China, People's Republic of : Shanxi Integrated Agricultural Development Project

Agriculture, natural resources and rural development / Agricultural production - Agro-industry, marketing, and trade - Livestock

The Project will provide credit and training to about 66,000 farm households in 26 counties of five municipalities in central and southern Shanxi. Of these, 11 are poverty counties and 12 are on the priority list for treatment of accelerated soil erosion in the PRC. The Project comprises four components (i) transition to high-value farm production by adopting technologies and practices that ensure environmental sustainability and increase farm income; (ii) strengthening of farm-market linkages by supporting on-farm and industrial agroprocessing and marketing of high-value products; (iii) capacity-building and training of farmers, farmer associations, and technical support agencies to support high-value production and processing of farm products; and (iv) project management to support efficient project implementation. To keep project implementation manageable, each participating county will take up two of the three activities in the first component-perennial crops, annual crops, and livestock. Structured criteria were used to select project counties, sites, and activities.

The Project will build the capacity of farmers, their associations, and staff of technical support agencies (TSAs) to adopt high-value and environmentally sustainable production systems that will increase farmer incomes and farm productivity, and improve food safety and quality. ADB's Multi-Donor Trust Fund under the Water Financing Partnership Facility (WFPF) and the Gender and Development Cooperation Fund (GDCF) will provide grants to pilot-test creative interventions. The WFPF-funded activities will demonstrate the viability of more productive and efficient irrigation techniques, and support farmers to adapt to climate change impacts. Poor farmers will be provided with subsidies to adopt water-saving technologies to showcase the efficiency and economic benefits of such interventions. Skills training will help farmers reduce dependence on increasingly scarce water resources. The GDCF grant will facilitate women's economic empowerment by (i) setting up a revolving fund for microfinance; (ii) organizing self-help groups linked to existing farmer associations to access markets; (iii) providing training on technical, marketing, alternative income-generation activities, and leadership; and (iv) building capacity to ensure sustainability of these activities.

Shanxi 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. After about 30 years of reforms, the agricultural service system, farmers' technical capacity, and women's economic participation have improved. However, the nature of extensive and scattered small-scale agriculture has not changed significantly. Most farmers continue to practice traditional agriculture mainly growing wheat and maize 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.

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, lead to market failure, and the inability of agro-enterprises and farmers to access formal financial services.

The Project will address these constraints and provide financing for high-value farming, agroprocessing, product quality and safety, environmentally sustainable farm practices by adopting water-saving irrigation techniques, microfinance to poor women, and improved capacity of farmers and TSAs. These initiatives are consistent with the Government's 11th Five-Year Plan (2006-2010) and ADB's PRC country partnership strategy, 2008-2010.

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

Sustainable and higher farm productivity and increased income in the project counties.

The project has promoted rapid development of animal and agriculture farming with modern facilities which significantly increased the farmers' income.

In Q4 2015, a total of 28.4124 million RMB was invested to the project, covering 599 farmer households in 12 counties. The components includes: 3D, civil work for 397 animal farms in amount of 19.3083 million RMB (7.877 million RMB for swine, 5.4063 million RMB for cattle, 6.9257 million RMB for sheep, minus 0.9006 million RMB for chicken); 3F, crop and tree plantation of asparagus, nut and fruit trees, and fast-growing poplars in 0.33 hectares on investment of 14.4 thousand RMB (for walnut); 3G, 6 arched sheds in amount of 95.4 thousand RMB; 3H, 194 green houses, prickly ash seedlings and dryland farm on investment of 7.3717 million RMB. Other expenditures included 50 thousand RMB for capacity building and training, 0.6865 million RMB for project management, and 0.8304 million RMB for demonstration area infrastructure and others.

Increased productivity and production of perennial crops

Increased productivity and production of annual crops

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

Expanded on-farm processing capacity

Training and equipment provided to demonstrate water-saving techniques

Project Management for effective project management capacity established and strengthened

As of Q4 2015, the weighted progress of the project reached to 91.96 %.

Annual crops: A total of 7.4671 million RMB was invested on 200 farmer households in this quarter. Cumulatively, a total of 255.6481 million RMB was invested on 9,344 farmer households in two categories - arched sheds & sunlight greenhouses. The quality all fit the criteria defined in the feasibility report, readily usable for growing vegetables in accordance with the managerial techniques and the agricultural standards for each subproject. The implementation satisfies the technical criteria for crop plantation, good breeds and appropriate management under the project. The civil work is in good quality with proper environmental controls. The farmers saw significant increase in income and women''s participation was over 65%. The project management and monitoring are all satisfactory.

