balance sheet, statement of income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than six (6) months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the covenants of the Loan Agreement as well as on the use of the

PA Section 2.09(a) and (b)

Complied with. Audited project accounts and financial statements were submitted on time.

38 Appendix 6


procedures for imprest account/statement of expenditures), all in the English language. SPG shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request. SPG, the Participating Municipalities, the Participating Counties, and the Subloan Borrowers shall enable ADB, upon ADB's request, to discuss from time to time respectively the financial statements and financial affairs concerning SPG to the extent relevant to the Project, and the AE Subloan Borrowers, with the auditors appointed by SPG or the concerned AE Subloan Borrowers pursuant to Section 2.09(a) hereabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of SPG or the concerned AE Subloan Borrowers unless SPG or such AE Subloan Borrowers shall otherwise agree.

Complied with.

26 AE sub-loan borrower’s responsibility. Each AE Subloan Borrower shall, promptly as required, take all action within its powers to maintain its corporate existence, to carry on its operations, and to acquire, maintain and renew all rights, properties, powers, privileges, and franchises which are necessary in the carrying out of the Project or in the conduct of its business. Each AE Subloan Borrower shall at all times conduct its business in accordance with sound administrative, financial, environmental and agro processing and business practices, and under the supervision of competent and experienced management and personnel. Each AE Subloan Borrower shall at all times operate and maintain its plants, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound administrative, financial, engineering, environmental, agro processing and business, and maintenance and operational practices

PA Section 2.11(a), (b) and (c)

Complied with.

27 Subloan borrowers’ (both farmers’ and AEs’) responsibility Except as ADB may otherwise agree, none of the Subloan Borrowers shall sell, lease or otherwise dispose of any of its assets which shall be required for the efficient carrying on of its operations or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement.

PA Section 2.12

Complied with.

28 Subloan borrowers’ (both farmers’ and AEs’) responsibility Except as ADB may otherwise agree, the Subloan Borrowers shall duly perform all their obligations under the Subloan Agreement, and shall not take, or concur in, any action which would have the effect of assigning, amending, abrogating or waiving any rights or obligations of the parties under the Subloan Agreement.

PA Section 2.14

Complied with.

29 AE subloan borrower’s responsibility The concerned AE shall promptly notify ADB of any proposal to amend, suspend or repeal any provision of its Charter, which may adversely affect its ability to implement the Project, and shall afford ADB an adequate opportunity to comment on such proposal prior to taking any action thereon.

PA Section 2.15

Complied with.

Appendix 6 39


30 Capacity building The SPG shall cause PMO and PIUs to (a) follow the agreed Project implementation plan; (b) undertake capacity building of beneficiaries and institutional strengthening; (c) appoint suitable trainers and training institutions based on a selection criteria; (d) select staff for training using a transparent and objective process; and (e) take such steps as may be reasonable to ensure, that staff who have received training under the Project, remain with the project throughout its implementation.

PA Schedule para 7

Complied with.

31 Employment and labor standards. The Participating Counties shall ensure that AEs comply with all employment and labor standards set forth in applicable laws, regulations, and policies of the Borrower. In addition, the Participating Counties shall cause AEs to ensure that all civil works contracts under the Project contain provisions requiring AE civil works contractors engaged under the Project to (a) provide timely payment of wages and safe working conditions to all workers including male and female workers; (b) provide women employment, where appropriate, and pay equal wages to women employees for the equivalent work; and (c) not employ child labor (as defined in the applicable law of the Borrower) in the project activities. The Participating Counties shall cause AEs to include these provisions in the bidding documents and contracts for all civil works under the project, and the PMO shall monitor and report on their implementation in its regular progress reports.

PA Schedule para 8

Complied with.

32 Gender development. SPG shall ensure that the Gender Action Plan be implemented and that the targets provided therein are attained. SPG shall in particular ensure that (i) ACWF at county level be part of county Project Leading Group

and involved in Project implementation on village level; (ii) the Project collect gender-disaggregated data, through PMO,

PIUs, and AEs for monitoring of gender targets set under the Project;

(iii) women have representation and are consulted in all project-related events and meetings, and that minutes include information on their participation; and

(iv) at least 40% of the overall capacity-building and training opportunities, and job created under the Project are provided to women.

PA Schedule para 9

Complied with. (i) ACWF was a member of county and village project leading group. (ii) and (iii) PMO conducted regular monitoring in line with project agreement. (iv) 7,932 person-times of training provided; more than 50% training opportunities for women.

33 Environment SPG shall ensure that all Project activities are implemented, constructed, maintained, and operated in strict conformity to (a) all applicable national and local government environmental laws, regulations, and procedures; (b) ADB’s Environmental Policy (2002) and guidelines; and (c) the environmental mitigation and monitoring measures set out in the respective environmental assessment reports. In case that any Project activity is cited for a violation of any law, regulation, standard, or ordinance related to environmental protection within the reporting period, a certification from the environmental authorities concerned shall be included in the reports showing that the defect has been corrected or a corrective action plan has been approved and made operational.

PA Schedule para 10

Complied with. PMO submitted five annual environmental monitoring reports and five annual progress reports.

40 Appendix 6


34 Eligibility of AE subloan borrowers (General) (i) AE's participation shall be on a voluntary basis. (ii) The proposed Subproject shall be with the objectives of Shanxi

Province’s Eleventh Five Year Plan. (iii) Counterpart fund obtained by the concerned AE from other

sources for the development of their investment proposal shall at least match the amount of the loan from the Project.

(iv) AEs shall make transparent, effective, and mutually-beneficial arrangements with households supplying product the AEs, with contracts clearly indicating, at least, input-output supply arrangements, procedures for determining procurement prices, and rights and responsibilities of both parties in the event of a dispute.

(v) The proposed investment shall facilitate (a) an increase in the production base and the number of participating farm households supplying product, (b) an improvement in yields on existing production base, more efficient use of water and soil resources, and (c) more environmentally-sound production technologies and practices including a reduction in the use of water and agrochemicals.

PA Schedule, para 11

Complied with.

35 Eligibility of AE sub-loan borrowers (Collateral) In respect to AE Subloan Borrowers, the Subloan shall be made under the following arrangements: (a) CFB of the concerned Participating County shall act as the lender of a Subloan of the one part and AE as the Subloan Borrower of the Subloan of the other part; and (b) AE shall provide an appropriate collateral in the form of physical assets including land use rights and building mortgage, plant, and machinery, pledge of its equity, or charge on the AE's accounts, which shall be equal to at least 125% of the proposed Subloan value.

PA Schedule para 11

Complied with.

36 Eligibility of AE sub-loan borrowers (Financial capacity and management) (i) Prior to and following receipt of the Subloan and for the duration

of the Subloan term, each AE Subloan Borrower shall maintain a debt-equity ratio not exceeding 1.5 (60:40), a debt service capacity ratio of at least 1.5, and a current ratio of at least 1.2.

(ii) The proposed Subproject shall not involve an expansion of more than three times the AE's capacity at the time of application for the Subloan.

(iii) The proposed Subproject shall be financially sound, as determined by financial analysis, including demand and risk analysis and demonstrate a financial internal rate of return in excess of the agro-enterprise's weighted average cost of capital.

(iv) The AE shall have in place sound accounting and financial management information systems that provide information necessary for monitoring the performance of the investment according to criteria agreed with the provincial project management office.

PA Schedule para 11

Complied with.

37 Eligibility of AE sub-loan borrowers (Other resources) The AE shall have access to water and land rights that are owned by the AE.

PA Schedule para 11

Complied with.

Appendix 6 41


38 Eligibility of AE sub-loan borrowers (Environmental aspect) (i) The AE shall satisfy prevailing national and, as appropriate,

international regulations relating to the use of agrochemicals by households supplying product to the agro-enterprise.

(ii) The AE shall have, or propose to install as part of the investment for which Subproject financing is sought, appropriate waste treatment and environmental management systems that comply with all national and provincial environmental standards, as demonstrated by certification from the appropriate EPB.

(iii) The proposed Subproject shall meet national, provincial, and local environmental standards, shall not generate waste or result in any adverse environmental impacts that cannot be mitigated, and, where necessary, shall incorporate in its design and costs measures to ensure environmental mitigation.

(iv) The proposed Subproject shall be subjected to an environmental examination carried out in accordance with applicable laws and regulations of the Borrower, Environmental Assessment Guidelines 2003 of ADB. The resulting environmental assessment report must be approved by appropriate provincial authorities.

(v) The AE shall comply with all local, national, and ADB safeguards requirements, as specified in relevant local and national policies and regulations, and ADB relevant policies and guidelines.

PA Schedule para 11

Complied with.

39 Eligibility of farmer sub-loan borrowers Farmer Sublon Borrowers shall meet the following eligibility criteria: (i) The Farmer Subloan Borrower's participation shall be on a

voluntary basis, willing to borrow and use the borrowed fund to produce as required by the Project.

(ii) The Farmer Subloan Borrower shall be located within the Project areas.

(iii) The Farmer Subloan Borrower shall have the capability to participate in the Project, including labor force of household, and skills required for the production under the Project.

(iv) The Farmer Subloan Borrower shall make in-kind contribution or counterpart fund to keep required liquidity for operation and earning on a sustainable basis.

(v) The Farmer Subloan Borrower shall enjoy credit-worthiness in the local community.

PA Schedule para 11

Complied with.

40 Eligibility of subprojects. The Subprojects to be financed by the Subloans shall meet the detailed eligibility criteria agreed between ADB and SPG, which include, among others, the following criteria. (i) The purposes of the proposed Subproject shall bring value

added, create model for extension, and have positive impact on poverty reduction.

(ii) The proposed Subproject shall involve agricultural production, livestock and vegetable farming, plantation of fruit trees, and other economic crops.

(iii) The proposed Subproject shall promote linking to the lines of products and agricultural industry/sector plan to be developed on a scale economy basis.

PA Schedule para 12

Complied with.

42 Appendix 6


(iv) The proposed Subproject shall yield benefit to participating farmers.

(v) The proposed Subproject shall use the advanced technology and in the manner to meet the food safety standards.

41 Sub-loan agreement The Subloans shall be made to the AEs and Farmer Subloan Borrowers under the following arrangements and on the following terms and conditions: (i) Parties of a Subloan Agreement shall be the concerned CFB of

the one part and AE or Farmer Subloan Borrower of the other part.

(ii) The objective of the proposed Subproject shall be consistent with the objective of the Project.

(iii) The Subloan shall be made under satisfactory security/collateral and guarantee arrangements as detailed provided below.

