China, People's Republic of: Forestry and Ecological Restoration Project in Three Northwest Provinces

Sovereign Project | 40684-013

Summary

To support the national and provincial government development policies and plans, the project will help the State Forestry Administration and the Gansu, Shaanxi, and Xinjiang provincial governments improve the productivity of the forestry sector, demonstrate an integrated ecosystem management forest-development approach, and introduce forest carbon-sequestration and climate change-mitigation measures. The Asian Development Bank (ADB) provided project preparatory technical assistance ($800,000, approved in December 2007). Key outputs of the project will include (i) economic tree crops development on about 38,000 hectares (ha) of barren and low-yielding forest lands that will benefit about 207,000 households, (ii) ecological or natural forestry development on about 300,000 ha, including replanting of about 4,500 ha, and (iii) project management support.

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Project Name Forestry and Ecological Restoration Project in Three Northwest Provinces
Project Number 40684-013
Country China, People's Republic of
Project Status Approved
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Grant 0250-PRC: Forestry and Ecological Restoration in Three Northwest Provinces Project (former names: (i) Ecosystem Restoration in Three Northwest Provinces (ii) Silk Road Ecosystem Restoration
Global Environment Facility US$ 5.10 million
Loan 2744-PRC: Forestry and Ecological Restoration in Three Northwest Provinces Project (former names: (i) Ecosystem Restoration in Three Northwest Provinces (ii) Silk Road Ecosystem Restoration
Ordinary capital resources US$ 100.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Partnerships
Sector / Subsector Agriculture, natural resources and rural development - Agricultural production - Forestry
Gender Equity and Mainstreaming Some gender elements
Description To support the national and provincial government development policies and plans, the project will help the State Forestry Administration and the Gansu, Shaanxi, and Xinjiang provincial governments improve the productivity of the forestry sector, demonstrate an integrated ecosystem management forest-development approach, and introduce forest carbon-sequestration and climate change-mitigation measures. The Asian Development Bank (ADB) provided project preparatory technical assistance ($800,000, approved in December 2007). Key outputs of the project will include (i) economic tree crops development on about 38,000 hectares (ha) of barren and low-yielding forest lands that will benefit about 207,000 households, (ii) ecological or natural forestry development on about 300,000 ha, including replanting of about 4,500 ha, and (iii) project management support.
Project Rationale and Linkage to Country/Regional Strategy

The rapid development of the PRC through agricultural expansion, industrialization, and urbanization is attributed to the initial impetus from land reforms and the resulting increase in agriculture output and productivity. As the rural economy transitioned from the centrally planned collective and commune systems to market-based management with price and profit incentives and improved property rights, infrastructure and financial services significantly raised income levels and reduced poverty. Rural poverty still persists for a range of reasons, including the small fragmented nature of land plots and the significant influence of the forest sector and the forest lands under its purview. Forest resource management was transferred from the private sector into collectives during 1950 1956, and from 1988 there has been an ongoing movement toward increased integration with market-based decision making through the allocation of forest user certificates to contracted households.

The total forest area in the PRC is about 175 million hectares (ha) and it supports a standing tree stock volume of about 13.6 billion cubic meters (m3). On a per capita basis, the PRC falls far below international standards, with a per capita forest area of about 0.13 ha compared with the international average of about 0.65 ha per capita. The standing stock volume of 10 m3 per capita compares to a global average of 66 m3. The PRC is a net importer of timber products. Land classified as forest land accounts for 285 million ha; however, only 60% or 169 million ha is forested. Forest land is typically of three types in the PRC: (i) ecological or natural forests, (ii) timber plantations, and (iii) economic tree crops comprising fruit and nut orchards. Of the forest land, 115.8 million ha (66%) is natural forest and 53.3 million ha (34%) is plantation forestry (timber and economic tree crops). The extent of forest located on nonforest land is only 6 million ha. The area of degraded and barren forest land totals about 116 million ha and has mostly been left out of the modernization of the rural PRC that focused on agricultural land. Within the western PRC, most of this land still supports traditional low-yielding and low-value cropping systems built around wheat and corn rotations, or is steep gully sidings and desert periphery that are barren or wastelands. The scale of the forest sector has continued to grow, with the forest cover increasing from less than 9% in 1949 to about 18% in 2007. This growth in forest cover has averaged about 4 million ha per year since 2000 and is in direct contrast with the global average of progressive forest cover loss, amounting to nearly 7.3 million ha per year over the same period. However, this impressive expansion of forest cover does not reveal the current low quality of forest structure, including the thin forest density and lack of biodiversity in the PRC forests. The sector target for forest cover is expected to reach 20% by 2010 with a further increase to 23% by 2020, requiring an additional 29 million ha to be forested during the project period through 2020. The project will contribute less than 1% of the proposed policy target. Within the rural landscape, the forestry sector has lagged behind in reforms and has been slow to respond to market-oriented policy priorities. Policy analyses demonstrate the need for reform with basically two categories of issues: (i) management of publicly owned forests, and (ii) the role of government in guiding managers of privately operated forest land and forest enterprises to support sector growth.

