|Project Rationale and Linkage to Country/Regional Strategy
The People's Republic of China's (PRC) gross domestic product (GDP) growth averaged 9% from 1978 to 2008, lifting about 250 million people out of poverty. Throughout the period, the agriculture sector made impressive advances in land and labor productivity, and food production. In 2006, agriculture accounted for 11.7% of the PRC's GDP, and agricultural crop land reached 157 million hectares (ha). Growth in agricultural production has enabled the country to feed more than a fifth of the world?s population from an eighth of the world?s arable land.
Despite the rapid economic growth, more than 200 million people in the PRC still live on an income of less than $1.25 per day, of whom more than 30 million people still live below the Government's rural poverty line of CNY625 ($77 equivalent) per annum. Rural and urban inequalities are increasing and threatening social stability. Farmers, in particular, have not experienced proportionate benefits from economic growth, and their standard of living is not improving at the same rates as the nonfarm population. Millions of households will still derive a livelihood from agriculture for decades to come. If rural environmental concerns and natural resources constraints are not adequately addressed, the opportunities for rural households to improve their livelihoods will gradually decrease. Rural poverty is also exacerbated by water scarcity because without adequate irrigation supplies, rural areas are often most affected by poverty. The situation is further aggravated as more than 20 million rural migrant workers have lost their jobs in the urban areas during the 2008?2009 financial crisis, and are returning to the rural areas. Raising rural incomes through sustainable rural development is one of the most pressing economic and social challenges facing the PRC.
There is also a strategic issue of food security and safety. National grain production peaked at 512 million tons in 1998, reached only 430 million tons in 2003, and crossed 500 million tons again in 2007. Although weather has played a part in the erratic grain production in recent years, other fundamental constraints exist especially related to land and water. Farm land is lost annually to urban sprawl and desertification. The country has more than 66 million ha of average- and low-yielding farmland, about 3.3 million ha of wasteland, 400 million ha of plains and grass-covered hillsides, 5.33 million ha of usable fresh water areas, and 2 million ha of coastal tidal-flat areas. The potentials of these lands are not yet fully explored for agricultural development. At the same time, the production efficiency and capability of farmers must be enhanced to meet market demands and international competition. This will require investments to modernize agricultural production through improved agricultural support services, crop diversification, adoption of better-quality and higher-yielding varieties, and better techniques for environmental management such as reforestation, integrated pest management (IPM), and production of 'nonpolluting/green food' with reduced chemical and pesticide use.
Water scarcity threatens both rural income growth and food security. Overall, the PRC is relatively water-deficient, ranking in the bottom (25%) of countries in terms of average annual water runoff per capita. The situation is worsened by uneven geographical distribution of the water resources, and irrigated agriculture is becoming important against this background. However, the efficiency and management of irrigation systems in the PRC have to be further strengthened. Both national and provincial governments have implemented numerous large irrigation and drainage projects between 1949 and 1978, and expanded the irrigated area from 16 million to 45 million ha. But weaknesses in irrigation system design, construction, operation, and maintenance have lowered their efficiency and many are in need of rehabilitation. Most irrigation systems are over 30 years old and in poor condition. Many were not designed to high standards for effective on-farm water distribution. In their present condition, these facilities are thus inefficient, water-wasting, and incapable of supporting high-productivity and market-oriented agriculture. There is an urgent need for rehabilitation and improvement. Other major problems faced by irrigation and drainage systems in the PRC include inadequate operation and maintenance (O&M) resulting from insufficient annual government budget, low water charges and collection rates, poor service delivery, unwillingness of users to pay, and lack of direct farmer participation and ownership. Acknowledging these challenges and the strategic importance of agriculture and rural development to the PRC's food security and sustainable economic development, the Government has set out to modernize its agriculture. The national comprehensive agricultural development (CAD) program was initiated in 1988 under the State Office for Comprehensive Agricultural Development (SOCAD) of the Ministry of Finance (MOF). One of the core responsibilities of SOCAD is to improve the productivities of low- and average-yielding farmlands through agricultural infrastructure development. SOCAD has been active in collaborating with international development partners such as the World Bank, the United Kingdom's Department for International Development, and the Global Environmental Facility (GEF).
During the Country Programming Mission in December 2008, SOCAD proposed to ADB a technical assistance (TA) for the Agricultural Infrastructure Development Project and it was included in the 2009 TA pipeline.