|Project Rationale and Linkage to Country/Regional Strategy
Although agriculture has been developing fast and making substantial contributions to the overall economic development of the People's Republic of China (PRC) in the past few decades, agricultural production and rural livelihoods have been lagging behind industrial production and urban livelihoods. For instance, the agricultural infrastructure is insufficient and fragile, technological development and adoption levels are low, and increasing challenges arise from natural resource and environmental constraints. There is also urgent demand for the sector to catch up on modern technology and business models to enhance scale economy, develop value chains, and improve product safety. Agricultural modernization is regarded as a fundamental way to ensure food security, develop rural economy, and close the gaps between rural and urban areas. Recognizing the critical period that the sector has been entering, the PRC's 12th Five-Year Plan (2011-2015) sets the core objectives of future agricultural development, which are speeding up the development of modern agriculture and improving the level of agricultural modernization and the farmers' living standards.
Given the significant regional disparities in the existing development levels and natural resources constraints across the country, a one-size-fits-all approach for different regions to achieve agricultural modernization might be unrealistic. A more practical strategy is to encourage and support some regions that have better basis for modernizing their agricultural sector to move forward first, and set up models for the remaining ones to follow. In view of this, the Ministry of Agriculture (MOA) in 2009 proposed to establish modern agriculture demonstration areas (MADAs) to serve as platforms, as well as models, to develop modern agriculture to improve agricultural productivity and rural income. Depending on local specialties and resources, and through concerted efforts and innovative institutions, each MADA may develop new agricultural development concepts and ideas, enhance agricultural infrastructure facilities and equipment, promote technological extensions and agricultural value chains, experiment with new business models and industrial organization, and/or improve farmers' human capital. The MADAs could also lead the neighboring areas to develop modern agriculture through building industrial linkages, spreading technologies and information, and improving human capital based on local needs.
The National Modern Agricultural Development Plan (2011-2015) publicized on 13 January 2012 states that a total of 300 MADAs will be constructed over the period from 2011 to 2015. Since August 2010, 153 counties, cities, and farm districts where the agricultural sector is relatively advanced have been selected to establish MADAs. It is hoped that these MADAs, as well as those to be designated, will lead the transformation toward modern agriculture, generate significant spillover effects to their neighborhood, and promote nationwide agricultural modernization. Local governments are also enthusiastic to host the MADAs in their respective jurisdictions. A number of them have prepared development plans for their respective MADAs and explored innovative ways to support construction.
MOA has identified two core issues to be addressed at the early stage of the MADA campaign. First, there is a need to develop prototypes of MADA strategic development plans to reflect stakeholders' consensus of modern agriculture and to identify major elements of MADAs for different regions. The MADA development plans prepared by the local governments can be substantially improved based on MOA's assessment. To be consistent with national policies and take into account local characteristics, the development plans should address the major aspects of constructing a MADA, e.g. access to resources, institutional innovations, performance monitoring and evaluation, and spillover effects on non-MADA regions.
Second, since more investments are required to develop the MADAs, it is necessary to identify strategies and assess options to mobilize financial resources and improve financial services for the MADA construction. While fiscal investment continues to play a key role in financing the agricultural sector, the government's fiscal budget for the development of MADAs is limited. Therefore, it is important to improve the efficiency of public investment on the MADAs. Furthermore, there are great potentials to mobilize non-fiscal financial resources including private capital, national policy lending, as well as funds from international financial institutions to support MADA construction. Associated with the lack of financial resources is poor financial services for the agricultural sector. There is thus a need to look into the gaps between demand for credit and insurance and the constrained supply of financial services in the MADAs, as well as to examine successful international experiences in financial support to agricultural modernization that may be applicable to the PRC.
The proposed TA will help MOA identify solutions to these two issues through preparing prototypes of MADA strategic development plans and conducting a study on financial support to the construction of MADAs. A policy note will also be prepared on strategic planning and financial support for agricultural modernization through MADA approach. An international conference on modern agricultural development and MADA construction will be held to share knowledge and improve the TA outputs.
In the PRC's 12th Five-Year Plan (2011-2015), the core objectives of agricultural development are speeding up the development of modern agriculture and improving the agricultural modernization level and the farmers' living standards. Accordingly, the plan makes a clear statement that construction of MADAs will be promoted. The proposed TA is in line with ADB's sector priorities as identified in the Country Partnership Strategy: People's Republic of China, 2012-2015, which supports interventions contributing to sound management of land, water, and forest, food security, and rural livelihood improvement.