(iv) The major financial terms of a Subloan shall include the following: (a) interest rate

(1) in case of a Subloan to AE Subloan Borrower, an interest at a fixed rate not lower than that set by People's Bank of China for the commercial bank loans with the similar maturity;

(2) in case of a Subloan to a Farmer Subloan Borrower, an interest at a fixed rate not higher than that of the rural credit cooperatives for lending with the same objective and similar maturity, but not lower than that set by People's Bank of China for the commercial bank loans with the similar maturity; and

(3) interest for the Subloans including sufficient coverage for (a) non-repayment risks and (b) administrative costs.

(b) maturity and grace period (1) in case of a Subloan to AE Subloan Borrower, a maturity

period not longer than 8 years including a grace period not longer than 4 years;

(2) in case of a Subloan to a Farmer Subloan Borrower engaged in livestock, or annual crops including the greenhouse, a maturity period not longer than 6 years including a grace period not longer than 2 years; and in case of a Subloan to a Farmer Subloan Borrower engaged in the perennial crops, a maturity period not longer than 13 years including a grace period not longer than 6 years; and

(c) the concerned CFB bearing the interest rate variation risk for all subloans.

(v) Sub-Loan ceiling amounts (a) in case of a Subloan to an AE Subloan Borrower, not

exceeding RMB5,000,000; and (b) in case of a Subloan to a Farmer Subloan Borrower engaged

in livestock, not exceeding RMB120,000; and (2) in case of a Subloan to a Farmer Subloan Borrower engaged in annual crops or perennial crops, not exceeding RMB60,000.

(vi) The following shall be included in the Subloan Agreement to the AE Subloan Borrowers: Unless the concerned CFB may otherwise agree, each AE Subloan Borrower shall not

PA Schedule para 13

Complied with.

Appendix 6 43


(a) change in ownership of project facilities, or sell, transfer or otherwise dispose of all or a substantial part of its assets;

(b) enter into agreement for any sale, transfer or assignment of the shares of the AE;

(c) enter into any transaction of merger or acquisition of or by the AE;

(d) enter into any borrowing arrangements other than in the ordinary course of business which shall not be made more senior than the sub-loan; or

(e) enter into any agreement to guarantee or, in any way or under any condition, assume or become obligated for all or any part of any financial or other obligations of a third party other than in the ordinary course of business; create or permit to exist any lien on any property, revenues or other assets, present or future, of the AE Subloan Borrower.

(vii) Collateral and Guarantee Agreement (a) In case of a Subloan to an AE Subloan Borrower, the AE

Subloan Borrower shall provide an appropriate collateral in the form of physical assets including land use rights and building mortgage, plant and machinery, pledge of its equity, or charge on the AE's accounts, which shall be equal to at least 125% of the proposed Subloan value, as being determined by a third party professional valuer entrusted by the concerned CFB.

(b) The Farmer Subloan Borrower shall be ensured by either of the following support arrangements: (a) guarantee provided by the concerned AE (conditioned on, among others, execution of AE and Farmer Agreement, and production of agricultural goods in accordance with AE's requirements in terms of kind, standards, and sale of products to AE); (b) pledge of management rights such as agricultural land contractual rights and tree plantation rights; (c) guarantee provided by not less than three other farmer households; (d) salary earner guarantee; (e) collateral provided by a third party farmer household; or (f) any other form of guarantee acceptable to ADB, the PMO, and the concerned CFB.

G0188-PRC: Climate Change Adaptation through Ground Water Management

42 The Recipient shall cause SPG to (i) maintain separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Grant proceeds and compliance with the financial covenants of this Grant Agreement as well as a separate opinion on the use of the procedures for imprest account/statement of expenditures), all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

GA, Section 4.02 (a)

Imprest account opened on 22 June 2011 and closed on 10 March 2014.

44 Appendix 6


43 (b) The Recipient shall cause SPG to enable ADB, upon ADB's request, to discuss SPG’s financial statements for the Project and its financial affairs related to the Project from time to time with the auditors appointed by SPG pursuant to Section 4.02(a) hereabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of SPG unless SPG shall otherwise agree.

GA, Section 4.02 (b)

Complied with.

44 The Recipient shall cause SPG to enable ADB's representatives to inspect the Project, the goods financed out of the proceeds of the Grant, and any relevant records and documents.

GA, Section 4.03

Complied with.

45 The Recipient shall designate SPG as the Project Executing Agency with overall responsibility for Project coordination and implementation, and liaison with ADB and other government agencies concerned. The Recipient shall ensure that SPG carry out the Project in accordance with provisions of this Grant Agreement.

GA, Schedule 4

Complied with.

G0189-PRC: Women’s Economic Empowerment

46 The Recipient shall cause SPG to (i) maintain separate accounts for the Project; (ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Grant proceeds and compliance with the financial covenants of this Grant Agreement as well as a separate opinion on the use of the procedures for imprest account/statement of expenditures), all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

GA, Section 4.02 (a)

Complied with.

47 The Recipient shall cause SPG to enable ADB, upon ADB's request, to discuss SPG’s financial statements for the Project and its financial affairs related to the Project from time to time with the auditors appointed by SPG pursuant to Section 4.02(a) hereabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of SPG unless SPG shall otherwise agree.

GA, Section 4.02 (b)

Complied with.

48 The Recipient shall cause SPG to enable ADB's representatives to inspect the Project, the goods financed out of the proceeds of the Grant, and any relevant records and documents.

GA, Section 4.03

Complied with.

49 The Recipient shall designate SPG as the Project Executing Agency with overall responsibility for Project coordination and implementation, and liaison with ADB and other government agencies concerned. The Recipient shall ensure that SPG carry out the Project in accordance with the provisions of this Grant Agreement.

GA, Schedule 4

Complied with.

ACWF = All-China Women’s Federation, ADB = Asian Development Bank, AE = agro-enterprise, CFB = county finance bureau, EA = executing agency, EPB = environment protection bureau, MOF = Ministry of Finance, PADO = Poor Area Development Office, PIU = project implementation unit, PLG = project leading group, PMO = project management office, PPMS = project performance monitoring system, SEPD = Shanxi Environment Protection Department, SFD = Shanxi Finance Department, SOE = statement of expenditure, SPG = Shanxi Provincial Government, WRB = water resources bureau. Source: Asian Development Bank.

Appendix 7 45

GRANT REPORTS

A7.1 G0188-PRC: Climate Change Adaptation through Ground Water Management Grant number, country, and name: G0188-PRC: Climate Change Adaptation through Ground Water Management

Amount approved: $500,000 Amount revised: N/A

Executing agency: Shanxi Provincial Government

Fund source: Multi-Donor Trust Fund1 under the ADB Water Financing Partnership Facility

Amount undisbursed: $19.96

Amount utilized: $499,980.04

Approval date: 16 December 2009

Signing date: 30 June 2010

Fielding of first consultant: 1 December 2010

Completion date Original: 31 December 2011

Actual: 31 May 2013

Account closing date

Original: 30 June 2012 Actual: 10 March 2014

ADB = Asian Development Bank, N/A = not applicable, PRC = People’s Republic of China.

A. Description

1. A grant assistance project of $500,000 from the Multi-Donor Trust Fund1 under the Asian Development Bank (ADB) Water Financing Partnership Facility was implemented under Loan 2607-PRC: Shanxi Integrated Agricultural Development to introduce sustainable water-saving techniques and improve the management of groundwater resources.2 The project supported four counties—Pingshun, Lishi, Qixian, and Xixian—that all have scarce groundwater resources. It aimed to (i) demonstrate highly efficient and economical irrigation techniques; and (ii) improve groundwater management through capacity building and training as well as effective implementation of the national and provincial rules and regulations on water resources. B. Expected Impact, Outcome, and Outputs

2. The grant was expected to demonstrate the positive effects of better groundwater management on farmers’ ability to adapt to climate change and the replication of best practices in other project and non-project counties in Shanxi Province. Three outputs were implemented under the grant: (i) assisting four groundwater-scarce project counties in promoting sustainable agro-production approaches; (ii) demonstrating highly efficient and economic irrigation techniques; and (iii) improving groundwater management through capacity building and the effective implementation of national and provincial rules and regulations on water resources. C. Delivery of Inputs and Conduct of Activities

3. International water-saving agriculture concepts and practices were introduced to project farmers. The grant is a pilot for demonstrating the links between groundwater management and climate change, and water-saving concepts for Shanxi Province. 4. Pilot activities in the four project counties were highly instrumental in fostering additional investigation and study in Shanxi Province. 5. Six training sessions were conducted. Overall, 1,200 diverse beneficiaries were trained directly and 5,500 indirectly. Around 200 training manuals were printed and distributed across the

1 Financing partners: the governments of Australia, Austria, Norway, Spain, and Switzerland. Administered by the

Asian Development Bank. 2 ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Loan and

Administration of Grants to the People’s Republic of China for the Shanxi Integrated Agricultural Development Project. Manila.

46 Appendix 7

province, as well as over 5,000 brochures to project farmers in various counties. As a result, information and knowledge on water-saving practices for project management personnel, water resources management personnel, and project farmers were improved; and all participants acquired an understanding of water-saving techniques. 6. The Shanxi–ADB Groundwater Management and Climate Change Adaptation Forum was held, solutions were proposed to tackle problems, and best approaches for water-saving agriculture were discussed. D. Evaluation of Outputs and Achievement of Outcome

7. Highly efficient and economic irrigation techniques demonstrated. The construction and operation of highly efficient water-saving irrigation demonstration projects in Lishi District, and Pingshun, Qixian, and Xixian counties is a qualitative effort to improve water productivity; it achieved a reduction in water consumption and increased crop yields. The grant activities also led to reduced use of chemical fertilizers and pesticides, saved labor inputs, and met demand for high-quality food products. 8. Water-saving irrigation for agricultural development introduced. Supporting water and agriculture infrastructure under the main loan, the grant served to conduct different types of demonstration activities with a focus on innovation, quick investment returns, and high added value. The activities began on pilot sites and were scaled up across the project area.

9. Positive social impacts achieved. Shanxi Province typically experiences drought in 9 years out of 10. Groundwater in areas where the province’s economic activities are concentrated has been excessively exploited and impacts of climate change have become increasingly serious. Before the project, farmers irrigated their fields through flood irrigation. With the implementation of the grant project, farmers of both the project areas and extended dissemination areas were made aware that water-saving irrigation could not only bring about social benefits, but also economic benefits, and therefore started to use water in a more rational way. In project areas, farmers began to voluntarily adopt irrigation techniques that suited their local conditions, such as drip irrigation, micro sprinkling, bubbler irrigation, or canal irrigation. As a result, crop water is used more efficiently and positive social impacts were generated.