The drylands of the western PRC cover about 40% of the country and contain some of the most severely degraded land in the world. The proposed project area covers about 165,000 square kilometers (km2), incorporating 18 districts and 55 counties selected from some of the worst-affected and poorer parts of Gansu, Shaanxi, and Xinjiang provinces. This area includes three distinct ecological zones: the loess plateau, the central mountain region, and the oases in Xinjiang. The ancient Silk Road ran through this area, starting near Xian and running northwest through Gansu and Xinjiang. The loess plateau in the PRC is characterized by fine, wind-blown soil that is very deep (up to about 200 meters in places) and highly prone to erosion. Much of the area of eastern Gansu and Shaanxi lies on the loess plateau. Agriculture is predominantly rain fed, producing relatively low-value and low-yielding annual crops, such as wheat and corn. The central mountain region includes the Qian mountains in Xinjiang, the Qilian mountains in Gansu, and the Qinling mountains in Shaanxi. It contains several nature and forest reserves that provide important habitats for endangered and protected species. The third zone, the desert oases in Xinjiang, is home to the majority of rural people and agricultural activities, but makes up only 4% of Xinjiang's territory. The oases require irrigation for agriculture and their desert climate features harsh winters and summers of extreme heat and high winds. To improve economic prospects and living conditions in this region, the establishment of shelter belts to prevent the shifting of the desert sands, and the construction of water management infrastructure (e.g., canals, wells, and high-efficiency irrigation), are vital. Oasis farming of grapes, melons, cotton, and wheat forms the core of local agricultural activities.

Between 1980 and 2006, the combined population of Gansu, Shaanxi, and Xinjiang increased from about 60 million to about 84 million, or by about 40%. The population of ethnic minorities therein grew from about 9.2 million to about 15.2 million, or by about 65%, over the same period. Land degradation is a critical environmental problem in all three project areas, seriously affecting about 274,600 km2 of land in Gansu (about 65% of its total area), about 30,000 km2 in Shaanxi (about 14.5% of the province), and about 1.1 million km2 of Xinjiang (about 64% of the total area). The economic cost of land degradation is estimated at about CNY3.1 billion in Gansu (about 15.9% of provincial gross domestic product), and about CNY11.6 billion in Shaanxi (about 3.6% of provincial gross domestic product). About 64% of the population in the three provinces lives in rural areas. In 2006, the average annual urban income in the project area was CNY9,103 ($1,097 equivalent), while the average annual per capita rural income was only CNY2,377 ($286), less than the poverty line defined as $1.25 per day. While there is greater reliance on agriculture in Xinjiang, the rate of growth in agriculture is lower because of the limited access to markets, poorer natural resource endowments (especially water), and a lack of essential infrastructure.

The key problems affecting the project area include (i) low forest land productivity and sustainability; (ii) land degradation and diminishing returns from traditional management practices and inputs; (iii) vulnerability of households to price fluctuations and natural disasters; and (iv) lack of adequate working capital and long-term financing for households, enterprises, and state forest farms (SFFs). Farming on degraded and barren land and steeply sloping land with low-yielding and unsustainable grain crops has become common because of the combined effect of population expansion and poor regulation.

Impact Improved incomes and sustainable livelihoods from the use of forest land in Gansu, Shaanxi, and Xinjiang
Project Outcome
Description of Outcome Increased productivity of forest lands and reduced land degradation in Gansu, Shaanxi, and Xinjiang.
Progress Toward Outcome

As of September 2014, 37,952.4 ha of economic forests have been planted, with the weighed implementation progress at 89.29% total of task in economic forest planting.

As of September 2014, 43,13.63 ha of ecological forests have been planted, with a weighed implementation progress of 82.26% of total tasks in ecological forest planting.

Forest cover and tree density increased by about 3.2% in Gansu; 1.7% in Shaanxi; .4% in Xinjiang.

Degraded forest land reduced by about 147,000 ha in Gansu; Shaanxi (TBD); 30,000 ha in Xinjiang

Implementation Progress
Description of Project Outputs

Mainstreamed IEM approaches applied to economic tree crop development

Mainstreamed IEM approaches applied to ecological forestry development

Project management support strengthened to implement forest sector reforms using IEM approaches in the provinces, counties, towns, and households

Status of Implementation Progress (Outputs, Activities, and Issues)

About 37,952.4 ha achieved by September 2014

About 118,000 households (57%) achieved by September 2014

Gansu: 0; Xinjiang: all 17 enterprises have dropped out

2,084 ha in Gansu restored as of June 2014.

