PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: PIDA26668 Public Disclosure Copy Project Name Poverty Alleviation and Agriculture-based Industry Pilot and Demonstration in Poor Areas Project (P133326) Region EAST ASIA AND PACIFIC Country China Sector(s) Crops (45%), Irrigation and drainage (5%), Animal production (35%), Agro-industry, marketing, and trade (5%), Agricultural extension and research (10%) Theme(s) Rural markets (40%), Rural services and infrastructure (40%), Rural policies and institutions (20%) Lending Instrument Investment Project Financing Project ID P133326 Borrower(s) People's Republic of China Implementing Agency State Council Leading Group of Poverty Alleviation and Devlpt, Int'l Poverty Reduction Ctr in China Environmental Category B-Partial Assessment Date PID Prepared/Updated 14-May-2015 Date PID Approved/Disclosed 27-Nov-2014, 21-May-2015 Estimated Date of Appraisal 28-Nov-2014 Completion Public Disclosure Copy Estimated Date of Board 23-Jun-2015 Approval Appraisal Review Decision This PID is recommended for CD review and approval. (from Decision Note) I. Project Context Country Context Over the past 35 years, China??s economic transformation and success in poverty reduction have been remarkable. In the 1980s, de-collectivization marked the beginning of the economic reform period in rural areas. The introduction of the Household Responsibility System that created a rural property system under which use rights to farmland were allocated to individual households for long-term management stimulated extraordinary agricultural and rural growth and became the most important a driver of poverty reduction during the first decade of the reform period. In the 1990s, domestic market reforms and China??s gradual integration into the global economy, along with investment and abundant labor supply, provided the driving force for China??s industrialization, export-led growth, and urbanization. These developments combined have allowed some 500 million farmers to escape poverty and some 260 million rural migrants to transition out of agriculture to more productive activities in the industry and services sectors. China??s urbanization Page 1 of 6 rate rose from 20 percent in 1980 to 50 percent in 2010, and per capita income grew from US$222 in 1980 to US$3,588 in 2013. Public Disclosure Copy Rural poverty, however, remains a development challenge in China. Measured by China??s national poverty line of RMB2,300/ year (US$377/ year), there were 128 million poor people in China in 2011, the majority of which are residing in rural areas . Poverty remains more pervasive and persistent in the western and inland provinces as compared to the more advanced coastal regions. Rural-urban disparity is high and large segments of the rural migrant population lack access to adequate social public services in the urban areas they have migrated to and potentially are vulnerable of falling back into poverty. As China??s urbanization and rural-to-urban migration continue, complex new questions and issues concerning further poverty poverty reduction and shared prosperity have arisen. These revolve around the modernization of the agriculture sector, growth in agricultural productivity and rural farm income, the modernization of rural institutions, the protection of land and property rights, the harmonization of rural and urban social security systems, food security and environmental sustainability. Sectoral and institutional Context Agriculture is a key sector and entry point for rural development, poverty reduction, and long-term employment and income opportunities in China??s rural areas, especially for those segments of the population that will not migrate but will remain engaged and dependent on agriculture. China's agriculture sector policies and its poverty reduction strategy, the Outline for Development-oriented Poverty Reduction for China??s Rural Areas (2011-2020), released in 2011, complement each other in that they both seek to capitalize on the agriculture potential to stimulate further rural transformation and modernization towards reducing rural-urban inequality. In particular, this potential includes the following: recent improvements in transportation infrastructure across the country provide new opportunities for agriculture development through Public Disclosure Copy better access to growing urban consumer markets. Changing consumer patterns create new value chain opportunities that allows shifting away from basic commodity production to product diversification and higher value products that meet demand of China's expanding urban population. There is a clear recognition that better functioning rural land markets are needed to promote land transfers for land consolidation and protect farmers?? rights at the same time. A renewed and strengthened regulatory and policy framework explicitly supports the establishment of farmer cooperatives to overcome the structural challenges of small farm size and scattered production in rural areas. And there is also a vibrant private commercial enterprise sector that can outreach and provide new technology to increase productivity in backward areas and assist in marketing of agricultural products to downstream consumers. These opportunities, however, remain largely untapped. Particularly in the remoter mountain areas of China, agricultural production remains characterized by poorly and scattered production because of the large numbers of unorganized household farms, low technology and management standards, limited access to capital for private investments, lack of marketing and price information, sub- standard product quality, and often a lack of a critical mass of production to attract investments in up-stream processing and marketing. Furthermore, local governments tend to take on roles and responsibilities in economic decision making that should be market-driven and are better placed in the hands of private farmer entrepreneurs and enterprises. Page 2 of 6 The Outline for Development-oriented Poverty Reduction for China??s Rural Areas (2011-2020), the recent poverty reduction strategy, takes the above mentioned challenges fully into account and provides a renewed direction for addressing rural poverty. While it aims to eliminate remaining Public Disclosure Copy hunger and elementary needs by 2020 and promotes the convergence of human development indicators and public services coverage across rural and urban areas, it also seeks to achieve a growth rate in rural per-capita income that is above the national average. It envisages the use of pro-poor value chains to capture opportunities arising from China??s growing domestic urban market and emphasizes the complementary roles of the public and the private sectors. To achieve this, it explicitly invites agribusinesses to invest and focus on economic activities of comparative advantage in poor areas while being conducive to environmental rehabilitation. These activities include major agricultural commodities, specialty products and tourism. The Outline also encourages the development of diversified farmer organizations such as farmer professional cooperatives. China??s legal framework on these cooperatives was recently strengthened, confirming that modernization of agriculture through cooperatives fully applies to poverty reduction programs (2014). Before that, farmer organizations supported under these programs had mostly been limited to small-scale mutual fu nds. China??s new poverty strategy also refines the current system of geographical targeting of designated national poverty counties and villages. To promote a broader regional development approach to poverty reduction and rural development, the Outline introduced the concept of ? ¡ãadjacent destitute mountain areas?