10. Better adaptation to climate change through better management of groundwater. Water-saving demonstrations coupled with training improved farmers’ ability to adapt to climate change by managing groundwater more efficiently. They helped build a local economy based on efficient water-saving irrigation, efficient growth of high-quality crops, and featured local agricultural produces.

11. Impacts on national and local regulations. Examples of good agricultural practice introduced by the grant were scaled up to new project areas and incorporated in national and local rules and regulations on the use of water resources. E. Overall Assessment and Rating

12. The grant objective is directly targeted to be responsive to the groundwater scarcity and agricultural dynamics of Shanxi Province. The pilot activities were in line with its research and capacity-building objectives. The result and success of the pilot demonstrations are an important reference and lesson for the conservation of water and the management of water resources in Shanxi Province. The grant is rated highly satisfactory in achieving its objectives.

Appendix 7 47

F. Major Lessons

13. Establish a solid project management system. To ensure smooth project implementation, the provincial project management office (PMO) designated a focal person to manage the grant activities, and in each county and municipal PMO, the director himself led the implementation efforts. Various counties set up leadership groups that also incorporated representatives of the project villages and local water resource bureaus to ensure and monitor project progress. 14. Streamline project management procedures. To strengthen project management, the provincial PMO formulated rules and regulations as well as administrative measures in accordance with the needs of the project. The documents included Administrative Measures for the Price Enquiry and Procurement of Grant Project Equipment, Notice for the further Strengthening of the ADB Grant Demonstration Project Monitoring Work, and Notice for the Further Strengthening of the Later-Stage Management of the ADB Grant Demonstration Project. 15. Regular project inspection missions for better monitoring. The provincial PMO conducted 10 inspection and coordination missions to the project counties during the project baseline survey and design, and another 20 during implementation. The missions helped resolve issues with project consultants, the county PMOs, and county water resource bureaus in a timely fashion by proposing useful measures. As a result, the project baseline surveys were smoothly conducted and the demonstration projects completed on time and in compliance with quality standards. 16. Lack of understanding of ADB procedures and requirements. Domestic consultants must be given training to obtain a good grasp of ADB project management procedures and documentation requirements. English language skills must be a requirement in the terms of reference so that the consultants can communicate with ADB directly and do not add pressure on the main PMO. 17. Delays in fielding consultants. The international consultant was fielded later than expected, which delayed planned activities. Procurement plans and implementation schedules should be reviewed and revised to account for delays in recruitment. G. Recommendations and Follow-Up Actions

18. Need for better understanding of ADB procedures and requirements. Domestic consultants must be provided training to have a good grasp of ADB project management procedures and documentation requirements. English language skills must be a requirement in the terms of reference so that the consultants can communicate with ADB and there is no added pressure on provincial PMOs to communicate with ADB on their behalf. 19. Realistic project implementation schedule. There should be periodic review and revision of procurement plans and implementation schedules to account for delays in recruitment. 20. Potential for more work. There is room for increasing the efforts to promote water-saving irrigation techniques and equipment in Shanxi Province, with a focus on promoting the latest tools available. Water-saving equipment could be purchased and installed by government and counterpart facilities with funds by projects or farmers. Companies or cooperatives could also invest in the construction of water-saving infrastructure. 21. Training on water-saving techniques could be strengthened by being provided on a regular basis to ensure that efficient irrigation techniques are scaled up; operation and maintenance of water-saving facilities should also be looked at.

48 Appendix 7

A7.2 G0189-PRC: Shanxi Province Rural Women Economic Empowerment Grant Project Grant number, country, and name: G0189-PRC: Shanxi Province Rural Women Economic Empowerment Grant Project

Amount approved: $195,000 Amount revised: N/A

Executing agency: Shanxi Provincial Government

Fund source: Gender and Development Cooperation Fund3

Amount undisbursed: $1,383.26

Amount utilized: $193,616.74

Approval date: 16 December 2009

Signing date: 30 June 2010

Fielding of first consultant: 20 December 2010

Completion date Original: 31 December 2011

Actual: 30 November 2013

Account closing date

Original: 30 June 2012 Actual: 17 June 2014

N/A = not applicable, PRC = People’s Republic of China.

A. Description

1. A pilot grant of $285,000 was implemented under Loan 2607-PRC: Shanxi Integrated Agricultural Development4 for enhancing the economic empowerment of poor rural women. The Gender and Development Cooperation Fund provided $195,000; provincial and county governments provided the remaining $90,000 equivalent in in-kind counterpart contributions (Liulin County: CNY400,000, Daning County: CNY200,000). The grant improved women’s access to economic opportunities through a novel village banking model that combines microfinance and collective purchase and sale of agricultural products. The expected impact of the grant was to advance gender equality through women’s economic empowerment in Shanxi. The grant was implemented over 15 months, from August 2012 to November 2013, in four villages of Daning and Liulin counties where poverty and male out-migration rates are high.

B. Expected Impact, Outcome, and Outputs

2. The expected impact of the grant was to advance gender equality through women’s economic empowerment in Shanxi. The expected outcome was better access for women to economic opportunities in target villages by supporting women’s production groups and capacity building. Three outputs were implemented under the grant: (i) establishing a community women’s development fund; (ii) building management and technical capacity of women in carrying out agricultural production activities and managing finance; and (iii) strengthening local government’s capacity to support women’s economic empowerment and to replicate and promote project practices.

C. Delivery of Inputs and Conduct of Activities

3. The community women’s development fund was set up based on the project design—54.30% of the total grant investment was used to support four project villages in the revolving use of microcredit funds. Community women’s development funds were set up in all four villages, overseen by a community fund management committee (CFMC) with democratically elected members. Under the leadership of the CFMC, 53 loan co-guarantee groups were formed and flexible loan repayment methods were adopted to ensure smooth implementation of the project.

3 Financing partners: the governments of Australia, Canada, Denmark, Ireland, and Norway. Administered by ADB. 4 ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Loan and

Administration of Grants to the People’s Republic of China for Shanxi Integrated Agricultural Development Project. Manila.

Appendix 7 49

4. Training and study tours on agricultural production technologies and economic management were carried out. In addition, 24 training units for around 600 beneficiaries on topics such as participatory monitoring evaluation, community fund financial management, social and gender awareness, leadership community organization and management skills, and agricultural production were provided. 5. Capacity building for local governments was conducted. Members of local project management offices and women’s federations took part in all training units, except those on agricultural production technologies, to strengthen the project’s impact and sustainability. 6. The grant was implemented smoothly. About one-third of the grant budget was spent on consulting services. Shanxi Fuyuanhui Gender Development and Training Center performed well in delivering its outputs.

D. Evaluation of Outputs and Achievement of Outcome

7. Fund established and autonomous credit management pioneered. The community women’s development fund was put into operation in July 2012. Flexible repayment terms and a co-loan guarantee mechanism were implemented by the four grant project villages to manage their own community fund. Microcredit proceeds were revolved in two rounds after project completion. Also, 58 co-loan guarantee groups were set up and 191 women benefited directly from the project, which far exceeds the target (114). The community development fund added value and filled a financing gap in the project areas, with poor women motivated to obtain loan funds and to engage in production activities. Economic empowerment facilitated by the grant has paved the way for poor women in project areas. 8. Rural poor women’s opportunities increased. A series of training sessions on agricultural production technologies were held, which boosted women beneficiaries’ skills in agricultural production and their capacity for economic management. Seven training units on the management of crops and livestock were held and attended by 475 poor women. The agricultural production capacity of women improved greatly, as did income-generating opportunities. 9. Communities are better at self-organizing. The project trained members of CFMCs on issues such as social and gender development, women’s leadership, and community organization management, to improve gender equality and self-organization. The grant activities gave rise to 12 community women’s leaders who have been instrumental in organizing larger women groups, and representing community interests on multiple platforms. 10. Women fully engaged in community affairs. The project helped establish a good relationship between the village administration and the CFMC. The village administration helps resolve outstanding issues facing the CFMC, but does not interfere with women’s loan affairs. Under this arrangement, women’s autonomous management of and decision-making on the development fund has remained intact.

E. Overall Assessment and Rating

11. The grant project has pioneered a new model of financial assistance for the rural poor in poverty-stricken areas of Shanxi Province. It was successful in equipping rural women with better agricultural production technologies and practices, and boosted their capacity to manage their finances by establishing community development funds that are managed by the rural women themselves. The funds were also used to support rural women in better carrying out their economic activities, such that poor rural women can have access to more economic opportunities and can better participate in decision-making. Thus, both their economic and social status

50 Appendix 7

improved. The grant project has served as a good demonstration for comprehensive agricultural development projects. Overall, it is rated satisfactory. 12. The grant demonstrates that if sufficient capacity building and support is given and beneficiaries have a sense of ownership and can make decisions by themselves, they will be more engaged and better motivated. Further, access to microfinance is an enabling factor in promoting the active participation of women in their communities, enhancing the cohesiveness of women’s groups, and economically empowering women. 13. The flexible terms of microcredit loans and repayment methods, and the co-loan guarantee groups set up on a voluntary basis are two pillars ensuring the healthy and sustainable development of the community women’s development fund. The practice shows that once beneficiaries realize that they have the authority to manage the fund and can access microcredit support over a long period, the fund will be sustainable.

F. Major Lessons

14. Disbursement delays. Serious impacts on project implementation were caused by the delay in disbursing grant funds. Thus, project beneficiaries lost interest and confidence in the project, and several activities were suspended and some beneficiaries dropped out. A series of training units were conducted for local government at the onset of the project. The lag between training and start of activities (due to delayed fund disbursement) led to fewer beneficiaries applying for the grant activities. Also, the delay in fund disbursement disrupted the project implementation schedule and compromised some activities. 15. Absence of support after project completion. The newly established women’s groups and development fund still require capacity building and technical support from government and other partners. Local governments should follow up on training, especially for management committees. 16. Turnover of project team. Three ADB project managers worked on the grant project. Fuyuanhui, the consulting firm, also had major staff turnover. These changes of personnel caused additional delays and issues in project implementation.

G. Recommendations and Follow-Up Actions

17. Need for simplified disbursement procedures for small grants. For similar grant projects in the future, the ADB grant disbursement procedure should be simplified, and coordination between the project management division and the financial disbursement department should be reinforced to ensure timely imprest account withdrawals and a realistic project implementation schedule. Periodic review and revision of implementation schedules is required. In the case of significant delays, grants should be extended to safeguard smooth implementation and completion of project activities and continuity in project management. At least one key member of the ADB project team should remain involved for the duration of the project. 18. Potential for scaling up. The women’s economic empowerment initiative covered only two counties and has the potential to be scaled up and replicated. Should funding be available in the future, grant activities could be implemented in all five project municipalities.