Not yet started

Not yet started

695 ha in Gansu restored

296 ha in Xinjiang restored

To be updated at midterm

About 72,991 households received training in IEM as of June 2014

All PPMOs and CPMOs established

Geographical Location Gansu, Shaanxi, and Xinjiang provinces
Safeguard Categories
Environment B
Involuntary Resettlement C
Indigenous Peoples A
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design The local governments and project preparatory TA (PPTA) consultants conducted workshops, questionnaire surveys, and interviews to collect views and concerns from the State Forestry Administration (SFA, the executing agency [EA]), the participating provinces, enterprises, and potential beneficiaries. During the preparation of the initial environmental examination (IEE), the local governments, enterprises, and PPTA consultants also held consultations with local farmers on the concerns over the proposed Project.
During Project Implementation Public consultation and participation of IAs, households, enterprises, SFFs, CFBs, FS, and other stakeholders, which have been key elements of the project design, will continue during the project implementation to (i) meet the evolving needs and expectations of the beneficiaries, (ii) increase public awareness about the benefits of the Project, and (iii) encourage active involvement of local communities and enterprises to maximize their support for the Project. Stakeholder participation and consultation will be carried out during the preparation of environmental and social reports, project impacts and benefit assessments, and the Government's and ADB's review missions. Participating enterprises, local farmers, and local government agencies will be invited to the consultations.
Business Opportunities
Consulting Services Consulting services will support the implementation of the ecological forestry component, including (i) assistance to the ecological forestry center and the Carbon Readiness and Education in Shaanxi, with the use if GEF financing; and (ii) training in Gansu and Xinjiang for pest identification, use of pesticides, and integrated pest management, which will be financed by loan and counterpart funds. The ecological forestry center will be supported with 7 months of international consulting services and 18 months of national consulting services to help the SFFs establish new business plans and identify suitable private investors, and provide assistance to the provincial project management office to design and test a negotiating framework that will assist the Shaanxi forestry department and the SFFs to negotiate payments for ecological services, and meet the criteria to enter into a suitable international carbon market. Recruitment will be through the individual consultant selection method. This method will enable the effective recruitment of highly qualified experts in these areas and is considered the most cost-effective method for the small number of consultants required. The Carbon Readiness and Education component will be supported by a national consulting firm, which will be recruited using the quality- and cost-based selection method (80:20) with simplified technical proposals. Recruitment is limited to national consulting firms because only national firms are qualified to conduct the required training. Detailed design will be carried out by carbon forestry assessment and audit experts. Training institutes will be engaged following a single-source selection method due to the limited resource persons providing training services in the provinces. In addition, contract amounts are very small at $100,000 or less per contract, that consulting firms may not express interest in participating. This method will enable the most timely, efficient, effective, and low-cost implementation of the training component. All recruitment will be carried out following ADB's Guidelines on the Use of Consultants (April 2010, as amended from time to time).
Procurement All procurement of goods and works will be carried out in accordance with ADB's Procurement Guidelines (April 2010, as amended from time to time). Contracts for goods estimated to exceed or equal to $1 million and contracts for works estimated to exceed or equal to $10 million will be procured using international competitive bidding procedures. Contracts for goods and works estimated to cost less than the international competitive bidding values but more than $100,000 for goods and $200,000 for works, will be procured through national competitive bidding procedures in accordance with the PRC Tendering and Bidding Law, 1999, subject to modifications agreed with ADB. Force account will be established for the planting inputs and labor for the economic tree crops and ecological forestry component. Contracts for goods estimated to cost $100,000 and less, and works estimated to cost $200,000 or less will be procured using shopping procedures. The relevant sections of ADB's Anticorruption Policy (1998, as amended to date) will be included in all procurement documents and contracts.
Responsible ADB Officer Frank Radstake
Responsible ADB Department East Asia Department
Responsible ADB Division Environment, Natural Resources & Agriculture Division, EARD
Executing Agencies
Government of Xinjiang Uygur Autonomous RegionPlanning & Budget Div.,Construction Bur.
No. 462 Zhongshan Road, Urumqi
Xinjiang Uygur Autonomous Region, PRC
Shaanxi Provincial GovernmentABO@SEIN.SXGB.COM.CNNo. 2 Dongxie 4th Road,
Nan Er-huan, Xian 710054
People's Republic of China
State Forestry AdministrationZWD009GEF@OP12.CNRoom 428, Building 22, Debao Xinyuan
Xicheng District, Beijing 100044
People's Rep of China
Gansu Provincial GovernmentNo. 136 Jinning Road
Lanzhou City, Gansu Province
People's Republic of China
Timetable
Concept Clearance 04 Jun 2009
Fact Finding 04 Jun 2009 to 16 Jun 2009
MRM 28 Jan 2010
Approval 29 Mar 2011
Last Review Mission -
PDS Creation Date 16 Jul 2009
Last PDS Update 18 Mar 2015

Grant 0250-PRC

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
29 Mar 2011 03 Jun 2011 22 Sep 2011 30 Sep 2016 - -
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 5.10 Cumulative Contract Awards
ADB 0.00 29 Mar 2011 0.00 0.71 14%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 5.10 29 Mar 2011 0.00 0.95 19%

Loan 2744-PRC

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
29 Mar 2011 03 Jun 2011 29 Sep 2011 31 Mar 2017 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 175.59 Cumulative Contract Awards
ADB 100.00 29 Mar 2011 62.47 0.00 62%
Counterpart 75.59 Cumulative Disbursements
Cofinancing 0.00 29 Mar 2011 51.09 0.00 51%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating - - - - - Satisfactory

Evaluation Documents

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