Perennial crops: A total of 14.4 thousand RMB was invested on 0.33 hectares of land for 1 farmer households in this quarter. Cumulatively, a total of 327.1197 million RMB was invested on 6971.88 hectares of land for 20,943 farmer households, covering walnut, jujube, crispy pear, apple, prickly ash seedlings, Chinese herbal plants, asparagus and fast-growing poplars. The output amounts to 262.92 million RMB. The civil work satisfies the quality criteria defined in the feasibility report and fits the good practice in the industrial sector. The facilities are readily usable for growing fruit trees in accordance with the managerial techniques and the agricultural standards for each subproject. The implementation satisfies the technical criteria for fruit tree plantation and the appropriate management under the project. The civil work is in good quality with proper environmental controls. The farmers saw significant increase in income and women''s participation was over 45%.

Animal Farming: A total of 19.3083 million RMB was invested on 397 farmer households in this quarter. Cumulatively, a total of 603.4396 million RMB was invested for 9,209 households. The yields amounted to 12.55 million animals with the output value of 1309.7379 million RMB. The civil work satisfies the quality criteria defined in the feasibility report, fits the good practice in the industrial sector, and meets the technical standards for animal farming. The activity disseminated the concentrated animal farming technologies, featured by high technical contents, proper management practices and good breeds in accordance with the requirements under the project. The civil work is in good quality with proper controls for animal wastes in accordance with environmental protection standards. The farmers saw significant increase in income and women''s participation was over 65%.

Improvement of agro-products quality: Cumulatively the investment amounted to 10.1039 million RMB on the following activities: 19 production bases with quality certifications (7 for organic vegetables, 1 for prickly ash seedlings, 1 for swine farming, 1 for meat sheep, 1 for meat chicken, 4 for organic walnuts, 1 for millet crop, 2 for crispy pear, and 1 for jujube plantation), which cover the agrarian field in 196,400 mu. At present, a total 60 kinds of agricultural products were issued with quality certifications. Meanwhile the training programs and surveys with 2,600 persons/times on GAP production technology, product quality monitoring, product certification, GAP criteria, proper use of pesticides and fertilizers, water-conserving irrigation, associations of crop production and animal farming, and the farmer households linkages, etc.

The Project will generate significant environmental benefits by helping farmers to adopt modern technologies and practices. The expansion of high-value perennial and annual crops will reduce soil erosion in sloped areas, improve water-use efficiency, reduce use of agrochemicals, and produce high-quality and safer products. The estimated annual water savings will be approximately 3.8 million m3. Fertilizer use is expected to be reduced by about 2,300 tons/per annum. Environmental benefits will not be even across all project counties.

Depending on the nature and/or number of activities, a net increase may result in the use of water and agrochemicals in certain counties. Net annual savings from reduced use of water and agrochemicals is expected to be around CNY15 million. Livestock activities will provide health benefits by encouraging farmers to collectively manage their herds in larger facilities, improving

hygienic conditions in living areas, and reducing soil degradation by limiting free-range grazing. Livestock waste, a major source of nonpoint source pollution in soil and water, will be disposed off safely either by composting and/or through biogas digesters to produce clean energy for domestic use.

Due to increased fruit-tree production, net annual pesticide use will increase by about 5.4 tons. Other potential adverse environmental impacts may stem from increased generation of agricultural waste and construction of cold storage and processing capacity for five groenterprises. The increase in waste production will be mitigated by adopting adequate treatment and disposal procedures. Construction impacts will be mitigated by applying a code of practice for all construction works, as outlined in the environmental management plan.

During project preparation, initial environmental examination and summary initial environmental examination reports were prepared in accordance with the PRC regulations and ADB guidelines. A summary of findings and recommendations of expected benefits and impacts are presented in Appendix 15. The summary initial environmental examination is in Supplementary Appendix K. Due diligence review of environmental management practices by the participating 24 agro-enterprises was also undertaken (Supplementary Appendix L). The review shows that the agro-enterprises comply with all national regulations and apply adequate environmental management procedures acceptable to ADB.