Appendix 8 51

PROCUREMENT PACKAGES FOR ADB FINANCING

At Appraisal

Actual

Packages

Estimated Costs

($ million)

Number of Contracts

Procurement

Mode

Estimated

Costs ($ million)

Number of Contracts

Procurement

Mode

A. Goods

1. Vehicles (cold storage) 0.31 1 NCB

0.26 1 NCB

2. Vehicles (project monitoring) 0.72 1 NCB

0.77 1 NCB

B. Consulting services

1. Capacity building and training 0.30 1 Individual

selection

0.24 4 Individual

selection

NCB = national competitive bidding. Source: Asian Development Bank.

52 Appendix 9

ECONOMIC AND FINANCIAL REEVALUATION

A. Scope of Reevaluation

1. Financial and economic reevaluations were conducted to assess the financial and economic viability of the project and each of the 27 types of subprojects at completion. Those subprojects were grouped into two subcategories: farmer subproject and agro-enterprise subproject. The farmer subprojects concerned 13 types of perennial crops, 4 types of annual crops, 8 types of livestock production, and 1 type of on-farm processing. The agro-enterprise subproject concerned on-farm processing by one enterprise. 1 The 26 types of farmer subprojects—89 subprojects in total—were implemented by groups of farmers in different project counties (38,829 farmers in total). Farmers in some counties implemented one subproject subcategory while others implemented several subcategories, depending on agro-climatic conditions and county governments’ policies. 2. Data used in the analysis were derived from field studies undertaken during the project completion review. The analysis was carried out on sample activities of 37 selected subprojects that are representative of the project. The project period was assumed to be 20 years (2010 to 2029), including 1–5 years of construction work for some subprojects. B. Financial Reevaluation 3. Methodology and assumptions. The methodology and assumptions for financial reevaluation were based on the unit model used at appraisal to estimate the financial internal rate of return (FIRR) at completion. The financial reevaluation at completion was conducted for each subproject in the following steps: (i) estimation of net cash flow, (ii) estimation of the weighted average costs of capital (WACC), (iii) estimation of the FIRRs, (iv) assessment of the subproject’s financial viability based on the FIRR and WACC, and (v) sensitivity analysis. The FIRR was also compared with the FIRR at appraisal. The financial reevaluation assumed a project life of 20 years; costs and revenues expressed in constant 2017 prices; and zero as the salvage value. 4. One unit of activities in this report means: 1 hectare (or 15 mu)2 for walnuts, apples, pears, Chinese dates, asparagus, prickly ash, lotus, poplars, and Chinese herbs; 4 mu for millet; 30 square meters for date drying; 1 mu for greenhouses and tunnels; and 1 set of livestock, i.e., 3 sows for pig breeding, 30 piglets for pig fattening, 4 cows for cattle breeding, 10 heads for cattle fattening, 3,000 chickens (broilers and layers), 20 ewes for sheep breeding, 10 goats for cashmere wool, and 8 units for storage. Financial costs and benefits were expressed in constant first-quarter 2017 prices. The capital costs for all activities include physical investment (actual civil works, equipment, and labor) and operational inputs during development, and training for farmers to ensure that they are familiar with the new activities. 5. Weighted average cost of capital. The WACC was calculated for each subproject

because it varies depending on the proportion of financing (Asian Development Bank ADB] loan and equity) allocated, which also changed the cost of overall financing across subprojects. The WACCs for different farmer subprojects ranged from 0.71% to 3.14%, while the WACC for the agro-enterprise subproject was 1.74%.

1 The project at appraisal intended to support one more type of on-farm processing subproject and four more types of

agro-processing subprojects. Changes in project beneficiaries’ needs and a mismatch in implementation timing meant that the agro-processing subprojects were not implemented under the project. Their loan allocation was reallocated to other subprojects.

2 A mu is a Chinese unit of measurement (1 mu = 666.67 square meters).

Appendix 9 53

6. Financial internal rate of return. For every subproject, the FIRR at completion was higher than the WACC, indicating that all subprojects were financially viable. The FIRRs and WACCs at completion and the FIRRs at appraisal are in Table A9.1. The FIRRs at completion ranged from 3.8% for lotus production to 19.4% for walnuts and fast-growing poplars, whereas the FIRRs at appraisal ranged from 14.6% for cashmere production to 47.6% for asparagus production. The differences in FIRR calculation between completion and appraisal were partly the result of lower revenue flow during the planting period. Though FIRRs at completion were not as high as those at appraisal, they are all higher than the respective WACCs. Hence, it can be concluded that all subprojects are financially viable.

Table A9.1: Financial Reevaluation

Activity – County At Appraisal At Completion

FIRR (%) FIRR (%) WACC (%)

Perennial Crops

Walnuts (flat areas) – Jiaokou 37.0 16.8 2.62

Walnuts (hilly areas) - Pingshun 29.0 14.9 2.62

Walnuts (hilly areas) – Yonghe 29.0 19.4 2.62

Apples (table quality) – Linyi 29.0 18.6 2.62

Apples (for processing) – Yongji 27.2 14.4 2.62

Pears – Pingyao 16.4 13.1 2.62

Chinese dates (dense planting) – Hongtong 28.1 11.5 2.62

Chinese dates (dense planting) – Linyi 28.1 18.3 2.62

Chinese dates (sparse planting) – Yyonghe 26.3 13.2 2.62

Prickly ash – Pingshun 19.7 16.7 3.14

Asparagus – Hongtong 47.6 8.6 2.62

Asparagus – Houma 47.6 6.2 2.62

Lotus – Hongtong 28.0 3.8 2.62

Fast-growing poplars – Yanhu 24.8 19.4 2.62

Chinese herbs (rainfed) – Huangqi Wanrong 46.4 7.1 2.22

Chinese herbs (irrigated) – Dihuang 27.6 6.6 2.22

Chinese herbs (irrigated) – Dansen 27.6 6.5 2.22

Chinese herbs (irrigated) – Chaihu 27.6 7.1 2.22

Annual Crops

Greenhouse (flat areas) – Yuci 22.3 14.5 3.12

Greenhouse (hilly areas) – Jiaocheng 17.9 16.8 3.12

Tunnel greenhouse – Qi 28.0 8.2 0.71

Millet – Qin 29.0 18.3 2.62

Livestock

Pig breeding – Yuci 17.6 9.9 3.14

Pig breeding – Houma 17.6 12.9 3.14

Pig fattening – Hongtong 22.6 12.0 3.14

Pig fattening – Linyi 22.6 11.3 3.14

Cattle breeding – Qin 15.5 14.5 3.14

Cattle breeding – Jiaocheng 15.5 14.8 3.14

Cattle fattening – Qin 15.5 9.7 3.14


Cattle fattening – Hongtong 21.4 15.3 3.14

Raising broiler chickens – Pingyao 21.9 12.4 3.14

Raising layer chickens – Pingyao 18.4 11.5 3.14

Sheep breeding (meat) – Linyi 19.4 8.6 3.14

Cashmere wool production – Yonghe 14.6 11.8 3.14

54 Appendix 9

Activity – County At Appraisal At Completion

FIRR (%) FIRR (%) WACC (%)

On-farm Processing

Date drying – Yonghe 21.7 10.7 2.62

Agro-processing

Qinzhou Yellow Millet (Group) Ltd. 44.3 14.2 1.74

% = percent, FIRR = financial internal rate of return, WACC = weighted average cost of capital. Source: Asian Development Bank estimates.

7. Sensitivity analysis. A switching value was used for the sensitivity analysis. 3 All subprojects were tested for two possible scenarios that could erode their financial viability—(i) revenue lower than expected and (ii) operation and maintenance costs higher than expected. The results are summarized in Table A9.2. They show that the switching value for most subprojects is higher than 5. This indicates that those subprojects would maintain their financial viability even if revenue were lower by 5% or operation and maintenance costs were higher by 5%; hence, their financial viability is robust. On the other hand, the switching value for some subprojects (some with perennial crops and some with livestock) is less than 5, which implies that they would have difficulty in sustaining their financial viability in a negative scenario.

Table A9.2: Sensitivity Analysis

Activity – County FIRR Switching Value

(%)

Revenue Decrease

O&M Cost Increase

Perennial Crops


Walnuts (hilly areas) – Pingshun 14.9 48.27 107.84




Pears – Pingyao 13.1 51.36 128.86

Chinese dates (dense planting) – Hongtong 11.5 8.94 11.12






Lotus - Hongtong 3.8 0.33 0.34





Chinese herbs (irrigated) – Chaihu 7.1 5.00 9.71 Annual Crops




Millet – Qin 18.3 12.89 16.22 Livestock





3 The switching value indicates the extent to which a decrease in revenue or an increase in O&M costs leaves the

subproject’s financial viability intact. The higher the switching value, the more robust the financial performance in an unfavorable scenario.

Appendix 9 55

Activity – County FIRR Switching Value

(%)

Revenue Decrease

O&M Cost Increase









Cashmere wool production – Yonghe 11.8 11.36 15.01 On-farm Processing

Date drying – Yonghe 10.7 5.98 6.83 Agro-processing


% = percent, FIRR = financial internal rate of return, O&M = operation and maintenance. Source: Asian Development Bank estimates.

8. Conclusion. The unit costs for all subprojects and activities increased since 2010, when the project became effective—labor costs rose the most compared with other inputs. This had a significant influence on the ability of the project to reach the target activities indicated at appraisal. If the activity targets were to remain unchanged, it would have required a significant increase in the total project cost by the end of project implementation. As a result, the project had to reduce the indicator target volumes to stay within a reasonable project cost; however, the total project cost increased from $189.31 million at appraisal to $201.32 million at completion. The project midterm review revised the indicator targets to minimize cost overruns and to be more responsive to market changes that had made some project activities more favorable and others less. The responsiveness of ADB and the project management office to any such changes that influence not only a project’s costs but also the achievement of its outcome and expected impacts should be a priority and become a part of regular review missions. 9. Despite the increase in investment and operating costs since 2010, the results of the financial analysis indicate that the 37 subprojects sampled were financially viable at the beginning of 2017. The FIRRs of all subprojects are lower than those assessed at appraisal, which can be attributed to the changes in value of inputs and outputs. The WACCs declined because the costs of the ADB loan decreased significantly since the appraisal assessment. This increases the financial feasibility of the subprojects and the overall project. The sensitivity analysis suggests that most subprojects are robust against potential negative changes in key project parameters from both financial perspectives. C. Economic Reevaluation 10. Methodology and assumptions. Like the financial reevaluation, the economic reevaluation adopted the methodology and assumptions used at appraisal (based on the unit model) to estimate the economic internal rate of return (EIRR) at completion. The economic reevaluation was conducted for each subproject as well as the overall project in the following steps: (i) estimation of net economic benefit flow, (ii) estimation of the EIRR, (iii) comparison of the EIRRs with the economic cost of capital (12%), (iv) comparison of the EIRR at completion with the EIRR at appraisal, and (v) sensitivity analysis.