¡À of which 14 have been prioritized for comprehensive regional development investments. Of these, the proposed project is targeting the Wumeng mountains of Sichuan and Guizhou Provinces and the Liupan Mountains of Gansu Provinces. II. Proposed Development Objectives The Project Development Objective (PDO) is to develop and demonstrate rural value chains that promote equitable organizational arrangements, participation, and the sustainable increase of income of target households in the Project Provinces. Public Disclosure Copy III. Project Description Component Name Integrated Value Chain Development Comments (optional) Component Name Public Infrastructure and Services Comments (optional) Component Name Research, Training and extension Comments (optional) Component Name Project Management, Monitoring and Evaluation Comments (optional) Page 3 of 6 Public Disclosure Copy IV. Financing (in USD Million) Total Project Cost: 295.10 Total Bank Financing: 150.00 Financing Gap: 0.00 For Loans/Credits/Others Amount Borrower 145.10 International Bank for Reconstruction and Development 150.00 Total 295.10 V. Implementation Project implementation arrangements have been set up at the central, provincial municipality, and county levels and included the following: (1) National Project Coordination Office. The International Poverty Reduction Center in China (IPRCC) of the State Council??s LGOPAD will serve as the national project coordination office. IPRCC will be responsible for coordinating the three provincial-level Foreign Capital Project Management Centers (FCPMCs) of the three provincial Poverty Alleviation and Development Offices in overall project implementation and for overall project coordination with the Bank. IPRCC will also guide the overall policy dialogue on poverty reduction at the national level and the implementation of the learning and knowledge dissemination activities of the project to inform the implementation of China??s Outline for Development-oriented Poverty Reduction for China??s Rural Areas (2011-2020) ; (2) Project Leading Groups. Project Leading Groups at the provincial, municipal and county levels, comprising representatives from the reform and development commissions, finance bureaus, poverty reduction offices, auditor??s offices, civil affairs bureaus, ethnic affairs commissions, women??s federation, and other departments will provide leadership, policy guidance, and direction for project implementation within their respective jurisdictions; (c) Project Management Offices. Provincial Public Disclosure Copy Project Management Office (PMO) have been established in the provincial FCPMCs under the Poverty Alleviation and Development Offices in Gansu, Sichuan and Guizhou to be responsible for overall project coordination and management, including annual work and budget planning; coordination of municipalities and counties in public outreach, work planning, procurement, fund withdrawal and reimbursement management and financial reporting; technical and institutional aspects of implementation; general oversight, field supervision and acceptance checks; and training and capacity building. The provincial PMOs will also be responsible for overall project M&E and reporting to the Bank and will maintain and, in consultation with IPRCC contribute to the update of the PIM, as necessary (including the Financial Management Manual (FMM)). Municipal-level PMOs will provide technical guidance to counties, supervise implementation, and assist the provincial PMO in acceptance checks, and M&E. County PMOs will have the primary responsibility for project management at the local level; (d) Administrative Village Committees. Village Committees will be responsible for local public information dissemination, community mobilization, planning and implementation of public infrastructure investments assigned to the administrative village level, and coordination of any land adjustments for infrastructure construction, as needed; (e) Professional Farmer Cooperatives. Farmer cooperatives will be established as economic entities and registered under China??s Farmer Professional Cooperative Law. They will have implementation responsibility for all activities under the CDF. They will organize cooperative members; prepare the cooperative industry investment and Cooperative Page 4 of 6 Annual Investment Plans (CAIPs); and administer cooperative development funds in accordance with approved plans and project regulations; (f) Farmer Cooperative Advisors will be recruited and trained by the provincial and county PMOs to assist in the establishment and operationalization of Public Disclosure Copy new cooperatives, provide guidance to cooperatives in the formulation and implementation of productive investments and CAIPs, and assist the county PMOs in conducting acceptance checks, monitoring and reporting of cooperative activities, and complaints handling; and (g) Technical Advisory Groups. Each county will set up a technical advisory group comprising representatives from government, cooperatives, and industry-related enterprises to provide advisory services for the cooperative value chain investments VI. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 ✖ Natural Habitats OP/BP 4.04 ✖ Forests OP/BP 4.36 ✖ Pest Management OP 4.09 ✖ Physical Cultural Resources OP/BP 4.11 ✖ Indigenous Peoples OP/BP 4.10 ✖ Involuntary Resettlement OP/BP 4.12 ✖ Safety of Dams OP/BP 4.37 ✖ Projects on International Waterways OP/BP 7.50 ✖ Projects in Disputed Areas OP/BP 7.60 ✖ Comments (optional) VII. Contact point Public Disclosure Copy World Bank Contact: Ulrich K. H. M. Schmitt Title: Program Leader Tel: 5723+378 / 9 Email: uschmitt@worldbank.org Borrower/Client/Recipient Name: People's Republic of China Contact: Mr. Yao Licheng Title: Director, Int'l Dept. MOF Tel: 86-10-68552064 Email: yaolicheng@sina.com Implementing Agencies Name: State Council Leading Group of Poverty Alleviation and Devlpt, Int'l Poverty Reduction Ctr in China Contact: Mr. Zuo Changsheng Title: Director General Tel: 86-10-84419669 Email: zuochangsheng@iprcc.org.cn Page 5 of 6 VIII. For more information contact: The InfoShop The World Bank Public Disclosure Copy 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Web: http://www.worldbank.org/infoshop Public Disclosure Copy Page 6 of 6