56 Appendix 9

11. The economic reevaluation was conducted in accordance with ADB’s Guidelines for the Economic Analysis of Projects.4 Economic costs and benefits are expressed in constant 2017 terms with an exchange rate of CNY6.38 = $1.00 and are valued in local currency using the world-price numeraire. Traded inputs and outputs are valued at border price equivalent values (BPEVs), and non-traded inputs and outputs at domestic market prices after taxes and duties are deducted, assuming the standard conversion factor of 1.0. The estimation of BPEVs is only applied to several key outputs, such as walnut and apple orchards, because these products from the People’s Republic of China account for a significant proportion of the world markets and for key inputs such as fertilizers and agrochemicals. The BPEVs are thus used to calculate the specific conversion factors for these products and costs, which are 1.036 for apples, 1.019 for walnuts, 0.918 for fertilizers, and 0.976 for agrochemicals. The wage rate used is based on the market wage rate and a shadow wage rate factor of 0.84.

12. Economic internal rate of return. The EIRRs of all subprojects and the overall project are in Table A9.3. The EIRRs of all subprojects are higher than the economic cost of capital (12%), indicating their economic viability. The EIRR for the overall project was 12.8%. By subproject, the EIRRs were 14.5%–27.3% for perennial crops; 16.8%–22.6% for annual crops; 13.2%–21.7% for livestock; 12.3% for on-farm processing; and 14.7% for agro-processing. Similar to the results of the financial revaluation, all EIRRs were lower at completion than at appraisal because of the combination of lower economic benefit and higher economic cost of the overall project and subprojects during the project implementation period.

Table A9.3: Economic Internal Rate of Return

Activity - County At Appraisal At Completion

EIRR (%) EIRR (%)

Perennial Crops

Walnuts (flat areas) – Jiaokou 41.5 17.9

Walnuts (hilly areas) – Pingshun 33.5 17.7

Walnuts (hilly areas) – Yonghe 33.5 21.9

Apples (table quality) – Linyi 34.2 21.3

Apples (for processing) – Yongji 30.0 17.0

Pears – Pingyao 20.0 15.0

Chinese dates (dense planting) – Hongtong 31.7 15.2

Chinese dates (dense planting) – Linyi 31.7 22.9

Chinese dates (sparse planting) – Yyonghe 29.6 15.1

Prickly ash – Pingshun 20.3 13.2

Asparagus – Hongtong 47.4 13.7

Asparagus – Houma 47.4 18.8

Lotus – Hongtong 28.1 27.3

Fast-growing poplars – Yanhu 25.8 25.4

Chinese herbs (rainfed) – Huangqi Wanrong 54.9 17.7

Chinese herbs (irrigated) – Dihuang 32.2 23.2

Chinese herbs (irrigated) – Dansen 32.2 14.5

Chinese herbs (irrigated) – Chaihu 32.2 15.9 Annual Crops

Greenhouse (flat areas) – Yuci 22.3 19.3

Greenhouse (hilly areas) – Jiaocheng 18.0 16.8

Tunnel greenhouse – Qi 28.1 21.1

Millet – Qin 31.5 22.6 Livestock

Pig breeding – Yuci 19.4 18.7

Pig breeding – Houma 19.4 18.5

Pig fattening – Hongtong 25.0 13.2

4 Asian Development Bank. 2017. Guidelines for the Economic Analysis of Projects. Manila.

Appendix 9 57

Activity - County At Appraisal At Completion

EIRR (%) EIRR (%)

Pig fattening – Linyi 25.0 14.2

Cattle breeding – Qin 15.9 15.8

Cattle breeding – Jiaocheng 15.9 15.8

Cattle fattening – Qin 21.9 20.1

Cattle fattening – Qin 21.9 21.7

Cattle fattening – Hongtong 21.9 21.1

Raising broiler chickens – Pingyao 22.6 16.0

Raising layer chickens – Pingyao 19.1 13.9

Sheep breeding (meat) – Linyi 20.1 20.0

Cashmere wool production – Yonghe 14.9 14.5 On-farm Processing

Date drying – Yonghe 23.4 12.3 Agro-processing

Qinzhou Yellow Millet (Group) Ltd 44.3 14.7 Overall Project 20.5% 12.8%

% = percent, EIRR = economic internal rate of return. Source: Asian Development Bank estimates.

13. Sensitivity analysis. The sensitivity analysis by subproject is based on the same scenarios as those tested in the sensitivity analysis for the financial reevaluation, and are presented in Table A9.4. The results show that the switching value for most subprojects is higher than 5, indicating robustness of the financial performance, while that for some subprojects (irrigated Chinese herb production in Dansen County; pig fattening in Hongtong and Linyi counties; and raising of broiler chickens in Pingyao County) is less than 5, which implies that they would have difficulty in sustaining their financial viability in a negative scenario.

Table A9.4: Sensitivity Analysis Activity – County EIRR Switching Value

% Revenue Decrease

O&M Cost Increase

Perennial Crops


Walnuts (hilly areas) – Pingshun 17.7 57.26 157.60




Pears – Pingyao 15.0 57.74 168.70

Chinese dates (dense planting) - Hongtong 15.2 13.02 16.88






Lotus – Hongtong 27.3 6.23 6.78





Chinese herbs (irrigated) – Chaihu 15.9 14.10 31.17

Annual Crops




Millet – Qin 22.6 15.83 20.56

Livestock

58 Appendix 9

Activity – County EIRR Switching Value

% Revenue Decrease

O&M Cost Increase













Cashmere wool production – Yonghe 14.5 15.35 21.38

On-farm Processing

Date drying – Yonghe 12.3 7.24 8.39

Agro-processing


% = percent, EIRR = economic internal rate of return, O&M = operation and maintenance. Source: Asian Development Bank estimates.

D. Conclusion 14. The financial and economic reevaluations were conducted based on the updated data at project completion. They reaffirmed the results of evaluations at appraisal—financial and economic viability of the overall project and all types of subprojects. Results of the sensitivity analysis further confirmed the resilience of the overall project and most of the subprojects against unfavorable scenarios (i.e., revenue decrease and increase in O&M costs). 15. The results showed the project financial and economic benefits outweighing the project financial and economic costs, which confirms the efficiency of the project. The project utilized the resources efficiently for the county and/or society to accomplish the project outcome. The substantial differences in FIRRs and EIRRs between appraisal and completion are due to the optimistic assumption of revenue flow and the underestimation of the investment cost.

Appendix 10 59

ENVIRONMENTAL MANAGEMENT

A. Environment Categorization and Due Diligence 1. The Shanxi Integrated Agricultural Development Project was classified category B for environmental safeguards by the Asian Development Bank (ADB). Environmental analysis was carried out in accordance with national environmental regulations and ADB’s Environment Policy (2002) and Environmental Assessment Guidelines (2003). The Government of Shanxi Province engaged China Agricultural University to conduct the environmental assessment and prepared the domestic environmental impact assessment reports. These documents were reviewed by ADB and approved by the provincial Environmental Protection Department. Based on the findings, a summary initial environmental examination (SIEE) was prepared in English, including a summary environmental management plan (SEMP) and environmental monitoring plan. Due diligence of the management practices of the 24 participating agro-enterprises showed that they were complying with the environmental regulations. These agro-enterprises provided support and credit guarantees for participating farmers. B. Institutional Setup and Capacity Development 2. Institutional arrangements and responsibilities for the implementation of measures and activities were defined in the SIEE, SEMP, and environmental monitoring plan. The provincial project management office (PMO) was responsible to ensure compliance with environmental safeguards during implementation. An environmental monitoring unit was established in the PMO to oversee environmental compliance. The unit was adequately staffed and worked in consultation with staff at municipal or county environmental protection bureaus (EPBs), as well as with staff of water conservation bureaus, to monitor compliance with the environmental regulations of the People’s Republic of China (PRC) during construction and operation. 3. The project provided technical support and training, as well as domestic consultants during implementation to assist the PMO in overseeing the monitoring of environmental impact and mitigation measures. The consultants helped the PMO undertake its own environmental monitoring and institute required mitigation measures instead of depending entirely on the EPBs. Training was also provided to agro-enterprises and associations to raise environmental awareness and implement environmental mitigation measures. In accordance with the SEMP and the project administration manual, the PMO organized training on (i) environmental laws, regulations, and policies; (ii) implementation of mitigation measures; (iii) handling of environmental conflicts with nearby residents; (iv) environmental technologies and procurement; (v) facility maintenance and operation; (vi) environmental monitoring and supervision; and (vii) documentation and reporting. C. Environmental Safeguard Measures and Environmental Monitoring and Reporting 4. The SEMP defined the environmental protection measures to be undertaken for the subprojects. They included the main mitigation measures, a monitoring and reporting program, institutional and contractual arrangements, and budgets. The environmental impacts of the construction activities were local and temporary. Particular attention was given to construction impacts, water conservation and reduced use of agrochemicals, wastewater control by the agro-enterprises, and the potential risk of pollution from livestock activities. The increased waste was to be mitigated by adopting adequate waste treatment and disposal procedures, in accordance with the PRC’s regulations and the project guidelines, i.e., safe disposal of waste by composting it and/or converting it into gas for home consumption using biogas digesters.

60 Appendix 10

5. From 2011, the PMO submitted five annual environmental monitoring reports and annual progress reports to ADB. They included extensive ambient environmental quality data, which focused on the domestic reporting requirements. Upon ADB’s request, the PMO gradually enhanced the environmental safeguard monitoring arrangements during project implementation. The environmental safeguard coordinator in the PMO worked closely with the Shanxi Environmental Protection Department, municipal and county EPBs, and water resource bureaus to ensure compliance with national requirements and ADB project documents, notably the SEMP and project administration manual. The PMO, with oversight by the environmental safeguard coordinator, conducted regular field visits to the project counties for monitoring and supervision. Unfortunately, the reports were weak in analytic assessments and on the performance of contractors regarding environmental protection. Moreover, a lot of duplication emerged each year (i.e., the same conclusions were included in subsequent reports). 6. The project is considered to be in compliance with the project’s safeguard documents and national environmental regulations, as also observed during the field visits to Pingshun, Qi, and Yuci counties. The Shanxi Environmental Protection Department also confirmed that the project did not cause any serious environmental concerns, and that all impacts were being mitigated. Most attention was given to potential pollution from livestock activities. The PMO reported that about 90% of all beneficiaries apply composting or use biogas digesters.1 These include all larger and medium-scale farms. No complaints on environmental impacts were recorded during project implementation. D. Cost of Implementing the Environmental Management Plan 7. During project preparation, no specific cost estimate was prepared for the implementation of the SEMP. These costs, in line with PRC common practices, were incorporated into the total project investment and management costs. ADB has been unable to determine the actual expenses for environmental monitoring, administration, compliance inspection, institutional strengthening, and training because the PMO accessed multiple sources for the implementation of the plan. E. Lessons 8. Implementation arrangements. The PMO found it difficult to coordinate the monitoring given the large number of counties and small subprojects. The PMO, with the support of the environmental protection bureaus, was still able to prepare extensive environmental monitoring reports. However, the practical value added by such reports can be questioned for projects that cover small-scale interventions over large areas. 9. Differences between domestic and ADB requirements. Although the domestic environmental assessments and ADB requirements are quite different, the project is in compliance with the project’s safeguard documents and national environmental regulations. While the domestic requirements focus on ambient environmental quality, ADB focuses on the monitoring of specific impacts to control project implementation if needed. Combining the implementation of the two approaches has proven to be difficult. The PMO chose generally to follow domestic procedures, and was not able to fully integrate the requirements of the SEMP into the domestic procedures to streamline monitoring. It can be concluded that it is necessary to adopt a pragmatic approach when dealing with a project in a large number of counties and with

1 Other project beneficiaries may have discarded their waste in more traditional ways (e.g. direct land application).

Appendix 10 61

many small subprojects. Additional capacity building should be provided to enable the staff of the executing agency to fully follow ADB’s procedures and expectations. It is also necessary to motivate the staff of a PMO and participating counties to understand and embrace the additional safeguard requirements that ADB is proposing when designing a new project.

62 Appendix 11

POVERTY REDUCTION AND SOCIAL DIMENSIONS A. Introduction 1. The project’s expected impact was to reduce rural poverty and develop a sustainable agriculture sector in 26 counties of Shanxi Province. The intended outcome was to increase farm productivity and create higher household incomes from high-value agricultural production by adopting appropriate and environmentally sound technologies and practices, value addition through processing, efficient market access, and improved food quality and safety in the project area. The project had four components: (i) transition to high-value production, (ii) strengthening of farmer–market links, (iii) capacity building and training, and (iv) project management.

2. During project preparation, a summary poverty reduction and social strategy was prepared to document the project’s impacts on poverty reduction and social dimensions. Accordingly, the project was classified as targeted intervention to tackle the core causes of income poverty by financing for high-value farming, agro-processing, product quality and safety, environmentally sustainable farm practices through water-saving irrigation techniques, microfinance to poor women, and stronger capacity of farmers and technical support agencies. The project was not expected to involve adverse social impacts.

B. Project Impacts 3. Socioeconomic growth. As implemented, the project greatly promoted the development of the agriculture sector, enhanced the related secondary and service sectors, and consequently contributed to regional economic growth in the project area. Statistics show that socioeconomic conditions in the project area have improved rapidly (Table A11.1). The per capita gross domestic product of the project counties increased by about 10.4%–131.5% from 2009 to 2015, and the per capita rural net income grew by about 77.6%–192.1% over the period.

Table A11.1: Socioeconomic Growth in the Project Area (CNY, unless otherwise defined) Area (PRC/Shanxi/Project Counties)

Year

Per Capita GDP

Per Capita

Government Revenue

Per Capita

Rural Net Income

PRC-wide 2009 26,222 5,134 5,153 2015 50,251 11,077 11,421.71 Growth 91.64% 115.75% 121.65% Shanxi Province 2009 21,522 2,351 4,244 2015 34,919 4,482 9,454 Growth 62.25% 90.64% 122.76% Jinzhong Municipality

Taigu 2009 13,185 574 7063 2015 24,986 1,369 15254 Growth 89.50% 138.56% 115.97% Qi Xian 2009 13,634 473 6,302 2015 24,356 1,187 13,961 Growth 78.64% 150.85% 121.53% Pingyao 2009 11,510 586 4,951 2015 18,991 837 10,386 Growth 65.00% 42.89% 109.78% Yuci 2009 22,030 1,137 6,766 2015 31,940 1,809 14,684 Growth 44.98% 59.13% 117.03% Changzi Municipality

Qin Xian (p) 2009 5,431 283 2651 2015 12,056 442 5227 Growth 121.98% 55.89% 97.17%

Appendix 11 63

Area (PRC/Shanxi/Project Counties)

Year

Per Capita GDP

Per Capita

Government Revenue

Per Capita

Rural Net Income

Pingshun (p) 2009 7,658 350 2720 2015 13,654 567 5054 Growth 78.30% 61.93% 85.81% Licheng 2009 12,043 642 4,126 2015 18,730 1,091 7,329 Growth 55.53% 69.89% 77.63% Luliang Municipality

Zhongyang (p) 2009 23,570 1,900 2,773 2015 30,030 2,890 5,791 Growth 27.41% 52.13% 108.84% Jiaokou (p) 2009 10,704 1,021 2,760 2015 24,783 4,372 6,467 Growth 131.53% 328.33% 134.31% Lishi (p) 2009 16,203 2,719 1,919 2015 20,595 2,546 5,135 Growth 27.11% (6.34)% 167.59% Jiaocheng 2009 17,916 1,585 3,610 2015 21,037 1,611 8,236 Growth 17.42% 1.67% 128.14% Wenshui 2009 7,816 351 4,028 2015 13,495 602 8,458 Growth 72.66% 71.42% 109.98% Liulin (p) 2009 42,947 3,649 3,415 2015 52,217b 6,397 9,974 Growth 21.58% 75.30% 192.06% Linfen Municipality

Fenxi (p) 2009 7,056 668 1,721 2015 13,012 374 3,136 Growth 84.41% (43.94)% 82.22% Hongdong 2009 15,226 968 5,240 2015 21,551 869 9,921 Growth 41.54% (10.29)% 89.33% Xiangfen 2009 16,977 648 5,381 2015 25,233 877 11,056 Growth 48.63% 35.32% 105.46% Linfen Development

Zonea 2009

N/A N/A N/A

2015 N/A N/A N/A Growth N/A N/A N/A Houma 2009 24,884 1,009 6,821 2015 36,142 1,888 12,538 Growth 45.24% 87.08% 83.81% Daning (p) 2009 6,164 286 1,191 2015 6,807 497 2,690 Growth 10.43% 73.80% 125.86% Yonghe (p) 2009 5,632 113 1,455 2015 10,774 826 2,974 Growth 91.30% 633.02% 104.40% Xixian (p) 2009 6,205 325 2,496 2015 12,403 759 4,762 Growth 99.89% 133.41% 90.79% Yuncheng Municipality

Yanhu 2009 16,468 485 4,705 2015 30,256 1,218 9,938 Growth 83.73% 151.25% 111.22% Yongji 2009 14,693 403 5,090 2015 29,234 890 10,879 Growth 98.97% 120.88% 113.73% Linyi 2009 10,951 155 5,019

64 Appendix 11

Area (PRC/Shanxi/Project Counties)

Year

Per Capita GDP

Per Capita

Government Revenue

Per Capita

Rural Net Income

2015 22,482 403 10,622 Growth 105.30% 159.78% 111.64% Jishan 2009 11,634 319 4,293 2015 20,000 446 9,014 Growth 71.91% 40.14% 109.97% Wanrong (p) 2009 6,660 173 3,549 2015 13,795 301 7,623 Growth 107.13% 73.90% 114.79%

( ) = negative, GDP = gross domestic product, N/A = not available, p = poverty county, PRC = People’s Republic of China. a Data are unavailable since Linfen Development Zone is only a branch agency of Linfen Municipality. b The figure is for 2014.

Source: National and Shanxi Provincial Statistic Yearbooks for 2010 and 2015.

4. Poverty reduction. The incidence of poverty in the project area has been significantly reduced during project implementation. Between 2010 and 2015, the total number of people living in relative poverty in the rural areas of Shanxi Province decreased by 61.1%, from 5.74 million to 2.23 million. A total of 3.51 million people were lifted above the relative poverty line. The poverty incidence rate in Shanxi Province also declined by 14.9 percentage points, from 24.1% to 9.2%, with a 62% decrease in the rural poverty rate in Shanxi Province (Table A11.2).

Table A11.2: Poverty Reduction in the Project Area

Project Area

Year

Rural

Population

Poverty

Headcount

Poverty Incidence

(%)

Reduced Percentage

(%)

Country-widea 2010 671,130,000 166,000,000 24.7 2015 603,460,000 60,000,000 9.94 14.8 Shanxi Provinceb 2010 23,817,400 5,740,000 24.1 2015 24,239,100 2,230,000 9.2 14.9

Note: Poverty line: per capital rural household income is less than CNY 2,300/person in 2010 prices. The figures for county-level poverty populations and for 2009 are not available. a Source: http://news.xinhuanet.com/politics/2015-12/25/c_128564935.htm. b Source: http://www.chinanews.com/sh/2016/08-18/7976704.shtml.

5. The project’s implementation has directly raised the incomes of beneficiaries, particularly of the poor. The provincial project management office (PMO) conducted surveys in 2010 and 2016 to measure incomes among beneficiaries. It interviewed 260 beneficiary households involved in the project and at the same time surveyed control groups—130 non-beneficiary households not involved in the project but living in the project villages and another 130 non-beneficiary households living outside the project villages. The 2016 survey indicates that (i) the project beneficiaries’ incomes are higher than those living in non-project areas; (ii) the average household income of beneficiary households increased by 270.9%, exceeding the increases among the control groups living inside (178.6%) and outside (116.3%) of project areas; and (iii) the income structure of beneficiary households improved after the project intervention, especially the portions of income from economic forests, vegetable crops, and livestock breeding increased significantly (Table A11.3).

Appendix 11 65

Table A11.3: Income Level and Structure of Sampled Households

Item

Beneficiary HHs in Project Villages

(260)

Non-Beneficiary HHs in Project Villages

(130)

Non-Beneficiary HHs outside Project Villages

(130)

2009 2015 Growth 2010 2015 Growth 2010 2015 Growth

Average HH total income (CNY) 29,815.5 110,577.2 270.9% 22,305.0 62,151.8 178.6% 24,775.4 53,579.0 116.3%

Income structure (CNY)

Food crops 4,394.8 2,852.9 (35.1)% 4,514.5 5,786.3 28.2% 5,879.9 6,402.7 8.9%

Cash crops 6,660.8 25,941.4 289.5% 5,522.7 12,896.5 133.5% 5,681.7 12,366.0 117.6%

Economic forest 3,082.9 18,455.3 498.6% 2,667.7 10,584.4 296.8% 1,469.9 8,101.1 451.1%

Vegetable crops 1,204.5 7,110.1 490.3% 2,377.7 1,895.6 (20.3)% 3,526.3 2,711.1 (23.1)%

Livestock breeding 7,167.6 37,563.1 424.1% 1,240.2 12,703.8 924.3% 875.3 6,381.3 629.0%

Migrant labor revenue 3,530.2 4,589.0 30.0% 4,273.6 7,974.1 86.6% 4,220.0 10,040.7 137.9%

Transport service 518.8 1,415.4 172.8% 490.7 714.7 45.6% 396.4 728.7 83.8%

Business service 387.6 962.0 148.2% 312.3 6,047.4 1,836.4% 743.3 3,686.2 395.9%

Other revenue 2,868.3 11,699.1 307.9% 905.6 3,548.9 291.9% 1,982.0 3,161.2 59.5%

Per capita net income (CNY) 5,283.8 11,391.2 115.6% 3,958.3 8,912.4 125.2% 5,750.8 6,735.0 17.1%

( ) = negative, CNY = Chinese yuan, HH = household. Source: Baseline and follow-up surveys by the Shanxi project management office in 2010 and 2016.

66 Appendix 11

6. Target beneficiaries’ achievements. The project was implemented in the same area as planned during the project preparation stage. The originally targeted number of beneficiary households (estimated at project appraisal) was 65,180. During the midterm review, the Asian Development Bank (ADB) approved a change in the project scope—the total number of target beneficiary households was adjusted to 48,040—because of the falling exchange rate, market changes, and changes in farmers’ own intentions. At project completion, the number of beneficiary households was 39,829, accounting for about 83% of the target adjusted during the midterm review (Table A11.5).

7. The investments in livestock breeding benefited 9,218 households; the accumulated investments in production bases for special, efficient, and advantageous agricultural products benefited 21,106 farmer households; and the accumulated investments for highly efficient facility-assisted agricultural production bases benefited 9,282 farmer households.

8. Local employment created. A large number of jobs were created during the project’s construction and operating periods. The target had been to create 150,000 employment and the gender action plan requied 40% of employment going to women. The project provided a total of 107,038 jobs. It is estimated that women accounted for 47.39% of that employment and poor laborers accounted for more than 33% (Table A11.4). Employment and labor standards were complied with.

Table A11.4: Job Opportunities Created by the Project Components

Work Days Added Annually ('000)

Jobs Created by the Project

in 6 years (no.)

1.Subtotal of livestock production 1,629.60 32,592 1.1 Sow production 192.2 3,844 1.2 Fattening of pigs 433.8 8,676 1.3 Cow production 199.5 3,990 1.4 Beef cattle 271.2 5,424 1.5 Raising of broiler chickens 123.5 2,470 1.6 Raising of layer chickens 179.1 3,582 1.7 Mutton sheep 172.4 3,448 1.8 Cashmere goats 57.9 1,158

2. Subtotal of perennial crops 1,414.1 28,282 2.1 Walnuts in flat areas 86.5 1,730 2.2 Walnuts in hilly areas 977.3 19,546 2.3 Table-quality apples 100.0 2,000 2.4 Apples for processing 50.0 1,000 2.5 Crispy pears 29.6 592 2.6 Chinese dates (D) 37.2 744 2.7 Chinese dates (S) 43.7 874 2.8 Prickly ash 22.4 448 2.9 Asparagus 4.9 98 2.10 Poplar plantations 30.2 604 2.11 Chinese medicinal herbs 32.3 646

3. Subtotal of annual crops 2,308.2 46,164 3.1 Vegetables in sunshine greenhouses (F) 742.5 14,850 3.2 Vegetables in sunshine greenhouses (H) 277.0 5,540

3.3 Vegetables in arch-canopy greenhouses 929.4 18,588 3.4 Lotus roots 320.9 6,418 3.5 Yellow millet 38.4 768

Total 5,351.9 107,038

D = dense planting, F = flat area, H = hilly area, S = sparse planting. Note: One job equals 300 workdays. Source: Shanxi project management office.

Appendix 11 67

C. Implementation Performance and Results 9. Land use and resettlement. The project did not require land acquisition and resettlement and was classified category C. The expansion of agricultural production and processing was on existing lands or lands belonging to the project beneficiaries.

10. Ethnic minorities. It was confirmed that no ethnic minority communities reside in the project area. Thus, the project was category C on indigenous people. Only very few populations with ethnic minority backgrounds who live in the project area after marriage or migration for work took part in the project activities. 11. Consultation, participation, and training. The project engaged a big number of rural households to participate in the agricultural investment activities. All households involved were consulted during project preparation and implementation. The success of the project highly depended on the effective participation of households. No constraint was placed on the poor and vulnerable farmers to participate in project activities.

12. As for training, 39,829 households were trained in agricultural skills and technique demonstration; 328 households were trained to install drip-irrigation systems in four target counties; 6,500 households participated in training for water-saving subprojects. Five pilot farmers’ associations were strengthened through training, and have been operating smoothly. 13. Key social targets. Socioeconomic targets set down in the design and monitoring framework, project administration manual, and other relevant project documents were generally met successfully. 14. Institutional arrangement. Provincial, municipal, and county PMOs were established to implement the project. Coordination and cooperation between PMOs, government departments, and participating farmer households went smoothly and contributed to the success of the project. Sufficient full-time and part-time staff were engaged to prepare and implement the project. Female staff accounted for more than one-third of the total staff and played very important roles in many aspects, particularly on women’s mobilization, consultation, and participation in the project. Training and study tours to similar projects were organized to strengthen their capacity. However, during implementation, the frequent turnover of personnel brought some difficulties to the assignments under the project. Lack of social focal staff and social development consultant(s) during implementation was a disadvantage. 15. Loan covenants. ADB loan covenants on social safeguards and social developments were complied with during implementation. 16. Monitoring and evaluation. During implementation, the project performance monitoring system was established in line with the project administration manual, but it was found to be relatively weak in establishing clear indicators and periodic monitoring on poverty reduction, gender, and social development. Meanwhile, no external social monitor or specialist was recruited by the Shanxi PMO to monitor and evaluate the social and poverty impacts of the project. In the progress reports submitted by the Shanxi PMO, social dimensions were also not paid adequate attentions.

68 Appendix 11

D. Conclusions and Lessons 17. The project has contributed greatly to sustainable socioeconomic development and poverty reduction in the project area of Shanxi Province, because (i) it was clearly targeted to the poor in rural areas and tackled the core causes of income poverty by providing finance for high-value farming, agro-processing, product quality and safety, environmentally sustainable farm practices through water-saving irrigation techniques, microfinance to poor women, and capacity building for farmers and technical support agencies; (ii) the participatory project management boosted farmers’ ownership of the project and promoted efficiency and transparency; and (iii) timely adjustment of the scope of project and subprojects in response to market changes ensured that the project was implemented in line with the region’s rapid socioeconomic development.

18. However, given the complex project design and large number of subprojects and beneficiary rural households, the monitoring and evaluation of social benefits should have been conducted more regularly during implementation to provide timely feedback for better project administration and subsequent evaluation.

Table A11.5: Achievement of Project Target Beneficiaries No

Counties

Components

Activities

Target at Project

Appraisal (no. of HHs)

Adjustment at Midterm

Review

(no. of HHs)

Actual at Project

Completion (no. of HHs)

Achieve-ment Rate

(%)

Jinzhong Municipality

1 Taigu

Livestock Mutton sheep 117 117 100.00

Annual crops

Vegetables in sunshine greenhouses (F)

500 550 550 100.00

Vegetables in arch-canopy greenhouses

1,350 990 801 80.91

agricultural products process company

Xintai Food Processing Company

4,800 0

0 N/A

2 Qi Xian

Livestock Beef cattle 480 35 35 100.00

Annual crops


1,035 500 48.31


2,720 2,456 3,382 137.70

3 Pingyao

Perennial crops

Crispy pears 190 150 0 0.00

Livestock Layer chickens 45 44 182 413.64 Broiler chickens 165 156 44 28.21

Support to agro-enterprise

Longlang Fruit Storage Company

1,600 0 0 N/A

4 Yuchi Annual crops


340 340 152 44.71

Vegetables in sunshine greenhouses (H)

360 360 159 44.17


300 23 7.67

Livestock Pig fattening 490 379 469 123.75

Appendix 11 69

Sow production 70 0 0 N/A

Mutton sheep 109 305 279.82 Shanxi Zeqin Livestock Raising Company

2,900

0 N/A

Changzi Municipality

5 Qin Xian (p)

Annual crops Yellow millet 2,280 2,082 120 5.76

Livestock Beef cattle 270 248 269 108.47 Cow production 530 486 394 81.07

Pig fattening 229 N/A Support to agro-enterprise

Qinzhou Yellow Millet Company

3,280 0 N/A

6 Pingshun (p)

Perennial crops

Walnuts in hilly areas

840 2,043 1,081 52.91

Prickly ash 2,260 2,319 890 38.38

Annual crops Vegetables in sunshine greenhouses (H)

0 211 N/A

7 Licheng

Annual crops Vegetables in sunshine greenhouses (F)

0 79 N/A

Perennial crops


3,000 3,000 2,772 92.40

Livestock Pig fattening 220 290 170 58.62 Mutton sheep 200 0 0 N/A

Luliang Municipality

8 Zhongyang (p)

Perennial crops


2,490 2,283 2,030 88.92

Livestock Beef cattle 180 201 201 100.00 Sow production 260 175 175 100.00

9 Jiaokou (p)

Perennial crops

Walnuts in flat areas

2,000 1,239 1,038 83.78

Livestock Layer chickens 75 69 78 113.04 Fattening pigs 250 299 295 98.66

10 Lishi (p)

Perennial crops


5,440 4,201 4,066 96.79

Annual crops

Vegetables in sunshine greenhouses (H)）

300 270

270 100.00

11 Jiaocheng

Annual crops Vegetables in sunshine greenhouses (H)

320 100 100 100.00


Cow production 870 983 885 90.03

12 Wenshui

Perennial crops

Crispy pears 570 180 180 100.00

Reservoir co-constructed by farmers

40 0 0 N/A

Livestock Beef cattle 400 367 386 105.18 Broiler chickens 30 71 51 71.83

13 Liulin (p)

Annual crops


550 467 334 71.52

Vegetables in archcanopy greenhouses

580 485 241 49.69

Livestock

Sow production 120 120 180 150.00

Pig fattening 250 250 316 126.40 Cow production 50 50 51 102.00

Beef cattle 70 70 80 114.29

70 Appendix 11

Linfen Municipality

14 Fenxi (p) Livestock Broiler chickens 204 192 94.12 Perennial crops


4,020 630 630 100.00

15 Hongdong

Perennial crops

Chinese dates (D)

1,590 531 406 76.46

Asparagus 450 246 246 100.00

Annual crops


550 610 110.91

Lotus roots 390 181 46.41


Pig fattening 440 140 140 100.00

16

Xiangfen

Perennial crops

Chinese dates (D)

1,110 0 0 N/A

Table-quality apples

1,500 0 0 N/A

Annual crops


450 398 88.44

Lotus roots 411 256 62.29

17 Development Zone


400 319 40 12.54


18 Houma

Perennial crops

Asparagus 2,490 80 80 100.00

Livestock Beef cattle 150 120 80.00 Mutton sheep 272 272 100.00

Sow production 640 386 386 100.00

19 Daning (p)

Perennial crops


1,200 859 242 28.17

Chinese dates (S)

585 0 0 N/A

Livestock Sow production 490 142 162 114.08

Mutton sheep 390 755 623 82.52

20 Yonghe (p) Perennial crops


750 750 667 88.93

Chinese dates (S)

1,230 200 200 100.00

Date-drying units

100 273 223 81.68

Livestock Cashmere goats 250 229 235 102.62

21 Xixian (p)

Perennial crops


900 900 700 77.78

Crispy pears 615 605 805 133.06

Annual crops


200 200 100.00


34 N/A

Livestock Cashmere goats 220 168 489 291.07 Sow production 165 N/A

Yuncheng Municipality

22 Yanhu Perennial crops

Poplar plantations

2,850 724 724 100.00


400 354 88.50

Chinese medicinal herbs

930 594 593 99.83

Appendix 11 71

% = percent, D = dense planting, F = flat area, H = hilly area, HH = household, N/A = not applicable, S = sparse planting. a The total HH number is less than the sum of HHs under each activity because a few beneficiaries possibly benefited from

multiple activities. Source: Shanxi project management office.


463 428 92.44

23 Yongji

Perennial crops

Apples for processing

2,250 1,110 1,110 100.00


285 213 74.74

Livestock Broiler chickens 110 110 112 101.82

24 Linyi

Perennial crops

Chinese dates (D)

720 836 967 115.64


720 548 777 141.72

Livestock Pig fattening 170 170 650 382.4 Mutton sheep 120 120 574 478.30

25 Jinshan Perennial crops

Chinese dates (S)

1,320 1,210 467 38.60

Livestock Layer chickens 320 293 280 95.56

26 Wanrong (p)

Perennial crops


2,600 726 420 57.85

Asparagus 600 0 0 N/A Chinese medicinal herbs

745 148 148 100.00


Layer chickens 60 152 195 128.29 Support to agro-enterprise

Huarong Fruit Co. Ltd.

3,500 0 0 N/A

Total 65,180 48,040 39,829a 83.00

72 Appendix 12

GENDER EQUALITY

A. Introduction 1. Since 1980, the People's Republic of China has achieved a significant reduction in overall poverty. Women, however, have not benefited equally because of social barriers. In the project areas, women find less employment in both on-farm and off-farm activities. They also have lower levels of education and less access to technical training and services, which might prevent them from participating in, and benefiting from, the project. Generally, women have a lower status in decision-making both at home and in the community, which might also bar them from project consultation, leaving their needs and concerns unaccounted for during project implementation. Due to inadequate resources, the All China Women’s Federation has not functioned well in each village to mobilize women and protect their interests. Finally, in many project counties, more than half of all farm households in a village are headed by women because the men migrate to seek off-farm employment. 2. The project was categorized as gender equity theme. During project preparation, a summary poverty reduction and social strategy was prepared to document the project’s impacts on poverty reduction and social dimensions. The gender action plan was developed to protect women’s rights, interests, and participation while maximizing their contribution to the project. The provincial and local project management offices were responsible for its implementation and to monitor gender-related activities and actions. B. Implementation Performance and Results

3. Gender assessment. The project promoted gender equity at various levels—from the criteria for selecting project counties, sites, and activities—e.g., criteria to ensure equal access to project funds and training opportunities—to general access to finance, opportunities to work with agro-enterprises, and pilot activities for women’s economic empowerment. These strategies were highly relevant because women are increasingly taking charge of agriculture. The planned activities were in line with achieving the project outcome and outputs, as they supported women’s access to finance, provided technical training, and increased their economic opportunities; contributed to poverty reduction (project impact); and increased agricultural production (project outcome). 4. As women are increasingly engaging in paid agricultural activities, small-scale (backyard) animal rearing or crop farming, supporting rural women to realize higher incomes is important for their overall social welfare and for reducing rural poverty. The project was designed to support such activities, and its focus on women’s involvement and their empowerment ensured the project’s overall success. Examples of how women benefited from economic empowerment are given in Appendix 7 of this project completion report. 5. Gender awareness. Training was provided to the project management office, project implementation units, and the leaders of township and village committees. Women's participation in project-related meetings and decision-making was actively encouraged, and training was provided on modern farm production technology and how to access markets to sell products. 6. Gender empowerment. A grant was provided to facilitate women’s economic empowerment in four villages of two poverty counties by (i) setting up revolving funds for microfinance; (ii) organizing self-help groups linked to existing farmer associations to ensure their access to markets and modern farm production techniques; (iii) providing training on technical,

Appendix 12 73

marketing, and alternative income-generating activities, and leadership at times and venues convenient for women; and (iv) building the capacities of county and village groups to ensure sustainability of women’s empowerment activities. Results and impact of the grant are in Appendix 7.

7. Employment. A large number of jobs were created during the project’s construction and operating periods. The target was to create 150,000 jobs, including 65% for women. The project provided 107,038 jobs. It is estimated that women accounted for 47.39% of that employment and poor laborers accounted for more than 33% (Appendix 11, Table A11.4). 8. Project gender action plan achievements are detailed in Table A12.1.

Table A12.1 Gender Equality Activities, Targets, and Achievements Component Activities and Targets Achievements at Project

Completion

1. Provision of project loans, technical advice, training, and employment

Overall promotion of gender awareness

Training will be provided to the PMOs and PIUs, financial and technical service agencies, and leaders of township governments and village committees to increase gender awareness. Women will be informed about opportunities to access project loan funds, technical advice and training, information, and employment.

460 person-timesa of training were provided to PMOs and PIUs, which included project implementation, monitoring, participatory approaches, and gender awareness. Activity was completed.

Employment and loan opportunities

Women will have equal access to project subloans, and will be able to sign subloan agreements without a male cosignatory. Employment opportunities will be made equally accessible to both women and men, but women will receive at least a 40% share of total employment. This is one of the conditions for the agro-enterprises to receive a project loan. The Gender and Development Cooperation Fund will set up revolving funds to provide microfinance to women groups in four villages of two poverty counties.

The project provided over 107,038 employment opportunities, of which 47.39% was taken up by women. 20 women's groups were set up and trained as microcredit co-guarantee groups and cooperatives; $86,000 in microfinance was provided to 4 target villages, 117 HH benefited, and 294 women were trained. This activity was fully completed and successfully achieved.

Technical advice and training

The training programs will have a gender-sensitive curriculum, and women will have equal access to all training programs. Qualified women will be encouraged to become farmer trainers and participate in demonstration activities. At least 40% of the training opportunities will be provided to women.

20 person-months of experts for women’s economic empowerment were provided. 7,932 person-months of training provided, e.g., on technical issues, participatory approaches, and gender awareness; more than 50% of training opportunities were for women. This activity was successfully achieved.

2. Institutional development for women’s participation

Increased representation of women

Women will elect their own representatives for village councils to ensure consultation and participation of women during project implementation. The PMO will monitor women’s participation.

100% of 20 women’s economic empowerment groups elected their own representatives.

74 Appendix 12

Component Activities and Targets Achievements at Project Completion

Women will represent and participate in all project-relevant decision-making processes.

This activity was successfully achieved.

Increased role of ACWF in villages

ACWF will be part of the project leading group. ACWF chapters in participating villages and counties will receive training in mobilization, facilitation, and monitoring. ACWF will monitor representation, communication and participation, and accrual of project benefits to women, especially to poor households and those headed by women.

ACWF was a member of the county and village project leading groups. This activity was successfully achieved.

3. Project management and implementation support

Sex- disaggregated baseline survey and M&E

(i) Gender-sensitive indicators will be included in the project M&E system, especially in areas such as access to technical advice and training, employment and income, and women’s representation in decision-making. (ii) The PMO will periodically monitor the indicators, and ACWF and women’s representatives in the villages will undertake participatory M&E annually.

Sex-disaggregated data is available for training and participation. PMO conducted regular monitoring and reporting in line with the project agreement. This activity was completed; however, more gender-sensitive indicators could have been included in the project design to fully capture the benefits of the project.

ACWF = All China Women's Federation, HH = household, M&E = monitoring and evaluation, PIU = project implementation unit, PMO = project management office. a Person-times are the number of people who have attended a training event. Source: Asian Development Bank. C. Conclusions and Lessons 9. Gender equity. In the project areas, women are primarily responsible for household work and farming activities, while many male laborers mainly work off the farm as migrant laborers. The project provided women with (i) needs-based training to adopt modern farm production technology and gain access to markets; and (ii) proportionate assistance from project activities, especially from subloans. The project created 107,038 jobs, including 47.39% for women. Of the participants of training to enhance farmers’ technical knowledge, more than half are estimated to have been for women. The project also enhanced women’s access to economic opportunities through an associated grant (Appendix 7). In general, women who remain in the villages have actively participated in the project, and women comprised majority of the project beneficiaries. More than 50% of training participants during project implementation were estimated to be women, thereby improving their skills, income, and social status. New job opportunities also have enabled women to gain skills and income. Having an additional income earner in families helped lift many households out of poverty and increased women’s status within their households and communities. 10. The gender design was relevant to the project’s impact, outcome, and outputs as designed. The activities and strategies implemented in the project were effective in that the project was able to meet its stated objectives because it clearly targeted not only the poor but also had a strong gender element. This can be seen in the over-achievement of indicator targets for women’s participation, training, and employment. Successful elements of the project are being scaled up and continue to be implemented in the province, even though the project has closed. Most notable is the associated grant project (Appendix 7), since these pilot activities continue to function and

Appendix 12 75

have proven highly successful in boosting both women’s economic position and their empowerment. 11. Although significant achievements were made, monitoring and evaluation of the project’s achievements could have included more sex-disaggregated data and been conducted more regularly during implementation to provide timely feedback for better project administration and subsequent evaluation.

Completion Report - Asian Development Bank · Team members E. Arcillas, Senior Operations...

Documents

Transcript of Completion Report - Asian Development Bank · Team members E. Arcillas, Senior Operations...